As filed with the Securities and Exchange Commission on
Registration No.
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
FANTASY SPORTS NET, INC.
(Exact Name of Registrant as Specified in its Charter)
--------------
New York 7372 11-3447964
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification
Incorporation or Code Number) Number)
Organization
--------------
142 Mineola Avenue, Suite 2-D
Roslyn Heights, New York 11577
(516) 626-6691
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
--------------
Darrell Lerner
President and Chief Executive Officer
Fantasy Sports Net, Inc.
142 Mineola Avenue, Suite 2-D
Roslyn Heights, New York 11577
(516) 626-6691
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
Copies of Communications to:
Barbara R. Mittman, Esq.
Grushko & Mittman
277 Broadway, Suite 801
New York, New York 10007
Phone: (212) 766-4655
Fax: (212) 227-5865
1
<PAGE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
If this Form is filed pursuant to Rule 462(d) under the Securities Act to
request automatic effectiveness of exhibits filed post-effectively, please check
the following box. / /
2
<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
Title of each Amount to be Proposed Proposed Amount of
class of registered maximum maximum registration
securities to (2) offering aggregate fee
be registered price per offering
Share price (1)
- --------------------------------------------------------------------------------
Common Stock, 22,200,000 $1.00 $22,200,000 $6,171.60
$.0001 par
value per
share
- --------------------------------------------------------------------------------
TOTALS 22,200,000 $1.00 $22,200,000 $6,171.60
================================================================================
(1) Estimated in accordance with Rule 457(i) solely for the purpose of
calculating the registration fee.
(2) Includes Common Stock issuable upon exercise of certain warrants and
options.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
3
<PAGE>
SUBJECT TO COMPLETION, DATED ______________________
FANTASY SPORTS NET, INC.
22,200,000 Shares of Common Stock
(par value $.0001 per share)
This Prospectus relates to an aggregate 22,200,000 shares (the "Shares") of
Common Stock, $.0001 par value per share ("Common Stock"), of Fantasy Sports
Net, Inc. (the "Company") which may be offered and sold from time to time, by
the Selling Shareholders named in this Prospectus (the "Selling Shareholders"),
consisting of (i) 9,000,000 shares of Common Stock issued to management; (ii)
3,300,000 shares of Common Stock and 3,300,000 shares of Common Stock issuable
upon the exercise of Warrants issued to certain subscribers (the "Subscribers")
pursuant to Subscription Agreements dated May 12, 1999 (collectively, the
"Agreements"); and (iii) 6,600,000 shares of Common Stock issuable to the
Subscribers pursuant to certain provisions of the Agreements, upon occurrence of
certain events and exercise by Fantasy Sports Net, Inc. of its right to compel
the Selling Shareholders to purchase common stock and Warrants of Fantasy Sports
Net, Inc. ("Put Rights"). See "Put Rights" and "Selling Shareholders".
The Shares may be offered and sold by the Selling Shareholders from time to
time in one or more transactions effected on any exchange or market where the
Shares may be listed for trading, in privately negotiated transactions, or by a
combination of such methods of sale, at market prices prevailing at the time of
sale, or at prices related to such prevailing market prices or at negotiated
prices. The Selling Shareholders may effect such transactions directly, or
indirectly through broker-dealers or agents acting on their behalf, and such
broker-dealers or agents may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Shares for whom they act as agent or to whom they sell Shares as
principal or both. The compensation to a particular broker-dealer might be in
excess of customary commissions. The price at which any of the Shares may be
sold, and the commissions, if any, paid in connection with any such sale, are
unknown and may vary from transaction to transaction. To the extent required,
this Prospectus may be amended and supplemented from time to time to describe a
specific plan of distribution. See "Plan of Distribution". The Selling
Shareholders are and any broker-dealers or agents that participate in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act of 1933, as amended (the "Securities
Act"), and any profit on the sale of the Shares by them and any commissions,
discounts or concessions received by any such broker-dealers or agents may be
deemed to be underwriting commissions or discounts under the Securities Act.
4
<PAGE>
Fantasy Sports Net, Inc. will not receive any of the proceeds from the sale
of Shares by the Selling Shareholders. Fantasy Sports Net, Inc. has agreed to
bear certain expenses in connection with the registration of the Shares being
offered by the Selling Shareholders. Fantasy Sports Net, Inc. has also agreed to
indemnify certain of the Selling Shareholders against certain liabilities,
including liabilities arising under the Securities Act.
-------------------------
The Securities offered hereby are speculative and involve a high degree of
risk and should not be purchased by investors who cannot afford the loss of
their entire investment. See "Risk Factors" beginning on page 9.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is _________, 1999
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by Fantasy Sports Net, Inc.. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy by any person in any
jurisdiction in which it is unlawful for such person to make such offering or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances imply that the information herein is
correct as of any date subsequent to the date hereof.
5
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Summary ........................................................ 7
The Offering .............................................................. 8
Summary Financial Information ............................................. 8
Risk Factors .............................................................. 9
Use of Proceeds ........................................................... 19
Dividend Policy ........................................................... 19
Capitalization ............................................................ 19
Selected Financial Data ................................................... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................................... 20
Business .................................................................. 21
Management ................................................................ 32
Director Compensation ..................................................... 33
Executive Compensation .................................................... 33
Certain Transactions ...................................................... 35
Principal and Selling Shareholders ........................................ 37
Selling Shareholders ...................................................... 38
Plan of Distribution ...................................................... 40
Description of Capital Stock .............................................. 42
Legal Matters ............................................................. 45
Experts ................................................................... 45
Available Information ..................................................... 45
-------------------------
Fantasy Sports Net, Inc. is not currently a reporting company under the
Securities Exchange Act of 1934. After this offering, Fantasy Sports Net, Inc.
intends to furnish its stockholders annual reports containing audited financial
statements examined by an independent accounting firm and quarterly reports for
the first three quarters of each fiscal year containing interim unaudited
financial information. Each purchaser of securities hereunder must expressly
agree to receive this Prospectus and all stockholder reports and communications,
including but not limited to all quarterly and annual reports and proxy
statements, by delivery of such materials to the purchaser's last known mailing
address or electronic mail address, at Fantasy Sports Net, Inc.'s discretion,
listed on Fantasy Sports Net, Inc.'s records, or by delivery of a notice to such
mailing address or electronic mailing address, at Fantasy Sports Net, Inc.'s
discretion, which directs such purchaser to a specific Web address where such
materials can be found, read and printed.
6
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified by the more detailed information and
Financial Statements and Notes appearing elsewhere in this Prospectus.
Prospective investors should carefully consider the information under the
heading "Venture Capital Investing" and "Risk Factors". Except as otherwise
specified, all information in this Prospectus assumes no exercise of outstanding
options or warrants.
The following summary contains forward-looking statements which involve
risks and uncertainties. Such forward-looking statements include, but are not
limited to, statements regarding future events and Fantasy Sports Net, Inc.'s
plans and expectations. Fantasy Sports Net, Inc.'s actual results may differ
materially from such statements. See also "Risk Factors", "Business" and
"Special Note on Forward-Looking Statements".
Fantasy Sports Net, Inc.
Fantasy Sports Net, Inc. is an Internet-based media company which will
provide interactive fantasy sports and other sports information and programming
to sports enthusiasts.
Subscribers will be able to participate in fantasy games comprised of
actual leagues or, if they choose to, they will be able to form their own
leagues. We plan to administer player transactions (for example, drafts, trades,
starting lineup selection and disabled list and minor league moves) and provide
summaries of scoring, standings and roster transactions. Proprietary contests
will feature cash prizes, and other awards based on the results of weekly,
season-long or special event related games of skill. Regular sweepstakes and
"giveaways" will feature cash prizes.
Fantasy Sports Net, Inc. plans to establish important strategic
relationships to increase awareness of the Fantasy Sports Net brand, build
traffic on its Web site and develop proprietary programming. We anticipate
receiving television and radio promotion through strategic media relationships
with syndicated sports and radio programs, and on numerous sports talk radio
stations around the country. To date, no agreements with any syndicated sports
and radio programs have been reached, therefore, there can be no assurance that
we will be successful in establishing any of these strategic relationships. In
addition, although none currently exists, we hope to establish strategic
relationships with sports stars, personalities, organizations and sports related
groups.
Fantasy Sports Net, Inc. was incorporated in New York in April, 1998. Its
principal executive offices are located at 142 Mineola Avenue, Suite 2-D, Roslyn
Heights, New York 11577, and its
7
<PAGE>
telephone number is (516) 626-6691. Unless the context otherwise requires, the
terms "Company" or "Fantasy Sports Net" refer to Fantasy Sports Net, Inc., and
the term "fantasysportsnet.com" refers to Fantasy Sports Net, Inc.'s Web site,
located at http://fantasysportsnet.com.
The Offering
Common Stock offered by the
Selling Shareholders...................... 22,200,000 shares (1)
Common Stock outstanding
as of June 30, 1999....................... 12,300,000 shares
Use of proceeds...........................
Fantasy Sports Net, Inc. will not receive any proceeds from the sale of the
shares by the Selling Shareholders, but will receive up to $1,650,000 from
exercise of the Warrants and up to $757,800 by exercising its right to compel
the Selling Shareholders to purchase Shares and Warrants exercisable for Shares.
See "Use of Proceeds."
(1) Includes: (i) 9,000,000 shares of Common Stock issued to management; (ii)
3,300,000 shares of Common Stock issued to Subscribers pursuant to the
Agreements; (iii) 3,300,000 shares of Common Stock reserved for issuance
pursuant to Warrants; and (iv) 6,600,000 shares of Common Stock issuable
pursuant to the Put Rights.
Summary Financial Information
Two Months
Year Ending Ending
3/31/99 5/31/99
------- -------
Balance Sheet Data:
Total Assets $ -0- $ 727,970
Total Liabilities -0- 380
Total Stockholders' Equity -0- 727,590
Statement of Operations:
Revenues $ -0- $ -0-
Expenses -0- 16,443
Income (loss) from operations -0- (16,443)
Net Income (loss) -0- (15,730)
Income (loss) per share -0- $ (0.002)
Shares used in computing net income (loss)
per share
8
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. Fantasy Sports Net, Inc.'s actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth in the following risk factors and
elsewhere in this Prospectus. In addition to the other information in this
Prospectus, the following risk factors should be considered carefully in
evaluating Fantasy Sports Net, Inc. and our business before purchasing the
Common Stock offered by this Prospectus.
Risk Factors Related to Fantasy Sports Net, Inc.'s Operations
We Have Limited Operating History; We Anticipate Continuing Losses; and We have
Accumulated Deficit.
Fantasy Sports Net, Inc. was incorporated in the State of New York on April
14, 1998 and has conducted organizational business, has no commercial
operations, and no significant operating history. There can be no assurance that
our activities will be profitable. We have not achieved any revenue to date and
our ability to generate significant revenue is subject to substantial
uncertainty. There can be no assurance that we will ever generate sufficient
revenue to meet expenses or achieve and maintain profitability. The failure to
do so would have a significant adverse effect on our business. Also, in view of
the rapidly changing nature of our business and its limited operating history,
we believe that period-to-period comparisons of our financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
There is Doubt As to Our Ability to Continue as a Going Concern.
As a development stage company, Fantasy Sports Net, Inc. has no revenue and
limited financing. These conditions raise doubt about the ability of Fantasy
Sports Net, Inc. to continue as a going concern. See "Report of Independent
Auditors" and Note 7 of "Notes to Financial Statements."
We Cannot Accurately Forecast Future Revenue; or Potential
Fluctuations in Quarterly Operating Results.
As a result of our relatively short operating history and the emerging
nature of the markets in which we plan to compete, we are limited in our ability
to accurately forecast our revenue. Our current and future expense levels will
be based largely on our expectations concerning future revenue. Accordingly, we
may be unable to adjust spending quickly enough to compensate for any unexpected
revenue shortfall. A shortfall in revenue in relation
9
<PAGE>
to our expectations could have a significant adverse effect on our business.
Dependence on Strategic Relationships Which May Not Materialize.
Fantasy Sports Net, Inc. plans to enter into strategic relationships with
sports superstars, personalities, organizations and sports related groups,
commercial online services, third party Web sites and developers of browsers and
other Internet-based products to increase awareness of its brand among
consumers, to create revenue opportunities and to obtain content for its Web
site. There can be no assurance that any party to a strategic agreement will
perform its obligations as agreed or that any such agreement would be
specifically enforceable by us. Many of our agreements (if we get any) will be
short-term in nature. Also, some of our agreements with our still unknown
strategic partners may be terminated by either party on short notice. The
failure to establish strategic relationships or to fully capitalize on any such
relationships could have a very negative impact on our business.
Intense Competition From Larger and Established Competitors.
Many of our current competitors have longer operating histories,
significantly greater financial, technical and marketing resources,
significantly greater name recognition and substantially larger user or
membership bases than we have. They have a significantly greater ability to
attract advertisers and users. In addition, many of our competitors may be able
to respond more quickly than us to new or emerging technologies and changes in
Internet user requirements. They are able to devote greater resources than us to
the development, promotion and sale of their services. There can be no assurance
that our current or potential competitors will not develop products and services
comparable or superior to those developed by us or adapt more quickly than us to
new technologies, evolving industry trends or changing Internet user
preferences. Increased competition could result in price reductions, reduced
margins or loss of market share (if we ever even obtain market share). Any of
these would materially and adversely affect our business. There can be no
assurance that we will be able to compete successfully against current and
future competitors.
We are Dependent on Key Personnel and There is the Risk of Loss of Those
Personnel.
Fantasy Sports Net, Inc.'s future success depends, in significant part,
upon the continued service of its senior management. The business will be
managed by Darrell Lerner, who shall serve as our President and Chairman of the
Board of Directors, Byron R. Lerner, who shall serve as our Vice-President, and
James Tubbs, who shall serve as our Secretary-Treasurer. The
10
<PAGE>
loss of any of these individuals, particularly in the early stages of our
operations, would materially adversely affect us. We do not maintain key man
life insurance covering any of our personnel. In May, 1999, we entered into
employment agreements with Darrell Lerner, Byron R. Lerner, and James Tubbs, for
gross annual combined salaries of $138,000 subject to increases whether or not
we have revenues. We also intend to grant bonuses based on profits to senior
management and other employees, if any.
Our future success also depends on our continuing ability to attract and
retain highly qualified technical, editorial and managerial personnel.
Competition for such personnel is intense, and we may experience difficulties in
attracting the required number of such individuals. There can be no assurance
that we will be able to attract or retain a sufficient number of highly
qualified employees in the future. If we are unable to hire and retain personnel
in key positions, our business could be negatively affected.
We May Be Subject to New Government Regulation Which May Impact Negatively on
Our Operations.
Fantasy Sports Net, Inc. is subject to various laws and governmental
regulations applicable to businesses generally. We believe that we are currently
in compliance with these laws and that these laws do not have a material impact
on our planned operations. In addition, although there are currently few laws or
regulations directly applicable to access to or commerce on the Internet, due to
the increasing popularity and use of the Internet, it is possible that more
stringent consumer protection laws and regulations may be adopted with respect
to the Internet, covering issues such as user privacy and expression, pricing,
intellectual property, information security, anti-competitive practices,
characteristics and quality of products and services and taxation of
subscription fees or gross receipts of internet service providers. Any such new
legislation or regulation or the application of existing laws and regulations to
the Internet could have a significant negative impact on our business, results
of operations and financial condition. The enactment of federal or state laws or
regulations in the future may increase our cost of doing business or decrease
the growth of the Internet and could in turn decrease the demand for our
products and services, increase our costs, or otherwise have an adverse effect
on our business. Moreover, the applicability to the Internet of existing laws in
various jurisdictions governing issues such as property ownership, libel and
personal privacy is uncertain, may take years to resolve and could expose us to
substantial liability.
11
<PAGE>
Our Future Success Will Be Dependent on Content Providers to Whom Significant
Payments Will Be Required to be Made; We May Also Be Subject to Third Party
Claims Against Us.
Fantasy Sports Net, Inc. will rely on independent content providers for
sports news, scores, statistics and other sports information. Our future success
depends, in significant part, on our ability to establish and maintain
relationships with such content providers. Termination of one or more
significant content provider agreements would decrease the availability of
sports news and information which we can offer our customers and could have a
material adverse effect on our business. To the extent that content providers
provide information to users at a lower cost than us or at minimal or no cost,
our business could be materially adversely affected. Fees payable to content
providers will constitute a significant portion of our cost of revenue. There
can be no assurance that our potential content providers will enter into or
renew agreements with us. If we are required to increase the fees payable to our
content providers, such increased payments could have a material adverse effect
on our business. Also, we may become subject to third party claims for
defamation, negligence, copyright or trademark infringement or other theories
based on the nature and content of information supplied by our content
providers, and any such claims may have a material adverse effect on our
business.
We Have No Trademark Protection; We May Be Liable For Third Party Claims For
Infringement of Trademark and Copyright Laws.
Fantasy Sports Net, Inc. has reserved the domain names
"Fantasysportsnet.com" and "Fantasysportsnet.net" for a period of two years. We
have not applied for U.S. trademark protection of the names. There is no
assurance that we will apply for trademark protection of the domain names or
that we will be able to secure a trademark of the names. Furthermore, there can
be no assurance that others will not bring copyright or trademark infringement
claims against us, or claim that our use of certain technologies violates a
patent. If it is determined that we have infringed upon a third party's
proprietary rights, there can be no assurance that any necessary licenses or
rights could be obtained on terms satisfactory to us, if at all. The inability
to obtain any required license on satisfactory terms could have a material
adverse effect on our business. We may also be subject to litigation to defend
against claims of infringement of the rights of others or to determine the scope
and validity of the intellectual property rights of others. Decisions against us
in such litigation could result in the loss of certain of our proprietary
rights, subject us to significant liabilities, require us to pay license fees to
other parties, and prevent us from selling our services. Any of these results
could have a material adverse effect on our business. Also, since we plan to
license a substantial portion of our content from third parties, our exposure to
copyright infringement actions
12
<PAGE>
may increase because we must rely upon such other parties for information as to
the origin and ownership of such licensed content.
System Failure, Delays and Inadequacy May Negatively Affect Our Operations.
The performance of our Web sites is critical to our reputation and ability
to attract and retain users, advertisers and members. Services based on
sophisticated software and computer systems often encounter development delays
and the underlying software may contain undetected errors or failures when
introduced. Any system error or failure that causes interruption in availability
or an increase in response time could result in a loss of potential or existing
users, advertisers or members and could reduce the attractiveness of our Web
sites to users and advertisers. Our operations are dependent on our ability to
maintain our computer and telecommunications equipment in effective working
order and to protect our systems against damage from fire, hurricanes, power
loss, telecommunications failure, break-ins, computer viruses and other events
beyond our control. Any damage or failure that causes system disruptions or
other significant interruptions in our operations could have a material adverse
effect on our business.
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. Fantasy Sports Net, Inc.
is currently designing and testing its services to be Year 2000 compliant. There
can be no assurances that Fantasy Sports Net, Inc.'s current services do not
contain undetected errors or defects with Year 2000 date functions that may
result in material costs to Fantasy Sports Net, Inc.. Although Fantasy Sports
Net, Inc. is not aware of any material operational issues or costs associated
with preparing its internal systems for the Year 2000, there can be no
assurances that Fantasy Sports Net, Inc. will not experience serious
unanticipated negative consequences and/or material costs caused by undetected
errors or defects in the technology used in its internal systems.
Seasonality
Fantasy Sports Net, Inc. expects that its revenue will be higher leading up
to and during major U.S. sports seasons and lower at other times of the year. In
addition, the effect of such seasonal fluctuations in revenue could be enhanced
or offset by revenue associated with major sports events, such as the Olympics,
the Ryder Cup and the World Cup, although such events do not occur every year.
Fantasy Sports Net, Inc. believes that advertising sales in traditional media,
such as television, generally are lower
13
<PAGE>
in the first and third calendar quarters of each year, and that advertising
expenditures fluctuate significantly with economic cycles. Depending on the
extent to which the Internet is accepted as an advertising medium, seasonality
and cyclicality in the level of Internet advertising expenditures could become
more pronounced. The foregoing factors could have an adverse affect on Fantasy
Sports Net, Inc.'s business.
Risks Related to the Internet Industry
The Market For Our Services is Emerging and Still Unknown.
Fantasy Sports Net, Inc. will operate in a market that is at a very early
stage of development, is rapidly changing and is characterized by an increasing
number of businesses who have introduced or developed competing products and
services. There can be no assurance that the market for our Web site will
develop or that demand for our services will emerge or continue. If the market
fails to develop, develops more slowly than expected or becomes saturated with
competitors, or if our Web site does not achieve or sustain market acceptance,
our business will suffer.
Our Revenue From Advertisements on the Internet May Be Limited.
Fantasy Sports Net, Inc. may derive a portion of its revenue from the sale
of advertisements on its Web site. Most potential advertisers and their
advertising agencies have only limited experience with the Internet as an
advertising medium and have not devoted a significant portion of their
advertising expenditures to Internet-based advertising. If widespread commercial
use of the Internet does not develop, or if the Internet does not develop as an
effective method for advertising, our business will suffer.
Our Success Will Be Dependent on Continued Growth in Use of the Internet.
Fantasy Sports Net, Inc.'s success is highly dependent upon continued
growth in the use of the Internet generally and, in particular, as a method for
advertising, information services and commerce. Use of the Internet by consumers
is at an early stage of development, and market acceptance of the Internet as a
medium for advertising, information services and commerce is subject to a high
level of uncertainty. Our future financial success will be dependent on the sale
of advertising on our Web site and our ability to attract and retain paying
members and to sell merchandise and services. There can be no assurance that the
Internet will be a successful commerce and information channel. Consumer concern
over Internet security for commercial and personal confidentiality has been, and
could continue to be, a barrier to commercial activities requiring consumers to
send their credit card information over the Internet.
14
<PAGE>
Technological Change May Have an Adverse Effect on Our Operations.
The Internet industry is characterized by rapid technological developments,
evolving industry standards, changes in user and customer requirements, frequent
new service and new product introductions. The introduction of services or
products relating to new technologies or the emergence of new industry standards
and practices could render our existing Web site and proprietary technology
obsolete and unmarketable or require significant unanticipated investments in
product development. If we are unable, for technical, legal, financial or other
reasons, to adapt in a timely manner to technological developments, evolving
industry standards, changing market conditions or customer requirements, or if
our Web site does not achieve market acceptance, our business will suffer.
Breach of Confidential Information on the Internet May Negatively Effect Our
Commerce.
A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. We will
rely on encryption and authentication technology licensed from third parties to
provide the security and authentication necessary to effect secure transmission
of confidential information. Advances in computer capabilities, new discoveries
in the field of cryptography or other events or developments may make it
difficult to protect customer transaction data. If any such compromise of our
security were to occur it could have a material adverse effect on our business.
There can be no assurance that our security measures will prevent security
breaches or that failure to prevent such security breaches would not have a
material adverse effect on our business.
We May Be Subject to Liability for Information Retrieved from the Internet.
Due to the fact that materials may be downloaded from our Web site operated
by us and afterwards may be distributed to others, there is a potential that
claims will be made against us for defamation, negligence, copyright or
trademark infringement or other theories based on the nature and content of such
materials. Such claims have been brought, sometimes successfully, against online
services in the past. In addition, we could be subject to liability with respect
to content that may be accessible through our Web site or third party Web sites
linked from our Web site. Although Fantasy Sports Net, Inc. intends to carry
general liability insurance, our insurance may not cover potential claims of
this type or may not be adequate to cover all costs incurred in defense of
potential claims or to indemnify us for all liability that may be imposed. Any
costs or imposition of liability that is not covered by insurance or in excess
of insurance coverage could have a material adverse effect on our business.
15
<PAGE>
Risks Related to Offering
Control by Existing Shareholders May Effect All Decisions Requiring Shareholder
Approval.
Fantasy Sports Net, Inc.'s present directors and executive officers will
own approximately 40.54% of the outstanding Common Stock of Fantasy Sports Net,
Inc. after the issuance of the 22,200,000 common shares described hereinafter.
As a result, these shareholders, if they act as a group, will be able to
significantly influence the outcome of all matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions.
Shares Eligible For Future Sale May Have Adverse Effect on Trading Market.
A substantial number of shares of Common Stock currently outstanding, or
issuable upon exercise of outstanding stock options and warrants, are or will
become eligible for future sale in the public market at prescribed times
pursuant to applicable regulations or registration rights held by certain
security holders. Sales of substantial amounts of Common Stock in the public
market, or the perception that such sales will occur, could have a material
negative effect on the market price of our Common Stock. In connection with
entering into business relationships, we may issue Common Stock and Warrants to
purchase significant amounts of Common Stock. The issuance of significant
amounts of Common Stock or Warrants, particularly warrants with exercise prices
below the fair market value of the Common Stock at the time of issuance, could
have an adverse effect on the market price for our Common Stock. Fantasy Sports
Net, Inc. may also issue shares to its attorneys and other professionals who
provide services to us.
Stock Option Plan May Dilute Shareholders.
The shareholders and Board of Directors of Fantasy Sports Net, Inc. adopted
a 1999 Stock Option Plan with reference to 5,100,000 common shares. The issuance
of the 5,100,000 shares pursuant to the 1999 Stock Option Plan may be further
dilutive to shareholders.
Our Only Real Property is a Lease of 300 Square Feet of Office Space.
We are currently leasing approximately 300 square feet for our executive
offices at 142 Mineola Avenue, Suite 2-D, Roslyn Heights, New York, for $500 per
month pursuant to a Sublease Agreement. We believe that the terms of such
leasing arrangement are no less favorable to us than those that we could have
obtained from an independent third party. The term of the Sublease Agreement is
one year and nine months beginning May 1, 1999 through February 28, 2001. The
Overlease is held by International Global
16
<PAGE>
Communications, Inc. Byron Lerner, Vice-President and Director of Fantasy Sports
Net, Inc. is the president of International Global Communications, Inc.
No Dividends Have Been Paid.
No dividends have been paid on any of our Common Stock and we do not expect
to pay any dividends in the foreseeable future.
Our Directors Have Certain Conflicts of Interest.
Byron Lerner, our Vice-President and Director, and James Tubbs, our
Secretary-Treasurer and Director, serve both as directors and as the President,
and Secretary-Treasurer, respectively, of Teltran International Group, Inc.,
provider of the internet portal to Fantasy Sports Net, Inc. They may make
decisions about the portal that are favorable to Teltran International Group,
Inc., but are not favorable to Fantasy Sports Net, Inc.
Our Directors Are Involved in Other Projects and Therefore Have a Limited Amount
of Time to Devote to Fantasy Sports Net, Inc.
Byron Lerner, our Vice-President and Director, and James Tubbs, our
Secretary-Treasurer and Director, serve both as directors and as the President,
and Secretary-Treasurer, respectively, of Teltran International Group, Inc.
Consequently, this may affect their ability to devote sufficient time to their
duties.
Our Directors Have Limited Liability.
Under Fantasy Sports Net, Inc.'s Certificate of Incorporation, the
directors cannot be held liable to Fantasy Sports Net, Inc. or to the
stockholders for monetary damages for breach of fiduciary duties unless the
breach involves (i) the director's duty of loyalty to Fantasy Sports Net, Inc.
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or (iii) a transaction
from which the director derived an improper personal benefit. This provision
does not affect the liability of any director under federal or applicable state
securities laws.
We May Not Be Able to Obtain or Maintain a Listing on the NASDAQ SmallCap Market
or the OTC Bulletin Board, So You May Not Be Able to Sell Your Shares Easily.
Because we may not be able to obtain or maintain a listing on the NASDAQ
SmallCap or the OTC Bulletin Board, your shares may be difficult or impossible
to sell. Trading in our Common Stock, if any, is intended to be conducted on the
OTC Bulletin Board or the NASDAQ SmallCap Market, after we obtain a listing, if
ever.
17
<PAGE>
However, if we are unable to qualify for this listing, we believe that our stock
will trade on over-the-counter market in the so-called "pink sheets".
Consequently, selling your Common Stock would be more difficult because only
smaller quantities of stock could be bought and sold, transactions could be
delayed, and security analysts' and news media's coverage of Fantasy Sports Net,
Inc. may be reduced. These factors could result in lower prices and larger
spreads in the bid and ask prices for our stock.
We May Not be Able to Obtain Future Equity Financing.
Subsequent to the completion of this offering, we will require substantial
additional capital to implement our expansion plan and to support future growth.
Additional financing could consist of equity, debt, or a combination of them.
Any additional equity financing may be dilutive to the shareholders, and debt
financing may impose substantial restrictions upon our ability to operate and
raise additional funds. The terms of any financing will be determined by us at
the appropriate time based upon management's good faith evaluation of Fantasy
Sports Net, Inc.'s best interests, and the best interests of our stockholders.
Such financing may involve the issuance by us of Common Stock or securities
convertible into Common Stock. There can be no assurance that additional capital
will be available or that, if available, such capital will be on satisfactory
terms.
Since Fantasy Sports Net, Inc. Has No Underwriter, There is a Greater Risk That
No Market Will Develop for Our Stock.
Lack of an underwriter or broker/dealer participation in the offering is
likely to increase the risk that no market for our securities will develop for
our Common Stock. Because Fantasy Sports Net, Inc. had not engaged the services
of an underwriter, the independent due diligence review of Fantasy Sports Net,
Inc., its affairs and financial condition, which would ordinarily be performed
by an underwriter, have not been performed.
We May Be Unable to Sell Stock in Some States Due to Blue Sky Regulations.
In order for our Common Stock to be resold, it must be registered with the
individual states. There can be no assurance that any or all stock registrations
in various states will be approved. If a registration is not approved, it will
be more difficult for you to sell your stock. We intend to use our best efforts
to register in every state where we believe there will be a significant market
for our stock. Presently, we intend to file a blue sky application only in New
York State.
Should any or all stock registrations not be approved, this would likely
result in impeding your ability to sell your stock.
18
<PAGE>
Broker-Dealers May Be Unable to Sell Our Stock Because of the Low Price.
Although we intend to be listed on the OTC Bulletin Board or the NASDAQ
SmallCap Market, if we are able to qualify in the future, there is no assurance
however that we will obtain this listing. Because our stock may therefore only
be sold on the over-the-counter market, certain rules which apply will make it
more difficult for you to sell your stock.
If our Common Stock is not listed on the NASDAQ SmallCap Market and/or any
stock exchange, it may become subject to Rule 15g-9 under the Exchange Act. That
rule imposes additional sales practice requirements on broker-dealers that sell
low-priced securities to persons other than established customers and
institutional accredited investors. For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. Consequently, the rule may affect the ability of broker-dealers to sell
your stock.
USE OF PROCEEDS
The proceeds from the sale of the Shares are solely for the account of the
Selling Shareholders. Accordingly, Fantasy Sports Net, Inc. will not receive any
of the proceeds from the sale of the Shares. See "Selling Shareholders" and
"Plan of Distribution." Fantasy Sports Net, Inc. could receive up to
approximately $2,407,800 upon exercise of all of the Warrants and Put Securities
(of which their is no assurance), which will be used for working capital and
other general corporate purposes.
DIVIDEND POLICY
Fantasy Sports Net, Inc. has never paid any cash dividends on its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future. Fantasy Sports Net, Inc. currently intends to retain future earnings, if
any, to fund the development and growth of its business.
CAPITALIZATION
The following table sets forth the capitalization of Fantasy Sports Net,
Inc. as of May 31, 1999. This section should be read in conjunction with Fantasy
Sports Net, Inc.'s Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
Long Term Indebtedness $ -0-
---------
Common Stock, $.0001 par value; 50,000,000 shares,
authorized; 12,300,000 shares issued and
outstanding 1,230
Additional paid-in-capital 742,470
Deficit (16,110)
---------
Total Stockholders' equity $ 727,970
---------
19
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data is derived from Fantasy Sports Net,
Inc.'s audited financial statements, which statements have been audited by
Goldberg & Drogin LLP, independent certified public accountants, and appear
elsewhere in this Prospectus. The results of operations for the two months ended
May 31, 1999 are not necessarily indicative of the results for the full year.
The following data should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Fantasy
Sports Net, Inc.'s Financial Statements and Notes thereto included elsewhere in
this Prospectus.
Two Months
Year Ending Ending
3/31/99 5/31/99
------- -------
Balance Sheet Data:
Total Assets $ -0- $727,970
Total Liabilities -0- 380
Total Stockholders' Equity -0- 727,590
Statement of Operations:
Revenues $ -0- $ -0-
Expenses -0- 16,443
Income (loss) from operations -0- (16,443)
Net Income (loss) -0- (15,730)
Income (loss) per share -0- $ (0.002)
Shares used in computing net income (loss)
per share
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. Fantasy Sports Net, Inc.'s actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain risk factors, including those set forth under "Risk Factors"
and elsewhere in this Prospectus. The following discussion also should be read
in conjunction with Fantasy Sports Net, Inc.'s Financial Statements and notes
thereto included
20
<PAGE>
elsewhere in this Prospectus.
Results of Operations - Inception (April 18, 1998) through May 31, 1999
Fantasy Sports Net, Inc. is considered to be in the development stage as
defined in Statement of Financial Accounting Standards No. 7. There have been no
operations since incorporation.
Liquidity and Capital Resources
Fantasy Sports Net, Inc. sold 3,000,000 shares each of its Common Stock to
Darrell Lerner, President and Director, Byron R. Lerner, Vice-President and
Director, and James Tubbs, Secretary-Treasurer and Director, for an aggregate
$900.00 in cash. The $900 in cash has been used for organizational matters. The
Company has no operating history and no material assets.
On May 12, 1999, Fantasy Sports Net, Inc. entered into subscription
agreements with certain stock subscribers, whereby the Company received $757,800
in the Private Placement. The Agreements provide for the issuance, by Fantasy
Sports Net, Inc., of (i) 3,000,000 shares of common stock for $750,000 (or $.25
per share), and (ii) 300,000 shares of common stock and 3,300,000 warrants for
$7,800 (or $.015 per share for common stock and $.001 per warrant). The warrants
are exercisable after May 12, 1999 for $.50 per share until May 12, 2004.
Currently, there has been no exercise of the warrants. Additionally, the Company
has the right to "put" up to $757,800 of its common stock, and common stock and
warrants to its subscribers for a period of two weeks following the filing of
this registration statement.
Revenues
Fantasy Sports Net, Inc. has not produced any revenues. As of May 31, 1999,
Fantasy Sports Net, Inc. has $7,219.94 in cash.
Costs and Expenses
As of May 31, 1999, total expenses are $16,443.
BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
Prospectus.
21
<PAGE>
Fantasy Sports Net, Inc. is an Internet-based media company which will
provide interactive fantasy sports and other sports information and programming
to sports enthusiasts.
Subscribers will be able to participate in fantasy games comprised of
actual leagues or if they choose to, form their own leagues. We plan to
administer player transactions (for example, drafts, trades, starting lineup
selection and disabled list and minor league moves) and provide summaries of
scoring, standings and roster transactions. Proprietary contests will feature
cash prizes, and other awards based on the results of weekly, season-long or
special event related games of skill. Regular sweepstakes and "giveaways" will
feature cash prizes.
Fantasy Sports Net, Inc. plans to establish strategic relationships to
increase awareness of the Fantasy Sports Net brand, build traffic on its Web
site and develop proprietary programming. We anticipate receiving television and
radio promotion through strategic media relationships with syndicated sports and
radio programs, and on numerous sports talk radio stations around the country.
To date, no agreements with any syndicated sports and radio programs have been
reached, therefore, there can be no assurance that we will be successful in
establishing any of these strategic relationships. In addition, although none
currently exists, we hope to establish strategic relationships with sports
superstars, personalities, organizations and affinity groups.
Information and Programming
Fantasy Sports Net, Inc. plans to provide up-to-date general sports news
and information for all major professional and college sports 24 hours a day,
seven days a week, including previews and game summaries, which we plan to
obtain from strategic partners and a variety of leading sports news
organizations such as The Associated Press, CBS, Reuters, Pro Sports Xchange and
SportsTicker.
