UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Pursuant to Section 12(b) or (g) of the Securities and Exchange
Act of 1934
19
PLAYANDWIN, INC.
(Exact name of registrant as specified in its charter)
Pre-effective Amendment 2
Nevada 88-039116
(State of organization) (I.R.S. Employer Identification No.)
7050 Weston Rd., Vaughn, Ontario, Canada L4L 8G7
(Address of principal executive offices)
Registrant's telephone number, including area code (905) 850-3940
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
ITEM 1. DESCRIPTION OF BUSINESS
Background
Playandwin, Inc. (the "Company") is a Nevada corporation formed
on June 9, 1995. Its principal place of business is located at
7050 Weston Rd., Vaughn, Ontario, Canada L4L 8G7. The Company was
originally incorporated under the name Cambridge Funding Group,
Inc. The Company changed its name to Agriceuticals Technologies,
Inc. on October 2, 1998. Then, on July 13, 1999, the Company
once again changed its name to Playandwin, Inc. The Company was
organized to engage in any lawful corporate business, including
but not limited to, participating in mergers with and
acquisitions of other companies. The Company has been in the
developmental stage since inception and has no operating history
other than organizational matters.
On June 9, 1995, the Company issued 2,000,000 shares of its
Common Stock, at a price of $0.001 per share, to Peter Berney,
one of the founders and the initial President/Director. The
Company also issued an additional 2,000,000 shares to Andrew W.
Berney, a second founder and initial
Secretary/Treasurer/Director, and 1,500,000 shares to Caron A.
Kelly, the third founder at a price of $0.001 per share. The
original sale and issuance of the securities were authorized by
resolutions of the Board of Directors in reliance upon the
exemption from registration requirements of Section 5 of the
Securies Act of 1933, as amended, (the "Act"), as provided in
Section (4)(2) of the Act. The initial founders gifted some of
their shares to a total of 5 persons, who gifted some of their
shares to a total of 20 additional persons. All of these
transfers were made in accordance with the exemption from
registration requirements of Section 5 of the Act, as provided in
Section 4(1) of the Act.
Originally the Company's primary focus was to seek a viable
company or companies with whom it could merge or acquire. On
November 1, 1998, the Company entered into an agreement by which
it would acquire the proprietary processes to process soybeans
into textured soy flours and then convert this partially defatted
flour into textured soy proteins or isolated soy proteins using
mechanical processes. On November 30, 1998, the Company issued
1,375,000 shares of its common stock to William L. Thompson, the
owner of these processes, pursuant to an employment agreement.
These shares constituted the purchase price for the proprietary
processes at a value of $2.20 per share, representing 25% of the
Company's issued and outstanding shares.
The Company was unable to raise sufficient funding to pursue that
objective, and therefore abandoned its amended business plan and
continued to be a developmental stage company. Because the
business plan for soybean growing, distribution, processing and
manufacturing was abandoned, the employment agreement was
terminated. Mr. Thompson, however, retains his common stock and
retained his proprietary rights to the processes also pursuant to
the terms of the employment agreement.
On January 13, 1999, the Company issued 200,000 shares of its
common stock to Thompson Kernaghan & Co. Inc. for consideration
of $150,000. This issuance was made in accordance with the
exemption from registration requirements of Regulation D, Rule
506.
Preliminary Notes
The accounting principles have been reconciled to US GAAP in all
material aspects.
Enforceability of Civil Liabilities Against Foreign Persons:
Pursuant to Rule 405 of Regulation S-K, the Company is not a
"foreign private issuer" since it was incorporated in and remains
validly constituted under the laws of the State of Nevada.
Subsidiaries
Playandwin Canada, Inc. ("PWIN Canada" - incorporated in Ontario,
Canada) - 100% owned by the Company;
Lynx Gaming Corp. ("Lynx" - incorporated in Ontario, Canada) -
100% owned by PWIN Canada;
P.E.S.T. Creative Gaming Corp. ("P.E.S.T." - incorporated in
Ontario, Canada) - 95% owned by Lynx Gaming Corp. and 5%
owned by PWIN Canada;
In October, 1999, the Company's wholly-owned Ontario subsidiary,
Playandwin Canada, Inc. (PWIN Canada), acquired all of the issued
and outstanding securities of Lynx Gaming Corp., and 5% of the
issued and outstanding equity of P.E.S.T. Creative Gaming Corp.
(P.E.S.T.) for securities convertible into common shares of the
Company. Lynx is the owner of the other 95% of P.E.S.T. The
convertible securities may not be converted before the first
anniversary of the closing of the acquisitions. Thereafter, one
third of the securities may be converted on the first
anniversary, a further third on the second anniversary, and all
securities may be converted after the third anniversary of the
closing. If all the convertible securities are converted, they
will increase the issued and outstanding common shares of the
Company by 3,883,690.
Acquisitions of Lynx and PEST
On August 30, 1999, effective October 1, 1999,PWIN Canada entered
into a Share Exchange Agreement with Lynx Gaming Corp. (Lynx),
then a privately held corporation. Lynx, along with its own
operations, is a minority-joint venture partner in Racingo
Investments Ltd. (RIL) which is developing a horse-racing based
game involving grid betting known as Racingo (see "Racingo Rules"
- - On- and Off-Track Betting License Agreement).
In accordance with the agreement, PWIN Canada i) exchanged
3,429,118 Class B nonvoting common shares ("Exchangeable
Shares") for 6,858,236 shares of Lynx's common stock; ii)
exchanged 368,857 warrants to purchase 368,857 of
Exchangeable Shares at $1.70 per share, for a period of six
months after October 1, 2000, for 737,714 warrants to
purchase 737,714 shares of Lynx's common stock at $0.85 per
share
Exchangeable Shares. The Exchangeable shares to be issued
by the PWIN Canada pursuant to the Agreement shall be
subject to the following terms:
(a) each Exchangeable Share may be exchanged at the
request of its holder for one common share of PWIN,
provided that in the event of a consolidation, split or
other reorganization of the capital stock of the PWIN
Canada or of PWIN, the number of PWIN common shares
issuable for each one Exchangeable Share shall be
adjusted accordingly;
(b) Of the Exchangeable Shares received by a Lynx
Shareholder on the Closing Date:
(i) none may be exchanged during the period
ending on and including the day of the first
anniversary of the Closing Date;
(ii) up to one-third (1/3) may be exchanged after
said first anniversary;
(iii) an additional one-third (1/3) may be
exchanged after the second anniversary of the
Closing Date; and
(iv) all Exchangeable Shares may be exchanged
after the third anniversary of the Closing
Date.
