<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
COOL ENTERTAINMENT INC.
(Name of Small Business Issuer in its charter)
COLORADO APPLIED FOR
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10900 N.E. 8TH STREET, SUITE 900, BELLEVUE, WASHINGTON 98004
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (888) 603-8833
Securities to be registered under Section 12(b) of the Act: NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of class)
Exhibit index on page ____ Page 1 of ____ pages
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Cool Entertainment Inc. (the "Company") was incorporated in the
State of Colorado on June 17, 1996, under the name Minas Novas Gold Corp., to
engage in mining operations. From inception to January 1999, the Company
obtained options to acquire various mining properties. On January 29, 1999,
the Board of Directors elected to abandon all mining operations and proceed
to acquire 100% of the issued and outstanding capital stock of Cool
Entertainment Inc., a Washington corporation ("Cool Washington"), in exchange
solely for 65% of the Company's then outstanding Common Stock (the "Share
Exchange"). The acquisition of Cool Washington was completed March 1, 1999,
and effective February 22, 1999, the Company changed its name to Cool
Entertainment Inc.
Under the terms of the Share Exchange, 75% of the shares issued to
the four shareholders of Cool Washington (the "Vendors") are held in escrow
with Pacific Corporate Trust Company of Vancouver, British Columbia, as the
escrow agent. Chelsea Pacific Financial Corp., of Vancouver, British Columbia
firm, has been given a right of first refusal to arrange for all financing
for the Company through March 1, 2000, and has agreed to use its best efforts
to arrange financing for the Company as follows: $500,000 by July 1, 1999;
$500,000 by September 1, 1999; $500,000 by December 1, 1999; and $500,000 by
March 1, 2000.
One-third of the escrowed shares are to be released when the first
financing milestone is met and Cool Washington certifies that it has
developed the website so that it is technically capable of providing media
content through online transactions. If Chelsea Pacific does not meet the
first financing milestone by the stated deadline, all intellectual property
created for the Company shall belong to the Vendors, the Management Agreement
and Employment and Consulting Agreements shall automatically terminate, and
the Share Exchange transaction shall be reversed. Chelsea Pacific did not
meet the first financing milestone. On December 2, 1999, the parties amended
the Escrow Agreement, giving Chelsea Pacific until December 15, 1999 to
complete the first financing milestone. Chelsea Pacific met the first
financing milestone by December 15, 1999.
Another one-third of the escrowed shares are to be released when the
second and third financing milestones are met and Cool Washington certifies
that it has entered into agreement relating to the distribution of audio and
video products through the website. The remaining escrowed shares are to be
released when the final financing milestone is met and Cool Washington
certifies that it has fully developed the website with the following
features: on-line magazines, on-line chat rooms, email services, and on-line
games.
If Chelsea Pacific does not meet the second, third, or fourth
financing milestones by their respective deadlines, the Vendors shall have
right to terminate Chelsea Pacific's right of first refusal and continue to
earn their shares out of escrow by providing the necessary certifications.
PROPOSED BUSINESS
The Company is in the process of offering a variety of entertainment
products on the Internet through its website, www.coolentertainment.com.
Customers would be able to make purchases through their personal computers.
The Company proposes to deliver purchased products to customers in North
America within three days of receipt of order. International delivery would
also be available. The Company proposes to enter into distribution agreements
with distributors in the music, film, video game, and literary segments of
the entertainment industry in order to offer the latest and most widely
advertised entertainment products available. In addition, the Company plans
to offer value-added services such as celebrity interviews, book reviews,
online chat rooms, online games, and free e-mail accounts on its website to
attract users to the website.
While the website is operational with respect to the free e-mail
service, products and other services are not yet available. The Company is
currently working with IBM to develop the "back end" e-commerce solution for
the website that will enable the Company to retail its products to consumers.
In September 1999, the Company announced that it was exploring
digital downloading as an additional revenue source. Digital downloading
refers to the digital delivery of music over the Internet. The Company is
still
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in the research and development stage with regard to this project and is
analyzing various business models before it determines which one it will
utilize for this project.
IBM CANADA LIMITED. The Company has engaged the services of IBM
Canada Limited to assist in the development of the Company's website. Through
September 30, 1999, approximately $29,000 had been paid for such services. It
is anticipated that an additional $180,000 will be incurred by February 2000.
DIGITAL RIVER, INC. In April 1999, the Company entered into a Dealer
Agreement with Digital River, Inc., a company that electronically distributes
products, including computer software to end users. The Company had
contemplated being a dealer for Digital River, but then determined not to
proceed with this arrangement. The agreement was terminated with no liability
to the Company other than the $500 paid by the Company for a set-up fee.
MUZE INC. In May 1999, the Company entered into a License Agreement
with Muze Inc., an organization that provides data and editorial content
about music, books, and videos. The Company has obtained a non-exclusive,
non-transferable, limited right to use Muze's on-line music and video
database on the Company's website. Management believes that providing this
information will promote sales of product. The agreement requires a minimum
monthly license fee of $2,500 for the databases being licensed by the
Company. The monthly license fees are based on a charge for units of product
sold by the Company that are listed in the licensed databases. The license
agreement is for a term of one year and renews automatically for successive
one-year periods unless terminated by one of the parties.
VALLEY MEDIA AGREEMENT. The Company entered into an Order
Fulfillment Agreement effective as of May 4, 1999 with i.FiLL, a division of
Valley Media, Inc., which is a wholesale distributor of music and video
entertainment products in the United States. The Company and i.FiLL agreed to
develop a computer and customer service interface for the purposes of
conducting small order product transactions via the Company's on-line store.
The Company is responsible for all marketing and merchandising efforts,
collecting orders, and sending the orders to i.FiLL. i.FiLL will be
responsible for picking, packing, and shipping the orders directly to the
Company's customers. i.FiLL is to be the exclusive supplier of product and
order fulfillment services for the Company within the United States. However,
the Company may use third parties as sources for products not available
through Valley Media if the Company has given Valley Media 30 days' notice of
its intention to do so and Valley Media fails to make the specified product
available by the end of that 30-day period.
The Company licenses Valley Media's product database for an annual
fee of $10,000, which was waived for the initial term of the agreement by
Valley. In addition to the cost of the products purchased, i.FiLL will charge
the Company packing and handling fees on a per unit basis, shipping costs,
return fees, fees for optional services, and fees for credit card processing.
The initial term of the agreement is for two years. The annual licensing fee
for the database will be due upon the first anniversary of the agreement. The
parties may mutually terminate the agreement at any time. Additionally,
either party may terminate the agreement upon 30 days' prior written notice
if i.FiLL discontinues fulfillment services to on-line customers, the Company
discontinues the on-line sale of the products, or if a party fails to cure a
material breach of the agreement after having received written notice of the
breach 30 days prior thereto.
MARKETING
The Company's first objective will be to pursue the North American
market with a targeted sales and marketing effort. If a North American market
presence is established, the Company will pursue international markets.
Management believes that market for its products and services will
be individuals within the age range of 18 to 49. Because this market segment
contains a large number of entry-level income earners whose single purchases
will likely be of relatively small dollar value, the Company intends to
position its product line accordingly. The Company intends to offer the
following advantages over other forms of purchasing media product:
- ONE-STOP SHOPPING CONCEPT enabling the customer to purchase all forms
of product in a consistent format
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- QUICK DELIVERY SERVICE by offering three-day delivery
- PRE-ORDERING SYSTEM enabling the customer to pre-order products and
have them delivered on the day of general release
- EASE OF PURCHASING enabling customers to search for and order
particular items in a few keystrokes
- COMPETITIVE PRICING
The Company plans to attract customers to its website through the
following methods:
- Targeted advertising and marketing throughout North America
- High visibility promotional campaigns
- Website offering high degree of functionality through a comprehensive
and current database, as well as interesting and informative content
- Services which will bring new visitors to the website
- Business relationships and alliances with high profile advertisers
and merchandisers
- Special marketing involving reciprocal agreements with recording
artists
The Company plans to conduct significant advertising campaigns
throughout North America at the time the website is launched, as well as at
strategic times throughout the year, such as holidays. Advertising forms will
be focused through trade magazines, radio, television, and billboard type of
advertising targeted at the Company's key demographic groups.
The Company also plans to initiate a number of promotional offers in
conjunction with its website launch. The Company plans to advertise and sell
a number of items in order to attract heavy web traffic, stimulate the
initial demand for orders, and prompt customers who patronize competing
retailers to try the Company's website. The Company plans to use a discount
pricing structure for institutional clients in order to induce heavier
volumes of purchase and to be competitive with the large traditional retail
outlets or distribution channels.
In July 1999, the Company engaged S&S Public Relations, Inc. of
Northbrook, Illinois, to develop and execute a public relations program. The
services of S&S Public Relations were terminated with an effective date in
November 1999. A total of $25,000 had been paid to S&S Public Relations.
In August 1999, the Company engaged Koo Creative Group Inc. of
Vancouver, British Columbia, to develop and create the corporate identity
and logo for the Company. The work was completed satisfactorily at a cost of
$965.
In September 1999, the Company announced that it was offering an
affiliate rewards program called Cool Connection to parties with corporate or
private websites. Parties who link to the Company's website will be able to
earn commissions from the Company. This program is anticipated to help
attract users to the Company's website. Due to the delay in launching fully
the Company's website, the Company has not yet had the opportunity to release
this program. The Company received e-mails and phone calls in regard to this
program.
Management believes that it will need to demonstrate the following
for a customer's online shopping experience to be successful:
- Consumers must be able to save time and money
- Consumers must be see a wide variety of selection of all media
categories in one place
- Consumers must be comfortable with security of their credit cards
There is no assurance that the Company will be able to attract a
sufficient number of users to its website or generate enough sales to be
profitable. The business of selling products on a retail basis on the
Internet is highly competitive. There are a large number of companies engaged
in this business. Given the Company's present size, it can be assumed that
virtually all of these other companies have greater financial and personnel
resources than the Company.
In addition, the Company faces risks pertaining to e-commerce
security, system capacity-related challenges, and growth management. As
explained below in Item 2. Management's Discussion and Analysis or Plan
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of Operation, the Company has only a limited operating history, has generated
losses since inception, and requires a significant amount of funding to
complete the development of its website and sustain operations through June
30, 2000. There is also substantial doubt about the Company's ability to
continue as a going concern.
TRADEMARKS
The Company is in the process of registering its name and logo as a
trademark in the United States and Canada. The necessary documentation has
been prepared and will be filed shortly.
COMPLIANCE WITH LAWS AND REGULATIONS
As of the date of this report, there are no laws directly affecting
commerce over the Internet, other than those generally pertaining to fraud
and fair trade. No governmental approval is required for any of the Company's
proposed products or services. There is no assurance that laws will not
develop concerning use of the Internet as a retail medium. The Company does
not expect that environmental laws will impact its activities.
EMPLOYEES
As of December 1, 1999, the Company had 6 full-time employees, 3 of
which were the Company's officers.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The acquisition of Cool Washington on March 1, 1999 has been
accounted for as a reverse takeover with Cool Washington being the deemed
acquiror for accounting purposes. The transaction has been accounted for as
the issuance of shares by Cool Washington for the net assets of the Company.
Accordingly, the financial statements included with this registration
statement reflect the financial position, results of operations, and cash
flows of Cool Washington from the date of its incorporation on November 3,
1998, consolidated with those of the Company from March 1, 1999.
RESULTS OF OPERATIONS
The Company is considered to be in the development stage since it
has not generated revenues and is continuing to develop its business. The
Company will not be able to generate any revenues until the first calendar
quarter of 2000.
From inception to June 30, 1999, the Company generated a net loss of
$117,297. Approximately 34% of the operating expenses were professional fees.
Of this amount, 59% or $23,367 were costs related to the acquisition of Cool
Washington. Of the remaining operating expenses, $29,878 was incurred for
site development and maintenance and $26,689 were management fees.
For the three months ended September 30, 1999, the Company incurred
a loss of $141,873. Operating expenses consisted of the following: management
fees of $48,993, professional fees of $28,185, travel, advertising and
promotion of $27,669, site development and maintenance of $22,784, and
$11,967 for office and administration.
Accordingly, since inception (November 3, 1998), the Company has
incurred a net loss of $259,170.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999 and September 30, 1999, the Company had working
capital of $58,951 and $116,606, respectively. All of the Company's liquidity
has been provided through the sale of its Common Stock. For the period from
November 3, 1998 to June 30, 1999, the Company has received $210,353 in net
proceeds from the issuance of its Common Stock. During the three months ended
September 30, 1999, the Company received an additional $225,000 from the sale
of stock.
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PLAN OF OPERATION
As of January 1, 2000, the Company had cash of approximately
$90,000, which will satisfy its requirements through February 2000.
Additional funds of $200,000 must be raised to complete the development of
the website and to continue operations through the end of June 2000. In
addition, the Company estimates that $1,000,000 would be required for a
marketing campaign. The Company is dependent upon external sources of funds
and there is no assurance that any such funding will be available to the
Company. The Company does not anticipate making any expenditures for plant or
equipment, but expects to increase the number of employees after its website
is launched and fully operational.
Due to the losses generated to date and the fact that operations
have been financed through the issuance of Common Stock, there is substantial
doubt about the Company's ability to continue as a going concern. As stated
above, the Company does not have sufficient working capital to sustain
operations until the end of its current fiscal year, which ends June 30,
2000. Additional debt or equity financing will be required and may not be
available or may not be available on reasonable terms.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue refers to the inability of computer and other
information technology systems to properly process date and time information
due to the programming of a two digit year rather than a four digit year. The
risk is that a system will recognize the digits "00" as 1900 rather than the
year 2000, or that the system may not recognize "00" as a year at all. As a
result, computers and embedded processing systems may be at risk of
malfunctioning.
The Company has completed its assessment of the impact of Year 2000
issues on its business operations. The Year 2000 issue may affect the Company
in four principal areas including: (1) computer systems such as personal
computers, operating systems, business software, and application software
including accounting systems, technical support software and administration
software; (2) field assets (primarily embedded systems) such as programmable
logic controllers and equipment control panels; (3) other systems such as
telephones, photocopiers and facsimile machines; and (4) third-party
suppliers and service providers such as banks and insurance companies.
To date, the Company has implemented and tested its computer
software and hardware for Year 2000 compliance and has concluded that its
hardware and software is Year 2000 compliant.
The Company's Year 2000 program is designed to reduce the Company's
risk of material losses due to the Year 2000 issue. Management does not
anticipate any material adverse effect from the Year 2000 issue; however, the
Company cannot be certain that it will not suffer material adverse effects in
the event that third parties upon which the Company is dependent are unable
to resolve their Year 2000 issues. The Company did not experience any
difficulties during the transition from 1999 to 2000.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company does not own real property. Since the Company has
contracted with Cool Management Ltd. in Vancouver for the management of the
Company, it is using the offices of Cool Management at Suite 303, 343 Railway
Street, Vancouver, British Columbia. The offices, approximately 2,700 square
feet, are leased from the third party.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table provides certain information as to the officers
and directors individually and as a group, and the holders of more than 5% of
the Common Stock of the Company, as of September 30, 1999:
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<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL PERCENT OF CLASS (1)
OWNERSHIP
- --------------------------------------------------------- --------------------------------- ------------------------
<S> <C> <C>
Clement K.M.Lau 5,796,011 (2) 16.13%
5484 Rugby Avenue
Burnaby, British Columbia
V5E 2N1 Canada
- --------------------------------------------------------- --------------------------------- ------------------------
Marc G. Belcourt 5,796,011 (2) 16.13%
9139 Carver Crescent
North Delta, British Columbia
V4C 6N1 Canada
- --------------------------------------------------------- --------------------------------- ------------------------
Leonard Wayne Voth 5,796,011 (2) 16.13%
4422 Stone Crescent
West Vancouver, British Columbia
V7V 1B7 Canada
- --------------------------------------------------------- --------------------------------- ------------------------
William J. Hadcock 5,796,011 (2) 16.13%
Apt 1301 - 238 Alvin Narod Mews
Vancouver, British Columbia
V6B 5Z3 Canada
- --------------------------------------------------------- --------------------------------- ------------------------
All officers and directors as a group (4 persons) 23,184,044 (3) 64.53%
- --------------------------------------------------------- --------------------------------- ------------------------
</TABLE>
(1) This table is based on 35,928,688 shares of Common Stock outstanding on
September 30, 1999. If a person listed on this table has the right to
obtain additional shares of Common Stock within sixty (60) days from
September 30, 1999, the additional shares are deemed to be outstanding for
the purpose of computing the percentage of class owned by such person, but
are not deemed to be outstanding for the purpose of computing the
percentage of any other person.
(2) Of these shares, Pacific Corporate Trust Company, Vancouver, British
Columbia is holding 4,347,008 shares in escrow, pursuant to the terms of
an Escrow Agreement dated March 1, 1999.
(3) Of these shares, Pacific Corporate Trust Company, Vancouver, British
Columbia is holding 17,388,032 shares in escrow, pursuant to the terms of
an Escrow Agreement dated March 1, 1999.
Messrs. Lau, Belcourt, Voth, and Hadcock may be deemed to be
"parents" of the Company within the meaning of the rules and regulations of
the Securities and Exchange Commission.
Other than the Escrow Agreement described in Part I - Item 1.
Business, there are no agreements known to management that may result in a
change of control of the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
<S> <C> <C>
Clement K.M. Lau 27 President, CEO and Director
William J. Hadcock 42 Vice President of Marketing and Distribution and Director
Marc Belcourt 34 Vice President of Technology and Director
Len Voth 52 Director
</TABLE>
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The term of office of each director of the Company ends at the next
annual meeting of the Company's stockholders or when such director's
successor is elected and qualifies. No date for the next annual meeting of
stockholders is specified in the Company's bylaws or has been fixed by the
Board of Directors. The term of office of each officer of the Company ends at
the next annual meeting of the Company's Board of Directors, expected to take
place immediately after the next annual meeting of stockholders, or when such
officer's successor is elected and qualifies.
CLEMENT LAU, has been the President, CEO and a director since March
1999. He was the president and a partner in Tilde Multimedia Inc., Vancouver,
British Columbia, from March 1997 to March 1999, an Internet development
company that specialized in website and CD-ROM development. He attended
Vancouver Film School, receiving a certificate in multimedia program in 1997;
and Columbia Academy of Radio, Television & Recording Arts, receiving a
certificate in film and video production in 1996. From May 1994 to June 1995,
he was the owner and operator of a restaurant in Vancouver. As the operator,
he managed all aspects of the business: starting up operations, leasing,
design, decorating, advertising, public relations, personnel, entertainment,
menu creation, and inventory control
WILLIAM J. HADCOCK has been the Vice President of Marketing and
Distribution and a director since March 1999. He worked for Astral Home
Entertainment, a Canadian company which distributes software, CDs and DVDs,
from 1990 to August 1999 as a district sales representative in Scarborough,
Ontario (1990-92), corporate account manager in Toronto, Ontario (1992-94),
and branch manager in Vancouver, British Columbia (1994-99). As the branch
manager, he supervised 21 employees and was responsible for key account
management, studio relations, budget implementation, and warehouse/showroom
operations.
MARC BELCOURT has been the Vice President of Technology and a
director since March 1999. He was the lead programmer and production manager
for CRM Training Inc., a multimedia firm located in Vancouver, British
Columbia, specializing in interactive training software for the marine safety
industry, from May 1997 to August 1999. Mr. Belcourt has also provided
website design, development, and programming services as an independent
contractor to other companies. He attended the Vancouver Film School,
receiving a certificate in multimedia program in 1997. From February 1995 to
May 1996, he was the owner and operator of a convenience store in downtown
Vancouver. Mr. Belcourt received a bachelor's degree in fine arts from the
University of Saskatchewan in 1994.
LEN VOTH has been a director since March 1999. Since February 1989,
Mr. Voth has worked for Westech Information Systems in Vancouver, British
Columbia. He has been a managing consultant since January 1996, providing
consulting and advisory services for technology selection, contract services,
financial services, marketing, and operations. He served as a marketing
manager from February 1989 to January 1996. Prior to his employment with
Westech, he worked as a computer programmer in Vancouver and Calgary,
Alberta. Mr. Voth received a bachelor's degree in mathematics in 1970 from
the University of British Columbia and a diploma in computer programming from
McKay Technical Institute in 1968. He is a member of the Canadian Information
Processing Society and has professional certification as a content
development provider, Internet service provider, and content service provider.
ITEM 6. EXECUTIVE COMPENSATION.
Cool Washington entered into a Management Agreement dated March 1,
1999, with Cool Management Inc., a British Columbia corporation. Pursuant to
the terms of that Agreement, Cool Management provides management services to
Cool Washington which includes management of Cool Entertainment's business of
Internet distribution of audio and visual products, design and maintenance of
the website, provision of operational and strategic leadership to Cool
Entertainment, keeping the directors informed about major policy issues,
reporting results of operating activities to the directors, provision of
recommendations for financial budgeting, and provision of advice to the
directors concerning possible acquisitions and divestitures by Cool
Entertainment. The Agreement is to terminate upon the earlier of (a) one year
from the day on which Chelsea Pacific meets the Fourth Financing Milestone as
defined in the Escrow Agreement or (b) the day Messrs. Lau, Hadcock, Voth,
and Belcourt become entitled to terminate Chelsea Pacific's right of first
refusal as defined in the Escrow Agreement. See Part I - Item 1. Business for
a description of the Escrow Agreement.
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Cool Management in turn has entered into employment agreements with
Clement Lau, William Hadcock, and Marc Belcourt, and a consulting agreement
with Len Voth. Cool Entertainment is obligated to pay Cool Management a fee
equal to the amounts payable under these employment or consulting agreements
plus 10% of such amount. All of the employment and consulting agreements have
the same term as the Management Agreement described above. In addition, all
of the employment and consulting agreements provide for confidentiality of
information and contain a covenant not to compete for a period of one year
after the termination of employment. The employment and consulting agreements
are summarized as follows:
<TABLE>
<CAPTION>
EMPLOYEE/ DUTIES TO BE PERFORMED BASE SALARY/
CONSULTANT CONSULTING FEES
- ------------------------- ----------------------------------------------------------------------- ----------------
<S> <C> <C>
Clement Lau - Oversight of management of Company's business; $50,000 per year
- Provision of operational and strategic leadership to
Company;
- Keeping the directors informed about major strategic issues;
- Monitoring and maintaining Company's relationship with
Chelsea Pacific;
- Oversight and development of business alliances for the
Company; and
- Provision of advice to directors concerning possibility and
desirability of acquisitions and divestitures by the Company
- ------------------------- ----------------------------------------------------------------------- ----------------
William Hadcock - Management and supervision of Company sales program; $50,000 per year
- Establishment and development of distribution linksfor
markets outside of North America;
- Establishment, maintenance, and monitoring of distribution
links within North America;
- Establishment and maintenance of Company's relations with
record companies and movie studios;
- Management and supervision of efforts to sell advertising on
Company's website; and
- Management and supervision of Company's efforts to obtain
marketing and co-operative advertising funds from record
companies and movie studios
- ------------------------- ----------------------------------------------------------------------- ----------------
Marc Belcourt - Development of website; $50,000 per year
- Recruitment and supervision of technical and development
staff;
- Equipment procurement;
- Software procurement;
- Database development; and
- Project development and management
- ------------------------- ----------------------------------------------------------------------- ----------------
Len Voth Consulting services as requested by the Company $25,000 per year
- ------------------------- ----------------------------------------------------------------------- ----------------
</TABLE>
In addition to their base salaries, Messrs. Lau, Hadcock, and Belcourt
receive employee benefits such as health, accident, life, and long-term
disability insurance coverage.
The following table sets forth information for all persons who have
served as the chief executive officer of the Company during the last three
fiscal years:
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- --------------------------- -----------
OTHER
ANNUAL RESTRICT- SECURITIES
NAME AND COMPENSATION ED STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS ($) AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) SARS (#) ($) ($)
- ------------------ ------ ---------- ------- ------------- ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clement Lau, 1999 $17,000(2) -0- -0- -0- -0- -0- -0-
President and CEO (1)
- ------------------ -------- ---------- ------- ------------- ------------ -------------- ----------- ---------------
Leroy Halterman, 1999 -0- -0- -0- -0- -0- -0- -0-
President (3)
- ------------------ -------- ---------- ------- ------------- ------------ -------------- ----------- ---------------
Reg Handford, 1999 -0- -0- -0- -0- -0- -0- -0-
President (4)
- ------------------ -------- ---------- ------- ------------- ------------ -------------- ----------- ---------------
Wolfdietrich F. 1999 -0- -0- -0- -0- -0- -0- -0-
Bruehl, President 1998
(5)
- ------------------ -------- ---------- ------- ------------- ------------ -------------- ----------- ---------------
Charles F. 1998 -0- -0- -0- -0- -0- -0- -0-
Stetler, 1997
President (6)
</TABLE>
(1) Mr. Lau has been the President since March 1, 1999. The amount shown
reflects compensation paid through the Management Agreement described above.
(2) The actual amount paid was Cdn$25,000, which is approximately US$17,000,
depending upon the exchange rate in effect at the time.
(3) Mr. Halterman was the President from September 25, 1998 to March 1, 1999.
(4) Mr. Handford was the President from August 14, 1998 to September 25, 1998.
(5) Mr. Bruehl was the President from June 24, 1998 to August 13, 1998.
(6) Mr. Stetler was the President from inception to June 23, 1998.
The Company does not pay monetary compensation to its directors, nor
does the Company compensate its directors for attendance at meetings. The
Company does reimburse the directors for reasonable expenses incurred during
the course of their performance.
There are not stock options issued or outstanding.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Mr. Lau may be deemed to be a "promoter" of the Company within the
meaning of the Rules and Regulations promulgated by the Securities and
Exchange Commission.
At June 30, 1999, $45,297 was reflected as a receivable on the
balance sheet. This amount had been advanced to Cool Management to fund
development of the Company's website. This amount was later billed to the
Company in accordance with the Company's Management Agreement with Cool
Management. Similarly, at September 30, 1999, $54,846 was shown as a
receivable.
In February 1999, Advantage Investment Holding Ltd., a shareholder,
advanced $15,000 to the Company to fund development of its website. At June
30, 1999 and September 30, 1999, this amount was reflected on the
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balance sheet as a loan payable. This amount was repaid through the issuance
of 28,300 shares of Common Stock in December 1999.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, no par value, and 1,000,000 shares of Preferred
Stock, no par value.
COMMON STOCK
Each share of Common Stock has one vote with respect to all matters
voted upon by the shareholders. The shares of Common Stock do not have
cumulative voting rights.
Holders of Common Stock are entitled to receive dividends, when and
if declared by the Board of Directors, out of funds of the Company legally
available therefor. The Company has never declared a dividend on its Common
Stock and has no present intention of declaring any dividends in the future.
Holders of Common Stock do not have any preemptive rights or other
rights to subscribe for additional shares, or any conversion rights. Upon a
liquidation, dissolution, or winding up of the affairs of the Company,
holders of the Common Stock will be entitled to share ratably in the assets
available for distribution to such stockholders after the payment of all
liabilities.
The outstanding shares of the Common Stock of the Company are fully
paid and non-assessable.
The registrar and transfer agent for the Company's Common Stock is
American Securities Transfer & Trust, Inc., 12039 West Alameda Parkway, Suite
Z-2, Lakewood, Colorado 80228.
PREFERRED STOCK
The Articles of Incorporation permit the Board of Directors, without
further shareholder authorization, to issue Preferred Stock in one or more
series and to fix the price and the terms and provisions of each series,
including dividend rights and preferences, conversion rights, voting rights,
redemption rights, and rights on liquidation, including preferences over the
Common Stock, all of which could adversely affect the rights of the holders
of the Common Stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is not traded on a registered securities
exchange, or on NASDAQ. The Company's Common Stock is quoted on the OTC
Bulletin Board, and was first listed on June 18, 1998 under the symbol
"MNGD." Since March 2, 1999, the stock has been trading under the symbol
"CULE." The following table sets forth the range of high and low bid
quotations for each fiscal quarter since the stock began trading. These
quotations reflect inter-dealer prices without retail mark-up, mark-down, or
commissions and may not necessarily represent actual transactions.
11
<PAGE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING HIGH BID LOW BID
<S> <C> <C>
June 30, 1998....................................... $ 0.875 $ 0.625
September 30, 1998................................ $ 1.375 $ 0.250
December 31, 1998................................ $ 1.500 $ 1.000
March 31, 1999.................................... $ 1.563 $ 0.290
June 30, 1999....................................... $ 1.563 $ 0.813
September 30, 1999................................ $ 1.000 $ 0.438
December 31, 1999................................ $ 0.700 $ 0.230
</TABLE>
On December 31, 1999, the closing price for the common stock was
$.2750.
As of September 30, 1999, there were 185 record holders of the
Company's Common Stock. Since the Company's inception, no cash dividends have
been declared on the Company's Common Stock.
ITEM 2. LEGAL PROCEEDINGS.
None.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has sold shares of its
Common Stock, which were not registered under the Securities Act of 1933, as
amended, as follows:
1. In November 1996, the Company sold 101,400 shares of Common
Stock for cash of $50,700 to 7 persons in reliance upon the
exemption from registration contained in Rule 504 of
Regulation D. No underwriters were used and no underwriting
commissions were paid.
2. In July 1998, the Company issued 2,000,000 shares of Common
Stock to Carey Whitehead as partial consideration for certain
mining claims in reliance upon the exemption from registration
contained in Section 4(2) of the Securities Act of 1933. No
underwriters were used and no underwriting commissions were
paid. These shares were later returned to the Company and
cancelled when the Company terminated the agreements for the
mining claims.
3. In January 1999, the Company sold 249,818 shares of Common
Stock for cash of $99,927 to Advantage Investment Holdings
Ltd. and Andrew Robinson in reliance upon the exemption from
registration contained in Rule 504 of Regulation D. No
underwriters were used and no underwriting commissions were
paid.
4. As of March 1, 1999, the Company issued 23,184,044 shares of
Common Stock to Clement K.M. Lau, William Hadcock, Leonard
Voth, and Marc Belcourt in exchange for their shares of Cool
Entertainment, Inc. in reliance upon the exemption from
registration contained in Section 4(2) of the Securities Act
of 1933. No underwriters were used and no underwriting
commissions were paid.
5. In April 1999, the Company sold 166,111 shares of Common Stock
for cash of $143,500 to Advantage Investment Holdings Ltd. in
reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933. No underwriters
were used and no underwriting
12
<PAGE>
commissions were paid. At the time of issuance, only 161,111
shares were issued due to a clerical error. The remaining
5,000 shares were issued in October 1999.
6. In May 1999, the Company sold 100,000 shares of Common Stock
for cash of $75,000 to Cerris Finance Limited in reliance upon
the exemption from registration contained in Section 4(2) of
the Securities Act of 1933. No underwriters were used and no
underwriting commissions were paid.
7. In February 1999, Advantage Investment Holding Ltd., a
shareholder, advanced $15,000 to the Company to fund
development of its website. At June 30, 1999 and September 30,
1999, this amount was reflected on the balance sheet as a loan
payable. This amount was repaid through the issuance of 28,300
shares of Common Stock in December 1999. The Company relied
upon the exemption from registration contained in Section 4(2)
of the Securities Act of 1933. No underwriters were used and
no underwriting commissions were paid.
8. In July 1999, the Company sold 115,375 shares of Common Stock
for cash of $75,000 to Cerris Finance Limited in reliance upon
the exemption from registration contained in Section 4(2) of
the Securities Act of 1933. No underwriters were used and no
underwriting commissions were paid. These shares were issued
in December 1999.
9. In August 1999, Cerris Finance Limited subscribed for 141,500
shares of Common Stock for cash of $75,000. The Company relied
upon the exemption from registration contained in Section 4(2)
of the Securities Act of 1933. No underwriters were used and
no underwriting commissions were paid. These shares were
issued in December 1999.
10. In September 1999, Cerris Finance Limited subscribed for
141,500 shares of Common Stock for cash of $75,000. The
Company relied upon the exemption from registration contained
in Section 4(2) of the Securities Act of 1933. No underwriters
were used and no underwriting commissions were paid. These
shares have not yet been issued.
11. In December 1999, Worgan Corporation subscribed for 524,000
shares of Common Stock for cash of $131,000. The Company
relied upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933. No underwriters
were used and no underwriting commissions were paid. These
shares have not yet been issued.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 7-109-101 ET SEQ. of the Colorado Business Corporation Act
and Article X of the Company's Articles of Incorporation permit the Company
to indemnify its officers and directors and certain other persons against
expenses in defense of a suit to which they are parties by reason of such
office, so long as the persons conducted themselves in good faith and the
persons reasonably believed that their conduct was in the Company's best
interests or not opposed to the Company's best interests, and with respect to
any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. Indemnification is not permitted in connection with a
proceeding by or in the right of the corporation in which the officer or
director was adjudged liable to the corporation or in connection with any
other proceeding charging that the officer or director derived an improper
personal benefit, whether or not involving action in an official capacity.
PART F/S
See pages beginning with F-1.
13
<PAGE>
PART III
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
REGULATION SEQUENTIAL
S-B NUMBER PAGE NUMBER
EXHIBIT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 Chelsea Pacific Financial Corp. Agreement dated February 25, 1999 ___
3.1 Articles of Incorporation, as amended ___
3.2 Bylaws ___
10.1 Management Agreement between Cool Entertainment, Inc., and Cool Management
Inc. dated March 1, 1999 ___
10.2 Employment Agreement between Cool Management Inc. and Marc G. Belcourt dated
March 1, 1999 ___
10.3 Consulting Agreement between Cool Management Inc. and Leonard Wayne Voth
dated March 1, 1999 ___
10.4 Employment Agreement between Cool Management Inc. and William J. Hadcock
dated March 1, 1999 ___
10.5 Employment Agreement between Cool Management Inc. and Clement K.M. Lau dated
March 1, 1999 ___
10.6 Escrow Agreement between Pacific Corporate Trust Company, Cool
Entertainment, Inc. (Washington), Chelsea Pacific Financial Corp.,
Entertainment, Inc. (Colorado), Clement Kar Man Lau, William James Hadcock,
Leonard Wayne Voth, and Marc Gregory Belcourt dated March 1, 1999, as amended ___
10.7 Form of Registration Rights Agreement between Cool Entertainment, Inc. and
each of Clement Kar Man Lau, William James Hadcock, Leonard Wayne Voth, and
Marc Gregory Belcourt dated March 1, 1999 ___
10.8 Order Fulfillment Agreement with Valley Media, Inc. dated May 4, 1999 ___
10.9 License Agreement with Muze, Inc. dated May 1999 ___
21 Subsidiaries of the registrant ___
27 Financial Data Schedule ___
</TABLE>
14
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
COOL ENTERTAINMENT, INC.
Date: January 12, 2000 By: /s/ Clement Lau
------------ -----------------------
Clement Lau, President
15
<PAGE>
Consolidated Financial Statements of
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
(Expressed in U.S. Dollars)
Period from November 3, 1998 (inception) to June 30, 1999
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Cool Entertainment Inc.