We also plan to deliver continuously updated, real-time scores, schedules,
standings, player and team statistics and odds for all major professional and
college sports from data providers including The Associated Press, Computer
Sports World, Data Broadcasting Corporation, Elias Sports Bureau and
SportsTicker and directly from the NBA, NFL and WNBA.
Although we have initiated some negotiations with sports news
organizations, no formal agreements have been reached. Therefore, there can be
no assurance that any formal agreements will be reached or that we will even be
able to provide the sports news information to subscribers.
22
<PAGE>
Web Site
Fantasy Sports Net, Inc. plans to feature comprehensive, in-depth coverage
of all major professional and college sports on its Web site, including the
following:
Baseball Football
Major League Baseball National Football League
Minor League Baseball College
College
Hockey Basketball
National Hockey League National Basketball Association
College Women's National Basketball
Association
College
Auto Racing Olympic Sports
Cricket Soccer
Golf Tennis
Horse Racing Volleyball
Women's Sports
Fantasy Leagues and Contests
We plan to launch our operations with baseball and horseracing in the
Winter of 1999, hopefully followed by golf and basketball in the Spring, 2000.
Future plans are to add other sports.
Participants in our fantasy sports games will compete with each other based
upon the actual performance of professional athletes. Initially, we will provide
the software for the formation of baseball leagues. However, leagues can be
formed in any of the major sports, as well as horseracing, autoracing and golf.
Participants will pay an entry fee at the beginning of the season ($49) and
small transaction fees ($10.00) each time they add or drop a new player, and a
small fee ($2.50) to make an adjustment to their roster. The league will work as
follows: participants will draft a team prior to the beginning of a season,
based on a salary cap structure which is used where players are assigned money
value based upon their abilities. Each participant will select a team 12 or 20
players whose aggregate value does not exceed the designated salary cap limit.
Participants will then compete against each other for the duration of the
season. Scoring will be determined according to how one's team of players rank
in several scoring categories. Participants will also be allowed a set number of
new players purchases and waiver moves throughout the season.
Fantasy Sports Net, Inc. plans to package its information and programming
to enable users to follow local or regional team and event coverage, including
weekly stories from college sports publications and team coverage from pro
sports and columns, video
23
<PAGE>
and other content from college sports. Members will be able to personalize the
information and programming they receive which will be delivered over the Web or
by e-mail.
Advertising and Sales
Fantasy Sports Net, Inc. believes that the demographics of its audience
will be similar to the traditional sports advertisers' target market,
predominantly male, the majority are between the ages of 18 to 54, and less than
half have college degrees and an annual income greater than $75,000.
We expect, in the future, to derive, a portion of our revenue from
advertising on our Web site. We anticipate that we will sell "banner"
advertisements that allow interested readers to link directly to the
advertisers' own Web sites or to promotional sites created by Fantasy Sports
Net, Inc. We also hope to offer sponsorship opportunities that will enable
advertisers to associate their corporate messages with Fantasy Sports Net,
Inc.'s coverage of athletes and marquee events (such as the World Series, the
Super Bowl, the Olympics, the NBA Playoffs and the Stanley Cup Playoffs),
special features of our Web site (including ScoreCenters or Baseball LIVE) and
special promotions, contests and events. Fantasy Sports Net, Inc. plans to
target traditional sports advertisers, such as consumer product and service
companies, sporting goods manufacturers and automobile companies, as advertisers
on its Web sites.
To date, no agreements have been reached with any advertisers or companies.
Therefore, there can be no assurance that we will be successful in reaching any
sales or advertising agreements.
Memberships and Offerings
Fantasy Sports Net, Inc. plans on offering subscribers incentives such as
early sign-up discounts and discounts for referring a friend in order to develop
customer loyalty. Once the software for other sports have been set up,
subscribers will also be able to play in multiple sports. Our plans are to send
e-mails prior to the start of each season to remind subscribers to renew their
membership or to try a new sport. We believe that e-mail represents an economic
means of advertising which can reach a large target audience.
We intend to award large grand prizes of up to $50,000 per winner which we
believe will represent a modest percentage of overall revenues. We also intend
to offer a high/low prize structure whereby prizes will be given not only to top
teams, but to bottom teams as well. Participants may sign up with the express
intention of trying to finish either first or last.
24
<PAGE>
Subscribers trying to finish last will most likely make new player
purchases and roster moves later in the season that they otherwise would not
have made. These moves each will have a small charge of ($10.00) each time they
add or drop a new player, and a small fee ($2.50) to make an adjustment to their
roster.
We also plan to offer small monthly prizes of $1,000 which we believe will
afford members a chance to start fresh each month if their team is otherwise out
of contention.
The fantasysportsnet.com Web site will also contain a special members only
area called "The Locker Room" which will host interactive trivia games, a
bulletin board, a sports chat room, a participant hall of fame, sports news and
trade rumors, as well as other entertainment items. The purpose of The Locker
Room is to keep subscribers in Fantasy Sports Net, Inc.'s Web site even when
they are not expressly playing a fantasy game. We hope this will attract
potential advertisers.
Fantasy Sports Net, Inc. plans to offer potential members a 30-day free
trial period. As is typical in the online services industry, a portion of the
users who access Fantasy Sports Net, Inc.'s service on a trial basis do not
become members, and each month a portion of our members terminate their
memberships. We believe that our conversion and retention rates will be
consistent with industry averages for online and similar services.
Merchandise
Although none currently exist, we anticipate that we will form
relationships with sports apparel retailers, sporting goods companies and other
similar merchants in order to provide to our subscribers on-line shopping. There
can be no assurance that we will be successful in establishing any of these
relationships.
Marketing
Fantasy Sports Net, Inc. plans to employ a variety of methods to promote
and attract traffic and new members to its Web site. Fantasy Sports Net, Inc.
intends to form strategic alliances with sports superstars, personalities,
organizations, affinity groups, media outlets and sponsorship with major
corporations. We also plan to advertise on the internet through the use of
banners which will be placed under keywords such as "basketball", "fantasy
basketball", and "fantasy sports" on all major search engines such as Yahoo,
Lyco, Intoseek and Excite. We have targeted several national publications such
as ESPN Magazine, The Sporting News, Fantasy Baseball Report, Hawes Fantasy
Baseball Guide, Ultimate Fantasy Baseball Yearbook, Daily Racing Form, and The
Blood Horse Magazine, in which Fantasy Sports Net, Inc. plans to advertise.
Fantasy Sports Net, Inc.'s print marketing will consist primarily of
advertisements in targeted sports publications, including
25
<PAGE>
Baseball America, Fantasy Baseball, Lindy's professional and college football
publications, Pro Football Weekly, The Sporting News, Street & Smith and USA
Today-Baseball Weekly, and online publications, including NetGuide, Home PC,
Online Access and Multimedia Online. Fantasy Sports Net, Inc.'s print
advertisements will also appear regularly in college sports publications. To
date, there are no agreements with any media outlets, corporations or magazines
and there is no assurance that any agreement will be reached.
Member Service and Support
We believe that member service and support are important to our ability to
attract and retain members. We plan to have member support staff to provide
toll-free telephone support to respond to customer requests. To date, no such
staff exists, so there can be no assurance that we will be successful in
establishing a support staff.
Competition
The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in the
early 1990's, the number of Web sites on the Internet competing for consumers'
attention and spending has proliferated with no substantial barriers to entry,
and Fantasy Sports Net, Inc. expects that competition will continue to
intensify. We will compete, directly and indirectly, for advertisers, viewers,
members, content providers, merchandise sales and rights to sports events with
the following categories of companies: (i) Web sites targeted to sports
enthusiasts generally (such as ESPN SportsZone and CNN and Sports Illustrated's
CNN/SI) or to enthusiasts of particular sports (such as Web sites maintained by
Major League Baseball, the NFL, the NBA and the NHL); (ii) publishers and
distributors of traditional off-line media (such as television, radio and
print), including those targeted to sports enthusiasts, many of which have
established or may establish Web sites; (iii) general purpose consumer online
services such as AOL and Microsoft Network, each of which provides access to
sports-related content and services; (iv) vendors of sports information,
merchandise, products and services distributed through other means, including
retail stores, mail, facsimile and private bulletin board services; and (v) Web
search and retrieval services, such as Excite, InfoSeek, Lycos and Yahoo, and
other high-traffic Web sites, such as those operated by CNET and Netscape.
Fantasy Sports Net, Inc. anticipates that the number of its direct and indirect
competitors will increase in the future. Management believes that our most
significant competitors are ESPN SportsZone and CNN/SI, Web sites which offer a
variety of sports content.
26
<PAGE>
Fantasy Sports Net, Inc. believes that the principal competitive factors in
attracting and retaining users and members are the depth, breadth and timeliness
of content, the ability to offer compelling and entertaining content and brand
recognition. Other important factors in attracting and retaining users include
ease of use, service quality and cost. Fantasy Sports Net, Inc. believes that
the principal competitive factor in attracting and retaining content providers
and merchandisers is Fantasy Sports Net, Inc.'s ability to offer sufficient
incremental revenue from licensing fees, bounties and online sales of product or
services. Fantasy Sports Net, Inc. believes that the principal competitive
factors in attracting advertisers include the number of users and members of
Fantasy Sports Net, Inc.'s Web site, the demographics of Fantasy Sports Net,
Inc.'s user and membership bases, price and the creative implementation of
advertisement placements. There can be no assurance that Fantasy Sports Net,
Inc. will be able to compete favorably with respect to these factors.
Many of Fantasy Sports Net, Inc.'s current competitors have longer
operating histories, significantly greater financial, technical and marketing
resources, significantly greater name recognition and substantially larger user
or membership bases than Fantasy Sports Net, Inc. They have a significantly
greater ability to attract advertisers and users. In addition, many of our
competitors may be able to respond more quickly than us to new or emerging
technologies and changes in Internet user requirements. They are able to devote
greater resources than us to the development, promotion and sale of their
services. There can be no assurance that our current or potential competitors
will not develop products and services comparable or superior to those developed
by us or adapt more quickly than us to new technologies, evolving industry
trends or changing Internet user preferences. Increased competition could result
in price reductions, reduced margins or loss of market share (if we ever even
obtain market share). Any of these would adversely affect our business. There
can be no assurance that we will be able to compete successfully against current
and future competitors.
Government Regulation and Legal Uncertainties
Fantasy Sports Net, Inc. is subject, both directly and indirectly, to
various laws and governmental regulations relating to its business. There are
currently few laws or regulations directly applicable to access to or commerce
on commercial online services or the Internet. However, due to the increasing
popularity and use of commercial online services and the Internet, it is
possible that a number of laws and regulations may be adopted with respect to
commercial online services and the Internet. Such laws and regulations may cover
issues such as user privacy, pricing and characteristics and quality of products
and services. On June 26, 1997, the United States Supreme Court held
unconstitutional certain provisions of the Communications Decency Act of 1996,
which, among
27
<PAGE>
other things, imposed criminal penalties for transmission of or allowing access
to certain obscene communications over the Internet and other computer services,
intended to protect minors. The adoption of similar laws or regulations in the
future may decrease the growth of commercial online services and the Internet,
which could in turn decrease the demand for Fantasy Sports Net, Inc.'s services
and products and increase Fantasy Sports Net, Inc.'s costs of doing business or
otherwise have an adverse effect on Fantasy Sports Net, Inc.'s business,
operating results and financial condition. Moreover, the applicability to
commercial online services and the Internet of existing laws governing issues
such as property ownership, libel and personal privacy is uncertain and could
expose Fantasy Sports Net, Inc. to substantial liability.
Fantasy Sports Net, Inc.'s contests and sweepstakes may be subject to state
and federal laws governing lotteries and gambling. We will seek to design our
contest and sweepstakes rules to fall within exemptions from such laws and
restricts participation to individuals over 18 years of age who reside in
jurisdictions within the United States and Canada in which the contests and
sweepstakes are lawful. There can be no assurance that Fantasy Sports Net,
Inc.'s contests and sweepstakes will be exempt from such laws or that the
applicability of such laws to Fantasy Sports Net, Inc. would not have a material
adverse effect on Fantasy Sports Net, Inc.'s business.
Tax authorities in a number of states are currently reviewing the
appropriate tax treatment of companies engaged in Internet commerce. New state
tax regulations may subject Fantasy Sports Net, Inc. to additional state sales
and income taxes. As Fantasy Sports Net, Inc.'s service will be available over
the Internet in multiple states and foreign countries, such jurisdictions may
claim that we are required to qualify to do business as a foreign corporation in
each such state and foreign country. The failure by Fantasy Sports Net, Inc. to
qualify as a foreign corporation in a jurisdiction where it is required to do so
could subject Fantasy Sports Net, Inc. to taxes and penalties for the failure to
qualify. It is possible that the governments of other states and foreign
countries also might attempt to regulate our transmissions of content on its Web
site or prosecute our violations of their laws. There can be no assurance that
violations of local laws will not be alleged or charged by state or foreign
governments, that Fantasy Sports Net, Inc. might not unintentionally violate
such law or that such laws will not be modified, or new laws enacted, in the
future.
In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by the Federal Communications
Commission (the "FCC") in the same manner as other telecommunications services.
For example, America's Carriers Telecommunications Association has filed a
petition with the FCC for this purpose. In addition, because the growing
popularity and use of the Internet has burdened the existing telecommunications
28
<PAGE>
infrastructure and many areas with high Internet use have begun to experience
interruptions in phone service, local telephone carriers, such as Pacific Bell,
have petitioned the FCC to regulate ISPs and OSPs in a manner similar to long
distance telephone carriers and to impose access fees on the ISPs and OSPs. If
either of these petitions are granted, or the relief sought therein is otherwise
granted, the costs of communicating on the Internet could increase
substantially, potentially slowing the growth in use of the Internet. Any such
new legislation or regulation or application or interpretation of existing laws
could have a material adverse effect on Fantasy Sports Net, Inc.'s business.
Intellectual Property
Fantasy Sports Net, Inc.'s performance and ability to compete are dependent
to a significant degree on its internally developed content and technology.
Fantasy Sports Net, Inc. will rely on a combination of copyright and trademark
laws, trade secret protection, confidentiality and non-disclosure agreements
with third parties and contractual provisions to establish and protect its
proprietary rights. There can be no assurance that the steps to be taken by
Fantasy Sports Net, Inc. to protect its proprietary rights will be adequate,
that Fantasy Sports Net, Inc. will apply for or be able to secure a trademark
registration for its mark in the United States and/or foreign countries, or that
third parties will not infringe upon or misappropriate Fantasy Sports Net,
Inc.'s copyright, trademark, service mark and similar proprietary rights. In
addition, effective copyright and trademark protection may be unenforceable or
limited in certain foreign countries, and the global nature of the Internet
makes it impossible to control the ultimate destination of Fantasy Sports Net,
Inc.'s services. In the future, litigation may be necessary to enforce and
protect Fantasy Sports Net, Inc.'s trade secrets, copyrights and other
intellectual property rights.
There can be no assurance that third parties will not bring copyright or
trademark infringement claims against Fantasy Sports Net, Inc. or claim that
Fantasy Sports Net, Inc.'s use of certain technologies violates a patent. If it
is determined that Fantasy Sports Net, Inc. has infringed upon a third party's
proprietary rights, there can be no assurance that any necessary licenses or
rights could be obtained on terms satisfactory to Fantasy Sports Net, Inc., if
at all. The inability to obtain any required license on satisfactory terms could
have a material adverse effect on Fantasy Sports Net, Inc.'s business. Fantasy
Sports Net, Inc. may also be subject to litigation to defend against claims of
infringement of the rights of others or to determine the scope and validity of
the intellectual property rights of others. If competitors of Fantasy Sports
Net, Inc. prepare and file applications in the United States that claim
trademarks used or registered by Fantasy Sports Net, Inc., Fantasy Sports Net,
Inc. may oppose those applications and have to participate in
29
<PAGE>
proceedings before the USPTO to determine priority of rights to the trademark,
which could result in substantial costs to Fantasy Sports Net, Inc., even if the
eventual outcome is favorable to Fantasy Sports Net, Inc. An adverse outcome
could require Fantasy Sports Net, Inc. to license disputed rights from third
parties or to cease using such trademarks. Any such litigation would be costly
and divert management's attention, either of which could have an adverse effect
on Fantasy Sports Net, Inc.'s business, results of operations and financial
condition. Adverse determinations in such litigation could result in the loss of
certain of Fantasy Sports Net, Inc.'s proprietary rights, subject Fantasy Sports
Net, Inc. to significant liabilities, require Fantasy Sports Net, Inc. to seek
licenses from third parties, or prevent Fantasy Sports Net, Inc. from selling
its services, any one of which could have a material adverse effect on Fantasy
Sports Net, Inc.'s business. In addition, inasmuch as Fantasy Sports Net, Inc.
plans to license a substantial portion of its content from third parties, its
exposure to copyright infringement actions may increase; because Fantasy Sports
Net, Inc. must rely upon such third parties for information as to the origin and
ownership of such licensed content. Fantasy Sports Net, Inc. generally will
obtain representations as to the origins and ownership of such licensed content
and generally will obtain indemnification to cover any breach of any such
representations; however, there can be no assurance that such representations,
if obtained, will be accurate or that such indemnification will provide adequate
compensation for any breach of such representations.
In 1998, Fantasy Sports Net, Inc. reserved the domain names
Fantasysportsnet.com and Fantasysportsnet.net for a period of two (2) years.
Fantasy Sports Net, Inc. has not applied for U.S. trademark protection of the
names Fantasysportsnet.com and Fantasysportsnet.net. It is possible that
competitors of Fantasy Sports Net, Inc. or others will adopt product or service
names similar to Fantasy Sports Net, Inc.'s, thereby impeding Fantasy Sports
Net, Inc.'s ability to build brand identity and possibly leading to customer
confusion. The inability of Fantasy Sports Net, Inc. to protect its
"Fantasysportsnet.com" and "Fantasysportsnet.net" marks and other marks
adequately could have a material adverse effect on Fantasy Sports Net, Inc.'s
business.
Despite Fantasy Sports Net, Inc.'s efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of our service or to
obtain and use information that Fantasy Sports Net, Inc. or its content
providers regard as proprietary. There can be no assurance that the steps taken
by Fantasy Sports Net, Inc. to protect its proprietary rights will be adequate
or that third parties will not infringe or misappropriate Fantasy Sports Net,
Inc.'s copyrights, trademarks, service marks and similar proprietary rights.
30
<PAGE>
Operations
Fantasy Sports Net, Inc. will maintain its computer system at its corporate
headquarters. Fantasy Sports Net, Inc.'s operations are dependent upon its
ability to protect its systems against damage from fire, hurricanes, power loss,
telecommunications failure, break-ins, computer viruses and other events beyond
Fantasy Sports Net, Inc.'s control. Fantasy Sports Net, Inc. will maintain
access to the Internet through third-party providers. Any disruption in Fantasy
Sports Net, Inc.'s Internet access, failure of Fantasy Sports Net, Inc.'s third
party providers to handle higher volumes of users or damage or failure that
causes system disruptions or other significant interruptions in Fantasy Sports
Net, Inc.'s operations could have a material adverse effect on Fantasy Sports
Net, Inc.'s business, results of operations and financial condition.
Facilities
Fantasy Sports Net, Inc. currently leases approximately 300 square feet for
its executive offices at 142 Mineola Avenue, Suite 2-D, Roslyn Heights, New
York, for $500 per month pursuant to a Sublease Agreement whose term is one year
and nine months beginning May 1, 1999 through February 28, 2001, from
International Global Communications, Inc. Byron Lerner, Vice-President and
Director of Fantasy Sports Net, Inc. is also the president of International
Global Communications, Inc. We believe that the terms of such leasing
arrangement are no less favorable than those that we could have obtained from an
independent third party.
Legal Proceedings
Fantasy Sports Net, Inc. is not currently nor has ever been a party to any
legal proceedings, the adverse outcome of which, individually or in the
aggregate, would have a material adverse effect on Fantasy Sports Net, Inc.'s
financial position or results of operations.
31
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of Fantasy Sports Net, Inc. are as
follows:
Name Age Position
---- --- --------
Darrell Lerner 25 President and Director
Byron R. Lerner 54 Vice-President and Director
James E. Tubbs 39 Secretary-Treasurer and
Director
Darrell Lerner (age 25) has been Fantasy Sports Net, Inc.'s President and
Director since its inception. Mr. Lerner is a Cum Laude graduate of Hofstra
University and is currently completing his final year of law school. Mr. Lerner
has a degree in business administration/finance and extensive experience in
tele- communications and journalism. Mr. Lerner is well known in the field of
horse racing and has written articles for the New York Post, USA Today, American
Turf Monthly, and The Racing Times. He has also been the subject of numerous
interviews by such racing publications as the TRC Newsletter. In addition, Mr.
Lerner appeared several times as a racing analyst on the Sportchannel TV show
"Thoroughbred Action with Harvey Pack."
Byron R. Lerner (age 54) has been Fantasy Sports Net, Inc.'s Vice-President
and Director since its inception. From June, 1997 to the present, Mr. Lerner has
been the president and chief executive officer of Teltran International, a
public company on the NASDAQ Bulletin Board. Between 1993 and 1995, Mr. Lerner
was president of International of GlobalCom, a firm he founded which engaged in
the resale of domestic and international long distance phone time. From 1990 to
1993, Mr. Lerner was president of L&S Communications, a reseller of domestic and
international long distance telephone time. Mr. Lerner brings over twenty-five
years of sales and general management experience to Fantasy Sports Net, Inc..
Aside from being an avid sports fan, Mr. Lerner played high school and college
basketball and continues to coach travel and A.A.U. teams in the New York
metropolitan area.
James E. Tubbs (age 39) has been Fantasy Sports Net, Inc.'s
Secretary-Treasurer and Director since its inception. From May, 1996 to the
present, Mr. Tubbs has been the executive vice-president and a director of
Teltran International, a public company on the NASDAQ Bulletin Board. Between
1994 and 1995, Mr. Tubbs was president of OmniCom, a reseller of UniDial. From
1984 through May, 1996, Mr. Tubbs worked in the entertainment industry for CBS
Sports, CBS Radio Sports and ABC Sports covering college football,
32
<PAGE>
baseball, and basketball; along with professional football, baseball,
basketball, tennis, golf, horse racing, track, and Olympic style competitions.
During this period, Mr. Tubbs covered 10 SuperBowls, 5 World Series and
Playoffs, 6 Final Fours, 6 NBA Championships, 3 Masters, and the NHL Playoffs.
His duties included writing, producing, as well as being the statistician, stage
manager and business manager for broadcaster, Brent Musburger.
Director Compensation
Fantasy Sports Net, Inc. reimburses its directors for out-of-pocket
expenses incurred in connection with their rendering of services as directors.
Fantasy Sports Net, Inc. currently does not intend to pay cash fees to its
directors for attendance at meetings.
Executive Compensation
The following table sets forth compensation earned by Fantasy Sports Net,
Inc.'s Chief Executive Officer and its other executive officers (the "Named
Executive Officers") to date:
Name Principal Position Year Salary
- ---- ------------------ ---- ------
Darrell Lerner President and Director 1999 $3,250.00
Byron R. Lerner Vice-President and 1999 1,250.00
Director
James E. Tubbs Secretary-Treasurer 1999 1,250.00
and Director
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Executive officers are
elected annually by the Board of Directors to hold office until the first
meeting of stockholders and until their successors are chosen and qualified.
1999 Stock Option Plan
Effective May, 1999, Fantasy Sports Net, Inc.'s shareholders approved the
Stock Plan. The purpose of the 1999 Stock Plan is to promote the interests of
the Company and its stockholders by providing its officers and employees with an
incentive to continue service with the Company. Accordingly, the Company may
grant to selected officers and employees Stock Options and/or Stock Appreciation
Rights in an effort to attract and retain in its employ qualified individuals
and to provide such individuals with incentives to devote their best efforts to
the Company through ownership of the Company's stock, thus enhancing the value
of the Company for the benefit of stockholders.
33
<PAGE>
Fantasy Sports Net, Inc.'s 1999 Stock Option Plan (the "1999 Plan") was
adopted by the Board of Directors in May, 1999. The 1999 Plan provides for the
grant of "incentive stock options," within the meaning of the Internal Revenue
Code, to employees and officers of Fantasy Sports Net, Inc., and non-qualified
stock options to employees, consultants, directors and officers of Fantasy
Sports Net, Inc. Up to 51,000,000 shares of Common Stock are authorized for
issuance under the 1999 Plan. As of June 30, 1999, no stock options have been
exercised.
The Stock Plan is administered by the Board of Directors. The Board of
Directors has authority to determine when and to whom to make grants of awards,
the number of shares to be covered by the grants, the types and terms of options
and other stock-related awards granted and the exercise price of options and
stock appreciation rights, provided that the exercise price of an option and the
appreciation base of a stock appreciation right may not be less than the fair
market value of the shares of the Common Stock on the date of grant, except
that, in the case of an incentive stock option granted to an individual who, at
the time such incentive stock option is granted, owns shares possessing 10% or
more of the total combined voting power of all classes of stock of Fantasy
Sports Net, Inc., the option exercise price may not be less than 110% of such
fair market value on the date of grant.
Employees and Employment Agreement
The business of Fantasy Sports Net, Inc. will be managed by Darrell Lerner,
who shall serve as our President and Chairman of the Board of Directors, Byron
R. Lerner, who shall serve as our Vice-President, and James Tubbs, who shall
serve as our Secretary-Treasurer. We do not maintain key man life insurance
covering any of our personnel. In May, 1999, we entered into employment
agreements with Darrell Lerner, Byron R. Lerner, and James Tubbs, for gross
annual combined salaries of $138,000 subject to increases whether or not we have
revenues. We also intend to grant bonuses based on profits to senior management
and other employees, if any.
Fantasy Sports Net, Inc. future success depends in large part upon our
ability to attract and retain highly qualified employees. Competition for such
personnel is intense, and there can be no assurance that we will be able to
retain our senior management or other key employees or that we will be able to
attract and retain additional qualified personnel in the future.
Limitation of Liability of Directors and Officers
As permitted by the Business Corporation Law of the State of New York,
Fantasy Sports Net, Inc.'s Articles of Incorporation provide that directors and
officers of Fantasy Sports Net, Inc. will not be personally liable to Fantasy
Sports Net, Inc. or its shareholders for monetary damages for breach of
fiduciary duty as
34
<PAGE>
a director or officer, except for liability for breach of a director's or
officer's duty of loyalty to Fantasy Sports Net, Inc. or its shareholders, for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, for acts relating to unlawful distributions or for any
transaction from which the director or officer derived an improper personal
benefit. Fantasy Sports Net, Inc.'s Articles of Incorporation also provide
(subject to certain exceptions) that Fantasy Sports Net, Inc. shall, to the
maximum extent permitted from time to time under the law of the State of New
York, indemnify, and upon request shall advance expenses to, any director or
officer to the extent permitted under such law as it may from time to time be in
effect. Fantasy Sports Net, Inc.'s bylaws require us to indemnify, to the full
extent permitted by law, any director, officer, employee or agent of Fantasy
Sports Net, Inc. for acts which such person reasonably believes are not in
violation of Fantasy Sports Net, Inc.'s corporate purposes as set forth in the
Articles of Incorporation. As a result of these provisions, shareholders may be
unable to recover damages against the directors and officers of Fantasy Sports
Net, Inc. for actions taken by them which constitute negligence, gross
negligence, or a violation of their fiduciary duties, which may reduce the
likelihood of shareholders instituting derivative litigation against directors
and officers and may discourage or deter shareholders from suing directors,
officers, employees and agents of Fantasy Sports Net, Inc. for breaches of their
duty of care, even though such an action, if successful, might otherwise benefit
Fantasy Sports Net, Inc. and its shareholders.
CERTAIN TRANSACTIONS
On May 6, 1999, Fantasy Sports Net, Inc. amended its Articles of
Incorporation to increase the authorized shares from 200 common shares, no par
value, to 50,000,000 common shares, $.0001 par value per share, and to
effectuate a 250,000 to 1 stock split, for a total of 9,000,000 common shares
issued and outstanding.
On May 12, 1999, Fantasy Sports Net, Inc. entered into subscription
agreements (the "Agreements") with each of the Subscribers (the "Private
Placement"). Pursuant to the Agreements, Fantasy Sports Net, Inc. is entitled to
aggregate proceeds of up to $757,800 in the Private Placement. The Agreements
provide for the issuance by Fantasy Sports Net, Inc. of (i) 3,000,000 shares
(the "Shares") of Common Stock for $750,000, or $.25 per share; and (ii) 300,000
shares of Common Stock and 3,300,000 Warrants for $7,800, or $.015 per share.
The Warrants are exercisable after May 12, 1999 for $.50 per share until May 12,
2004.
Pursuant to the Agreements, Fantasy Sports Net, Inc. also has the right to
"put" up to $757,800 of its Common Stock, and Common Stock and Warrants to the
Subscribers for a period of two weeks
35
<PAGE>
following the filing of the registration statement (the "Put Rights"). Such Put
Rights contemplate the issuance of shares of Put Common Stock and Put Common
Stock and Warrants required to be purchased by the Subscribers (the "Put
Securities") after delivery of a notice (a "Put Notice") from Fantasy Sports
Net, Inc., at a price equal to the price in the Private Placement. The
obligation of the Subscribers to purchase Common Stock pursuant to the exercise
by Fantasy Sports Net, Inc. of the Put Rights is subject to various conditions,
including conditions relating to the timely filing of the registration statement
and there being no material changes in Fantasy Sports Net, Inc.'s business or
business prospects. The number of shares of Common Stock that Fantasy Sports
Net, Inc. may issue at any one time upon exercise by Fantasy Sports Net, Inc. of
the Put Rights is limited to the number of shares of Common Stock and Common
Stock and Warrants which the Subscribers had purchased in the Agreements. In the
event Fantasy Sports Net, Inc. does not exercise the Put in connection with any
or all of the Put Securities, the Subscribers may exercise the Put on Fantasy
Sports Net, Inc.'s behalf by written notice to Fantasy Sports Net, Inc. within
two weeks after the end of the Put exercise period. The aggregate amount of the
Puts may not exceed $757,800.
If Fantasy Sports Net, Inc. seeks to sell shares of its Common Stock to
prospective investors for 240 days after the effective date of a registration
statement covering the Securities, Fantasy Sports Net, Inc. must give the
Subscribers (i) prior written notice of such sale and (ii) an opportunity to
purchase an amount of Common Stock to maintain their respective proportionate
interests in Fantasy Sports Net, Inc. (the "Right of First Refusal"). The Right
of First Refusal must be on the same terms and conditions offered to the
prospective investors.
Management has agreed not to sell or otherwise dispose of their aggregate
9,000,000 shares of Common Stock registered herein for a period of one year from
the date of effectiveness of this Registration Statement.
Although we have no present intention to do so, we may, in the future,
enter into other transactions and agreements relating to our business with our
directors, officers, principal stockholders and other affiliates. Fantasy Sports
Net, Inc. intends for all such transactions and agreements to be on terms no
less favorable to Fantasy Sports Net, Inc. than those obtainable from
unaffiliated third parties on an arm's-length basis. In addition, the approval
of a majority of Fantasy Sports Net, Inc.'s disinterested directors will be
required for any such transactions or agreements.
36
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth, as of June 30, 1999, certain transactions
with respect to the beneficial ownership of Fantasy Sports Net, Inc.'s Common
Stock by (i) each person who beneficially owns more than five percent of Fantasy
Sports Net, Inc.'s outstanding Common Stock, (ii) each director of Fantasy
Sports Net, Inc., (iii) each of the executive officers named in the Summary
Compensation Table, (iv) all directors and executive officers of Fantasy Sports
Net, Inc. as a group and (v) each Selling Shareholder:
<TABLE>
<CAPTION>
====================================================================================================================================
Identity of Shares Percent of Shares Shares
Stockholder or Beneficially Shares Offered Beneficially
Group Owned Outstanding Owned (After
(Before the (Before the the
Offering)(1) Offering)(1) Offering)
(3) (4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Darrell Lerner 3,000,000 19.3% 3,000,000 -0-
(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Byron R. Lerner 3,000,000 19.3% 3,000,000 -0-
(2)
- ------------------------------------------------------------------------------------------------------------------------------------
James Tubbs 3,000,000 19.3% 3,000,000 -0-
(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Libra Finance S.A. 612,000 3.923% 1,224,000 -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Danbury 2,280,000 14.615% 4,560,000 -0-
Investments Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Alaistair-Prescott 150,000 0.096% 300,000 -0-
Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Hyett Capital, 150,000 0.096% 300,000 -0-
Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Talbiya B. 406,000 0.26% 812,000 -0-
Investments Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Ellis Enterprises 202,000 0.1294% 404,000 -0-
Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Arcadia Mutual 666,664 0.4273% 1,333,328 -0-
Fund, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Berkeley Group 666,668 0.4273% 1,333,336 -0-
Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Windsor Group Ltd. 666,668 0.4273% 1,333,336 -0-
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Austost Anstalt 300,000 0.1923% 600,000 -0-
Schaan
- ------------------------------------------------------------------------------------------------------------------------------------
Balmore Funds S.A. 300,000 0.1923% 600,000 -0-
Nesher, Inc. 200,000 0.1282% 400,000 -0-
- ------------------------------------------------------------------------------------------------------------------------------------
All Officer and 9,000,000 -0-
Directors as a
Group (3 persons)
====================================================================================================================================
</TABLE>
- ----------------
(1) Represents those shares of Common Stock held by the Selling
Shareholders, if any, together with those shares that such Selling
Shareholders have the right to acquire within 60 days from the date of this
Prospectus.
(2) Subject to one year lockup.
(3) Includes shares subject to Options not exercisable within sixty days
and therefore not reflected in prior columns.
(4) Assumes all of the Shares being offered will be sold. Because the
Selling Shareholders may sell all, some or none of the Shares that he, she
or it holds, and because the offering contemplated by this Prospectus is
not now a "firm commitment" underwritten offering, the actual number of
Shares that will be held by the Selling Shareholders upon or prior to
termination of this offering may vary. See "Plan of Distribution."
SELLING SHAREHOLDERS
Relationship of Selling Shareholders with Fantasy Sports Net, Inc.
None of the Selling Shareholders currently has, or within the past three
years has had, any position, office, or other material relationship with Fantasy
Sports Net, Inc. or any predecessor or affiliate of Fantasy Sports Net, Inc..
Sales of Outstanding Shares by Selling Shareholders
None of the Selling Shareholders have advised Fantasy Sports Net, Inc., and
Fantasy Sports Net, Inc. is unable to predict, if, when, and the extent to which
they intend to sell the Shares being registered hereunder for their respective
accounts. Notwithstanding the foregoing, for purposes of the following Selling
Shareholders Table, all of the Shares are deemed to be offered hereby by the
Selling Shareholders for sale to the public. Based upon the foregoing
assumption, the following table sets forth information, as at June 30, 1999,
with respect to (i) each Selling
38
<PAGE>
Shareholder's beneficial ownership of Fantasy Sports Net, Inc.'s Common Stock
prior to the offering of any Shares hereunder by such Selling Shareholder, (ii)
the number of Shares which may be offered for sale hereunder and (iii) the
number shares of Fantasy Sports Net, Inc.'s Common Stock to be beneficially
owned by each Selling Shareholder after the offering (assuming the sale of all
Shares being offered hereunder).
There can be no assurance that any of the Selling Shareholders will offer
for sale any or all of the Common Stock offered by them pursuant to this
Prospectus.
The Private Placement
On May 12, 1999 (the "Subscription Date"), Fantasy Sports Net, Inc. entered
into subscription agreements (the "Agreements") with each of the Subscribers
(the "Private Placement"). Pursuant to the Agreements, Fantasy Sports Net, Inc.
is entitled to aggregate proceeds of up to $757,800 in the Private Placement.
The Agreements provide for the issuance by Fantasy Sports Net, Inc. of (i)
3,000,000 shares (the "Shares") of Common Stock for $750,000, or $.25 per share;
and (ii) 300,000 shares of Common Stock and 3,300,000 Warrants for $7,800, or
$.015 per share. The Warrants are exercisable after May 12, 1999 for $.50 per
share until May 12, 2004.
Put Rights
Fantasy Sports Net, Inc. also has the right to "put" up to $757,800 of its
Common Stock, and Common Stock and Warrants to the Subscribers for a period of
two weeks following the filing of the registration statement (the "Put Rights").