(c) Each Exchangeable Share may be exchanged at the
request of the PWIN Canada at any time during the
period ending on and including the day of the fifth
anniversary of the Closing Date, and shall be exchanged
upon: (i) the occurrence of a take over bid for all of
the issued and outstanding shares of PWIN; or (ii) the
day of the fifth anniversary of the Closing Date. All
Exchangeable Shares shall be automatically exchanged on
the fifth anniversary of the Closing Date.
Exchangeable Warrants. Each Exchangeable Warrant to be
issued by the PWIN Canada pursuant to this Agreement shall
entitle its holder to acquire one Exchangeable Share at a
price of $1.70. No Exchangeable Warrant may be exercised on
or before the day of the first anniversary of the Closing
Date. The Exchangeable Warrants shall expire eighteen (18)
months after the Closing Date.
On September 27, 1999, effective October 1, 1999, PWIN Canada
entered into a Share Exchange Agreement to acquire the remaining
5% of P.E.S.T., the registered owner of the Canadian Racingo
Rights, World Racingo Rights and Copyright Assets.
In accordance with the agreement, PWIN Canada i) exchanged
57,144 Exchangeable Shares, for 114,288 shares of PEST's
common stock; and i) exchanged 28,571 warrants to purchase
28,571 Exchangeable Shares at $1.70 per share, for 28,571
warrants to purchase 28,571 shares of PEST's common stock at
$0.85 per share.
Exchangeable Shares. The Exchangeable Shares to be issued by
the PWIN Canada pursuant to this Agreement shall be subject
to the following terms:
(a) each Exchangeable Share may be exchanged at the
request of its holder for one common share of PWIN,
provided that in the event of a consolidation, split or
other reorganization of the capital stock of the PWIN
Canada or of PWIN, the number of PWIN common shares
issuable for each one Exchangeable Share shall be
adjusted accordingly;
(b) Of the Exchangeable Shares received by a Lynx
Shareholder on the Closing Date:
(i) none may be exchanged during the period
ending on and including the day of the first
anniversary of the Closing Date;
(ii) up to one-third (1/3) may be exchanged after
said first anniversary;
(iii) an additional one-third (1/3) may be
exchanged after the second anniversary of the
Closing Date; and
(iv) all Exchangeable Shares may be exchanged
after the third anniversary of the Closing
Date.
(c) Each Exchangeable Share may be exchanged at the
request of the PWIN Canada at any time during the
period ending on and including the day of the fifth
anniversary of the Closing Date, and shall be exchanged
upon: (i) the occurrence of a take over bid for all of
the issued and outstanding shares of PWIN; or (ii) the
day of the fifth anniversary of the Closing Date. All
Exchangeable Shares shall be automatically exchanged on
the fifth anniversary of the Closing Date.
Exchangeable Warrants. Each Exchangeable Warrant to be
issued by PWIN Canada pursuant to this Agreement shall
entitle its holder to acquire one Exchangeable Share at a
price of $1.70. No Exchangeable Warrant may be exercised on
or before the day of the first anniversary of the Closing
Date. The Exchangeable Warrants shall expire eighteen (18)
months after the Closing Date.
On October 7, 1999, P.E.S.T. signed a Master License Agreement to
grant to RIL the exclusive license to use, utilize, develop,
advertise, market, promote, sell, distribute and exploit in any
way, the Racingo Patent, U.S. Racingo Rights, Canadian Racingo
Rights, World Racingo Rights, Copyright Assets and the
Documentation. In consideration for the license rights and
assets, RIL must pay a a one-time license fee of $1,000 to each
of the grantors of the licenses. All license fees shall be
satisfied by the issuance of shares from RIL in the following
proportions:
Winning Games, Inc. - 500 common shares; 450 Class A Shares; 450
Class B Shares; and 375 Class C Shares
P.E.S.T. - 100 common shares; 125 Class A Shares; 175 Class B
Shares; and 250 Class C Shares
PacCanUs Inc. - 400 common shares, 425 Class A Shares; 375 Class
B Shares; and 375 Class C Shares
Dividends will be distributed by the Company to the shareholders
of the Company in the following manner:
(a) Class A Shares will have dividend rights only to income
earned by the Company from the various license agreements, or
from any other revenues from licenses granted to Playandwin Inc.
or its affiliates;
(b) Class B Shares will have dividend rights only to income
earned by the Corporation from any North American licensing or
active business other than income from the various license
agreements or from any other revenue from licence granted to
Playandwin Inc. or its affiliates;
(c) Class C Shares will have dividend rights to all income
streams earned by the Corporation from any licencing or active
business outside North America or any other income streams not
allocated herein to the Class A Shares or the Class B Shares; and
(d) No dividends will be issued for the Common Shares.
Racingo Investments Ltd.
RIL obtained U.S. Patent No. 5,518,239 dated May 21, 1996 for a
racing lottery sweepstakes game called "RACINGO". This patent was
later assigned to Winning Games Inc., an Illinois company.
Winning Games Inc. applied for a trademark over "RACINGO" in the
U.S., application no. 75/331,278. the Company has a ten percent
ownership of the voting common stock.
On October 7, 1999, the Company signed a Letter of Agreement with
RIL in conjunction with an Internet License Agreement. This gave
the Company first right of refusal on any licensing of RACINGO in
any venue other than the Internet, including but not limited to
(i) lotteries; (ii) Indian gaming - i.e. establishments located
on Indian/Native/First Nations reserves or operated by
individuals duly exempted from local restrictions on gaming by
virtue of their status as Indians/Natives/First Nations; or (iii)
bingo halls. This right of first refusal will last until March 1,
2002. In order for the Company to exercise its rights, the
Company must respond to and match any bona fide offer made to
RACINGO by a third party within 60 days of RACINGO's receipt of
such an offer.
All rights in and to RACINGO are owned by Winning Games Inc.,
PacCanUs Inc. and P.E.S.T. These rights have been licensed to
RIL, a Delaware corporation owned by the three companies. RIL has
granted to the Company exclusive licenses to certain applications
of RACINGO. These licenses do not cover RACINGO on cruise ships,
Indian/First Nations betting establishments, in-flight betting
establishments owned and operated by airlines, bingo halls, and
in-home betting facilities provided through cable television.