We have audited the consolidated balance sheet of Cool Entertainment Inc. and
subsidiary (formerly Minas Novas Gold Corp.) (a Development Stage Enterprise)
as of June 30, 1999 and the consolidated statements of operations,
stockholders' equity and cash flows for the period from November 3, 1998
(inception) to June 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of Cool Entertainment Inc. and
subsidiary (formerly Minas Novas Gold Corp.) (a Development Stage Enterprise)
as at June 30, 1999 and the results of their operations and their cash flows
for the period from November 3, 1998 (inception) to June 30, 1999 in
conformity with United States generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
note 1 to the consolidated financial statements, the Company has suffered
losses from operations and has negative cash flows from operations that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in note 1.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ KPMG LLP
Chartered Accountants
Richmond, Canada
November 19, 1999
F-2
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Consolidated Balance Sheet
(Expressed in U.S. Dollars)
June 30, 1999
<TABLE>
<CAPTION>
1999
---------------
<S> <C>
Assets
Current asset:
Cash $ 89,058
Other asset:
Receivable from related party (note 6) 45,297
---------------
$ 134,355
===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 15,107
Loan payable (note 6) 15,000
---------------
Total current liabilities 30,107
Stockholders' equity:
Common stock, no par value, authorized 100,000,000 shares;
issued and outstanding 35,928,688 shares in 1999 217,158
Other paid-in capital (note 8) 4,387
Deficit accumulated during the development stage (117,297)
---------------
Total stockholders' equity 104,248
Commitment (note 5)
Subsequent events (note 8)
---------------
$ 134,355
===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Consolidated Statement of Operations
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
November 3, 1998
(inception)
to June 30,
1999
----------------
<S> <C>
Operating expenses:
Organization costs $ 1,218
Site development and maintenance 29,878
Management fees 26,689
Professional fees 39,447
Travel, advertising and promotion 14,780
Office and administrative 5,285
----------------
Loss for the period and deficit accumulated during development stage $ (117,297)
================
Net loss per common share, basic and diluted $ (0.01)
================
Weighted average common shares outstanding, basic and diluted 15,346,241
================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Consolidated Statement of Stockholders' Equity
(Expressed in U.S. Dollars)
Period from November 3, 1998 (inception) to June 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Other During Total
------------------------- Paid-In Development Stockholders'
Shares Amount Capital Stage Equity
---------- ----------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, November 3, 1998
(Minas Novas Gold Corp.
Common Stock) 12,483,533 $ 180,958 $ - $ - $ 180,958
Adjustment to comply with
reverse takeover accounting:
- elimination of Minas
Novas common stock - (180,958) - - (180,958)
- Cool Washington
common stock - 400 - - 400
Common stock issued to
purchase all issued and
outstanding shares of
Cool Washington, March 1,
1999 (note 2(a)) 23,184,044 11,192 - - 11,192
Common stock issued for cash,
April 12, 1999 at $0.75 per
share, net of issuance costs
of $2,849 40,000 27,151 - - 27,151
Common stock issued for cash,
April 23, 1999 at $0.90 per
share, net of issuance costs
of $2,736 121,111 106,264 - - 106,264
Fully paid stock subscriptions
April 23, 1999, at $0.90 per
share, net of issuance costs
of $113 (note 8) - - 4,387 - 4,387
Common stock issued for cash,
May 28, 1999 at $0.75 per
share, net of issuance costs
of $2,849 100,000 72,151 - - 72,151
---------- ----------- ------- ---------- ------------
Net loss - - - (117,297) (117,297)
---------- ----------- ------- ---------- ------------
Balance, June 30, 1999 35,928,688 $ 217,158 $ 4,387 $ (117,297) $ 104,248
========== =========== ======= ========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
(Expressed in U.S. dollars)
<TABLE>
<CAPTION>
Period from
November 3, 1998
(inception)
to June 30,
1999
----------------
<S> <C>
Cash flows from operating activities:
Operations:
Loss for the period $ (117,297)
Items not involving cash:
Amortization of organization costs 1,218
Changes in operating asset and
liabilities:
Receivable from related party (21,930)
Accounts payable and accrued liabilities 13,754
-------------
Net cash used in operating activities (124,255)
Cash flows from investing activity:
Cash acquired on acquisition 2,960
-------------
Net cash provided by investing activity 2,960
Cash flows from financing activities:
Net proceeds from issuances of common stock and subscriptions 210,353
-------------
Net cash provided by financing activities 210,353
-------------
Increase in cash and cash equivalents during the period and cash at end of period $ 89,058
=============
Supplementary disclosure:
Non-cash transactions:
Stock issued to acquire Cool Entertainment Inc. (note 2(a)) $ 8,232
Interest paid -
Taxes paid -
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
Period from November 3, 1998 to June 30, 1999
1. GENERAL AND FUTURE OPERATIONS
Cool Entertainment Inc. (the "Company") was incorporated under the laws of
the State of Colorado on June 17, 1996, under the name of Minas Novas Gold
Corp. On February 22, 1999, the Company changed its name to Cool
Entertainment Inc. Prior to its acquisition of Cool Washington (note 2(a)),
the Company was a holding company with no substantive operations.
The Company is currently in the business of retailing entertainment related
products such as CDs, DVDs and videos through the website it is developing.
These consolidated financial statements have been prepared on a going
concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes the
Company will continue in operation for the foreseeable future and will be
able to realize its assets and discharge its liabilities and commitments in
the normal course of business. Certain conditions, discussed below,
currently exist which raise substantial doubt upon the validity of this
assumption. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company's future operations are dependent upon the market's acceptance
of its services and the Company's ability to secure strategic partnerships
There can be no assurance that the Company will be able to secure market
acceptance or strategic partnerships. As of June 30, 1999, the Company is
considered to be in the development stage as the Company has not generated
revenues and is continuing to develop its business. The Company has
experienced negative cash flows and operations have primarily been financed
through the issuance of common stock. The Company does not have sufficient
working capital to sustain operations until the end of the year ended June
30, 2000. Additional debt or equity financing will be required and may not
be available or may not be available on reasonable terms.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Reverse takeover and basis of presentation:
On March 1, 1999, the Company issued 23,184,044 common shares for all
of the issued and outstanding shares of Cool Entertainment Inc. ("Cool
Washington"), a company incorporated in the State of Washington on
November 3, 1998. The acquisition was a reverse takeover with Cool
Washington being the deemed accounting acquiror for financial statement
purposes. The transaction has been accounted for as a capital
transaction effectively representing an issue of shares by Cool
Washington for the net assets of the Company.
F-7
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. dollars)
Period from November 3, 1998 to June 30, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(a) Reverse takeover and basis of presentation (continued):
The net assets acquired as follows:
<TABLE>
<S> <C>
Cash $ 2,960
Other working capital ,net 22,015
Organizational costs 1,217
Loan payable (15,000)
---------------
$ 11,192
===============
</TABLE>
Acquisition related costs of $23,367 were incurred and were recorded as
professional fees in the current period.
The historical financial statements reflect the financial position,
results of operations and cash flows of Cool Washington from the date
of its incorporation on November 3, 1998, consolidated with those of
the Company from March 1, 1999.
(b) Basis of consolidation:
These consolidated financial statements have been prepared using
generally accepted accounting principles in the United States. The
financial statements include the accounts of the Company's wholly-owned
subsidiary, Cool Washington. All significant intercompany balances and
transactions have been eliminated in the consolidated financial
statements.
(c) Use of estimates:
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the recorded amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and reported
revenues and expenses for the reporting period. Actual results could
differ from those estimates.
(d) Income taxes:
The Company follows the asset and liability method of accounting for
income taxes. Under this method, current taxes are recognized for the
estimated income taxes payable for the current period.
Deferred income taxes are provided based on the estimated future tax
effects of temporary differences between financial statement carrying
amounts of assets and liabilities and their respective tax basis as
well as the benefit of losses available to be carried forward to future
years for tax purposes.
F-8
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. dollars)
Period from November 3, 1998 to June 30, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(d) Income taxes (continued):
Deferred tax assets and liabilities are measured using enacted tax
rates that are expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in operations in the period that includes
the substantive enactment date. A valuation allowance is recorded for
deferred tax assets when it is more likely than not that such deferred
tax assets will not be realized.
(e) Research and development:
Research and development costs are expensed when incurred. Equipment
used in research and development is capitalized only if it has an
alternative future use.
(f) Cash and cash equivalents:
Cash equivalents includes highly liquid debt investments with remaining
maturities at the date of purchase of three months or less.
(g) Net loss per share:
Basic loss per share is computed using the weighted average number of
common shares outstanding during the period. Diluted loss per share is
computed using the weighted average number of common and potentially
dilutive common stock outstanding during the period. As the Company has
a net loss in the period presented, basic and diluted net loss per
share are the same.
Excluded from the computation of diluted loss per share for the year
ended June 30, 1999 are 17,388,033 shares of common stock held in
escrow. The release of these escrowed shares is contingent upon the
Company's achievement of contractually specified financing and website
development milestones.
F-9
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. dollars)
Period from November 3, 1998 to June 30, 1999
3. DEFERRED TAX ASSETS AND LIABILITIES:
<TABLE>
<CAPTION>
June 30,
1999
----------
<S> <C>
Deferred tax asset:
Operating loss carryforward $ 43,700
Valuation allowance (43,700)
---------
Net deferred tax asset $ -
=========
</TABLE>
Management believes that it is not more likely than not that it will create
sufficient taxable income sufficient to realize its deferred tax assets. It
is reasonably possible these estimates could change due to future income
and the timing and manner of the reversal of deferred tax liabilities. Due
to its losses, the Company has no income tax expense.
The Company has operating loss carryforwards for income tax purposes at
June 30, 1999 of approximately $115,000. Operating losses begin to expire
in fiscal year 2012.
4. FINANCIAL INSTRUMENTS:
FAIR VALUE:
The carrying values of cash, accounts payable and accrued liabilities
approximate fair value due to the short-term maturities of these
instruments.
It is not practicable to determine the fair value of the loan payable and
the receivable from related party due to their related party nature and the
absence of a secondary market for such instruments.
5. COMMITMENT:
In May 1999, the Company entered into a software licensing agreement with a
third party. The Company is obligated by the contract to make monthly
payments of $2,500 until May, 2000.
F-10
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. dollars)
Period from November 3, 1998 to June 30, 1999
6. RELATED PARTY BALANCES AND TRANSACTIONS:
In March, 1999, the Company entered into a contract with a company, Cool
Management Inc., controlled by its stockholders to provide management
services, site development and other professional services at cost plus
10%. The expiry date of the contract is contingent upon the Company's
achievement of certain financing milestones and will conclude on the date
the final milestone is reached or upon the termination of the financing
agent. The Company incurred cash compensation expense of $56,567 during
the period from November 3, 1998 (inception) to June 30, 1999.
The receivable from related party of $45,297 is non-interest bearing,
unsecured and due on demand. The funds were advanced to Cool Management
Inc. to fund development of the Company's website.
The loan payable balance of $15,000 arose from a transaction between a
shareholder and the Company. The loan is non-interest bearing, unsecured
and due on demand. This loan was settled subsequent to year-end through the
issuance of shares, see note 8.
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. The Company is currently
working on their Year 2000 preparations. However, it is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
F-11
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. dollars)
Period from November 3, 1998 to June 30, 1999
8. SUBSEQUENT EVENTS:
(a) On July 20, 1999, 115,375 common shares were issued at $0.65 per share
to finance the operations of the Company.
(b) On August 6, 1999, 141,500 common shares were subscribed for at $0.53
per share to finance the operations of the Company.
(c) On September 10, 1999, 141,500 common shares were subscribed for at
$0.53 per share to finance the operations of the Company.
(d) In October, 1999, 5,000 common shares stock certificates were released
by the transfer agent. These stock certificates were recorded as other
paid-in capital at June 30, 1999.
(e) The loan payable outstanding as at June 30, 1999 was settled in
December, 1999 through the issuance of 28,300 common shares valued at
$0.53 per share.
F-12
<PAGE>
Interim Consolidated Financial Statements of
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
(Expressed in U.S. Dollars)
September 30, 1999
F-13
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Interim Consolidated Balance Sheets
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
--------------- ---------------
(unaudited)
<S> <C> <C>
Assets
Current asset:
Cash $ 124,181 $ 89,058
Subscriptions receivable 24,094 -
--------------- ---------------
Total current assets 148,275 89,058
Property and equipment, net 15,923 -
Receivable from related party 54,846 45,297
--------------- ---------------
$ 219,044 $ 134,355
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 16,669 $ 15,107
Loan payable 15,000 15,000
--------------- ---------------
31,669 30,107
Stockholders' equity:
Common stock, no par value, authorized 100,000,000 shares;
issued and outstanding 35,928,688 shares in 1999 217,158 217,158
Other paid-in capital 229,387 4,387
Deficit accumulated during the development stage (259,170) (117,297)
--------------- ---------------
Total stockholders' equity 187,375 104,248
$ 219,044 $ 134,355
=============== ===============
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-14
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Interim Consolidated Statements of Operations
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
Three November 3,
months ended 1998 (inception)
September 30, to September 30,
1999 1999
--------------- ----------------
(unaudited) (unaudited)
<S> <C> <C>
Operating expenses:
Organization costs $ - $ 1,218
Depreciation 2,275 2,275
Site development and maintenance 22,784 52,662
Management fees 48,993 75,682
Professional fees 28,185 67,632
Travel, advertising and promotion 27,669 42,449
Office and administrative 11,967 17,252
--------------- ---------------
Loss for the period $ (141,873) $ (259,170)
=============== ===============
Net loss per common share, basic and diluted $ (0.01) $ (0.02)
=============== ===============
Weighted average common shares outstanding, basic and diluted 18,272,785 16,286,127
=============== ===============
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-15
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Interim Consolidated Statement of Stockholders' Equity
(Expressed in U.S. Dollars)
Period from November 3, 1998 (inception) to September 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Other During Total
------------------------- Paid-In Development Stockholders'
Shares Amount Capital Stage Equity
---------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 3, 1998
(Minas Novas Gold Corp.
Common Stock) 12,483,533 $ 180,958 $ - $ - $ 180,958
Adjustment to comply with
reverse takeover accounting:
- elimination of Minas
Novas common stock - (180,958) - - (180,958)
- Cool Washington
common stock - 400 - - 400
Common stock issued to
purchase all issued and
outstanding shares of
Cool Washington, March 1,
1999 (note 2(a)) 23,184,044 11,192 - - 11,192
Common stock issued for cash,
April 12, 1999 at $0.75 per
share, net of issuance costs
of $2,849 40,000 27,151 - - 27,151
Common stock issued for cash,
April 23, 1999 at $0.90 per
share, net of issuance costs
of $2,736 121,111 106,264 - - 106,264
Fully paid stock subscriptions,
April 23, 1999, at $0.90 per
share, net of issuance costs
of $113 - - 4,387 - 4,387
Common stock issued for cash,
May 28, 1999 at $0.75 per
share, net of issuance costs
of $2,849 100,000 72,151 - - 72,151
Net loss - - - (117,297) (117,297)
---------- ---------- -------- ------------ ------------
BALANCE, JUNE 30, 1999 35,928,688 217,158 4,387 (117,297) 104,248
Fully paid stock subscriptions,
July 20, 1999 at $0.65 per
share, net of issuance costs
of nil - - 75,000 - 75,000
</TABLE>
F-16
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Interim Consolidated Statement of Stockholders' Equity
(Expressed in U.S. Dollars)
Period from November 3, 1998 (inception) to September 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Other During Total
------------------------- Paid-In Development Stockholders'
Shares Amount Capital Stage Equity
---------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(continued)
Fully paid stock subscriptions
August 6, 1999, at $0.53 per
share, net of issuance costs
of nil - $ - $ 55,985 $ - $ 55,985
Unpaid stock subscriptions
August 6, 1999, at $0.53 per
share, net of issuance costs
of nil (note 4) - - 19,015 - 19,015
Fully paid stock subscriptions
September 10, 1999, at $0.53 per
share, net of issuance costs
of nil - - 69,921 - 69,921
Unpaid stock subscriptions
September 10, 1999, at $0.53 per
share, net of issuance costs
of nil (note 4) - - 5,079 - 5,079
---------- ---------- -------- ------------ ------------
Net loss - - - (141,873) (141,873)
---------- ---------- -------- ------------ ------------
Unaudited balance, September 30, 1999 35,928,688 $ 217,158 $229,387 $ (259,170) $ 187,375
========== ========== ======== ============ ============
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-17
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Interim Consolidated Statement of Cash Flows
(Expressed in U.S. dollars)
<TABLE>
<CAPTION>
Period from
Three November 3,
months ended 1998 (inception)
September 30, to September 30,
1999 1999
--------------- ----------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Operations:
Loss for the period $ (141,873) $ (259,170)
Items not involving cash:
Amortization - 1,218
Depreciation 2,275 2,275
Changes in operating asset and liabilities:
Subscriptions receivable (24,094) (24,094)
Receivable from related party (9,549) (31,479)
Accounts payable and accrued liabilities 1,562 15,316
--------------- ---------------
Net cash used in operating activities (171,679) (295,934)
--------------- ---------------
Cash flows from investing activities:
Cash acquired on acquisition - 2,960
Purchase of property and equipment (18,198) (18,198)
--------------- ---------------
Net cash used in investing activities (18,198) (15,238)
--------------- ----------------
Cash flows from financing activities:
Net proceeds from issuances of common stock and
subscriptions 225,000 435,353
--------------- ---------------
Net cash provided by financing activities 225,000 435,353
--------------- ---------------
Net increase in cash and cash equivalents during the period 35,123 124,181
Cash and cash equivalents at beginning of period 89,058 -
--------------- ---------------
Cash and cash equivalents at end of period $ 124,181 $ 124,181
=============== ===============
Supplementary disclosure:
Non-cash transactions:
Stock issued to acquire Cool Entertainment Inc. (note 2(a)) $ - $ 8,232
Interest paid - -
Taxes paid - -
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-18
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
(Unaudited)
Three months ended September 30, 1999
Period from November 3, 1998 (inception) to September 30, 1999
1. GENERAL AND FUTURE OPERATIONS
Cool Entertainment Inc. (the "Company") was incorporated under the laws of
the State of Colorado on June 17, 1996, under the name of Minas Novas Gold
Corp. On February 15, 1999, the Company changed its name to Cool
Entertainment Inc. Prior to its acquisition of Cool Washington (note 2(a)),
the Company was a holding company with no substantive operations.
The Company is currently in the business of retailing entertainment related
products such as CDs, DVDs and videos through the website it is developing.
These consolidated financial statements have been prepared on a going
concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes the
Company will continue in operation for the foreseeable future and will be
able to realize its assets and discharge its liabilities and commitments in
the normal course of business. Certain conditions, discussed below,
currently exist which raise substantial doubt upon the validity of this
assumption. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company's future operations are dependent upon the market's acceptance
of its services and the Company's ability to secure strategic partnerships
There can be no assurance that the Company will be able to secure market
acceptance or strategic partnerships. As of September 30, 1999, the Company
is considered to be in the development stage as the Company has not
generated revenues and is continuing to develop its business. The Company
has experienced negative cash flows and operations have primarily been
financed through the issuance of common stock. The Company does not have
sufficient working capital to sustain operations until the end of the year
ended June 30, 2000. Management's plan is to raise additional debt or
equity financing and such financings may not be available or may not be
available on reasonable terms.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Reverse takeover and basis of presentation:
On March 1, 1999, the Company issued 23,184,044 common shares for all
of the issued and outstanding shares of Cool Entertainment Inc. ("Cool
Washington"), a company incorporated in the State of Washington on
November 3, 1998. The acquisition was a reverse takeover with Cool
Washington being the deemed accounting acquiror for financial statement
purposes. The transaction has been accounted for as a capital
transaction effectively representing an issue of shares by Cool
Washington for the net assets of the Company.
F-19
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
(Unaudited)
Three months ended September 30, 1999
Period from November 3, 1998 (inception) to September 30, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(a) Reverse takeover and basis of presentation (continued):
The net assets acquired as follows:
<TABLE>
<S> <C>
Cash $ 2,960
Other working capital ,net 22,015
Organizational costs 1,217
Loan payable (15,000)
---------------------------------------------------
$ 11,192
===================================================
</TABLE>
Acquisition related costs of $23,367 were incurred and were recorded as
professional fees.
The historical financial statements reflect the financial position of
Cool Washington from the date of its incorporation on November 3, 1998,
consolidated with those of the Company from March 1, 1999.
(b) Basis of consolidation:
These consolidated financial statements have been prepared using
generally accepted accounting principles in the United States. The
financial statements include the accounts of the Company's wholly-owned
subsidiary, Cool Washington and all adjustments, consisting solely of
normal recurring adjustments, which in management's opinion are
necessary for a fair presentation of the financial results for the
interim periods. The financial statements have been prepared consistent
with the accounting policies described in the Company's financial
statements for the period ended June 30, 1999 and should be read in
conjunction therewith. Certain comparative figures have been
reclassified to conform to the presentation adopted in the current
period.
(c) Use of estimates:
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the recorded amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and reported
revenues and expenses for the reporting period. Actual results could
differ from those estimates.
(d) Property and equipment
Property and equipment are stated at cost and are depreciated using the
straight line method over their estimated useful life determined to be
2 years.
F-20
<PAGE>
COOL ENTERTAINMENT INC.
(FORMERLY MINAS NOVAS GOLD CORP.)
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
(Unaudited)
Three months ended September 30, 1999
Period from November 3, 1998 (inception) to September 30, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(e) Net loss per share:
Basic loss per share is computed using the weighted average number of
common shares outstanding during the period. Fully paid common share
subscriptions that entitles the holder to dividends are included in
weighted average number of common shares. Diluted loss per share is
computed using the weighted average number of common and potentially
dilutive common stock outstanding during the period. As the Company has
a net loss in the period presented, basic and diluted net loss per
share are the same.
Excluded from the computation of diluted loss per share for the period
ended September 30, 1999 are 17,388,033 shares of common stock held in
escrow. The release of these escrowed shares is contingent upon the
Company's achievement of certain financing and website development
milestones.
3. RELATED PARTY BALANCES AND TRANSACTIONS:
In March, 1999, the Company entered into a contract with a company, Cool
Management Inc., controlled by its stockholders to provide management
services, site development and other professional services at cost plus
10%. The expiry date of the contract is contingent upon the Company's
achievement of certain financing milestones and will conclude on the date
the final milestone is reached or upon the termination of the financing
agent. The receivable from related party is non-interest bearing,
unsecured and due on demand. The funds were advanced to Cool Management
Inc. to fund development of the Company's website.
4. SUBSEQUENT EVENTS:
(a) Cash was received subsequent to year end for the common stock
subscription agreements of August 6, 1999 and September 10, 1999 prior
to January 9, 2000. These amounts are recorded as subscriptions
receivable on the balance sheet.
(b) In October, 1999, 5,000 common shares stock certificates were
released by the transfer agent. These stock certificates were recorded
as other paid-in capital at June 30, 1999.
(c) On December 15, 1999, 524,000 common shares were issued at $0.25 per
share to finance the operations of the Company.
(d) The loan payable outstanding as at June 30, 1999 was settled in
December, 1999 through the issuance of 28,300 common shares valued at
$0.53 per share.
F-21
<PAGE>
Exhibit 2.1
Chelsea Pacific Financial Corp. Agreement dated February 25, 1999
<PAGE>
- --------------------------------------------------------------------------------
CHELSEA PACIFIC FINANCIAL CORP.
1738 - 609 Granville Street
Vancouver, BC V7Y 1G5
- --------------------------------------------------------------------------------
HAND DELIVERED
Clement Kar Man Lau
5484 Rugby Avenue
Burnaby, BC V5E 2N1
William James Hadcock
Apt. 1301 - 238 Alvin Narod Mews
Vancouver, BC V6B 5Z3
Leonard Wayne Voth
4422 Stone Crescent
West Vancouver, BC V7W 1B7
Marc Gregory Belcourt
307 - 1137 Bute Street
Vancouver, BC V6E 1Z7
Cool Entertainment, Inc.
(a Washington corporation)
c/o 5484 Rugby Avenue
Burnaby, BC V5E 2N1
Cool Entertainment, Inc.
(a Colorado corporation)
1738 - 609 Granville Street
Vancouver, British Columbia
V7Y 1G5
February 25, 1999
Dear Sirs:
RE: COOL ENTERTAINMENT, INC.
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 2
- -------------------------------
This letter sets out the terms of an agreement between Leonard Wayne Voth,
Clement Kar Man Lau, Marc Gregory Belcourt, William James Hadcock (Voth, Lau,
Belcourt and Hadcock are herein together referred to as the "Vendors"), Cool
Entertainment Inc., a corporation incorporated under the laws of Colorado (the
"U.S. Company"), Cool Entertainment, Inc., a corporation incorporated under the
laws of Washington ("Cool) and Cool Management Inc. in regard to the acquisition
of all the issued and outstanding shares of Cool by the U.S. Company, in
consideration of the issuance of shares in the capital stock of the U.S. Company
(the "U.S. Shares") to the Vendors representing sixty-five percent (65%) of the
issued and outstanding share capital of the U.S. Company. This agreement amends
and restates the Agreement between Chelsea and the Vendors dated December 8,
1998, as amended January 20, 1999 (the "Letter of Intent").
1. REPRESENTATIONS AND WARRANTIES OF COOL AND THE VENDORS
In order to induce Chelsea to enter into this Agreement, Cool
and the Vendors jointly and severally represent, warrant and covenant to Chelsea
as follows:
(a) the registered and beneficial owners of an aggregate of 1,000
shares in the capital stock of Cool (the "Cool Shares"), are
as follows:
Clement Kar Man Lau 250 Cool Shares;
Leonard Wayne Voth 250 Cool Shares;
Marc Gregory Belcourt 250 Cool Shares;
William James Hadcock 250 Cool Shares;
and the Cool Shares represent all the issued and outstanding
shares of Cool;
(b) no person, firm or corporation has any right capable of
becoming an agreement for the purchase, subscription or
issuance of any of the unissued shares of the
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 3
- -------------------------------
capital stock of Cool, nor will Cool issue any additional
shares in its capital stock prior to the Closing (as defined
below);
(c) Cool has only recently been incorporated for the business
purposes disclosed in its Business Plan dated September 1,
1998 (the "Business Plan"), a copy of which has been provided
to Chelsea, and to date no financial statements have been
prepared for Cool, however, there are no material debts,
obligations or liabilities (including contingent liabilities)
of Cool to the Vendors or any other party apart from this
Agreement, except for professional fees incurred with respect
to the transaction described herein;
(d) Cool is a company duly incorporated under the laws of the
State of Washington, is not a public company, and is a valid
and subsisting corporation in good standing under the laws of
Washington;
(f) the authorized capital of Cool consists of 10,000 common
shares of which there are 1,000 shares issued and outstanding
as fully paid and non-assessable;
(g) the Vendors acknowledge that the U.S. Shares will be issued to
them under exemptions from the prospectus and registration
requirements under applicable U.S. and British Columbia
securities legislation and, accordingly, the U.S. Shares
issued hereunder may be subject to trading restrictions under
applicable legislation;
(h) the Vendors have developed a non-proprietary concept for the
creation of an Internet site for the sale of entertainment
products as disclosed in the Business Plan;
(i) Cool has not guaranteed or agreed to guarantee any debt,
liability or other obligation of any firm, person or
corporation;
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 4
- -------------------------------
(j) there are no outstanding loans from Cool to shareholders of
Cool;
(k) Cool has no employees or any liability to former employees;
(l) the board of directors of Cool are not entitled to any
bonuses;
(m) the Vendors are not aware of any occurrence or event which has
had, or might reasonably expect to have, a material adverse
affect on Cool's business results or its operation;
(n) the Vendors are not aware of any occurrence of event which has
had or might reasonably expect to have a material adverse
effect upon Cool's present operation;
(o) to the best of the knowledge of the Vendors, there are no
actions, suits, judgments, investigations or proceedings
outstanding or pending against the Vendors or Cool;
(p) to the best of the knowledge of the Vendors, Cool is not in
breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which
apply to it; and
(q) Cool has not since the date of its incorporation waived or
surrendered any right of material value.
In order to induce Chelsea to enter into and consummate this Agreement, each of
the Vendors severally represents to Chelsea that:
(a) those of the Cool Shares owned by him are free and clear of
all liens, charges, encumbrances or claims of third parties of
any kind or character whatsoever;
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 5
- -------------------------------
(b) he has due and sufficient right, title and authority to enter
into this Agreement on the terms and conditions herein set
forth and to transfer the legal and beneficial title and
ownership of those of the Cool Shares owned by him; and
(c) no person, firm or corporation has any agreement or option or
a right capable of becoming an agreement for the purchase of
those of the Cool Shares owned by him.
2. REPRESENTATIONS AND WARRANTIES OF CHELSEA AND THE U.S. COMPANY
In order to induce the Vendors to enter into and consummate
this Agreement, Chelsea and the U.S. Company jointly and severally represent,
warrant and covenant to the Vendors and Cool that, as at the date hereof and as
at the Closing:
(a) no person, firm or corporation has any agreement or option or
a right capable of becoming an agreement for the purchase of
shares of capital stock of the U.S. Company, or any right
capable of becoming an agreement for the purchase,
subscription or issuance of any of the unissued shares in the
capital stock of the U.S. Company, nor will the U.S. Company
issue any additional shares in its capital stock until the
Closing has occurred, with the exception of up to 250,000
shares of Common Stock the U.S. Company has allotted for sale
to various purchasers at a price of US$0.40 per share;
(b) the debts, obligations and liabilities (including contingent
liabilities) of the U.S. Company are no more than an aggregate
of US$20,000, all of which will be satisfied from the proceeds
of the sale of shares referred to in Section 2(a) above;
(c) the U.S. Company has been duly incorporated, and is a valid
and subsisting company in good standing under the laws of
Colorado, and has due and
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 6
- -------------------------------
sufficient corporate power and authority to enter into this
Agreement and to issue the U.S. Shares to the Vendors;
(d) entry into this agreement and the issuance of the U.S. Shares
to the Vendors has been authorized by all necessary
proceedings of the directors and the shareholders of the U.S.
Company;
(e) the authorized capital of the U.S. Company consists of
100,000,000 shares of Common Stock, No Par Value and 1,000,000
shares of Preferred Stock, No Par Value of which there are
12,233,715 shares of Common Stock issued and outstanding as
fully paid and non-assessable;
(f) the U.S. Company has not guaranteed or agreed to guarantee any
debt, liability or other obligation of any firm, person or
corporation;
(g) there are no outstanding loans owed by or to the U.S. Company,
the U.S. Company has no employees and no obligations to any
former employees, and the directors of the U.S. Company are
not entitled to any bonuses;
(h) the U.S. Company has not, since June 17, 1996, the date of its
incorporation, engaged in any business whatsoever, apart from
its incorporation and organization, the raising of capital,
and entry into:
(i) an agreement with Highland Resources Inc.
("Highland") dated July 15, 1996, as amended
September 30, 1996 and January 31, 1997 for the
acquisition of a 50% interest in a mineral property
in Brazil known as Gandalera Ferrifero (the "Highland
Agreement") referred to in Note 1 to the U.S.
Company's audited financial statements dated June 30,
1998; and
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 7
- -------------------------------
(ii) agreements with Carey Whitehead ("Whitehead")
concerning the purchase by the Company of certain
mineral claims from Whitehead dated November 7, 1997
and July 3, 1998 (the "Mineral Claims Purchase
Agreements");
(i) the U.S. Company has not experienced nor is it aware
of any occurrence or event which has had, or might
reasonably expect to have, a material adverse affect
upon its operation;
(j) there are no actions, suits, judgments, investigations,
arbitrations or other proceedings outstanding or pending
against the U.S. Company;
(k) the U.S. Company is not in breach of any laws, ordinances,
statutes, regulations, by-laws, orders or decrees to which it
is subject or which apply to it;
(l) the audited financial statements of the U.S. Company for the
12 month period ended June 30, 1998 and the unaudited
financial statements of the U.S. Company for the three month
period ended September 30, 1998 attached hereto as Schedules
"A" and "B" respectively and provided to the Vendors have been
prepared in accordance with generally accepted accounting
principles in the United States, fairly and accurately
describe the financial position of the U.S. Company as at
their respective dates, and no financial statements for the
U.S. Company for any later date or period have been prepared
or are available;
(m) the U.S. Shares will be issued to the Vendors as fully-paid
and non-assessable;
(n) all of the issued and outstanding shares in the capital stock
of the U.S. Company are presently, and the U.S. Shares will be
on the Closing, admitted to quotation on the OTC Bulletin
Board (the "Bulletin Board"), such shares are
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 8
- -------------------------------
presently quoted on the Bulletin Board by 5 broker-dealers,
all of whom to the best of the knowledge of Chelsea and the
U.S. Company have complied with the provisions of
Section 15c2-11 of the SECURITIES EXCHANGE ACT of 1934 (the
"1934 Act"), and the U.S. Company is in good standing with
respect to all regulatory requirements of the Bulletin Board
and under U.S. federal and applicable State securities laws;
(o) the U.S. Company is not presently a reporting issuer under the
1934 Act, but neither it nor Chelsea knows of any impediment
to it becoming a reporting issuer under the 1934 Act;
(p) the U.S. Company has no further obligations to Highland under
the Highland Agreement and is party to no litigation,
administrative proceedings or arbitration related in any way
to the Highland Agreement, and to the best of the knowledge of
the U.S. Company and Chelsea, no such litigation,
administrative proceedings or arbitration is pending or
threatened;
(q) the only material contracts to which the U.S. Company is party
as at the date hereof are the Mineral Claims Purchase
Agreements, copies of which have been provided to the Vendors.
The U.S. Company and Whitehead will, prior to the Closing,
enter into agreements acceptable in form and substance to the
Vendors whereby the Mineral Claims Purchase Agreements will be
voided, and Whitehead shall release the U.S. Company from all
liabilities whatsoever under the Mineral Claims Purchase
Agreements;
(r) the U.S. Company has not waived or surrendered any right of
material value, except as set forth herein;
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 9
- -------------------------------
(s) the U.S. Company has filed all state, federal and foreign tax
returns which are required to be filed, and has paid all taxes
required to be paid and any other assessment, fine or penalty
which has been levied against it;
(t) the minute books of the U.S. Company provided to the
solicitors for the Vendors contain records of all of the
proceedings of the U.S. Company's directors, committees of
directors and shareholders since the date of the U.S.
Company's incorporation with the exception of minutes of a
meeting of the directors of the U.S. Company dated January 29,
1999 and a meeting of the shareholders of the Company held on
February 15, 1999, copies of which have been provided to the
solicitors for the Vendors, or will be provided prior to
Closing.
3. SHARE EXCHANGE
The Vendors agree with the U.S. Company to sell, transfer and
exchange all the Cool Shares to the U.S. Company, free and clear of all liens,
charges and encumbrances in consideration of the issuance by the U.S. Company to
the Vendors of such number of Shares of Common Stock of the U.S. Company as will
represent 65% of its issued shares (the "U.S. Shares") after completion of such
issuance, free of all liens, charges and encumbrances.
The U.S. Company agrees that upon completion of the sale of
the shares of Common Stock referred to in Section 2(a) hereof, it will forthwith
issue a number of shares of Common Stock equal to 65% or the number of shares
sold (the "Adjustment Shares").
The sale, transfer and exchange of the Cool Shares and the
issue of the U.S. Shares as provided herein (the "Closing") shall take place on
a day (the "Closing Date") to be agreed between the Vendors and Chelsea and the
U.S. Company, but which in any event shall take place no later than March 1,
1999 (the "Outside Date"). If the Closing has not taken place by the Outside
Date this Agreement will be void and of no further effect.
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 10
- -----------------------------
At the Closing, the Vendors shall deliver to the U.S. Company
the certificates representing the Cool Shares, duly endorsed for transfer, to
the U.S. Company, conditionally upon and simultaneously with the delivery by the
U.S. Company:
(a) to the Vendors of certificates representing 25% of the U.S.
Shares, issued in the names of the Vendors or according to the
Vendors' direction; and
(b) to Pacific Corporate Trust Company (the "Escrow Agent"), of
certificates representing 75% of the U. S. Shares (the
"Escrowed Shares"), issued in the names of the Vendors or
according to the Vendors' direction, to be held by the Escrow
Agent under the terms of an agreement in the form attached
hereto as Schedule "C" (the "Escrow Agreement") to be entered
into between the Escrow Agent, Chelsea, the Vendors, Cool and
the U.S. Company (the "Escrow Agreement").