Such Put Rights contemplate the issuance of shares of Put Common Stock and Put
Common Stock and Warrants required to be purchased by the Subscribers (the "Put
Securities") after delivery of a notice (a "Put Notice") from Fantasy Sports
Net, Inc., at a price equal to the price in the Private Placement. The
obligation of the Subscribers to purchase Common Stock pursuant to the exercise
by Fantasy Sports Net, Inc. of the Put Rights is subject to various conditions,
including conditions relating to the timely filing of the registration statement
and there being no material changes in Fantasy Sports Net, Inc.'s business or
business prospects. The number of shares of Common Stock that Fantasy Sports
Net, Inc. may issue at any one time upon exercise by Fantasy Sports Net, Inc. of
the Put Rights is limited to the number of shares of Common Stock and Common
Stock and Warrants which the Subscribers had purchased in the Agreements. In the
event Fantasy Sports Net, Inc. does not exercise the Put in connection with any
or all of the Put Securities, the Subscribers may exercise the Put on Fantasy
Sports Net, Inc.'s behalf by written notice to Fantasy Sports Net, Inc. within
two weeks after the end of the Put exercise period. The aggregate amount of the
Puts may not exceed $757,800.
39
<PAGE>
Right of First Refusal
If Fantasy Sports Net, Inc. seeks to sell shares of its Common Stock to
prospective investors for 240 days after the effective date of a registration
statement covering the Securities, Fantasy Sports Net, Inc. must give the
Subscribers (i) prior written notice of such sale and (ii) an opportunity to
purchase an amount of Common Stock to maintain their respective proportionate
interests in Fantasy Sports Net, Inc. (the "Right of First Refusal"). The Right
of First Refusal must be on the same terms and conditions offered to the
prospective investors.
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be offered and sold from time to
time by the Selling Shareholders. The Selling Shareholders will act
independently of Fantasy Sports Net, Inc. in making decisions with respect to
the timing, manner and size of each sale. The Selling Shareholders may sell the
Shares offered hereby in the over-the-counter market, on the Nasdaq National
Market, in privately negotiated transactions, or by a combination of such
methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated market prices. The
Shares may be sold by one or more of the following means of distribution: (a) a
block trade in which the broker-dealer so engaged will attempt to sell Shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker-dealer as principal and
resale by such broker-dealer for its own account pursuant to this Prospectus;
(c) an over-the-counter distribution in accordance with the rules of the Nasdaq
National Market; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (e) in privately negotiated transactions. To
the extent required, this Prospectus may be amended and supplemented from time
to time to describe a specific plan of distribution.
In connection with distributions of the Shares or otherwise, the Selling
Shareholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with such transactions, broker-dealers or
other financial institutions may engage in short sales of the Shares in the
course of hedging the positions they assume with Selling Shareholders. The
Selling Shareholders may also sell the Shares short and redeliver the Shares to
close out such short positions. The Selling Shareholders may also enter into
option or other transactions with broker-dealers or other financial institutions
which require the delivery to such broker-dealer or other financial institution
of Shares offered hereby, which Shares such broker-dealer or other financial
institution may resell pursuant to this Prospectus. The Selling Shareholders may
also pledge Shares to a broker-dealer or
40
<PAGE>
other financial institution, and, upon a default, such broker-dealer or other
financial institution may effect sales of the pledged Shares pursuant to this
Prospectus. In addition, any Shares that qualify for sale pursuant to Rule 144
may be sold under Rule 144 rather than pursuant to this Prospectus.
In effecting sales, brokers, dealers or agents engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate. Such
broker-dealers or agents may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Shares for whom they act as agent or to whom they sell Shares as
principal or both (which compensation to a particular broker-dealer might be in
excess of customary commissions). Under certain circumstances, the Selling
Shareholders and any broker-dealers or agents that participate in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities, and any profit on the sale of the Shares by
them and any commissions, discounts or concessions received by any such
broker-dealers or agents may be deemed to be underwriting commissions or
discounts under the Securities Act.
Fantasy Sports Net, Inc. will not receive any of the proceeds from the sale
of Shares by the Selling Shareholders. However, Fantasy Sports Net, Inc. could
receive up to approximately $757,800 upon exercise of all of the Warrants and
Put Securities (of which their is no assurance). See "Use of Proceeds." Fantasy
Sports Net, Inc. has agreed to bear certain expenses in connection with the
registration of the Shares being offered by the Selling Shareholders. In
addition, Fantasy Sports Net, Inc. has agreed to indemnify certain of the
Selling Shareholders against certain liabilities, including liabilities arising
under the Securities Act, or to contribute to payments they may be required to
make in respect thereof.
To comply with the securities laws of certain jurisdictions, if applicable,
the Shares must be offered or sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain jurisdictions the Shares
may not be offered or sold unless they have been registered or qualified for
sale in such jurisdiction or an exemption from the registration or qualification
requirement is available and is complied with.
Fantasy Sports Net, Inc. has advised the Selling Shareholders that the
anti-manipulation rules under the Exchange Act may apply to their sales of
Shares in the market and to the activities of the Selling Shareholders and their
affiliates. Fantasy Sports Net, Inc. has also informed the Selling Shareholders
of the need for delivery of a copy of this Prospectus to purchasers at or prior
to the time of any sale of the Shares offered hereby, and Fantasy Sports Net,
Inc. will make copies of this Prospectus available to the Selling Shareholders
for such purpose. The Selling Shareholders may
41
<PAGE>
indemnify any broker-dealer that participates in transactions involving the sale
of the Shares against certain liabilities, including liabilities arising under
the Securities Act.
There can be no assurance that the Selling Shareholders will sell all or
any of the Shares offered hereunder. Fantasy Sports Net, Inc. has agreed with
certain of the Selling Shareholders to use its best efforts to maintain the
effectiveness of the Registration Statement of which this Prospectus is a part
for a period of not less than two years following the effective date of the
registration statement. No sales may be made pursuant to this Prospectus after
such date unless Fantasy Sports Net, Inc. amends or supplements this Prospectus
to indicate that it has agreed to extend such period of effectiveness.
DESCRIPTION OF CAPITAL STOCK
On May 6, 1999, Fantasy Sports Net, Inc. amended its Articles of
Incorporation to increase the authorized shares from 200 common shares, no par
value, to 50,000,000 common shares, $.0001 par value per share.
Common Stock
As of June 30, 1999, there were 12,300,000 shares of Common Stock
outstanding and held of record by approximately 14 stockholders.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding preferred stock. Upon the liquidation, dissolution or winding up of
Fantasy Sports Net, Inc., the holders of Common Stock are entitled to receive
ratably the net assets of Fantasy Sports Net, Inc. available after the payment
of all debts and other liabilities and subject to the prior rights of any
outstanding preferred stock. Holders of the Common Stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of Common
Stock are fully paid and nonassessable. The rights, preferences and privileges
of holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which Fantasy
Sports Net, Inc. may designate and issue in the future. There are no shares of
preferred stock outstanding.
42
<PAGE>
Registration Rights
Certain securityholders of Fantasy Sports Net, Inc. (the
"Rightsholders") are entitled to require Fantasy Sports Net, Inc. to register
under the Securities Act of 1933, as amended (the "Securities Act"), up to a
total of approximately 22,200,000 shares (the "Registrable Shares") of Common
Stock (including 6,600,000 shares of Common Stock issuable upon the exercise of
Put Securities and Warrants) pursuant to the terms of the Agreements. The
Agreements provide that in the event Fantasy Sports Net, Inc. proposes to
register any of its securities under the Securities Act at any time or times,
the Rightsholders, subject to certain exceptions, shall be entitled to include
Registrable Shares in such registration. In addition, certain Rightsholders have
additional rights, subject to certain conditions and limitations, to require
Fantasy Sports Net, Inc. to prepare and file a registration statement under the
Securities Act with respect to their Registrable Shares. Fantasy Sports Net,
Inc. is generally required to bear the expenses of all such registrations.
Warrants
Each Warrant issued pursuant to the Agreements entitles the holder thereof
(the "Warrantholder") to purchase one share of Common Stock. The Warrants are
exercisable at a price of $.50 per share until May 12, 2004. The "Put Warrants"
are exercisable for five years from the Put Closing Date. The Warrants are not
redeemable by Fantasy Sports Net, Inc. at any time.
The exercise price and number of shares of Common Stock or other securities
issuable on exercise of the Warrants are subject to adjustment in certain
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation of Fantasy Sports Net, Inc. Reference is
made to the Warrant (which has been filed as an exhibit to this Registration
Statement) for a complete description of the terms and conditions therein (the
description herein contained herein qualified in its entirety by reference
thereto).
The Warrants may be exercised upon surrender of the Warrant on or prior to
the expiration date to Fantasy Sports Net, Inc. at its principal office or at
the office of the Warrant agent appointed by Fantasy Sports Net, Inc. in
accordance with the terms of the Warrant, with the subscription form attached
thereto completed and executed as indicated, accompanied by full payment of the
exercise price (in cash or by certified check or official bank check payable to
the order of Fantasy Sports Net, Inc.) for the number of Warrants being
exercised. The Warrant Holders do not have the right or privileges of holders of
Common Stock.
43
<PAGE>
Shares Eligible For Future Sale
Upon completion of this offering, Fantasy Sports Net, Inc. will have
outstanding 22,200,000 shares of Common Stock, all of which (including the
Shares being registered hereby) are "restricted securities" as defined under
Rule 144 (the "Restricted Shares"), substantially all of which are available for
sale in the public market, subject to the provisions of Rule 144 under the
Securities Act, or pursuant to this Registration Statement. In addition, certain
holders of the Restricted Shares are entitled to certain registration rights.
See "--Registration Rights."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least one year is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
(i) one percent of the outstanding shares of Common Stock; or (ii) the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding the date on which notice of such sale is filed with the Securities and
Exchange Commission. Sales under Rule 144 are also subject to certain manner of
sale provisions and notice requirements and to the availability of current
public information about Fantasy Sports Net, Inc.. In addition, a person who is
not an Affiliate and has not been an Affiliate for at least three months prior
to the sale and who has beneficially owned Restricted Shares for at least two
years may resell such shares without regard to the requirements described above.
Fantasy Sports Net, Inc. is unable to estimate the number of Restricted Shares
that ultimately will be sold under Rule 144 because the number of shares will
depend in part on the market price for the Common Stock, the personal
circumstances of the sellers and other factors. See "Risk Factors--Shares
Eligible for Future Sale" and "Risk Factors--Possible Volatility of Stock
Price."
Sales of substantial amounts of Restricted Shares, or the perception that
such sales could occur, could adversely affect prevailing market prices for the
Common Stock and could impair Fantasy Sports Net, Inc.'s future ability to
obtain capital through an offering of equity securities.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Olde Monmouth
Stock Transfer & Trust Company, 77 Memorial Parkway, Suite 101, Atlantic
Highlands, New Jersey 07716.
44
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for Fantasy Sports Net, Inc. by Grushko & Mittman, 277 Broadway, New York,
New York 10007.
EXPERTS
The audited balance sheet of Fantasy Sports Net, Inc. as of March 31, 1999,
unaudited balance sheet as of May 31, 1999, and the related statement of
operations for the period ended May 31, 1999 included in this Prospectus and
Registration Statement to the extent indicated in their report, have been
prepared by Leibman Goldberg & Drogin LLP, independent certified public
accountants, and are included herein in reliance upon the authority of said firm
as experts in giving said report.
AVAILABLE INFORMATION
Fantasy Sports Net, Inc. has filed with the Commission a registration
statement on Form SB-2 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act, with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit, each such statement being qualified in all respects by such reference.
For further information with respect to Fantasy Sports Net, Inc. and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto. Copies of the Registration Statement and the
exhibits and schedules thereto may be inspected, without charge, at the offices
of the Commission, or obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Fantasy Sports Net, Inc. is also required to file electronic versions of these
documents with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR"). The Commission maintains a
World Wide Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
45
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
FINANCIAL STATEMENT
FROM APRIL 14, 1998 (INCEPTION) TO MARCH 31, 1999
with
INDEPENDENT AUDITORS' REPORT
LIEBMAN GOLDBERG & DROGIN LLP
Certified Public Accountants
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
FROM APRIL 14, 1998 (INCEPTION) TO MARCH 31, 1999
CONTENTS
PAGE #
Independent Auditors' Report 1
Balance Sheet 2
Notes to Financial Statement 3 - 4
<PAGE>
[LETTERHEAD OF LIEBMAN GOLDBERG & DROGIN LLP]
To the Board of Directors
Fantasy Sports Net, Inc.
Roslyn Heights, New York
Gentlemen:
We have compiled the accompanying balance sheets of Fantasy Sports Net, Inc. as
of From April 14, 1998 (Inception) to March 31, 1999 and 1997 and the related
statements of net income, retained earnings and cash flows for the years then
ended in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
The accompanying supplemental information is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such supplemental information has been compiled by us and is solely
the representation of management. We have not audited or reviewed the
accompanying supplemental information and, accordingly, do not express an
opinion or any other form of assurance on it.
/s/ LIEBMAN GOLDBERG & DROGIN LLP
June 25, 1999
Garden City, New York
-1-
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
March 31, 1999
FANTASY SPORTS NET, INC.
(A Development Stage Company)
BALANCE SHEET
March 31, 1999
Liabilities and Stockholders' Equity
Stockholders' Equity:
Common stock, no par value, 200 shares
authorized, 36 shares issued and outstanding $ 2,150
Stock subscriptions receivable (2,150)
-------
Total stockholders' equity $ --
-------
Total liabilities and stockholders' equity $ --
=======
See notes to financial statements
-2-
<PAGE>
Note 1 - Nature of Operations:
Fantasy Sports Net, Inc. was incorporated on April 14, 1998 under the
business laws of the State of New York. The Company is an Internet-based
media company which will provide interactive fantasy sports and other
sports information to the sports enthusiasts. Subscribers will be able to
participate in fantasy games and contests which are based upon the actual
performances of real-world professional teams and athletes. The Company has
secured a site on the World Wide Web at http:/www.fantasysportsnet.com for
its operations on the internet. This website will provide additional
services such as information, merchandise and other interactive
capabilities to its subscribers.
Note 2 - Summary of Significant Accounting Policies:
Development Stage Activities and Operations:
The Company is in its initial stages of formation and has not incurred any
expenses to date. All future costs incurred in development activities will
be charged to operations as incurred. The Company has not produced any
revenues.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
amounts.
Note 3 - Going Concern:
The accompanying financial statement has been prepared assuming that the
Company will continue as a going concern. As a development stage company,
the Company has no revenue and limited financing. These conditions raise
doubt about its ability to continue as a going concern. The financial
statement does not include any adjustments that might result from this
uncertainty.
-3-
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
March 31, 1999
Note 4 - Subsequent Events
On May 6, 1999, Fantasy Sports Net, Inc. amended its articles of
incorporation to increase the authorized shares from 200 common shares, no
par value to 50,000,000 common shares, $.0001 par value per share, and
effected a 250,000 to 1 stock split, accounting for a total of 9,000,000
common shares issued and outstanding to the Company's original
stockholders.
On May 12, 1999, Fantasy Sports Net, Inc. entered into subscription
agreements with certain stock subscribers, whereby the Company received
$757,800 in the Private Placement. The Agreements provide for the issuance,
by Fantasy Sports Net, Inc., of (I) 3,000,000 shares of common stock for
$750,000 (or $.25 per share), and (ii) 300,000 shares of common stock and
3,300,000 warrants for $7,800 (or $.015 per share for common stock and
$.001 per warrant). The warrants are exercisable fter May 12, 1999 for $.50
per share until May 12, 2004. Currently, there has been no exercise of the
warrants. Additionally, the Company has the right to "put" up to $757,800
of its common stock, and common stock and warrants to its subscribers for a
period of two weeks following the filing of a registration statement.
In May, 1999, the Company entered into a sublease agreement for office
space from a company owned by the vice president. The lease term is through
February, 2001. The monthly rent is $500.
Additionally, the Company entered into employment agreements with the
president, vice president and secretary-treasurer who are also original
stockholders. Gross annual combined salaries will initially be $138,000. In
May, 1999, a stock option plan was adopted by the Board of Directors for
these employees providing for the granting of "incentive stock options",
and non-qualified stock options to employees and other outside parties
having business relationships with Fantasy Sports Net, Inc. The plan
authorizes the issuance of up to 5,100,000 shares of common stock. To date,
no stock options have been exercised.
-4-
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION
FOR THE TWO MONTHS ENDED MAY 31, 1999
AND FOR THE PERIOD APRIL 14, 1998 (INCEPTION) TO MAY 31, 1999
with
ACCOUNTANTS' COMPILATION REPORT
LIEBMAN GOLDBERG & DROGIN LLP
Certified Public Accountants
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
FOR THE TWO MONTHS ENDED MAY 31, 1999
AND FOR THE PERIOD APRIL 14, 1998 (INCEPTION) TO MAY 31, 1999
CONTENTS
PAGE #
Accountants' Compilation Report 1
Financial Statements:
Balance Sheet 2
Statement of Operations 3
Statement of Cash Flows 4
Notes to Financial Statements 5 - 7
Supplemental Information:
Schedule 8
<PAGE>
[LETTERHEAD OF LIEBMAN GOLDBERG & DROGIN LLP]
To the Board of Directors
Fantasy Sports Net, Inc.
Roslyn Heights, New York
Gentlemen:
We have compiled the accompanying balance sheet of Fantasy Sports Net, Inc. as
of May 31, 1999 and the related statements of operations and cash flows for the
two months then ended and for the period from April 14, 1998 (Inception) to May
31, 1999 in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
The accompanying supplemental information is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such supplemental information has been compiled by us and is solely
the representation of management. We have not audited or reviewed the
accompanying supplemental information and, accordingly, do not express an
opinion or any other form of assurance on it.
/s/ LIEBMAN GOLDBERG & DROGIN LLP
June 25, 1999
Garden City, New York
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
BALANCE SHEET
May 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 721,994
---------
Total current assets $ 721,994
Fixed Assets:
Property, furniture, fixtures and equipment,
net of accumulated depreciation of $200 5,976
---------
Total assets $ 727,970
=========
Liabilities and Stockholders' Equity
Current Liabilities:
Corporation taxes payable $ 380
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.0001 par value, 50,000,000 shares
authorized, 12,300,000 shares issued and outstanding $ 1,230
Additional paid in capital 742,470
Deficit (16,110)
---------
Total stockholders' equity 727,590
---------
Total liabilities and stockholders' equity $ 727,970
=========
</TABLE>
See accountants, compilation report and notes.
-2-
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the two April 14, 1998
months ended (Inception) to
May 31, 1999 May 31, 1999
------------ ------------
Income $ -- $ --
Expenses:
Selling, general, and administrative
expenses 16,443 16,443
-------- --------
Loss before other income and depreciation (16,443) (16,443)
-------- --------
Other income (expenses)
Interest income 913 913
Depreciation expense (200) (200)
-------- --------
Total other income (expenses) 713 713
-------- --------
Net loss during development stage (15,730) (15,730)
Provision for income taxes (380) (380)
-------- --------
Net loss (16,110) (16,110)
Retained earnings - Beginning -- --
-------- --------
Deficit - Ending $(16,110) $(16,110)
======== ========
Net loss per share of common stock based
upon 10,121,311 and 9,166,019 weighted
average shares respectively $ (0.002) $ (0.002)
======== ========
See accountants, compilation report and notes.
-3-
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the two April 14, 1998
months ended (Inception) to
May 31, 1999 May 31, 1999
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (16,110) $ (16,110)
Adjustment to reconcile net loss to net
cash (used in) operating activities:
Depreciation expense 200 200
Decrease in Stock subscription receivable 900 900
Increase in corporation taxes payable 380 380
--------- ---------
Net cash (used in) operating activities (14,630) (14,630)
--------- ---------
Cash Flows from Investing Activities:
Purchase of fixed assets (6,176) (6,176)
--------- ---------
Net cash (used in) investing activities (6,176) (6,176)
--------- ---------
Cash Flows from Financing Activities:
Cash received from investors 742,800 742,800
--------- ---------
Net cash provided by financing activities 742,800 742,800
--------- ---------
Net increase in cash 721,994 721,994
Cash, and Cash Equivalents, Beginning -- --
--------- ---------
Cash, and Cash Equivalents Ending $ 721,994 $ 721,994
========= =========
</TABLE>
See accountants, compilation report and notes.
-4-
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
Note 1 - Nature of Operations:
Fantasy Sports Net, Inc. was incorporated on April 14, 1998 under the
business laws of the State of New York. The Company is an Internet-based
media company which will provide interactive fantasy sports and other
sports information to the sports enthusiasts. Subscribers will be able to
participate in fantasy games and contests which are based upon the actual
performances of real-world professional teams and athletes. The Company has
secured a site on the World Wide Web at http:/www.fantasysportsnet.com for
its operations on the internet. This website will provide additional
services such as information, merchandise and other interactive
capabilities to its subscribers.
Note 2 - Summary of Significant Accounting Policies:
Development Stage Activities and Operations:
All costs incurred in development activities are charged to operations as
incurred. The Company has not produced any revenues.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
amounts.
Property and Equipment:
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the related assets, which range from five to ten years.
Maintenance and repairs are charged to expense when incurred; betterments
are capitalized. Upon the sale or retirement of assets, the cost and
accumulated depreciation are removed from the account and any gain or loss
is recognized.
Cash and Cash Equivalents:
The Company considers all highly liquid temporary cash investments with
original maturities of three months or less to be cash equivalents.
Impairment of Long-Lived Assets:
In March, 1995, SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of, was issued. SFAS No.
121 requires impairment losses to be recorded on long lived assets used in
operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
carrying amount of the assets. SFAS No. 121, also addresses the accounting
for long-lived assets that are expected to be disposed of. The Company has
not yet adopted SFAS No. 121, however, the effect of such adoption will not
be material.
-5-
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
Note 2 - Summary of Significant Accounting Policies (Continued):
Per Share Amounts:
In February 1997, Statement of Financial Accounting Standards ("SFAS") No.
128, Earnings per Share, was issued. SFAS No. 128 simplifies the
methodology of computing earnings per share and requires the presentation
of basic and diluted earnings per share. The Company's basic and diluted
earnings per share are the same, since the Company's common stock
equivalents are antidilutive.
Net loss per share is computed using the weighted average number of common
and dilutive common equivalent shares outstanding during the period. Common
equivalent shares consist of the common shares issuable upon exercise of
stock options and warrants. There were 3,300,000 warrants and 6,600,000
puts outstanding at May 31, 1999, that could potentially dilute earnings
per share in the future. Such options and warrants were not included in the
computation of diluted loss per share because to do so would have been
antidilutive for the period presented.
Note 3 - Income Taxes:
No provision for Federal and state income taxes has been recorded as the
Company has incurred a net operating loss for the two months ended May 31,
1999.
Deferred tax assets at May 31, 1999 are not significant. The Company will
provide a full 100% valuation allowance on any deferred tax assets at March
31, 2000, to reduce such deferred income tax assets to zero as it is
management's belief that realization of such amounts do not meet the
criteria required by generally accepted accounting principles. Management
will review the valuation allowance requirement annually and make
adjustments as warranted.
Note 4 - Stockholders' Equity
On May 6, 1999, Fantasy Sports Net, Inc. amended its articles of
incorporation to increase the authorized shares from 200 common shares, no
par value to 50,000,000 common shares, $.0001 par value per share, and
effected a 250,000 to 1 stock split, accounting for a total of 9,000,000
common shares issued and outstanding to the Company's original
stockholders.
On May 12, 1999, Fantasy Sports Net, Inc. entered into subscription
agreements with certain stock subscribers, whereby the Company received
$757,800 in the Private Placement. The Agreements provide for the issuance,
by Fantasy Sports Net, Inc., of (I) 3,000,000 shares of common stock for
$750,000 (or $.25 per share), and (ii) 300,000 shares of common stock and
3,300,000 warrants for $7,800 (or $.015 per share for common stock and
$.001 per warrant). The warrants are exercisable after May 12, 1999 for
$.50 per share until May 12, 2004. Currently, there has been no exercise of
the warrants. Additionally, the Company has the right to "put" up to
$757,800 of its common stock, and common stock and warrants to its
subscribers for a period of two weeks following the filing of a
registration statement.
-6-
<PAGE>
FANTASY SPORTS NET, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
Note 5 - Stock Options and Employment Agreement
The Company entered into employment agreements with the president, vice
president and secretary-treasurer who are also original stockholders. Gross
annual combined salaries will initially be $138,000. In May, 1999, a stock
option plan was adopted by the Board of Directors for these employees
providing for the granting of "incentive stock options", and non-qualified
stock options to employees and other outside parties having business
relationships with Fantasy Sports Net, Inc. The plan authorizes the
issuance of up to 5,100,000 shares of common stock. To date, no stock
options have been exercised.
Note 6 - Commitments and Contingencies:
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplates continuation of
the Company as a going concern. The Company is a development stage company
and to date has had no revenues and limited financing. See note 4 as it
relates to the issuance of capital stock. Additionally, the Company, has a
loss of $16,110 for the period ended May 31, 1999.
In May, 1999, the Company entered into a sublease agreement for office
space from a company owned by the vice president. The lease term is through
February, 2001. The monthly rent is $500.
Note 7 - Going Concern:
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As a development stage company,
the Company has no revenue and limited financing. These conditions raise
doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from this
uncertainty.
-7-
<PAGE>
Supplemental Information
<TABLE>
<CAPTION>
For the two April 14, 1998
months ended (Inception) to
May 31, 1999 May 31, 1999
------------ ------------
<S> <C> <C>
Selling, General and Administrative Expenses:
Officer salaries $11,500 $11,500
Office expenses 995 995
Insurance 661 661
Rent 1,745 1,745
Miscellaneous 12 12
Professional fees 500 500
Employee benefits 280 280
Travel and entertainment 750 750
------- -------
$16,443 $16,443
======= =======
</TABLE>
See accountants, compilation report and notes.
-8-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Other Expenses of Issuance and Distribution.
Fantasy Sports Net, Inc. estimates that expenses payable by it in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:
Securities and Exchange Commission registration fee... $6,171.60
Blue Sky fees and expenses (including legal and
filing fees)........................................ $
Printing Expenses (other than stock certificates)..... $
Legal fees and expenses............................... $
Accounting fees and expenses.......................... $
Miscellaneous expenses................................ $
Total............................................ $
(1) All amounts except the Securities and Exchange Commission registration fee
are estimated.
Fantasy Sports Net, Inc. will pay all expenses of registration of the
shares being sold by the Selling Shareholders, excluding fees and expenses of
counsel, if any, to the Selling Shareholders, any commissions, discounts or
concessions, and transfer or other taxes, which shall be borne by the Selling
Shareholders.
Item 25. Indemnification of Directors and Officers
Articles VII of Fantasy Sports Net, Inc.'s Articles of Incorporation
provides that Fantasy Sports Net, Inc. may, to the fullest extent permitted by
Section 721 through 726 of the Business Corporation Law of New York, indemnify
any and all directors and officers whom it shall have power to indemnify under
the said sections from and against any and all of the expenses, liabilities or
other matters referred to in or covered by such sections, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which the persons so indemnified may be entitled under any By-Law,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
by holding such office, and shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefits of the heirs, executors and
administrators of such a person.
A director of Fantasy Sports Net, Inc. shall not be personally liable to
Fantasy Sports Net, Inc. or its shareholders for damages for any breach of duty
in his or her capacity as a director, unless a judgment or other final
adjudication adverse to him or her
46
<PAGE>
establishes that (x) his or her acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, or (y) he or she
personally gained in fact a financial or other advantage to which he or she was
not legally entitled or (z) his or her acts violated Section 719 of the Business
Corporation Law.
Articles VII of Fantasy Sports Net, Inc.'s Articles of Incorporation
provides that a director or officer of Fantasy Sports Net, Inc. shall not, in
the absence of fraud, be disqualified from his or her office by dealing with or
contracting with the Company as vendor, purchaser or otherwise. In the absence
of fraud, no transaction, contract or act of Fantasy Sports Net, Inc., the Board
of Directors, the Executive Committee of the Board of Directors, or any other
duly constituted committee, shall be void, voidable or affected by reason of the
fact that any director or officer of Fantasy Sports Net, Inc., or any firm of
which any director or officer of Fantasy Sports Net, Inc. is a member, or any
corporation of which any director or officer of Fantasy Sports Net, Inc. is an
officer, director, or shareholder, is in any way interested in the transaction,
contract or act, if either: (i) the fact of such common directorship,
officership, or financial or other interest is disclosed or known to the Board
of Directors or the Executive Committee, and the Board of Directors or the
Executive Committee approves the transaction, contract or act by a vote
sufficient for such purposes without the vote of such interested director, if
any; provided that any such director may be counted in determining the presence
of a quorum at any such meeting of the Board of Directors or the Executive
Committee; or (ii) the fact of such common directorship, officership or
financial or other interest is disclosed or known to the shareholders entitled
to vote on the transaction, contract or act and the transaction, contract or act
is approved by vote of the shareholders entitled to vote thereon, whether or not
the Board of Directors or the Executive Committee has approved the transaction,
contract or act. Any such transaction, contract or act which is ratified by a
majority in interest of a quorum of the shareholders of Fantasy Sports Net, Inc.
having voting power at any annual or special meeting called for such purpose,
shall, if such common ownership or financial or other interest is disclosed in
the notice of the meeting, be valid and as binding as though approved or
ratified by every shareholder of Fantasy Sports Net, Inc., except as otherwise
provided by the laws of the State of New York.
Item 26. Recent Sales of Unregistered Securities
On May 6, 1999, Fantasy Sports Net, Inc. amended its Articles of
Incorporation to increase the authorized shares from 200 common shares, no par
value, to 50,000,000 common shares, $.0001 par value per share, and effected a
250,000 to 1 stock split for a total of 9,000,000 issued and outstanding.
47
<PAGE>
In May, 1999, Fantasy Sports Net, Inc. issued (i) 3,300,000 shares of
Common Stock to 14 "accredited investors" and (ii) 3,300,000 Warrants to
purchase 3,300,000 shares of Common Stock at an exercise price of $.50 per share
(the "Private Placement").
In issuing such securities, Fantasy Sports Net, Inc. relied on the
exemption provided by Rule 506 of Regulation D promulgated under the Securities
Act.
Item 27. Exhibits
Exhibit
Number Description of Exhibit
2.1 Form of Subscription Agreement between Fantasy Sports Net, Inc. and each of
Arcadia Mutual Fund, Inc., Berkeley Group, Inc., Windsor Group, Ltd., Austost
Anstalt Schaan, Balmore Funds S.A., Nesher, Inc., Talbiya B.
Investments Ltd., and Ellis Enterprises, Ltd.
2.2 Form of Subscription Agreement between Fantasy Sports Net, Inc., Libra
Finance S.A., Danbury Investments Ltd., Alaistair-Prescott Ltd., Hyett Capital
Ltd., Talbiya B. Investments Ltd., and Ellis Enterprises, Ltd.
2.3 Funds Escrow Agreement between Fantasy Sports Net, Inc., Arcadia Mutual
Fund, Inc., Berkeley Group, Inc., Windsor Group, Ltd., Austost Anstalt Schaan,
Balmore Funds S.A., Nesher, Inc., Talbiya B. Investments Ltd., and Ellis
Enterprises, Ltd.
2.4 Funds Escrow Agreement between Fantasy Sports Net, Inc., Libra Finance S.A.,
Danbury Investments Ltd., Alaistair-Prescott Ltd., Hyett Capital Ltd., Talbiya
B. Investments Ltd., and Ellis Enterprises, Ltd.
3.1 Certificate of Incorporation
3.2 Amended and Restated Certificate of Incorporation
3.3 Bylaws
4.1* Specimen Certificate of Fantasy Sports Net, Inc.'s Common Stock
4.2 Form of Warrant
4.3 1999 Employees and Consultants Stock Option Plan
5.1 Opinion of Grushko & Mittman as to the legality of the securities being
registered
48
<PAGE>
10.1 Employment Agreement between Fantasy Sports Net, Inc. and Darrell Lerner
effective as of May, 1999
10.2 Employment Agreement between Fantasy Sports Net, Inc. and Byron R. Lerner
effective as of May, 1999
10.3 Employment Agreement between Fantasy Sports Net, Inc. and James Tubbs
effective as of May, 1999
23.1 Consent of Liebman Goldberg & Drogin, LLP, Independent Certified Public
Accountants
23.2 Consent of Grushko & Mittman (included in Exhibit 5.1)
27.1 Financial Date Schedule
- ----------
* To be filed by amendment
Item 28. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective
49
<PAGE>
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
50
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this SB-2 Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on July 9, 1999.
FANTASY SPORTS NET, INC.
By: /s/ Darrell Lerner
--------------------------
Darrell Lerner
President and Director
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this SB-2
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
/s/ Darrell Lerner 7/9/99
- ------------------ ------- President and
DARRELL LERNER Date Director
/s/ Byron R. Lerner 7/9/99
- ------------------- ------
BYRON R. LERNER Date Vice-President
and Director
/s/ James Tubbs 7/9/99
- ------------------- ------
JAMES TUBBS Date Secretary-
Treasurer and
Director
51
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
2.1 Form of Subscription Agreement between Fantasy Sports Net, Inc. and each
of Arcadia Mutual Fund, Inc., Berkeley Group, Inc., Windsor Group, Ltd.,
Austost Anstalt Schaan, Balmore Funds S.A., Nesher, Inc., Talbiya B.
Investments Ltd., and Ellis Enterprises, Ltd.
2.2 Form of Subscription Agreement between Fantasy Sports Net, Inc., Libra
Finance S.A., Danbury Investments Ltd., Alaistair-Prescott Ltd., Hyett
Capital Ltd., Talbiya B. Investments Ltd., and Ellis Enterprises, Ltd.
2.3 Funds Escrow Agreement between Fantasy Sports Net, Inc., Arcadia Mutual
Fund, Inc., Berkeley Group, Inc., Windsor Group, Ltd., Austost Anstalt
Schaan, Balmore Funds S.A., Nesher, Inc., Talbiya B. Investments Ltd.,
and Ellis Enterprises, Ltd.
2.4 Funds Escrow Agreement between Fantasy Sports Net, Inc., Libra Finance
S.A., Danbury Investments Ltd., Alaistair-Prescott Ltd., Hyett Capital
Ltd., Talbiya B. Investments Ltd., and Ellis Enterprises, Ltd.
3.1 Certificate of Incorporation
3.2 Amended and Restated Certificate of Incorporation
3.3 Bylaws
4.1* Specimen Certificate of Fantasy Sports Net, Inc.'s Common Stock
4.2 Form of Warrant
4.3 1999 Employees and Consultants Stock Option Plan
5.1 Opinion of Grushko & Mittman as to the legality of the securities being
registered
10.1 Employment Agreement between Fantasy Sports Net, Inc. and Darrell Lerner
effective as of May, 1999
10.2 Employment Agreement between Fantasy Sports Net, Inc. and Byron R. Lerner
effective as of May, 1999
52
<PAGE>
10.3 Employment Agreement between Fantasy Sports Net, Inc. and James Tubbs
effective as of May, 1999
23.1 Consent of Liebman Goldberg & Drogin, LLP, Independent Certified Public
Accountants
23.2 Consent of Grushko & Mittman (included in Exhibit 5.1)
27.1 Financial Data Schedules
53
Exhibit 2.1
SUBSCRIPTION AGREEMENT
(Common Stock)
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Fantasy Sportsnet,
Inc., a New York corporation (the "Company") hereby agrees to issue and to sell
to the Subscriber, the number of shares of Common Stock, $.001 par value (the
"Company Shares") as set forth on the signature page hereof for the aggregate
consideration as set forth on the signature page hereof ("Purchase Price"). (The
Company Shares are sometimes referred to herein as the "Shares" or "Common
Stock" or "Securities). Upon acceptance of this Agreement by the Subscriber, the
Company shall issue and deliver to the Subscriber the Company Shares against
payment, by federal funds (U.S.) wire transfer of the Purchase Price.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished with and has
read the Company's Summarized Business Plan including the section "Risk Factors"
(hereinafter referred to as the "Reports"). In addition, the Subscriber has
received from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested, and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities (such information in writing is
collectively, the "Other Written Information").