However, RIL has granted to the Company a right of first refusal
on any licensing of RACINGO for lotteries, Indian/First Nations
betting establishments, and bingo halls.
The Company is filing this registration statement on a voluntary
basis, pursuant to section 12(g) of the Securities Exchange Act
of 1934 (the "Exchange Act"), in order to ensure that public
information is readily accessible to all shareholders and
potential investors, and to increase the Company's access to
financial markets, and to permit the Company's common stock to be
quoted on the OTC-BB.
PacCanUs Inc.
PacCanUs Inc. is a holding company whose operating companies are
in the business of developing and executing communications needs
to clients in both Canada and the US.
Vickers and Benson Advertising
Vickers & Benson is one of the few full-service, integrated
communications companies left that is still 100% Canadian-owned.
With annual billings of over $213 million, we consistently rank
as one of the top-ten agencies in Canada. Our motto is to make
our clients rich and our mothers proud. Which is something we do
regularly, including our breakthrough work for mbanx (the times
are a changin' - a la Bob Dylan) and Bank of Montreal (can a bank
change?)
MaxxMedia Media Buying Services
MaxxMedia provides complete Media Management Services to all V&B
clients. In addition, we serve many of our own clients, based
largely on our reputation for exceptional media analysis. Our
work is supported by access to all the major media research and
audience measurement databases for the Canadian and U.S. Markets.
In addition, we have also invested heavily in some of the most
sophisticated media analysis, planning and buying software
programs available.
Warwick & Associates - Public Relations
Warwick & Associates was established in 1979 to provide public
relations, event management and promotion services to private and
public sector clients. We have served as advisors to governments
on highly sensitive issues, planned and implemented successful
public interest campaigns and provided our clients with crisis
communications and media training. We have also developed and
executed media relations and publicity programs and profile-
building programs for senior executives and industry leaders at
both the national and grassroots levels.
Vickers and Benson Account Planning
At Vickers and Benson, we believe it is essential to have the
customer - or their representative, a creative planner - involved
in every stage of the creative process. Accordingly we have built
one of the largest planning groups in the country. Our sole
mission is to continuously improve the effectiveness of our
clients' marketing communication, through the rigorous analysis
of all available data from tracking study awareness and imagery
to transactions and profitability.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This registration statement contains statements that are forward-
looking statements within the meaning of the federal securities
laws. These include statements about our expectations, beliefs,
intentions or strategies for the future, which we indicate by
words or phrases such as "anticipate," "expect," "intend,"
"plan," "will," "believe" and similar language. These statements
involve known and unknown risks, including those resulting from
economic and market conditions, the regulatory environment in
which we operate, competitive activities, and other business
conditions, and are subject to uncertainties and assumptions set
forth elsewhere in this registration statement. Our actual
results may differ materially from results anticipated in these
forward-looking statements. We base our forward-looking
statements on information currently available to us, and we
assume no obligation to update these statements.
Business of Registrant
The Company's business is the development, marketing, promotion
and sale of a pari-mutuel bingo-type wager game known as
"RACINGO". As in Bingo, the object is to form a winning pattern
out of numbers randomly placed on a grid. In RACINGO, the winning
numbers are selected by the outcome of one or more horse or
greyhound races. RACINGO combines the ease of Bingo and
excitement of horse races with lottery-size jackpots.
Risk Factors
The Company's business is subject to the following risk factors:
RELIANCE ON KEY PERSONNEL. The Company places particular reliance
on certain key advisors, directors, and the president, whose
involvement would be considered material to the Company.
COMPETITION. Though the lottery-sized payouts are new and
exciting to the horseracing industry, the game Racingo itself
will compete with other forms of betting currently offered at the
racetracks.
FUTURE FINANCING. The future success of the Company may depend on
financing and the relationship not being secured with a tote
company.
REGULATION. Although the Company will be subject to regulation
under the Securities Exchange Act of 1934, management believes
the Company will not be subject to regulation under the
Investment Company Act of 1940, insofar as the Company will not
be engaged in the business of investing or trading in securities.
The Company has obtained no formal determination from the
Securities and Exchange Commission as to the status of the
Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act would subject the Company
to material adverse consequences.
The Company does not at present have any governmental permits,
licenses or the like. It is probable that the Company will
acquire gaming licenses in the future.
LIMITED OPERATING HISTORY. The Company has not generated any
revenues since its inception and has a limited operating history.
There can be no assurances that the Company will operate at a
profit. There can be no assurances that the growth strategies
identified by management will be successful, or, if they are
successful, that they will have a positive effect on the earnings
of the Company.
SPECULATIVE NATURE OF COMPANY'S PROPOSED OPERATIONS. The success
of the Company's operations may be dependent upon management
together with numerous other factors beyond the Company's
control.
Marketing Plans
Initially, the Company will launch Fantasy Racingo in the United
States. Fantasy Racingo will be offered for free and utilized as
a brand awareness and upsale campaign. The Company will use
Internet Sports Network, Inc. (ISN) to produce, manage and host
the software.
ISN is a company that specializes in games/contests strategy,
services, and related content. They license the proprietary
technology underlying their contests and content and provide
customizing and marketing services to leading web sites. ISN
products are licensed as private label products and are also
available in co-marketing opportunities through their network of
ISN owned and operated online sites, such as SportsRacket.com
brand and ISN's partner brands.
The Company and ISN will co-market Fantasy Racingo through ISN's
customers (1.7 million registered users) and also through print
media. The co-marketing plan between ISN, the software
development host for Fantasy Racingo and the Company is
structured in a way that the party who generates the advertiser
shall be entitled to 80% of the revenue generated from that
particular advertiser while the other party is entitled to 20% of
the revenues. Both companies will actively pursue further clients
who will market Fantasy Racingo on their web-sites. If ISN
delivers Fantasy Racingo to their clients (e.g. sportsline.com,
playboy.com, etc.), then ISN will be entitled to 80% of the
revenues, while the Company will receive 20%. (Note: Mr.
McFadden, Director of the Company, is also the Director of
Marketing at ISN. Mr. DeFrancesco, a member of the Company's
Advisory Board, is President and Chairman of the Board for ISN.)
The Company is also negotiating a platform for Internet Racingo
with a television network to build an infrastructure to hub a
worldwide betting platform. (see "Horse Racing Channel"). This
platform will not accept North American bets and will feature
Racingo games in multi-language versions (i.e. Australian
Racingo, Asian Racingo, German Racingo, etc.).