Forthwith upon closing of the sale of the shares of Common
Stock referred to in Section 2(a) hereof, the U.S. Company shall deliver:
(a) certificates representing 25% of the Adjustment Shares, issued
in the names of the Vendors or according to the Vendors'
direction, to the Vendors; and
(b) certificates representing 75% of the Adjustment Shares, issued
in the names of the Vendors or according to the Vendors'
direction, to the Escrow Agent, to be held by the Escrow Agent
under the terms of the Escrow Agreement.
4. NON-COMPETITION
Cool will, prior to the Closing, enter into a management
agreement with Cool Management in the form attached as Schedule "D" hereto with
Cool Management. Cool Management will, prior to the Closing Date, enter into
employment or consulting agreements with each of the Vendors in the forms
attached as Schedule "E" hereto (with Messrs. Lau,
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 11
- -----------------------------
Hadcock and Belcourt) and Schedule "F" hereto (with Mr. Voth) (the
"Non-Competition Agreements").
The U.S. Company agrees with each of the Vendors that, if a
stock option plan is established by the U.S. Company after the Closing, each of
the Vendors will be entitled to participate therein on a basis at least as
favorable as that of any other participant.
Chelsea agrees that, while any of the U.S. Shares or the
Adjustment Shares remain subject to the Escrow Agreement and for one year
thereafter, it will not arrange financing for or otherwise be involved in
investor relations activities for or on behalf of any company or other entity
involved in substantially the same business as Cool.
5. U.S. SHARES
The Vendors acknowledge and agree that when the Closing takes
place they will acquire the U.S. Shares. If the U.S. Shares or the Adjustment
Shares have not been registered with the Securities and Exchange Commission of
the United States or with State regulatory authority in reliance upon exemptions
provided in the SECURITIES ACT of 1933 as amended, the rules and regulations
thereunder, or applicable State securities law, the Vendors recognize and
understand that the transfer agent for the U.S. Company has been or will be
directed to place a stop transfer order against the transfer of the U.S. Shares
until the requirements set out herein have been fulfilled. In connection with
the foregoing, the Vendors further acknowledge the shares to be issued to them
will have a restrictive legend placed thereon which will read substantially as
follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED TO
THE REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATIONS
THAT THESE SHARES HAVE BEEN TAKEN FOR INVESTMENT. THESE SHARES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED TO A
RESIDENT OR CITIZEN OF THE UNITED STATES, UNLESS AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY HAS BEEN RECEIVED BY THE
COMPANY TO THE EFFECT THAT SUCH
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 12
- -----------------------------
SALE, TRANSFER OR ASSIGNMENT WILL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, THE RULES AND REGULATIONS
THEREUNDER, OR APPLICABLE STATE SECURITIES LAWS.
6. INVESTOR RELATIONS
Chelsea agrees to provide investor relations services in
regard to the promotion of the U.S. Company for a minimum period of one (1) year
from the Closing Date. Subject to Chelsea meeting the financial milestones set
out herein, Chelsea shall be paid by the U.S. Company a fee of U.S. $5,000
monthly, in arrears, in respect of such services. Chelsea shall be responsible
for payment of all expenses it incurs in connection with the provision of such
services from such fee.
7. RIGHT OF FIRST REFUSAL
Chelsea shall have the right, but not the obligation, to
advance or arrange all debt or equity financings required by the U.S. Company to
meet the objectives of the Business Plan for a period of one (1) year from the
Closing Date.
The U.S. Company will notify Chelsea of the terms of any
further debt or equity financing that it requires or proposes to obtain for one
year from the Closing Date.
The right of first refusal must be exercised by Chelsea within
10 days following the receipt of the notice by notifying the U.S. Company that
it will provide such financing on the terms set out in the notice.
If Chelsea fails to give notice within the 10 days that it
will provide such financing upon the terms set out in the notice, the U.S.
Company will then be free to make other arrangements to obtain such financing
from another source.
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 13
- -----------------------------
The right of first refusal will terminate:
(a) if, on receipt of any notice from the U.S. Company under this
Section, Chelsea fails to exercise the right; and
(b) as provided in the Escrow Agreement.
8. CONDITIONS PRECEDENT FOR CHELSEA
All obligations of Chelsea under this Agreement are subject to the fulfilment
prior to Closing of each of the following:
(a) each of the Vendors shall have executed a Non-Competition
Agreement in the form provided herein;
(b) all the parties thereto shall have executed the Escrow
Agreement; and
(c) the representations and the warranties of the Vendors set
forth in this Agreement shall be true and correct as of the
date of this Agreement and shall be true and correct as of the
Closing Date as if made by the Vendors on the Closing Date;
The foregoing conditions in this paragraph are inserted for the exclusive
benefit of Chelsea and may be waived by it in whole or in part at any time prior
to Closing.
9. CONDITIONS PRECEDENT FOR THE VENDORS
All obligations of the Vendors under this Agreement are
subject to the fulfilment prior to Closing of each of the following:
(a) the representations and the warranties of Chelsea and the U.S.
Company set forth in this Agreement shall be true and correct
as of the date of this
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 14
- -----------------------------
Agreement and shall be true and correct as of the Closing Date
as if made by the U.S. Company and Chelsea as of the Closing
Date;
(b) each of the Vendors shall have executed the Non-Competition
Agreement to which they are respectively party;
(c) all of the parties thereto shall have executed the Escrow
Agreement;
(d) the U.S. Company shall have received all state securities or
"Blue Sky" permits and other authorizations necessary to issue
the U.S. Shares to the Vendors;
(e) all of the issued and outstanding shares in the capital stock
of the U.S. Company, and the U.S. Shares, shall be duly and
validly issued as fully-paid and non-assessable and shall be
admitted to quotation on the Bulletin Board;
(f) there shall not have been a material adverse change in the
business or affairs of the U.S. Company;
(g) the Vendors shall have been provided with all available
financial statements of the U.S. Company, and shall be
satisfied with the condition of the U.S. Company, financial
and otherwise;
(h) the U.S. Company shall have taken all measures necessary to
issue the U.S. Shares to the Vendors under appropriate
exemptions from the prospectus requirement of the SECURITIES
ACT (British Columbia) and the registration requirement of the
SECURITIES ACT OF 1933 (United States);
(i) the U.S. Company shall have entered into a Registration Rights
Agreement with each of the Vendors in the form attached hereto
as Schedule G;
(j) on or prior to the Closing, the directors of the U.S. Company
shall have taken all measures necessary to appoint each of the
Vendors as directors of the U.S.
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 15
- -----------------------------
Company, the present directors of the U.S. Company shall have
resigned as a director thereof, and the Vendors shall be
the sole directors of the U.S. Company;
(k) the Vendors will have received an opinion from the lawyers for
the U.S. Company in form and substance acceptable to the
Vendors, acting reasonably;
The foregoing conditions in this paragraph are inserted for the exclusive
benefit of the Vendors and may be waived by them in whole or in part at any time
prior to Closing.
10. INDEPENDENT LEGAL ADVICE
The parties acknowledge that they have obtained or waived the
right to obtain independent legal advice relating to any and all matters
associated with this Agreement.
11. PUBLICITY
Neither party shall issue any public announcement concerning
the transaction contemplated herein or in regard to this Agreement without the
consent of the other party. Such consent should not be unreasonably withheld,
except as required by law. The parties further agree that any public
announcement made that is required by law will disclose only the portion of any
information concerning this transaction that is legally required. The disclosing
party shall give the other party reasonable prior written notice of any
disclosure.
12. FEES AND EXPENSES
Each party agrees to pay the legal fees and expenses incurred
by it relating to the matter described in this Agreement. It is acknowledged and
agreed that Cool Entertainment may pay certain of the professional expenses
incurred by the Vendors in connection with the transactions described herein
after the Closing.
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 16
- -----------------------------
13. CLOSING
The Closing shall take place at the offices of Messrs. Swinton
& Company, in the City of Vancouver, in the Province of British Columbia, at
12.00 p.m. on the 1st day of March, 1999, or such other date as may be mutually
agreed upon.
14. MISCELLANEOUS
(a) The parties shall do all such other things and do such acts as
to carry out the intention of this Agreement.
(b) This Agreement cannot be amended unless in writing by both
parties.
(c) This Agreement shall be governed and construed in accordance
with the laws of the Province of British Columbia.
(d) There are not other agreements, representations and warranties
between the parties hereto except as set out herein.
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 17
- -----------------------------
(e) This Letter Agreement shall enure to the benefit of and be
binding upon the parties hereto and their executors,
administrators, successors and assigns.
Please acknowledge your acceptance and agreements in regard to
the above terms and conditions by executing the enclosed copy of this Letter
Agreement and returning the same to our offices as soon as possible.
Yours very truly
CHELSEA PACIFIC FINANCIAL CORP.
Per: /s/ Carey Whitehead
---------------------
WE HEREBY AGREE AND ACKNOWLEDGE OUR AGREEMENT TO THE ABOVE TERMS AND CONDITIONS.
This 25th day of February, 1999.
Signed, sealed and delivered )
by LEONARD WAYNE VOTH )
in the presence of: )
)
/s/ S. Campbell Fitch )
- -------------------------------------- )
Name )
)
S. CAMPBELL FITCH )
Swinton & Company )
1000-840 Howe Street )
Vancouver, B.C., V6Z 2M1 )
- -------------------------------------- ) /s/ Leonard Wayne Voth
Address ) ------------------------------
) LEONARD WAYNE VOTH
- -------------------------------------- )
)
)
- -------------------------------------- )
Occupation )
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 18
- -----------------------------
Signed, sealed and delivered )
by CLEMENT KAR MAN LAU )
in the presence of: )
)
/s/ S. Campbell Fitch )
- -------------------------------------- )
Name )
)
S. CAMPBELL FITCH )
Swinton & Company )
1000-840 Howe Street )
Vancouver, B.C., V6Z 2M1 )
- -------------------------------------- ) /s/ Clement Kar Man Lau
Address ) ------------------------------
) CLEMENT KAR MAN LAU
- -------------------------------------- )
)
)
- -------------------------------------- )
Occupation )
Signed, sealed and delivered )
by MARC GREGORY BELCOURT )
in the presence of: )
)
/s/ S. Campbell Fitch )
- -------------------------------------- )
Name )
)
S. CAMPBELL FITCH )
Swinton & Company )
1000-840 Howe Street )
Vancouver, B.C., V6Z 2M1 )
- -------------------------------------- ) /s/ Marc Gregory Belcourt
Address ) ------------------------------
) MARC GREGORY BELCOURT
- -------------------------------------- )
)
)
- -------------------------------------- )
Occupation )
<PAGE>
CHELSEA PACIFIC FINANCIAL CORP.
Clement Kar Man Lau et al
February 25, 1999
Page 19
- -----------------------------
Signed, sealed and delivered )
by WILLIAM JAMES HADCOCK )
in the presence of: )
)
/s/ S. Campbell Fitch )
- -------------------------------------- )
Name )
)
S. CAMPBELL FITCH )
Swinton & Company )
1000-840 Howe Street )
Vancouver, B.C., V6Z 2M1 )
- -------------------------------------- ) /s/ William James Hadcock
Address ) ------------------------------
) WILLIAM JAMES HADCOCK
- -------------------------------------- )
)
)
- -------------------------------------- )
Occupation )
The corporate seal of )
COOL ENTERTAINMENT, INC. )
(a Washington corporation )
was hereunto affixed in the presence of: )
)
/s/ Clement Kar Man Lau )
- -------------------------------------- )
Authorized Signatory ) c/s
)
)
- -------------------------------------- )
Authorized Signatory )
The corporate seal of )
COOL ENTERTAINMENT, INC. )
(a Colorado corporation) )
was hereunto affixed in the presence of: )
)
)
- -------------------------------------- )
Authorized Signatory ) c/s
)
)
- -------------------------------------- )
Authorized Signatory )
<PAGE>
Exhibit 3.1
Articles of Incorporation, as amended
<PAGE>
MINAS NOVAS GOLD CORP.
ARTICLES OF AMENDMENT
MINAS NOVAS GOLD CORP., a Colorado corporation (hereinafter referred to as the
"Corporation"), hereby certifies to the Secretary of State of the State of
Colorado that:
FIRST: The name of the Corporation is MINAS NOVAS GOLD CORP.
SECOND: The Articles of Incorporation of the Corporation are hereby amended by
striking in their entirety Article I and by substituting in lieu thereof the
following:
ARTICLE I
NAME
The name of the Corporation is Cool Entertainment, Inc.
THIRD: The amendment was advised to the stockholders by written informal
action, unanimously taken by the Board of Directors of the Corporation,
pursuant to and in accordance with Sections 7-108-202 and 7-110-103 of the
Colorado Business Corporation Act on January 29, 1999.
FOURTH: The amendment was adopted by the stockholders of the Corporation at a
special meeting held February 15, 1999. The number of votes cast for the
amendment by each voting group entitled to vote separately on the amendment
was sufficient for approval by that voting group under the provisions of
Section 7-110-103 of the Colorado Business Corporation Act.
IN WITNESS WHEREOF, MINAS NOVAS GOLD CORP. has caused these Articles of
Amendment to be signed in its name and on its behalf by its President, who
acknowledges that these Articles of Amendment are the act and deed of MINAS
NOVAS GOLD CORP. and, under the penalties of perjury, that the matters and facts
set forth herein with respect to authorization and approval are true in all
material respects to the best of the President's knowledge, information, and
belief.
MINAS NOVAS GOLD CORP.
By: /s/ Leroy Halterman
-------------------------------
Leroy Halterman, President
<PAGE>
ARTICLES OF INCORPORATION
OF
MINAS NOVAS GOLD CORP.
The undersigned, who is a natural person eighteen years or older,
acting as the incorporator of a corporation to be incorporated under the laws of
the State of Colorado, adopts these Articles of Incorporation.
ARTICLE I
NAME
The name of the Corporation is Minas Novas Gold Corp.
ARTICLE II
AUTHORIZED CAPITAL
The Corporation shall have authority to issue 100,000,000 shares of
Common Stock, No Par Value and 1,000,000 shares of Preferred Stock, No Par
Value.
COMMON STOCK. After the requirements with respect to preferential
dividends on the preferred stock, if any, shall have been met, and after the
Corporation shall have complied with all the requirements, if any, with respect
to the setting aside of sums as sinking funds or redemption or purchase
accounts, then, and not otherwise, the holders of the common stock shall be
entitled to receive such dividends as may be declared from time to time by the
Board of Directors of the Corporation.
After distribution in full of the preferential amount, if any, to be
distributed to the holders of the preferred stock in the event of voluntary or
involuntary liquidation, distribution, or sale of assets, dissolution, or
winding-up of the Corporation, the holders of the common stock shall be entitled
to receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to shareholders, ratably
in proportion to the number of shares of the common stock held by them
respectively.
Except as may otherwise be required by law, each holder of the common
stock shall have one vote in respect of each share of the common stock held by
such holder on all matters voted upon by the shareholders.
PREFERRED STOCK. Shares of preferred stock may be divided into such
series as may be established, from time to time, by the Board of Directors. The
Board of Directors, from time to time, may fix and determine the relative rights
and preferences of the shares of any series so established.
<PAGE>
ARTICLE III
OFFICES
The street address of the initial registered office of the Corporation
is 4582 South Ulster Street Parkway, Suite 201, Denver, Colorado, 80237, and the
name of the initial registered agent at that address is Fay M. Matsukage. The
written consent of the initial registered agent to the appointed as such is
stated below.
The address of the Corporation's initial principal office is 16 Marlowe
House, 29 Portsmouth Road, Kingston-upon-Thames, Surrey KT1 2NY, London, United
Kingdom.
ARTICLE IV
INCORPORATOR
The name and address of the incorporator is Fay M. Matsukage, 4582
South Ulster Street Parkway, Suite 201, Denver, Colorado 80237.
ARTICLE V
PURPOSES
The purposes for which the Corporation is organized and its powers are
as follows:
To engage in all lawful business; and
To have, enjoy, and exercise all of the rights, powers, and
privileges conferred upon corporations incorporated pursuant to Colorado law,
whether now or hereafter in effect, and whether or not herein specifically
mentioned.
ARTICLE VI
QUORUM FOR SHAREHOLDERS' MEETINGS
One-third of the votes entitled to be cast on any matter by each voting
group entitled to vote on a matter shall constitute a quorum of that voting
group for action on that matter.
ARTICLE VII
BOARD OF DIRECTORS
The corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be managed under the
direction of, a board of directors.
2
<PAGE>
The names and addresses of the initial directors are:
Wolfdietrich L. or F. Bruehl
16 Marlowe House 29 Portsmouth Road
Kingston-upon-Thames KT1 2NY, London, UK
Charles F. Stetler
Av. Prof. Silvio Vasconcelos 168
Sao Bento, Belo Horizonte, MG, Brazil
Jose Lourenco Viana Neto
Rua Matipo, 488, Ap 601
Santo Antonio, Belo Horizonte, MG, Brazil
John Jacob Stetler
6701 Corintia Street
Carlsbad, CA 92009
The directors shall be elected at each annual meeting of shareholders,
provided that vacancies may be filled by election by the remaining directors,
though less than a quorum or by the shareholders at a special meeting called for
that purpose. Despite the expiration of his or her term, a director continues to
serve until his or her successor is elected and qualifies.
ARTICLE VIII
CUMULATIVE VOTING
Cumulative voting shall not be permitted in the election of directors.
ARTICLE IX
LIMITATION ON DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director; except that this provision shall not eliminate or limit the
liability of a director to the Corporation or to its shareholders for monetary
damages otherwise existing for (i) any breach of the director's duty of loyalty
to the Corporation or to its shareholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) acts specified in Section 7-108-403 of the Colorado Business Corporation
Act; or (iv) any transaction from which the director directly or indirectly
derived any improper personal benefit. If the Colorado Business Corporation Act
is hereafter amended to eliminate or limit further the liability of a director,
then, in addition to the elimination and limitation of liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent permitted by the Colorado Business Corporation Act
as so amended. Any repeal or modification of this Article IX shall not adversely
affect any right or
3
<PAGE>
protection of a director of the Corporation under this Article IX, as in effect
immediately prior to such repeal or modification, with respect to any liability
that would have accrued, but for this Article IX, prior to such repeal or
modification.
ARTICLE X
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by
applicable law in effect from time to time, any person, and the estate and
personal representative of any such person, against all liability and expense
(including attorneys' fees) incurred by reason of the fact that he is or was a
director or officer of the Corporation or, while serving as a director or
officer of the Corporation, he is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, fiduciary, or
agent of, or in any similar managerial or fiduciary position of, another
domestic or foreign corporation or other individual or entity or of an employee
benefit plan. The Corporation shall also indemnify any person who is serving or
has served the Corporation as director, officer, employee, fiduciary, or agent,
and that person's estate and personal representative, to the extent and in the
manner provided in any bylaw, resolution of the shareholders or directors,
contract, or otherwise, so long as such provision is legally permissible.
In witness whereof, the undersigned incorporator has executed these
Articles of Incorporation this 12th day of June, 1996.
/s/ Fay M. Matsukage
---------------------------------
Fay M. Matsukage, Incorporator
The undersigned consents to the appointment as the initial registered
agent of Minas Novas Gold Corp.
/s/ Fay M. Matsukage
---------------------------------
Fay M. Matsukage
4
<PAGE>
Exhibit 3.2
Bylaws
<PAGE>
BYLAWS
OF
MINAS NOVAS GOLD CORP.
ARTICLE I
SHAREHOLDERS
1. ANNUAL SHAREHOLDERS' MEETING. The annual shareholders' meeting shall be
held on the date and at the time and place fixed from time to time by the board
of directors; provided, however, that the first annual meeting shall be held on
a date that is within six months after the close of the first fiscal year of the
Corporation, and each successive annual meeting shall be held on a date that is
within the earlier of six (6) months after the close of the last fiscal year or
fifteen (15) months after the last annual meeting.
2. SPECIAL SHAREHOLDERS' MEETING. A special shareholders' meeting for any
purpose or purposes, may be called by the board of directors or the president.
The Corporation shall also hold a special shareholders' meeting in the event it
receives, in the manner specified in Section VII.3., one or more written demands
for the meeting, stating the purpose or purposes for which it is to be held,
signed and dated by the holders of shares representing not less than one-tenth
of all of the votes entitled to be cast on any issue at the meeting. Special
meetings shall be held at the principal office of the Corporation or at such
other place as the board of directors or the president may determine.
3. RECORD DATE FOR DETERMINATION OF SHAREHOLDERS.
(a) In order to make a determination of shareholders (1) entitled to
notice of or to vote any shareholders' meeting or at any adjournment of a
shareholders' meeting, (2) entitled to demand a special shareholders' meeting,
(3) entitled to take any other action, (4) entitled to receive payment of a
share dividend or a distribution, or (5) for any other purpose, the board of
directors may fix a future date as the record date for such determination of
shareholders. The record date may be fixed not more than seventy (70) days
before the date of the proposed action.
(b) Unless otherwise specified when the record date is fixed, the time
of day for determination of shareholders shall be as of the Corporation's close
of business on the record date.
(c) A determination of shareholders entitled to be given notice of or
to vote at a shareholders' meeting is effective for any adjournment of the
meeting unless the board of directors fixes a new record date, which the board
shall do if the meeting is adjourned to a date more than one hundred twenty
(120) days after the date fixed for the original meeting.
(d) If no record date is otherwise fixed, the record date for
determining shareholders entitled to be given notice of and to vote at an annual
meeting or special shareholders' meeting is the day before the first notice is
given to shareholders.
<PAGE>
(e) The record date for determining shareholders entitled to take action
without a meeting pursuant to Sections I.10, and I.11. is the date a writing
upon which the action is taken is first received by the Corporation.
4. VOTING LIST.
(a) After a record date is fixed for a shareholders' meeting, the
secretary shall prepare a list of names of all its shareholders who are entitled
to be given notice of the meeting. The list shall be arranged by voting groups
and within each voting group by class or series of shares, shall be alphabetical
within each class or series, and shall show the address of, and the number of
shares of each such class and series that are held by, each shareholder.
(b) The shareholders' list shall be available for inspection by any
shareholders, beginning the earlier of ten (10) days before the meeting for
which the list was prepared or two (2) business days after notice of the meeting
is given and continuing through the meeting, and any adjournment thereof, at the
Corporation's principal office or at a place identified in the notice of the
meeting in the city where the meeting will be held.
(c) The secretary shall make the shareholders' list available at the
meeting, and any shareholder or agent or attorney of a shareholder is entitled
to inspect the list at any time during the meeting or any adjournments.
5. NOTICE TO SHAREHOLDERS.
(a) The secretary shall give notice to shareholders of the date, time,
and place of each annual and special shareholders' meeting no fewer than ten
(10) nor more than sixty (60) days before the date of the meeting; except that,
if the articles of incorporation are to be amended to increase the number of
authorized shares, at least thirty (30) days' notice shall be given. Except as
otherwise required by the Colorado Business Corporation Act, the secretary shall
be required to give such notice only to shareholders entitled to vote at the
meeting.
(b) Notice of an annual shareholders' meeting need not include a
description of the purpose or purposes for which the meeting is called unless a
purpose of the meeting is to consider an amendment to the articles of
incorporation, a restatement of the articles of incorporation, a plan of merger
or share exchange, disposition of substantially all of the property of the
Corporation, consent by the Corporation to the disposition of property by
another entity, or dissolution of the Corporation.
(c) Notice of a special shareholders' meeting shall include a
description of the purpose or purposes for which the meeting is called.
(d) Notice of a shareholders' meeting shall be in writing and shall be
given
2
<PAGE>
(1) by deposit in the United States mail, properly addressed to
the shareholder's address shown in the Corpora-tion's current record of
shareholders, first class postage prepaid, and, if so given, shall be
effective when mailed; or
(2) by telegraph, teletype, electronically transmitted facsimile,
electronic mail, mail, or private carrier or by personal delivery to the
shareholder, and, if so given, shall be effective when actually received
by the shareholder.
(e) If an annual or special shareholders' meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
or place if the new date, time, or place is announced at the meeting before
adjournment; provided, however, that, if a new record date for the adjourned
meeting is fixed pursuant to Section I.3.(c), notice of the adjourned meeting
shall be given to persons who are shareholders as of the new record date.
(f) If three (3) successive notices are given by the Corporation,
whether with respect to a shareholders' meeting or otherwise, to a shareholder
and are returned as undeliverable, no further notices to such shareholder shall
be necessary until another address for the shareholder is made known to the
Corporation.
6. QUORUM. Shares entitled to vote as a separate voting group may take action
on a matter at a meeting only if a quorum of those shares exists with respect to
that matter. One-third of the votes entitled to be cast on the matter by the
voting group shall constitute a quorum of that voting group for action on the
matter. If a quorum does not exist with respect to any voting group, the
president or any shareholder or proxy that is present at the meeting, whether or
not a member of that voting group, may adjourn the meeting to a different date,
time, or place, and (subject to the next sentence) notice need not be given of
the new date, time, or place if the new date, time, or place is announced at the
meeting before adjournment. If a new record date for the adjourned meeting is or
must be fixed pursuant to Section I.3.(c), notice of the adjourned meeting shall
be given pursuant to Section I.5. to persons who are shareholders as of the new
record date. At any adjourned meeting at which a quorum exists, any matter may
be acted upon that could have been acted upon at the meeting originally called;
provided, however, that, if new notice is given of the adjourned meeting, then
such notice shall state the purpose or purposes of the adjourned meeting
sufficiently to permit action on such matters. Once a share is represented for
any purpose at a meeting, including the purpose of determining that a quorum
exists, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
shall be set for that adjourned meeting.
7. VOTING ENTITLEMENT OF SHARES. Except as stated in the articles of
incorporation, each outstanding share, regardless of class, is entitled to one
vote, and each fractional share is entitled to a corresponding fractional vote,
on each matter voted on at a shareholders' meeting.
8. PROXIES; ACCEPTANCE OF VOTES AND CONSENTS.
(a) A shareholder may vote either in person or by proxy.
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(b) An appointment of a proxy is not effective against the Corporation
until the appointment is received by the Corporation. An appointment is valid
for eleven (11) months unless a different period is expressly provided in the
appointment form.
(c) The Corporation may accept or reject any appointment of a proxy,
revocation of appointment of a proxy, vote, consent, waiver, or other writing
purportedly signed by or for a shareholder, if such acceptance or rejection is
in accordance with the provisions of Sections 7-107-203 and 7-107-205 of the
Colorado Business Corporation Act.
9. WAIVER OF NOTICE.
(a) A shareholder may waive any notice required by the Colorado
Business Corporation Act, the articles of incorporation, or these Bylaws,
whether before or after the date or time stated in the notice as the date or
time when any action will occur or has occurred. The waiver shall be in writing,
be signed by the shareholder entitled to the notice, and be delivered to the
Corporation for inclusion in the minutes or filing with the corporation records,
but such delivery and filing shall not be conditions of the effectiveness of the
waiver.
(b) A shareholder's attendance at a meeting waives objection to lack of
notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting because of lack of notice or defective notice, and waives
objection to consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented.
10. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action required or permitted
to be taken at a shareholders' meeting may be taken without a meeting if all of
the shareholders entitled to vote thereon consent to such action in writing.
Action taken pursuant to this section shall be effective when the Corporation
has received writings that describe and consent to the action, signed by all of
the shareholders entitled to vote thereon. Action taken pursuant to this section
shall be effective as of the date the last writing necessary to effect the
action is received by the Corporation, unless all of the writings necessary to
effect the action specify another date, which may be before or after the date
the writings are received by the Corporation. Such action shall have the same
effect as action taken at a meeting of shareholders and may be described as such
in any document. Any shareholder who has signed a writing describing and
consenting to action taken pursuant to this section may revoke such consent by a
writing signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the Corporation before the effectiveness of the action.
11. MEETINGS BY TELECOMMUNICATIONS. Any or all of the shareholders may
participate in an annual or special shareholders' meeting by, or the meeting may
be conducted through the use of, any means of communication by which all persons
participating in the meeting may hear each other during the meeting. A
shareholder participating in a meeting by this means is deemed to be present in
person at the meeting.
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ARTICLE II
DIRECTORS
1. AUTHORITY OF THE BOARD OF DIRECTORS. The corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, a board of directors.
2. NUMBER. The number of directors shall be fixed by resolution of the board
of directors from time to time and may be increased or decreased by resolution
adopted by the board of directors from time to time, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director.
3. QUALIFICATION. Directors shall be natural persons at least eighteen (18)
years old but need not be residents of the State of Colorado or shareholders of
the Corporation.
4. ELECTION. The board of directors shall be elected at the annual meeting of
the shareholders or at a special meeting called for that purpose.
5. TERM. Each director shall be elected to hold office until the next annual
meeting of shareholders and until the director's successor is elected and
qualified.
6. RESIGNATION. A director may resign at any time by giving written notice of
his or her resignation to any other director or (if the director is not also the
secretary) to the secretary. The resignation shall be effective when it is
received by the other director or secretary, as the case may be, unless the
notice of resignation specifies a later effective date. Acceptance of such
resignation shall not be necessary to make it effective unless the notice so
provides.
7. REMOVAL. Any director may be removed by the shareholders of the voting
group that elected the director, with or without cause, at a meeting called for
that purpose. The notice of the meeting shall state that the purpose, or one of
the purposes, of the meeting is removal of the directors. A director may be
removed only if the number of votes cast in favor of removal exceeds the number
of votes cast against removal.
8. VACANCIES.
(a) If a vacancy occurs on the board of directors, including a vacancy
resulting from an increase in the number of directors:
(1) The shareholders may fill the vacancy at the next annual
meeting or at a special meeting called for that purpose; or
(2) The board of directors may fill the vacancy; or
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(3) If the directors remaining in office constitute fewer than a
quorum of the board, they may fill the vacancy by the affirmative vote of
a majority of all the directors remaining in office.
(b) Notwithstanding Section II.8.(a), if the vacant office was held by a
director elected by a voting group of shareholders, then, if one or more of the
remaining directors were elected by the same voting group, only such directors
are entitled to vote to fill the vacancy if it is filled by directors, and they
may do so by the affirmative vote of a majority of such directors remaining in
office; and only the holders of shares of that voting group are entitled to vote
to fill the vacancy if it is filled by the shareholders.
(c) A vacancy that will occur at a specific later date, by reason of a
resignation that will be come effective at a later date under Section II.6. or
otherwise, may be filled before the vacancy occurs, but the new director may not
take office until the vacancy occurs.
9. MEETINGS. The board of directors may hold regular or special meetings in
or out of Colorado. A regular meeting shall be held, without other notice than
these Bylaws, immediately after and at the same place as the annual meeting of
shareholders. The board of directors may, by resolution, establish other dates,
times, and places for additional regular meetings, which may thereafter be held
without further notice. Special meetings may be called by the president or by
any two directors and shall be held at the principal office of the Corporation
unless another place is consented to by every director. At any time when the
board consists of a single director, that director may act at any time, date, or
place without notice.
10. NOTICE OF SPECIAL MEETING. Notice of a special meeting shall be given to
every director at least twenty-four (24) hours before the time of the meeting,
stating the date, time, and place of the meeting. The notice need not describe
the purpose of the meeting. Notice may be given orally to the director,
personally, or by telephone or other wire or wireless communication. Notice may
also be given in writing by telegraph, teletype, electronically transmitted
facsimile, electronic mail, mail, or private carrier. Notice shall be effective
at the earliest of the time it is received; five days after it is deposited in
the United States mail, properly addressed to the last address of the director
shown on the records of the Corporation, first class postage prepaid; or the
date shown on the return receipt if mailed by registered or certified mail,
return receipt requested, postage prepaid, in the United States mail and if the
return receipt is signed by the director to whom the notice is addressed.
11. QUORUM. Except as provided in Section II.8., a majority of the number of
directors fixed in accordance with these Bylaws shall constitute a quorum for
the transaction of business at all meetings of the board of directors. The act
of the majority of the directors present at any meeting at which a quorum is
present shall be the act of the board of directors, except as otherwise
specifically required by law.
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12. WAIVER OF NOTICE.
(a) A director may waive any notice of a meeting before or after the
time and date of the meeting stated in the notice. Except as provided by
Section II.12.(b), the waiver shall be in writing and shall be signed by the
director. Such waiver shall be delivered to the secretary for filing with the
corporate records, but such delivery and filing shall not be conditions of the
effectiveness of the waiver.
(b) A director's attendance at or participation in a meeting waives any
required notice to him or her of the meeting unless, at the beginning of the
meeting or promptly upon his or her later arrival, the director objects to
holding the meeting or transacting business at the meeting because of lack of
notice or defective notice and does not thereafter vote for or assent to action
taken at the meeting.
13. ATTENDANCE BY TELEPHONE. One or more directors may participate in a
regular or special meeting by, or conduct the meeting through the use of, any
means of communication by which all directors participating may hear each other
during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
14. DEEMED ASSENT TO ACTION. A director who is present at a meeting of the
board of directors when corporate action is taken shall be deemed to have
assented to all action taken at the meeting unless:
(a) The director objects at the beginning of the meeting, or promptly
upon his or her arrival, to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to any action taken at the
meeting;
(b) The director contemporaneously requests that his or her dissent or
abstention as to any specific action taken be entered in the minutes of the
meeting; or
(c) The director causes written notice of his or her dissent or
abstention as to any specific action to be received by the presiding officer of
the meeting before adjournment of the meeting or by the secretary (or, if the
director is the secretary, by another director) promptly after adjournment of
the meeting.
The right of dissent or abstention pursuant to this Section II.14. as to a
specific action is not available to a director who votes in favor of the action
taken.
15. ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or permitted by
law to be taken at a board of directors' meeting may be taken without a meeting
if all members of the board consent to such action in writing. Action shall be
deemed to have been so taken by the board at the time the last director signs a
writing describing the action taken, unless, before such time, any director has
revoked his or her consent by a writing signed by the director and received by
the secretary or any other person authorized by the Bylaws or the board of
directors to receive such a revocation.
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Such action shall be effective at the time and date it is so taken unless the
directors establish a different effective time or date. Such action has the same
effect as action taken at a meeting of directors and may be described as such in
any document.
ARTICLE III
COMMITTEES OF THE BOARD OF DIRECTORS
1. COMMITTEES OF THE BOARD OF DIRECTORS.
(a) Subject to the provisions of Section 7-109-106 of the Colorado
Business Corporation Act, the board of directors may create one or more
committees and appoint one or more members of the board of directors to serve on
them. The creation of a committee and appointment of members to it shall require
the approval of a majority of all the directors in office when the action is
taken, whether or not those directors constitute a quorum of the board.
(b) The provisions of these Bylaws governing meetings, action without
meeting, notice, waiver of notice, and quorum and voting requirements of the
board of directors apply to committees and their members as well.
(c) To the extent specified by resolution adopted from time to time by
a majority of all the directors in office when the resolution is adopted,
whether or not those directors constitute a quorum of the board, each committee
shall exercise the authority of the board of directors with respect to the
corporate powers and the management of the business and affairs of the
Corporation; except that a committee shall not:
(1) Authorize distributions;
(2) Approve or propose to shareholders action that the Colorado
Business Corporation Act requires to be approved by shareholders;
(3) Fill vacancies on the board of directors or on any of its
committees;
(4) Amend the articles of incorporation pursuant to
Section 7-110-102 of the Colorado Business Corporation Act;
(5) Adopt, amend, or repeal bylaws;
(6) Approve a plan of merger not requiring shareholder approval;
(7) Authorize or approve reacquisition of shares, except according
to a formula or method prescribed by the board of directors; or
(8) Authorize or approve the issuance or sale of shares, or a
contract for the sale of shares, or determine the designation and relative
rights, preferences, and limitations of a
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class or series of shares; except that the board of directors may
authorize a committee or an officer to do so within limits specifically
prescribed by the board of directors.
(d) The creation of, delegation of authority to, or action by, a
committee does not alone constitute compliance by a director with applicable
standards of conduct.