(b) Information on Subscriber. The Subscriber is an "accredited investor",
as such term is defined in Regulation D promulgated by the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States privately-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable the Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment. The Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities. The Subscriber is
able to bear the risk of such investment for an indefinite period and to afford
a complete loss
<PAGE>
thereof. The Subscriber is not a United States citizen or resident. No offer to
purchase the Securities has been made to the Subscriber in the United States.
(c) Purchase of Company Shares. On the Closing Date, the Subscriber will
purchase the Company Shares for its own account and not with a view to any
distribution thereof.
(d) Compliance with Securities Act. The Subscriber understands and agrees
that the Securities have not been registered under the Securities Act of 1933,
as amended (the "1933 Act") by reason of their issuance in a transaction that
does not require registration under the 1933 Act, and that such Securities must
be held unless a subsequent disposition is registered under the 1933 Act or is
exempt from such registration.
(e) Company Shares Legend. The Company Shares shall bear the following
legend:
"THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SHARES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR AN
OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FANTASY SPORTSNET, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
(f) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber. At no time was the Subscriber presented with or
solicited by any leaflet, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or solicited or invited
to attend a promotional meeting otherwise than in connection and concurrently
with such communicated offer.
(g) Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date and Put Closing Date (as hereinafter defined), shall be true and
correct as of such Closing Date and Put Closing Date. The foregoing
representations and warranties shall survive the Closing Date and Put Closing
Date.
2. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
the requisite corporate power to own its properties and to carry on its business
as now being conducted. The Company is duly qualified as a foreign
2
<PAGE>
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or prospects or condition (financial or otherwise) of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital stock
of the Company has been duly authorized and validly issued and are fully paid
and non-assessable.
(c) Authority; Enforceability. This Agreement and each other agreement
entered into in connection herewith has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity; and the Company has full corporate power and authority necessary to
enter into this Agreement and such other agreements, and to perform its
obligations hereunder and all other agreements entered into by the Company
relating hereto.
(d) Additional Issuances. There are no outstanding agreements or preemptive
or similar rights affecting the Company's common stock or equity and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of common stock or equity of the Company or other
equity interest in any of the subsidiaries of the Company, except as described
in the Reports or Other Written Information.
(e) Consents. No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company,
or any of its affiliates, the NASD, NASDAQ or the Company's Shareholders is
required for execution of this Agreement, and all other agreements entered into
by the Company relating thereto, including, without limitation issuance and sale
of the Securities, and the performance of the Company's obligations hereunder,
which consent will have been obtained at or before Closing, if required.
(f) No Violation or Conflict. Assuming the representations and warranties
of the Subscriber in Paragraph 1 are true and correct and the Subscriber
complies with its obligations under this Agreement, neither the issuance and
sale of the Securities nor the performance of its obligations under this
Agreement and all other agreements entered into by the Company relating thereto
by the Company will:
(i) violate, conflict with, result in a breach of, or constitute a default
(or an event which with the giving of notice or the lapse of time or both would
be reasonably likely to
3
<PAGE>
constitute a default) under (A) the articles of incorporation, charter or bylaws
of the Company, or any of its affiliates, (B) to the Company's knowledge, any
decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company, or any of its affiliates of any court, governmental
agency or body, or arbitrator having jurisdiction over the Company, or any of
its affiliates or over the properties or assets of the Company, or any of its
affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company, or any
of its affiliates is a party, by which the Company, or any of its affiliates is
bound, or to which any of the properties of the Company, or any of its
affiliates is subject, or (D) the terms of any "lock-up" or similar provision of
any underwriting or similar agreement to which the Company, or any of its
affiliates is a party; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company, or any of
its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under the
1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on the date of
issuance and on the Closing Date, the Securities will be duly and validly
issued, fully paid and nonassessable;
(iii) will not have been issued or sold in violation of any preemptive or
other similar rights of the holders of any securities of the Company;
(iv) will not subject the holders thereof to personal liability by reason
of being such holders; and
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under this Agreement, and all
other agreements entered into by the Company relating hereto.
(i) Information Concerning Company. The Reports and Other Written
Information do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
4
<PAGE>
(j) Defaults. Neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or ByLaws. Neither the Company nor
any of its subsidiaries is (i) in default under or in violation of any other
material agreement or instrument to which it is a party or by which it or any of
its properties are bound or affected, which default or violation would have a
material adverse effect on the Company, (ii) in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) to its
knowledge in violation of any statute, rule or regulation of any governmental
authority material to its business.
(k) Use of Proceeds. The proceeds of the Subscriber funds to be released to
the Company will be used for working capital and for expenses of this offering
and as described in the Reports.
(l) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) in connection with the offer or sale of
the Securities.
(m) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects and, unless the Company otherwise notifies the
Subscriber prior to the Closing Date and Put Closing Date, shall be true and
correct in all material respects as of such Closing Date and Put Closing Date.
The foregoing representations and warranties shall survive the Closing Date and
Put Closing Date.
3. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Rule 506 of Regulation D promulgated thereunder.
4. Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legend set forth in Section 1(e) above
upon resale subject to an effective registration statement after the Securities
are registered under the Act.
5. No Regulatory Review. The Subscriber is aware that this Subscription
Agreement relates to a limited private offering and that no federal, state or
other agency has made any finding or determination as to the fairness of the
investment described in this Subscription Agreement nor made any recommendation
or endorsement of the investment.
5
<PAGE>
6. Legal Fees/Commissions. The Company shall pay to counsel to the
Subscriber its fee of $15,000 for services rendered to the Subscriber in
reviewing this Agreement and other subscription agreements for the aggregate
subscription amounts of up to $757,800 and acting as escrow agent.
7.1. Covenants of the Company. The Company covenants and agrees with the
Subscriber as follows:
(a) The Company shall promptly secure the listing of the Company Shares
upon each national securities exchange, or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain such listing so long as any other shares of common
stock shall be so listed.
(b) The Company shall take all necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to the Subscriber and promptly provide copies
thereof to Subscriber.
(c) The Company undertakes to use the proceeds of the Subscriber's funds
for working capital and expenses of this offering and as further described in
the Reports.
8. Covenants of the Company and Subscriber Regarding Idemnifications.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend
Subscriber against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon Subscriber which results, arises out of or is based upon (i) any
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or Reports or other
Written Information; or (ii) any breach or default in performance by Company of
any covenant or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and defend the
Company at all times against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon the Company which results, arises out of or is based upon (a) any
misrepresentation by Subscriber in this Agreement or in any Exhibits or
Schedules attached hereto; or (b) any breach or default in performance by
Subscriber of any covenant or undertaking to be performed by Subscriber
hereunder, or any other agreement entered into by the Company and Subscribers
relating hereto.
6
<PAGE>
9.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 180 days after the Closing
Date, but not later than three years after the Closing Date, the Company, upon a
written request therefor from any record holder or holders of more than 50% of
the aggregate of the Company's Shares issued at or about the same time in the
Company's offering of 6,000,000 Company Shares (the Securities and securities
issued or issuable by virtue of ownership or exercise of the Securities, and the
Put Securities defined in Section 10.1(b)(i) hereof, being, the "Registrable
Securities"), shall prepare and file with the SEC a registration statement under
the Act covering the Registrable Securities which are the subject of such
request, unless such Registrable Securities are the subject of a pending or
effective registration statement. In addition, upon the receipt of such request,
the Company shall promptly give written notice to all other record holders of
the Registrable Securities that such registration statement is to be filed and
shall include in such registration statement Registrable Securities for which it
has received written requests within 10 days after the Company gives such
written notice. Such other requesting record holders shall be deemed to have
exercised their demand registration right under this Section 9.1(i). As a
condition precedent to the inclusion of Registrable Securities, the holder
thereof shall provide the Company with such information as the Company
reasonably requests. The obligation of the Company under this Section 9.1(i)
shall be limited to one registration statement.
(ii) If the Company at any time proposes to register any of its securities
under the Act for sale to the public, whether for its own account or for the
account of other security holders or both, except with respect to registration
statements on Forms S-4, S-8 or another form not available for registering the
Registrable Securities for sale to the public, provided the Registrable
Securities are not otherwise registered for resale by the Subscriber or Holder
pursuant to an effective registration statement, each such time it will give at
least 30 days' prior written notice to the record holder of the Registrable
Securities of its intention so to do. Upon the written request of the holder,
received by the Company within 30 days after the giving of any such notice by
the Company, to register any of the Registrable Securities, the Company will
cause such Registrable Securities as to which registration shall have been so
requested to be included with the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent required to
permit the sale or other disposition of the Registrable Securities so registered
by the holder of such Registrable Securities (the "Seller"). In the event that
any registration pursuant to this Section 9.1(ii) shall be, in whole or in part,
an underwritten public offering of common stock of the Company, the number of
shares of Registrable Securities to be included in such an underwriting may be
reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be
7
<PAGE>
of the opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein; provided, however, that the
Company shall notify the Seller in writing of any such reduction.
Notwithstanding the forgoing provisions, the Company may withdraw any
registration statement referred to in this Section 9.1 (ii) without thereby
incurring any liability to the Seller. (iii) If, at the time any written request
for registration is received by the Company pursuant to Section 9.1 (i), the
Company has determined to proceed with the actual preparation and filing of a
registration statement under the 1933 Act in connection with the proposed offer
and sale for cash of any of its securities for the Company's own account, such
written request shall be deemed to have been given pursuant to Section 9.1 (ii)
rather than Section 9.1 (i), and the rights of the holders of Registrable
Securities covered by such written request shall be governed by Section 9.1 (ii)
except that the Company or underwriter, if any, may not withdraw such
registration or limit the amount of Registrable Securities included in such
registration.
(iv) The Company shall file with the Commission within 75 days of the
Closing Date (the "Filing Date"), and use its reasonable commercial efforts to
cause to be declared effective a Form SB-2 registration statement (or such other
form that it is eligible to use) within two hundred and ten (210) days of the
Closing Date in order to register the Registrable Securities for resale and
distribution under the Act. The registration statement described in this
paragraph must be declared effective by the Commission within 210 days of the
Closing Date (as defined herein) ("Effective Date"). The Company will register
not less than one (1) share of common stock in the aforedescribed registration
statement for each Company Share subscribed for and one share of common stock
for each common share issuable upon exercise of the Warrants. The Registrable
Securities shall be reserved and set aside exclusively for the benefit of the
Subscriber and not issued, employed or reserved for anyone other than the
Subscriber. Except as disclosed to the Subscriber in writing, no equity of the
Company other than the Registrable Securities and Put Securities may be included
for registration in such registration statement. Such registration statement
will be promptly amended or additional registration statements will be promptly
filed by the Company as necessary to register additional Company Shares to allow
the public resale of all Common Stock included in and issuable by virtue of the
Registrable Securities.
9.2. Registration Procedures. If and whenever the Company is required by
the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and
8
<PAGE>
remain effective for the period of the distribution contemplated thereby
(determined as herein provided), and promptly provide to the holders of
Registrable Securities copies of all filings;
(b) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for the period
specified in paragraph (a) above and comply with the provisions of the Act with
respect to the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Seller's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the Seller and in the case of an underwritten
public offering, the managing underwriter shall reasonably request, provided,
however, that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;
(e) list the Registrable Securities covered by such registration statement
with any securities exchange on which the Common Stock of the Company is then
listed;
(f) immediately notify the Seller and each underwriter under such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all publicly available, non- confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller,
9
<PAGE>
underwriter, attorney, accountant or agent in connection with such registration
statement.
9.3. Provision of Documents.
(a) At the request of the Seller, provided a demand for registration has
been made pursuant to Section 9.1(i) or a request for registration has been made
pursuant to Section 9.1(ii), the Registrable Securities will be included in a
registration statement filed pursuant to this Section 9. In the event of a firm
commitment underwritten public offering in which the Registrable Securities are
so included, the lockup, if any, requested by the managing underwriter may not
exceed ninety (90) days after the effective date thereof.
(b) In connection with each registration hereunder, the Seller will furnish
to the Company in writing such information with respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws. In connection with
each registration pursuant to Section 9.1(i) or 9.1(ii) covering an underwritten
public offering, the Company and the Seller agree to enter into a written
agreement with the managing underwriter in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature.
9.4. Non-Registration Events. The Company and the Subscriber agree that the
Seller will suffer damages if any registration statement required under Section
9.1(i) or 9.1(ii) above is not filed within 60 days after request by the Holder
and not declared effective by the Commission within 120 days after such request
[or the Filing Date and Effective Date, respectively, in reference to the
Registration Statement on Form SB-2 or such other form described in Section
9.1(iv)], and maintained in the manner and within the time periods contemplated
by Section 9 hereof, and it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, if (i) the Registration Statement
described in Sections 9.1(i) or 9.1(ii) is not filed within 60 days of such
request, or is not declared effective by the Commission on or prior to the date
that is 120 days after such request, or (ii) the registration statement on Form
SB-2 or such other form described in Section 9.1(iv) is not filed on or before
the Filing Date or not declared effective on or before the sooner of the
Effective Date, or within ten days of receipt by the Company of a communication
from the Commission that the registration statement described in Section 9.1(iv)
will not be reviewed, or (iii) any registration statement described in Sections
9.1(i), 9.1(ii) or 9.1(iv) is filed and declared effective but shall thereafter
cease to be effective (without being succeeded immediately by an additional
registration statement filed and declared effective) for a period of time which
shall exceed 30 days in the aggregate per year but not more than 20 consecutive
calendar days (defined as a
10
<PAGE>
period of 365 days commencing on the date the Registration Statement is declared
effective) (each such event referred to in clauses (i), (ii) and (iii) of this
Section 9.4 is referred to herein as a "Non-Registration Event"), then, for so
long as such Non-Registration Event shall continue, the Company shall pay in
cash as Liquidated Damages to each holder of any Registrable Securities an
amount equal to two (2%) percent for each thirty (30) days or part thereof, of
the Purchase Price of the Company Shares as set forth on the signature page
hereto, then owned of record by such holder as of the occurrence of such
Non-Registration Event. Payments to be made pursuant to this Section 9.4 shall
be due and payable immediately upon demand in immediately available funds.
9.5. Expenses. All expenses incurred by the Company in complying with
Section 9, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, fee of one counsel, if any, to represent all the
Sellers, and costs of insurance are called "Registration Expenses". All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any special
counsel to the Seller, are called "Selling Expenses". The Seller shall pay the
fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection with the
registration statement under Section 9. All Selling Expenses in connection with
each registration statement under Section 9 shall be borne by the Seller and may
be apportioned among the Sellers in proportion to the number of shares sold by
the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
9.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under the
Act pursuant to Section 9, the Company will indemnify and hold harmless the
Seller, each officer of the Seller, each director of the Seller, each
underwriter of such Registrable Securities thereunder and each other person, if
any, who controls such Seller or underwriter within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Seller, or such underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities was registered under the Act
pursuant to Section 9, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or
11
<PAGE>
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such Seller, the underwriter or any such controlling person in
writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable Securities
under the Act pursuant to Section 9, the Seller will indemnify and hold harmless
the Company, and each person, if any, who controls the Company within the
meaning of the Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the Act
pursuant to Section 9, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Seller, as such, furnished in
writing to the Company by such Seller specifically for use in such registration
statement or prospectus, and provided, further, however, that the liability of
the Seller hereunder shall be limited to the proportion of any such loss, claim,
damage, liability or expense which is equal to the proportion that the public
offering price of the Registrable Securities sold by the Seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the gross proceeds
12
<PAGE>
received by the Seller from the sale of Registrable Securities covered by such
registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 9.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 9.6(c) if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the event of
joint liability under the Act in any case in which either (i) the Seller, or any
controlling person of the Seller, makes a claim for indemnification pursuant to
this Section 9.6 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 9.6 provides for indemnification in such case, or (ii) contribution
under the Act may be required on the part of the Seller or controlling person of
the Seller in circumstances for which indemnification is provided under this
Section 9.6; then, and in each such case, the Company and the Seller will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after
13
<PAGE>
contribution from others) in such proportion so that the Seller is responsible
only for the portion represented by the percentage that the public offering
price of its securities offered by the registration statement bears to the
public offering price of all securities offered by such registration statement,
provided, however, that, in any such case, (A) the Seller will not be required
to contribute any amount in excess of the public offering price of all such
securities offered by it pursuant to such registration statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 10(f) of the Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
10.1. Obligation To Purchase.
(a) The Subscriber agrees to purchase from the Company up to the additional
shares of Common Stock ("Put Stock") described on the signature page hereof for
up to the aggregate consideration designated on the signature page hereof (the
"Put"). The Put Stock is sometimes referred to as the "Put Securities".
(b) The agreement to purchase the Put Stock is contingent on the following:
(i) The timely filing of the registration statement described in Section
9.1(iv) hereof relating to all the Registrable Securities.
(ii) No material adverse change in the Company's business or business
prospects shall have occurred after the Closing Date. Material adverse change is
defined as any effect on the business, operations, properties, prospects, or
financial condition of the Company that is material and adverse to the Company
and its subsidiaries and affiliates, taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement, or any other agreement entered into or to be entered into in
connection herewith, in any material respect.
(iii) The non-occurrence of all of the following:
(1) The Company breaches any material covenant, term or condition of this
Subscription Agreement and such breach continues for a period of seven (7) days
after written notice to the Company from the Subscriber.
(2) Any material representation or warranty of the Company made in this
Subscription Agreement, or in any agreement, statement or certificate given in
writing pursuant thereto shall be false or misleading.
14
<PAGE>
(3) The Company shall make an assignment of a substantial part of its
property or business for the benefit of creditors, or apply for or consent to
the appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed.
(4) Any money judgment, confession of judgment, writ or similar process
shall be entered against the Company or its property or other assets for more
than $50,000, and is not vacated, satisfied, bonded or stayed within 45 days.
(5) Bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings or relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company.
(iv) The execution and delivery to the Subscriber of a certificate signed
by its chief executive officer representing the truth and accuracy of all the
Company's representations and warranties contained in this Subscription
Agreement as of the Put Date, and the Put Closing Date and confirming the
undertakings contained herein, and representing the satisfaction of all
contingencies and conditions required for the exercise of the Put.
(v) The execution by the Company and delivery to the Subscriber of all
documents reasonably necessary to memorialize the rights and obligations of each
of the parties in relation to the Put.
10.2. Exercise of Put.
(a) The Company's right to exercise the Put expires two weeks after the
filing of the registration statement described in Section 9.1(iv) of this
Subscription Agreement relating to all the Registrable Securities. In the event
the Company does not exercise the Put in connection with any or all of the Put
Securities, the Subscriber may exercise the Put on the Company's behalf in
connection with the Put Securities described on the signature page hereof, by
written notice to the Company within two weeks after the end of the Put exercise
period. Such notice will be deemed a Put Notice (as defined hereafter) and the
Company will comply with all its obligations described herein.
(b) The Put may be exercised by the Company by the giving to the Subscriber
of a written notice of exercise ("Put Notice") during the exercise period of the
Put in relation to all the subject Put Securities. The date a Put Notice is
given is a Put Date. The Put Notice must be accompanied by the (i) officer's
certificate described in Section 10.1(b) above; and (ii) a copy of the filed
registration statement.
15
<PAGE>
(c) Unless otherwise agreed to by the Subscribers, Put Notices must be
given to all Subscribers in proportion to the amounts agreed to be purchased by
all Subscribers undertaking to purchase Put Shares in the $7,800 and $750,000
offerings to which this and other Subscription Agreements relate. The aggregate
amount of all such Put Notices may not exceed $757,800.
(d) Payment by the Subscriber in relation to a Put Notice relating to the
Put must be made within seven (7) days of receipt of a Put Notice relating to
the Put. Payment will be made against delivery to the Subscriber or an escrow
agent to be agreed upon by the Company and Subscriber, of the Put Securities and
items set forth in Section 10.2(b) above.
11. (a) Right of First Refusal. Until 240 days after the effective date of
the Registration Statement described in Section 9.1(iv) hereof, the Subscriber
shall be given not less than ten (10) business days prior written notice of any
proposed sale by the Company of its common stock or other securities or debt
obligations. The Subscriber shall have the right during the ten (10) business
days following the notice to agree to purchase an amount of Company Shares in
the same proportion as being purchased in the aggregate offering to which this
Subscription Agreement relates (i.e. $750,000 in the aggregate), of those
securities proposed to be issued and sold, in accordance with the terms and
conditions set forth in the notice of sale. In the event such terms and
conditions are modified during the notice period, the Subscriber shall be given
prompt notice of such modification and shall have the right during the original
notice period or for a period of ten (10) business days following the notice of
modification, whichever is longer, to exercise such right. In the event the
right of first refusal described in this Section is exercised by the Subscriber
and the Company thereby receives net proceeds from such exercise, then
commissions and fees will be paid by the Company to the Placement Agents in the
same amounts as specified in the notice of sale.
(b) Offering Restrictions. Except with respect to securities otherwise
disclosed in the Reports or Other Written Information, the Company agrees not to
issue any equity, convertible debt or other securities prior to 120 days after
the Effective Date.
12. Miscellaneous.
(a) Notices. All notices or other communications given or made hereunder
shall be in writing and shall be personally delivered or deemed delivered the
first business day after being telecopied (provided that a copy is delivered by
first class mail) to the party to receive the same at its address set forth
below or to such other address as either party shall hereafter give to the other
by notice duly made under this Section: (i) if to the Company, to Fantasy
Sportsnet, Inc., 142 Mineola Avenue, Suite 2-d,
16
<PAGE>
Roslyn Heights, New York 11577, telecopier number: (212) 643-1998, and (ii) if
to the Subscriber, to the name, address and telecopy number set forth on the
signature page hereto. Any notice that may be given pursuant to this Agreement,
or any document delivered in connection with the foregoing may be given by the
Subscriber on the first business day after the observance dates in the United
States of America by Orthodox Jewry of Rosh Hashanah, Yom Kippur, the first two
days of the Feast of Tabernacles, Shemini Atzeret Simchat Torah, the first two
and final two days of Passover and Pentecost, with such notice to be deemed
given and effective, at the election of the Subscriber on a holiday date that
precedes such notice. Any notice received by the Subscriber on any of the
aforedescribed holidays may be deemed by the Subscriber to be received and
effective as if such notice had been received on the first business day after
the holiday.
(b) Closing. The consummation of the transactions contemplated herein shall
take place at the offices of Grushko & Mittman, 277 Broadway, Suite 801, New
York, New York 10007, upon the satisfaction of all conditions to Closing set
forth in this Agreement. The closing date shall be the date that subscriber
funds representing the net amount due the Company from the Purchase Price are
transmitted by wire transfer to the Company (the "Closing Date"). The closing
date for the Put shall be the date on which Subscriber funds representing the
net amount due the Company from the Put Purchase Price are transmitted to or on
behalf of the Company ("Put Closing Date").
(c) Entire Agreement; Assignment. This Agreement represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and may be amended only by a writing executed by both parties. No right or
obligation of either party shall be assigned by that party without prior notice
to and the written consent of the other party.
(d) Conflict. The parties hereto have been advised of a possible conflict
of interest arising from the past and future representation by Grushko & Mittman
of the Subscriber in other transactions and the current representation by
Grushko & Mittman of the Company in connection with this Subscription Agreement,
related matters and the registration statement described in Section 9.1(iv)
hereof. The Company and Subscriber acknowledge that they have been advised by
Grushko & Mittman to investigate and consider the potential impact of this
conflict prior to executing this Subscription Agreement and in connection with
the registration statement described in Section 9.1(iv) of this Subscription
Agreement. The parties hereto consent to the representation by Grushko & Mittman
of the Company in this and other matters and the representation by Grushko &
Mittman of the Subscribers in other matters, and waive any conflict.
17
<PAGE>
(e) Execution. This Agreement may be executed by facsimile transmission,
and in counterparts, each of which will be deemed an original.
(f) Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this Agreement
and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any other agreement
delivered in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.
(g) Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 13(e) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(h) Automatic Termination. This Agreement shall automatically terminate
without any further action of either party hereto if the Closing shall not have
occurred by the tenth (10th) business day following the date this Agreement is
accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
18
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $166,666.00
Common Shares Purchased: 666,664 (at $.25 per share)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $166,666.00
Put Stock: 666,664 Common Shares (at $.25 per share)
ARCADIA MUTUAL FUND, INC. - Subscriber
55 Frederick Street
Box CB-13029
Nassau, Bahamas
Fax: 242-356-2053
By:
-------------------------------
19
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $166,667.00
Common Shares Purchased: 666,668 (at $.25 per share)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $166,667.00
Put Stock: 666,668 Common Shares (at $.25 per share)
BERKELEY GROUP, LTD. - Subscriber
P.O. Box N-1836
Suite A096
Nassau, Bahamas
Fax: 415-449-3490
By:
------------------------------
Donna Wood
20
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $166,667.00
Common Shares Purchased: 666,668 (at $.25 per share)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $166,667.00
Put Stock: 666,668 Common Shares (at $.25 per share)
WINDSOR GROUP, LTD. - Subscriber
2159 des Laurentides Blvd., Suite 199
Laval, Quebec H7M 4M2, Canada
Fax: 604-608-2952
By:
-----------------------------------
Pacco Sinclair
21
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $75,000.00
Common Shares Purchased: 300,000 (at $.25 per share)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $75,000.00
Put Stock: 300,000 Common Shares (at $.25 per share)
AUSTOST ANSTALT SCHAAN - Subscriber
7440 Fuerstentum
Lichenstein Landstrasse 163
Fax: 011-431-534532895
By:
-------------------------------
22
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $75,000.00
Common Shares Purchased: 300,000 (at $.25 per share)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $75,000.00
Put Stock: 300,000 Common Shares (at $.25 per share)
BALMORE FUNDS S.A. - Subscriber
P.O. Box 4603
Zurich, Switzerland
Fax: 011-411-201-6262
By:
-----------------------------
23
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $50,000.00
Common Shares Purchased: 200,000 (at $.25 per share)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $50,000.00
Put Stock: 200,000 Common Shares (at $.25 per share)
NESHER, INC. - Subscriber
c/o Ragnall House
18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Fax: 011-972-36120639
By:
-------------------------
24
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $25,000.00
Common Shares Purchased: 100,000 (at $.25 per share)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $25,000.00
Put Stock: 100,000 Common Shares (at $.25 per share)
TALBIYA B. INVESTMENTS LTD. - Subscriber
c/o Ragnall House
18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Fax: 011-972-36120639
By:
---------------------------
25
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $25,000.00
Common Shares Purchased: 100,000 (at $.25 per share)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $25,000.00
Put Stock: 100,000 Common Shares (at $.25 per share)
ELLIS ENTERPRISES, LTD. - Subscriber
42A Waterloo Road
London, NW2 7UF, England
Fax: 011-441-814506694
By:
----------------------------
26
Exhibit 2.2
SUBSCRIPTION AGREEMENT
(Common Stock and Warrants)
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Fantasy Sportsnet,
Inc., a New York corporation (the "Company") hereby agrees to issue and to sell
to the Subscriber, the number of shares of Common Stock, $.001 par value (the
"Company Shares") and Common Stock Purchase Warrants ("Warrants") as set forth
on the signature page hereof for the aggregate consideration as set forth on the
signature page hereof ("Purchase Price"). (The Company Shares are sometimes
referred to herein as the "Shares" or "Common Stock"). The Company Shares,
Warrants, and the Common Stock issuable upon exercise of the Warrants are
collectively referred to herein as, the "Securities"). Upon acceptance of this
Agreement by the Subscriber, the Company shall issue and deliver to the
Subscriber the Company Shares and Warrants against payment, by federal funds
(U.S.) wire transfer of the Purchase Price.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished with and has
read the Company's Summarized Business Plan including the section "Risk Factors"
(hereinafter referred to as the "Reports"). In addition, the Subscriber has
received from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested, and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities (such information in writing is
collectively, the "Other Written Information").
(b) Information on Subscriber. The Subscriber is an "accredited investor",
as such term is defined in Regulation D promulgated by the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States privately-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable the Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase,
<PAGE>
which represents a speculative investment. The Subscriber has the authority and
is duly and legally qualified to purchase and own the Securities. The Subscriber
is able to bear the risk of such investment for an indefinite period and to
afford a complete loss thereof. The Subscriber is not a United States citizen or
resident. No offer to purchase the Securities has been made to the Subscriber in
the United States.
(c) Purchase of Company Shares. On the Closing Date, the Subscriber will
purchase the Company Shares and Warrants for its own account and not with a view
to any distribution thereof.
(d) Compliance with Securities Act. The Subscriber understands and agrees
that the Securities have not been registered under the Securities Act of 1933,
as amended (the "1933 Act") by reason of their issuance in a transaction that
does not require registration under the 1933 Act, and that such Securities must
be held unless a subsequent disposition is registered under the 1933 Act or is
exempt from such registration.
(e) Company Shares Legend. The Company Shares, and the shares of Common
Stock issuable upon the exercise of the Warrants shall bear the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO FANTASY SPORTSNET, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(f) Warrants Legend. The Warrants shall bear the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO FANTASY SPORTSNET, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
2
<PAGE>
(g) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber. At no time was the Subscriber presented with or
solicited by any leaflet, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or solicited or invited
to attend a promotional meeting otherwise than in connection and concurrently
with such communicated offer.
(h) Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date and Put Closing Date (as hereinafter defined), shall be true and
correct as of such Closing Date and Put Closing Date. The foregoing
representations and warranties shall survive the Closing Date and Put Closing
Date.
2. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
the requisite corporate power to own its properties and to carry on its business
as now being conducted. The Company is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction where the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to so qualify
would not have a material adverse effect on the business, operations or
prospects or condition (financial or otherwise) of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital stock
of the Company has been duly authorized and validly issued and are fully paid
and non-assessable.
(c) Authority; Enforceability. This Agreement and each other agreement
entered into in connection herewith has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity; and the Company has full corporate power and authority necessary to
enter into this Agreement and such other agreements, and to perform its
obligations hereunder and all other agreements entered into by the Company
relating hereto.
(d) Additional Issuances. There are no outstanding agreements or preemptive
or similar rights affecting the Company's common stock or equity and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or
3
<PAGE>
issuance of any shares of common stock or equity of the Company or other equity
interest in any of the subsidiaries of the Company, except as described in the
Reports or Other Written Information.
(e) Consents. No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company,
or any of its affiliates, the NASD, NASDAQ or the Company's Shareholders is
required for execution of this Agreement, and all other agreements entered into
by the Company relating thereto, including, without limitation issuance and sale
of the Securities, and the performance of the Company's obligations hereunder,
which consent will have been obtained at or before Closing, if required.
(f) No Violation or Conflict. Assuming the representations and warranties
of the Subscriber in Paragraph 1 are true and correct and the Subscriber
complies with its obligations under this Agreement, neither the issuance and
sale of the Securities nor the performance of its obligations under this
Agreement and all other agreements entered into by the Company relating thereto
by the Company will:
(i) violate, conflict with, result in a breach of, or constitute a default
(or an event which with the giving of notice or the lapse of time or both would
be reasonably likely to constitute a default) under (A) the articles of
incorporation, charter or bylaws of the Company, or any of its affiliates, (B)
to the Company's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company, or any of its affiliates
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its affiliates or over the properties or assets of
the Company, or any of its affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock option or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company, or any of its affiliates is a party, by which
the Company, or any of its affiliates is bound, or to which any of the
properties of the Company, or any of its affiliates is subject, or (D) the terms
of any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company, or any of its affiliates is a party; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company, or any of
its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under the
1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on the date of
issuance and on the Closing Date, the
4
<PAGE>
Securities (not including the common stock issuable upon exercise of the
Warrants) will be duly and validly issued, fully paid and nonassessable;
(iii) will not have been issued or sold in violation of any preemptive or
other similar rights of the holders of any securities of the Company;
(iv) will not subject the holders thereof to personal liability by reason
of being such holders; and
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under this Agreement, and all
other agreements entered into by the Company relating hereto.
(i) Information Concerning Company. The Reports and Other Written
Information do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(j) Defaults. Neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or ByLaws. Neither the Company nor
any of its subsidiaries is (i) in default under or in violation of any other
material agreement or instrument to which it is a party or by which it or any of
its properties are bound or affected, which default or violation would have a
material adverse effect on the Company, (ii) in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) to its
knowledge in violation of any statute, rule or regulation of any governmental
authority material to its business.
(k) Use of Proceeds. The proceeds of the Subscriber funds to be released to
the Company will be used for working capital and for expenses of this offering
and as described in the Reports.
(l) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) in connection with the offer or sale of
the Securities.
5
<PAGE>
(m) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects and, unless the Company otherwise notifies the
Subscriber prior to the Closing Date and Put Closing Date, shall be true and
correct in all material respects as of such Closing Date and Put Closing Date.
The foregoing representations and warranties shall survive the Closing Date and
Put Closing Date.
3. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Rule 506 of Regulation D promulgated thereunder.
4. Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legend set forth in Section 1(e) above
upon resale subject to an effective registration statement after the Securities
are registered under the Act.
5. No Regulatory Review. The Subscriber is aware that this Subscription
Agreement relates to a limited private offering and that no federal, state or
other agency has made any finding or determination as to the fairness of the
investment described in this Subscription Agreement nor made any recommendation
or endorsement of the investment.
6. Legal Fees/Commissions. The Company shall pay to counsel to the
Subscriber its fee of $15,000 for services rendered to the Subscriber in
reviewing this Agreement and other subscription agreements for the aggregate
subscription amounts of up to $757,800 and acting as escrow agent.
7.1. Covenants of the Company. The Company covenants and agrees with the
Subscriber as follows:
(a) The Company shall promptly secure the listing of the Company Shares
upon each national securities exchange, or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain such listing so long as any other shares of common
stock shall be so listed.
(b) The Company shall take all necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to the Subscriber and promptly provide copies
thereof to Subscriber.
(c) The Company undertakes to use the proceeds of the Subscriber's funds
for working capital and expenses of this offering and as further described in
the Reports.
6
<PAGE>
8. Covenants of the Company and Subscriber Regarding
Idemnifications.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend
Subscriber against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon Subscriber which results, arises out of or is based upon (i) any
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or Reports or other
Written Information; or (ii) any breach or default in performance by Company of
any covenant or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and defend the
Company at all times against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon the Company which results, arises out of or is based upon (a) any
misrepresentation by Subscriber in this Agreement or in any Exhibits or
Schedules attached hereto; or (b) any breach or default in performance by
Subscriber of any covenant or undertaking to be performed by Subscriber
hereunder, or any other agreement entered into by the Company and Subscribers
relating hereto.
9.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 180 days after the Closing
Date, but not later than three years after the Closing Date, the Company, upon a
written request therefor from any record holder or holders of more than 50% of
the aggregate of the Company's Shares or holders of 50% of the Warrants issued
at or about the same time in the Company's offering of 300,000 Company Shares
and 3,300,000 Warrants (the Securities and securities issued or issuable by
virtue of ownership or exercise of the Securities, and the Put Securities
defined in Section 10.1(b)(i) hereof, being, the "Registrable Securities"),
shall prepare and file with the SEC a registration statement under the Act
covering the Registrable Securities which are the subject of such request,
unless such Registrable Securities are the subject of a pending or effective
registration statement. In addition, upon the receipt of such request, the
Company shall promptly give written notice to all other record holders of the
Registrable Securities that such registration statement is to be filed and shall
include in such registration statement Registrable Securities for which it has
received written requests within 10 days after the Company gives such written
notice. Such other requesting record holders shall be deemed to have exercised
their demand registration right under this Section 9.1(i). As a condition
precedent to the inclusion of Registrable Securities, the holder thereof shall
provide the Company with such information as the Company reasonably requests.
7
<PAGE>
The obligation of the Company under this Section 9.1(i) shall be limited to one
registration statement.