On- and Off-Track RACINGO
The Company holds an exclusive license from RIL to use or sub-
license the use of RACINGO (and all related patents, trademarks,
copyrights and other intellectual property rights) at on- or off-
track betting establishments. The license covers the territories
of Canada, Mexico and the United States, has a term of ten years,
and is automatically renewable for an additional ten years. Under
the license, the Company will pay to RIL 0.5% of all revenues
from sales of RACINGO tickets at on- or off-track betting
establishments, television or promotion rights relating to on- or
off-track RACINGO, and sales of RACINGO-branded merchandise
(other than merchandise sold over the Internet).
Under the license, the Company must provide ("seed") a minimum
jackpot of US$1,000,000, and a further US$3,000,000 in financing
for the market launch of on- and off-track RACINGO. The jackpots
will be co-mingled where commercially feasible and permitted by
law. The Company must also recruit horse or greyhound racing
tracks with an aggregate annual betting volume of
US$5,000,000,000 for a successful market launch, which can be
achieved by three large tracks and five small tracks.
The annual betting volume is the amount of dollars wagered per
year at the racetracks. The Company has a signed letter of
agreement with Private Capital Group, Inc. for a financing
commitment for the amounts needed to seed the jackpots.
Internet RACINGO
The Company holds an exclusive license from RIL to use or sub-
license the use of RACINGO (and all related patents, trademarks,
copyrights and other intellectual property rights) over the
Internet. The license covers the entire world. The license has a
term of ten years, and is automatically renewable for an
additional ten years. Under the license, the Company will pay to
RIL 1% of all revenues from sales of RACINGO tickets over the
Internet, television or promotion rights relating to internet
RACINGO, and sales of RACINGO-branded merchandise over the
Internet.
The Company must provide a jackpot guarantee of at least
US$250,000, and further capital to finance the market launch of
internet RACINGO. The jackpots will be co-mingled where
commercially feasible and permitted by law. The Company will need
to recruit at least fifteen licensed Internet betting
establishments for a successful market launch.
Autotote Memorandum of Understanding
The Company has entered into a Non-Binding Memorandum of
Understanding ("Memorandum") with Autotote Systems, Inc.
("Autotote"), a computerized pari-mutuel wagering company. The
responsibilities for both companies has been outlined below. The
formal agreements between the two companies will last for a
period of five years with an option to renew for five years.
Autotote shall receive a fee equal to 23% of PWIN's gross
revenues (the "Take-Out") from the sale of On-Line Racingo
worldwide, and from the sale of On- and Off-track Racingo in the
United States of America and such other jurisdiction for which
PWIN may obtain a license to conduct or market On- and Off-track
Racingo (i.e. if PWIN has a Take-Out of 6.5% of wagers then
Autotote shall receive a fee equal to 1.5% of wagers). The
Company is subject to a minimum fee of 1.25% of all wagers on
Racingo for Autotote. Autotote will receive 5% of PWIN's gross
revenues from each such sale.
A tote company provides the systems and services that allow a
patron to place a wager and collect a payout after a race has
finished. This is all calculated through a pari-mutuel wagering
system. A pari-mutuel wagering system is a complex integrated
hardware/software solution that prints bet tickets, calculates
odds and allows for the redemption of winning tickets, which are
processed at up to a thousand transactions per second, in a
secure, redundant system.
Autotote Corporation is a technology supplier and operator of
wagering systems, related equipments and gaming venues in North
America and worldwide. The Company provides technology, services
and operations management primarily to two major segments of the
industry: pari-mutuel wagering, consisting primarily of wagering
conducted on horse racing, greyhound racing and jai-alai: and
government sponsored or licensed lotteries. In addition, Autotote
provides technologically advanced Video Game Machines. The
Company is provider of Racing Industry simulcasting services in
the United States through its broadcasting of live racing events
via satellite to other racetracks and off-track betting
facilities.
The Company is currently negotiating with Autotote Systems, Inc.
and the gaming network to form a joint venture for U.S. land
based (racetracks) Racingo. Seventy-five percent of all
racetracks in the U.S. use Autotote to process wagers at their
racetracks and OTB's. Under this joint venture, the roles are as
follows:
Autotote Responsibilities
1. Installation of Racingo software at all racetracks.
2. Upgrades and changes to software.
3. Hubbing of the betting pool and managing the distribution of
winnings.
4. Filings for approval of the Racingo Software for gaming
license purposes on a State by State basis.
5. Supply racing secretary on a full time basis - choosing min.
9 horse fields.
6. Supply Racingo race data via publications to the patrons.
7. Negotiate in good faith for Racingo distribution at non-
Autotote racetracks.
8. Pay all software-associated costs not requested by
PlayandWin Inc.
9. Support and co-sell Autotote racetracks via sales reps.
PlayandWin Inc.
1. Supply personnel and materials for racetrack sell-in.
2. Set up corporate offices for management of U.S. based
Racingo.
3. Fund all launch requirements: marketing commitments (min. $3
million U.S.).
4. Continue marketing and research on Racingo.
5. Supply $1 million jackpot at all times for Prize E. (Prize E
is one of the following ways to win)
Prize E: If no winning tickets are sold matching all
squares on the ticket in the exact order of finish for
the first, second and third, the winning payoff for
Prize D will be the sum of the net pool from Prize E
and the net pool from Prize D;
Prize D: If no winning tickets are sold matching all
squares on the ticket in the exact order of finish for
first, second and third for Prize E AND if no winning
tickets are sold matching all squares on the ticket in
any order of finish for first, second and third for
Prize D, then the net pool from Prize E plus the net
pool from Prize D will be added to the net pool for
Prize C; should no winning tickets for Prize D yet
winning tickets should be sold for Prize E, then the
net pool from Prize D will be added to the net pool for
the next prize category down the list (C, B or A),
based on the order fo precedence, containing at least
one winning ticket, but if no winning ticket is sold
for prizes C, B, and A then the net pool for Prize D
will be added to Prize E;
Prize C: If a winning ticket is sold matching five squares
in the pattern of upper and lower left with middle
center and upper and lower right, the winning payoff
for Prize C will be the sum of the net pool from Prize
E, the net pool from Prize D and the net pool from
Prize C; (assumes no winning tickets from Prizes E and
D)
If no winning tickets are sold matching five squares in
the pattern of upper and lower left with middle center
and upper and lower fight for Prize C AND if no winning
tickets are sold for Prizes E and D then the net pool
form Prize E and the net pool from Prize D and the net
pool from Prize C will be added to the net pool for
Prize B;
Prize B: If no winning ticket is sold matching four squares
in the pattern of middle left with upper and lower
center and middle right, for Prize B AND if no winning
tickets are sold for Prizes E, D and C then the net
pool from Prizes E, D, C and B will be added to the net
pool for Prize A.