ARTICLE IV
OFFICERS
1. GENERAL. The Corporation shall have as officers a president, a secretary,
and a treasurer, who shall be appointed by the board of directors. The board of
directors may appoint as additional officers a chairman and other officers of
the board. The board of directors, the president, and such other subordinate
officers as the board of directors may authorize from time to time, acting
singly, may appoint as additional officers one or more vice presidents,
assistant secretaries, assistant treasurers, and such other subordinate officers
as the board of directors, the president, or such other appointing officers deem
necessary or appropriate. The officers of the Corporation shall hold their
offices for such terms and shall exercise such authority and perform such duties
as shall be determined from time to time by these Bylaws, the board of
directors, or (with respect to officers who are appointed by the president or
other appointing officers) the persons appointing them; provided, however, that
the board of directors may change the term of offices and the authority of any
officer appointed by the present or other appointing officers. Any two or more
offices may be held by the same person. The officers of the Corporation shall be
natural persons at least eighteen (18) years old.
2. TERM. Each officer shall hold office from the time of appointment until
the time of removal or resignation pursuant to Section IV.3. or until the
officer's death.
3. REMOVAL AND RESIGNATION. Any officer appointed by the board of directors
may be removed at any time by the board of directors. Any officer appointed by
the president or other appointing officer may be removed at any time by the
board of directors or by the person appointing the officer. Any officer may
resign at any time by giving written notice of resignation to any director (or
to any director other than the resigning officer if the officer is also a
director), to the president, to the secretary, or to the officer who appointed
the officer. Acceptance of such resignation shall not be necessary to make it
effective, unless the notice so provides.
4. PRESIDENT. The president shall preside at all meetings of shareholders,
and the president shall also preside at all meetings of the board of directors
unless the board of directors has appointed a chairman, vice chairman, or other
officer of the board and has authorized such person to preside at meetings of
the board of directors instead of the president. Subject to the direction and
control of the board of directors, the president shall be the chief executive
officer and of the Corporation and as such shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the board of directors are carried into effect. The president may
negotiate, enter into, and execute contracts, deeds and other instruments on
behalf of the Corporation as are necessary and appropriate to the conduct of the
business and affairs of the Corporation or as are approved by the board of
directors. The president shall have such additional authority and duties
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as are appropriate and customary for the office of president and chief
executive officer, except as the same may be expanded or limited by the board
of directors from time to time.
5. VICE PRESIDENT. The vice president, if any, or, if there are more than
one, the vice presidents in the order determined by the board of directors or
the president (or, if no such determination is made, in the order of their
appointment), shall be the officer or officers next in seniority after the
president. Each vice president shall have such authority and duties as are
prescribed by the board of directors or president. Upon the death, absence, or
disability of the president, the vice president, if any, or, if there are more
than one, the vice presidents in the order determined by the board of directors
or the president, shall have the authority and duties of the president.
6. SECRETARY. The secretary shall be responsible for the preparation and
maintenance of minutes of the meetings of the board of directors and of the
shareholders and of the other records and information required to be kept by the
Corporation under Section 7-116-101 of the Colorado Business Corporation Act and
for authenticating records of the Corporation. The secretary shall also give, or
cause to be given, notice of all meetings of the shareholders and special
meetings of the board of directors, keep the minutes of such meetings, have
charge of the corporate seal and have authority to affix the corporate seal to
any instrument requiring it (and, when so affixed, it may be attested by the
secretary's signature), be responsible for the maintenance of all other
corporate records and files and for the preparation and filing of reports to
governmental agencies (other than tax returns), and have such other authority
and duties as are appropriate and customary for the office of secretary, except
as the same may be expanded or limited by the board of directors from time to
time.
7. ASSISTANT SECRETARY. The assistant secretary, if any, or, if there are
more than one, the assistant secretaries in the order determined by the board of
directors or the secretary (or, if no such determination is made, in the order
of their appointment) shall, under the supervision of the secretary, perform
such duties and have such authority as may be prescribed from time to time by
the board of directors or the secretary. Upon the death, absence, or disability
of the secretary, the assistant secretary, if any, or if there are more than
one, the assistant secretaries in the order designated by the board of directors
or the secretary (or, if no such determination is made, in the order of their
appointment), shall have the authority and duties of the secretary.
8. TREASURER. The treasurer shall have control of the funds and the care and
custody of all stocks, bonds, and other securities owned by the Corporation, and
shall be responsible for the preparation and filing of tax returns. The
treasurer shall receive all moneys paid to the Corporation and, subject to any
limits imposed by the board of directors, shall have authority to give receipts
and vouchers, to sign and endorse checks and warrants in the Corporation's name
and on the Corporation's behalf, and give full discharge for the same. The
treasurer shall also have charge of disbursement of funds of the Corporation,
shall keep full and accurate records of the receipts and disbursements, and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as shall be designated by the
board of directors. The treasurer shall have such additional authority and
duties as are appropriate and customary for the office of treasurer, except as
the same may be expanded or limited by the board of directors from time to time.
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9. ASSISTANT TREASURER. The assistant treasurer, if any, or, if there are
more than one, the assistant treasurers in the order determined by the board of
directors or the treasurer (or, if no such determination is made, in the order
of their appointment) shall, under the supervision of the treasurer, perform
such duties and have such authority as may be prescribed from time to time by
the board of directors or the treasurer. Upon the death, absence, or disability
of the treasurer, the assistant treasurer, if any, or, if there are more than
one, the assistant treasurers in the order designated by the board of directors
or the treasurer (or, if no such determination is made, in the order of their
appointment), shall have the authority and duties of the treasurer.
10. COMPENSATION. Officers shall receive such compensation for their services
as may be authorized or ratified by the board of directors. Election or
appointment of an officer shall not of itself create a contractual right to
compensation for services performed as such officer.
ARTICLE V
INDEMNIFICATION
1. DEFINITIONS. As used in this article:
(a) "Corporation" includes any domestic or foreign entity that is a
predecessor of the Corporation by reason of a merger or other transaction in
which the predecessor's existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, fiduciary, or agent of another domestic or foreign corporation or
other person or of an employee benefit plan. A director is considered to be
serving an employee benefit plan at the Corporation's request if his or her
duties to the Corporation also impose duties on, or otherwise involve services
by, the director to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(c) "Expenses" includes counsel fees.
(d) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine, including an excise tax
assessed with respect to an employee benefit plan, or reasonable expenses.
(e) "Official capacity" means, when used with respect to a director,
the office of director in the Corporation and, when used with respect to a
person other than a director as contemplated in Section V.1.(a), the office in
the Corporation held by the officer or the employment, fiduciary, or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
Corporation. "Official capacity" does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.
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(f) "Party" includes a person who was, is, or is threatened to be made
a named 3defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal.
2. AUTHORITY TO INDEMNIFY DIRECTORS.
(a) Except as provided in Section V.2.(d), the Corporation may
indemnify a person made a party to a proceeding because the person is or was a
director against liability incurred in the proceeding if:
(1) The person conducted himself or herself in good faith; and
(2) The person reasonably believed:
(A) In the case of conduct in an official capacity with the
Corporation, that his or her conduct was in the Corporation's best
interests; and
(B) In all other cases, that his or her conduct was at least
not opposed to the Corporation's best interests; and
(3) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement of Section V.2.(a)(2)(B). A director's conduct with respect to an
employee benefit plan for a purpose that the director did not reasonably believe
to be in the interests of the participants in or beneficiaries of the plan shall
be deemed not to satisfy the requirements of Section V.2.(a)(1).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this Section V.2.
(d) The Corporation may not indemnify a director under this Section V.2.
(1) In connection with a proceeding by or in the right of the
Corporation in which the director was adjudged liable to the Corporation;
or
(2) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not involving
action in an official capacity, in which
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proceeding the director was adjudged liable on the basis that he or she
derived an improper personal benefit.
(e) Indemnification permitted under this Section V.2. in connection with
a proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with the proceeding.
3. MANDATORY INDEMNIFICATION OF DIRECTORS. The Corporation shall indemnify a
person who was wholly successful, on the merits or otherwise, in the defense of
any proceeding to which the person was a party because the person is or was a
director, against reasonable expenses incurred by him or her in connection with
the proceeding.
4. ADVANCE OF EXPENSES TO DIRECTORS.
(a) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if:
(1) The director furnishes to the Corporation a written
affirmation of the director's good faith belief that he or she has met the
standard of conduct described in Section V.2.
(2) The director furnishes to the Corporation a written
undertaking, executed personally or on the director's behalf, to repay the
advance if it is ultimately determined that he or she did not meet the
standard of conduct; and
(3) A determination is made that the facts then known to those
making the determination would not preclude indemnification under this
article.
(b) The undertaking required by Section V.4.(a)(2) shall be an unlimited
general obligation of the director but need not be secured and may be accepted
without reference to financial ability to make repayment.
(c) Determinations and authorizations of payments under this
Section V.4. shall be made in the manner specified in Section V.6.
5. COURT-ORDERED INDEMNIFICATION OF DIRECTORS. A director who is or was a
party to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order indemnification in the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under Section V.3., the court shall order indemnification, in
which case the court shall also order the Corporation to pay the director's
reasonable expenses incurred to obtain court-ordered indemnification.
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(b) If it determines that the director is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances, whether or not the
director met the standard of conduct set forth in Section V.2.(a) or was
adjudged liable in the circumstances described in Section V.2.(d), the court may
order such indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability shall have
been adjudged in the circumstances described in Section V.2.(d) is limited to
reasonable expenses incurred in connection with the proceeding and reasonable
expenses incurred to obtain court-ordered indemnification.
6. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF DIRECTORS.
(a) The Corporation may not indemnify a director under Section V.2.
unless authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in Section V.2. The
Corporation shall not advance expenses to a director under Section V.4. unless
authorized in the specific case after the written affirmation and undertaking
required by Sections V.4.(a)(1) and V.4.(a)(2) are received and the
determination required by Section V.4.(a)(3) has been made.
(b) The determination required by Section V.6.(a) shall be made:
(1) By the board of directors by a majority vote of those present
at a meeting at which a quorum is present, and only those directors not
parties to the proceeding shall be counted in satisfying the quorum; or
(2) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board of directors,
which committee shall consist of two or more directors not parties to the
proceeding; except that directors who are parties to the proceeding may
participate in the designation of directors for the committee.
(c) If a quorum cannot be obtained as contemplated in
Section V.6.(b)(1), and a committee cannot be established under
Section V.6.(b)(2) if a quorum is obtained or a committee is designated, if a
majority of the directors constituting such quorum or such committee so directs,
the determination required to be made by Section V.6.(a) shall be made:
(1) By independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in
Section V.6.(b)(1) of V.6.(b)(2), or, if a quorum of the full board cannot
be obtained and a committee cannot be established, by independent legal
counsel selected by a majority vote of the full board of directors; or
(2) By the shareholders.
(d) Authorization of indemnification and advance of expenses shall be
made in the same manner as the determination that indemnification or advance of
expenses is permissible; except that, if the determination that indemnification
or advance of expenses is permissible is made by independent
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legal counsel, authorization of indemnification and advance of expenses shall
be made by the body that selected such counsel.
7. INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND AGENTS.
(a) An officer is entitled to mandatory indemnification under
Section V.3. and is entitled to apply for court-ordered indemnification under
Section V.5., in each case to the same extent as a director;
(b) The Corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the Corporation to the same extent as to a
director; and
(c) The Corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a greater extent
than is provided in these Bylaws, if not inconsistent with public policy, and if
provided for by general or specific action of its board of directors or
shareholders or by contract.
8. INSURANCE. The Corporation may purchase and maintain insurance on behalf
of a person who is or was a director, officer, employee, fiduciary, or agent of
the Corporation, or who, while a director, officer, employee, fiduciary, or
agent of the Corporation, is or was serving at the request of the Corporation as
a director, officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee benefit plan,
against liability asserted against or incurred by the person in that capacity or
arising from his or her status as a director, officer, employee, fiduciary, or
agent, whether or not the Corporation would have power to indemnify the person
against the same liability under Sections V.2., V.3., or V.7. Any such insurance
may be procured from any insurance company designated by the board of directors,
whether such insurance company is formed under the laws of this state or any
other jurisdiction of the United States or elsewhere, including any insurance
company in which the Corporation has an equity or any other interest through
stock ownership or otherwise.
9. NOTICE TO SHAREHOLDERS OF INDEMNIFICATION OF DIRECTOR. If the Corporation
indemnifies or advances expenses to a director under this article in connection
with a proceeding by or in the right of the Corporation, the Corporation shall
give written notice of the indemnification or advance to the shareholders with
or before the notice of the next shareholders' meeting. If the next shareholder
action is taken without a meeting at the instigation of the board of directors,
such notice shall be given to the shareholders at or before the time the first
shareholder signs a writing consenting to such action.
ARTICLE VI
SHARES
1. CERTIFICATES. Certificates representing shares of the capital stock of the
Corporation shall be in such form as is approved by the board of directors and
shall be signed by the chairman or vice chairman of the board of directors (if
any), or the president or any vice president, and by the secretary
15
<PAGE>
or an assistant secretary or the treasurer or an assistant treasurer. All
certificates shall be consecutively numbered, and the names of the owners, the
number of shares, and the date of issue shall be entered on the books of the
Corporation. Each certificate representing shares shall state upon its face
(a) That the Corporation is organized under the laws of the State of
Colorado;
(b) The name of the person to whom issued;
(c) The number and class of the shares and the designation of the
series, if any, that the certificate represents;
(d) The par value, if any, of each share represented by the certificate;
(e) A conspicuous statement, on the front or the back, that the
Corporation will furnish to the shareholder, on request in writing and without
charge, information concerning the designations, preferences, limitations, and
relative rights applicable to each class, the variations in preferences,
limitations, and rights determined for each series, and the authority of the
board of directors to determine variations for future classes or series; and
(f) Any restrictions imposed by the Corporation upon the transfer of the
shares represented by the certificate.
2. FACSIMILE SIGNATURES. Where a certificate is signed
(a) By a transfer agent other than the Corporation or its employee, or
(b) By a registrar other than the Corporation or its employee, any or
all of the officers' signatures on the certificate required by Section VI.1. may
be facsimile. If any officer, transfer agent, or registrar who has signed, or
whose facsimile signature or signatures have been placed upon, any certificate,
shall cease to be such officer, transfer agent, or registrar, whether because of
death, resignation, or otherwise, before the certificate is issued by the
Corporation, it may nevertheless be issued by the Corporation with the same
effect as if he or she were such officer, transfer agent, or registrar at the
date of issue.
3. TRANSFER OF SHARES. Transfers of shares shall be made on the books of the
Corporation only upon presentation of the certificate or certificates
representing such shares properly endorsed by the person or persons appearing
upon the face of such certificate to be the owner, or accompanied by a proper
transfer or assignment separate from the certificate, except as may otherwise be
expressly provided by the statutes of the State of Colorado or by order of a
court of competent jurisdiction. The officers or transfer agents of the
Corporation may, in their discretion, require a signature guaranty before making
any transfer. The Corporation shall be entitled to treat the person in whose
name any shares are registered on its books as the owner of those shares for all
purposes and shall
16
<PAGE>
not be bound to recognize any equitable or other claim or interest in the shares
on the part of any other person, whether or not the Corporation shall have
notice of such claim or interest.
4. SHARES HELD FOR ACCOUNT OF ANOTHER. The board of directors may adopt by
resolution a procedure whereby a shareholder of the Corporation may certify in
writing to the Corporation that all or a portion or the shares registered in the
name of such shareholder are held for the account of a specified person or
persons. The resolution shall set forth
(a) The classification of shareholders who may certify;
(b) The purpose or purposes for which the certification may be made;
(c) The form of certification and information to be contained herein;
(d) If the certification is with respect to a record date or closing of
the stock transfer books, the time after the record date or the closing of the
stock transfer books within which the certification must be received by the
Corporation; and
(e) Such other provisions with respect to the procedure as are deemed
necessary or desirable. Upon receipt by the Corporation of a certification
complying with the procedure, the persons specified in the certification shall
be deemed, for the purpose or purposes set forth in the certification, to be the
holders of record of the number of shares specified in place of the shareholders
making the certification.
ARTICLE VII
MISCELLANEOUS
1. CORPORATE SEAL. The board of directors may adopt a seal, circular in form
and bearing the name of the Corporation and the words "SEAL" and "COLORADO,"
which, when adopted, shall constitute the seal of the Corporation. The seal may
be used by causing it or a facsimile of it to be impressed, affixed, manually
reproduced, or rubber stamped with indelible ink.
2. FISCAL YEAR. The board of directors may, by resolution, adopt a fiscal
year for the Corporation.
3. RECEIPT OF NOTICES BY THE CORPORATION. Notices, shareholder writings
consenting to action, and other documents or writings shall be deemed to have
been received by the Corporation when they are received
(a) At the registered office of the Corporation in the State of
Colorado.
(b) At the principal office of the Corporation (as that office is
designated in the most recent document filed by the Corporation with the
Secretary of State for the State of Colorado designating a principal office)
addressed to the attention of the secretary of the Corporation;
17
<PAGE>
(c) By the secretary of the Corporation wherever the secretary may be
found; or
(d) By any other person authorized from time to time by the board of
directors, the president, or the secretary to receive such writings, wherever
such person is found.
4. AMENDMENT OF BYLAWS. These Bylaws may at any time and from time to time be
amended, supplemented, or repealed by the board of directors.
The foregoing Bylaws were duly adopted by the Board of Directors as the
initial bylaws of Minas Novas Gold Corp., effective June 18, 1996.
/s/ Jose Lourenco Viana Neto
-----------------------------------
Jose Lourenco Viana Neto, Secretary
18
<PAGE>
Exhibit 10.1
Management Agreement between Cool Entertainment, Inc., and Cool Management Inc.
dated March 1, 1999
<PAGE>
- -------------------------------------------------------------------------------
MANAGEMENT AGREEMENT
- -------------------------------------------------------------------------------
THIS AGREEMENT (the "Agreement") is made as of the 1st day of March, 1999,
BETWEEN
COOL ENTERTAINMENT, INC. , a corporation incorporated under
the laws of Washington having its registered office at 1601
Fifth Avenue, Suite 2400, Seattle, Washington, 98101-1618
("Cool Entertainment");
AND
COOL MANAGEMENT INC., a corporation incorporated under the
laws of British Columbia having its registered office at 1000
- 840 Howe Street, Vancouver, British Columbia, V6Z 2M1
("Cool Management").
WHEREAS:
A. Cool Entertainment wishes to contract with Cool Management for
the provision of management services by Cool Management to Cool Entertainment,
and Cool Management has agreed to contract with Cool Entertainment to provide
those services to Cool Entertainment.
NOW THEREFORE this Agreement witnesses that in consideration of the premises and
the mutual covenants and agreements contained in this Agreement, the parties
hereto (the "Parties") hereby agree as follows:
1. MANAGEMENT SERVICES
1.1 Cool Management shall provide management services (the
"Services") to Cool Entertainment on the terms and subject to the conditions
contained in this Agreement.
1.2 The Services to be provided by Cool Management shall, without
limitation, include:
<PAGE>
- 2 -
(a) management of Cool Entertainment's business of internet
distribution of audio and visual products;
(b) design and maintenance of the Web site through which Cool
Entertainment will carry on such business;
(c) provision of operational and strategic leadership to Cool
Entertainment;
(d) keeping the directors of Cool Entertainment informed about
major policy issues facing Cool Entertainment;
(e) reporting of results of operating activities of Cool
Entertainment to the directors of Cool Entertainment in
timely, accurate and clear fashion, so that the directors of
Cool Entertainment can fulfil their fiduciary duties to Cool
Entertainment;
(f) provision of recommendations for financial budgeting to Cool
Entertainment, and preparation of budgets and forecasts for
Cool Entertainment for consideration by the directors of Cool
Entertainment; and
(g) provision of advice to the directors of Cool Entertainment
concerning possible acquisitions and divestitures by Cool
Entertainment.
2. CARE, SKILL AND DILIGENCE
Cool Management represents and warrants to Cool Entertainment that:
(a) Cool Management will enter into employment or consulting
agreements with parties who have the qualifications,
experience and capabilities necessary to perform the Services,
including Clement Kar Man Lau, William James Hadcock, Leonard
Wayne Voth and Marc Gregory Belcourt (Lau, Hadcock, Voth and
Belcourt are collectively referred to herein as the
"Vendors"); and
(b) the Services shall be performed by Cool Management according
to the standard of care, skill and diligence which would be
exercised by a prudent and competent person in similar
circumstances.
<PAGE>
- 3 -
3. CONTROL OF PROVISION OF SERVICES
Cool Entertainment acknowledges that as Cool Management is an independent
contractor. Cool Management shall have control over the provision of the
Services to Cool Entertainment, and will determine the manner, methods,
techniques and procedures for the provision by Cool Management of the Services
to Cool Entertainment.
4. TERM
4.1 Subject to Section 10 of this Agreement, Cool Management shall
provide the Services to Cool Entertainment for a term (the "Term"), commencing
on the day Chelsea Pacific Financial Corp. ("Chelsea") meets the First Financing
Milestone, as that term is defined in Section 7.1(a) of the Escrow Agreement
between Pacific Corporate Trust Company, Cool Entertainment, Chelsea, Minas
Novas Gold Corp. (the "U.S. Company") and the Vendors of even date herewith (the
"Escrow Agreement"), and ending on that day (the "Expiry Date") which is the
earlier of:
(a) one year from the day on which Chelsea meets the Fourth
Financing Milestone (as defined in Section 7.1(d) of the
Escrow Agreement); and
(b) the day the Vendors become entitled to terminate Chelsea's
right of first refusal provided in Section 7 of the Amendment
and Restatement between Chelsea, the Vendors, Cool
Entertainment and the U.S. Company of even date herewith (the
"Amendment and Restatement") pursuant to Section 7.4(h)(i) of
the Escrow Agreement.
Cool Entertainment and Cool Management may extend the term of this Agreement for
a further term of one year from the Expiry Date, in which case "Term" shall also
refer to that extended time period. It is expressly understood and agreed that
neither Cool Entertainment nor Cool Management shall be obligated to agree to
any extension of the Term.
<PAGE>
- 4 -
4.2 For greater certainty, it is acknowledged that if the Term
does not commence as a result of the failure of Chelsea to meet the First
Financing Milestone, Cool Entertainment shall have no liability to pay any fee
to Cool Management under Section 6.1 hereof.
5. PERFORMANCE OF SERVICES
5.1 Cool Management shall provide the Services to Cool
Entertainment in accordance with the terms of this Agreement.
5.2 During the Term, Cool Management shall not carry on or engage
in, directly or indirectly, any work or business contrary to, or which detracts
from or is not in the best interests of Cool Entertainment or the performance of
Cool Management's obligations under this Agreement.
6. PAYMENT
6.1 It is acknowledged and agreed that Cool Management shall
contract with each of the Vendors for the provision of their services to Cool
Management. It is further acknowledged and agreed that, as the business of Cool
Entertainment expands, Cool Management may contract for the services of other
parties to aid in performance of the Services. The Vendors, together with such
other parties with whom Cool Management may contract to aid in the provision of
the services, are hereinafter referred to as the "Personnel". The Personnel will
be primarily responsible for performance of the Services on behalf of Cool
Management.
6.2 During the Term, Cool Management shall provide Cool
Entertainment with an invoice in respect of the aggregate monthly amounts
payable to the Personnel pursuant to their contracts with Cool Management, on
the first business day following the end of each month.
6.3 In consideration of the performance of the Services in
accordance with this Agreement, Cool Entertainment shall pay to Cool Management
a fee equal to the aggregate monthly amounts payable to the Personnel, pursuant
to their respective contracts with Cool Management as reflected in such invoice,
plus 10% of such amount (the "Fee"). The Fee shall be payable forthwith upon
receipt of such invoice.
<PAGE>
- 5 -
7. EXPENSES
7.1 Cool Management shall prepare budgets for monthly expenditures
to be made in pursuance of Cool Entertainment's business for review by the
directors of Cool Entertainment. All items in such budgets which are not
referred to in the Business Plan dated September 1, 1998 previously provided by
Cool Entertainment to Chelsea shall be subject to the approval of the directors
of Cool Entertainment.
7.2 It is the intent of the parties hereto that Cool Entertainment
shall be solely responsible for supplying Cool Management with the funds
necessary for Cool Management to provide the Services and for paying on Cool
Entertainment's behalf all expenses which are referred to in the Business Plan
or are Approved Expenses. Accordingly, Cool Management shall be under no
obligation whatsoever to extend any of its own funds in the course of providing
the Services hereunder. Cool Entertainment shall be responsible for advancing
all funds for payment of expenses referred to in the Business Plan and Approved
Expenses to Cool Management before they are expended.
7.3 Within 30 days of the end of each month for which a budget is
prepared by Cool Management , Cool Management shall provide the directors of
Cool Entertainment with invoices in respect of funds advanced by Cool
Entertainment showing expenditure of such funds in accordance with such budgets.
7.4 Cool Management may elect, but shall not be obliged, to pay
expenses referred to in the Business Plan and Approved Expenses from its own
funds. If Cool Management does so, then Cool Entertainment shall reimburse Cool
Management for all such expenses incurred by Cool Management provided that such
expenses are supported by receipts given to Cool Entertainment within 45 days of
end of the month during which such expenses were incurred.
8. NO AGENCY RELATIONSHIP
Cool Management is not the agent of Cool Entertainment and, accordingly, shall
not purport to enter into any contract or subcontract on behalf of Cool
Entertainment, or otherwise act on behalf of Cool Entertainment, other than to
provide the Services.
<PAGE>
- 6 -
9. EXPIRY
9.1 The provisions of Section 10 shall remain in force for one
year from the date this agreement expires.
9.2 Cool Entertainment and Cool Management acknowledge that the
expiry of this Agreement in accordance with its terms or its failure to be
renewed or extended may result in loss or damage to Cool Entertainment or Cool
Management, or both, but that neither Cool Entertainment nor Cool Management
shall be liable to the other for any loss or damage resulting from that expiry
or the failure of this Agreement to be renewed or extended (including, without
limitation, any loss of prospective profits, or any damage caused by loss of
goodwill) or by reason of any expenditures, investments, leases or commitments
made in anticipation of the continuance of this Agreement. This paragraph shall
not relieve Cool Entertainment or Cool Management from liability for damages
arising out of any violation or breach of this Agreement.
9.3 Any amounts due by Cool Entertainment to Cool Management as
part of the Fee shall be paid within 30 days of expiry .
10. CONFIDENTIAL INFORMATION
Cool Management acknowledges that during the Term:
(a) it will have access to and will be entrusted with detailed
confidential information, know-how and trade secrets relating
to the business and affairs of Cool Entertainment including,
without limitation, finances, products, services, dealings and
transactions of Cool Entertainment, and the names, addresses,
preferences or other particular business requirements of Cool
Entertainment's customers ("Confidential Information"), and
that the disclosure of Confidential Information to competitors
of Cool Entertainment or to the public would be highly
detrimental to the best interests of Cool Entertainment;
(b) in the course of performing the Services hereunder, Cool
Management will be one of the principal representatives of
Cool Entertainment and as such will be
<PAGE>
- 7 -
significantly responsible for maintaining or
enhancing the goodwill of Cool Entertainment; and
(c) the rights of Cool Entertainment to maintain the
confidentiality of Confidential Information, and to preserve
its goodwill, constitute proprietary rights of Cool
Entertainment which Cool Entertainment is entitled to protect;
and Cool Management will not, during the Term and for one year after the expiry
of the Term, disclose to any person, firm or corporation any Confidential
Information for any purpose other than the purposes of Cool Entertainment and
Cool Management will not disclose or use for any purpose other than for those of
Cool Entertainment any Confidential Information, provided that the foregoing
covenant shall not extend to Confidential Information which:
(d) disclosure of which is specifically consented to in writing by
Cool Entertainment;
(e) Cool Management is required by applicable law or by an order
of a court of competent jurisdiction to disclose;
(f) now or subsequently becomes available to the public through no
fault of Cool Management;
(g) Cool Management can demonstrate to have had rightfully in its
possession prior to the disclosure;
(h) is independently developed by Cool Management without the use
of any Confidential Information; or
(i) Cool Management rightfully obtains from a third party who has
the right to transfer or disclose it.
Cool Management acknowledges that the foregoing covenant is necessary and
fundamental for the protection of the business of Cool entertainment and that a
breach by Cool Management of such covenant would result in damage to Cool
Entertainment which would not be adequately compensated by an award of damages
to Cool Entertainment and that, in addition to all other
<PAGE>
- 8 -
remedies available to Cool Management, Cool Management shall be entitled to the
immediate remedy of a restraining order, injunction or other form of relief as
may be decreed or issued by any court of competent jurisdiction to restrain or
enjoin Cool Management from breaching such covenant.
11. INDEMNITY
Cool Management shall protect, indemnify and hold Cool Entertainment harmless
from and against any and all liabilities, costs, damages, and expenses
(including legal fees and disbursements) resulting from or attributable to any
and all acts and omissions of Cool Management. Similarly, Cool Entertainment
shall protect, indemnify and hold Cool Management harmless from and against any
and all liabilities, costs, damages and expenses (including legal fees and
disbursements) resulting from or attributable to any and all acts and omissions
of Cool Entertainment
12. MISCELLANEOUS
12.1 ASSIGNMENT
This Agreement may not be assigned by any Party without the prior written
consent of the other Party and any attempt to assign the rights, duties or
obligations under this Agreement without those consents shall have no effect.
12.2 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties with respect
to the matters referred to herein and there are no representations or
warranties, express or implied, statutory or otherwise and no agreements
collateral hereto other than as expressly set forth or referred to herein.
12.3 FURTHER ASSURANCES
The Parties shall execute all other documents and do all further things as may
be necessary to carry out and give effect to the intent of this Agreement.
<PAGE>
- 9 -
12.4 SEVERABILITY
Should any part of this Agreement be declared or held invalid for any reason,
that invalidity shall not affect the validity of the remainder which shall
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion.
12.5 AMENDMENTS
This Agreement may be amended by an agreement in writing signed by the Parties.
12.6 TIME
Time shall be of the essence of this Agreement.
12.7 GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws
of British Columbia.
12.8 HEADINGS
The headings appearing in this Agreement are inserted for convenience of
reference only and shall not affect the interpretation of this Agreement.
12.9 NOTICES
All notices required or permitted to be given under this Agreement shall be in
writing and may be delivered personally or by facsimile transmission to the
addresses set forth on page 1 or at any other addresses as may from time to time
be notified in writing by the Parties. Any notice delivered personally or by
facsimile transmission shall be deemed to have been given and received at the
time of delivery.
<PAGE>
- 10 -
12.10 ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties and
their respective heirs, personal representatives, successors and permitted
assigns.
IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first
above written.
COOL ENTERTAINMENT, INC. (a Washington corporation)
Per:
/s/ Clement K.M. Lau
- -------------------------------------------
Clement K.M. Lau:
Authorized Signatory
COOL MANAGEMENT INC. (a British Columbia company)
Per:
/s/ Clement K.M. Lau
- -------------------------------------------
Clement K.M. Lau:
Authorized Signatory
<PAGE>
Exhibit 10.2
Employment Agreement between Cool Management Inc. and Marc G. Belcourt
dated March 1, 1999
<PAGE>
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT (this "Agreement") is made as of the 1st day of March, 1999,
BETWEEN
COOL MANAGEMENT INC., a company incorporated under the laws of
British Columbia, having its registered office at 1000 - 840
Howe Street, Vancouver, British Columbia, V6Z 2M1
(the "Company");
AND
MARC G. BELCOURT, who resides at 9139 Carver Crescent, North
Delta, British Columbia, V4C 6N1
(the "Employee").
WHEREAS:
A. The Company is party to a management contract (the "Management
Agreement") between the Company and of Cool Entertainment, Inc. ("Cool
Entertainment"), a Washington corporation which intends to carry on the business
of internet sales of audio and visual products; and
B. The Company wishes to retain the services of the Employee on
the terms and conditions contained in this Agreement.
IN CONSIDERATION OF the premises and the mutual agreements herein contained, the
parties hereto (the "Parties") agree as follows:
1. EMPLOYMENT
The Company shall employ the Employee for the Term (as defined below) upon and
subject to the terms and conditions set out in this Agreement and the Employee
accepts the employment on those terms and conditions.
<PAGE>
- 2 -
2. TERM OF EMPLOYMENT
The term of employment (the "Term") shall commence on the day Chelsea Pacific
Financial Corp. ("Chelsea") meets the First Financing Milestone, as that term is
defined in Section 7.1(a) of the Escrow Agreement between Pacific Corporate
Trust Company, Cool Entertainment, Chelsea, Minas Novas Gold Corp. (the "U.S.
Company") and Clement Kar Man Lau, William James Hadcock, Leonard Wayne Voth and
Marc Gregory Belcourt (Lau, Hadcock, Voth and Belcourt are herein collectively
referred to as the "Vendors") of even date herewith (the "Escrow Agreement"),
and ending on that day (the "Expiry Date") which is the earlier of:
(a) one year from the day on which Chelsea meets the Fourth
Financing Milestone (as defined in Section 7.1(d) of the
Escrow Agreement); and
(b) the day the Vendors become entitled to terminate Chelsea's
right of first refusal provided in Section 7 of the Amendment
and Restatement between Chelsea, the Vendors, Cool
Entertainment and the U.S. Company of even date herewith (the
"Amendment and Restatement") pursuant to Section 7.4(h)(i) of
the Escrow Agreement.
3. DUTIES OF EMPLOYEE
The Employee shall, on behalf of the Company, perform the following duties:
(a) Development of the website through which Cool Entertainment
intends to sell audio and video products;
(b) Recruitment and supervision of technical and development
staff;
(c) Equipment procurement
(d) Software procurement;
(e) Database development; and
(f) Project development and management.
together with such other duties as the Company may reasonably prescribe from
time to time.
4. STANDARDS AND DEVOTION
4.1 The Employee shall at all times during the Term, except during
periods of vacation or when disabled by sickness or incapacity, faithfully and
diligently perform the Employee's duties in a professional manner. The Employee
shall use the Employee's best endeavours to promote and advance the business of
Cool Entertainment, and shall devote the Employee's entire time and attention to
the business and affairs of Cool Entertainment.
<PAGE>
- 3 -
4.2 The Employee acknowledges that intellectual property developed
by him in the course of provision of services to the Company hereunder will be
the property of Cool Entertainment (subject to Section 7.4(c) of the Escrow
Agreement), and the Employee will cooperate with Cool Entertainment with respect
to the making of any filings reasonably necessary to protect such intellectual
property, and will execute all documents reasonably necessary to transfer the
ownership of benefits thereof to Cool Entertainment.
4.3 The Employee will be entitled to participate in any stock
option plan established by the U.S. Company, which upon completion of the
transaction described in the Amendment and Restatement shall be the owner of all
of the issued and outstanding shares in the capital of Cool Entertainment, on a
basis at least as favourable as that of any other participant therein.
5. REMUNERATION AND BENEFITS
As the Employee's entire remuneration for all services rendered to the Company
during the Term, the Employee shall be entitled to receive from the Company:
(a) a base salary (the "Salary") of US $50,000 per year, payable
in arrears within 3 business days of the end of each month;
and
(b) employee benefits in accordance with Schedule "A" hereto.
6. VACATION
6.1 The Employee shall be entitled to an annual paid vacation of
three weeks, commencing after one year of service to the Company hereunder.
6.2 The Employee will use his reasonable best efforts to ensure
that his vacation time does not coincide with vacation time taken by the other
Vendors pursuant to their contracts of employment with the Company.
7. FACILITIES
The Company shall provide and maintain the facilities, equipment and supplies it
deems necessary for the performance of the Employee's duties and
responsibilities pursuant to this Agreement.