(ii) If the Company at any time proposes to register any of its securities
under the Act for sale to the public, whether for its own account or for the
account of other security holders or both, except with respect to registration
statements on Forms S-4, S-8 or another form not available for registering the
Registrable Securities for sale to the public, provided the Registrable
Securities are not otherwise registered for resale by the Subscriber or Holder
pursuant to an effective registration statement, each such time it will give at
least 30 days' prior written notice to the record holder of the Registrable
Securities of its intention so to do. Upon the written request of the holder,
received by the Company within 30 days after the giving of any such notice by
the Company, to register any of the Registrable Securities, the Company will
cause such Registrable Securities as to which registration shall have been so
requested to be included with the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent required to
permit the sale or other disposition of the Registrable Securities so registered
by the holder of such Registrable Securities (the "Seller"). In the event that
any registration pursuant to this Section 9.1(ii) shall be, in whole or in part,
an underwritten public offering of common stock of the Company, the number of
shares of Registrable Securities to be included in such an underwriting may be
reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the forgoing provisions, the Company may
withdraw any registration statement referred to in this Section 9.1(ii) without
thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration is received by
the Company pursuant to Section 9.1(i), the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
1933 Act in connection with the proposed offer and sale for cash of any of its
securities for the Company's own account, such written request shall be deemed
to have been given pursuant to Section 9.1(ii) rather than Section 9.1(i), and
the rights of the holders of Registrable Securities covered by such written
request shall be governed by Section 9.1(ii) except that the Company or
underwriter, if any, may not withdraw such registration or limit the amount of
Registrable Securities included in such registration.
(iv) The Company shall file with the Commission within 75 days of the
Closing Date (the "Filing Date"), and use its reasonable commercial efforts to
cause to be declared effective a Form SB-2 registration statement (or such other
form that it is eligible to use) within two hundred and ten (210) days of the
8
<PAGE>
Closing Date in order to register the Registrable Securities for resale and
distribution under the Act. The registration statement described in this
paragraph must be declared effective by the Commission within 210 days of the
Closing Date (as defined herein) ("Effective Date"). The Company will register
not less than one (1) share of common stock in the aforedescribed registration
statement for each Company Share subscribed for and one share of common stock
for each common share issuable upon exercise of the Warrants. The Registrable
Securities shall be reserved and set aside exclusively for the benefit of the
Subscriber and not issued, employed or reserved for anyone other than the
Subscriber. Except as disclosed to the Subscriber in writing, no equity of the
Company other than the Registrable Securities and Put Securities may be included
for registration in such registration statement. Such registration statement
will be promptly amended or additional registration statements will be promptly
filed by the Company as necessary to register additional Company Shares to allow
the public resale of all Common Stock included in and issuable by virtue of the
Registrable Securities.
9.2. Registration Procedures. If and whenever the Company is required by
the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as herein provided), and promptly provide to
the holders of Registrable Securities copies of all filings;
(b) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for the period
specified in paragraph (a) above and comply with the provisions of the Act with
respect to the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Seller's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the Seller and in the case of an underwritten
public offering, the managing underwriter shall reasonably request,
9
<PAGE>
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration statement
with any securities exchange on which the Common Stock of the Company is then
listed;
(f) immediately notify the Seller and each underwriter under such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all publicly available, non- confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
9.3. Provision of Documents.
(a) At the request of the Seller, provided a demand for registration has
been made pursuant to Section 9.1(i) or a request for registration has been made
pursuant to Section 9.1(ii), the Registrable Securities will be included in a
registration statement filed pursuant to this Section 9. In the event of a firm
commitment underwritten public offering in which the Registrable Securities are
so included, the lockup, if any, requested by the managing underwriter may not
exceed ninety (90) days after the effective date thereof.
(b) In connection with each registration hereunder, the Seller will furnish
to the Company in writing such information with respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws. In connection with
each registration pursuant to Section 9.1(i) or 9.1(ii) covering an underwritten
public offering, the Company and the Seller agree to enter into a written
agreement with the managing underwriter in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature.
10
<PAGE>
9.4. Non-Registration Events. The Company and the Subscriber agree that the
Seller will suffer damages if any registration statement required under Section
9.1(i) or 9.1(ii) above is not filed within 60 days after request by the Holder
and not declared effective by the Commission within 120 days after such request
[or the Filing Date and Effective Date, respectively, in reference to the
Registration Statement on Form SB-2 or such other form described in Section
9.1(iv)], and maintained in the manner and within the time periods contemplated
by Section 9 hereof, and it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, if (i) the Registration Statement
described in Sections 9.1(i) or 9.1(ii) is not filed within 60 days of such
request, or is not declared effective by the Commission on or prior to the date
that is 120 days after such request, or (ii) the registration statement on Form
SB-2 or such other form described in Section 9.1(iv) is not filed on or before
the Filing Date or not declared effective on or before the sooner of the
Effective Date, or within ten days of receipt by the Company of a communication
from the Commission that the registration statement described in Section 9.1(iv)
will not be reviewed, or (iii) any registration statement described in Sections
9.1(i), 9.1(ii) or 9.1(iv) is filed and declared effective but shall thereafter
cease to be effective (without being succeeded immediately by an additional
registration statement filed and declared effective) for a period of time which
shall exceed 30 days in the aggregate per year but not more than 20 consecutive
calendar days (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) (each such event referred to in
clauses (i), (ii) and (iii) of this Section 9.4 is referred to herein as a
"Non-Registration Event"), then, for so long as such Non-Registration Event
shall continue, the Company shall pay in cash as Liquidated Damages to each
holder of any Registrable Securities an amount equal to two (2%) percent for
each thirty (30) days or part thereof, of the Purchase Price of the Company
Shares and aggregate exercise prices of the Warrants as set forth on the
signature page hereto, then owned of record by such holder as of the occurrence
of such Non-Registration Event. Payments to be made pursuant to this Section 9.4
shall be due and payable immediately upon demand in immediately available funds.
9.5. Expenses. All expenses incurred by the Company in complying with
Section 9, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, fee of one counsel, if any, to represent all the
Sellers, and costs of insurance are called "Registration Expenses". All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any special
counsel to the Seller, are called "Selling Expenses". The Seller shall pay the
fees of its own additional counsel, if any.
11
<PAGE>
The Company will pay all Registration Expenses in connection with the
registration statement under Section 9. All Selling Expenses in connection with
each registration statement under Section 9 shall be borne by the Seller and may
be apportioned among the Sellers in proportion to the number of shares sold by
the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
9.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under the
Act pursuant to Section 9, the Company will indemnify and hold harmless the
Seller, each officer of the Seller, each director of the Seller, each
underwriter of such Registrable Securities thereunder and each other person, if
any, who controls such Seller or underwriter within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Seller, or such underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities was registered under the Act
pursuant to Section 9, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished by any such
Seller, the underwriter or any such controlling person in writing specifically
for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable Securities
under the Act pursuant to Section 9, the Seller will indemnify and hold harmless
the Company, and each person, if any, who controls the Company within the
meaning of the Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any
12
<PAGE>
material fact contained in the registration statement under which such
Registrable Securities were registered under the Act pursuant to Section 9, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the Seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such Seller, as such, furnished in writing to the Company by such
Seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of the Seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the
Registrable Securities sold by the Seller under such registration statement
bears to the total public offering price of all securities sold thereunder, but
not in any event to exceed the gross proceeds received by the Seller from the
sale of Registrable Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 9.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 9.6(c) if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses
13
<PAGE>
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified parties shall have the right to select one separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
(d) In order to provide for just and equitable contribution in the event of
joint liability under the Act in any case in which either (i) the Seller, or any
controlling person of the Seller, makes a claim for indemnification pursuant to
this Section 9.6 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 9.6 provides for indemnification in such case, or (ii) contribution
under the Act may be required on the part of the Seller or controlling person of
the Seller in circumstances for which indemnification is provided under this
Section 9.6; then, and in each such case, the Company and the Seller will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that the
Seller is responsible only for the portion represented by the percentage that
the public offering price of its securities offered by the registration
statement bears to the public offering price of all securities offered by such
registration statement, provided, however, that, in any such case, (A) the
Seller will not be required to contribute any amount in excess of the public
offering price of all such securities offered by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
10.1. Obligation To Purchase.
(a) The Subscriber agrees to purchase from the Company up to the additional
shares of Common Stock ("Put Stock") and up to the amount of Warrants ("Put
Warrants") described on the signature page hereof for up to the aggregate
consideration designated on the signature page hereof (the "Put"). Collectively
the Put Stock and Put Warrants (as hereinafter defined) are referred to as the
"Put Securities".)
(b) The agreement to purchase the Put Securities is contingent on the
following:
(i) The timely filing of the registration statement described in Section
9.1(iv) hereof relating to all the Registrable Securities.
14
<PAGE>
(ii) No material adverse change in the Company's business or business
prospects shall have occurred after the Closing Date. Material adverse change is
defined as any effect on the business, operations, properties, prospects, or
financial condition of the Company that is material and adverse to the Company
and its subsidiaries and affiliates, taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement, or any other agreement entered into or to be entered into in
connection herewith, in any material respect.
(iii) The non-occurrence of all of the following:
(1) The Company breaches any material covenant, term or condition of this
Subscription Agreement and such breach continues for a period of seven (7) days
after written notice to the Company from the Subscriber.
(2) Any material representation or warranty of the Company made in this
Subscription Agreement, or in any agreement, statement or certificate given in
writing pursuant thereto shall be false or misleading.
(3) The Company shall make an assignment of a substantial part of its
property or business for the benefit of creditors, or apply for or consent to
the appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed.
(4) Any money judgment, confession of judgment, writ or similar process
shall be entered against the Company or its property or other assets for more
than $50,000, and is not vacated, satisfied, bonded or stayed within 45 days.
(5) Bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings or relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company.
(iv) The execution and delivery to the Subscriber of a certificate signed
by its chief executive officer representing the truth and accuracy of all the
Company's representations and warranties contained in this Subscription
Agreement as of the Put Date, and the Put Closing Date and confirming the
undertakings contained herein, and representing the satisfaction of all
contingencies and conditions required for the exercise of the Put.
(v) The execution by the Company and delivery to the Subscriber of all
documents reasonably necessary to
15
<PAGE>
memorialize the rights and obligations of each of the parties in
relation to the Put.
10.2. Exercise of Put.
(a) The Company's right to exercise the Put expires two weeks after the
filing of the registration statement described in Section 9.1(iv) of this
Subscription Agreement relating to all the Registrable Securities. In the event
the Company does not exercise the Put in connection with any or all of the Put
Securities, the Subscriber may exercise the Put on the Company's behalf in
connection with the Put Securities described on the signature page hereof, by
written notice to the Company within two weeks after the end of the Put exercise
period. Such notice will be deemed a Put Notice (as defined hereafter) and the
Company will comply with all its obligations described herein.
(b) The Put may be exercised by the Company by the giving to the Subscriber
of a written notice of exercise ("Put Notice") during the exercise period of the
Put in relation to all the subject Put Securities. The date a Put Notice is
given is a Put Date. The Put Notice must be accompanied by the (i) officer's
certificate described in Section 10.1(b) above; and (ii) a copy of the filed
registration statement.
(c) Unless otherwise agreed to by the Subscribers, Put Notices must be
given to all Subscribers in proportion to the amounts agreed to be purchased by
all Subscribers undertaking to purchase Put Shares in the $7,800 and $750,000
offerings to which this and other Subscription Agreements relate. The aggregate
amount of all such Put Notices may not exceed $757,800.
(d) Payment by the Subscriber in relation to a Put Notice relating to the
Put must be made within seven (7) days of receipt of a Put Notice relating to
the Put. Payment will be made against delivery to the Subscriber or an escrow
agent to be agreed upon by the Company and Subscriber, of the Put Securities and
items set forth in Section 10.2(b) above.
10.3. Put Warrants. The Put Warrants will be exercisable at $.50 per common
share and identical to the Warrants except that such Put Warrants will be
exercisable commencing on the Put Closing Date and for five years thereafter.
11. Miscellaneous.
(a) Notices. All notices or other communications given or made hereunder
shall be in writing and shall be personally delivered or deemed delivered the
first business day after being telecopied (provided that a copy is delivered by
first class mail) to the party to receive the same at its address set forth
below or to such other address as either party shall hereafter give to the other
by notice duly made under this Section: (i) if to the
16
<PAGE>
Company, to Fantasy Sportsnet, Inc., 142 Mineola Avenue, Suite 2-d, Roslyn
Heights, New York 11577, telecopier number: (212) 643-1998, and (ii) if to the
Subscriber, to the name, address and telecopy number set forth on the signature
page hereto. Any notice that may be given pursuant to this Agreement, or any
document delivered in connection with the foregoing may be given by the
Subscriber on the first business day after the observance dates in the United
States of America by Orthodox Jewry of Rosh Hashanah, Yom Kippur, the first two
days of the Feast of Tabernacles, Shemini Atzeret Simchat Torah, the first two
and final two days of Passover and Pentecost, with such notice to be deemed
given and effective, at the election of the Subscriber on a holiday date that
precedes such notice. Any notice received by the Subscriber on any of the
aforedescribed holidays may be deemed by the Subscriber to be received and
effective as if such notice had been received on the first business day after
the holiday.
(b) Closing. The consummation of the transactions contemplated herein shall
take place at the offices of Grushko & Mittman, 277 Broadway, Suite 801, New
York, New York 10007, upon the satisfaction of all conditions to Closing set
forth in this Agreement. The closing date shall be the date that subscriber
funds representing the net amount due the Company from the Purchase Price are
transmitted by wire transfer to the Company (the "Closing Date"). The closing
date for the Put shall be the date on which Subscriber funds representing the
net amount due the Company from the Put Purchase Price are transmitted to or on
behalf of the Company ("Put Closing Date").
(c) Entire Agreement; Assignment. This Agreement represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and may be amended only by a writing executed by both parties. No right or
obligation of either party shall be assigned by that party without prior notice
to and the written consent of the other party.
(d) Conflict. The parties hereto have been advised of a possible conflict
of interest arising from the past and future representation by Grushko & Mittman
of the Subscriber in other transactions and the current representation by
Grushko & Mittman of the Company in connection with this Subscription Agreement,
related matters and the registration statement described in Section 9.1(iv)
hereof. The Company and Subscriber acknowledge that they have been advised by
Grushko & Mittman to investigate and consider the potential impact of this
conflict prior to executing this Subscription Agreement and in connection with
the registration statement described in Section 9.1(iv) of this Subscription
Agreement. The parties hereto consent to the representation by Grushko & Mittman
of the Company in this and other matters and the representation by Grushko &
Mittman of the Subscribers in other matters, and waive any conflict.
17
<PAGE>
(e) Execution. This Agreement may be executed by facsimile transmission,
and in counterparts, each of which will be deemed an original.
(f) Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this Agreement
and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any other agreement
delivered in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.
(g) Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 13(e) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(h) Automatic Termination. This Agreement shall automatically terminate
without any further action of either party hereto if the Closing shall not have
occurred by the tenth (10th) business day following the date this Agreement is
accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
18
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $1,326.00
Common Shares Purchased: 51,000 (at $.015 per share)
Common Stock Purchase Warrants: 561,000 (at $.001 per Warrant)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $1,326.00
Put Stock: 51,000 Common Shares (at $.015 per share)
Put Warrants: 561,000 (at $.001 per Warrant)
LIBRA FINANCE, S.A. - Subscriber
P.O. Box 4603
Zurich, Switzerland
Fax: 011-411-201-6262
By:
---------------------------
19
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $4,590.00
Common Shares Purchased: 165,000 (at $.015 per share)
Common Stock Purchase Warrants: 2,115,000 (at $.001 per Warrant)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $4,590.00
Put Stock: 165,000 Common Shares (at $.015 per share)
Put Warrants: 2,115,000 (at $.001 per Warrant)
DANBURY INVESTMENTS LTD. - Subscriber
4101 Pine Tree Drive, Suite 1427
Miami Beach, Florida 33140
Fax: 305-672-7331
By:
---------------------------
Last sentence of Section 1(b) is deemed deleted from the Subscription
Agreement.
20
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $500.00
Common Shares Purchased: 25,000 (at $.015 per share)
Common Stock Purchase Warrants: 125,000 (at $.001 per Warrant)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $500.00
Put Stock: 25,000 Common Shares (at $.015 per share)
Put Warrants: 125,000 (at $.001 per Warrant)
ALASTAIR-PRESCOTT LTD. - Subscriber
245 Dixon Road, Suite 525
Etobicoke, Ontario
M9P 2M4 Canada
Fax: 403-934-6061
By:
---------------------------
21
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $500.00
Common Shares Purchased: 25,000 (at $.015 per share)
Common Stock Purchase Warrants: 125,000 (at $.001 per Warrant)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $500.00
Put Stock: 25,000 Common Shares (at $.015 per share)
Put Warrants: 125,000 (at $.001 per Warrant)
HYETT CAPITAL LTD. - Subscriber
1510 51st Street
Brooklyn, New York 11219
Fax: 718-972-6196
By:
---------------------------
Last sentence of Section 1(b) is deemed deleted from the Subscription
Agreement.
22
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $663.00
Common Shares Purchased: 25,500 (at $.015 per share)
Common Stock Purchase Warrants: 280,500 (at $.001 per Warrant)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $663.00
Put Stock: 25,500 Common Shares (at $.015 per share)
Put Warrants: 280,500 (at $.001 per Warrant)
TALBIYA B. INVESTMENTS LTD. - Subscriber
c/o Ragnall House
18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Fax: 011-972-36120639
By:
---------------------------
23
<PAGE>
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
FANTASY SPORTSNET, INC.
By:
-------------------------------
Dated: May ____, 1999
Aggregate Purchase Price: $221.00
Common Shares Purchased: 8,500 (at $.015 per share)
Common Stock Purchase Warrants: 93,500 (at $.001 per Warrant)
ACCEPTED: Dated as of May ____, 1999
PUT
Aggregate Put Purchase Price: $221.00
Put Stock: 8,500 Common Shares (at $.015 per share)
Put Warrants: 93,500 (at $.001 per Warrant)
ELLIS ENTERPRISES, LTD. - Subscriber
42A Waterloo Road
London, NW2 7UF, England
Fax: 011-441-814506694
By:
---------------------------
24
<PAGE>
Exhibit 2.3
FUNDS ESCROW AGREEMENT
(Common Stock)
This Agreement is dated as of the 12th day of May, 1999 among Fantasy
Sportsnet, Inc. (the "Company"), the parties identified on Schedule A hereto,
("Subscriber" or "Subscribers"), and Grushko & Mittman (the "Escrow Agent"):
W I T N E S S E T H:
WHEREAS, the Company and Subscriber have entered into Subscription
Agreements ("Subscription Agreement") calling for the sale by the Company of the
Company's Common Stock ("Company Shares") to the Subscribers for the aggregate
purchase price of $750,000 in the denominations set forth on Schedule A hereto
against payment of the aggregate purchase price; and
WHEREAS, the parties hereto require the Company to deliver the Company
Shares and other documents against payment therefor, with the foregoing
documents and payment to be delivered to the Escrow Agent to be held in escrow
and released by the Escrow Agent in accordance with the terms and conditions of
this Agreement; and
WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to
the terms and conditions of this Agreement;
NOW THEREFORE, the parties agree as follows:
ARTICLE I
INTERPRETATION
1.1. Definitions. Whenever used in this Agreement, the following terms
shall have the following respective meanings:
(a) "Agreement" means this Agreement and all amendments made hereto by
written agreement among the parties;
(b) "Company Shares" means Common Stock of the Company to be issued to the
Subscribers in the amounts designated on Schedule A hereto.
(c) "Escrowed Payment" means the sum of up to $750,000 to be held in escrow
by the Escrow Agent on behalf of the Company and Subscribers.
1
<PAGE>
(d) "Subscription Agreement" means the Subscription Agreement with the
exhibits and schedules thereto entered or to be entered into by the Company and
Subscribers in reference to the Company Shares and Warrants.
(e) Collectively, the Company Shares, and Subscription Agreements signed on
behalf of the Company are referred to as "Company Documents."
(f) Collectively, the Escrowed Payment and Subscription Agreements signed
on behalf of the Subscribers are referred to as "Subscriber Documents."
1.2. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the Company Documents and Subscriber
Documents and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. There are no warranties,
representations and other agreements made by the parties in connection with the
subject matter hereof except as specifically set forth in this Agreement.
1.3. Extended Meanings. In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders. The word "person" includes an
individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.
1.4. Waivers and Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by all parties, or, in the
case of a waiver, by the party waiving compliance. Except as expressly stated
herein, no delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder preclude any
other or future exercise of any other right, power or privilege hereunder.
1.5. Headings. The division of this Agreement into articles, sections,
subsections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
1.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
principles of conflict of laws.
1.7. Jurisdiction and Consents to Service of Process. The Company and the
Subscriber each hereby irrevocably consent to the exclusive jurisdiction of the
courts of the State of New York and
2
<PAGE>
of any Federal Court located in the State of New York, each as may have
competent jurisdiction, in connection with any action, suit or other proceeding
arising out of or relating to this Agreement or any action taken or omitted
hereunder, waive trial by jury, and waive personal service of any summons,
complaint or other process and agree that the service thereof may be made by
certified or registered mail directed to such person at such person's address
for purpose of notice hereunder.
1.8. Fees. The Company shall pay the Escrow Agent the fee described in
Section 6 of the Subscription Agreement. This fee shall be paid by proportionate
deduction from the Escrowed Payment deliverable to the Company, but only if a
portion of the Escrowed Payment is to be released to the Company pursuant to
this Agreement.
ARTICLE II
DELIVERIES TO THE ESCROW AGENT
2.1. Delivery of Company Documents to Escrow Agent. On or about the date
hereof, the Company shall deliver to the Escrow Agent the Company Documents.
2.2 Delivery of Subscriber Documents to Escrow Agent. On or about the date
hereof, the Subscriber shall deliver to the Escrow Agent the Subscriber
Documents and the Escrowed Payment pursuant to the following wire transfer
instructions:
Citibank, N.A.
250 Broadway
New York, New York 10007, USA
ABA Number: 0210-00089
For Credit to: Grushko & Mittman
IOLA Trust Account
Account Number: 037-45208884
2.3. Intention to Create Escrow Over Company Documents and Subscriber
Documents. The Subscriber and Company intend that the Company Documents and
Subscriber Documents shall be held in escrow by the Escrow Agent pursuant to
this Agreement for their benefit as set forth herein.
2.4. Escrow Agent to Deliver Company Documents and Subscriber Documents.
The Escrow Agent shall hold and release the Company Documents and Subscriber
Documents only in accordance with the terms and conditions of this Agreement.
3
<PAGE>
ARTICLE III
RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS
3.1. Release of Escrow. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Company Documents and Subscriber Documents as
follows:
(a) Upon receipt by the Escrow Agent of the Company Documents and the
corresponding Subscriber Documents, the Escrow Agent will release the Company
Documents to the Subscribers and the corresponding Subscriber Documents will be
released to the Company. The Company will provide written facsimile or original
instructions to the Escrow Agent as to the disposition of all funds releasable
to the Company.
(b) In the event the Escrow Agent does not receive Company Documents and
the corresponding Subscriber Documents prior to June 1, 1999, then the Escrow
Agent will return the Company Documents to the Company, and return the
Subscriber Documents to the Subscribers.
(c) Upon receipt by the Escrow Agent of joint written instructions ("Joint
Instructions") signed by the Company and the Subscriber, it shall deliver the
Company Documents and Subscriber Documents in accordance with the terms of the
Joint Instructions.
(d) Upon receipt by the Escrow Agent of a final and non-appealable
judgment, order, decree or award of a court of competent jurisdiction (a "Court
Order"), the Escrow Agent shall deliver the Company Documents and Subscriber
Documents in accordance with the Court Order. Any Court Order shall be
accompanied by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which opinion must be reasonably satisfactory to the Escrow
Agent) to the effect that the court issuing the Court Order has competent
jurisdiction and that the Court Order is final and non-appealable.
3.2. Acknowledgement of Company and Subscriber; Disputes. The Company and
the Subscriber acknowledge that the only terms and conditions upon which the
Company Documents and Subscriber Documents are to be released are set forth in
Sections 3 and 4 of this Agreement. The Company and the Subscriber reaffirm
their agreement to abide by the terms and conditions of this Agreement with
respect to the release of the Company Documents and Subscriber Documents. Any
dispute with respect to the release of the Company Documents and Subscriber
Documents shall be resolved pursuant to Section 4.2 or by agreement between the
Company and Subscriber.
4
<PAGE>
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1. Duties and Responsibilities of the Escrow Agent. The Escrow Agent's
duties and responsibilities shall be subject to the following terms and
conditions:
(a) The Subscriber and Company acknowledge and agree that the Escrow Agent
(i) shall not be responsible for or bound by, and shall not be required to
inquire into whether either the Subscriber or Company is entitled to receipt of
the Company Documents and Subscriber Documents pursuant to, any other agreement
or otherwise; (ii) shall be obligated only for the performance of such duties as
are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii)
may rely on and shall be protected in acting or refraining from acting upon any
written notice, instruction, instrument, statement, request or document
furnished to it hereunder and believed by the Escrow Agent in good faith to be
genuine and to have been signed or presented by the proper person or party,
without being required to determine the authenticity or correctness of any fact
stated therein or the propriety or validity or the service thereof; (iv) may
assume that any person purporting to give notice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so; (v) shall not be under any duty to give the property held
by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its
own similar property; and (vi) may consult counsel satisfactory to Escrow Agent,
the opinion of such counsel to be full and complete authorization and protection
in respect of any action taken, suffered or omitted by Escrow Agent hereunder in
good faith and in accordance with the opinion of such counsel.
(b) The Subscriber and Company acknowledge that the Escrow Agent is acting
solely as a stakeholder at their request and that the Escrow Agent shall not be
liable for any action taken by Escrow Agent in good faith and believed by Escrow
Agent to be authorized or within the rights or powers conferred upon Escrow
Agent by this Agreement. The Subscriber and Company, jointly and severally,
agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent's
partners, employees, agents and representatives for any action taken or omitted
to be taken by Escrow Agent or any of them hereunder, including the fees of
outside counsel and other costs and expenses of defending itself against any
claim or liability under this Agreement, except in the case of gross negligence
or willful misconduct on Escrow Agent's part committed in its capacity as Escrow
Agent under this Agreement. The Escrow Agent shall owe a duty only to the
Subscriber and Company under this Agreement and to no other person.
5
<PAGE>
(c) In the event the Company does not receive its portion of the Escrowed
Payment, then the Subscriber and Company jointly and severally agree to
reimburse the Escrow Agent for its reasonable out-of-pocket expenses (including
counsel fees) incurred in connection with the performance of its duties and
responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent hereunder by
giving five (5) days prior written notice of resignation to the Subscriber and
the Company. Prior to the effective date of the resignation as specified in such
notice, the Subscriber and Company will issue to the Escrow Agent a Joint
Instruction authorizing delivery of the Company Documents and Subscriber
Documents to a substitute Escrow Agent selected by the Subscriber and Company.
If no successor Escrow Agent is named by the Subscriber and Company, the Escrow
Agent may apply to a court of competent jurisdiction in the State of New York
for appointment of a successor Escrow Agent, and to deposit the Company Shares
and Escrowed Payment with the clerk of any such court.
(e) The Escrow Agent does not have and will not have any interest in the
Company Documents and Subscriber Documents, but is serving only as escrow
Subscriber, having only possession thereof. The Escrow Agent shall not be liable
for any loss resulting from the making or retention of any investment in
accordance with this Escrow Agreement.
(f) This Agreement sets forth exclusively the duties of the Escrow Agent
with respect to any and all matters pertinent thereto and no implied duties or
obligations shall be read into this Agreement.
(g) The Escrow Agent shall be permitted to act as counsel for the
Subscriber or Company, as the case may be, in any dispute as to the disposition
of the Company Documents and Subscriber Documents, in any other dispute between
the Subscriber and Company, whether or not the Escrow Agent is then holding the
Company Documents and Subscriber Documents and continues to act as the Escrow
Agent hereunder.
(h) The provisions of this Section 4.1 shall survive the resignation of the
Escrow Agent or the termination of this Agreement.
4.2. Dispute Resolution: Judgments. Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:
(a) If any dispute shall arise with respect to the delivery, ownership,
right of possession or disposition of the Company Documents and Subscriber
Documents, or if the Escrow Agent shall in good faith be uncertain as to its
duties or rights
6
<PAGE>
hereunder, the Escrow Agent shall be authorized, without liability to anyone, to
(i) refrain from taking any action other than to continue to hold the Company
Documents and Subscriber Documents pending receipt of a Joint Instruction from
the Subscriber and Company, or (ii) deposit the Company Documents and Subscriber
Documents with any court of competent jurisdiction in the State of New York, in
which event the Escrow Agent shall give written notice thereof to the Subscriber
and the Company and shall thereupon be relieved and discharged from all further
obligations pursuant to this Agreement. The Escrow Agent may, but shall be under
no duty to, institute or defend any legal proceedings which relate to the
Company Documents and Subscriber Documents. The Escrow Agent shall have the
right to retain counsel if it becomes involved in any disagreement, dispute or
litigation on account of this Agreement or otherwise determines that it is
necessary to consult counsel.
(b) The Escrow Agent is hereby expressly authorized to comply with and obey
any Court Order. In case the Escrow Agent obeys or complies with a Court Order,
the Escrow Agent shall not be liable to the Subscriber and Company or to any
other person, firm, corporation or entity by reason of such compliance.
ARTICLE V
GENERAL MATTERS
5.1. Termination. This escrow shall terminate upon the release of all of
the Company Documents and Subscriber Documents or at any time upon the agreement
in writing of the Subscriber and Company.
5.2. Notices. All notices, request, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been received one (1) day after being sent by telecopy (with copy delivered by
regular mail):
(a) If to the Company, to:
Fantasy Sportsnet, Inc.
142 Mineola Avenue, Suite 2-d
Roslyn Heights, New York 11577
(212) 643-1998 (Telecopier)
(b) If to the Subscriber, to: the addresses and telecopier numbers listed on
Schedule A hereto.
7
<PAGE>
(c) If to the Escrow Agent, to:
Grushko & Mittman
Attorneys at Law
277 Broadway, Suite 801
New York, New York 10007
(212) 227-5865 (telecopier)
or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.
5.3 Interest. Interest will not be payable to the Subscriber or Company in
connection with the Escrowed Payment.
5.4. Assignment; Binding Agreement. Neither this Agreement nor any right or
obligation hereunder shall be assignable by any party without the prior written
consent of the other parties hereto. This Agreement shall enure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.
5.5. Invalidity. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal, or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
5.6. Counterparts/Execution. This Agreement may be executed in any number
of counterparts and by different signatories hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This Agreement
may be executed by facsimile transmission.
[THIS SPACE INTENTIONALLY LEFT BLANK]
8
<PAGE>
5.7. Agreement. Each of the undersigned states that he has read the
foregoing Funds Escrow Agreement and understands and agrees to it.
FANTASY SPORTSNET, INC.
"Company"
By:
---------------------------------
ARCADIA MUTUAL FUND, INC.
"Subscriber"
By:
---------------------------------
BERKELEY GROUP, LTD.
"Subscriber"
By:
---------------------------------
WINDSOR GROUP, LTD.
"Subscriber"
By:
---------------------------------
ESCROW AGENT:
By:
---------------------------------
GRUSHKO & MITTMAN
9
<PAGE>
5.7. Agreement. Each of the undersigned states that he has read the
foregoing Funds Escrow Agreement and understands and agrees to it.
FANTASY SPORTSNET, INC.
"Company"
By:
---------------------------------
AUSTOST ANSTALT SCHAAN
"Subscriber"
By:
---------------------------------
BALMORE FUNDS, S.A.
"Subscriber"
By:
---------------------------------
NESHER, INC.
"Subscriber"
By:
---------------------------------
TALBIYA B. INVESTMENTS LTD.
"Subscriber"
By:
---------------------------------
ELLIS ENTERPRISES, LTD.
"Subscriber"
By:
---------------------------------
ESCROW AGENT:
By:
---------------------------------
GRUSHKO & MITTMAN
10
<PAGE>
SCHEDULE A TO FUNDS ESCROW AGREEMENT
================================================================================
SUBSCRIBERS COMPANY SHARES ESCROWED PAYMENT
- --------------------------------------------------------------------------------
ARCADIA MUTUAL FUND, INC 666,664 $ 166,666.00
55 Frederick Street
Box CB-13029
Nassau, Bahamas
Fax: 242-356-2053
- --------------------------------------------------------------------------------
BERKELEY GROUP, LTD 666,668 $ 166,667.00
P.O. Box N-1836
Suite A096
Nassau, Bahamas
Fax: 415-449-3490
- --------------------------------------------------------------------------------
WINDSOR GROUP, LTD 666,668 $ 166,667.00
2159 Des Laurentides Blvd
Suite 199
Laval, Quebec
H7M 4M2, Canada
Fax: 604-608-2952
- --------------------------------------------------------------------------------
AUSTOST ANSTALT SCHAAN 300,000 $ 75,000.00
7440 Fuerstentum
Lichenstein Landstrasse 163
Fax: 011-431-534532895
- --------------------------------------------------------------------------------
BALMORE FUNDS S.A 300,000 $ 75,000.00
P.O. Box 4603
Zurich, Switzerland
Fax: 011-411-201-6262
- --------------------------------------------------------------------------------
NESHER, INC 200,000 $ 50,000.00
c/o Ragnall House
18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Fax: 011-972-36120639
- --------------------------------------------------------------------------------
TALBIYA B. INVESTMENTS LTD 100,000 $ 25,000.00
c/o Ragnall House
18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Fax: 011-972-36120639
- --------------------------------------------------------------------------------
ELLIS ENTERPRISES, LTD 100,000 $ 25,000.00
42A Waterloo Road
London, NW2 7UF, England
Fax: 011-441-814506694
- --------------------------------------------------------------------------------
TOTALS 3,000,000 $ 750,000.00
================================================================================
11
Exhibit 2.4
FUNDS ESCROW AGREEMENT
(Common Stock and Warrants)
This Agreement is dated as of the 12th day of May, 1999 among Fantasy
Sportsnet, Inc. (the "Company"), the parties identified on Schedule A hereto,
("Subscriber" or "Subscribers"), and Grushko & Mittman (the "Escrow Agent"):
W I T N E S S E T H:
WHEREAS, the Company and Subscriber have entered into Subscription
Agreements ("Subscription Agreement") calling for the sale by the Company of the
Company's Common Stock ("Company Shares") and Common Stock Purchase Warrants
("Warrants") to the Subscribers for the aggregate purchase price of $7,800 in
the denominations set forth on Schedule A hereto against payment of the
aggregate purchase price; and
WHEREAS, the parties hereto require the Company to deliver the Company
Shares and Warrants and other documents against payment therefor, with the
foregoing documents and payment to be delivered to the Escrow Agent to be held
in escrow and released by the Escrow Agent in accordance with the terms and
conditions of this Agreement; and
WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to
the terms and conditions of this Agreement;
NOW THEREFORE, the parties agree as follows:
ARTICLE I
INTERPRETATION
1.1. Definitions. Whenever used in this Agreement, the following terms
shall have the following respective meanings:
(a) "Agreement" means this Agreement and all amendments made hereto by
written agreement among the parties;
(b) "Company Shares" means Common Stock of the Company to be issued to the
Subscribers in the amounts designated on Schedule A hereto.
(c) "Warrants" means the common stock purchase warrants of the Company to
be issued to the Subscribers in the amounts
1
<PAGE>
designated on Schedule A hereto.
(d) "Escrowed Payment" means the sum of up to $7,800 to be held in escrow
by the Escrow Agent on behalf of the Company and Subscribers.
(e) "Subscription Agreement" means the Subscription Agreement with the
exhibits and schedules thereto entered or to be entered into by the Company and
Subscribers in reference to the Company Shares and Warrants.
(f) Collectively, the Company Shares, Subscriber Warrants, and Subscription
Agreements signed on behalf of the Company are referred to as "Company
Documents."
(g) Collectively, the Escrowed Payment and Subscription Agreements signed
on behalf of the Subscribers are referred to as "Subscriber Documents."
1.2. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the Company Documents and Subscriber
Documents and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. There are no warranties,
representations and other agreements made by the parties in connection with the
subject matter hereof except as specifically set forth in this Agreement.
1.3. Extended Meanings. In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders. The word "person" includes an
individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.