Prize A: If no winning ticket(s) is sold matching three
squares on a ticket in either of the follwing patterns:
a) upper left with middle center and lower right, or
b) lower left with middle center and upper right for
Prize A, then the net pool from Prizes E, D, C, B and A
will be paid to all ticket holders of the current
RACINGO wager.
The Company is in the final stages of negotiations with a 24-hour
horseracing channel (the "television network" or the "gaming
network") offering at-home wagering via set-top box and a remote
control wherever the local technology allows for it. Currently
offered in 3 states, this network expects 20 states to have
legalized the system by 2001.
Gaming Network
1. Co-mingle TV pool with racetrack pool.
2. Bring member race tracks to Racing.
3. Co-market Racingo in U.S.
4. Logistic and racetrack management
5. Produce and co-market full TV show for Racingo rights.
The gaming network is a 24 hour live racing channel that
broadcasts commentary, odds, insight, and previews as well as
past performances into homes through cable T.V. This is unique in
the horseracing industry and allows people from home to watch the
races at home and bet over the phone where legally acceptable.
While the Company has not yet entered into any formal contracts
or letters of intents with the gaming network, the final
contracts are being drawn up and management is confident of
completion in the first quarter of 2000. Racingo's land based
launch is targeted at the Kentucky Derby in May 2000.
Management believes that the Company can commit to its cash
requirements for commencement of its operations for the next
twelve months through a loan received from a private investor.
There is no material contract for the term of the loan.
Liquidity and Capital Resources
As of the date of this Form 10-SB, the Company has yet to
initiate its revenue generating and is still in the development
stage. Consequently, the Company has been substantially, and
will be, dependent on, equity financing to fund its cash
requirements for operations.
The Company has certain cash requirements to initiate its
business plan. Management has estimated these requirements to be,
as follows: i) begin the operations of the Racingo Land Based
estimated to be approximately $3,000,000 U.S.; ii) begin the
operations of the Internet Racingo based operations estimated to
be approximately $550,000 U.S.; and iii) general and
administrative costs estimated to be approximately $700,000 U.S.
The company must also arrange for insurance for guaranteed
jackpots. Management has been in discussion with an insurance
carrier and has an estimated cost of $50,000 per $1 million
guaranteed.
As of the date of this Form 10-SB, the Company has entered into a
non-exclusive "best efforts basis" private placement of its
equity securities with an investment banking firm, Private
Capital Group, Inc., Clearwater, Florida, to raise the required
funds under the commitments. Private Capital Group, Inc.
specializes in facilitating growth capital for emerging
companies.
Employees
The Company's only employees at the present time are its
president and the 5 members of the Advisory Board, who will
devote as much time as the Board of Directors determine is
necessary to carry out the affairs of the Company. (See "Item
5").
Management's Discussion and Analysis of Financial Conditions
Results of Operations
For the years ended February 28, 1999 and February 28, 1998
General and Administrative ("G&A") expenses consist of payroll
and related expenses for executive and administrative personnel,
professional fees, travel and promotion and other general
corporate expenses. G&A for the year ended 1999 was approximately
$279,000, which was $153,000 less than 1998, which was $432,000.
Management fees declined by $86,000 as well as consulting fees by
$27,000. Another component of the decline is advertising which
was down by $24,000.
Once the company completes its financing; the company will step-
up its operations to initiate its business plans in accordance to
its licensing agreements. Therefore the company expects G&A to
increase significantly in the future.
Liquidity and Capital Resources
To date in 1998 and 1999, there were no sales and the company was
funded by loans for $60,000 and cash from sale of stock in the
amount of $660,000.
The company believes that it will satisfy its future cash
requirements by way of private placements of equity totaling
approximately $5 million.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's offices are located at 7050 Weston Rd., Vaughn,
Ontario, Canada L4L 8G7. The Company will occupy this office
space (1857 sq. ft.) beginning February 1, 2000 for a three year
period. Under the terms of the agreement, the Company will pay
$11.00/square foot/month for the first year; $11.50/square
foot/month for the second year; and $12.00/square foot/month for
the third year. Since the Company does not invest or plan to
invest in any investments or interests in real estate, real
estate mortgages, or securities of or interests in person
primarily engaged in real estate activities, it does not have any
policies instituted with respect to the aforementioned
investments or interests, etc.
Since the company is incorporated in Nevada, it is required to
maintain a resident office in that state in which corporate
documents are available. The resident office is located at is One
East First Street, Reno, Nevada 89501. No activities take place
in the resident office. All other activities have been
consolidated to the facility described above.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth each person known to the Company,
as of January 27, 2000, to be a beneficial owner of five percent
(5%) or more of the Company's common stock, by the Company's
directors individually, and by all of the Company's directors and
executive officers as a group. Except as noted, each person has
sole voting and investment power with respect to the shares
shown.
Beneficial Owners:
<TABLE>
<S> <C> <C> <C>
Title of Name/Address Shares Percentage
Class of Owner Beneficially Ownership
Owned
Common Andrew W. Berney 550,000 7.77%
4056 Elkridge Drive
Las Vegas, NV 89129
Common Caron A. Kelly 1,000,000 14.13%
4065 Elkridge Drive
Las Vegas, NV 89129
Common Randy J. McDowell 525,000 7.42%
100 N. Wallace #232
Las Vegas, NV 89129
Common William L. Thompson 1,375,000 19.43%
RR #7 Woodstock
Ontario, Canada
N4S 7W2
Common Douglas McFadden 75,000 0.98%
26 Benson Ave.
Suite 202
Richmond, Ontario
L4C 4E6
Common Total Ownership of 75,000 1.05%
Officers and
Directors (1
individual - Stock
Option see Note 1)
</TABLE>
Members of Advisory Board Stock Options (if exercised)
<TABLE>
<S> <C> <C> <C>
Title of Name/Address of Owner Shares Percentage
Class Beneficially Ownership
Owned
Common Stephen Peskoff 250,000 3.28%
c/o Underhill Investment
Corp.
1001 Nineteenth Street
N.