8. EXPENSES
The Employee shall incur no significant expenses in the course of performing his
duties hereunder without the prior approval of the Company. Upon itemization of
expenses for which such approval has been obtained and submission of receipts
therefor to the Company, the Company shall reimburse the Employee for such
expenses within 30 days.
<PAGE>
- 4 -
9. INDEMNITY
The Employee shall protect, indemnify and hold the Company harmless from and
against any and all liabilities, costs, damages, and expenses (including legal
fees and disbursements) resulting from or attributable to any and all acts and
omissions of the Employee, provided, however, that to the extent that any
liabilities, costs, damages and expenses are compensated for by insurance
purchased or paid for by the Company, the Employee shall not be required to
reimburse the Company or the insurer for those liabilities, costs, damages or
expenses. The Company shall request that the Employee be shown as an additional
insured on all insurance policies obtained by it or shall obtain from the
insurer a waiver of subrogation in favour of the Employee.
10. ASSIGNMENT OF INCOME
If at any time during the Term, the Employee receives remuneration or any
payment for any professional services rendered by the Employee on behalf of the
Company, the Employee shall be deemed to have received such remuneration or
payment as agent for the Company, and shall forthwith assign and make a full
accounting to the Company of that remuneration or payment received.
11. CONFIDENTIALITY
The Employee acknowledges that during the Term, the Employee will:
(a) have access to and will be entrusted with detailed
confidential information, know-how and trade secrets relating
to the business and affairs of the Company, Cool Entertainment
and the U.S. Company including, without limitation, finances,
products, services, dealings and transactions of Cool
Entertainment and the U.S. Company, and the names, addresses,
preferences or other particular business requirements of Cool
Entertainment's and the U.S. Company's customers
("Confidential Information"), and that the disclosure of
Confidential Information to competitors of the Company, Cool
Entertainment or the U.S. Company or to the public would be
highly detrimental to the best interests of the Company, Cool
Entertainment and the U.S. Company;
(b) in the course of performing services hereunder, the Employee
will be one of the principal representatives of Cool
Entertainment and the U.S. Company and as such will be
significantly responsible for maintaining or enhancing the
goodwill of Cool Entertainment and the U.S. Company; and
(c) the rights of the Company, Cool Entertainment and the U.S.
Company to maintain the confidentiality of Confidential
Information, and to preserve its goodwill, constitute
proprietary rights of the Company, Cool Entertainment and the
U.S.
<PAGE>
- 5 -
Company which the Company, Cool Entertainment and the U.S.
Company are entitled to protect;
and the Employee will not, during the Term and for one year after the expiry
thereof, disclose to any person, firm or corporation any Confidential
Information for any purpose other than the purposes of Cool Entertainment and
the U.S. Company and the Employee will not disclose or use for any purpose other
than for those of Cool Entertainment or the U.S. Company any Confidential
Information, provided that the foregoing covenant shall not extend to
Confidential Information which:
(a) disclosure of is specifically consented to in writing by the
Company. Cool Entertainment and the U.S. Company;
(b) the Employee is required by applicable law or by an order of a
court of competent jurisdiction to disclose;
(c) now or subsequently becomes available to the public through no
fault of the Employee;
(d) the Employee can demonstrate to have had rightfully in its
possession prior to disclosure to the Employee by the Company,
Cool Entertainment or the U.S. Company;
(e) is independently developed by the Employee without the use of
any Confidential Information; or
(f) the Employee rightfully obtains from a third party who has the
right to transfer or disclose it.
The Employee acknowledges that the foregoing covenant is necessary and
fundamental for the protection of the businesses of Cool Entertainment and the
U.S. Company and that a breach by the Employee of such covenant would result in
damage to Cool Entertainment and the U.S. Company which would not be adequately
compensated by an award of damages to Cool Entertainment or the U.S. Company and
that, in addition to all other remedies available to Cool Entertainment or the
U.S. Company, Cool Entertainment and the U.S. Company shall be entitled to the
immediate remedy of a restraining order, injunction or other form of relief as
may be decreed or issued by any court of competent jurisdiction to restrain or
enjoin the Employee from breaching such covenant.
12. NON-COMPETITION
12.1 The Employee covenants and agrees that he will not, until that
day which is the earlier of: (i) one year from the expiry of the Term; and (ii)
the day the Vendors become entitled
<PAGE>
- 6 -
to terminate Chelsea's right of first refusal provided in Section 7 of the
Amendment and Restatement pursuant to Section 7.4(h)(i) of the Escrow Agreement:
(a) directly or indirectly, in any capacity whatsoever,
alone or in association with any other person, firm or corporation (other than
the Company or Cool Entertainment), as a principal, agent, shareholder,
director, guarantor, creditor, or in any other relationship whatsoever, save and
except as an employee only, engage or be concerned or interested in any business
substantially similar to the business of Cool Entertainment and which may
compete with the business of Cool Entertainment at any time during that period
in any territory in which Cool Entertainment carries on its business;
(b) directly or indirectly, use or disclose to any person,
except duly authorized officers and employees of the Company and Cool
Entertainment, any Confidential Information acquired by him by reason of his
involvement and association with the Company; or
(c) directly or indirectly, solicit any customer of Cool
Entertainment, as of the date of termination of employment, in any territory in
which Cool Entertainment carries on its business during that period.
Notwithstanding the foregoing, the Employee may invest in or have an interest in
entities traded on any public market or offered by any brokerage house, if an so
long as the interest does not exceed 5% of the voting control of such entity.
12.2 The parties recognize that irreparable damage would result
from any violation of the covenant in Section 12.1. It is therefore expressly
agreed that, in addition to any and all of the remedies available to the Company
and Cool Entertainment, they will each be entitled to the immediate remedy of
injunction or such other equitable relief as may be decreed or issued by any
court of competent jurisdiction to enforce Section 12.1 hereof.
12.3 The Employee acknowledges that the covenant in Section 12.1
hereof is given for good and valuable consideration (receipt of which is hereby
acknowledged), and that by reason of his unique knowledge of and his association
with the business of Cool Entertainment, the scope of such covenant as to time
and area is reasonable and commensurate with the protection of the legitimate
interests of Cool Management and Cool Entertainment. The covenant in
Section 12.1 shall survive termination of the Employees employment hereunder for
a period of one year, and such covenant is severable for that purpose. If any
part of such covenant is held to be unenforceable by a court of competent
jurisdiction, such part may be severed and replaced by the widest term that
would not be held to be void or unenforceable. The Employee waives all defences
to the strict enforcement of such covenant.
13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties with respect
to the matters referred to herein and there are no representations or
warranties, express or implied, statutory or
<PAGE>
- 7 -
otherwise and no agreements collateral hereto other than as expressly set forth
or referred to herein.
14. FURTHER ASSURANCES
The Parties shall execute all other documents and do all further things as may
be necessary to carry out and give effect to the intent of this Agreement.
15. SEVERABILITY
Should any part of this Agreement be declared or held invalid for any reason,
that invalidity shall not affect the validity of the remainder which shall
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion.
16. AMENDMENTS
This Agreement may be amended by an agreement in writing signed by the Parties.
17. TERMINATION
17.1 The Company may terminate the Employee's employment hereunder
as follows:
(a) at any time, by notice in writing to the Employee, for just
cause which, without limitation, shall include:
(i) if there is a repeated and demonstrated failure on
the part of the Employee to perform his material
duties provided hereunder in a competent manner and
if the Employee fails to substantially remedy such
failure within a reasonable period of time after
receipt of written notice thereof;
(ii) if the Employee is convicted of a criminal offence
involving fraud or dishonesty;
(iii) if the Employee or any member of his family makes any
personal profit arising out of or in connection with
a transaction to which the Company or Cool
Entertainment is a party or with which it is
associated without making disclosure to and obtaining
the prior written consent of the Company or Cool
Entertainment, as the case may be;
(iv) if the Employee fails to honour his fiduciary duties
to the Company, including the duty to act in the best
interests of the Company; or
<PAGE>
- 8 -
(v) if the Employee disobeys reasonable instructions
given in the course of employment by the directors of
the Company that are not inconsistent with the
Employee's duties hereunder and are not remedied by
the Employee within a reasonable period of time after
receiving written notice thereof,
(b) at any time, upon notice in writing thereof to the Employee,
if the Company, Cool Entertainment or the Employee has a
receiving order made against it or him, goes into bankruptcy
either voluntarily or involuntarily or makes a proposal to
creditors;
(c) at any time, upon notice in writing from the Company to the
Employee, if the Company or Cool Entertainment sells all or
substantially all of its assets or proceedings are commenced
to wind-up the Company or Cool Entertainment;
(d) if the Employee, either by reason of illness or mental or
physical disability or if the Employee fails, for one hundred
and twenty (120) consecutive days or for a total of one
hundred and eighty (180) days in any period of twelve (12)
consecutive months during the Term, to perform his duties
hereunder, then by one (1) month's notice in writing from the
Company to the Employee.
17.2 If the Company terminates the engagement of the Employee as
provided under subparagraphs 17.1(a) or 17.1(b), the Employee shall be entitled
only to the accrued salary owing to him up to the effective date of termination,
less any amounts owed by the Employee to the Company.
17.3 If the Company terminates the engagement of the Employee as
provided under Section 17.1(c), the Company shall pay to the Employee as
liquidated damages and compensation in full in respect of loss of such
engagement an amount equal to the salary which the Employee would have received
hereunder during the three (3)-month period commencing on the effective date of
termination, and such amount shall be payable immediately on termination of the
engagement.
17.4 The Employee may in his sole discretion terminate his
employment hereunder if any one of the following occurs during the Term:
(a) a change of control of Cool Entertainment; or
(b) the Company materially alters the duties and responsibilities
of the Employee without his prior written consent,
by giving the Company 30 days notice in writing of his resignation.
17.5 For the purposes of this Agreement, "change of control" means
the occurrence of:
(a) the sale or a series of sales occurring within any twelve
(12)-month period, other than a sale to an affiliate (as that
term is defined in the British Columbia COMPANY
<PAGE>
- 9 -
ACT) of Cool Entertainment, of assets of Cool Entertainment
having a value greater than 50% of the fair market value of
the assets of Cool Entertainment determined on a consolidated
basis prior to such sale or prior to the first of a series of
sales occurring within any twelve (12)-month period;
(b) the disposition of all of substantially all of the assets of
Cool Entertainment where such sale or disposition is required
by applicable law to be approved as a special resolution of
the shareholders of Cool Entertainment ; or
(c) any event or series of events pursuant to which on any date
the Vendors no longer comprise a majority of the directors of
Cool Entertainment.
18. NOTICES
All notices required or permitted to be given under this Agreement shall be in
writing and personally delivered to the intended recipient.
19. TIME
Time shall be of the essence of this Agreement.
20. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws
of British Columbia.
21. HEADINGS
The headings appearing in this Agreement are inserted for convenience of
reference only and shall not affect the interpretation of this Agreement.
22. ASSIGNMENT
No Party may assign or transfer either the rights or the obligations created by
this Agreement without the prior written consent of the other Party hereto.
<PAGE>
- 10 -
23. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties and
their respective heirs, personal representatives, successors and permitted
assigns.
IN WITNESS WHEREOF this Agreement has been duly executed by the Parties as of
the day and year first above written.
COOL MANAGEMENT INC.
per: /s/ Clement K.M. Lau
-------------------------------------
Clement K.M. Lau:
Authorized Signatory
Signed, sealed and delivered )
by MARC G. BELCOURT )
in the presence of: )
)
)
/s/ S. Campbell Fitch )
- -------------------------------------- )
S. Campbell Fitch )
)
1000, 840 Howe Street, Vancouver, B.C. )
- -------------------------------------- ) /s/ Marc G. Belcourt
Address ) --------------------------------
) MARC G. BELCOURT
- -------------------------------------- )
)
)
Lawyer )
- -------------------------------------- )
Occupation )
<PAGE>
Exhibit 10.3
Consulting Agreement between Cool Management Inc. and Leonard Wayne Voth
dated March 1, 1999
<PAGE>
- --------------------------------------------------------------------------------
CONSULTING AGREEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT dated for reference March 1, 1999
BETWEEN
COOL MANAGEMENT INC., a company incorporated under the laws of
British Columbia having its registered office at 1000-840 Howe
Street, Vancouver, British Columbia, V6Z 2M1
(the "Company");
AND
LEONARD WAYNE VOTH, who resides at 4422 Stone Crescent, West
Vancouver, British Columbia, V7V 1B7
(the "Consultant").
WHEREAS:
A. The Company is party to a management contract (the "Management
Agreement") between the Company and Cool Entertainment, Inc. ("Cool
Entertainment"), a Washington corporation which intends to carry on the business
of internet sales of audio and visual products; and
B. The Company wishes to retain the Consultant to provide certain
consulting services on the terms and conditions contained in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained the Parties agree as follows:
1. INTERPRETATION
1.1 In this Agreement the following terms shall have the meaning
set out below:
(a) "AGREEMENT" means this consulting agreement as amended and
supplemented from time to time;
<PAGE>
- 2 -
(b) "BOARD" means the board of directors of the Company;
(c) "BUSINESS DAY" means any day other than Saturday, Sunday or a
statutory holiday in British Columbia;
(d) "CONSULTING FEES" has the meaning given in Article 4;
(e) "CONSULTING SERVICES" means such advice, assistance and
services with respect to such matters as the Company may
reasonably prescribe from time to time;
(f) "PARTIES" means parties to this Agreement, and "PARTY" means
any one of them; and
(g) "TERM" has the meaning given in Article 3.
1.2 GOVERNING LAW
This Agreement shall be governed by and be constructed in accordance with the
laws of the Province of British Columbia and laws of Canada applicable in the
Province of British Columbia.
1.3 SEVERABILITY
If any one or more of the provisions contained in this Agreement should be
determined to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
1.4 ENUREMENT
This Agreement shall enure to the benefit of and be binding on the Parties and
their respective heirs, successors, personal representatives and permitted
assigns.
1.5 HEADINGS
The headings in this Agreement are inserted for convenience only and shall not
affect the interpretation of this Agreement.
<PAGE>
- 3 -
2.0 CONSULTING SERVICES
The Company hereby retains the Consultant, on a non-exclusive basis, to provide
to the Company the Consulting Services as requested by the Company, acting
reasonably, from time to time.
3.0 TERM
The term of this Agreement (the "Term") shall commence on the day Chelsea
Pacific Financial Corp. ("Chelsea") meets the First Financing Milestone, as that
term is defined in Section 7.1(a) of the Escrow Agreement between Pacific
Corporate Trust Company, Cool Entertainment, Chelsea, Minas Novas Gold Corp.
(the "U.S. Company") and Clement Kar Man Lau, William James Hadcock, Leonard
Wayne Voth and Marc Gregory Belcourt (Lau, Hadcock, Voth and Belcourt are herein
collectively referred to as the "Vendors") of even date herewith (the "Escrow
Agreement"), and ending on that day (the "Expiry Date") which is the earlier of:
(a) one year from the day on which Chelsea meets the Fourth
Financing Milestone (as defined in Section 7.1(d) of the
Escrow Agreement); and
(b) the day the Vendors become entitled to terminate Chelsea's
right of first refusal provided in Section 7 of the Amendment
and Restatement between Chelsea, the Vendors, Cool
Entertainment and the U.S. Company of even date herewith (the
"Amendment and Restatement") pursuant to Section 7.4(h)(i) of
the Escrow Agreement.
4.0 REMUNERATION FOR CONSULTING SERVICES
As remuneration for the Consulting Services, the Company will pay to the
Consultant a fee of US$25,000 per year commencing on the commencement of the
Term (the "Consulting Fees").
5.0 CONFIDENTIAL INFORMATION
5.1 CONFIDENTIALITY
The Consultant acknowledges that during the Term, the Consultant will:
<PAGE>
- 4 -
(a) have access to and will be entrusted with detailed
confidential information, know-how and trade secrets relating
to the business and affairs of the Company, Cool Entertainment
and the U.S. Company including, without limitation, finances,
products, services, dealings and transactions of Cool
Entertainment and the U.S. Company, and the names, addresses,
preferences or other particular business requirements of Cool
Entertainment's and the U.S. Company's customers
("Confidential Information"), and that the disclosure of
Confidential Information to competitors of the Company, Cool
Entertainment or the U.S. Company or to the public would be
highly detrimental to the best interests of the Company, Cool
Entertainment and the U.S. Company;
(b) in the course of performing services hereunder, the Consultant
will be one of the principal representatives of Cool
Entertainment and the U.S. Company and as such will be
significantly responsible for maintaining or enhancing the
goodwill of Cool Entertainment and the U.S. Company; and
(c) the rights of the Company, Cool Entertainment and the U.S.
Company to maintain the confidentiality of Confidential
Information, and to preserve its goodwill, constitute
proprietary rights of the Company, Cool Entertainment and the
U.S. Company which the Company, Cool Entertainment and the
U.S. Company are entitled to protect;
and the Consultant will not, during the Term and for one year after the expiry
thereof, disclose to any person, firm or corporation any Confidential
Information for any purpose other than the purposes of Cool Entertainment and
the U.S. Company and the Consultant will not disclose or use for any purpose
other than for those of Cool Entertainment or the U.S. Company any Confidential
Information, provided that the foregoing covenant shall not extend to
Confidential Information which:
(a) disclosure of is specifically consented to in writing by the
Company, Cool Entertainment and the U.S. Company;
<PAGE>
- 5 -
(b) the Consultant is required by applicable law or by an order of
a court of competent jurisdiction to disclose;
(c) now or subsequently becomes available to the public through no
fault of the Consultant;
(d) the Consultant can demonstrate to have had rightfully in its
possession prior to disclosure to the Consultant by the
Company, Cool Entertainment or the U.S. Company;
(e) is independently developed by the Consultant without the use
of any Confidential Information; or
(f) the Consultant rightfully obtains from a third party who has
the right to transfer or disclose it.
The Consultant acknowledges that the foregoing covenant is necessary and
fundamental for the protection of the businesses of Cool Entertainment and the
U.S. Company and that a breach by the Consultant of such covenant would result
in damage to Cool Entertainment and the U.S. Company which would not be
adequately compensated by an award of damages to Cool Entertainment or the U.S.
Company and that, in addition to all other remedies available to Cool
Entertainment or the U.S. Company, Cool Entertainment and the U.S. Company shall
be entitled to the immediate remedy of a restraining order, injunction or other
form of relief as may be decreed or issued by any court of competent
jurisdiction to restrain or enjoin the Consultant from breaching such covenant.
6.0 BREACH OF COVENANTS
If the Consultant is in breach of any of his covenants under this Agreement, the
Company shall have the right at any time to terminate this Agreement by giving
to the Consultant 30 days' notice of its intention to terminate and upon the
expiry of such 30 day period this Agreement will
<PAGE>
- 6 -
terminate except for the provisions of Articles 5 and 10, which shall survive
for a period of one year from such termination, and Article 8.
7.0 MISCELLANEOUS
7.1 NO PARTNERSHIP OR AGENCY
The relationship between the Company and the Consultant is that of independent
contractor and nothing herein contained shall be interpreted so as to create a
partnership or agency relationship between the Parties.
7.2 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties with respect
to the subject matter hereof and supersedes and replaces all previous
correspondence, written or oral, with respect to the subject matter hereof.
7.3 NOTICE
All communications required to be given under this Agreement will be in writing
and will be deemed to have been properly given if transmitted by facsimile
transmission or delivered to the address of the Party directly, and will be
deemed to have been received, if transmitted by facsimile transmission, on the
first Business Day following that facsimile transmission, or if delivered, upon
the date of delivery. The communications will be sent to the addresses set forth
on page one of this Agreement or any other address or addresses that the Parties
shall advise the other in writing from time to time.
8.0 TAXES AND OBLIGATIONS
Each of the Company and the Consultant shall be responsible for their own legal
obligations and will pay their own taxes and make their own payroll and other
deductions, as required by applicable law. Each Party agrees to indemnify and
save harmless the other from any claim which may affect the other Party in the
event of a breach by such Party of its obligations under this Agreement.
<PAGE>
- 7 -
9.0 TERMINATION
Except for the provisions of Articles 5, 10 and 8, either Party may terminate
this Agreement upon giving 30 days' prior notice in writing to the other.
10.0 NON-COMPETITION
10.1 The Consultant covenants and agrees that he will not, until
that day which is the earlier of: (i) one year from the expiry of the Term; and
(ii) the day the Vendors become entitled to terminate Chelsea's right of first
refusal provided in Section 7 of the Amendment and Restatement pursuant to
Section 7.4(h)(i) of the Escrow Agreement:
(a) directly or indirectly, in any capacity whatsoever,
alone or in association with any other person, firm or corporation (other than
the Company or Cool Entertainment), as a principal, agent, shareholder,
director, guarantor, creditor, or in any other relationship whatsoever, save and
except as an employee only, engage or be concerned or interested in any business
substantially similar to the business of Cool Entertainment and which may
compete with the business of Cool Entertainment at any time during that period
in any territory in which Cool Entertainment carries on its business;
(b) directly or indirectly, use or disclose to any person,
except duly authorized officers and employees of the Company and Cool
Entertainment, any Confidential Information acquired by him by reason of his
involvement and association with the Company; or
(c) directly or indirectly, solicit any customer of Cool
Entertainment, as of the date of termination of employment, in any territory in
which Cool Entertainment carries on its business during that period.
Notwithstanding the foregoing, the Consultant may invest in or have an interest
in entities traded on any public market or offered by any brokerage house, if an
so long as the interest does not exceed 5% of the voting control of such entity.
10.2 The parties recognize that irreparable damage would result
from any violation of the covenant in Section 10.1. It is therefore expressly
agreed that, in addition to any and all of
<PAGE>
- 8 -
the remedies available to the Company and Cool Entertainment, they will each be
entitled to the immediate remedy of injunction or such other equitable relief as
may be decreed or issued by any court of competent jurisdiction to enforce
Section 10.1 hereof.
10.3 The Consultant acknowledges that the covenant in Section 10.1
hereof is given for good and valuable consideration (receipt of which is hereby
acknowledged), and that by reason of his unique knowledge of and his association
with the business of Cool Entertainment, the scope of such covenant as to time
and area is reasonable and commensurate with the protection of the legitimate
interests of Cool Management and Cool Entertainment. The covenant in Section
10.1 shall survive expiry of the Term for a period of one year, and such
covenant is severable for that purpose. If any part of such covenant is held to
be unenforceable by a court of competent jurisdiction, such part may be severed
and replaced by the widest term that would not be held to be void or
unenforceable. The Consultant waives all defences to the strict enforcement of
such covenant.
11.0 INTELLECTUAL PROPERTY AND STOCK OPTION PLAN
11.1 The Consultant acknowledges that intellectual property
developed by him in the course of provision of services to the Company hereunder
will be the property of Cool Entertainment (subject to Section 7.4(c) of the
Escrow Agreement), and the Consultant will cooperate with Cool Entertainment
with respect to the making of any filings reasonably necessary to protect such
intellectual property, and will execute all documents reasonably necessary to
transfer the ownership of benefits thereof to Cool Entertainment.
11.2 The Consultant will be entitled to participate in any stock
option plan established by the U.S. Company , which upon completion of the
transaction described in the Amendment and Restatement shall be the owner of all
of the issued and outstanding shares in the capital of Cool Entertainment, on a
basis at least as favourable as that of any other participant therein.
<PAGE>
- 9 -
IN WITNESS WHEREOF this Agreement has been executed by the Parties as of the
date first above written.
COOL MANAGEMENT INC.
Per:
/s/ Clement K.M. Lau
- --------------------------------------
Clement K.M. Lau:
Authorized Signatory
Signed, sealed and delivered )
by LEONARD WAYNE VOTH )
in the presence of: )
)
/s/ Campbell Fitch )
- -------------------------------------- )
S. Campbell Fitch )
)
1000, 840 HOWE STREET, VANCOUVER, B.C. )
- -------------------------------------- ) /s/ Leonard Wayne Voth
Address ) -------------------------------
) LEONARD WAYNE VOTH
- -------------------------------------- )
)
)
Lawyer )
- -------------------------------------- )
Occupation )
<PAGE>
Exhibit 10.4
Employment Agreement between Cool Management Inc. and William J. Hadcock
dated March 1, 1999
<PAGE>
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT (this "Agreement") is made as of the 1st day of March, 1999,
BETWEEN
COOL MANAGEMENT INC., a company incorporated under the laws of
British Columbia, having its registered office at 1000 - 840
Howe Street, Vancouver, British Columbia, V6Z 2M1
(the "Company");
AND
WILLIAM J. HADCOCK, who resides at Apt. 1301 - 238 Alvin Narod
Mews, Vancouver, British Columbia, V6B 5Z3
(the "Employee").
WHEREAS:
A. The Company is party to a management contract (the "Management
Agreement") between the Company and of Cool Entertainment, Inc. ("Cool
Entertainment"), a Washington corporation which intends to carry on the business
of internet sales of audio and visual products; and
B. The Company wishes to retain the services of the Employee on
the terms and conditions contained in this Agreement.
IN CONSIDERATION OF the premises and the mutual agreements herein contained, the
parties hereto (the "Parties") agree as follows:
1. EMPLOYMENT
The Company shall employ the Employee for the Term (as defined below) upon and
subject to the terms and conditions set out in this Agreement and the Employee
accepts the employment on those terms and conditions.
<PAGE>
- 2 -
2. TERM OF EMPLOYMENT
The term of employment (the "Term") shall commence on the day Chelsea Pacific
Financial Corp. ("Chelsea") meets the First Financing Milestone, as that term is
defined in Section 7.1(a) of the Escrow Agreement between Pacific Corporate
Trust Company, Cool Entertainment, Chelsea, Minas Novas Gold Corp. (the "U.S.
Company") and Clement Kar Man Lau, William James Hadcock, Leonard Wayne Voth and
Marc Gregory Belcourt (Lau, Hadcock, Voth and Belcourt are herein collectively
referred to as the "Vendors") of even date herewith (the "Escrow Agreement"),
and ending on that day (the "Expiry Date") which is the earlier of:
(a) one year from the day on which Chelsea meets the Fourth
Financing Milestone (as defined in Section 7.1(d) of the
Escrow Agreement); and
(b) the day the Vendors become entitled to terminate Chelsea's
right of first refusal provided in Section 7 of the Amendment
and Restatement between Chelsea, the Vendors, Cool
Entertainment and the U.S. Company of even date herewith (the
"Amendment and Restatement") pursuant to Section 7.4(h)(i) of
the Escrow Agreement.
3. DUTIES OF EMPLOYEE
The Employee shall, on behalf of the Company, perform the following duties:
(a) management and supervision of Cool Entertainment's sales
program;
(b) establishment and development of distribution links for
markets outside of North America;
(c) establishment, maintenance and monitoring of distribution
links within North America;
(d) establishment and maintenance of Cool Entertainment's
relations with record companies and movie studios;
(e) management and supervision of efforts to sell advertising on
Cool Entertainment's website; and
(f) management and supervision of Cool Entertainment's efforts to
obtain marketing and co-operative advertising funds from
record companies and movie studios.
<PAGE>
- 3 -
together with such other duties as the Company may reasonably prescribe from
time to time.
4. STANDARDS AND DEVOTION
4.1 The Employee shall at all times during the Term, except during
periods of vacation or when disabled by sickness or incapacity, faithfully and
diligently perform the Employee's duties in a professional manner. The Employee
shall use the Employee's best endeavours to promote and advance the business of
Cool Entertainment, and shall devote the Employee's entire time and attention to
the business and affairs of Cool Entertainment.
4.2 The Employee acknowledges that intellectual property developed
by him in the course of provision of services to the Company hereunder will be
the property of Cool Entertainment (subject to Section 7.4(c) of the Escrow
Agreement), and the Employee will cooperate with Cool Entertainment with respect
to the making of any filings reasonably necessary to protect such intellectual
property, and will execute all documents reasonably necessary to transfer the
ownership of benefits thereof to Cool Entertainment.
4.3 The Employee will be entitled to participate in any stock
option plan established by the U.S. Company, which upon completion of the
transaction described in the Amendment and Restatement shall be the owner of all
of the issued and outstanding shares in the capital of Cool Entertainment, on a
basis at least as favourable as that of any other participant therein.
5. REMUNERATION AND BENEFITS
As the Employee's entire remuneration for all services rendered to the Company
during the Term, the Employee shall be entitled to receive from the Company:
(a) a base salary (the "Salary") of US $50,000 per year, payable
in arrears within 3 business days of the end of each month;
and
(b) employee benefits in accordance with Schedule "A" hereto.
6. VACATION
6.1 The Employee shall be entitled to an annual paid vacation of
three weeks, commencing after one year of service to the Company hereunder.
6.2 The Employee will use his reasonable best efforts to ensure
that his vacation time does not coincide with vacation time taken by the other
Vendors pursuant to their contracts of employment with the Company.
<PAGE>
- 4 -
7. FACILITIES
The Company shall provide and maintain the facilities, equipment and supplies it
deems necessary for the performance of the Employee's duties and
responsibilities pursuant to this Agreement.
8. EXPENSES
The Employee shall incur no significant expenses in the course of performing his
duties hereunder without the prior approval of the Company. Upon itemization of
expenses for which such approval has been obtained and submission of receipts
therefor to the Company, the Company shall reimburse the Employee for such
expenses within 30 days.
9. INDEMNITY
The Employee shall protect, indemnify and hold the Company harmless from and
against any and all liabilities, costs, damages, and expenses (including legal
fees and disbursements) resulting from or attributable to any and all acts and
omissions of the Employee, provided, however, that to the extent that any
liabilities, costs, damages and expenses are compensated for by insurance
purchased or paid for by the Company, the Employee shall not be required to
reimburse the Company or the insurer for those liabilities, costs, damages or
expenses. The Company shall request that the Employee be shown as an additional
insured on all insurance policies obtained by it or shall obtain from the
insurer a waiver of subrogation in favour of the Employee.
10. ASSIGNMENT OF INCOME
If at any time during the Term, the Employee receives remuneration or any
payment for any professional services rendered by the Employee on behalf of the
Company, the Employee shall be deemed to have received such remuneration or
payment as agent for the Company, and shall forthwith assign and make a full
accounting to the Company of that remuneration or payment received.
11. CONFIDENTIALITY
The Employee acknowledges that during the Term, the Employee will:
(a) have access to and will be entrusted with detailed
confidential information, know-how and trade secrets relating
to the business and affairs of the Company, Cool Entertainment
and the U.S. Company including, without limitation, finances,
products, services, dealings and transactions of Cool
Entertainment and the U.S. Company, and the names, addresses,
preferences or other particular business
<PAGE>
- 5 -
requirements of Cool Entertainment's and the U.S. Company's
customers ("Confidential Information"), and that the
disclosure of Confidential Information to competitors of
the Company, Cool Entertainment or the U.S. Company or to
the public would be highly detrimental to the best
interests of the Company, Cool Entertainment and the U.S.
Company;
(b) in the course of performing services hereunder, the Employee
will be one of the principal representatives of Cool
Entertainment and the U.S. Company and as such will be
significantly responsible for maintaining or enhancing the
goodwill of Cool Entertainment and the U.S. Company; and
(c) the rights of the Company, Cool Entertainment and the U.S.
Company to maintain the confidentiality of Confidential
Information, and to preserve its goodwill, constitute
proprietary rights of the Company, Cool Entertainment and the
U.S. Company which the Company, Cool Entertainment and the
U.S. Company are entitled to protect;
and the Employee will not, during the Term and for one year after the expiry
thereof, disclose to any person, firm or corporation any Confidential
Information for any purpose other than the purposes of Cool Entertainment and
the U.S. Company and the Employee will not disclose or use for any purpose other
than for those of Cool Entertainment or the U.S. Company any Confidential
Information, provided that the foregoing covenant shall not extend to
Confidential Information which:
(a) disclosure of is specifically consented to in writing by the
Company. Cool Entertainment and the U.S. Company;
(b) the Employee is required by applicable law or by an order of a
court of competent jurisdiction to disclose;
(c) now or subsequently becomes available to the public through no
fault of the Employee;
(d) the Employee can demonstrate to have had rightfully in its
possession prior to disclosure to the Employee by the Company,
Cool Entertainment or the U.S. Company;
(e) is independently developed by the Employee without the use of
any Confidential Information; or
(f) the Employee rightfully obtains from a third party who has the
right to transfer or disclose it.
<PAGE>
- 6 -
The Employee acknowledges that the foregoing covenant is necessary and
fundamental for the protection of the businesses of Cool Entertainment and the
U.S. Company and that a breach by the Employee of such covenant would result in
damage to Cool Entertainment and the U.S. Company which would not be adequately
compensated by an award of damages to Cool Entertainment or the U.S. Company and
that, in addition to all other remedies available to Cool Entertainment or the
U.S. Company, Cool Entertainment and the U.S. Company shall be entitled to the
immediate remedy of a restraining order, injunction or other form of relief as
may be decreed or issued by any court of competent jurisdiction to restrain or
enjoin the Employee from breaching such covenant.
12. NON-COMPETITION
12.1 The Employee covenants and agrees that he will not, until that
day which is the earlier of: (i) one year from the expiry of the Term; and (ii)
the day the Vendors become entitled to terminate Chelsea's right of first
refusal provided in Section 7 of the Amendment and Restatement pursuant to
Section 7.4(h)(i) of the Escrow Agreement:
(a) directly or indirectly, in any capacity whatsoever,
alone or in association with any other person, firm or corporation (other than
the Company or Cool Entertainment), as a principal, agent, shareholder,
director, guarantor, creditor, or in any other relationship whatsoever, save and
except as an employee only, engage or be concerned or interested in any business
substantially similar to the business of Cool Entertainment and which may
compete with the business of Cool Entertainment at any time during that period
in any territory in which Cool Entertainment carries on its business;
(b) directly or indirectly, use or disclose to any person,
except duly authorized officers and employees of the Company and Cool
Entertainment, any Confidential Information acquired by him by reason of his
involvement and association with the Company; or
(c) directly or indirectly, solicit any customer of Cool
Entertainment, as of the date of termination of employment, in any territory in
which Cool Entertainment carries on its business during that period.
Notwithstanding the foregoing, the Employee may invest in or have an interest in
entities traded on any public market or offered by any brokerage house, if an so
long as the interest does not exceed 5% of the voting control of such entity.
12.2 The parties recognize that irreparable damage would result
from any violation of the covenant in Section 12.1. It is therefore expressly
agreed that, in addition to any and all of the remedies available to the Company
and Cool Entertainment, they will each be entitled to the immediate remedy of
injunction or such other equitable relief as may be decreed or issued by any
court of competent jurisdiction to enforce Section 12.1 hereof.
12.3 The Employee acknowledges that the covenant in Section 12.1
hereof is given for good and valuable consideration (receipt of which is hereby
acknowledged), and that by reason
<PAGE>
- 7 -
of his unique knowledge of and his association with the business of Cool
Entertainment, the scope of such covenant as to time and area is reasonable
and commensurate with the protection of the legitimate interests of Cool
Management and Cool Entertainment. The covenant in Section 12.1 shall survive
termination of the Employees employment hereunder for a period of one year,
and such covenant is severable for that purpose. If any part of such covenant
is held to be unenforceable by a court of competent jurisdiction, such part
may be severed and replaced by the widest term that would not be held to be
void or unenforceable. The Employee waives all defences to the strict
enforcement of such covenant.
13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties with respect
to the matters referred to herein and there are no representations or
warranties, express or implied, statutory or otherwise and no agreements
collateral hereto other than as expressly set forth or referred to herein.
14. FURTHER ASSURANCES
The Parties shall execute all other documents and do all further things as may
be necessary to carry out and give effect to the intent of this Agreement.
15. SEVERABILITY
Should any part of this Agreement be declared or held invalid for any reason,
that invalidity shall not affect the validity of the remainder which shall
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion.
16. AMENDMENTS
This Agreement may be amended by an agreement in writing signed by the Parties.