1.4. Waivers and Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by all parties, or, in the
case of a waiver, by the party waiving compliance. Except as expressly stated
herein, no delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder preclude any
other or future exercise of any other right, power or privilege hereunder.
1.5. Headings. The division of this Agreement into articles, sections,
subsections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
2
<PAGE>
1.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
principles of conflict of laws.
1.7. Jurisdiction and Consents to Service of Process. The Company and the
Subscriber each hereby irrevocably consent to the exclusive jurisdiction of the
courts of the State of New York and of any Federal Court located in the State of
New York, each as may have competent jurisdiction, in connection with any
action, suit or other proceeding arising out of or relating to this Agreement or
any action taken or omitted hereunder, waive trial by jury, and waive personal
service of any summons, complaint or other process and agree that the service
thereof may be made by certified or registered mail directed to such person at
such person's address for purpose of notice hereunder.
ARTICLE II
DELIVERIES TO THE ESCROW AGENT
2.1. Delivery of Company Documents to Escrow Agent. On or about the date
hereof, the Company shall deliver to the Escrow Agent the Company Documents.
2.2 Delivery of Subscriber Documents to Escrow Agent. On or about the date
hereof, the Subscriber shall deliver to the Escrow Agent the Subscriber
Documents and the Escrowed Payment pursuant to the following wire transfer
instructions:
Citibank, N.A.
250 Broadway
New York, New York 10007, USA
ABA Number: 0210-00089
For Credit to: Grushko & Mittman
IOLA Trust Account
Account Number: 037-45208884
2.3. Intention to Create Escrow Over Company Documents and Subscriber
Documents. The Subscriber and Company intend that the Company Documents and
Subscriber Documents shall be held in escrow by the Escrow Agent pursuant to
this Agreement for their benefit as set forth herein.
2.4. Escrow Agent to Deliver Company Documents and Subscriber Documents.
The Escrow Agent shall hold and release the Company Documents and Subscriber
Documents only in accordance with the terms and conditions of this Agreement.
3
<PAGE>
ARTICLE III
RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS
3.1. Release of Escrow. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Company Documents and Subscriber Documents as
follows:
(a) Upon receipt by the Escrow Agent of the Company Documents and the
corresponding Subscriber Documents, the Escrow Agent will release the Company
Documents to the Subscribers and the corresponding Subscriber Documents will be
released to the Company. The Company will provide written facsimile or original
instructions to the Escrow Agent as to the disposition of all funds releasable
to the Company.
(b) In the event the Escrow Agent does not receive Company Documents and
the corresponding Subscriber Documents prior to June 1, 1999, then the Escrow
Agent will return the Company Documents to the Company, and return the
Subscriber Documents to the Subscribers.
(c) Upon receipt by the Escrow Agent of joint written instructions ("Joint
Instructions") signed by the Company and the Subscriber, it shall deliver the
Company Documents and Subscriber Documents in accordance with the terms of the
Joint Instructions.
(d) Upon receipt by the Escrow Agent of a final and non-appealable
judgment, order, decree or award of a court of competent jurisdiction (a "Court
Order"), the Escrow Agent shall deliver the Company Documents and Subscriber
Documents in accordance with the Court Order. Any Court Order shall be
accompanied by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which opinion must be reasonably satisfactory to the Escrow
Agent) to the effect that the court issuing the Court Order has competent
jurisdiction and that the Court Order is final and non-appealable.
3.2. Acknowledgement of Company and Subscriber; Disputes. The Company and
the Subscriber acknowledge that the only terms and conditions upon which the
Company Documents and Subscriber Documents are to be released are set forth in
Sections 3 and 4 of this Agreement. The Company and the Subscriber reaffirm
their agreement to abide by the terms and conditions of this Agreement with
respect to the release of the Company Documents and Subscriber Documents. Any
dispute with respect to the release of the Company Documents and Subscriber
Documents shall be resolved pursuant to Section 4.2 or by agreement between the
Company and Subscriber.
4
<PAGE>
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1. Duties and Responsibilities of the Escrow Agent. The Escrow Agent's
duties and responsibilities shall be subject to the following terms and
conditions:
(a) The Subscriber and Company acknowledge and agree that the Escrow Agent
(i) shall not be responsible for or bound by, and shall not be required to
inquire into whether either the Subscriber or Company is entitled to receipt of
the Company Documents and Subscriber Documents pursuant to, any other agreement
or otherwise; (ii) shall be obligated only for the performance of such duties as
are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii)
may rely on and shall be protected in acting or refraining from acting upon any
written notice, instruction, instrument, statement, request or document
furnished to it hereunder and believed by the Escrow Agent in good faith to be
genuine and to have been signed or presented by the proper person or party,
without being required to determine the authenticity or correctness of any fact
stated therein or the propriety or validity or the service thereof; (iv) may
assume that any person purporting to give notice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so; (v) shall not be under any duty to give the property held
by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its
own similar property; and (vi) may consult counsel satisfactory to Escrow Agent,
the opinion of such counsel to be full and complete authorization and protection
in respect of any action taken, suffered or omitted by Escrow Agent hereunder in
good faith and in accordance with the opinion of such counsel.
(b) The Subscriber and Company acknowledge that the Escrow Agent is acting
solely as a stakeholder at their request and that the Escrow Agent shall not be
liable for any action taken by Escrow Agent in good faith and believed by Escrow
Agent to be authorized or within the rights or powers conferred upon Escrow
Agent by this Agreement. The Subscriber and Company, jointly and severally,
agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent's
partners, employees, agents and representatives for any action taken or omitted
to be taken by Escrow Agent or any of them hereunder, including the fees of
outside counsel and other costs and expenses of defending itself against any
claim or liability under this Agreement, except in the case of gross negligence
or willful misconduct on Escrow Agent's part committed in its capacity as Escrow
Agent under this Agreement. The Escrow Agent shall owe a duty only to the
Subscriber and Company under this Agreement and to no other person.
5
<PAGE>
(c) In the event the Company does not receive its portion of the Escrowed
Payment, then the Subscriber and Company jointly and severally agree to
reimburse the Escrow Agent for its reasonable out-of-pocket expenses (including
counsel fees) incurred in connection with the performance of its duties and
responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent hereunder by
giving five (5) days prior written notice of resignation to the Subscriber and
the Company. Prior to the effective date of the resignation as specified in such
notice, the Subscriber and Company will issue to the Escrow Agent a Joint
Instruction authorizing delivery of the Company Documents and Subscriber
Documents to a substitute Escrow Agent selected by the Subscriber and Company.
If no successor Escrow Agent is named by the Subscriber and Company, the Escrow
Agent may apply to a court of competent jurisdiction in the State of New York
for appointment of a successor Escrow Agent, and to deposit the Company Shares
and Escrowed Payment with the clerk of any such court.
(e) The Escrow Agent does not have and will not have any interest in the
Company Documents and Subscriber Documents, but is serving only as escrow
Subscriber, having only possession thereof. The Escrow Agent shall not be liable
for any loss resulting from the making or retention of any investment in
accordance with this Escrow Agreement.
(f) This Agreement sets forth exclusively the duties of the Escrow Agent
with respect to any and all matters pertinent thereto and no implied duties or
obligations shall be read into this Agreement.
(g) The Escrow Agent shall be permitted to act as counsel for the
Subscriber or Company, as the case may be, in any dispute as to the disposition
of the Company Documents and Subscriber Documents, in any other dispute between
the Subscriber and Company, whether or not the Escrow Agent is then holding the
Company Documents and Subscriber Documents and continues to act as the Escrow
Agent hereunder.
(h) The provisions of this Section 4.1 shall survive the resignation of the
Escrow Agent or the termination of this Agreement.
4.2. Dispute Resolution: Judgments. Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:
(a) If any dispute shall arise with respect to the delivery, ownership,
right of possession or disposition of the Company Documents and Subscriber
Documents, or if the Escrow Agent shall in good faith be uncertain as to its
duties or rights
6
<PAGE>
hereunder, the Escrow Agent shall be authorized, without liability to anyone, to
(i) refrain from taking any action other than to continue to hold the Company
Documents and Subscriber Documents pending receipt of a Joint Instruction from
the Subscriber and Company, or (ii) deposit the Company Documents and Subscriber
Documents with any court of competent jurisdiction in the State of New York, in
which event the Escrow Agent shall give written notice thereof to the Subscriber
and the Company and shall thereupon be relieved and discharged from all further
obligations pursuant to this Agreement. The Escrow Agent may, but shall be under
no duty to, institute or defend any legal proceedings which relate to the
Company Documents and Subscriber Documents. The Escrow Agent shall have the
right to retain counsel if it becomes involved in any disagreement, dispute or
litigation on account of this Agreement or otherwise determines that it is
necessary to consult counsel.
(b) The Escrow Agent is hereby expressly authorized to comply with and obey
any Court Order. In case the Escrow Agent obeys or complies with a Court Order,
the Escrow Agent shall not be liable to the Subscriber and Company or to any
other person, firm, corporation or entity by reason of such compliance.
ARTICLE V
GENERAL MATTERS
5.1. Termination. This escrow shall terminate upon the release of all of
the Company Documents and Subscriber Documents or at any time upon the agreement
in writing of the Subscriber and Company.
5.2. Notices. All notices, request, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been received one (1) day after being sent by telecopy (with copy delivered by
regular mail):
(a) If to the Company, to:
Fantasy Sportsnet, Inc.
142 Mineola Avenue, Suite 2-d
Roslyn Heights, New York 11577
(212) 643-1998 (Telecopier)
(b) If to the Subscriber, to: the addresses and telecopier numbers listed on
Schedule A hereto.
7
<PAGE>
(c) If to the Escrow Agent, to:
Grushko & Mittman
Attorneys at Law
277 Broadway, Suite 801
New York, New York 10007
(212) 227-5865 (telecopier)
or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.
5.3 Interest. Interest will not be payable to the Subscriber or Company in
connection with the Escrowed Payment.
5.4. Assignment; Binding Agreement. Neither this Agreement nor any right or
obligation hereunder shall be assignable by any party without the prior written
consent of the other parties hereto. This Agreement shall enure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.
5.5. Invalidity. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal, or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
5.6. Counterparts/Execution. This Agreement may be executed in any number
of counterparts and by different signatories hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This Agreement
may be executed by facsimile transmission.
[THIS SPACE INTENTIONALLY LEFT BLANK]
8
<PAGE>
5.7. Agreement. Each of the undersigned states that he has read the
foregoing Funds Escrow Agreement and understands and agrees to it.
FANTASY SPORTSNET, INC.
"Company"
By:
---------------------------------------
LIBRA FINANCE S.A.
"Subscriber"
By:
---------------------------------------
DANBURY INVESTMENTS LTD.
"Subscriber"
By:
---------------------------------------
ALASTAIR-PRESCOTT LTD.
"Subscriber"
By:
---------------------------------------
HYETT CAPITAL LTD.
"Subscriber"
By:
---------------------------------------
TALBIYA B. INVESTMENTS LTD.
"Subscriber"
By:
---------------------------------------
ELLIS ENTERPRISES, LTD.
"Subscriber"
By:
---------------------------------------
ESCROW AGENT:
By:
---------------------------------------
GRUSHKO & MITTMAN
9
<PAGE>
SCHEDULE A TO FUNDS ESCROW AGREEMENT
================================================================================
SUBSCRIBERS COMPANY SUBSCRIBER ESCROWED
SHARES WARRANTS PAYMENT
- --------------------------------------------------------------------------------
LIBRA FINANCE S.A 51,000 561,000 $ 1,326.00
P.O. Box 4603
Zurich, Switzerland
Fax: 011-411-201-6262
- --------------------------------------------------------------------------------
DANBURY INVESTMENTS LTD 165,000 2,115,000 $ 4,590.00
4101 Pine Tree Drive, Suite
1427
Miami Beach, Florida 33140
Fax: 305-672-7331
- --------------------------------------------------------------------------------
ALASTAIR-PRESCOTT LTD 25,000 125,000 $ 500.00
245 Dixon Road, Suite 525
Etobicoke, Ontario
M9P 2M4, Canada
Fax: 403-934-6061
- --------------------------------------------------------------------------------
HYETT CAPITAL LTD 25,000 125,000 $ 500.00
1510 51st Street
Brooklyn, New York 11219
Fax: 718-972-6196
- --------------------------------------------------------------------------------
TALBIYA B. INVESTMENTS LTD 25,500 280,500 $ 663.00
c/o Ragnall House
18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Fax: 011-972-36120639
- --------------------------------------------------------------------------------
ELLIS ENTERPRISES, LTD 8,500 93,500 $ 221.00
42A Waterloo Road
London, NW2 7UF, England
Fax: 011-441-814506694
- --------------------------------------------------------------------------------
TOTALS 300,000 3,300,000 $ 7,800.00
================================================================================
10
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
FANTASY SPORTS NET, INC.
Under Section 402 of the Business Corporation Law
<PAGE>
CERTIFICATE OF INCORPORATION
OF
FANTASY SPORTS NET, INC.
Under Section 402 of the Business Corporation Law
The undersigned for the purposes of forming a corporation pursuant to
section 402 of the Business Corporation Law of the State of New York does hereby
certify and set forth:
First: The name of the corporation is:
FANTASY SPORTS NET, INC.
Second: The purpose for which the corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the
Business Corporation Law provided the corporation is not formed to engage in any
act or activity requiring the consent or approval of any state official,
department, board, agency other body without such approval or consent first
being obtained.
Third: The office of the corporation is to be located in the County of NEW
YORK State of New York.
Fourth: The aggregate number of shares which the corporation shall have the
authority to issue is 200 shares no par value all of which shall be of one
class.
Fifth: The Secretary of State is designated as agent of the corporation
upon whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the corporation
served upon him is: FANTASY SPORTS NET, INC. c/o JOHN HUGHES LAW FIRM 421 7TH
AVENUE NY, NY 10001
In witness whereof, this certificate has been subscribed to this 4/14/98 by
the undersigned who affirms that the statements made herein are true under the
penalties of perjury.
/s/ JAMES TUBBS
-------------------------------
JAMES TUBBS
52 JAMES STREET / SOLE
ALBANY, NY 12207 INCORPORATOR
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
FANTASY SPORTS NET, INC.
(a New York corporation)
(Under Section 805 of the Business
Corporation Law of the State of New York)
--------------------------------------
The undersigned, desiring to amend a certificate of incorporation under the
provisions of the Business Corporation Law of the State of New York (hereinafter
referred to as the "BCL"), hereby certifies as follows:
FIRST: The name of the corporation is Fantasy Sports Net, Inc (hereinafter
referred to as the "Corporation").
SECOND: The Certificate of Incorporation of the Corporation was filed by
the New York Department of State on the 14th day of April, 1998.
THIRD: The amendments to the Certificate of Incorporation effected by this
Certificate are as follows:
(a) Paragraph Fourth of the Certificate of Incorporation of the
Corporation, which sets forth the aggregate number and designations of shares of
stock which the Corporation shall have the authority to issue, is hereby amended
to increase the number of authorized shares from 200 to 50,000,000 and to change
the par value from no par value to $.0001 by eliminating it in its entirety and
substituting the following language in lieu thereof:
"Fourth: The aggregate number of shares of stock which the
corporation shall have the authority to issue is fifty
million (50,000,000) shares, of one class only which shares
shall be designated Common Stock, each such share having a
par value of $.0001."
(b) Each of the Corporation's issued shares, with no par value per share,
outstanding prior to this Amendment shall be converted into and exchanged for
shares of the Corporation's common stock, $.0001 per share, as follows:
1
<PAGE>
Issued shares changed: 36 shares of common stock
no par value
Issued shares resulting 9,000,000 shares of common stock,
from change $.0001 par value
(on a 250,000 to 1 basis)
Unissued shares changed 164 shares of common stock,
no par value
Unissued shares resulting 41,000,000 shares of common stock,
from change $.0001 par value
(on a 250,000 to 1 basis)
(c) To change the post office address to which the Secretary of State shall
mail a copy of any process against the Corporation served upon him. To
accomplish the change, Paragraph Fifth of the Certificate of Incorporation
relating to the service of process is hereby amended to read as follows:
"Fifth: The Secretary of State is designated as agent of the
Corporation upon whom process against it may be served. The
post office address to which the Secretary of State shall
mail a copy of any process against the Corporation served
upon him is:
c/o Darrell Lerner
142 Mineola Avenue, Suite 2-D
Roslyn Heights, New York 11577
(d) To add a new article "Sixth" to eliminate pre- emptive rights. To
accomplish the foregoing, a new article "Sixth" is hereby added to read as
follows:
"Sixth: No holder of shares of the Corporation, because of
his ownership of such shares, shall have a pre-emptive,
preferential or other right to purchase, subscribe for,
receive or take any part of any shares of the Corporation of
any class, or any securities convertible into, exchangeable
for, or carrying a right to purchase its shares of any
class, whether now or hereafter authorized, and whether
issued, optioned, sold or offered for sale by the
Corporation for cash or other consideration."
(e) To add a new article "Seventh" for indemnification of officers and
directors. To accomplish the foregoing, a new article "Seventh" is hereby added
to read as follows:
2
<PAGE>
"Seventh: (i) The Corporation may, to the fullest extent
permitted by Section 721 through 726 of the Business
Corporation Law of New York, indemnify any and all directors
and officers whom it shall have power to indemnify under the
said sections from and against any and all of the expenses,
liabilities or other matters referred to in or covered by
such sections, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which
the persons so indemnified may be entitled under any By-Law,
agreement, vote of shareholders or disinterested directors
or otherwise, both as to action in his or her official
capacity and as to action in another capacity by holding
such office, and shall continue as to a person who has
ceased to be a director or officer and shall inure to the
benefits of the heirs, executors and administrators of such
a person.
(ii) A director of this Corporation shall not be personally
liable to the Corporation or its shareholders for damages
for any breach of duty in his or her capacity as a director,
unless a judgment or other final adjudication adverse to him
or her establishes that (x) his or her acts or omissions
were in bad faith or involved intentional misconduct or a
knowing violation of law, or (y) he or she personally gained
in fact a financial or other advantage to which he or she
was not legally entitled or (z) his or her acts violated
Section 719 of the Business Corporation Law."
(f) To add a new article "Eighth" regarding interested transactions. To
accomplish the foregoing, a new article "Eighth" is hereby added to read as
follows:
"Eighth: A director or officer of the Corporation shall not,
in the absence of fraud, be disqualified from his or her
office by dealing with or contracting with the Corporation
as vendor, purchaser or otherwise. In the absence of fraud,
no transaction, contract or act of the Corporation, the
Board of Directors, the Executive Committee of the Board of
Directors, or any other duly constituted committee, shall be
void, voidable or affected by reason of the fact that any
director or officer of the Corporation, or any firm of which
any director or officer of the Corporation is a member, or
any corporation of which any director or officer of the
Corporation is an officer, director, or shareholder, is in
any way interested in the transaction, contract or act, if
either:
3
<PAGE>
(i) the fact of such common directorship, officership, or
financial or other interest is disclosed or known to the
Board of Directors or the Executive Committee, and the Board
of Directors or the Executive Committee approves the
transaction, contract or act by a vote sufficient for such
purposes without the vote of such interested director, if
any; provided that any such director may be counted in
determining the presence of a quorum at any such meeting of
the Board of Directors or the Executive Committee; or
(ii) the fact of such common directorship, officership or
financial or other interest is disclosed or known to the
shareholders entitled to vote on the transaction, contract
or act and the transaction, contract or act is approved by
vote of the shareholders entitled to vote thereon, whether
or not the Board of Directors or the Executive Committee has
approved the transaction, contract or act.
Any such transaction, contract or act which is ratified by a
majority in interest of a quorum of the shareholders of the
Corporation having voting power at any annual or special
meeting called for such purpose, shall, if such common
ownership or financial or other interest is disclosed in the
notice of the meeting, be valid and as binding as though
approved or ratified by every shareholder of the
Corporation, except as otherwise provided by the laws of the
State of New York."
FOURTH: The stated capital is increased from $-0- to $50,000 by virtue of
the change in the par value of the outstanding shares from $-0- to $.0001.
The amendments effectuated by this Certificate of Amendment of the
Certificate of Incorporation were authorized by unanimous written consent of all
the shareholders of the Corporation following authorization by the Board of
Directors by unanimous written consent.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this 28th day of
April, 1999.
By:
---------------------------------
Darrell Lerner, President
By:
---------------------------------
James Tubbs, Secretary/Treasurer
4
Exhibit 3.3
BY-LAWS
OF
FANTASY SPORTS NET, INC.
ARTICLE I - OFFICES
The office of the Corporation shall be located in any City and State designated
by the Board of Directors. The Corporation may also maintain other offices at
such other places within or without the United States as the Board of Directors
may, from time to time, determine.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held if called by the Board
of Directors within five months after the close of the fiscal year of the
Corporation, for the purpose of electing directors, and transacting such other
business as may properly come before the meeting.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders of
not less than 10 per cent of all the outstanding shares of the corporation
entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
1
<PAGE>
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than 10 nor more than 50 days before the
date of the meeting, either personally or by mail, by or at the direction of the
president, or the secretary, or the officer or persons calling the meeting, to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, 30 days. If the stock transfer books shall be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such books shall be closed for at least 15
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than 45 days
and, in case of a meeting of stockholders, not less than 15 days prior to the
date on which the particular action requiring such determination of stockholders
is to be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the directors declaring such dividend is adopted, as the case
may be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
6. QUORUM.
At any meeting of stockholders 50% of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than said number of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such
2
<PAGE>
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
7. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting.
8. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these bylaws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholders. Upon the demand of any stockholder, the vote for
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by majority vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of this State.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these bylaws and the laws of this State.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors shall be not less than one (1) nor more than seven
(7). All actions taken by the corporation requiring approval of the Board of
Directors, when the Board of Directors consists of only one director, shall be
valid. The directors shall be elected at the annual meeting of the stockholders
and each director shall be elected to serve until his successor shall be elected
and shall qualify. When the Board of Directors consists of only one director,
such director may accept his own resignation and appoint his successor. A
director need not be a stockholder.
3
<PAGE>
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice than
this bylaw immediately after and at the same place as, the annual meeting of
stockholders. The directors may provide, by resolution, the time and place for
the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of the
president or any two directors. The person or persons authorized to call special
meetings of the directors may fix the place for holding any special meeting of
the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least 3 days previously
thereto by written notice delivered personally, by telegram, telecopier or
mailed to each director at his business or home address. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed delivered when the telegram is delivered to the telegraph
company. If notice be given by telecopier, such notice shall be deemed delivered
upon completion of the telecopier transmission. The attendance of a director at
a meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
6. QUORUM.
At any meeting of the directors a majority of the directors shall
constitute a quorum for the transaction of business, but if less than said
number is present at a meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice. In the event the
corporation has only two directors, then one director will constitute a quorum.
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
4
<PAGE>
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors authorized by the board of directors or shareholders and vacancies
occurring in the board for any reason except the removal of directors without
cause may be filled by a vote of a majority of the directors then in office,
although less than a quorum exists. Vacancies occurring by reason of the removal
of directors without cause shall be filled by vote of the stockholders. A
director elected to fill a vacancy caused by resignation, increase in the number
of directors, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
9. REMOVAL OF DIRECTORS
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
of such officer, and the acceptance of the resignation shall not be necessary to
make it effective. With the consent of a majority of the other members of the
board of directors, or without such consent if there are no other directors, any
director tendering his resignation to the board of directors may accept such
resignation and appoint a successor to complete the term of the resigning
director.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefore.
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of
5
<PAGE>
the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of three or more directors. Each
such committee shall serve at the pleasure of the board.
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a vice-president, a
secretary and a treasurer, each of whom shall be elected by the directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the directors. Any two or more offices may be held by the same
person.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected at a meeting of the directors held when determined by the directors.
Each officer shall hold office until his successor shall have been duly elected
and shall have qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided.
3. REMOVAL
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
4. VACANCIES
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
5. SALARIES
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
6
<PAGE>
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS
The directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
2. LOANS
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be signed
by such officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be determined by resolution of the directors.
4. DEPOSITS
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be in such form
as shall be determined by the directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by law
and by the directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders, the
number of shares and date of issue, shall be entered on the stock transfer books
of the corporation. All certificates surrendered to the corporation for transfer
shall be cancelled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefore upon such terms and indemnity to the corporation
as the directors may prescribe.
7
<PAGE>
2. TRANSFERS OF SHARES
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall end on the 31st day of March in
each year.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation and the words,
"Corporate Seal."
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these bylaws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
8
<PAGE>
ARTICLE XI - AMENDMENTS
These bylaws may be altered, amended or repealed and new bylaws may be
adopted by a vote of the stockholders representing a majority of all the shares
issued and outstanding, at any annual stockholders' meeting or at any special
stockholders' meeting when the proposed amendment has been set out in the notice
of such meeting, or by a unanimous vote of the Board of Directors provided that
the amendment is not inconsistent with the powers provided the Board of
Directors by the Articles of Incorporation.
9
Exhibit 4.2
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FANTASY SPORTSNET, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase _________ Shares of
Common Stock of Fantasy Sportsnet, Inc.
(subject to adjustment as provided
herein)
COMMON STOCK PURCHASE WARRANT
No. 1 May , 1999
FANTASY SPORTSNET, INC., a corporation organized under the laws of the
State of New York (the "Company"), hereby certifies that, for value received,
_______________, or assigns, is entitled, subject to the terms set forth below,
to purchase from the Company after May ____, 1999 at any time or from time to
time before 5:00 p.m., New York time, on May ____, 2004 (the "Expiration Date"),
up to _________ fully paid and nonassessable shares of Common Stock (as
hereinafter defined), $.001 par value per share, of the Company, at a purchase
price of $0.50 per share (such purchase price per share as adjusted from time to
time as herein provided is referred to herein as the "Purchase Price"). The
number and character of such shares of Common Stock and the Purchase Price are
subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term Company shall include Fantasy Sportsnet, Inc. and any
corporation which shall succeed or assume the obligations of Fantasy Sportsnet,
Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock, $.001
par value per share, as authorized on the date of the Agreement, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies,
1
<PAGE>
be entitled to vote for the election of a majority of directors of the Company
(even if the right so to vote has been suspended by the happening of such a
contingency) and (c) any other securities into which or for which any of the
securities described in (a) or (b) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the holder
hereof by surrender of this Warrant, with the form of subscription attached as
Exhibit A hereto (the Subscription Form") duly executed by such holder, to the
Company at its principal office or at the office of its Warrant agent (as
provided in Section 11), accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock for which this Warrant is
then exercisable by the Purchase Price (as hereinafter defined) then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part (but not for a
fractional share) by surrender of this Warrant in the manner and at the place
provided in subsection 1.2 except that the amount payable by the holder on such
partial exercise shall be the amount obtained by multiplying (a) the number of
shares of Common Stock designated by the holder in the Subscription Form by (b)
the Purchase Price then in effect. On any such partial exercise, the Company, at
its expense, will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes), may
request, the number of shares of Common Stock for which such Warrant may still
be exercised.
2
<PAGE>
1.4. Fair Market Value. Fair Market Value of a share of Common Stock as of
a particular date (the "Determination Date") shall mean the Fair Market Value of
a share of the Company's Common Stock. Fair Market Value of a share of Common
Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or is quoted on
the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") National Market System or the NASDAQ SmallCap Market, then the
closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange or on the
NASDAQ National Market System or the NASDAQ SmallCap Market but is traded in the
over-the-counter market, then the mean of the closing bid and asked prices
reported for the last business day immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common Stock
is not publicly traded, then as the Holder and the Company agree or in the
absence of agreement by arbitration in accordance with the rules then standing
of the American Arbitration Association, before a single arbitrator to be chosen
from a panel of persons qualified by education and training to pass on the
matter to be decided.
(d) If the Determination Date is the date of a liquidation, dissolution or
winding up, or any event deemed to be a liquidation, dissolution or winding up
pursuant to the Company's charter, then all amounts to be payable per share to
holders of the Common Stock pursuant to the charter in the event of such
liquidation, dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common Stock in liquidation under the charter, assuming
for the purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the exercise
of the Warrant, upon the request of the holder hereof acknowledge in writing its
continuing obligation to afford to such holder any rights to which such holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrants pursuant to
Subsection 3.2, such bank or trust company shall have all the powers and duties
of a warrant agent appointed pursuant to Section 10 and shall accept, in its own
3
<PAGE>
name for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct in compliance with
applicable Securities Laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such holder is entitled
upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
4
<PAGE>
3.2. Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 3 to a bank or trust company having
its principal office in New York, NY, as trustee for the holder or holders of
the Warrants.
3.3. Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 3.3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 3.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the holders of the Warrants be delivered to the Trustee as
contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that
5
<PAGE>
would otherwise (but for the provisions of this Section 4) be in effect, and (b)
the denominator is the Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements. The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrants, all shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of the
Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
Securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") with respect to any
or all of the Shares. On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
Transferor Endorsement Form") and together with evidence reasonably satisfactory
to the Company demonstrating compliance with applicable Securities Laws, the
Company at its expense but with payment by the Transferor of any applicable
transfer taxes) will issue and deliver to or on the order of the Transferor
thereof a new Warrant or Warrants of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.
6
<PAGE>
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The holder of this Warrant has been granted certain
registration rights by the Company. These registration rights are set forth in a
Subscription Agreement entered into by the Company and Subscribers of the
Company's Common Stock at or prior to the issue date of this Warrant. The terms
of the Subscription Agreement are incorporated herein by this reference.
10. Warrant Agent. The Company may, by written notice to the each holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
11. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
12. Notices, etc. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
13. Maximum Exercise. The holder shall not be entitled to exercise on an
exercise date that amount of warrants in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by such holder and its affiliates on such
exercise date, and (ii) the number of shares of Common Stock issuable upon the
exercise of this Warrant with respect to which the determination of this proviso
is being made on an exercise date, which would result in beneficial ownership by
the holder and its affiliates of more than 9.99% of the outstanding shares of
Common Stock of the Company on such exercise date. For the purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
7
<PAGE>
Exchange of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the
foregoing, the holder shall not be limited to aggregate warrant exercises of
only 9.99%.
14. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as of
the date first written above.
Fantasy Sportsnet, Inc.
By:
-----------------------------
Witness:
- --------------------------------
8
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Fantasy Sportsnet, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, ________________ shares
of Common Stock of Fantasy Sportsnet, Inc. and herewith makes payment of
$___________________ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to _____________________ whose
address is ____________________________________________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________
_____________________________________
(Signature must conform to name of
holder as specified on the face of
the Warrant)
=====================================
(Address)
9
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Fantasy Sportsnet, Inc. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Fantasy Sportsnet, Inc. with full power of substitution in the premises.
================================================================================
Transferees Percentage Number
----------- Transferred Transferred
----------- -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Dated: ______________________ , 19___ _______________________________
(Signature must conform to name
of holder as specified on the
face of the warrant)
Signed in the presence of:
- ------------------------------------- -------------------------------
(Name) (address)
-------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
=====================================
(Name)
10
Exhibit 4.3
FANTASY SPORTS NET, INC.
1999 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the 1999 Stock Option Plan of Fantasy Sports Net, Inc., a
New York corporation (the "Company") is to promote the interests of the Company
and its stockholders by providing its officers and employees with an incentive
to continue service with the Company. Accordingly, the Company may grant to
selected officers and employees Stock Options and/or Stock Appreciation Rights
in an effort to attract and retain in its employ qualified individuals and to
provide such individuals with incentives to devote their best efforts to the
Company through ownership of the Company's stock, thus enhancing the value of
the Company for the benefit of stockholders.
SECTION 2. DEFINITIONS
(A). "Agreement" shall mean a written agreement setting forth the terms of
an Award, in substantially the form of Exhibit "A" attached hereto for an Award
of Non-Qualified Stock Options, and in substantially the form of Exhibit "B"
attached hereto for an Award of Incentive Stock Options.
(B). "Award" shall mean an Option or a Stock Appreciation Right, in each
case granted under this Plan.
(C). "Beneficiary" shall mean the person, persons, trust or trusts
designated by an Employee or if no designation has been made, the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive the benefits specified under this Plan in the event of
an Employee's death.
(D). "Board" shall mean the Board of Directors of the Company.
(E). "Change in Control" shall be deemed to occur (1) upon the approval by
the Board (or if approval of the Board is not required as a matter of law, the
stockholders of the Company) of (a) any consolidation or merger of the Company
in which the Company is not the continuing or surviving corporation or pursuant
to which shares of Common Stock would be converted into cash, securities or
other property, other than a merger in which the holders of Common Stock
immediately prior to the merger will have the same proportionate ownership of
Common Stock of the surviving corporation immediately after the merger, (b) any
sale, lease, exchange, or other transfer (in one transaction or a series of
1
<PAGE>
related transaction) of all or substantially all the assets of the Company, or
(c) adoption of any plan or proposal for the liquidation or dissolution of the
Company, (2) when any "person" (as defined in Section 13(d) of the Exchange
Act), other than the Company or any Subsidiary or employee benefit plan or trust
maintained by the Company, shall become the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 60% of
the Company's Common Stock outstanding at the time, without the prior approval
of the Board, or (3) at any time during a period of two consecutive years,
individuals who at the beginning of such period constituted the Board shall
cease for any reason to constitute at least a majority thereof, unless the
election or the nomination for election by the Company's stockholders of each
new director during such two-year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such two-year period.
(F). "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(G). "Committee" shall mean either (i) the Stock Option Committee of the
Board, as from time to time constituted, or any successor committee of the Board
with similar functions, which shall consist of two or more members, each of whom
shall be Disinterested, or (ii) if no such Stock Option Committee shall have
been designated by the Board, the entire Board provided that to the extent
required by Section 16(b) of the Exchange Act and Rule 16b-3 of the Securities
and Exchange Commission thereunder, with respect to specific grants of Options
(including Reload Options) or Stock Appreciation Rights this Plan shall be
administered by an administrator or administrators who are Disinterested.
(H). "Common Stock" shall mean the Common Stock of the Company, no par
value, subject to adjustment pursuant to Section 10 herein.
(I). "Company" shall mean, collectively, the Company and its Subsidiaries.
(J). "Disinterested" shall mean disinterested within the meaning of
applicable regulatory requirements, including those promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange Act.
(K). "Employee" shall mean an officer or employee of the Company holding
the title of President, Chief Executive Officer, Chief Operating Officer, Vice
President, Executive Vice President, Senior Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer, either alone or in combination with
other titles.
2
<PAGE>
(L). "Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended and applicable rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
(M). "Exercise Price" shall mean, with respect of each share of Common
Stock subject to (i) an Option (other than a Reload Option), the price fixed by
the Committee at which such shares may be purchased from the Company pursuant to
the exercise of such Option, which price at no time may be less than 100% of the
Fair Market Value of the Common Stock on the date the Option is granted or (ii)
a Reload Option, the price of which is as fixed pursuant to Section 6 of this
Plan.
(N). "Fair Market Value" shall be (i) the value of one share of the
Company's Common Stock as determined by the appraisal or valuation procedure set
forth in any stockholders' or buy-sell agreement to which the stockholder with
respect to whom the value is to be determined is a party, or (ii) if no such
stockholders' or buy-sell agreement is in force or effect, the value of one
share of the Company's Common Stock as determined by the Company's independent
certified public accountants, or (iii) if at any time the Company's Common Stock
is publicly traded, (a) the mean between the high bid and low asked trading
prices of the Company's Common Stock as reported in the "pink sheets" published
by the National Quotation Bureau, Inc. or (B) if the Common Stock is no longer
reported in the "pink sheets," the mean between the high and low sales price of
the Common Stock as reported on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), as applicable, or (C) if the Common Stock
is no longer reported on NASDAQ, the mean between the high and low sales price
of the Common Stock as reported on an exchange on which the Common Stock is
trading, or (D) if there is no trading of the Common Stock on the date in
question, then the closing price of the Common Stock, as so reported, on the
next preceding date on which there was trading of the Common Stock.
(O). "Incentive Stock Option" or "ISO" shall mean an Option that is
intended by the Committee to meet the requirements of Section 422 of the Code or
any successor provision.