10th Floor
Arlington, VA 22209
Common Andrew DeFrancesco 75,000 0.98%
225 Richmond Street West
Suite 403
Toronto, Ontario M5V-1W2
Common Douglas McFadden 75,000 0.98%
26 Benson Ave.
Suite 202
Richmond, Ontario L4C
4E6
Common Adam Hawkins 75,000 0.98%
140 Eastbourne Ave.
Toronto, Ontario M5P-2G6
Common Total Ownership by 475,000 6.23%
Members of Advisory
Board Stock Options (4
Members)
</TABLE>
Effect to Beneficial Owners (if Options are exercised)
<TABLE>
<S> <C> <C> <C>
Title of Name/Address of Owner Shares Percentage
Class Beneficially Ownership
Owned
Common Andrew W. Berney 550,000 7.21%
4056 Elkridge Drive
Las Vegas, NV 89129
Common Caron A. Kelly 1,000,000 13.11%
4065 Elkridge Drive
Las Vegas, NV 89129
Common Randy J. McDowell 525,000 6.88%
100 N. Wallace #232
Las Vegas, NV 89129
Common William L. Thompson 1,375,000 18.02%
RR #7 Woodstock
Ontario, Canada N4S 7W2
Common Total Ownership over 5% 3,450,000 45.22%
and Officers and
Directors
</TABLE>
Note 1: The Company currently has a Stock Option Agreement
("Agreement") with Penguin Petrolium Products Limited
("Penguin"), dated December 15, 1999. Under the terms of the
Agreement, Penguin has the option to purchase 80,000 shares of
the Company's common stock at $2.00 per shares, of which 50,000
shares are exercisable until 5:00 PM (EST) Monday, January 17,
2000, which have been exercised in January, 2000. The remaining
30,000 shares are exercisable on the 2nd anniversary of the date
of the Agreement.
Four members of the Advisory Board are entitled to stock options
for a total amount of 475,000 shares at a purchase price of $2.00
per share. Three of the four may be exercised prior to November
28, 2004, with the fourth expiring in October 5, 2004.
Note 2: A Canada Exchangeable Share enables the holder to receive
one share of the Company's common stock for no consideration. The
Exchangeable Shares are convertible into shares of the Company's
common stock in three installments of 1,162,087 shares on each of
October 1, 2000, October 1, 2001 and October 1, 2002. However the
Company can call the Exchangeable Shares on the earlier of
October 1, 2004 or the occurrence of a take over bid for all of
the issued and outstanding stock of the Company. In aggregate
the Company has committed to issue 3,486,262 shares of its common
stock if the issued Exchangeable shares are converted and 397,428
shares of its common stock if the warrants are exercised.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS
The members of the Board of Directors of the Company serve until
the next annual meeting of the stockholders, or until their
successors have been elected. The officers serve at the pleasure
of the Board of Directors.
There are no agreements for any officer or director to resign at
the request of any other person, and none of the officers or
directors named below are acting on behalf of, or at the
direction of, any other person.
Information as to the directors and executive officers of the
Company is as follows:
<TABLE>
<S> <C> <C>
Name Age Position
Stewart Garner 34 President/Secretary/T
reasurer/Director
Douglas McFadden 67 Director
</TABLE>
Stewart Garner; President/Secretary/Treasurer/Director
Stewart Garner has been the Officer and Director of the Company
since November 1999. As President, Mr. Garner has been overseeing
the day to day operations of the Company.
Since April 1996, Mr. Garner has been the President of Lynx
Gaming Corp. overseeing its daily operations and negotiations.
Since the acquisition of Lynx Gaming Corp., which is now a wholly-
owned subsidiary of the Company, Mr. Garner has focused his
attention to the day to day operations of the Company.
From 1995 to 1997, Mr. Garner was employed as an Account
Executive with Octagon Industries, an advertising and promotions
company. While there, he was responsible for generating and
creating new clients.
Douglas McFadden; Director
Douglas McFadden has been the Director of the Company since
December 1999, when he was also appointed as a new addition to
the Advisory Board.
Since September 1999, Mr. McFadden has been the Director of
Marketing at Internet Sports Network, Inc., a company involved in
the games/contests strategy, services, etc. His expertise has
been focused exclusively on packaging and promotions.
Prior to September 1999, for at least the past five years, Mr.
McFadden has been an entrepreneurial businessman with an
extensive marketing background including successful international
promotional campaigns in both the toy and sports collectibles
industry.
There is no family relationship between any of the officers and
directors of the Company.
Committees
Advisory Board
On November 24, 1999, the Company created an advisory board,
consisting of new members, to help steer the Company towards a
launch of the new game Racingo.
Stephen D. Peskoff - Advisory Board Committee since November
1999.
Mr. Peskoff has been active the thoroughbred horse industry since
1978, during which time he won two Eclipse Awards and was the
breeder of 1991's U.S. "Horse of the Year."
Since November 1994, Mr. Peskoff has been a Consultant to the
chairman of Friedman, Billings, Ramsey & Co. Inc. (FBR) and
launched the Investment Banking-Special Situations group, which
he currently heads.
Prior to joining FBR, Mr. Peskoff was with Drexel, Burnham,
Lambert, as well as being Managing Partner of Investment Capital
Associates with over $2 billion of real estate origination of
commercial and industrial real estate in major U.S. metropolitan
markets.
Mr. Peskoff received his B.A. from the University of Rhode Island
and his MBA from the University of Toledo.
Andrew DeFrancesco - Advisory Board Committee since November
1999.
Mr. DeFrancesco is currently President and Chairman of the Board
for Internet Sports Network (OTCBB: ISNI). ISN has developed over
600 online and offline business partnerships throughout North
America and the world. Their clients have included the likes of
Yahoo (Nasdaq:YHOO - news), Excite (Nasdaq:ATHM - news),
Cannondale (Nasdaq:BIKE - news) and DaimlerChrysler (NYSE:DCX -
news) amongst others.
Prior to ISN, Mr. DeFrancesco was Executive Vice President of
Dominick & Dominick Securities Canada. Mr. DeFrancesco dedicated
his time there evenly to institutional equity sales and trading,
and sourcing and structuring of equity and debt financings.
Prior to joining Dominick in October 1997, Mr. DeFrancesco held
the position of Manager of Institutional Trading and Sales, April
1994 to April 1995, and Associate Director, Corporate Finance,
April 1995 to July 1997, at C.M. Oliver & Company Limited.