17. TERMINATION
17.1 The Company may terminate the Employee's employment hereunder
as follows:
(a) at any time, by notice in writing to the Employee, for just
cause which, without limitation, shall include:
(i) if there is a repeated and demonstrated failure on the
part of the Employee to perform his material duties
provided hereunder in a competent manner and if the
Employee fails to substantially remedy such failure
within a reasonable period of time after receipt of
written notice thereof;
<PAGE>
- 8 -
(ii) if the Employee is convicted of a criminal offence
involving fraud or dishonesty;
(iii) if the Employee or any member of his family makes any
personal profit arising out of or in connection with a
transaction to which the Company or Cool Entertainment
is a party or with which it is associated without
making disclosure to and obtaining the prior written
consent of the Company or Cool Entertainment, as the
case may be;
(iv) if the Employee fails to honour his fiduciary duties to
the Company, including the duty to act in the best
interests of the Company; or
(v) if the Employee disobeys reasonable instructions given
in the course of employment by the directors of the
Company that are not inconsistent with the Employee's
duties hereunder and are not remedied by the Employee
within a reasonable period of time after receiving
written notice thereof,
(b) at any time, upon notice in writing thereof to the Employee,
if the Company, Cool Entertainment or the Employee has a
receiving order made against it or him, goes into bankruptcy
either voluntarily or involuntarily or makes a proposal to
creditors;
(c) at any time, upon notice in writing from the Company to the
Employee, if the Company or Cool Entertainment sells all or
substantially all of its assets or proceedings are commenced
to wind-up the Company or Cool Entertainment;
(d) if the Employee, either by reason of illness or mental or
physical disability or if the Employee fails, for one hundred
and twenty (120) consecutive days or for a total of one
hundred and eighty (180) days in any period of twelve (12)
consecutive months during the Term, to perform his duties
hereunder, then by one (1) month's notice in writing from the
Company to the Employee.
17.2 If the Company terminates the engagement of the Employee as
provided under subparagraphs 17.1(a) or 17.1(b), the Employee shall be entitled
only to the accrued salary owing to him up to the effective date of termination,
less any amounts owed by the Employee to the Company.
17.3 If the Company terminates the engagement of the Employee as
provided under Section 17.1(c), the Company shall pay to the Employee as
liquidated damages and compensation in full in respect of loss of such
engagement an amount equal to the salary which the Employee would have received
hereunder during the three (3)-month period commencing on the effective date of
termination, and such amount shall be payable immediately on termination of the
engagement.
<PAGE>
- 9 -
17.4 The Employee may in his sole discretion terminate his
employment hereunder if any one of the following occurs during the Term:
(a) a change of control of Cool Entertainment; or
(b) the Company materially alters the duties and responsibilities
of the Employee without his prior written consent,
by giving the Company 30 days notice in writing of his resignation.
17.5 For the purposes of this Agreement, "change of control" means
the occurrence of:
(a) the sale or a series of sales occurring within any twelve
(12)-month period, other than a sale to an affiliate (as that
term is defined in the British Columbia COMPANY ACT) of Cool
Entertainment, of assets of Cool Entertainment having a value
greater than 50% of the fair market value of the assets of
Cool Entertainment determined on a consolidated basis prior to
such sale or prior to the first of a series of sales occurring
within any twelve (12)-month period;
(b) the disposition of all of substantially all of the assets of
Cool Entertainment where such sale or disposition is required
by applicable law to be approved as a special resolution of
the shareholders of Cool Entertainment ; or
(c) any event or series of events pursuant to which on any date
the Vendors no longer comprise a majority of the directors of
Cool Entertainment.
18. NOTICES
All notices required or permitted to be given under this Agreement shall be in
writing and personally delivered to the intended recipient.
19. TIME
Time shall be of the essence of this Agreement.
20. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws
of British Columbia.
<PAGE>
- 10 -
21. HEADINGS
The headings appearing in this Agreement are inserted for convenience of
reference only and shall not affect the interpretation of this Agreement.
22. ASSIGNMENT
No Party may assign or transfer either the rights or the obligations created by
this Agreement without the prior written consent of the other Party hereto.
23. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties and
their respective heirs, personal representatives, successors and permitted
assigns.
IN WITNESS WHEREOF this Agreement has been duly executed by the Parties as of
the day and year first above written.
COOL MANAGEMENT INC.
per: /s/ Clement K.M. Lau
---------------------------------------
Clement K.M. Lau:
Authorized Signatory
Signed, sealed and delivered )
by WILLIAM J. HADCOCK )
in the presence of: )
)
/s/ Campbell Fitch )
- -------------------------------------- )
S. Campbell Fitch )
)
1000, 840 HOWE STREET, VANCOUVER, B.C. )
- -------------------------------------- ) /s/ William J. Hadcock
Address ) ------------------------------
) WILLIAM J. HADCOCK
- -------------------------------------- )
)
)
Lawyer )
- -------------------------------------- )
Occupation )
<PAGE>
Exhibit 10.5
Employment Agreement between Cool Management Inc. and Clement K.M. Lau
dated March 1, 1999
<PAGE>
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT (this "Agreement") is made as of the 1st day of March, 1999,
BETWEEN
COOL MANAGEMENT INC., a company incorporated under the laws of
British Columbia, having its registered office at 1000 - 840
Howe Street, Vancouver, British Columbia, V6Z 2M1
(the "Company");
AND
CLEMENT K.M. LAU, who resides at 5484 Rugby Avenue, Burnaby,
British Columbia, V5E 2N1
(the "Employee").
WHEREAS:
A. The Company is party to a management contract (the "Management
Agreement") between the Company and Cool Entertainment, Inc. ("Cool
Entertainment"), a Washington corporation which intends to carry on the business
of internet sales of audio and visual products; and
B. The Company wishes to retain the services of the Employee on
the terms and conditions contained in this Agreement.
IN CONSIDERATION OF the premises and the mutual agreements herein contained, the
parties hereto (the "Parties") agree as follows:
1. EMPLOYMENT
The Company shall employ the Employee for the Term (as defined below) upon and
subject to the terms and conditions set out in this Agreement and the Employee
accepts the employment on those terms and conditions.
<PAGE>
- 2 -
2. TERM OF EMPLOYMENT
The term of employment (the "Term") shall commence on the day Chelsea Pacific
Financial Corp. ("Chelsea") meets the First Financing Milestone, as that term is
defined in Section 7.1(a) of the Escrow Agreement between Pacific Corporate
Trust Company, Cool Entertainment, Chelsea, Minas Novas Gold Corp. (the "U.S.
Company") and Clement Kar Man Lau, William James Hadcock, Leonard Wayne Voth and
Marc Gregory Belcourt (Lau, Hadcock, Voth and Belcourt are herein collectively
referred to as the "Vendors") of even date herewith (the "Escrow Agreement"),
and ending on that day (the "Expiry Date") which is the earlier of:
(a) one year from the day on which Chelsea meets the Fourth
Financing Milestone (as defined in Section 7.1(d) of the
Escrow Agreement); and
(b) the day the Vendors become entitled to terminate Chelsea's
right of first refusal provided in Section 7 of the Amendment
and Restatement between Chelsea, the Vendors, Cool
Entertainment and the U.S. Company of even date herewith (the
"Amendment and Restatement") pursuant to Section 7.4(h)(i) of
the Escrow Agreement.
3. DUTIES OF EMPLOYEE
The Employee shall, on behalf of the Company, perform the following duties:
(a) oversight of management of Cool Entertainment's business;
(b) provision of operational and strategic leadership to Cool
Entertainment;
(c) keeping the directors of Cool Entertainment informed about
major strategic issues facing Cool Entertainment;
(d) monitoring and maintaining Cool Entertainment's relationship
with Chelsea Pacific Financial Corp.;
(e) oversight and development of business alliances for Cool
Entertainment; and
(d) provision of advice to the directors of Cool Entertainment
concerning the possibility and desirability of acquisitions
and divestitures by Cool Entertainment;
together with such other duties as the Company may reasonably prescribe from
time to time.
4. STANDARDS AND DEVOTION
4.1 The Employee shall at all times during the Term, except during
periods of vacation or when disabled by sickness or incapacity, faithfully and
diligently perform the Employee's duties in a professional manner. The Employee
shall use the Employee's best
<PAGE>
- 3 -
endeavours to promote and advance the business of Cool Entertainment, and shall
devote the Employee's entire time and attention to the business and affairs of
Cool Entertainment.
4.2 The Employee acknowledges that intellectual property developed
by him in the course of provision of services to the Company hereunder will be
the property of Cool Entertainment (subject to Section 7.4(c) of the Escrow
Agreement), and the Employee will cooperate with Cool Entertainment with respect
to the making of any filings reasonably necessary to protect such intellectual
property, and will execute all documents reasonably necessary to transfer the
ownership of benefits thereof to Cool Entertainment.
4.3 The Employee will be entitled to participate in any stock
option plan established by the U.S. Company, which upon completion of the
transaction described in the Amendment and Restatement shall be the owner of all
of the issued and outstanding shares in the capital of Cool Entertainment, on a
basis at least as favourable as that of any other participant therein.
5. REMUNERATION AND BENEFITS
As the Employee's entire remuneration for all services rendered to the Company
during the Term, the Employee shall be entitled to receive from the Company:
(a) a base salary (the "Salary") of US $50,000 per year, payable
in arrears within 3 business days of the end of each month;
and
(b) employee benefits in accordance with Schedule "A" hereto.
6. VACATION
6.1 The Employee shall be entitled to an annual paid vacation of
three weeks, commencing after one year of service to the Company hereunder.
6.2 The Employee will use his reasonable best efforts to ensure
that his vacation time does not coincide with vacation time taken by the other
Vendors pursuant to their contracts of employment with the Company.
7. FACILITIES
The Company shall provide and maintain the facilities, equipment and supplies it
deems necessary for the performance of the Employee's duties and
responsibilities pursuant to this Agreement.
<PAGE>
- 4 -
8. EXPENSES
The Employee shall incur no significant expenses in the course of performing his
duties hereunder without the prior approval of the Company. Upon itemization of
expenses for which such approval has been obtained and submission of receipts
therefor to the Company, the Company shall reimburse the Employee for such
expenses within 30 days.
9. INDEMNITY
The Employee shall protect, indemnify and hold the Company harmless from and
against any and all liabilities, costs, damages, and expenses (including legal
fees and disbursements) resulting from or attributable to any and all acts and
omissions of the Employee, provided, however, that to the extent that any
liabilities, costs, damages and expenses are compensated for by insurance
purchased or paid for by the Company, the Employee shall not be required to
reimburse the Company or the insurer for those liabilities, costs, damages or
expenses. The Company shall request that the Employee be shown as an additional
insured on all insurance policies obtained by it or shall obtain from the
insurer a waiver of subrogation in favour of the Employee.
10. ASSIGNMENT OF INCOME
If at any time during the Term, the Employee receives remuneration or any
payment for any professional services rendered by the Employee on behalf of the
Company, the Employee shall be deemed to have received such remuneration or
payment as agent for the Company, and shall forthwith assign and make a full
accounting to the Company of that remuneration or payment received.
11. CONFIDENTIALITY
The Employee acknowledges that during the Term, the Employee will:
(a) have access to and will be entrusted with detailed
confidential information, know-how and trade secrets relating
to the business and affairs of the Company, Cool Entertainment
and the U.S. Company including, without limitation, finances,
products, services, dealings and transactions of Cool
Entertainment and the U.S. Company, and the names, addresses,
preferences or other particular business requirements of Cool
Entertainment's and the U.S. Company's customers
("Confidential Information"), and that the disclosure of
Confidential Information to competitors of the Company, Cool
Entertainment or the U.S. Company or to the public would be
highly detrimental to the best interests of the Company, Cool
Entertainment and the U.S. Company;
<PAGE>
- 5 -
(b) in the course of performing services hereunder, the Employee
will be one of the principal representatives of Cool
Entertainment and the U.S. Company and as such will be
significantly responsible for maintaining or enhancing the
goodwill of Cool Entertainment and the U.S. Company; and
(c) the rights of the Company, Cool Entertainment and the U.S.
Company to maintain the confidentiality of Confidential
Information, and to preserve its goodwill, constitute
proprietary rights of the Company, Cool Entertainment and the
U.S. Company which the Company, Cool Entertainment and the
U.S. Company are entitled to protect;
and the Employee will not, during the Term and for one year after the expiry
thereof, disclose to any person, firm or corporation any Confidential
Information for any purpose other than the purposes of Cool Entertainment and
the U.S. Company and the Employee will not disclose or use for any purpose other
than for those of Cool Entertainment or the U.S. Company any Confidential
Information, provided that the foregoing covenant shall not extend to
Confidential Information which:
(a) disclosure of is specifically consented to in writing by the
Company. Cool Entertainment and the U.S. Company;
(b) the Employee is required by applicable law or by an order of a
court of competent jurisdiction to disclose;
(c) now or subsequently becomes available to the public through no
fault of the Employee;
(d) the Employee can demonstrate to have had rightfully in its
possession prior to disclosure to the Employee by the Company,
Cool Entertainment or the U.S. Company;
(e) is independently developed by the Employee without the use of
any Confidential Information; or
(f) the Employee rightfully obtains from a third party who has the
right to transfer or disclose it.
The Employee acknowledges that the foregoing covenant is necessary and
fundamental for the protection of the businesses of Cool Entertainment and the
U.S. Company and that a breach by the Employee of such covenant would result in
damage to Cool Entertainment and the U.S. Company which would not be adequately
compensated by an award of damages to Cool Entertainment or the U.S. Company and
that, in addition to all other remedies available to Cool Entertainment or the
U.S. Company, Cool Entertainment and the U.S. Company shall be entitled to the
immediate remedy of a restraining order, injunction or other form of relief as
may be
<PAGE>
- 6 -
decreed or issued by any court of competent jurisdiction to restrain or enjoin
the Employee from breaching such covenant.
12. NON-COMPETITION
12.1 The Employee covenants and agrees that he will not, until that
day which is the earlier of: (i) one year from the expiry of the Term; and (ii)
the day the Vendors become entitled to terminate Chelsea's right of first
refusal provided in Section 7 of the Amendment and Restatement pursuant to
Section 7.4(h)(i) of the Escrow Agreement:
(a) directly or indirectly, in any capacity whatsoever,
alone or in association with any other person, firm or corporation (other than
the Company or Cool Entertainment), as a principal, agent, shareholder,
director, guarantor, creditor, or in any other relationship whatsoever, save and
except as an employee only, engage or be concerned or interested in any business
substantially similar to the business of Cool Entertainment and which may
compete with the business of Cool Entertainment at any time during that period
in any territory in which Cool Entertainment carries on its business;
(b) directly or indirectly, use or disclose to any person,
except duly authorized officers and employees of the Company and Cool
Entertainment, any Confidential Information acquired by him by reason of his
involvement and association with the Company; or
(c) directly or indirectly, solicit any customer of Cool
Entertainment, as of the date of termination of employment, in any territory in
which Cool Entertainment carries on its business during that period.
Notwithstanding the foregoing, the Employee may invest in or have an interest in
entities traded on any public market or offered by any brokerage house, if an so
long as the interest does not exceed 5% of the voting control of such entity.
12.2 The parties recognize that irreparable damage would result
from any violation of the covenant in Section 12.1. It is therefore expressly
agreed that, in addition to any and all of the remedies available to the Company
and Cool Entertainment, they will each be entitled to the immediate remedy of
injunction or such other equitable relief as may be decreed or issued by any
court of competent jurisdiction to enforce Section 12.1 hereof.
12.3 The Employee acknowledges that the covenant in Section 12.1
hereof is given for good and valuable consideration (receipt of which is hereby
acknowledged), and that by reason of his unique knowledge of and his association
with the business of Cool Entertainment, the scope of such covenant as to time
and area is reasonable and commensurate with the protection of the legitimate
interests of Cool Management and Cool Entertainment. The covenant in
Section 12.1 shall survive termination of the Employees employment hereunder for
a period of one year, and such covenant is severable for that purpose. If any
part of such covenant is held to be unenforceable by a court of competent
jurisdiction, such part may be severed and replaced by
<PAGE>
- 7 -
the widest term that would not be held to be void or unenforceable. The Employee
waives all defences to the strict enforcement of such covenant.
13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties with respect
to the matters referred to herein and there are no representations or
warranties, express or implied, statutory or otherwise and no agreements
collateral hereto other than as expressly set forth or referred to herein.
14. FURTHER ASSURANCES
The Parties shall execute all other documents and do all further things as may
be necessary to carry out and give effect to the intent of this Agreement.
15. SEVERABILITY
Should any part of this Agreement be declared or held invalid for any reason,
that invalidity shall not affect the validity of the remainder which shall
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion.
16. AMENDMENTS
This Agreement may be amended by an agreement in writing signed by the Parties.
17. TERMINATION
17.1 The Company may terminate the Employee's employment hereunder
as follows:
(a) at any time, by notice in writing to the Employee, for just
cause which, without limitation, shall include:
(i) if there is a repeated and demonstrated failure on
the part of the Employee to perform his material
duties provided hereunder in a competent manner and
if the Employee fails to substantially remedy such
failure within a reasonable period of time after
receipt of written notice thereof;
(ii) if the Employee is convicted of a criminal offence
involving fraud or dishonesty;
(iii) if the Employee or any member of his family makes any
personal profit arising out of or in connection with
a transaction to which the Company or
<PAGE>
- 8 -
Cool Entertainment is a party or with which it is
associated without making disclosure to and obtaining
the prior written consent of the Company or Cool
Entertainment, as the case may be;
(iv) if the Employee fails to honour his fiduciary duties
to the Company, including the duty to act in the best
interests of the Company; or
(v) if the Employee disobeys reasonable instructions
given in the course of employment by the directors of
the Company that are not inconsistent with the
Employee's duties hereunder and are not remedied by
the Employee within a reasonable period of time after
receiving written notice thereof,
(b) at any time, upon notice in writing thereof to the Employee,
if the Company, Cool Entertainment or the Employee has a
receiving order made against it or him, goes into bankruptcy
either voluntarily or involuntarily or makes a proposal to
creditors;
(c) at any time, upon notice in writing from the Company to the
Employee, if the Company or Cool Entertainment sells all or
substantially all of its assets or proceedings are commenced
to wind-up the Company or Cool Entertainment;
(d) if the Employee, either by reason of illness or mental or
physical disability or if the Employee fails, for one hundred
and twenty (120) consecutive days or for a total of one
hundred and eighty (180) days in any period of twelve (12)
consecutive months during the Term, to perform his duties
hereunder, then by one (1) month's notice in writing from the
Company to the Employee.
17.2 If the Company terminates the engagement of the Employee as
provided under subparagraphs 17.1(a) or 17.1(b), the Employee shall be entitled
only to the accrued salary owing to him up to the effective date of termination,
less any amounts owed by the Employee to the Company.
17.3 If the Company terminates the engagement of the Employee as
provided under Section 17.1(c), the Company shall pay to the Employee as
liquidated damages and compensation in full in respect of loss of such
engagement an amount equal to the salary which the Employee would have received
hereunder during the three (3)-month period commencing on the effective date of
termination, and such amount shall be payable immediately on termination of the
engagement.
17.4 The Employee may in his sole discretion terminate his
employment hereunder if any one of the following occurs during the Term:
(a) a change of control of Cool Entertainment; or
(b) the Company materially alters the duties and responsibilities
of the Employee without his prior written consent,
<PAGE>
- 9 -
by giving the Company 30 days notice in writing of his resignation.
17.5 For the purposes of this Agreement, "change of control"
means the occurrence of:
(a) the sale or a series of sales occurring within any twelve
(12)-month period, other than a sale to an affiliate (as that
term is defined in the British Columbia COMPANY ACT) of Cool
Entertainment, of assets of Cool Entertainment having a value
greater than 50% of the fair market value of the assets of
Cool Entertainment determined on a consolidated basis prior to
such sale or prior to the first of a series of sales occurring
within any twelve (12)-month period;
(b) the disposition of all of substantially all of the assets of
Cool Entertainment where such sale or disposition is required
by applicable law to be approved as a special resolution of
the shareholders of Cool Entertainment ; or
(c) any event or series of events pursuant to which on any date
the Vendors no longer comprise a majority of the directors of
Cool Entertainment.
18. NOTICES
All notices required or permitted to be given under this Agreement shall be in
writing and personally delivered to the intended recipient.
19. TIME
Time shall be of the essence of this Agreement.
20. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws
of British Columbia.
21. HEADINGS
The headings appearing in this Agreement are inserted for convenience of
reference only and shall not affect the interpretation of this Agreement.
22. ASSIGNMENT
No Party may assign or transfer either the rights or the obligations created by
this Agreement without the prior written consent of the other Party hereto.
<PAGE>
- 10 -
23. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties and
their respective heirs, personal representatives, successors and permitted
assigns.
IN WITNESS WHEREOF this Agreement has been duly executed by the Parties as of
the day and year first above written.
COOL MANAGEMENT INC.
per: /s/ Clement K.M. Lau
-----------------------------------
Clement K.M. Lau:
Authorized Signatory
Signed, sealed and delivered )
by CLEMENT K.M. LAU )
in the presence of: )
)
/s/ S. Campbell Fitch )
- -------------------------------------- )
S. Campbell Fitch )
)
1000, 840 Howe Street, Vancouver, B.C. )
- -------------------------------------- ) /s/ Clement K.M. Lau
Address ) ------------------------------
) CLEMENT K.M. LAU
- -------------------------------------- )
)
)
- -------------------------------------- )
Occupation )
<PAGE>
Exhibit 10.6
Escrow Agreement between Pacific Corporate Trust Company, Cool Entertainment,
Inc. (Washington), Chelsea Pacific Financial Corp., Entertainment, Inc.
(Colorado), Clement Kar Man Lau, William James Hadcock, Leonard Wayne Voth, and
Marc Gregory Belcourt dated March 1, 1999, as amended
<PAGE>
- --------------------------------------------------------------------------------
ESCROW AGREEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT dated for reference March 1, 1999, is made
BETWEEN
PACIFIC CORPORATE TRUST COMPANY, of Suite 830, 625 Howe
Street, Vancouver, British Columbia, V6C 3B8
(the "Escrow Agent");
AND
COOL ENTERTAINMENT, INC., a corporation incorporated according
to the laws of the State of Washington, with a registered
address at Suite 2400, 1601 Fifth Avenue, Seattle, Washington,
98101-1618
("Cool");
and
CHELSEA PACIFIC FINANCIAL CORP., of 1738 - 609 Granville
Street, Vancouver, British Columbia, V7Y 1C5
("Chelsea")
AND
COOL ENTERTAINMENT, INC., a corporation incorporated according
to the laws of the State of Colorado, with a business address
at Suite 1738, 609 Granville Street, Vancouver, British
Columbia, V7Y 1G5
(the "U.S. Company")
and
CLEMENT KAR MAN LAU, of 5484 Rugby Avenue, Burnaby, British
Columbia, V5E 1G5; WILLIAM JAMES HADCOCK, of Suite 1301, 238
Alvin Narod Mews, Vancouver, British Columbia, V6B 5Z3;
LEONARD WAYNE VOTH, of 4422 Stone Crescent, West Vancouver,
British Columbia, V7W 1B7; and MARC GREGORY BELCOURT, of 9139
Carver Crescent, North Delta, British Columbia, V4C 6N1
(collectively, "the Vendors")
<PAGE>
2
WHEREAS:
A. The Vendors and Chelsea are party to an agreement regarding
the sale of the issued and outstanding shares of Cool dated December 8, 1998, as
amended by an agreement dated January 20, 1999 between the Vendors, Chelsea and
the U.S. Company and amended and restated by an agreement (the "Purchase
Agreement") dated February 25, 1999 between the Vendors, Chelsea, the U.S.
Company and Cool;
B. Pursuant to the Purchase Agreement, the Vendors have agreed to
sell all of the issued and outstanding shares of Cool (the "Cool Shares") to the
U.S. Company, in consideration of the issuance by the U.S. Company to the
Vendors of shares in the capital stock of the U.S. Company representing 65% of
the issued and outstanding share capital of the U.S. Company, after giving
effect to such issuance (the "U.S. Shares");
C. Pursuant to the Purchase Agreement, Cool Management Inc. ("Cool
Management") has entered into a management agreement with Cool Entertainment
dated effective the date hereof (the "Management Agreement"), and each of the
Vendors have entered into employment or consulting agreements with Cool
Management (collectively, the "Employment Agreements"), dated effective the date
hereof;
D. Pursuant to the Purchase Agreement, the Vendors have agreed to
place the 75% of the U.S. Shares (the "Escrowed Shares") in escrow according to
the terms hereof;
E. The Escrow Agent has agreed to act as escrow agent in respect of
the Escrowed Shares according to the terms hereof;
NOW THEREFORE in consideration of the covenants contained in this Agreement and
other good and valuable consideration (the receipt and sufficiency of which is
acknowledged), the parties agree as follows:
<PAGE>
3
1. INTERPRETATION
In this Agreement:
(a) "Business Plan" has the meaning defined in the Purchase
Agreement;
(b) "Closing" has the meaning defined in Section 2 hereof;
(c) "Cool Shares" has the meaning defined in Recital "B" hereof;
(d) "Development Umpire" has the meaning defined in Section 7.4
hereof;
(e) "Escrowed Shares" has the meaning defined in Recital "D" hereof;
(f) "Management Agreement" has the meaning defined in Recital "C"
hereof;
(g) "Non-Escrowed Shares" has the meaning defined in Subsection 2.1
hereof;
(h) "Purchase Agreement" has the meaning defined in Recital "A"
hereof; and
(i) "U.S. Shares" has the meaning defined in Recital "B" hereof.
2. VENDORS TO DELIVER CERTIFICATES
2.1 The U.S. Company agrees with the Vendors to issue certificates
representing:
(a) 25% of the U.S. Shares to the Vendors (the "Non-Escrowed
Shares"), registered in the names of the Vendors; and
(b) the Escrowed Shares to the Vendors, registered in the names of
the Vendors;
on the closing of the purchase and sale of the Cool Shares pursuant to
the Purchase Agreement (the "Closing").
2.2 the U.S. Company agrees with the Vendors and Chelsea to deliver the
certificates representing the Escrowed Shares to the Escrow Agent
forthwith upon the Closing, to be held according to the terms hereof.
<PAGE>
4
3. PLACEMENT OF SHARES IN ESCROW BY VENDORS
The Vendors hereby place the Escrowed Shares in escrow with the Escrow Agent
according to the terms hereof.
4. VOTING OF SHARES IN ESCROW
The Vendors may exercise all voting rights attached to the Escrowed Shares,
provided that the Vendors agree with Chelsea that they shall not propose any
consolidation of the share capital of the U.S. Company while any of the Escrowed
Shares are subject to escrow hereunder without the consent of Chelsea. The
foregoing proviso shall not apply to any consolidation proposed by any
shareholder other than the Vendors. However, the Vendors shall vote against any
such resolution unless Chelsea grants its prior written consent to the Vendors
voting in favour of such a resolution.
5. NO WAIVER OF SHAREHOLDERS' RIGHTS
The Vendors waive no rights attached to the Escrowed Shares, except the right to
sell, assign or otherwise transfer the Escrowed Shares or any interest in the
Escrowed Shares. For the sake of clarity, such waiver does not apply to any of
the Escrowed Shares which are released from escrow.
6. TRANSFER WITHIN ESCROW
The Vendors will not sell, deal in, assign, transfer in any manner whatsoever or
agree to sell, deal in, assign or transfer in any manner whatsoever, any of the
Escrowed Shares which are subject to escrow hereunder or beneficial ownership of
or any interest in them. The Escrow Agent shall not accept or acknowledge any
transfer, assignment, declaration of trust or any other documents evidencing a
change in legal or beneficial ownership of any of the Escrowed Shares subject to
escrow hereunder, or of any interest in such Escrowed Shares, subject to the
terms of this Agreement.
<PAGE>
5
7. FINANCING OF COOL, DEVELOPMENT OF COOL'S BUSINESS AND RELEASE
FROM ESCROW
7.1 Chelsea agrees with Cool, the U.S. Company and the Vendors that,
following the Closing, it shall use its best efforts to arrange financing for
the U.S. Company in the following amounts, by the following times:
(a) on or before that day (the "First Financing Date") which falls
120 days from the Closing, financing resulting in proceeds of
U.S. $500,000, net to the treasury of the U.S. Company of
commissions, charges and expenses (the "First Financing
Milestone");
(b) on or before that day (the "Second Financing Date") which falls
180 day from Closing, financing resulting in further proceeds of
U.S. $500,000 net to the treasury of the U.S. Company of
commissions, charges and expenses (the "Second Financing
Milestone");
(c) on or before that day (the "Third Financing Date") which falls
270 day from Closing, financing resulting in further proceeds of
U.S. $500,000 net to the treasury of the U.S. Company of
commissions, charges and expenses (the "Third Financing
Milestone"); and
(d) on or before that day (the "Fourth Financing Date") which falls
one year from Closing, financing resulting in further proceeds
of U.S. $500,000 net to the treasury of the U.S. Company of
commissions, charges and expenses (the "Fourth Financing
Milestone").
7.2 In respect of each financing referred to in Section 7.1 hereof,
the U.S. Company agrees to pay a commission to Chelsea in an amount to be
agreed, but in any event within the guidelines set forth in Section 17.2.8 of
the Vancouver Stock Exchange's Corporate Finance Policy and Procedure Manual.
7.3 Following the Closing, receipt by the U.S. Company of funds
pursuant to the First Financing Milestone and such funds having been made
available by the U.S. Company to Cool,
<PAGE>
6
Cool will certify to the Escrow Agent that it has received US $500,000
pursuant to the First Financing Milestone, and Cool will use its best efforts
to develop the website referred to in Cool's Business Plan (the "Website"), and
Cool's intended business of internet distribution of audio and video products,
according to the following schedule:
(a) by that day (the "First Release Date") which falls 90 days from
the day Chelsea meets the First Financing Milestone, receipt of
funds by the U.S. Company pursuant to such milestone, such funds
having been made available by the U.S. Company to Cool, and the
foregoing certification having been provided to the Escrow
Agent, to develop the Website such that it is technically
capable of providing media content through online transactions
(the "First Development Milestone");
(b) by that day (the "Second Release Date") which falls 90 days from
the day Chelsea has met the Second and Third Financing
Milestones, receipt of funds by the U.S. Company pursuant to
such milestones, and such funds having been made available by
the U.S. Company to Cool, to enter into agreements relating to
distribution of audio and video products through the Website
(the "Second Development Milestone"); and
(c) by that day (the "Third Release Date") which falls 90 days from
the day Chelsea meets the Fourth Financing Milestone, receipt of
funds by the U.S. Company pursuant to such milestones, and such
funds having been made available by the U.S. Company to Cool, to
fully develop the Website with the following features:
1. on-line magazines;
2. on-line chat rooms;
3. email services; and
4. on-line games.
<PAGE>
7
7.4 The Escrow Agent will release the Escrowed Shares from escrow
hereunder to the Vendors pro-rata on the following terms:
(a) 33.33 % of the Escrowed Shares (the "First Escrow Tranche")
shall be released from escrow on the First Release Date if
Peter Koo, or if Mr. Koo is unable or unwilling to act,
Anthony Leung, of Deloitte & Touche's technical group in
Vancouver (the "Development Umpire") certifies to the Escrow
Agent that Cool has met the First Development Milestone;
(b) If, on the First Release Date, Chelsea has met the First
Financing Milestone, but Cool has not met the First
Development Milestone, then the First Escrow Tranche shall be
released to the Vendors on the day following the First Release
Date when the Development Umpire certifies to the Escrow Agent
that Cool has met the First Development Milestone;
(c) Chelsea, the U.S. Company and Cool agree with the Vendors that
if Chelsea does not meet the First Financing Milestone by the
First Financing Date, then :
(i) all intellectual property created by Cool Management,
the Vendors and the Escrow Agent for Cool and the U.S.
Company as at the First Financing Date shall
automatically, without further action, conclusively be
deemed to have been transferred by the U.S. Company and
Cool to the Vendors for good and valuable consideration,
and Cool and the U.S. Company will execute all documents
and co-operate fully with the Vendors with respect to
any filings which are necessary to transfer such
intellectual property to the Vendors;
(ii) the Management Agreement and the Employment Agreements
shall automatically, without further action,
conclusively be deemed to have terminated;
(iii) the Vendors shall forthwith return to the U.S. Company
the certificates representing the Non-Escrowed Shares
for cancellation;
<PAGE>
8
(iv) the U.S. Company shall forthwith return the Cool Shares
to the Vendors, free of any liens, charges or other
encumbrances whatsoever;
(v) the Escrow Agent shall return the certificates
representing the Escrowed Shares to the U.S.. Company
for cancellation; and
(vi) this Agreement shall terminate.
(d) a further 33.33% of the Escrowed Shares (the "Second Escrow
Tranche") shall be released from escrow on the Second Release
Date if Cool certifies to the Escrow Agent that it has
received US $1,000,000 pursuant to the Second and Third Financing
Milestones and the Development Umpire certifies to the Escrow
Agent that Cool has met the Second Development Milestone;
(e) if, on the Second Release Date, Chelsea has met the Second and
Third Financing Milestones, but Cool has not met the Second
Development Milestone, then the Second Escrow Tranche shall be
released from Escrow to the Vendors on the day following the
Second Release Date when Cool certifies to the Escrow Agent that
it has received US $1,000,000 pursuant to the Second and Third
Financing Milestones and the Development Umpire certifies to the
Escrow Agent that Cool has met the Second Development Milestone;
(f) the balance of the Escrowed Shares (the "Third Escrow Tranche")
shall be released from escrow on the Third Release Date if Cool
certifies to the Escrow Agent that it has received US $500,000
pursuant to the Fourth Financing Milestone and the Development
Umpire certifies to the Escrow Agent that Cool has met the Third
Development Milestone;
(g) If, on the Third Release Date, Chelsea has met the Fourth
Financing Milestone, but Cool has not met the Third Development
Milestone, then the Third Escrow Tranche shall be released to the
Vendors on the day following the Third Release Date when Cool
certifies to the Escrow Agent that it has received US $500,000
<PAGE>
9
pursuant to the Fourth Financing Milestone and the Development
Umpire certifies to the Escrow Agent that Cool has met the Third
Development Milestone;
(h) if on the Second, Third or Fourth Financing Dates, Chelsea has
not met the Second, Third or Fourth Financing Milestone, then
Chelsea agrees with the Vendors that in any such case the
Vendors shall have the right to provide notice to Chelsea that
proceeds of financing in the amounts provided in the unmet
Milestone must be received by the U.S. Company that day which
falls 60 days from the Second, Third or Fourth Financing Date,
respectively. If proceeds of financing in such amount is not
received by such date, then:
(i) the Vendors shall have the right to terminate Chelsea's
right of first refusal in respect of the U.S. Company
provided in Section 7 of the Purchase Agreement; and
(ii) the Vendors shall have the right to continue to earn the
U.S. Shares out of escrow by providing certification to
the Escrow Agent that Cool has met the Second, Third and
Fourth Development Milestones, as the case may be; and
7.5 The decision of the Development Umpire as to whether Cool has met
a Development Milestone shall be final and binding upon the parties, and there
shall be no appeal therefrom.
7.6 Upon the receipt of written request, the Escrow Agent shall give
to any Vendor a letter or receipt stating the number of Escrowed Shares
represented by certificates held for such Vendor by the Escrow Agent subject to
the terms hereof, but such letter or receipt shall not be assignable.
8. NO SURRENDER FOR CANCELLATION
The Vendors shall not be required to surrender the Escrowed Shares for
cancellation under any circumstances except those set out herein.
<PAGE>
10
9. AMENDMENT OF AGREEMENT
This Agreement may be amended only by a written agreement among the parties.
10. ESCROW AGENT
10.1 The Escrow Agent is not a party to, and is not bound by, any
provisions which may be evidenced by, or arise out of, any agreement other than
as herein set forth.