(P). "Nonqualified Stock Option" or "NQSO" shall mean an Option granted
pursuant to this Plan which does not qualify as an Incentive Stock Option.
(Q). "Option" shall mean the right to purchase Common Stock at a price to
be specified and upon terms to be designated by the Committee or otherwise
determined pursuant to this Plan. An Option shall be designated by the Committee
as a Nonqualified Stock Option or an Incentive Stock Option.
3
<PAGE>
(R). "Original Option" shall mean an option as defined in subsection (D) of
Section 6 of this Plan.
(S). "Personal Representative" shall mean the person or persons who, upon
the disability or incompetence of an Employee, shall have acquired on behalf of
the Employee by legal proceeding or otherwise the right to receive the benefits
specified in this Plan.
(T). "Plan" shall mean the Company's 1999 Stock Option Plan.
(U). "Reload Option" shall mean an option granted pursuant to Subsection
(D) of Section 6 of this Plan.
(V). "Retirement" shall mean retirement of an Employee in the employ of the
Company at any time.
(W). "Section 16(b) Optionee" shall mean an Employee or former Employee who
is subject to Section 16(b) of the Exchange Act.
(X). "Stock Appreciation Right" or "SAR" shall mean the right of the holder
to elect to surrender an Option or any portion thereof which is then exercisable
and receive in exchange thereof shares of Common Stock, cash, or a combination
thereof, as the case may be, with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock over the Exercise Price specified
in such Option, multiplied by the number of shares of Common Stock covered by
such Option or portion thereof which is so surrendered. An SAR may only be
granted concurrently with the grant of the related Option. An SAR shall be
exercised upon such additional terms and conditions as may be determined by the
Committee under this Plan.
(Y). "Subsidiary" shall mean any present or future subsidiary corporations,
as defined in Section 424 of the Code, of the Company.
(Z). "Tax Date" shall mean the date if any on which withholding tax
obligations arise with respect to the exercise of an Award.
SECTION 3. STOCK SUBJECT TO THE PLAN
There will be reserved for issuance under the Plan (upon the exercise of
Options and Stock Appreciation Rights), an aggregate of 5,100,000 shares of the
Company's Common Stock. Such shares shall be authorized but unissued shares of
Common Stock. Except as provided in Section 7 herein, if any Award under the
Plan shall expire or terminate for any reason without having been exercised in
full, or if any Award shall be forfeited, the shares subject to the unexercised
or forfeited portion of such Award shall again be available for the purposes of
this Plan. Any shares of Common
4
<PAGE>
Stock received by an Employee upon an exercise of Options or Stock Appreciation
Rights hereunder shall be subject to the provisions of any stockholders' or
buy-sell agreement then in effect among the holders of the Company's Common
Stock.
SECTION 4. ADMINISTRATION
This Plan shall be administered by the Committee. No person who is (or,
within one year prior to his or her appointment as a member of the Committee,
was) eligible to participate in the Plan, or in any other stock option or stock
bonus plan of the Company, shall be a member of the Committee.
In addition to any implied powers and duties that may be needed to carry
out the provisions of the Plan, the Committee shall have all the powers vested
in it by the terms of the Plan, including exclusive authority to select the
Employees to be granted Awards under the Plan, to determine the type, size and
terms of the Awards to be made to each Employee selected, to determine the time
when Awards will be granted, and to prescribe the form of the Agreements
embodying Awards made under the Plan. The Committee shall be authorized to
interpret the Plan and the Awards granted under the Plan, to establish, amend
and rescind any rules and regulations relating to the Plan, to make any other
determination which it believes necessary or advisable for the administration of
the Plan, and to correct any defect or supply any omissions or reconcile any
inconsistency in the Plan or in any Award in the manner and to the extent the
Committee deems necessary or desirable. Any decision of the Committee in the
administration of the Plan, as described herein, shall be final and conclusive.
The Committee may act only by a majority of its members. Any determination
of the Committee may be made, without notice, by the written consent of a
majority of the members of the Committee. In addition, the Committee may
authorize any one of their number or any officer of the Company to execute and
deliver documents on behalf of the Committee. No member of the Committee shall
be liable for any action taken or omitted to be taken by him or her or by any
other member of the Committee in connection with the Plan, except for his or her
own willful misconduct or as expressly provided by statute.
SECTION 5. ELIGIBILITY
Awards may only be granted to individuals who are Employees.
Notwithstanding the foregoing, (a) Incentive Stock Options shall not be granted
to any owner of 10% or more of the total combined voting power of the Company
and its Subsidiaries (a "10% Owner"), provided that Incentive Stock Options may
be granted to a 10% Owner if (i) the Exercise Price of each such Option is equal
to 110% of the Fair Market Value of the Company's Common Stock on the date of
grant and (ii) such Options expire or terminate on the fifth
5
<PAGE>
anniversary of the date of grant, and (b) the aggregate Fair Market Value of
Common Stock subject to an Incentive Stock Option granted to an Employee in any
calendar year shall not exceed $100,000.
SECTION 6. STOCK OPTIONS
A. Designation and Price.
(a). Any Option granted under the Plan may be granted as an Incentive Stock
Option or as a Nonqualified Stock Option as shall be designated by the Committee
at the time of the grant of such Option. Each Option shall be evidenced by an
Agreement between the recipient and the Company, which Agreement shall specify
the designation of the Option as an ISO or a NQSO, as the case may be, and shall
contain such terms and conditions as the Committee, in its sole discretion, may
determine in accordance with the Plan.
(b). Every Incentive Stock Option shall provide for a fixed expiration date
of not later than ten years from the date such Incentive Stock Option is
granted.
(c). The Exercise Price of Common Stock issued pursuant to each Option
(other than a Reload Option) shall be fixed by the Committee at the time of the
granting of the Option; provided, however, that such Exercise Price shall in no
event be less than 100% of the Fair Market Value of the Common Stock on the date
such Option is granted.
B. Exercise.
The Committee may, in its discretion, provide for Options granted under the
Plan to be exercisable in whole or in part; provided; however, that no Option
(other than a Reload Option) shall be exercisable prior to the first anniversary
of the date of its grant, except as provided in Section 8 herein or as the
Committee otherwise determines in accordance with the Plan, and in no case may
an Option be exercised at any time for fewer than 1,000 shares (or the total
remaining shares covered by the Option if fewer than 1,000 shares) during the
term of the Option. The specified number of shares will be issued upon receipt
by the Company of (i) notice from the optionee of exercise of an Option, and
(ii) either payment to the Company (as provided in Section 6, subsection (C)
below), of the Exercise Price for the number of shares with respect to which the
Option is exercised, or with approval of the Committee, a secured promissory
note as hereinafter provided. Each such notice and payment shall be delivered or
mailed by post-paid mail, addressed to the Treasurer of the Company at the
Company's principal office, or such other place as the Company may designate
from time to time. Separate stock certificates shall be issued by the Company
for those shares acquired pursuant to the exercise of an ISO and for those
shares
6
<PAGE>
acquired pursuant to a NQSO.
C. Payment for Shares.
Except as otherwise provided in this Section 6, the Exercise Price for the
Common Stock shall be paid in full when the Option is exercised. Subject to such
rules as the Committee may impose, and subject to the federal income tax laws,
rules and regulations relating to Incentive Stock Options (the "ISO Rules"), the
Exercise Price may be paid in whole or in part in (i) cash, (ii) whole shares of
Common Stock owned by the Employee six months or longer and evidenced by
negotiable certificates, valued at their Fair Market Value on the date of
exercise, (iii) by a combination of such methods of payment, or (iv) such other
consideration as shall constitute lawful consideration for the issuance of
Common Stock and be approved by the Committee (including without limitation,
assurance satisfactory to the Committee from a broker registered under the
Exchange Act, of the delivery to the Company of the proceeds of an imminent sale
of stock to be issued pursuant to the exercise of such Option, such sale to be
made at the direction of the Employee). If certificates representing shares of
Common Stock are used to pay all or part of the Exercise Price of an Option,
separate certificates shall be delivered by the Company representing the same
number of shares as each certificate so used and an additional certificate shall
be delivered representing any additional shares to which the Employee is
entitled as a result of exercise of the Option. Moreover, if so provided in the
Agreement, and subject to the ISO Rules and such additional restrictions, terms
and conditions as the Committee may impose, an Employee may request the Company
to "pyramid" his or her shares; that is, to automatically apply the shares which
he or she is entitled to receive on the exercise of a portion of an Option to
satisfy the exercise for additional portions of the Option, thus resulting in
multiple simultaneous exercises of an Option by use of whole shares as payment.
The Committee may, in its discretion, authorize payment of all or any part of
the Exercise Price over a period of not more than five years from the date the
Option is exercised. In such instance any unpaid balance of the Exercise Price
shall be evidenced by the Employee's promissory note payable to the order of the
Company which shall be secured by such collateral and shall bear interest at
such rate or rates as determined from time to time by the Committee.
D. Reload Options.
The Committee shall have the authority to specify at the time of grant that
an Employee shall be granted another Stock Option (a "Reload Option") in the
event such Employee exercises all or part of a Stock Option (an "Original
Option") by surrendering in accordance with Section 6, subsection (C) previously
owned shares of Common Stock in full or partial payment of the Exercise Price
under such Original Option, subject to the availability of shares
7
<PAGE>
of Common Stock under the Plan at the time of exercise. Each Reload Option shall
entitle the Employee to receive upon exercise in full a number of shares of
Common Stock equal to the number of shares of Common Stock surrendered in
payment of the Exercise Price, shall have an Exercise Price per share of Common
Stock equal to the Fair Market Value of the Common Stock on the date of grant of
such Reload Option and shall expire on the stated expiration date of the
Original Option. A Reload Option shall be exercisable at any time and from time
to time from and after the date of grant of such Reload Option (or, as the
Committee, in its sole discretion, shall determine at the time of grant, at such
time or times as shall be specified in the Reload Option); provided, however,
that a Reload Option granted to a Section 16(b) Optionee shall not be
exercisable during the first six months from the date of grant of such Reload
Option. The first such Reload Option may provide for the grant, when exercised,
of one subsequent Reload Option to the extent and upon such terms and
conditions, consistent with this Section 6, subsection (D), as the Committee, in
its sole discretion, shall specify at or after the time of grant of such Reload
Option. The term of each Reload Option shall be equal to the remaining term of
the underlying Option. Upon the exercise of an underlying Option or Reload
Option, the Reload Option will be evidenced by an amendment to the underlying
Agreement. No additional Reload Options shall be granted to Employees when
Options and/or Reload Options are exercised pursuant to the terms of this Plan
following termination of the Employee's employment for any reason. A Reload
Option shall contain such other terms and conditions (which may include a
restriction on the transferability of the number of shares of Common Stock
received upon exercise of the Original Option reduced by a number of shares
equal in value to the tax liability incurred upon exercise) as the Committee, in
its sole discretion, may deem desirable and are set forth in the Agreement
evidencing the Reload Option. Notwithstanding the fact that the underlying
Option may be an Incentive Stock Option, a Reload Option is not intended to
qualify as an Incentive Stock Option.
E. Restrictions on Transfer of Shares.
Each Employee who receives an Award of Incentive Stock Options under this
Plan shall be prohibited from the sale, exchange, transfer, pledge,
hypothecation, gift or other disposition of the shares of Common Stock received
upon exercise of any such Option until the later of two (2) years from the date
of the granting of such Incentive Stock Option to the Employee or one (1) year
from the date such shares of Common Stock were transferred to the Employee upon
exercise; unless the Employee shall deliver to the Committee an option of
counsel reasonably satisfactory to the Committee that such sale, exchange,
transfer, pledge, hypothecation, gift or other disposition is not a
"disqualifying disposition" by virtue of Section 424(c) of the Code.
8
<PAGE>
SECTION 7. STOCK APPRECIATION RIGHTS
The Committee may grant Stock Appreciation Rights pursuant to the
provisions of this Section 7 to any holder of any Option (including any Reload
Option) granted under the Plan with respect to all or a portion of the shares
subject to such Option. An SAR may only be granted concurrently with the grant
of the related Option. Subject to the terms and provisions of this Section 7,
(i) each SAR shall be transferable only at the same time and to the same extent
the related Options are transferable, (ii) each SAR shall be exercisable only at
the same time and to the same extent the related Option is exercisable and in no
event after the termination of the related Option, and (iii) an SAR shall be
exercisable only when the Fair Market Value (determined as of the date of
exercise of the SAR) of each share of Common Stock with respect to which the SAR
is to be exercised shall exceed the Exercise Price per share of Common Stock
subject to the related Option. An SAR granted under the Plan shall be
exercisable in whole or in part by notice to the Company. Such notice shall
state that the holder of the SAR elects to exercise the SAR and the number of
shares in respect of which the SAR is being exercised. For purposes of this
Section 7, the date of exercise of an SAR shall mean the date on which the
Company receives such notice.
The exercise of any Option shall cancel that number of related Stock
Appreciation Rights which is equal to the number of shares of Common Stock
purchased pursuant to said Option.
Subject to the terms and provisions of this Section 7, upon the exercise of
an SAR, the holder thereof shall be entitled to receive from the Company
consideration (in the form hereinafter provided) equal in value to the excess of
the Fair Market Value (determined as of the date of exercise of the SAR) of each
share of Common Stock with respect to which such SAR has been exercised over the
Exercise Price per share of Common Stock subject to the related Option. The
Committee may stipulate in the Agreement the form of consideration which shall
be received by such holder, which shall be in shares of Common Stock (valued at
Fair Market Value on the date of exercise of the SAR), or in cash, or partly in
cash and partly in shares of Common Stock, as the holder shall request;
provided, however, that the Committee, in its sole discretion, may disapprove
the form of consideration requested and instead authorize the payment of such
consideration in shares of Common Stock (valued as aforesaid), or in cash, or
partly in cash, or partly in shares of Common Stock.
Upon the exercise of an SAR, the related Option shall be deemed exercised
to the extent of the number of shares of Common Stock with respect to which such
SAR is exercised and to that extent a corresponding number of shares of Common
Stock shall not again be available for the grant of Awards under the Plan. Upon
the exercise or termination of the Related Option, the SAR with
9
<PAGE>
respect thereto shall be considered to have been exercised or terminated to the
extent of the number of shares of Common Stock with respect to which the related
Option was so exercised or terminated.
SECTION 8. CONTINUED EMPLOYMENT AND AGREEMENT TO SERVE
(a) Subject to the provisions of paragraph (e) of this Section 8, every
Option (other than a Reload Option) and SAR shall provide that it may not be
exercised in whole or in part for a period of one year after the date of
granting such Option and, if the employment of the Employee shall terminate for
any reason other than death or disability as determined by the Committee, prior
to the end of such one year period or with respect to any Reload Option such
other period as may be specified by the Committee within which such Reload
Option may not be exercised, the Option granted to such Employee shall
immediately terminate.
(b) Every Option shall provide that in the event the Employee dies while
employed by the Company, during the one-year period of disability described in
paragraph (c) of this Section 8, or within three months after cessation of
employment for any reason, such Option shall be exercisable, at any time or from
time to time prior to the fixed termination date set forth in the related
Agreement, by the Beneficiaries of the decedent for the number of shares which
the Employee could have acquired under the Option immediately prior to the
Employee's death.
(c) Every Option shall provide that in the event the employment of any
Employee shall cease by reason of total and permanent disability within the
meaning of Section 22(e)(3) of the Code, as determined by the Committee at any
time during the term of the Option, such Option shall be exercisable, at any
time or from time to time by such Employee, during a period of one year of
continuing disability following termination of employment by reason of such
disability for the number of shares which the Employee could have acquired under
the Option immediately prior to the Employee's total and permanent disability.
The one-year period following such termination of employment during which
Options may be exercisable may be extended at the discretion of the Committee;
provided, however, that no Option may be exercisable after the fixed termination
date set forth in the related Agreement. The determination by the Committee of
any question involving disability shall be conclusive and binding.
(d) Except as provided in paragraphs (a), (b), (c) and (e) of this Section
8, every Option shall provide that it shall terminate on the earlier to occur of
the fixed termination date set forth in the Option or three months after
cessation of the Employee's employment for any reason except (i) Retirement, in
which event the Option shall be exercisable for a period of three months after
such Retirement date, which three-month period may be extended at the
10
<PAGE>
discretion of the Committee in the case of Non-Qualified Stock Options or (ii)
termination of the Employee's employment by the Company for "cause," as defined
by the Committee from time to time or in any employment agreement an Employee
might have with the Company, in which case the Option shall terminate
immediately upon such termination of Employee's employment by the Company. If an
Option is exercised after cessation of employment or Retirement, it may be
exercised only in respect of the number of shares which the Employee could have
acquired under the Option immediately prior to such cessation of employment or
Retirement; provided, however, that no Option may be exercised after the fixed
termination date set forth in the Option.
(e) Notwithstanding any provision of this Section 8 to the contrary, any
Award granted pursuant to the Plan may, in the discretion of the Committee or as
provided in the relevant Agreement, become exercisable, at any time or from time
to time, prior to the fixed termination date set forth in the Award for the full
number of awarded shares or any part thereof, less such numbers as may have been
theretofore acquired under the Award (i) from and after the time the Employee
ceases to be an employee of the Company as a result of the sale or other
disposition by the Company of assets or property (including shares of any
Subsidiary) in respect of which such Employee had theretofore been employed or
as a result of which such Employee's continued employment with the Company is no
longer required, and (ii) in the case of a Change in Control, from and after the
date of such Change in Control.
(f) Each Employee granted an Award under this Plan shall agree by his or
her acceptance of such Award to remain in the service of the Company for a
period of at least one year from the date of the Agreement respecting the Award
between the Company and the Employee. Such service shall, subject to the terms
of any contract between the Company and such Employee, be at the pleasure of the
Company and at such compensation as the Company shall reasonably determine from
time to time. Nothing in the Plan, or in any Award granted pursuant to the Plan,
shall confer on any individual any right to continue in the employment of or
service to the Company or interfere in any way with the right of the Company to
terminate the Employee's employment at any time.
(g) Subject to the limitations set forth in Section 422 of the Code, the
Committee may adopt, amend, or rescind from time to time such provisions as it
deems appropriate with respect to the effect of leaves of absence approved by
any duly authorized officer of the Company with respect to any Employee,
provided that any Incentive Stock Options granted pursuant to this Plan shall
terminate on the ninetieth (90th) day of any such leave of absence unless such
Employee's re-employment rights are guaranteed by law or by contract.
11
<PAGE>
SECTION 9. WITHHOLDING TAXES
Federal, state or local law may require the withholding of taxes applicable
to gains resulting from the exercise of an Award. Unless otherwise prohibited by
the Committee, each Employee may satisfy any such tax withholding obligation by
any of the following means, or by a combination of such means: (i) a cash
payment, (ii) authorizing the Company to withhold from the shares of Common
Stock otherwise issuable to the Employee pursuant to the exercise or vesting of
an Award a number of shares having a Fair Market Value, as of the Tax Date,
which will satisfy the amount of the withholding tax obligation, or (iii) by
delivery to the Company of a number of shares of Common Stock having a Fair
Market Value, as of the Tax Date, which will satisfy the amount of the
withholding tax obligation arising from an exercise or vesting of an Award. An
Employee's election to pay the withholding tax obligation by (ii) or (iii) above
must be made on or before the Tax Date, is irrevocable, is subject to such rules
as the Committee may adopt, and may be disapproved by the Committee. If the
amount requested is not paid, the Committee may refuse to issue Common Stock
under the Plan.
SECTION 10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding Common Stock of the Company
by reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination, or exchange of shares, split-up,
split-off, spin-off, liquidation or other similar change in capitalization, or
any distribution to common stockholders other than cash dividends, the number or
kind of shares that may be issued under the Plan pursuant to Section 3 herein
and the number or kind of shares subject to, or the price per share under any
outstanding Award shall be automatically adjusted so that the proportionate
interest of the Employee shall be maintained as before the occurrence of such
event. Such adjustment shall be conclusive and binding for all purposes of the
Plan.
SECTION 11. AMENDMENTS AND TERMINATION
Unless the Plan shall have been terminated as hereinafter provided, the
Plan shall terminate on, and no Award (other than Reload Options automatically
granted pursuant to Section 6 herein) shall be granted after
____________________. The Plan may be terminated, modified or amended by the
stockholders of the Company. The Board may at any time terminate, modify or
amend the Plan in such respects as it shall deem advisable; provided, however,
that the Board may not, without approval by the holders of a majority of the
outstanding shares of Common Stock present and voting at any annual or special
meeting of stockholders of the Company: (i) increase (except as provided in
Section 10 herein) the maximum number of shares which may be issued pursuant to
the Awards granted
12
<PAGE>
under the Plan, (ii) change the class of persons eligible to receive Awards,
(iii) change the manner of determining the Exercise Price of Options other than
to change the manner of determining the Fair Market Value of the Common Stock as
set forth in Section 2 herein or (iv) extend the period during which Awards may
be granted or exercised.
SECTION 12. MISCELLANEOUS PROVISIONS
(a) No Employee or other person shall have any claim or right to be granted
an Award under the Plan.
(b) An Employee's rights and interest under the Plan may not be assigned or
transferred in whole or in part, either directly or by operation of law or
otherwise (except in the event of an Employee's death, by will or the laws of
descent and distribution), including, but not by way of limitation, execution,
levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no
such right or interest of any Employee in the Plan shall be subject to any
obligation of liability of such individual. An Award shall be exercisable,
during an Employee's lifetime, only by him or her or his or her Personal
Representative. The holder of an Award shall have none of the rights of a
stockholder until the shares of Common Stock subject thereto shall have been
registered in the name of the person receiving or person or persons exercising
the Award on the transfer books of the Company.
(c) No Common Stock shall be issued hereunder unless counsel for the
Company shall be satisfied that such issuance will be in compliance with
applicable Federal, state, and other securities laws.
(d) The expenses of the Plan shall be borne by the Company.
(e) By accepting any Award under the Plan, each Employee and each Personal
Representative or Beneficiary claiming under or through him or her shall be
conclusively deemed to have indicated his or her acceptance and ratification of,
and consent to, any action taken under the Plan by the Company, the Board or the
Committee.
(f) Awards granted under the Plan shall be binding upon the Company, its
successors and assigns.
(g) The appropriate officers of the Company shall cause to be filed any
reports, returns, or other information regarding Awards hereunder or any Common
Stock issued pursuant hereto as may be required by Section 13 or 15(d) of the
Exchange Act, or any other applicable statute, rule, or regulation.
13
<PAGE>
(h) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required.
(i) Each Employee shall be deemed to have been granted an Award on the date
the Committee took action to grant such Award under the Plan or such later date
as the Committee, in its sole discretion, shall determine at the time such grant
is authorized; provided, however, that a Reload Option shall be deemed to have
been granted on the date on which the Original Option is exercised or such later
date as the Committee, in its sole discretion, shall determine prior to the date
on which the underlying Reload Option is exercised or such later date as the
Committee, in its sole discretion, shall determine prior to the date on which
such exercise occurs.
SECTION 13. EFFECTIVENESS OF THE PLAN
The Plan shall be submitted to the stockholders of the Company for their
approval and adoption on or about May, 1999 or such other date fixed for the
next meeting of stockholders or any adjournments or postponements thereof. The
Plan shall not be effective and no Award shall be made hereunder unless and
until the Plan has been so approved and adopted at a meeting of the Company's
stockholders.
SECTION 14. GOVERNING LAW
The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the State of New York.
14
Exhibit 5.1 and
Exhibit 23.2
GRUSHKO & MITTMAN
Attorneys at Law
277 BROADWAY, SUITE 801
NEW YORK, NEW YORK 10007
(212) 766-4655 (Telephone)
(212) 227-5865 (Telecopier)
July 9, 1999
Fantasy Sports Net, Inc.
142 Mineola Avenue, Suite 2-D
Roslyn Heights, New York 11577
Re: Form SB-2 Registration Statement
Opinion and Consent of Counsel
Gentlemen:
As counsel for Fantasy Sports Net, Inc. (the "Corporation"), a New York
corporation, I have examined the Articles of Incorporation, as amended, ByLaws
and minutes of the Corporation and such other corporate records, documents and
proceedings and have considered such questions of law as I deemed relevant for
the purpose of this opinion. I have also, as such counsel, examined the
Registration Statement on Form SB-2 (the "Registration Statement"), covering the
registration of an aggregate of 22,200,000 Shares of Common Stock, $.0001 par
value per share (the "Shares") of which 9,900,000 are issuable upon exercise of
common stock purchase warrants and options.
Based on the foregoing, I am of the opinion that:
1. The Corporation is a duly organized and validly existing corporation
under the laws of the State of New York, with corporate power to conduct the
business it conducts as described in the Registration Statement.
2. The Corporation has an authorized capitalization as set forth in the
Registration Statement.
3. The Common Stock has been duly and validly authorized and created and,
subject to payment therefore pursuant to the terms described in the Registration
Statement and Subscription Agreements referred to in the Registration Statement,
will be duly and validly issued as fully paid and non-assessable shares of
Common Stock.
<PAGE>
Page -2-
July 9, 1999
4. The Warrants have been duly and validly authorized and created and,
subject to payment for the exercise thereof pursuant to the terms of the
Registration Statement, the Common Stock issued as a result of exercise of the
Warrants will be duly and validly issued as fully paid and non-assessable shares
of Common Stock.
I consent to the filing of this opinion as an exhibit to the aforesaid
Registration Statement and further consents to the reference made to me under
the caption "Legal Opinions" in the Prospectus constituting part of such
Registration Statement.
Very truly yours,
GRUSHKO & MITTMAN
Barbara R. Mittman
BRM:al
Exhibit 10.1
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as of May 1, 1999
by and between Fantasy Sports Net, Inc., a New York corporation (the "Company"),
and Darrell Lerner (the "Executive").
The Executive is being employed by the Company as an executive officer. The
parties desire to enter into an employment agreement and to set forth herein the
terms and conditions of the Executive's continued employment by the Company and
its subsidiaries.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and the mutual benefits to be derived here from, the Company and
the Executive agree as follows:
1. Employment.
(a) Duties. The Company shall employ the Executive, on the terms set forth
in this Agreement, as its President. The Executive accepts such employment with
the Company and shall perform and fulfill such duties as are assigned to him
hereunder consistent with his status as a senior executive of the Company
devoting his best efforts and a substantial portion of his time and attention to
the performance and fulfillment of his duties and to the advancement of the
interests of the Company, subject only to the direction, approvals, control and
directives of the Company's Board of Directors (the "Board"). Nothing contained
herein shall be construed, however, to prevent the Executive from trading in or
managing, for his own account and benefit, in stocks, bonds, securities, real
estate, commodities or other forms of investments (subject to law and Company
policy with respect to trading in Company securities). Without any additional
consideration, Executive shall also serve as an officer of any or all
subsidiaries of the Company. Unless otherwise indicated by the context, the term
"Company" shall include the Company and all its subsidiaries.
(b) Place of Performance. In connection with his employment by the Company,
the Executive shall be based at the Company's principal place of business in New
York, except when required for travel in Company business.
(c) Nomination as Director. The Company agrees that it will nominate the
Executive as a member of the Board of Directors each year during the term of
this Agreement and will use its best efforts to ensure that the Executive is
elected to the Board of Directors.
1
<PAGE>
2. Term. The Executive's employment under this Agreement shall commence as
of May 1, 1999 (the "Commencement Date") and shall, unless sooner terminated in
accordance with the provisions hereof, continue uninterrupted until April 30,
2002 ("Term"). As used herein "Year" shall refer to a twelve month period ending
April 30th. Unless notice of non-renewal is given by either party at least sixty
(60) days prior to the end of the Term or prior to the end of any Year
thereafter, the Term of this Agreement shall be automatically extended for an
additional period of one year.
3. Compensation. Executive shall receive a "Base Salary" during the Term.
For the period May, 1999 through April, 2000, the Base Salary shall be at the
rate of $78,000 per annum with increases, subject to a semi-annual review by the
Board of Directors.
4. Insurance.
(a) Health Insurance and Other Benefits. During the Term, the Executive
shall be entitled to all employee benefits generally offered by the Company to
its executive officers and key management employees, including, without
limitation, all pensions, profit sharing, retirement, stock option, salary
continuation, deferred compensation, disability insurance, hospitalization
insurance, major medical insurance, medical reimbursement, survivor income, life
insurance or any other benefit plan or arrangement established and maintained by
the Company, subject to the rules and regulations then in effect regarding
participation therein.
(b) Keyman Insurance. The Company may obtain keyman life insurance upon the
life of the Executive in amounts to be determined from time to time by Executive
and the Company.
5. Expenses.
(a) Reimbursement of Expenses. The Executive shall be reimbursed for all
items of travel, entertainment and miscellaneous expenses that the Executive
reasonably incurs in connection with the performance of his duties hereunder,
provided the Executive submits to the Company such statements and other evidence
supporting said expenses as the Company may reasonably require.
(b) Automobile Allowance. The Executive shall be reimbursed for the
expenses of owning or leasing an automobile suitable for his position and
consistent with Company practices, including the expenses of operating, insuring
and parking such automobile, provided the Executive submits to the Company such
statements and other evidence supporting such expenses as the Company may
require.
2
<PAGE>
6. Vacation. The Executive shall be entitled to not less than four (4)
weeks of vacation in any calendar year. Any unused vacation time in a year shall
be accumulated and increase the amount of vacation time in subsequent years.
7. Termination of Employments.
(a) Death or Total Disability. In the event of the death of the Executive
during the Term, this Agreement shall terminate as of the date of the
Executive's death. In the event of the Total Disability (as that term is defined
below) of the Executive for sixty (60) days in the aggregate during any
consecutive nine (9) month period during the Term, the Company shall have the
right to terminate this Agreement by giving the Executive thirty (30) days'
prior written notice thereof, and upon the expiration of such thirty (30) day
period, the Executive's employment under this Agreement shall terminate. If the
Executive shall resume his duties within thirty (30) days after receipt of such
a notice of termination and continue to perform such duties for four (4)
consecutive weeks thereafter, this Agreement shall continue in full force and
effect, without any reduction in Base Salary and other benefits, and the notice
of termination shall be considered null and void and of no effect. Upon
termination of this Agreement under this Paragraph 7(a), the Company shall have
no further obligations or liabilities under this Agreement, except to pay to the
Executive's estate or the Executive, as the case may be, (i) the portion, if
any, that remains unpaid of the Base Salary for the Year in which termination
occurred, but in no event less than six (6) months' Base Salary; and (ii) the
amount of any expenses reimbursable in accordance with Paragraph 4 above, and
any automobile allowance due under Paragraph 5 above; and (iii) any amounts due
under any Company benefit, welfare or pension plan. Except as otherwise provided
by their terms, any stock options not vested at the time of the termination of
this Agreement under this Paragraph 7(a) shall immediately become fully vested.
The term "Total Disability" as used herein, shall mean a mental or physical
condition which in the reasonable opinion of an independent medical doctor
selected by the Company renders the Executive unable or incompetent to carry out
the material duties and responsibilities of the Executive under this Agreement
at the time the disabling condition was incurred. In the event the Executive
disagrees with such opinion, the Executive may, at his sole expense, select an
independent medical doctor and, in the event that doctor disagrees with the
opinion of the doctor selected by the Company, they shall select a third
independent medical doctor, and the three doctors shall, by majority vote,
determine whether the employee has suffered Total Disability. The expense of the
third doctor shall be shared equally by the Company and the Executive.
Notwithstanding the foregoing, if the Executive is covered under any policy of
disability insurance under Paragraph 3(c) above, under no circumstances shall
the definition of Total
3
<PAGE>
Disability be different from the definition of that term in such policy.
(b) Discharge for Cause. The Company may discharge the Executive for
"Cause" upon notice and thereby immediately terminate his employment under this
Agreement. For purposes of this Agreement, the Company shall have "Cause" to
terminate the Executive's employment if the Executive, in the reasonable
judgment of the Company, (i) materially breaches any of his agreements, duties
or obligations under this Agreement and has not cured such breach or commenced
in good faith to correct such breach within thirty (30) days after notice; (ii)
embezzles or converts to his own use any funds of the Company or any client or
customer of the Company; (iii) converts to his own use or unreasonably destroys,
intentionally, any property of the Company, without the Company's consent; (iv)
is convicted of a crime; (v) is adjudicated an incompetent; or (vi) is
habitually intoxicated or is diagnosed by an independent medical doctor to be
addicted to a controlled substance (any disagreement of Executive shall be
resolved using the procedure provided in Paragraph 7(a) above).
(c) Termination by Executive. Executive may terminate this Agreement for
the failure by the Company to comply with the material provisions of this
Agreement which failure is not cured within thirty (30) days after notice ("Good
Reason").
(d) No Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, not shall the amount of any payment provided for in
this Agreement be reduced by any compensation earned by the Executive as the
result of his employment by another employer.
8. Restrictive Covenant.
(a) Competition. As used herein "Company Business" shall mean any business
which the Company is actively pursuing or actively considering while the
executive was employed by the Company provided that upon termination or
execution of this agreement the term "Company Business" shall refer to any
arrangement or contract or relation of the Company or any subsidiary existing or
actually pursued at the time of termination or expiration of the Agreement. The
Executive undertakes and agrees that during the term of this Agreement and for a
period of two years after the date of termination or expiration of this
Agreement he will not compete, directly or indirectly, with respect to a Company
Business or participate as a director, officer, employee, agent, consultant,
representative or otherwise, or as a stockholder, partner or joint venturers, or
have any direct or indirect financial interest, including, without limitation,
the interest of a creditor, in any business competing with respect to a Company
Business. Executive acknowledges that such prospects
4
<PAGE>
represent a corporate opportunity or are the property of the Company and
Executive should have no rights with respect to such properties on projects.
Executive further undertakes and agrees that during the term of the Agreement
and for a period of one year after the date of termination or expiration of this
Agreement he will not, directly or indirectly employ, cause to be employed, or
solicit for employment any of Company's or its subsidiaries' employees.
Notwithstanding the foregoing, the provisions of the Paragraph 7(a) shall not
apply to termination by the Executive pursuant to Section 7(c) or by the Company
without cause.
(b) Scope of Covenant. Should the duration, geographical area or range or
proscribed activities contained in Paragraph 8(a) above be held unreasonable by
any court of competent jurisdiction, then such duration, geographical area or
range of proscribed activities shall be modified to such degree as to make it or
them reasonable and enforceable.
(c) Non-Disclosure of Information.
(i) The Executive shall (i) never, directly or indirectly, disclose to any
person or entity for any reason, or use for his own personal benefit, any
"Confidential Information" (as hereinafter defined) either during his employment
with the Company or following termination of that employment for any reason (ii)
at all times take all precautions necessary to protect from loss or disclosure
by him of any and all documents or other information containing, referring or
relating to such Confidential Information, and (iii) upon termination of his
employment with the Company for any reason, the Executive shall promptly return
to the Company any and all documents or other tangible property containing,
referring or relating to such Confidential Information, whether prepared by him
or others.
(ii) Notwithstanding any provision to the contrary in this Paragraph 8(c),
this paragraph shall not apply to information which the Executive is called upon
by legal process regular on its face (including, without limitation, by subpoena
or discovery requirement) to disclose or to information which has become part of
the public domain or is otherwise publicly disclosed through no fault or action
of the Executive.
(iii) For purposes of this Agreement, "Confidential Information" means any
information relating in any way to the business of the Company disclosed to or
known to the Executive as a consequence of, result of, or through the
Executive's employment by the Company which consists of technical and
nontechnical information about the Company's products, processes, computer
programs, concepts, forms, business methods, data, any and all financial and
accounting data, marketing, customers, customer lists, and services and
information corresponding thereto acquired by the Executive during the term of
the Executive's employment by
5
<PAGE>
the Company. Confidential Information shall not include any of such items which
are published or are otherwise part of the public domain, or freely available
from trade sources or otherwise.
(iv) Upon termination of this Agreement for any reason, the Executive shall
turn over to the Company all tangible property then in the Executive's
possession or custody which belongs or relates to the Company. The Executive
shall not retain any copies or reproductions of computer programs,
correspondence, memoranda, reports, notebooks, drawings, photographs, or other
documents which constitute Confidential Information.