From March 1993 to March 1994, he served as an Associate
Financial advisor at Midland Walwyn (now Merrill Lynch Canada).
Mr. DeFrancesco received his Bachelor of Arts in Economics and
Politics from the University of Western Ontario and completed
courses with the Canadian Securities Institute.
Mr. DeFrancesco is also a member of the board of directors of the
Players for Kids Charity Foundation.
On December 16, 1999, the Company added 3 new senior advisors to
the Advisory Board.
Douglas McFadden (please see above for bio)
Adam Hawkins; Lottery Advisor
Mr. Hawkins was with the Ontario Lottery Corporation from 1975 to
1991 where he served as Executive Vice President for most of this
time. As Executive Vice President, Mr. Hawkins was part of the
Senior Management team which introduced new products resulting in
annual sales increasing from $100 million to over $1.5 billion.
During his term he introduced a $4 billion cash collection system
through electronic funds transfer and managed a corporate annual
budget of over $100 million.
Alex Dolgonos; Technical Advisor
Currently Chairman, President and CFO of Unique Broadband Systems
(VSE:UBS - news), a recognized world leader in the design,
development and manufacture of broadband wireless and other
wireless solutions that serve the service provider,
telecommunications and broadcast industries. With headquarters in
Markham, Ontario, Unique Broadband Systems markets its products
globally, providing 24X7 support. Unique Broadband Systems is a
trademark of Unique Broadband Systems Inc.
Conflicts of Interest
The officers and directors are, so long as they are officers or
directors of the Company, subject to the restriction that all
opportunities contemplated by the Company's plan of operation
which come to their attention, either in the performance of their
duties or in any other manner, will be considered opportunities
of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this
requirement will be a breach of the fiduciary duties of the
officer or director.
As noted before, Mr. McFadden and Mr. DeFrancesco are employed by
ISN, a majore partner of the Company with respect to the
marketing of Racingo. As such, these individuals may have a
conflict of interest with respect to agreements between the two
companies. The Board of Directors is aware of this conflict, and
will evaluate all recommendations by the Advisory Board with this
in mind. To the extent possible, Mr. DeFrancesco will not
participate in making recommendations to the Board concerning ISN
agreements.
Investment Company Act of 1940
Although the Company will be subject to regulation under the
Securities Act of 1933 and the Securities Exchange Act of 1934,
management believes the Company will not be subject to regulation
under the Investment Company Act of 1940 insofar as the Company
will not be engaged in the business of investing or trading in
securities. In the event the Company engages in business
combinations which result in the Company holding passive
investment interests in a number of entities, the Company could
be subject to regulation under the Investment Company Act of
1940. In such event, the Company would be required to register as
an investment company and could be expected to incur significant
registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission
as to the status of the Company under the Investment Company Act
of 1940 and, consequently, any violation of such Act would
subject the Company to material adverse consequences.
ITEM 6. EXECUTIVE COMPENSATION
The President of Playandwin, Inc. is entitled to a salary of
US$4,000 per month, which has been deferred until such a time
that the Company will generate revenue. The Company does not at
present have a compensation plan for officers and directors.
Summary Compensation Table
Annual compensation Long term compensation
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Awards Payout
s
Name and Year Salary Bonus( Other Restric Securit LTI All
Position ($) 1) ($) Annua ted ies P othe
l Stock underly Pay r
Comp. Awards ing out Comp
($) ($) options s .
/ SARs ($) ($)
(#)
Stewart Garner, 1999 $48,000
President and
Director
</TABLE>
Option /SAR Grant in Last Fiscal Year
Individual Grants
<TABLE>
<S> <C> <C> <C> <C>
Name Number of Percent of total Exercise or base Expiration
securities options / SARs price ($/sh) Date
underlying granted to
options / SARs employees in
Granted (#) last fiscal year
Stephen 250,000 $2.00/sh 11/200
Peskoff, 4
Advisory Board
Andrew 75,000 $2.00/sh 10/2004
DeFrancesco,
Advisory Board
Douglas 75,000 $2.00/sh 11/2004
McFadden,
Director
Adam Hawkins, 75,000 $2.00/sh 11/2004
Lottery Advisor
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
P.E.S.T. Creative Gaming Corporation is owned by Lynx Gaming
Corp. and the Company's wholly-owned Ontario subsidiary,
Playandwin Canada Inc. Lynx Gaming Corp. is a wholly-owned
subsidiary of Playandwin Canada Inc.
Andrew DeFrancesco, a member of the Advisory Board, is the
current President and Chairman of the Board for Internet Sports
Network, Inc.
Douglas McFadden is also the Director of Marketing for Internet
Sports Network, Inc.
ITEM 8. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company has been threatened.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is quoted on the over-the-counter
market in the United States under the symbol PWIN. The stock was
listed previously under the symbol ATTI. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
<TABLE>
<S> <C> <C>
Qtr. Ended Low/Bid High/Ask
As of July 2.50 2.62
31, 1999
Sept. 30, 1.81 3.37
1999
Dec. 31, 2.37 3.50
1999
</TABLE>
Source: America Online.
The Company's common stock is considered a "penny stock" under
the Commission rules.
Effective August 11, 1993, the Securities and Exchange Commission
adopted Rule 15g-9, which established the definition of a "penny
stock," for purposes relevant to the Company, as any equity
security that has a market price of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require: (i) that a broker or dealer
approve a person's account for transactions in penny stocks; and
(ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve
a person's account for transactions in penny stocks, the broker
or dealer must (i) obtain financial information and investment
experience and objectives of the person; and (ii) make a
reasonable determination that the transactions in penny stocks
are suitable for that person and that person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating
to the penny stock market, which, in highlight form, (i) sets
forth the basis on which the broker or dealer made the
suitability determination; and (ii) that the broker or dealer
received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks
of investing in penny stocks in both public offerings and in
secondary trading, and about commissions payable to both the
broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in
the account and information on the limited market in penny
stocks.
The National Association of Securities Dealers, Inc. (the
"NASD"), which administers NASDAQ, has recently made changes in
the criteria for initial listing on the NASDAQ Small Cap market
and for continued listing. For initial listing, a company must
have net tangible assets of $4 million, market capitalization of
$50 million or net income of $750,000 in the most recently
completed fiscal year or in two of the last three fiscal years.