10.2 The Escrow Agent acts hereunder as a depository only and is not
responsible or liable in any manner whatever for the sufficiency, correctness,
genuineness or validity of any instrument deposited with it, or for the form of
execution of such instrument, or for the identity or authority or right of any
person or party executing it. The Escrow Agent is entitled to rely exclusively
upon the determination of the Development Umpire as to whether or not a
Development Milestone has been met.
10.3 The Escrow Agent shall not be required to take notice of any
default or to take any action with respect to such default involving any expense
or liability, unless notice in writing of such default is formally given to The
Manager, Corporate Trust Department of the Escrow Agent and unless it is
indemnified, in a manner satisfactory to it, against such expense or liability.
10.4 The Escrow Agent shall be protected in acting upon any written
notice, request, waiver, consent, receipt or other paper or document apparently
signed by the proper person or party.
10.5 The Escrow Agent may seek the advice of legal counsel in the
event of any question or dispute as to the construction of any of the provisions
hereof or its duties hereunder, and it shall incur no liability and shall be
fully protected in acting in accordance with the opinion and instructions of
such legal counsel.
10.6 The Escrow Agent shall not be answerable for the default or
misconduct of any agent or legal counsel employed or appointed, at its
discretion, by it if such agent or legal counsel shall have been selected with
reasonable care.
<PAGE>
11
10.7 The Escrow Agent shall not be liable for any error of judgment,
or for any act done or omitted by it in good faith, or for any mistake of fact
or law, or for anything which it may do or omit from doing in connection
herewith, except its own fraud or negligence.
10.8 In the event of any disagreement between any of the parties to
this Agreement, or between them or any of them and any other person, resulting
in demands or adverse claims being made in connection with or for any asset
involved herein or affected hereby, the Escrow Agent shall be entitled, at its
discretion, to refuse to comply with any demands or claims on it, so long as
such disagreement shall continue, and in so refusing the Escrow Agent may make
no delivery or other disposition of any asset involved herein or affected
hereby, and in so doing the Escrow Agent shall not be or become liable in any
way or to any person or party for its failure or refusal to comply with such
conflicting demands or adverse claims, and it shall be entitled to continue so
to refrain from acting and so to refuse to act until the right of such person or
party shall have finally been adjudicated in a court assuming and having
jurisdiction over the assets involved herein or affected hereby, or all
differences shall have been adjusted by agreement and the Escrow Agent shall
have been notified thereof in writing signed by all persons and parties
interested.
10.9 The parties jointly and severally undertake to indemnify and hold
harmless the Escrow Agent for any claims, losses, damages, costs and expenses,
including fees, disbursements and out-of-pocket expenses of any agent and legal
counsel, related to the execution of this obligations, and to pay the fees,
disbursements and out-of-pocket expenses of the Escrow Agent in acting as set
out in this Agreement.
10.10 The Escrow Agent may charge such reasonable fees for its services
hereunder as may be agreed between the Escrow Agent and the U.S. Company. It is
agreed between the Escrow Agent and the U.S. Company that a fee of Cdn.$1,000.00
will be payable to the Escrow Agent upon execution and delivery of this
Agreement and delivery of the Escrowed Shares to the Escrow Agent hereunder. It
is agreed between the parties hereto that Chelsea shall be responsible
for payment of such amount at such time. The U.S. Company shall be responsible
<PAGE>
12
for payment of all fees charged by the Escrow Agent in connection with the
services provided by the Escrow Agent hereunder after delivery of the Escrowed
Shares to the Escrow Agent.
11. NOTICE
A notice referred to in this Agreement shall be in writing and delivered to the
party to which notice is to be given at the address indicated above. The notice
shall be deemed to have been received on the date of delivery. Any party may
change its address for notice by giving notice to the other parties in
accordance with this Section.
12. FURTHER ASSURANCES
The parties shall execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
13. TIME
Time is of the essence of this Agreement.
14. GOVERNING LAWS
This Agreement shall be construed in accordance with and governed by the laws of
British Columbia and the federal laws of Canada applicable therein.
15. COUNTERPARTS AND DELIVERY
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which shall constitute one agreement, and
may be delivered by telecopier.
16. LANGUAGE
Wherever a singular expression is used in this Agreement, that expression is
deemed to include the plural or the body corporate where required by the
context.
<PAGE>
13
17. ENUREMENT
This Agreement enures to the benefit of and is binding on the parties and their
heirs, executors, administrators, successors and permitted assigns.
The parties have executed and delivered this Agreement as of the date of
reference of this Agreement.
PACIFIC CORPORATE TRUST COMPANY
- ------------------------------------------- c/s
Authorized Signatory
COOL ENTERTAINMENT, INC.
(a Washington Corporation)
- ------------------------------------------- c\s
Authorized Signatory
CHELSEA PACIFIC FINANCIAL CORP.
- ------------------------------------------- c\s
Authorized Signatory
COOL ENTERTAINMENT, INC.
(a Colorado Corporation)
- ------------------------------------------- c\s
Authorized Signatory
CLEMENT KAR MAN LAU
- ------------------------------------------- (seal)
Authorized Signatory
<PAGE>
14
WILLIAM JAMES HADCOCK
- ------------------------------------------- (seal)
Authorized Signatory
LEONARD WAYNE VOTH
- ------------------------------------------- (seal)
Authorized Signatory
MARC GREGORY BELCOURT
- ------------------------------------------- (seal)
Authorized Signatory
<PAGE>
- ------------------------------------------------------------------------------
Addendum to the Escrow Agreement
- -----------------------------------------------------------------------------
THIS AGREEMENT dated for reference 2nd December, 1999, is made
BETWEEN
PACIFIC CORPORATE TRUST COMPANY, of Suite 830, 625 Howe Street,
Vancouver, British Columbia V6C 3B8
(the "Escrow Agent");
AND
COOL ENTERTAINMENT, INC., a corporation incorporated according to the
laws of the State of Washington, with a registered address at Suite
2400, 1601 Fifth Avenue, Seattle, Washington, 98101-1618
("Cool");
AND
CHELSEA PACIFIC FINANCIAL CORP., of 1738 - 609
Granville Street, Vancouver, British Columbia, V7Y 1C5
("Chelsea")
AND
COOL ENTERTAINMENT, INC., a corporation incorporated according to the
laws of the State of Colorado, with a business address at Suite 1738,
609 Granville Street, Vancouver, British Columbia, V7Y 1G5
(the "U.S. Company")
AND
CLEMENT KAR MAN LAU, of 5484 Rugby Avenue, Burnaby, British Columbia,
V5E 1G5; WILLIAM JAMES HADCOCK, of Suite 1301, 238 Alvin Narod Mews,
Vancouver, British Columbia, V6B 5Z3; LEONARD WAYNE VOTH, of 4422 Stone
Crescent, West Vancouver, British Columbia, V7W 1B7; and MARC GREGORY
BELCOURT, of 9139 Carver Crescent, North Delta, British Columbia, V4C
6N1
(collectively, "the Vendors")
<PAGE>
2
WHEREAS:
A. The Vendors and Chelsea are party to an agreement regarding the sale of
the issued and outstanding shares of Cool dated December 8, 1998, as amended by
an agreement dated January 20, 1999 between the Vendors, Chelsea and the U.S.
Company and amended and restated by an agreement (the "Purchase Agreement")
dated February 25, 1999 between the Vendors, Chelsea, the U.S. Company and Cool;
B. Pursuant to the Purchase Agreement, the Vendors have agreed to sell all
of the issued and outstanding shares of Cool (the "Cool Shares") to the U.S.
Company, in consideration of the issuance by the U.S. Company to the Vendors of
shares in the capital stock of the U.S. Company representing 65% of the issued
and outstanding share capital of the U.S. Company, after giving effect to such
issuance (the "U.S. Shares");
C. Pursuant to the Purchase Agreement, Cool Management Inc. ("Cool
Management") has entered into a management agreement with Cool Entertainment
dated effective the date hereof (the "Management Agreement"), and each of the
Vendors have entered into employment or consulting agreements with Cool
Management (collectively, the "Employment Agreements"), dated effective the date
hereof;
D. Pursuant to an agreement between the parties dated for reference March 1
(the "Escrow Agreement) the Vendors have placed 75% of the U.S. Shares (the
"Escrowed Shares") in escrow according to the terms of the Escrow Agreement;
E. The parties wish to amend the Escrow Agreement;
NOW THEREFORE consideration of the covenants contained in this Agreement and
other good and valuable consideration (the receipt and sufficiency of which
is acknowledged), the parties agree as follows:
1. INTERPRETATION
In this Agreement, capitalized terms not otherwise defined herein have the
meanings defined in the Escrow Agreement.
<PAGE>
3
2. FINANCING OF COOL AND DEVELOPMENT OF COOL'S BUSINESS
2.1 Chelsea shall complete financing milestone #1 (to US $500K.) net to
treasury the balance of USD$131,000. Any surplus or deficiency shall be
adjusted in milestone #2. Balance remaining to complete milestone #1 is
US$23,000.
2.2 Chelsea may take a finder's fee in accordance to the original escrow
agreement but must deliver to Cool no less than USD131,000 net to
treasury, of which no less than USD$65,500 is deposited net to treasury
on signing of this agreement, the remaining amount shall be deposited net
to treasury no later than 15th December, 1999.
2.3 Chelsea remains as Cool's Investor Relations partner for 12 months after
signing this addendum and all existing terms in the agreement remain in
effect during this period. All costs relating to performing this function
are paid for out of the finder's fees taken by Chelsea. If they do not
meet financing milestone #2, or #3 or #4, Cool reserves the option to
seek alternative funding.
2.4 Chelsea has 2 months after signing this agreement addendum to nominate a
person to be on the board of directors. The existing board will vote to
accept the suggested new director and has the full power to deny any
person suggested by Chelsea. There will be no cost to Cool for a new
director. Cannot be unreasonably denied or withheld.
2.5 After financial milestone #1 is completed, Cool signs a letter indicating
the directors roll out option is now waived, according to the escrow
agreement.
2.6 Cool continues work on delivery milestone #1, according to the agreement.
Finder's fees may be collected on all future financing arranged by
Chelsea.
2.7 When financing milestone #2 is met, Cool then agrees to deliver
development milestone #2 according to the agreement.
<PAGE>
4
2.8 Cool directors will continue to promote the company within the
limitations set out for corporate directors.
2.9 Both parties agree to allocate stock options at 65% to Cool and 35% to
Chelsea or assignee.
2.10 6 months shall be added to the term where the company shall not roll back
to the capitalization of the outstanding share structure, unless with the
written approval by Chelsea.
3. AMENDMENT OF AGREEMENT
This Agreement may be amended only by a written agreement among the parties.
4. GOVERNING LAWS
This Agreement shall be construed in accordance with and governed by the laws of
British Columbia and the federal laws of Canada applicable therein.
5. COUNTERPARTS AND DELIVERY
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which shall constitute one agreement, and
may be delivered by telecopier.
6. ENUREMENT
This Agreement enures to the benefit of and is binding on the parties and their
heirs, executors, administrators, successors and permitted assigns.
The parties have executed and delivered this Agreement as of the date of
reference of this Agreement.
PACIFIC CORPORATE TRUST COMPANY
- --------------------- c/s
Authorized Signatory
<PAGE>
5
COOL ENTERTAINMENT, INC.
(a Washington Corporation)
/s/ CLEMENT KAR MAN LAU c/s
- ---------------------------
Authorized Signatory
CHELSEA PACIFIC FINANCIAL CORP.
/s/ CAREY WHITEHEAD c/s
- ----------------------------
Authorized Signatory
COOL ENTERTAINMENT, INC.
(a Colorado Corporation)
/s/ CLEMENT KAR MAN LAU c/s
- -----------------------
Authorized Signatory
CLEMENT KAR MAN LAU
/s/ CLEMENT KAR MAN LAU (seal)
- ----------------------
Authorized Signatory
WILLIAM JAMES HADCOCK
/s/ WILLIAM JAMES HADCOCK (seal)
- -------------------------
Authorized Signatory
LEONARD WAYNE VOTH
/s/ LEONARD WAYNE VOTH (seal)
- ----------------------
Authorized Signatory
MARC GREGORY BELCOURT
/s/ MARC GREGORY BELCOURT (seal)
- ------------------------
Authorized Signatory
<PAGE>
Exhibit 10.7
Form of Registration Rights Agreement between Cool Entertainment, Inc. and each
of Clement Kar Man Lau, William James Hadcock, Leonard Wayne Voth, and Marc
Gregory Belcourt dated March 1, 1999
<PAGE>
CONFIDENTIAL CONFIDENTIAL
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of March 1,
1999, is made and entered into by and between COOL ENTERTAINMENT, INC., a
Colorado corporation ("Company") and CLEMENT KAR MAN LAU ("Holder").
RECITALS
A. Holder has been issued 5,796,011 shares ("Shares") of the Company's
common stock ("Common Stock").
B. The Company desires to provide Holder with certain registration
rights with respect to the Shares owned by Holder upon the terms and conditions
hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions hereinafter set forth, the parties hereto hereby
agree as follows:
1. DEFINITIONS.
1.1 "COMMON STOCK" means the Common Stock of the Company.
1.2 "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
1.3 "REGISTRABLE SECURITIES" means the Shares and any
securities issued or issuable with respect to such Shares by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consideration or other reorganization. As to any
particular Registrable Securities, once issued, such shares shall cease to be
Registrable Securities when (a) such shares shall have been registered under the
Securities Act, the registration statement with respect to the sale of such
shares shall have become effective under the Securities Act and such shares
shall have been disposed of pursuant to such effective registration statement,
(b) such shares shall have been distributed pursuant to Rule 144 (or any similar
provision relating to the disposition of securities then in force) under the
Securities Act, (c) such shares shall have been otherwise transferred, new
certificates or other evidences of ownership for them not bearing a legend
restricting further transfer and not subject to any stop-transfer order or other
restrictions on transfer shall have been delivered by the Company and subsequent
disposition of such shares shall not require registration or qualification of
such shares under the Securities Act or any state securities laws then in force,
or (d) such shares shall cease to be outstanding.
1.4 "REGISTRATION EXPENSES" shall have the meaning set forth
in Section 2.3.
1.5 "SEC" shall mean the Securities and Exchange Commission.
1.6 "SECURITIES ACT" shall mean the Securities Act of 1933,
as amended.
1.7 "SHARES" shall have the meaning set forth in the
recitals to this Agreement.
2. INCIDENTAL REGISTRATION.
1
<PAGE>
2.1 REGISTRATION RIGHTS. If the Company at any time proposes
to register any of its securities under the Securities Act, whether or not for
sale for its own account, in a manner which would permit registration of the
Registrable Securities for sale to the public under the Securities Act, the
Company shall offer Holder the opportunity to include in such registration
statement any or all of its Registrable Securities. The Company will use its
best efforts to effect the registration under the Securities Act of the
Registrable Securities which the Company has been so requested to register by
Holder, to the extent requisite to permit the disposition (in accordance with
such intended methods thereof) of the Registrable Securities so to be
registered; PROVIDED, that if such registration involves an underwritten or
"best efforts" offering, Holder must offer and sell the Registrable Securities
in a manner as contemplated in the registration statement and as reasonably
determined by the Company and the underwriters or agents selected by the
Company. The Company will pay all Registration Expenses (as hereinafter defined)
in connection with each registration of Registrable Securities requested
pursuant to this Agreement.
2.2 PRIORITY IN INCIDENTAL REGISTRATION. If a registration
pursuant to this Agreement involves an underwritten or "best efforts offering
and the managing underwriter or agent advises the Company in writing that, in
its opinion, the number of securities which the Company, Holder and any other
persons intend to include in such registration exceeds the number which would
have an adverse effect on such offering, including the price at which such
securities can be sold, the Company will include in such registration (i) first,
all the securities the Company proposes to sell for its own account, (ii)
second, a number of such securities equal to the number, in the opinion of such
underwriters or agents, which can be sold without having the adverse effect
referred to above, such amount to be allocated pro rata among Holder and other
persons having similar registration rights on the basis of the relative number
of securities Holder and other persons have requested to be included in such
registration.
2.3 REGISTRATION EXPENSES. As used in this Agreement,
"Registration Expenses" shall mean all expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all SEC, stock exchange, National Association of Securities Dealers, Inc. or
Nasdaq registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the Company in connection with
blue sky qualification of the Registrable Securities), rating agency fees,
printing expenses, messenger and delivery expenses, fees and disbursements of
counsel for the Company and all independent certified public accountants
(including the expenses of any annual audit, special audit or "cold comfort"
letters required by or incident to such performance and compliance), securities
acts liability insurance (if the Company so desires), the reasonable fees and
expenses of any special experts retained by the Company in connection with such
registration, and fees and expenses of other persons retained by the Company.
3. REGISTRATION PROCEDURE. In effecting the registration of the
Registrable Securities as provided in this Agreement, the Company shall, at its
sole expense:
(a) Prepare and file with the SEC a registration statement
with respect to the Registrable Securities and use its best efforts to cause
such registration statement to become effective; PROVIDED, HOWEVER, that before
filing with the SEC a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to counsel selected by Holder
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel, and (ii) notify Holder of any stop order
issued or threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
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<PAGE>
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to keep such registration
statement effective for a period of not less than ninety (90) days or such
shorter period which will terminate when all Registrable Securities covered by
such registration statement have been sold, and comply with the provisions of
the Act with respect to the disposition of all the Registrable Securities
covered by such registration statement during such period;
(c) Furnish to Holder copies of the registration statement,
each amendment and supplement thereto (in each case including all exhibits
thereto), the prospectus included in such registration statement (including each
preliminary prospectus) in conformity with the requirements of the Securities
Act and such other documents as Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by Holder;
(d) Use its best efforts to register or qualify the
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by Holder and do any and all
other acts and things which may be reasonably necessary or advisable to enable
Holder to consummate the disposition in such jurisdictions of the Registrable
Securities owned by Holder;
(e) Use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable Holder to consummate the
disposition of such Registrable Securities;
(f) Immediately notify Holder at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and the Company will promptly prepare and
furnish to Holder a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(g) Enter into such customary agreements and take all such
other actions as Holder reasonably requests in order to expedite or facilitate
the disposition of such Registrable Securities, including customary
indemnification;
(h) Make available for inspection by Holder and any
attorney, accountant or other agent retained by Holder (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such Inspector in connection with such registration statement; and
(i) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC.
The Company may require Holder to furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may from time to time reasonably request in writing.
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Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in paragraph 3(f),
Holder will forthwith discontinue disposition of Registrable Securities,
pursuant to the registration statement covering such Registrable Securities
until Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph 3(f), and, if so directed by the Company, Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in Holder's possession, of the prospectus covering
such Registrable Securities current at the time of receipt of such notice. In
the event the Company shall give any such notice, the period mentioned in
paragraph 3(b) shall be extended by the greater of (i) three months or (ii) the
number of days during the period from and including the date of the giving of
such notice pursuant to paragraph 3(f) to and including the date when Holder
shall have received the copies of the supplemented or amended prospectus
contemplated by paragraph 3(f).
4. INDEMNIFICATION.
4.1 INDEMNIFICATION BY THE COMPANY. In connection with the
registration of the Registrable Securities under the Securities Act pursuant to
this Agreement, the Company will, and it hereby does, indemnify and hold
harmless, to the full extent permitted by law, Holder, and each other person, if
any, who controls Holder within the meaning of the Securities Act, against any
and all losses, claims, damages or liabilities, joint or several, and expenses
(including any amounts paid in any settlement effected with the Company's prior
written consent) to which Holder or any such controlling person may become
subject under the Securities Act, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) or expenses arising out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto, or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse Holder and
each such controlling person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending such loss, claim,
liability, action or proceedings; PROVIDED, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expenses arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement or amendment or supplement thereto
or in any such preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by Holder or controlling person specifically stating
that it is for use in the preparation thereof; and PROVIDED, FURTHER, that the
Company will not be liable to Holder or any such controlling person under the
indemnity agreement in this Section 4.1 with respect to any preliminary
prospectus as then amended or supplemented as the case may be, to the extent
that any such loss, claim, damage or liability of Holder or such controlling
person results from the fact that Holder or such controlling person sold
Registrable Securities to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus
(including any documents incorporated by reference therein), whichever is most
recent, if the Company has previously furnished copies thereof to Holder or such
controlling person and such final prospectus, as then amended or supplemented,
has corrected any such misstatement or omission. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
Holder or such controlling person and shall survive the transfer of such
securities by Holder.
4.2 INDEMNIFICATION BY HOLDER. The Company may require, as a
condition to including the Registrable Securities in any registration statement
filed in accordance with this Agreement, that the Company shall have received an
undertaking reasonably satisfactory to it from
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Holder, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 4.1) the Company and its controlling persons
and all other prospective sellers and their respective controlling persons
with respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instruction duly executed by Holder specifically stating
that it is for use in the preparation of such registration statement,
preliminary, final or summary prospectus or amendment or supplement, or a
document incorporated by reference into any of the foregoing. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Company or Holder and shall survive the transfer of such
securities by Holder; PROVIDED, HOWEVER, that Holder shall not be liable to
the Company under this Section 4.2 for any amounts exceeding the product of
the purchase price per Registrable Security and the number of Registrable
Securities being sold pursuant to such registration statement or prospectus
by Holder.
4.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 4, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, promptly give written
notice to the latter of the commencement of such action; PROVIDED, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subsections of this Section 4, except to the extent that the indemnifying party
is actually materially prejudiced by such failure to give notice. In case any
such action is brought against an indemnified party, unless in such indemnified
party's reasonable judgement a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
will be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption of the
defense thereof, and the indemnifying party will not be subject to any liability
for any settlement made without its consent (which consent shall not be
unreasonably withheld). No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
4.4 OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding Sections 4.1, 4.2 and 4.3 (with appropriate
modifications) shall be given by the Company and Holder with respect to any
required registration or other qualification of securities under any federal or
state law or regulation of governmental authority other than the Securities Act.
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<PAGE>
5. NO INCONSISTENT AGREEMENTS. The Company will not hereafter
enter into any agreement with respect to any of its securities which is
inconsistent with the rights granted to Holder in this Agreement.
6. REMEDIES. The Company acknowledges and agrees that in the
event of any breach of this Agreement by it, Holder would be irreparably harmed
and could not be made whole by monetary damages. The Company accordingly agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate and that Holder, in addition to any other remedy to which they
may be entitled at law or in equity, shall be entitled to compel specific
performance of this Agreement in any action instituted in any court of the
United States or any state thereof having subject matter jurisdiction for such
action.
7. GENERAL PROVISIONS.
7.1 WAIVERS. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall be deemed
to constitute a waiver by the party taking such action or compliance with any
representation, warranty, covenant, or agreement contained herein or in any
ancillary document. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any other or
subsequent breach. The waiver by any party of any of the conditions precedent to
its respective obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement.
7.2 NOTICES. All notices and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally, by courier service,
telecopied, or mailed by registered or certified mail, postage prepaid, return
receipt requested, to the party to whom the same is so delivered or mailed:
(a) if to the Company:
Cool Entertainment, Inc.
c/o 5484 Rugby Avenue
Burnaby, British Columbia V5E 2N1
Attn: Clement Lau
(b) if to Holder:
Clement K.M. Lau
5484 Rugby Avenue
Burnaby, British Columbia V5E 2N1
or to such other address as any of the above shall have specified by notice
hereunder. Notices delivered personally, by mail or telecopied shall be deemed
communicated as of actual receipt.
7.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement among the parties hereto with respect to the subject matter
hereof, and supersedes any and all prior agreements and undertakings, oral or
written, concerning the subject matter hereof. This Agreement may not be changed
or terminated orally, and may only be changed or terminated by a writing signed
by the party against whom such change or termination is sought.
7.4 BINDING EFFECT; BENEFITS. This Agreement shall inure to
the benefit of and shall be binding upon and enforceable by the parties hereto
and their respective heirs, legal representatives, successors, and assigns.
Nothing in this Agreement, expressed or implied, is intended to or shall confer
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on any person other than the parties hereto any rights, remedies, obligations,
or liabilities under or by reason of this Agreement.
7.5 HEADINGS. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
7.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.
7.7 RULES OF CONSTRUCTION. In this Agreement, unless the
context otherwise requires, words in the singular include the plural, and in the
plural include the singular, and words of the masculine gender include the
feminine and the neuter, and, when the sense so indicates, words of the neuter
gender may refer to any gender.
7.8 ASSIGNMENT. This Agreement is not assignable without the
prior written consent of the nonassigning party or parties.
7.9 GOVERNING LAW; VENUE. The validity, performance, and
enforcement of this Agreement shall be governed by the laws of the State of
Washington. Any action commenced hereunder shall be conducted before a court of
appropriate jurisdiction in King County, Washington.
7.10 COOPERATION. The parties agree to execute such further
documents and take such further actions as necessary to carry out the provisions
of this Agreement and to fully accomplish its purpose and intent.
7.11 ATTORNEYS' FEES. The prevailing party in any proceedings
arising in connection with this Agreement shall be entitled to reimbursement for
his or its reasonable costs incurred in connection therewith, including
attorneys' fees.
7.12 SET-OFF. Each party hereto shall be entitled to set-off
against any amount it may owe to any other party under this Agreement or any
other agreement executed in connection herewith any and all amounts that are due
to that party by such other party under or in connection with the terms of this
Agreement.
"THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK"
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7.13 TIME OF ESSENCE. Time is of essence in connection with
the performance of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and date first above written.
COOL ENTERTAINMENT, INC.
(a Colorado Corporation)
By:
-------------------------------
Clement K.M. Lau
"Company"
CLEMENT KAR MAN LAU
----------------------------------
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Exhibit 10.8
Order Fulfillment Agreement with Valley Media, Inc. dated May 4, 1999
<PAGE>
Cool Entertainment / i.FILL
Order Fulfillment Agreement CONFIDENTIAL
ORDER FULFILLMENT AGREEMENT
This Order Fulfillment Agreement ("Agreement") is entered into effective as
of the 4 day of MAY 1999, by and between COOL ENTERTAINMENT, INC.
("Retailer") and I.FILL, a division of Valley Media, Inc. ("Valley").
BACKGROUND
A. Valley has created databases known as "audioFILE" and "audioTRAX" which
contain information regarding pre-recorded music and music related products
("Audio Product"), theatrical video and video related products ("Video
Product"), theatrical DVD and DVD related products ("DVD Product") and
video game and video game related products ("Game Product"). Audio, Video,
DVD and Game Product may be collectively referred to herein as "Product".
B. i.FILL provides to various retailers "direct-to-consumer" order fulfillment
services, pursuant to which i.FILL picks, packs and ships Product to the
retailer's customers.
C. Retailer intends to operate on the World Wide Web an "on-line retail store"
(the "Site") through which it intends to sell Product.
AGREEMENT
Subject to the terms and conditions set forth below, the parties agree as
follows:
1. BASIC AGREEMENT. Retailer and i.FILL agree to develop a computer and
customer service interface for the purposes of conducting small order
Product transactions via an on-line music/video store and other direct
response marketing efforts. Retailer will build and maintain a web site.
Retailer will also conduct all marketing and merchandising efforts, collect
all orders and send such orders to i.FILL via EDI. i.FILL will be
responsible for picking, packing and shipping the orders directly to
Retailer's customers.
2. EXCLUSIVITY. i.FILL will be the exclusive supplier of Product and related
order fulfillment services for Retailer's customers within the United
States, provided, however, that Retailer may utilize third parties as
sources for Product not available through audioFILE or otherwise through
Valley if Retailer has given i.FILL thirty (30) calendar days notice of its
intention to do so and i.FILL fails to make the specified Product available
by the end of such period.
3. TECHNICAL ASSISTANCE. i.FILL shall provide technical assistance to
Retailer for the testing of their EDI transmission of orders to Valley's
Bulletin Board System or FTP server.
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Cool Entertainment / i.FILL
Order Fulfillment Agreement CONFIDENTIAL
4. AUDIOFILE DATABASE. i.FILL will license the audioFILE database for an
annual licensing fee of $10,000. The fee for the first year of the initial
term of this Agreement is due and payable upon execution of this Agreement.
The fee for the second year of the initial term of this Agreement is due
and payable upon the first anniversary of the date of this Agreement.
5. AUDIO PRODUCT PRICING. i.FILL agrees to sell and Retailer agrees to
purchase Audio Product at four percent (4%) below Valley's wholesale prices
as set forth on the Audio Price Schedule, attached hereto as EXHIBIT A.
Wholesale prices may be revised by Valley from time to time, effective upon
written notice to Retailer of such changes.
6. VIDEO PRODUCT PRICING. i.FILL agrees to sell and Retailer agrees to
purchase Video Product at thirty-eight percent (38%) below suggested retail
price.
7. DVD PRODUCT PRICING. i.FILL agrees to sell and Retailer agrees to purchase
DVD Product at the studio-specific prices as set forth on the DVD Price
Schedule, attached hereto as EXHIBIT B. Studio-specific prices may be
revised by Valley from time to time, effective upon written notice to
Retailer of such changes.
8. GAME PRODUCT PRICING. i.FILL agrees to sell and Retailer agrees to
purchase Game Product at Valley's wholesale prices as set forth in the
audioFILE database. Valley's Game Product wholesale prices may be revised
from time to time, effective upon audioFILE database revisions of same.
9. VOLUME REBATES. For purposes of this Agreement, "Net Product Purchases"
means Retailer's gross purchases of Product from Valley, not including
fulfillment and shipping charges, and less returns. In the event that
Retailer's Net Product Purchases exceed $3,500,000 per year within one year
of the date of this Agreement or the subsequent one year period during the
term of this Agreement, Retailer shall receive rebates based on the
incremental Annual Net Product Purchases as follows:
<TABLE>
<CAPTION>
ANNUAL NET PRODUCT PURCHASES REBATE
---------------------------- ------
<S> <C>
$ 3,500,001 - $ 5,000,000 1% of the portion of Annual Net
Product Purchases of
$3,500,001 - $5,000,000
$ 5,000,001 - $ 7,500,000 2% of the portion of Annual Net
Product Purchases of
$5,000,001 - $7,500,000
$ 7,500,001 - $10,000,000 3% of the portion of Annual Net
Product Purchases of
$7,500,001 - $10,000,000
$10,000,001 + 4% of the portion of Annual Net
Product Purchases of
$10,000,001 +
</TABLE>
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Cool Entertainment / i.FILL
Order Fulfillment Agreement CONFIDENTIAL
9.1. REBATE DISCOUNTS. Although purchases of DVD and Game Product shall
accrue toward the annual sales volume needed to receive Rebates.
Rebate discounts will be applied to Audio and Video Product
purchases only. Rebate discounts will not apply to DVD and Game
Product purchases. Rebates are calculated on a yearly basis
beginning on January 1, 1999. At year-end the Rebate will be
calculated on Net Product Purchases for the calendar year (on a pro
rata basis) and shall appear as a credit on Retailer's next invoice.
10. CUSTOM INVOICE. i.FILL will create a custom invoice with Retailer's logo,
product return and customer service information printed on same. i.FILL
will waive the usual $500 fee for this service. Subsequent changes to the
invoice will be made for a fee to be negotiated by the parties.
11. ORDER PLACEMENT. Retailer will collect all orders and send such orders to
i.FILL via EDI.
11.1. AUDIO PRE-ORDERS. Orders for new release Product that are placed
with i.FILL prior to the date that that new release title is first
to be made available to consumers (the "Street Date") are defined as
Pre-Orders. Retailer shall collect Audio Product pre-orders until
four days prior to the Street Date, at which point such Pre-Orders
will be forwarded in a separate batch to i.FILL on the date and time
of day required by i.FILL. i.FILL shall ship all Pre-Orders no
later than Street Date minus one day, provided i.FILL has received
the new release title(s) from the label/distributor of such new
release(s) in time for processing. If a Street Date is delayed,
Retailer will be responsible for holding the Pre-Orders until four
(4) days before the new Street Date.
11.2. VIDEO, DVD AND GAME PRE-ORDERS. Retailer shall forward to i.FILL
all Video, DVD and Game Pre-Orders as it receives them (in batches
separate from regular orders) up to one day prior to pre-book date.
Retailer shall mark each Pre-Order "ship comlete" by typing a "Y" in
the "ship complete" field of the EDI inbound specifications. i.FILL
shall ship all Pre-Orders no later than Street Date minus one day,
provided i.FILL has received the new release title(s) from the
studio/distributor of such new release(s) in time for processing.
If a Street Date is delayed, Retailer will be responsible for
holding the Pre-Orders until four (4) days before the new Street
Date.
11.3. BACK-ORDERS. i.FILL shall ship the in-stock items of an order as
set forth in this Agreement and, except as set forth in this
section, will cancel the out of stock items. Retailer may elect to
have i.FILL hold an order that has one or more items out of stock
until it is completely fulfilled by typing a "Y" in the "ship
complete" field of the EDI inbound specifications. Retailer will
inform i.FILL the number of days, up to a maximum of 25 days (the
"Hold Period"), that i.FILL is to hold the "ship complete" orders
before shipping the available products and canceling the out of
stock products. In the event that all products included in an order
are out
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Cool Entertainment / i.FILL
Order Fulfillment Agreement CONFIDENTIAL
of stock, i.FILL will hold the order for the Hold Period before
canceling the order (subject to prior cancellation of such order by
Retailer).
12. ORDER FULFILLMENT. The following sets forth i.FILL's fulfillment
practices:
12.1. PRIORITY. Priority orders are defined as orders shipped
domestically for overnight or second-day air freight delivery.
Priority orders received by i.FILL on any business day by 10:00 a.m.
Pacific Time ("PT") will be shipped on the same day. Orders
received after 10:00 a.m. PT will be shipped the following business
day provided that the Product ordered is in stock at that time.
12.2. STANDARD. Standard orders are defined as all orders shipped
domestically or internationally for other than overnight or
second-day air freight delivery. On any business day that i.FILL
receives Standard orders by 1:00 p.m. PT, it will ship the orders
the following business day. Standard orders received after
1:00 p.m. PT will be deemed received the next business day and
i.FILL will ship these orders the business day after the day they
are deemed to be received provided that the Product ordered is in
stock at that time.
12.3. PEAK PERIODS. The first day of a business week and any day on which
order volume is greater than 20% above average (calculated on a
floating 30-day basis) is defined as a Peak Period. i.FILL shall
use best efforts to adhere to the fulfillment policies set forth
above during Peak Periods, but its failure to so adhere during Peak
Periods shall not be considered a default under this Agreement.
13. FULFILLMENT FEES. Unless otherwise provided in this Agreement, Retailer
agrees to pay i.FILL the following fees for each order fulfilled by i.FILL.
13.1. PACKING AND HANDLING FEES. For purposes of this Agreement, "Unit"
means a single piece of Product or any multiple Product set that is
shrink-wrapped together as one. i.FILL will pick, pack and prepare
Product for shipment to Retailer's customers according to the
following schedule:
<TABLE>
<CAPTION>
ANNUAL NET PRODUCT PURCHASES 1ST UNIT ADD'L UNITS
---------------------------- -------- -----------
<S> <C> <C>
$ 0 - $ 5,000,000 $1.20 $0.50 each
$ 5,000,001 - $ 7,500,000 $1.15 $0.50 each
$ 7,500,001 - $10,000,000 $1.10 $0.50 each
$10,000,001 + $1.05 $0.50 each
</TABLE>
13.1.1. Contemporaneously upon meeting each of the above Annual Net
Product Purchases thresholds, the corresponding Packing and
Handling Fees will become effective and will appear on
Retailer's invoice. For example, the order that raises
Retailer's Annual Net Product Purchases over $5,000,000,
will incur Packing and Handling Fees of $1.15 for the first
unit and $0.50 for each additional unit in that order and
those fees will
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appear on the same invoice that bills Retailer for the Product
contained in that order.