9. Arbitration.
(a) Any and all other disputes, controversies and claims arising out of or
relating to this Agreement, or with respect to the interpretation of this
Agreement, or the rights or obligations of the parties and their successors and
permitted assigns, whether by operation of law or otherwise, shall be settled
and determined by arbitration in New York City, New York pursuant to the then
existing rules of the American Arbitration Association ("AAA") for commercial
arbitration.
(b) In the event that the Executive disputes a determination that Cause
exists for terminating his employment hereunder pursuant to Paragraph 7(b), or
the Company disputes the determination that Good Reason exists for the
Executive's termination of this Agreement pursuant to Paragraph 7(c), either
party disputing this determination shall serve the other with written notice of
such dispute ("Dispute Notice") within thirty (30) days after the date the
Executive is terminated for Cause or the date the Executive terminates this
Agreement for Good Reason. Within fifteen (15) days thereafter, the Executive or
the Company, as the case may be, shall, in accordance with the Rules of the AAA,
file a petition with the AAA for arbitration of the dispute, the costs thereof
to be shared equally by the Executive and the Company unless an order of the AAA
provides otherwise. If the Executive serves a Dispute Notice upon the Company,
an amount equal to the portion of the Base Salary Executive would be entitled to
receive hereunder shall be placed by the Company in an interest-bearing escrow
account mutually agreeable to the parties or the Company shall deliver an
irrevocable letter of credit for such amount plus interest containing terms
mutually agreeable to the parties. If the AAA determines that Cause existed for
the termination, the escrowed funds and accrued interest shall be paid to the
Company. However, in the event the AAA determines that the Executive was
terminated without Cause or that Executive resigned for Good Reason, the
escrowed funds and accrued interest shall be paid to the Executive.
(c) Any proceeding referred to in Paragraph 9(a) or (b) shall also
determine Executive's entitlement to legal fees as well
6
<PAGE>
as all other disputes between the parties relating to Executive's
employment.
(d) The parties covenant and agree that the decision of the AAA shall be
final and binding and hereby waive their right to appeal therefrom.
10. Indemnity. The Company shall indemnify and hold Executive harmless from
all liability to the full extent permitted by the laws of its state of
incorporation.
11. Miscellaneous.
(a) Notices. Any notice, demand or communication required or permitted
under this Agreement shall be in writing and shall either be hand-delivered to
the other party or mailed to the addresses set forth below by registered or
certified mail, return receipt requested or sent by overnight express mail or
courier or facsimile to such address, if a party has a facsimile machine. Notice
shall be deemed to have been given and received when so hand-delivered or after
three (3) business days when so deposited in the U.S. Mail, or when transmitted
and received by facsimile or sent by express mail properly addressed to the
other party. The addresses are:
To the Company: Fantasy Sports Net, Inc.
142 Mineola Avenue, Suite 2-D
Roslyn Heights, New York 11577
(212) 683-1997 (telecopier)
To the Executive: Darrell Lerner
10 Estates Drive
Roslyn, New York 11576
The foregoing addresses may be changed at any time by notice given in the manner
herein provided.
(b) Integration; Modification. This Agreement constitutes the entire
understanding and agreement between the Company and the Executive regarding its
subject matter and supersedes all prior negotiations and agreements, whether
oral or written, between them with respect to its subject matter. This Agreement
may not be modified except by a written agreement signed by the Executive and a
duly authorized officer of the Company.
(c) Enforceability. If any provision of this Agreement shall be invalid or
unenforceable, in whole or in part, such provision shall be deemed to be
modified or restricted to the extent and in the manner necessary to render the
same valid and enforceable, or shall be deemed excised from this Agreement, as
the case may require, and this Agreement shall be construed and enforced to the
maximum extent permitted by law as if such
7
<PAGE>
provision had been originally incorporated herein as so modified or restricted,
or as if such provision had not been originally incorporated herein, as the case
may be.
(d) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties, including and their respective heirs, executors,
successors and assigns, except that this Agreement may not be assigned by the
Executive.
(e) Waiver of Breach. No waiver by either party of any condition or of the
breach by the other of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one (1) or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or the breach of any other term or covenant set
forth in this Agreement. Moreover, the failure of either party to exercise any
right hereunder shall not bar the later exercise thereof with respect to other
future breaches.
(f) Governing Laws. This Agreement shall be governed by the internal laws
of the State of New York.
(g) Headings. The headings of the various sections and paragraphs have been
included herein for convenience only and shall not be considered in interpreting
this Agreement.
(h) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(i) Due Authorization. The Company represents that all corporate action
required to authorize the execution, delivery and performance of this Agreement
has been duly taken.
IN WITNESS WHEREOF, this Agreement has been executed by the Executive and,
on behalf of the Company, by its duly authorized officer on the day and year
first above written.
-----------------------------------
DARRELL LERNER
FANTASY SPORTS NET, INC.
By:
--------------------------------
Darrell Lerner
President and Director
8
Exhibit 10.2
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as of May 1, 1999
by and between Fantasy Sports Net, Inc., a New York corporation (the "Company"),
and Byron R. Lerner (the "Executive").
The Executive is being employed by the Company as an executive officer. The
parties desire to enter into an employment agreement and to set forth herein the
terms and conditions of the Executive's continued employment by the Company and
its subsidiaries.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and the mutual benefits to be derived here from, the Company and
the Executive agree as follows:
1. Employment.
(a) Duties. The Company shall employ the Executive, on the terms set forth
in this Agreement, as its Vice-President. The Executive accepts such employment
with the Company and shall perform and fulfill such duties as are assigned to
him hereunder consistent with his status as a senior executive of the Company
devoting his best efforts and a substantial portion of his time and attention to
the performance and fulfillment of his duties and to the advancement of the
interests of the Company, subject only to the direction, approvals, control and
directives of the Company's Board of Directors (the "Board"). Nothing contained
herein shall be construed, however, to prevent the Executive from trading in or
managing, for his own account and benefit, in stocks, bonds, securities, real
estate, commodities or other forms of investments (subject to law and Company
policy with respect to trading in Company securities). Without any additional
consideration, Executive shall also serve as an officer of any or all
subsidiaries of the Company. Unless otherwise indicated by the context, the term
"Company" shall include the Company and all its subsidiaries.
(b) Place of Performance. In connection with his employment by the Company,
the Executive shall be based at the Company's principal place of business in New
York, except when required for travel in Company business.
(c) Nomination as Director. The Company agrees that it will nominate the
Executive as a member of the Board of Directors each year during the term of
this Agreement and will use its best efforts to ensure that the Executive is
elected to the Board of Directors.
1
<PAGE>
2. Term. The Executive's employment under this Agreement shall commence as
of May 1, 1999 (the "Commencement Date") and shall, unless sooner terminated in
accordance with the provisions hereof, continue uninterrupted until April 30,
2002 ("Term"). As used herein "Year" shall refer to a twelve month period ending
April 30th. Unless notice of non-renewal is given by either party at least sixty
(60) days prior to the end of the Term or prior to the end of any Year
thereafter, the Term of this Agreement shall be automatically extended for an
additional period of one year.
3. Compensation. Executive shall receive a "Base Salary" during the Term.
For the period May, 1999 through April, 2000, the Base Salary shall be at the
rate of $30,000 per annum with increases, subject to a semi-annual review by the
Board of Directors.
4. Insurance.
(a) Health Insurance and Other Benefits. During the Term, the Executive
shall be entitled to all employee benefits generally offered by the Company to
its executive officers and key management employees, including, without
limitation, all pensions, profit sharing, retirement, stock option, salary
continuation, deferred compensation, disability insurance, hospitalization
insurance, major medical insurance, medical reimbursement, survivor income, life
insurance or any other benefit plan or arrangement established and maintained by
the Company, subject to the rules and regulations then in effect regarding
participation therein.
(b) Keyman Insurance. The Company may obtain keyman life insurance upon the
life of the Executive in amounts to be determined from time to time by Executive
and the Company.
5. Expenses.
(a) Reimbursement of Expenses. The Executive shall be reimbursed for all
items of travel, entertainment and miscellaneous expenses that the Executive
reasonably incurs in connection with the performance of his duties hereunder,
provided the Executive submits to the Company such statements and other evidence
supporting said expenses as the Company may reasonably require.
(b) Automobile Allowance. The Executive shall be reimbursed for the
expenses of owning or leasing an automobile suitable for his position and
consistent with Company practices, including the expenses of operating, insuring
and parking such automobile, provided the Executive submits to the Company such
statements and other evidence supporting such expenses as the Company may
require.
2
<PAGE>
6. Vacation. The Executive shall be entitled to not less than four (4)
weeks of vacation in any calendar year. Any unused vacation time in a year shall
be accumulated and increase the amount of vacation time in subsequent years.
7. Termination of Employments.
(a) Death or Total Disability. In the event of the death of the Executive
during the Term, this Agreement shall terminate as of the date of the
Executive's death. In the event of the Total Disability (as that term is defined
below) of the Executive for sixty (60) days in the aggregate during any
consecutive nine (9) month period during the Term, the Company shall have the
right to terminate this Agreement by giving the Executive thirty (30) days'
prior written notice thereof, and upon the expiration of such thirty (30) day
period, the Executive's employment under this Agreement shall terminate. If the
Executive shall resume his duties within thirty (30) days after receipt of such
a notice of termination and continue to perform such duties for four (4)
consecutive weeks thereafter, this Agreement shall continue in full force and
effect, without any reduction in Base Salary and other benefits, and the notice
of termination shall be considered null and void and of no effect. Upon
termination of this Agreement under this Paragraph 7(a), the Company shall have
no further obligations or liabilities under this Agreement, except to pay to the
Executive's estate or the Executive, as the case may be, (i) the portion, if
any, that remains unpaid of the Base Salary for the Year in which termination
occurred, but in no event less than six (6) months' Base Salary; and (ii) the
amount of any expenses reimbursable in accordance with Paragraph 4 above, and
any automobile allowance due under Paragraph 5 above; and (iii) any amounts due
under any Company benefit, welfare or pension plan. Except as otherwise provided
by their terms, any stock options not vested at the time of the termination of
this Agreement under this Paragraph 7(a) shall immediately become fully vested.
The term "Total Disability" as used herein, shall mean a mental or physical
condition which in the reasonable opinion of an independent medical doctor
selected by the Company renders the Executive unable or incompetent to carry out
the material duties and responsibilities of the Executive under this Agreement
at the time the disabling condition was incurred. In the event the Executive
disagrees with such opinion, the Executive may, at his sole expense, select an
independent medical doctor and, in the event that doctor disagrees with the
opinion of the doctor selected by the Company, they shall select a third
independent medical doctor, and the three doctors shall, by majority vote,
determine whether the employee has suffered Total Disability. The expense of the
third doctor shall be shared equally by the Company and the Executive.
Notwithstanding the foregoing, if the Executive is covered under any policy of
disability insurance under Paragraph 3(c) above, under no circumstances shall
the definition of Total
3
<PAGE>
Disability be different from the definition of that term in such policy.
(b) Discharge for Cause. The Company may discharge the Executive for
"Cause" upon notice and thereby immediately terminate his employment under this
Agreement. For purposes of this Agreement, the Company shall have "Cause" to
terminate the Executive's employment if the Executive, in the reasonable
judgment of the Company, (i) materially breaches any of his agreements, duties
or obligations under this Agreement and has not cured such breach or commenced
in good faith to correct such breach within thirty (30) days after notice; (ii)
embezzles or converts to his own use any funds of the Company or any client or
customer of the Company; (iii) converts to his own use or unreasonably destroys,
intentionally, any property of the Company, without the Company's consent; (iv)
is convicted of a crime; (v) is adjudicated an incompetent; or (vi) is
habitually intoxicated or is diagnosed by an independent medical doctor to be
addicted to a controlled substance (any disagreement of Executive shall be
resolved using the procedure provided in Paragraph 7(a) above).
(c) Termination by Executive. Executive may terminate this Agreement for
the failure by the Company to comply with the material provisions of this
Agreement which failure is not cured within thirty (30) days after notice ("Good
Reason").
(d) No Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, not shall the amount of any payment provided for in
this Agreement be reduced by any compensation earned by the Executive as the
result of his employment by another employer.
8. Restrictive Covenant.
(a) Competition. As used herein "Company Business" shall mean any business
which the Company is actively pursuing or actively considering while the
executive was employed by the Company provided that upon termination or
execution of this agreement the term "Company Business" shall refer to any
arrangement or contract or relation of the Company or any subsidiary existing or
actually pursued at the time of termination or expiration of the Agreement. The
Executive undertakes and agrees that during the term of this Agreement and for a
period of two years after the date of termination or expiration of this
Agreement he will not compete, directly or indirectly, with respect to a Company
Business or participate as a director, officer, employee, agent, consultant,
representative or otherwise, or as a stockholder, partner or joint venturers, or
have any direct or indirect financial interest, including, without limitation,
the interest of a creditor, in any business competing with respect to a Company
Business. Executive acknowledges that such prospects
4
<PAGE>
represent a corporate opportunity or are the property of the Company and
Executive should have no rights with respect to such properties on projects.
Executive further undertakes and agrees that during the term of the Agreement
and for a period of one year after the date of termination or expiration of this
Agreement he will not, directly or indirectly employ, cause to be employed, or
solicit for employment any of Company's or its subsidiaries' employees.
Notwithstanding the foregoing, the provisions of the Paragraph 7(a) shall not
apply to termination by the Executive pursuant to Section 7(c) or by the Company
without cause.
(b) Scope of Covenant. Should the duration, geographical area or range or
proscribed activities contained in Paragraph 8(a) above be held unreasonable by
any court of competent jurisdiction, then such duration, geographical area or
range of proscribed activities shall be modified to such degree as to make it or
them reasonable and enforceable.
(c) Non-Disclosure of Information.
(i) The Executive shall (i) never, directly or indirectly, disclose to any
person or entity for any reason, or use for his own personal benefit, any
"Confidential Information" (as hereinafter defined) either during his employment
with the Company or following termination of that employment for any reason (ii)
at all times take all precautions necessary to protect from loss or disclosure
by him of any and all documents or other information containing, referring or
relating to such Confidential Information, and (iii) upon termination of his
employment with the Company for any reason, the Executive shall promptly return
to the Company any and all documents or other tangible property containing,
referring or relating to such Confidential Information, whether prepared by him
or others.
(ii) Notwithstanding any provision to the contrary in this Paragraph 8(c),
this paragraph shall not apply to information which the Executive is called upon
by legal process regular on its face (including, without limitation, by subpoena
or discovery requirement) to disclose or to information which has become part of
the public domain or is otherwise publicly disclosed through no fault or action
of the Executive.
(iii) For purposes of this Agreement, "Confidential Information" means any
information relating in any way to the business of the Company disclosed to or
known to the Executive as a consequence of, result of, or through the
Executive's employment by the Company which consists of technical and
nontechnical information about the Company's products, processes, computer
programs, concepts, forms, business methods, data, any and all financial and
accounting data, marketing, customers, customer lists, and services and
information corresponding thereto acquired by the Executive during the term of
the Executive's employment by
5
<PAGE>
the Company. Confidential Information shall not include any of such items which
are published or are otherwise part of the public domain, or freely available
from trade sources or otherwise.
(iv) Upon termination of this Agreement for any reason, the Executive shall
turn over to the Company all tangible property then in the Executive's
possession or custody which belongs or relates to the Company. The Executive
shall not retain any copies or reproductions of computer programs,
correspondence, memoranda, reports, notebooks, drawings, photographs, or other
documents which constitute Confidential Information.
9. Arbitration.
(a) Any and all other disputes, controversies and claims arising out of or
relating to this Agreement, or with respect to the interpretation of this
Agreement, or the rights or obligations of the parties and their successors and
permitted assigns, whether by operation of law or otherwise, shall be settled
and determined by arbitration in New York City, New York pursuant to the then
existing rules of the American Arbitration Association ("AAA") for commercial
arbitration.
(b) In the event that the Executive disputes a determination that Cause
exists for terminating his employment hereunder pursuant to Paragraph 7(b), or
the Company disputes the determination that Good Reason exists for the
Executive's termination of this Agreement pursuant to Paragraph 7(c), either
party disputing this determination shall serve the other with written notice of
such dispute ("Dispute Notice") within thirty (30) days after the date the
Executive is terminated for Cause or the date the Executive terminates this
Agreement for Good Reason. Within fifteen (15) days thereafter, the Executive or
the Company, as the case may be, shall, in accordance with the Rules of the AAA,
file a petition with the AAA for arbitration of the dispute, the costs thereof
to be shared equally by the Executive and the Company unless an order of the AAA
provides otherwise. If the Executive serves a Dispute Notice upon the Company,
an amount equal to the portion of the Base Salary Executive would be entitled to
receive hereunder shall be placed by the Company in an interest-bearing escrow
account mutually agreeable to the parties or the Company shall deliver an
irrevocable letter of credit for such amount plus interest containing terms
mutually agreeable to the parties. If the AAA determines that Cause existed for
the termination, the escrowed funds and accrued interest shall be paid to the
Company. However, in the event the AAA determines that the Executive was
terminated without Cause or that Executive resigned for Good Reason, the
escrowed funds and accrued interest shall be paid to the Executive.
(c) Any proceeding referred to in Paragraph 9(a) or (b) shall also
determine Executive's entitlement to legal fees as well
6
<PAGE>
as all other disputes between the parties relating to Executive's employment.
(d) The parties covenant and agree that the decision of the AAA shall be
final and binding and hereby waive their right to appeal therefrom.
10. Indemnity. The Company shall indemnify and hold Executive harmless from
all liability to the full extent permitted by the laws of its state of
incorporation.
11. Miscellaneous.
(a) Notices. Any notice, demand or communication required or permitted
under this Agreement shall be in writing and shall either be hand-delivered to
the other party or mailed to the addresses set forth below by registered or
certified mail, return receipt requested or sent by overnight express mail or
courier or facsimile to such address, if a party has a facsimile machine. Notice
shall be deemed to have been given and received when so hand-delivered or after
three (3) business days when so deposited in the U.S. Mail, or when transmitted
and received by facsimile or sent by express mail properly addressed to the
other party. The addresses are:
To the Company: Fantasy Sports Net, Inc.
142 Mineola Avenue, Suite 2-D
Roslyn Heights, New York 11577
(212) 683-1997 (telecopier)
To the Executive: Byron R. Lerner
10 Estates Drive
Roslyn, New York 11576
The foregoing addresses may be changed at any time by notice given in the manner
herein provided.
(b) Integration; Modification. This Agreement constitutes the entire
understanding and agreement between the Company and the Executive regarding its
subject matter and supersedes all prior negotiations and agreements, whether
oral or written, between them with respect to its subject matter. This Agreement
may not be modified except by a written agreement signed by the Executive and a
duly authorized officer of the Company.
(c) Enforceability. If any provision of this Agreement shall be invalid or
unenforceable, in whole or in part, such provision shall be deemed to be
modified or restricted to the extent and in the manner necessary to render the
same valid and enforceable, or shall be deemed excised from this Agreement, as
the case may require, and this Agreement shall be construed and enforced to the
maximum extent permitted by law as if such
7
<PAGE>
provision had been originally incorporated herein as so modified or restricted,
or as if such provision had not been originally incorporated herein, as the case
may be.
(d) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties, including and their respective heirs, executors,
successors and assigns, except that this Agreement may not be assigned by the
Executive.
(e) Waiver of Breach. No waiver by either party of any condition or of the
breach by the other of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one (1) or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or the breach of any other term or covenant set
forth in this Agreement. Moreover, the failure of either party to exercise any
right hereunder shall not bar the later exercise thereof with respect to other
future breaches.
(f) Governing Laws. This Agreement shall be governed by the internal laws
of the State of New York.
(g) Headings. The headings of the various sections and paragraphs have been
included herein for convenience only and shall not be considered in interpreting
this Agreement.
(h) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(i) Due Authorization. The Company represents that all corporate action
required to authorize the execution, delivery and performance of this Agreement
has been duly taken.
IN WITNESS WHEREOF, this Agreement has been executed by the Executive and,
on behalf of the Company, by its duly authorized officer on the day and year
first above written.
-----------------------------------
BYRON R. LERNER
FANTASY SPORTS NET, INC.
By:
--------------------------------
Darrell Lerner
President and Director
8
Exhibit 10.3
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as of May 1, 1999
by and between Fantasy Sports Net, Inc., a New York corporation (the "Company"),
and James Tubbs (the "Executive").
The Executive is being employed by the Company as an executive officer. The
parties desire to enter into an employment agreement and to set forth herein the
terms and conditions of the Executive's continued employment by the Company and
its subsidiaries.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and the mutual benefits to be derived here from, the Company and
the Executive agree as follows:
1. Employment.
(a) Duties. The Company shall employ the Executive, on the terms set forth
in this Agreement, as its Secretary-Treasurer. The Executive accepts such
employment with the Company and shall perform and fulfill such duties as are
assigned to him hereunder consistent with his status as a senior executive of
the Company devoting his best efforts and a substantial portion of his time and
attention to the performance and fulfillment of his duties and to the
advancement of the interests of the Company, subject only to the direction,
approvals, control and directives of the Company's Board of Directors (the
"Board"). Nothing contained herein shall be construed, however, to prevent the
Executive from trading in or managing, for his own account and benefit, in
stocks, bonds, securities, real estate, commodities or other forms of
investments (subject to law and Company policy with respect to trading in
Company securities). Without any additional consideration, Executive shall also
serve as an officer of any or all subsidiaries of the Company. Unless otherwise
indicated by the context, the term "Company" shall include the Company and all
its subsidiaries.
(b) Place of Performance. In connection with his employment by the Company,
the Executive shall be based at the Company's principal place of business in New
York, except when required for travel in Company business.
(c) Nomination as Director. The Company agrees that it will nominate the
Executive as a member of the Board of Directors each year during the term of
this Agreement and will use its best efforts to ensure that the Executive is
elected to the Board of Directors.
1
<PAGE>
2. Term. The Executive's employment under this Agreement shall commence as
of May 1, 1999 (the "Commencement Date") and shall, unless sooner terminated in
accordance with the provisions hereof, continue uninterrupted until April 30,
2002 ("Term"). As used herein "Year" shall refer to a twelve month period ending
April 30th. Unless notice of non-renewal is given by either party at least sixty
(60) days prior to the end of the Term or prior to the end of any Year
thereafter, the Term of this Agreement shall be automatically extended for an
additional period of one year.
3. Compensation. Executive shall receive a "Base Salary" during the Term.
For the period May, 1999 through April, 2000, the Base Salary shall be at the
rate of $30,000 per annum with increases, subject to a semi-annual review by the
Board of Directors.
4. Insurance.
(a) Health Insurance and Other Benefits. During the Term, the Executive
shall be entitled to all employee benefits generally offered by the Company to
its executive officers and key management employees, including, without
limitation, all pensions, profit sharing, retirement, stock option, salary
continuation, deferred compensation, disability insurance, hospitalization
insurance, major medical insurance, medical reimbursement, survivor income, life
insurance or any other benefit plan or arrangement established and maintained by
the Company, subject to the rules and regulations then in effect regarding
participation therein.
(b) Keyman Insurance. The Company may obtain keyman life insurance upon the
life of the Executive in amounts to be determined from time to time by Executive
and the Company.
5. Expenses.
(a) Reimbursement of Expenses. The Executive shall be reimbursed for all
items of travel, entertainment and miscellaneous expenses that the Executive
reasonably incurs in connection with the performance of his duties hereunder,
provided the Executive submits to the Company such statements and other evidence
supporting said expenses as the Company may reasonably require.
(b) Automobile Allowance. The Executive shall be reimbursed for the
expenses of owning or leasing an automobile suitable for his position and
consistent with Company practices, including the expenses of operating, insuring
and parking such automobile, provided the Executive submits to the Company such
statements and other evidence supporting such expenses as the Company may
require.
2
<PAGE>
6. Vacation. The Executive shall be entitled to not less than four (4)
weeks of vacation in any calendar year. Any unused vacation time in a year shall
be accumulated and increase the amount of vacation time in subsequent years.
7. Termination of Employments.
(a) Death or Total Disability. In the event of the death of the Executive
during the Term, this Agreement shall terminate as of the date of the
Executive's death. In the event of the Total Disability (as that term is defined
below) of the Executive for sixty (60) days in the aggregate during any
consecutive nine (9) month period during the Term, the Company shall have the
right to terminate this Agreement by giving the Executive thirty (30) days'
prior written notice thereof, and upon the expiration of such thirty (30) day
period, the Executive's employment under this Agreement shall terminate. If the
Executive shall resume his duties within thirty (30) days after receipt of such
a notice of termination and continue to perform such duties for four (4)
consecutive weeks thereafter, this Agreement shall continue in full force and
effect, without any reduction in Base Salary and other benefits, and the notice
of termination shall be considered null and void and of no effect. Upon
termination of this Agreement under this Paragraph 7(a), the Company shall have
no further obligations or liabilities under this Agreement, except to pay to the
Executive's estate or the Executive, as the case may be, (i) the portion, if
any, that remains unpaid of the Base Salary for the Year in which termination
occurred, but in no event less than six (6) months' Base Salary; and (ii) the
amount of any expenses reimbursable in accordance with Paragraph 4 above, and
any automobile allowance due under Paragraph 5 above; and (iii) any amounts due
under any Company benefit, welfare or pension plan. Except as otherwise provided
by their terms, any stock options not vested at the time of the termination of
this Agreement under this Paragraph 7(a) shall immediately become fully vested.
The term "Total Disability" as used herein, shall mean a mental or physical
condition which in the reasonable opinion of an independent medical doctor
selected by the Company renders the Executive unable or incompetent to carry out
the material duties and responsibilities of the Executive under this Agreement
at the time the disabling condition was incurred. In the event the Executive
disagrees with such opinion, the Executive may, at his sole expense, select an
independent medical doctor and, in the event that doctor disagrees with the
opinion of the doctor selected by the Company, they shall select a third
independent medical doctor, and the three doctors shall, by majority vote,
determine whether the employee has suffered Total Disability. The expense of the
third doctor shall be shared equally by the Company and the Executive.
Notwithstanding the foregoing, if the Executive is covered under any policy of
disability insurance under Paragraph 3(c) above, under no circumstances shall
the definition of Total
3
<PAGE>
Disability be different from the definition of that term in such policy.
(b) Discharge for Cause. The Company may discharge the Executive for
"Cause" upon notice and thereby immediately terminate his employment under this
Agreement. For purposes of this Agreement, the Company shall have "Cause" to
terminate the Executive's employment if the Executive, in the reasonable
judgment of the Company, (i) materially breaches any of his agreements, duties
or obligations under this Agreement and has not cured such breach or commenced
in good faith to correct such breach within thirty (30) days after notice; (ii)
embezzles or converts to his own use any funds of the Company or any client or
customer of the Company; (iii) converts to his own use or unreasonably destroys,
intentionally, any property of the Company, without the Company's consent; (iv)
is convicted of a crime; (v) is adjudicated an incompetent; or (vi) is
habitually intoxicated or is diagnosed by an independent medical doctor to be
addicted to a controlled substance (any disagreement of Executive shall be
resolved using the procedure provided in Paragraph 7(a) above).
(c) Termination by Executive. Executive may terminate this Agreement for
the failure by the Company to comply with the material provisions of this
Agreement which failure is not cured within thirty (30) days after notice ("Good
Reason").
(d) No Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, not shall the amount of any payment provided for in
this Agreement be reduced by any compensation earned by the Executive as the
result of his employment by another employer.
8. Restrictive Covenant.
(a) Competition. As used herein "Company Business" shall mean any business
which the Company is actively pursuing or actively considering while the
executive was employed by the Company provided that upon termination or
execution of this agreement the term "Company Business" shall refer to any
arrangement or contract or relation of the Company or any subsidiary existing or
actually pursued at the time of termination or expiration of the Agreement. The
Executive undertakes and agrees that during the term of this Agreement and for a
period of two years after the date of termination or expiration of this
Agreement he will not compete, directly or indirectly, with respect to a Company
Business or participate as a director, officer, employee, agent, consultant,
representative or otherwise, or as a stockholder, partner or joint venturers, or
have any direct or indirect financial interest, including, without limitation,
the interest of a creditor, in any business competing with respect to a Company
Business. Executive acknowledges that such prospects
4
<PAGE>
represent a corporate opportunity or are the property of the Company and
Executive should have no rights with respect to such properties on projects.
Executive further undertakes and agrees that during the term of the Agreement
and for a period of one year after the date of termination or expiration of this
Agreement he will not, directly or indirectly employ, cause to be employed, or
solicit for employment any of Company's or its subsidiaries' employees.
Notwithstanding the foregoing, the provisions of the Paragraph 7(a) shall not
apply to termination by the Executive pursuant to Section 7(c) or by the Company
without cause.
(b) Scope of Covenant. Should the duration, geographical area or range or
proscribed activities contained in Paragraph 8(a) above be held unreasonable by
any court of competent jurisdiction, then such duration, geographical area or
range of proscribed activities shall be modified to such degree as to make it or
them reasonable and enforceable.
(c) Non-Disclosure of Information.
(i) The Executive shall (i) never, directly or indirectly, disclose to any
person or entity for any reason, or use for his own personal benefit, any
"Confidential Information" (as hereinafter defined) either during his employment
with the Company or following termination of that employment for any reason (ii)
at all times take all precautions necessary to protect from loss or disclosure
by him of any and all documents or other information containing, referring or
relating to such Confidential Information, and (iii) upon termination of his
employment with the Company for any reason, the Executive shall promptly return
to the Company any and all documents or other tangible property containing,
referring or relating to such Confidential Information, whether prepared by him
or others.
(ii) Notwithstanding any provision to the contrary in this Paragraph 8(c),
this paragraph shall not apply to information which the Executive is called upon
by legal process regular on its face (including, without limitation, by subpoena
or discovery requirement) to disclose or to information which has become part of
the public domain or is otherwise publicly disclosed through no fault or action
of the Executive.
(iii) For purposes of this Agreement, "Confidential Information" means any
information relating in any way to the business of the Company disclosed to or
known to the Executive as a consequence of, result of, or through the
Executive's employment by the Company which consists of technical and
nontechnical information about the Company's products, processes, computer
programs, concepts, forms, business methods, data, any and all financial and
accounting data, marketing, customers, customer lists, and services and
information corresponding thereto acquired by the Executive during the term of
the Executive's employment by
5
<PAGE>
the Company. Confidential Information shall not include any of such items which
are published or are otherwise part of the public domain, or freely available
from trade sources or otherwise.
(iv) Upon termination of this Agreement for any reason, the Executive shall
turn over to the Company all tangible property then in the Executive's
possession or custody which belongs or relates to the Company. The Executive
shall not retain any copies or reproductions of computer programs,
correspondence, memoranda, reports, notebooks, drawings, photographs, or other
documents which constitute Confidential Information.
9. Arbitration.
(a) Any and all other disputes, controversies and claims arising out of or
relating to this Agreement, or with respect to the interpretation of this
Agreement, or the rights or obligations of the parties and their successors and
permitted assigns, whether by operation of law or otherwise, shall be settled
and determined by arbitration in New York City, New York pursuant to the then
existing rules of the American Arbitration Association ("AAA") for commercial
arbitration.
(b) In the event that the Executive disputes a determination that Cause
exists for terminating his employment hereunder pursuant to Paragraph 7(b), or
the Company disputes the determination that Good Reason exists for the
Executive's termination of this Agreement pursuant to Paragraph 7(c), either
party disputing this determination shall serve the other with written notice of
such dispute ("Dispute Notice") within thirty (30) days after the date the
Executive is terminated for Cause or the date the Executive terminates this
Agreement for Good Reason. Within fifteen (15) days thereafter, the Executive or
the Company, as the case may be, shall, in accordance with the Rules of the AAA,
file a petition with the AAA for arbitration of the dispute, the costs thereof
to be shared equally by the Executive and the Company unless an order of the AAA
provides otherwise. If the Executive serves a Dispute Notice upon the Company,
an amount equal to the portion of the Base Salary Executive would be entitled to
receive hereunder shall be placed by the Company in an interest-bearing escrow
account mutually agreeable to the parties or the Company shall deliver an
irrevocable letter of credit for such amount plus interest containing terms
mutually agreeable to the parties. If the AAA determines that Cause existed for
the termination, the escrowed funds and accrued interest shall be paid to the
Company. However, in the event the AAA determines that the Executive was
terminated without Cause or that Executive resigned for Good Reason, the
escrowed funds and accrued interest shall be paid to the Executive.
(c) Any proceeding referred to in Paragraph 9(a) or (b) shall also
determine Executive's entitlement to legal fees as well
6
<PAGE>
as all other disputes between the parties relating to Executive's employment.
(d) The parties covenant and agree that the decision of the AAA shall be
final and binding and hereby waive their right to appeal therefrom.
10. Indemnity. The Company shall indemnify and hold Executive harmless from
all liability to the full extent permitted by the laws of its state of
incorporation.
11. Miscellaneous.
(a) Notices. Any notice, demand or communication required or permitted
under this Agreement shall be in writing and shall either be hand-delivered to
the other party or mailed to the addresses set forth below by registered or
certified mail, return receipt requested or sent by overnight express mail or
courier or facsimile to such address, if a party has a facsimile machine. Notice
shall be deemed to have been given and received when so hand-delivered or after
three (3) business days when so deposited in the U.S. Mail, or when transmitted
and received by facsimile or sent by express mail properly addressed to the
other party. The addresses are:
To the Company: Fantasy Sports Net, Inc.
142 Mineola Avenue, Suite 2-D
Roslyn Heights, New York 11577
(212) 683-1997 (telecopier)
To the Executive: James Tubbs
10 Estates Drive
Roslyn, New York 11576
The foregoing addresses may be changed at any time by notice given in the manner
herein provided.
(b) Integration; Modification. This Agreement constitutes the entire
understanding and agreement between the Company and the Executive regarding its
subject matter and supersedes all prior negotiations and agreements, whether
oral or written, between them with respect to its subject matter. This Agreement
may not be modified except by a written agreement signed by the Executive and a
duly authorized officer of the Company.
(c) Enforceability. If any provision of this Agreement shall be invalid or
unenforceable, in whole or in part, such provision shall be deemed to be
modified or restricted to the extent and in the manner necessary to render the
same valid and enforceable, or shall be deemed excised from this Agreement, as
the case may require, and this Agreement shall be construed and enforced to the
maximum extent permitted by law as if such
7
<PAGE>
provision had been originally incorporated herein as so modified or restricted,
or as if such provision had not been originally incorporated herein, as the case
may be.
(d) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties, including and their respective heirs, executors,
successors and assigns, except that this Agreement may not be assigned by the
Executive.
(e) Waiver of Breach. No waiver by either party of any condition or of the
breach by the other of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one (1) or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or the breach of any other term or covenant set
forth in this Agreement. Moreover, the failure of either party to exercise any
right hereunder shall not bar the later exercise thereof with respect to other
future breaches.
(f) Governing Laws. This Agreement shall be governed by the internal laws
of the State of New York.
(g) Headings. The headings of the various sections and paragraphs have been
included herein for convenience only and shall not be considered in interpreting
this Agreement.
(h) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(i) Due Authorization. The Company represents that all corporate action
required to authorize the execution, delivery and performance of this Agreement
has been duly taken.
IN WITNESS WHEREOF, this Agreement has been executed by the Executive and,
on behalf of the Company, by its duly authorized officer on the day and year
first above written.
-----------------------------------
JAMES TUBBS
FANTASY SPORTS NET, INC.
By:
--------------------------------
Darrell Lerner
President and Director
8
Exhibit 23.1
LIEBMAN GOLDBERG & DROGIN LLP
Certified Public Accountants
591 STEWART AVENUE, SUITE 450
GARDEN CITY, NEW YORK 11530
Tel. (516) 228-6600
Fax (516) 228-6664
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Fantasy Sports Net, Inc.
We hereby consent to the use in the Registration Statement on Form SB-2 of
our report dated June 25, 1999, relating to the compiled financial statements of
Fantasy Sports Net, Inc. and any reference to our firm under the caption
"Experts" in the Registration Statement.
/s/ Liebman Goldberg & Drogin, LLP
- -------------------------------------
Liebman Goldberg & Drogin, LLP
Certified Public Accountants
July 1, 1999