13.2. SURCHARGES. Retailer agrees to pay to i.FILL the following
surcharges as applicable:
13.2.1. INTERNATIONAL SHIPMENT SURCHARGE. Surcharge of $0.50 per
order shipped internationally via integrated carrier.
13.2.2. USPS PRIORITY MAIL INSURED SURCHARGE. Surcharge of $0.50
per order shipped USPS Priorioty Mail Insured.
13.2.3. MANUAL PROCESSING SURCHARGE. In the event i.FILL receives
an order by any other means than EDI transmission (i.e., by
mail, facsimile, etc.) a surcharge of $1.50 per order shall
be assessed.
14. SHIPPING.
14.1. RISK OF LOSS. All shipments under this Agreement shall be F.O.B.
Valley's shipping facility. Title and risk of loss with respect to
all orders and products shipped by i.FILL or Valley under this
Agreement shall pass to Retailer or it's customers upon delivery of
the products to the carrier at the point of shipment. In the event
of shipping damage or orders lost in shipment, i.FILL will assist in
filing a claim on behalf of Retailer and will credit Retailer any
amounts received or credits to i.FILL in connection with each claim.
14.2. CHOICE OF CARRIER. i.FILL will ship the order with the carrier
requested by Retailer or its customer. i.FILL will cancel any order
for which the delivery address is not serviced by the indicated
carrier, and will promptly notify Retailer of the same. Retailer
shall have the option to retransmit the order or be shipped via an
alternate i.FILL supported carrier.
14.3. SHIPPING COSTS. i.FILL will invoice Retailer's customers at such
rates as are requested by Retailer. Retailer will pay i.FILL
shipping costs per the shipping tables attached hereto as EXHIBIT C
(as amended from time to time by i.FILL). i.FILL will provide
Retailer written notice of shipping rate changes and the effective
date of such changes. i.FILL represents that the shipping costs
charged to Retailer are its actual shipping costs (not considering
rebates.)
15. PRODUCT RETURNS.
15.1. DEFINITIONS. For purposes of this Agreement, the terms set forth
below shall be defined as follows.
15.1.1. "Eligible Return Product" means any Product other than
ineligible Return Product.
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15.1.2. "Defective Product" means any Eligible Return Product
returned to i.FILL or Valley that is identified as defective
when returned and which is actually defective.
15.1.3. "Ineligible Return Product" means any of the following: (a)
Opended CDs from any of the following companies: (i)
Intersound, (ii) RYKO, (iii) Sony Music Entertainment, (iv)
Universal Music and Video Distributors ("UMVD"), (v) Warner,
(vi) Elektra or (vii) Atlantic; (b) Opened audio cassettes
from UMVD; (c) Opened Video Product; (d) Opened DVD Product;
(e) Opened Game Product; (f) accessories; (g) blank tape;
(h) counterfeit Product; (i) imports; (j) promos; (k)
limited editions; (l) Product identified in audioFILE as
non-returnable; (m) Product sold by a record/video club; (n)
Product sold on a one-way basis; (o) Product with a last
customer return date (as defined in the audioFILE License)
prior to the date the returned Product is received by i.FILL
or Valley; (p) Product without the original artwork or liner
notes; (q) Schwann Guides; (r) defaced Product; (s) Product
with damaged artwork or a foreign substance on the media;
and (t) vinyl Product (including, without limitation, LPs
and 12" singles).
15.1.4. "Opened" means, with respect to any Product, that the top
spine label or original manufacturer's shrink wrap or "dog
bone" holographic sticker has been removed or cut in any
way.
15.2. STANDARD RETURN POLICY. Retailer will receive a return credit for
Eligible Return Product returned to i.FILL or Valley but will NOT
receive a return credit for Ineligible Return Product.
15.3. RETURN FEES.
15.3.1. PROCESSING FEES. Any Ineligible Return Product returned to
i.FILL or Valley will be forwarded to Retailer at Retailer's
expense, and Retailer will be charged a $1.00 processing fee
for each such unit of Ineligible Return Product; provided,
however, that Retailer may elect to have i.FILL keep such
Ineligible Return Product and avoid the processing fee.
15.3.2. RESTOCKING FEES. Retailer will be charged a fifteen percent
(15%) restocking fee for processing all Eligible Return
Product returned to i.FILL or Valley; provided, however,
that no such fee will be charged for (a) Defective Product
or (b) Product that was shipped to one of Retailer's
customers but (i) was not listed on the customer's invoice
or (ii) was incorrectly listed on the invoice.
15.3.3. REBURBISHING FEES. Retailer will be charged a $0.35 per
unit refurbishing fee on all Eligible Product returned to
i.FILL or Valley that has been Opened; provided, however,
that no such fee shall be charged for Defective Product.
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15.3.4. RESHIPPING FEES. i.FILL will ship or reship to Retailer's
customers at no additional charge (a) replacement Product
for any Defective Product and (b) any Product reported as
missing by one of Retailer's customers that was listed as
fulfilled on the Customer's invoice.
15.4. RETURN PROCESSING INFORMATION. Return processing information will
be posted weekly to i.FILL's Bulletin Board System.
15.5. MODIFICATIONS. i.FILL reserves the right to modify its return
policies from time to time. Such modifications shall be effective
upon receipt by Retailer of written notice thereof. Any change in
return policies must be directly related to a change in the return
policies of i.FILL's suppliers.
16. OPTIONAL SERVICES.
16.1. PAPER INSERTS. Retailer will pay a fee of $0.10 per Paper Insert
packed by i.FILL at the request of Retailer in product shipped under
this Agreement. Retailer shall supply the Paper Inserts at no cost
to i.FILL. For purposes of this paragraph, Paper Inserts are
defined as lightweight, paper-based, promotional items the same size
or smaller than a standard single CD, or pre-folded to such size.
16.2. MERCHANDISE INSERTS. At Retailer's request, i.FILL will pack
Merchandise Inserts (promotional merchandise sold through Retailer,
other than the Paper Inserts described above in section 16.1) into
Retailer's orders at a charge to be negotiated by the parties after
a sample has been received and reviewed for packing and shipping
requirements. Retailer shall supply Merchandise Inserts at no cost
to i.FILL.
16.3. MERCHANDISE MANAGEMENT FEE. Upon request by Retailer, i.FILL will
receive and warehouse Merchandise Inserts (described above in
section 16.2) for a Merchandise Management Fee to be negotiated by
the parties after a sample has been received and reviewed for
warehousing requirements. For merchandise that is "standard
product" (defined as a single CD, cassette, VHS, or DVD) a
Merchandise Management Fee of $0.50 per unit will be charged to
Retailer.
16.4. INSERT BAR CODES. A unique UPC bar-code is required for each Paper
or Merchandise Insert. Retailer should purchase and apply a
proprietary bar-code on all inserts. At Retailer's request or if
the bar-code does not meet Valley's standards, i.FILL will create
and apply a bar-code for a fee of $0.30 per applied bar-code.
16.5. CUSTOM BOX STICKERS. At Retailer's request, i.FILL will apply
custom box stickers for of fee of $0.30 per applied sticker.
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16.6. AUDIOTRAX. Upon Retailer's request, i.FILL will license the
audioTRAX database for 6an annual licensing fee of $3,000.
16.7. CALL CENTER SERVICES. If Retailer requests Call Center Services,
i.FILL would maintain Call Center hours of 6:00 a.m. PT to 6:00 p.m.
PT, daily, excluding Holidays. Incoming calls after hours would be
received via voice mail and would be returned the following day for
order placement. Retailer would be charged a one-time fee of
$500.00 for a unique "toll-free" number. In addition, there would
be Call Center charges of $1.50 per call and $0.15 per minute.
Staffed 24-hour Call Center Services are available upon request for
a fee to be negotiated by the parties.
16.8. CONSUMER CREDIT PROCESSING. In the event Retailer requests that
i.FILL, on behalf of Retailer, provide consumer credit processing
services, i.FILL agrees to provide those services to Retailer's
customers under the following terms:
16.8.1. FEES. Retailer agrees to pay i.FILL 3% of the total
consumer transactions processed by credit card as an expense
item.
16.8.2. TOTAL CONSUMER TRANSACTION. Includes Product price,
shipping and handling, and applicable sales tax.
16.8.3. ADDITIONAL FEES. Retailer shall be responsible for paying
any additional fees assessed by the credit card processor
including, but not limited to, charges related to fraud and
other chargebacks.
16.8.4. ACCEPTED CARDS. Visa, MasterCard, American Express and
Discover cards.
16.8.5. SERVICES PROVIDED.
(a) Obtain credit card processor authorization;
(b) Cancel order due to credit card decline/invalid;
(c) Report to Retailer all Address Verification Service
("AVS") non-matching orders; and
(d) Research chargebacks.
16.8.6. ADDRESS VERIFICATION SERVICE. i.FILL will notify Retailer
of all AVS problem orders on a daily basis (Monday through
Friday, excluding holidays.) The order will be cancelled if
Retailer has not provided i.FILL with a corrected address
within four calendar days of said notification. i.FILL will
ship to a new address within two days of verification of the
new information by the credit card processor.
16.8.7. SALES TAX. i.FILL will collect sales tax from Retailer's
customers as instructed by Retailer. Retailer shall provide
i.FILL a current list of tax
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rates to be charged for all applicable states. i.FILL shall
remit collected tax funds to Retailer for payment to the
appropriate taxing authorities.
17. BILLING AND PAYMENT. Pending i.FILL's review and approval of Retailer's
credit application, i.FILL will extend credit to Retailer under the
following terms and conditions:
17.1. INVOICES AND ACCOUNT RECONCILIATION. i.FILL will provide Retailer
with an account reconciliation on a monthly basis. Invoices are due
and payable thirty (30) days after the invoice date.
17.2 PAST DUE AMOUNTS. i.FILL includes an embedded two percent (2%)
discount for timely payment on all Product. This discount shall be
revoked in the event of a late payment by Retailer and a two percent
(2%) revoked discount fee will be charged on any amounts not paid
within thirty (30) days after the invoice date. Furthermore, all
overdue balances not paid within thirty (30) days after the invoice
date, will be assessed interest at the lesser of one and one-half
percent (1.5%) or the maximum interest rate allowable by law,
beginning on the due date. i.FILL, in its sole discretion, may
refer collection of any past due amount to any agency or attorney,
and Retailer will be liable for the payment of all costs and
expenses, including reasonable attorneys' fees, associated
therewith.
18. PROPRIETARY RIGHTS.
18.1. CONFIDENTIAL INFORMATION. The term "Confidential Information"
refers to this Agreement and the subject matter of this Agreement
and to all information which one party furnishes or makes available
to the other party and all information related to one party's
business which the other party acquires in the course of performing
its obligations under this Agreement. Disclosure of Confidential
Information by a party is forbidden except in the following
circumstances: (i) to employees and outside parties, but only to
the extent necessary to fulfill its obligations under the Agreement;
(ii) if the Confidential Information disclosed is already publicly
known through no fault of the disclosing party; and (iii) if the
Confidential Information is required to be disclosed by law or legal
process, provided that the party, from whom disclosure is promptly
required, gives the other party notice and agrees to cooperate with
the non-disclosing party as that party may reasonably request to
oppose disclosure. Under no circumstances may i.FILL (including its
principles or affiliates) use Retailer's customers' data for any
commercial or improper purposes.
18.2. TRANSACTION INFORMATION. Both parties shall use best efforts to
ensure maximum security of transaction information maintained on
each party's computer system including, but not limited to, the
names, addresses and products ordered by Retailer's customers.
18.3. AUDIOFILE DATABASE. The rights to intellectual property related to
the audioFILE database are governed by the audioFILE License
(EXHIBIT D). Any termination of
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Order Fulfillment Agreement CONFIDENTIAL
this Agreement will automatically terminate the audioFILE License,
and any termination of the audioFILE License will automatically
terminate this Agreement.
18.4. AUDIOTRAX DATABASE. The rights to intellectual property related to
the audioTRAX database are governed by the audioTRAX License
(EXHIBIT E). Any termination of this Agreement will automatically
terminate the audioTRAX License.
18.5. NO RIGHTS TO MARKS. Each party is hereby granted no rights in or to
the other party's Marks. "Marks" means the trademarks, service
marks, trade names or other marks, registered or otherwise, used by
either i.FILL or Retailer, as applicable.
19. TERM.
19.1. INITIAL TERM. The initial term of this Agreement will take effect
on the date first written above, and shall continue in effect until
the second anniversary thereof unless terminated earlier or extended
as set forth herein.
19.2. EARLY TERMINATION. This Agreement shall terminate at any time upon
the mutual consent of the parties. This Agreement shall also
terminate according to its terms upon thirty (30) days' prior
written notice by either party under the following conditions:
19.2.1. Either party may terminate this Agreement, absent a material
breach, if i.FILL discontinues fulfillment services to
on-line customers or Retailer discontinues the on-line sale
of Product.
19.2.2. i.FILL or Retailer delivers to the other party a 30-day
written notice of termination for a material breach of this
Agreement, and the other party fails to cure such breach
within thirty (30) days.
20. LIMITATION OF REMEDIES AND EXCLUSION OF WARRANTIES. IN NO EVENT SHALL
i.FILL BE LIABLE TO RETAILER FOR INDIRECT OR CONSEQUENTIAL DAMAGES, WHETHER
OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
REGARDLESS OF THE FORM OF ACTION. ALL PRODUCT SOLD HEREUNDER IS SOLD
"AS-IS" AND i.FILL EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES
WITH RESPECT TO PRODUCT SOLD UNDER THIS AGREEMENT, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY AND FITNESS FOR PURPOSE.
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21. REPRESENTATIONS AND WARRANTIES.
21.1. I.FILL'S REPRESENTATIONS AND WARRANTIES.
21.1.1. i.FILL has the right and authority to enter into this
Agreement.
21.1.2. i.FILL will use best efforts to deliver Product to
Retailer's customers in substantially the same condition as
it was in when it was received by Valley in Valley's
distribution facility.
21.2. RETAILER'S REPRESENTATIONS AND WARRANTIES.
21.2.1. Retailer has the right and authority to enter into this
Agreement.
21.2.2. Retailer will not include any content on its website that
infringes on the intellectual property rights, including
copyright and trademark rights, of any third party.
21.2.3. Retailer will provide adequate customer service and abide by
its terms of service and privacy policies.
22. INDEMNIFICATION. Both parties will, at all times, indemnify and hold the
other party harmless from any and all third-party claims, damages,
liabilities, costs and expenses (including reasonable attorney's fees)
arising out of any breach or alleged breach by such party of any warranty
or representation made by such party in this Agreement. Retailer will
further indemnify and hold i.FILL and Valley harmless for any and all
third-party claims, damages, liabilities, costs and expenses (including
reasonable attorney's fees) arising out of any infringement or alleged
infringement of intellectual property belonging to a third-party or out of
any error, omission, misconduct or negligence on the part of Retailer in
the performance of its obligations under this Agreement.
23. FORCE MAJEURE. Neither party will be liable for failure to perform, or the
delay in performance of, any of its obligations under this Agreement if,
and to the extent, that such failure or delay is caused by events
substantially beyond its control, including, but not limited to, acts of
God, acts of the public enemy or governmental body in its sovereign or
contractual capacity, war, fire, floods, strikes, epidemics, quarantine
restrictions, civil unrest or riots, freight embargoes and/or unusually
severe weather. Lack of funds by either party shall not excuse timely
performance. The party so affected shall use commercially reasonable
efforts to avoid or remove such causes of non-performance or delay, and
shall continue performance hereunder with reasonable dispatch whenever such
causes are removed. If any such non-performance or delay continues for
more than sixty (60) days, the unaffected party may elect to terminate this
Agreement without liability or any liquidated or other damages upon written
notice to the other party.
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24. GENERAL.
24.1. OPERATIONS REVIEW. No more often than every ninety (90) days, and
upon twenty-one (21) days' advance written notice, Retailer may
request a conference with i.FILL to discuss operations.
24.2. NOTICE. All notices, including those related to product pricing,
ordering and fulfillment policies that will have a material impact
on the other party's business, shall be in writing and delivered by
certified mail, postage prepaid and return receipt requested, or
transmitted either by facsimile or electronic mail if confirmed
contemporaneously by such mailing, to the addresses provided in
writing, from time to time, by the parties.
24.3. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the entire
agreement of the parties concerning the subject matter hereof,
superseding all prior proposals, negotiations and agreements
concerning the subject matter of this Agreement. No representation
or promise relating to and no amendment of this Agreement will be
binding unless it is in writing and signed by authorized
representatives of both parties.
24.4. ASSIGNMENT. This Agreement may not be assigned by either party
without first obtaining the other party's written consent, except
that either party may, without the other party's prior written
consent, assign this Agreement to a purchaser of all or
substantially all of its assets or a majority or controlling
interest in its voting stock, or to a subsidiary or affiliate of
such party, provided that such purchaser's net worth at the time of
purchase is equal to or greater than that of the assigning party's
net worth. This Agreement will be binding upon and inure to the
benefit of successors and permitted assigns of the parties hereto.
24.5. CAPTIONS; WAIVER; SEVERABILITY. The captions appearing in this
Agreement are inserted only as a matter of convenience and in no way
define, limit, construe or describe the scope or interpretation of
this Agreement. No waiver by a party of any breach of any provision
of this Agreement will constitute a waiver of any other provision of
this Agreement. If any provision of this Agreement shall be held
invalid, void or unenforceable, the remaining provisions hereof
shall in no way be affected or impaired, and such remaining
provisions shall remain in full force and effect.
24.6. GOVERNING LAW AND ARBITRATION. This Agreement shall be construed
and enforced pursuant to the laws of the State of California. If
the parties are unable to settle any disagreements regarding this
Agreement or the project contemplated by this Agreement, such
disagreements shall be submitted to binding arbitration within the
State of California under the rules of the American Arbitration
Association as then in effect.
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24.7. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same
agreement, and will become a binding agreement when one or more
counterparts have been signed by each party and delivered to the
other party. Facsimile signatures shall be considered original in
all respects.
In witness whereof, the parties hereto have executed this Agreement effective as
of the date first above written.
i.FILL, a division of COOL ENTERTAINMENT, INC.
Valley Media, Inc.
By: /s/Nora Moore Jimenez By: /s/Clement Lau
------------------------------ ------------------------------
Its: Director New Media Its: President
------------------------------ ----------------------------
Address: Address:
1280 Santa Anita Ct. #900 - 10900 8th Street
- ---------------------------------- ----------------------------------
Woodland, CA 95776 Bellvue, WA 98004
- ---------------------------------- ----------------------------------
Telephone: 530-661-6600 Telephone: 425-688-2997
----------------------- ----------------------
Facsimile: 530-661-7878 Facsimile: 425-454-4383
----------------------- ----------------------
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<PAGE>
Exhibit 10.9
License Agreement with Muze, Inc. dated May 1999
<PAGE>
LICENSE AGREEMENT
Based on their respective representations, warranties, covenants, rights, and
responsibilities, set forth below, Muze Inc., at 304 Hudson Street, 8th
Floor, New York, NY 10013, Fax No. 212.741.1246, a New York corporation, and
Cool Entertainment, Inc. at Suite 900 10900 NE 8th St., Bellevue, WA 98004,
Fax No. 604.540.8328 a Washington State corporation, enter into this License
Agreement as follows:
1. DEFINITIONS
"Agreement" means this License Agreement, including its attachment(s).
"Terms and Conditions" means the specific additional terms and conditions of
this Agreement set forth in Attachment 1 (as may be amended from time to time).
"Effective Date" means the date this Agreement enters into force, noted in the
Terms and Conditions.
"Hardware" means the computer and other hardware on which the Products run (the
Hardware is listed in Attachment 1 unless Muze supplies any of the Hardware, in
which case Hardware and the terms of purchase are set forth in an Attachment 2).
"Licensee" means Cool Entertainment, Inc.
"Muze" means Muze Inc.
"Products" means data and/or software and periodic updates licensed by Muze to
Licensee under this Agreement, as set forth in the Terms and Conditions.
"Services" means the services provided by MUZE to Licensee under this
Agreement, if any, as described or provided for in the Terms and Conditions.
2. GRANT OF LICENSE
Muze grants Licensee a non-exclusive, non-transferable, limited right to use
the Products strictly in accordance with all the provisions of this
Agreement. This license shall be immediately terminable by Muze for any
material breach by Licensee of its obligations under this Agreement.
Unless terminated by Muze as provided for above, the license and this
Agreement shall continue in force for the time period set forth in the Terms
and Conditions. Should Muze terminate this Agreement because of a material
breach by Licensee, it will not refund any portion of the license fees or
other fees (as provided for in the Terms and Conditions) already paid by
Licensee or already accrued at the time of termination. Unless otherwise
provided in the Terms and Conditions, this Agreement shall automatically be
extended for successive one-year periods at the end of the initial term.
All ownership rights in the Products and any related know-how, and in any
works that may be created by Muze as part of the Services, shall remain with
Muze. Licensee shall not contest Muze's ownership rights in the Products or
any such works.
3. LICENSEE'S OBLIGATIONS
LICENSEE SHALL:
a. Use the Products only on the Hardware, at the locations, and according to
the conditions specified in the Terms and Conditions.
b. Make all payments required by the Terms and Conditions in a timely manner.
c. Comply with all applicable laws and regulations regarding use of the
Products. Including any laws of regulations relating to sale of goods and
services and to privacy rights. Licensee shall be responsible for
determining the existence and applicability of any such laws and regulations
and for obtaining any necessary permits or approvals for use of the Products.
d. Restrict its end users to non-commercial use of the Products and notify
each of its end users of the Products that the Products are owned by Muze and
may not be copied or used without Muze's consent. Licensee shall incorporate
the rights notices set forth in the Terms and Conditions in its end-user
interfaca.
e. Keep confidential all of Muze's proprietary information provided to it
under this Agreement (or under any previous Confidentiality Agreement) during
the term of this Agreement and for ten (10) years after termination. This
obligation shall apply to
MUZE CONFIDENTIAL PAGE 1 OF 3
<PAGE>
any information identified by Muze as confidential and any information that
Licensee knows, or should know under the circumstances, is proprietary. Muze
proprietary information may include the Products, documentation, technical
information, business or technical concepts or designs. Licensee's
obligation shall not apply to information: (a) lawfully in the public domain,
(b) Licensee lawfully possessed before disclosure by Muze, or (c) lawfully
disclosed to Licensee by a third party without obligation of confidentiality.
Upon termination of this Agreement, Licensee shall return or destroy, at
Muze's election, any Muze proprietary information still in its possession.
f. Upon termination of this Agreement, return or destroy, at Muze's
election, the Products and any copies, as well as any matter that
incorporates any other Muze proprietary or confidential information.
Licensee shall provide Muze with a certified letter attesting to this
destruction.
g. Permit Muze to use Licensee's name as a customer reference and
prominently feature a link to Muze's web site if the Products are available
to end users on the Internet pursuant to the Terms and Conditions.
h. Indemnify Muze against any claims made against Muze (or its affiliates,
officers, directors, employees, or contractors) by third parties (including
by any of Licensee's employees or contractors) arising out of (a) content,
software, or hardware not provided by Muze, (b) Licensee's breach of any of
its obligations under this Agreement, or (c) any illegal or unauthorized use
of the Products by Licensee, its employees, contractors, or end users. Muze
shall promptly notify Licensee of any such claim. Licensee shall conduct the
defense of any such claim, at its own expense, subject to Muze's right to
participate and to approve any settlement that purports to bind Muze in any
way.
LICENSEE SHALL NOT:
a. Use the Products other than at the sites and in the manner set forth in
the Terms and Conditions.
b. Reverse engineer, decompile, or dissassemble the Products, nor shall it
modify the Products or create any derivitive works.
c. Assign, sell, rent, timeshare or use the Products in any way not
expressly permitted in this Agreement.
d. Sublicense the Products to any party, including to its affiliates, unless
specifically authorized to do so in the Terms and Conditions.
e. Make any copies of the Products, except (a) as necessary to run the
Products on the Hardware and (b) one copy for archival or backup purposes.
f. Intentionally or negligently permit any third party to copy the Products
or extract data or code from them.
g. Remove any Muze copyright or other proprietary rights notices included in
or on any of the Products.
h. Use Muze's trademarks without written consent.
LICENSEE REPRESENTS AND WARRANTS THAT:
a. It is authorized to enter into this Agreement.
b. It is free to fully perform its obligations under this Agreement and will
comply with each of them.
4. MUZE'S OBLIGATIONS
MUZE SHALL:
a. Indemnify Licensee from any claim by a third party that proper use of the
Products infringes a U.S. intellectual property right of that third party.
This indemnity is conditioned on Licensee's (a) prompt notification of Muze
of any such claim and (b) compliance with its respective covenants. This
indemnity shall not apply to (i) graphical, audio, video, or other media
content, or third-party software, supplied with or as part of the Products or
(ii) any software or systems not provided by Muze. Muze shall have the right
to conduct the defense of any such claim, subject to Licensee's reasonable
right to participate in any settlement thereof that may affect it in any way
not related to its use of the Products. Should any such claim by a third
party result in a material limitation of Licensee's rights to use the
Products, Muze shall, at its election: (a) provide a functionally equivalent,
non-infringing substitute for the Product(s); (b) procure at its own expense
the necessary licenses or rights for Licensee to continue using the
Product(s); or (c) refund any license fees paid by Licensee for the period
beginning upon such material limitation of Licensee's rights, in no case
shall Muze's liability under this Agreement exceed the total license and
other fees paid by Licensee.
PAGE 2 OF 3
<PAGE>
b. Perform the Services, if any, (specified in the Terms and Conditions) in
a professional manner and to a professional standard of quality and
effectiveness.
MUZE REPRESENTS AND WARRANTS THAT:
a. It is authorized and has the right to enter into this Agreement and is
free to fully perform its obligations hereunder.
b. It shall comply with all of its obligations hereunder.
5. DISCLAIMER OF WARRANTIES; LIMITATION ON LIABILITY
EXCEPT AS SET FORTH ABOVE, Muze MAKES NO WARRANTIES, EXPRESS OR IMPLIED (BY
LAW OR OTHERWISE) AS TO ANY MATTER WHATSOEVER, THE PRODUCTS ARE PROVIDED "AS
IS," AND ANY AND ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
EXCEPT AS SET FORTH ABOVE, Muze SHALL NOT BE LIABLE FOR ANY CLAIMS AGAINST
Licensee BY ANY THIRD PARTY (INCLUDING BY Licensee's EMPLOYEES OR
CONTRACTORS). IN NO CASE SHALL ANY LIABILITY OF Muze EXCEED THE TOTAL LICENSE
AND OTHER FEES PAID TO Muze BY Licensee HEREUNDER. FURTHERMORE, Muze SHALL
UNDER NO CIRCUMSTANCES (OTHER THAN WILLFUL MISCONDUCT) BE LIABLE FOR
INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES.
6. OTHER PROVISIONS
PRESS RELEASES; Muze and Licensee shall each have the reasonable right to
approve the other's press releases concerning the business relationship of
the parties. If one party does not respond to the other party's request for
approval within five (5) business days of receiving any such request,
approval shall be deemed granted.
GOVERNING LAW AND DISPUTE RESOLUTION. This Agreement shall be governed by
New York law, as though executed and fully performed in New York, and without
reference to New York's conflicts of laws principles. Licensee consents to
venue and personal jurisdiction in the State and Federal courts located in
New York County for the resolution of any disputes arising out of this
Agreement.
Licensee acknowledges that any breach by it of its obligations under this
Agreement may cause Muze irreparable harm for which there may be no adequate
remedy at law, and that Muze may therefore be entitled to equitable relief by
injunction or otherwise.
AMENDMENT OR WAIVER. Any amendment to this Agreement must be in writing and
signed by both parties. No provision of this Agreement may be waived except
in writing signed by the party against whom enforcement of the waiver is
sought.
NOTICES. Notices shall be sent by courier or by certified mail to the
addresses set forth above, or to any succeeding address that may be provided.
INDEPENDENT CONTRACTORS: Both parties acknowledge that they are independent
contractors and that no joint venture, partnership, agency, or employment
agreement is created by this Agreement.
ENTIRE AGREEMENT. This Agreement and its Attachment(s) constitute the
parties' entire agreement with respect to the subject matter hereof and
supersede all prior and contemporaneous oral and written representations with
respect thereto.
Signed:
Muze Inc. Cool Entertainment, Inc.
By: By: /s/ Clement Lau
----------------------------------- -----------------------------------
Name: Anthony Laudico Name:
Title: Chief Executive Officer Title:
PAGE 3 OF 3
<PAGE>
ATTACHMENT 1
TERMS AND CONDITIONS
EFFECTIVE DATE:
- - May ____, 1999.
TERM:
- - One (1) years from effective date.
- - Agreement will renew automatically for successive one (1) year periods
unless either of the parties notifies the other in writing of its desire
to terminate the Agreement at least sixty (60) days before the end of the
term or any successive term.
PRODUCTS, FORMAT, MEDIUM:
> CHECK ALL THAT APPLY
- - [X] Muze for Music (database only), on-line version
- - [X] Muze for Video (database only), on-line version
- - [ ] Muze for books (database only), on-line version
- - [X] Encyclopedia of Popular Music (database only), on-line version
SITES, HARDWARE, AND OTHER LIMITATIONS:
- - Licensee's use of the Products shall be limited to the following website(s)
for on-line sales transactions (a separate license fee may be due for each
site; see below for definition of single site):
> List URL(s): www.coolent.com
- - The Products may only run on a single server. Multiple URL's linked to the
same site for on-line sales transactions generally constitute a single
site, as do mirrored on-line sales transactional sites.
- - Licensee shall not offer, or knowingly permit others to offer, public
internet access terminals at any retail location where its products are
sold.
- - Licensee shall not display to end users the catalog numbers (except for
catalog numbers for classical music) or UPC numbers that may be contained
in the Products.
PAYMENT AND TERMS:
- - Fees shall be payable beginning the earlier of the first month starting at
least thirty (30) days after the delivery of the Product(s) to Licensee, or
the date Licensee's site (URL listed above) is running the Products and is
accessible to Licensee's end users via the internet.
- - The minimum monthly licensee fee is $1,000.00 per Product for each of Muze
for Music, Muze for Video, and $500.00 for the Encyclopedia of Popular
Music. Minimum fees shall be paid on the first day of each month for which
they are due.
ATTACHMENT 1 TO LICENSE AGREEMENT PAGE 1 OF 3
MUZE CONFIDENTIAL
<PAGE>
- - For each Product licensed, if greater than the monthly minimum, the monthly
license fee shall be calculated based on the following rates, and shall be
due by the fifteenth day of the following month, with a credit for the
minimum already paid:
> for each on-line sale of any Licensee product listed in the database
of the Muze for Music Product (plus the premium if the Agreement also
covers Encyclopedia of Popular Music):
<TABLE>
<CAPTION>
ON-LINE SALES PRICE PER EPM PREMIUM
(per month) UNIT SOLD (if applicable)
------------------------------------------------------------------------
<S> <C> <C>
Sale of first 0-14,999 units $.25 $.125
------------------------------------------------------------------------
Sale of succeeding 15,000-24,999 units $.22 $.11
------------------------------------------------------------------------
Sale of succeeding 25,000-34,999 units $.19 $.095
------------------------------------------------------------------------
Sale of succeeding 35,000 units and over $.15 $.075
------------------------------------------------------------------------
</TABLE>
[BY WAY OF EXPLANATION, IN EACH CALENDAR MONTH, ON-LINE PRODUCT SALES
OF 0-14,999 UNITS ARE BILLED AT $.25 PER UNIT (OR $.375 WITH
ENCYCLOPEDIA OF POPULAR MUSIC); ON-LINE PRODUCT SALES OF 15,000-
24,999 UNITS ARE BILLED AT $.22 PER UNIT (OR $.33 WITH ENCYCLOPEDIA OF
POPULAR MUSIC); ON-LINE PRODUCT SALES OF 25,000-34,999 UNITS ARE
BILLED AT $.19 PER UNIT (OR $.285 WITH ENCYCLOPEDIA OF POPULAR MUSIC)
AND ON-LINE PRODUCT SALES OF 35,000 UNITS AND OVER ARE BILLED AT $.15
PER UNIT (OR $.225 WITH ENCYCLOPEDIA OF POPULAR MUSIC).]
> for each on-line sale of any Licensee product listed in the database
of the Muze for Video Product:
<TABLE>
<CAPTION>
ON-LINE SALES PRICE PER
(per month) UNIT SOLD
--------------------------------------------------------
<S> <C>
Sale of first 0-14,999 units $.25
--------------------------------------------------------
Sale of succeeding 15,000 - 24,999 units $.22
--------------------------------------------------------
Sale of succeeding 25,000 - 34,999 units $.19
--------------------------------------------------------
Sale of succeeding 35,000 units and over $.15
--------------------------------------------------------
</TABLE>
- - If Licensee delivers any of its products by digital download (as opposed to
physical delivery on a tangible medium), the license fee for such sales
shall be separately accounted for as follows:
> Digital download sales shall not affect the minimum fees set forth
above.
> The monthly license fee for such sales shall be two percent (2%) of
the retail price of all such sales, due the fifteenth day of the
following month.
- - Licensee shall report its sales to Muze monthly by number of items sold.
Licensee shall maintain records (including title, artist and format)
sufficient to back up such reports for a rolling three-year period.
- - Muze may audit Licensee's records once each year. If an audit shows an
underpayment of more than five percent (5%) for any month. Licensee shall
pay the reasonable costs of the audit.
- - Licensee shall not have any interest in any other website that engages in
the sale or fulfillment of products listed in the Product databases, unless
Licensee ensures that Muze receives all fees which would otherwise be due
Muze based on transactions (as set forth above) at such alternative
locations.
PAGE 2 OF 3
<PAGE>
SERVICES:
- - For so long as Licensee is in compliance with its obligations under the
Agreement, Muze will provide updates of data and/or software relevant to
the licensed Products approximately every week for Music and Video and
every month for the Encyclopedia of Popular Music.
- - Muze will provide the updates in one of Muze's standard formats/media, as
agreed by the parties. Licensee shall return each update (unless updates
are downloaded by agreement with Muze) before receiving the next update.
- - Any custom work provided by Muze shall be at Muze's standard rates pursuant
to an authorized work order.
RIGHTS NOTICES:
- - Licensee shall ensure that the following credits and rights notices appear
on each page of its website from which end users may access the Products:
> For Muze for Music:
"Copyright 1948-(current year) Muze Inc. For personal non-commercial use only.
All rights reserved."
> For Muze for Video:
"Copyright 1981-(current year) Muze Inc. For personal non-commercial use only.
All rights reserved."
> For Encyclopedia of Popular Music:
"Copyright 1999-(current year) Muze UK Ltd. For personal non-commercial use
only. All rights reserved."
> On all pages from which the Products may be accessed:
The Muze logo, as supplied electronically with the Products.
PAGE 3 OF 3
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
The only subsidiary of Cool Entertainment Inc. is a Washington corporation,
Cool Entertainment Inc., which does business under that name.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD NOVEMBER 3, 1998 TO JUNE 30,
1999 AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> OTHER 3-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-2000
<PERIOD-START> NOV-03-1998 JUL-01-1999
<PERIOD-END> JUN-30-1999 SEP-30-1999
<CASH> 89,058 124,181
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 89,058 148,275
<PP&E> 0 18,198
<DEPRECIATION> 0 2,275
<TOTAL-ASSETS> 134,355 219,044
<CURRENT-LIABILITIES> 30,107 31,669
<BONDS> 0 0
0 0
0 0
<COMMON> 217,158 217,518
<OTHER-SE> (112,910) (29,783)
<TOTAL-LIABILITY-AND-EQUITY> 134,355 219,044
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 117,297 141,873
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (117,297) (141,873)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (117,297) (141,873)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (117,297) (141,873)
<EPS-BASIC> (0.01) (0.01)
<EPS-DILUTED> (0.01) (0.01)
</TABLE>