For initial listing, the common stock must also have a minimum
bid price of $4 per share. In order to continue to be included on
NASDAQ, a company must maintain $2,000,000 in net tangible assets
and a $1,000,000 market value of its publicly-traded securities.
In addition, continued inclusion requires two market-makers and a
minimum bid price of $1.00 per share.
Holders
There are 13 holders of the Company's Common Stock. There were
5,500,000 shares issued to the three founders of the Company, who
transferred some of their shares to a total of 5 individuals, who
then transferred some of their shares to a total of 20
individuals. On November 30, 1998, the Company issued 1,375,000
shares of its common stock to William L. Thompson for the
proprietary processes pursuant to an employment agreement. These
shares of the Company's Common Stock were issued in accordance
with the exemption from registration afforded by Section 4(2) of
the Securities Act of 1933. On January 13, 1999, the Company
issued 200,000 shares of its common stock for consideration of
$150,000 exempt from registration pursuant to Rule 504,
Regulation D.
Dividends
The Registrant has not paid any dividends to date, and has no
plans to do so in the immediate future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
With respect to the issuances and transfers made, the Registrant
relied on Section 4(2) of the Securities Act of 1933, as amended.
No advertising or general solicitation was employed in offering
the shares. The securities were offered for investment only and
not for the purpose of resale or distribution, and the transfer
thereof was appropriately restricted.
On November 30, 1999, the Company issued 1,375,000 shares of its
common stock to William Thompson for the proprietary rights to
process soybeans.
On January 13, 1999, the Company issued 200,000 shares of its
common stock for consideration of $150,000 pursuant to Rule 504,
Regulation D.
In general, under Rule 144 adopted pursuant to the Securities Act
of 1933, a person (or persons whose shares are aggregated) who
has satisfied a one year holding period, under certain
circumstances, may sell within any three-month period a number of
shares which does not exceed the greater of one percent of the
then outstanding Common Stock or the average weekly trading
volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares
without any quantity limitation by a person who has satisfied a
two-year holding period and who is not, and has not been for the
preceding three months, an affiliate of the Company.
ITEM 11. DESCRIPTION OF SECURITIES.
Common Stock
The Company's Articles of Incorporation authorizes the issuance
of 50,000,000 shares of Common Stock, par value $0.001 per share,
of which 7,075,000 are issued and outstanding. The shares are non-
assessable, without pre-emptive rights, and do not carry
cumulative voting rights. Holders of common shares are entitled
to one vote for each share on all matters to be voted on by the
stockholders. The shares are fully paid, non-assessable, without
pre-emptive rights, and do not carry cumulative voting rights.
Holders of common shares are entitled to share ratably in
dividends, if any, as may be declared by the Company from time-to-
time, from funds legally available. In the event of a
liquidation, dissolution, or winding up of the Company, the
holders of shares of common stock are entitled to share on a pro-
rata basis all assets remaining after payment in full of all
liabilities.
Management is not aware of any circumstances in which additional
shares of any class or series of the Company's stock would be
issued to management or promoters, or affiliates or associates of
either.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company and its affiliates may not be liable to its
shareholders for errors in judgment or other acts or omissions
not amounting to intentional misconduct, fraud, or a knowing
violation of the law, since provisions have been made in the
Articles of incorporation and By-laws limiting such liability.
The Articles of Incorporation and By-laws also provide for
indemnification of the officers and directors of the Company in
most cases for any liability suffered by them or arising from
their activities as officers and directors of the Company if they
were not engaged in intentional misconduct, fraud, or a knowing
violation of the law. Therefore, purchasers of these securities
may have a more limited right of action than they would have
except for this limitation in the Articles of Incorporation and
By-laws.
The officers and directors of the Company are accountable to the
Company as fiduciaries, which means such officers and directors
are required to exercise good faith and integrity in handling the
Company's affairs. A shareholder may be able to institute legal
action on behalf of himself and all others similarly stated
shareholders to recover damages where the Company has failed or
refused to observe the law.
Shareholders may, subject to applicable rules of civil procedure,
be able to bring a class action or derivative suit to enforce
their rights, including rights under certain federal and state
securities laws and regulations. Shareholders who have suffered
losses in connection with the purchase or sale of their interest
in the Company in connection with such sale or purchase,
including the misapplication by any such officer or director of
the proceeds from the sale of these securities, may be able to
recover such losses from the Company.
ITEM 13. FINANCIAL STATEMENTS.
The financial statements and supplemental data required by this
Item 13 follow the index of financial statements appearing at
Item 15 of this Form 10-SB.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
1. i. The Company's principal accountant was
dismissed on December 31, 1999
ii. The principal accountant's report on the financial
statements for the past two years was modified as to uncertainty
that the Company will continue as a going concern.
iii. The decision to change accountants was approved by the board
of directors.
iv. A. There were no disagreements with the former
accountant on any matter of accounting principles or
practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to the former
accountants satisfaction, would have caused it to make
reference to the subject matter of the disagreement(s) in
connection with its report.
2. A new accountant has been engaged as the principal
accountant to audit the issuer's financial statements. The new
accountant is Merdinger, Fruchter, Rosen & Corso, P.C. and was
engaged as of December 31, 1999. Neither the Company nor anyone
acting on its behalf consulted the new accountant regarding:
ii. the application of accounting principles to a specific
completed or contemplated transaction, or the type of audit
opinion that might be rendered on the small business issuer's
financial statements, as part of the process of deciding as to
the accounting, auditing or financial reporting issue, or
iii. any matter that was the subject of a disagreement or event
identified in response to paragraph 1(iv) of this Item.
3. The Company has provided the former accountant with a copy
of the disclosures it is making in response to this Item. The
Company has requested the former accountant to furnish a letter
addressed to the Commission stating that it agrees with the
statements made by the Company. The Company has filed the letter
as an exhibit to the registration statement containing this
disclosure.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
FINANCIAL STATEMENTS (PLAYANDWIN, INC.)
Independent Auditor's Report of Merdinger, Fruchter,
Rosen & Corso, P.C., dated February 9, 2000
Balance Sheet as of September 30, 1999
Statement of Operation for the nine months ended
September 30, 1999
Statement of Cash Flows for the nine months ended
September 30, 1999
Notes to Financial Statements
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF AGRICEUTICALS TECHNOLOGIES, INC.:
We have audited the accompanying balance sheets of Agriceuticals
Technologies, Inc. (formerly known as Cambridge Funding Group,
Inc.) (A Development Stage Company) as of December 31, 1998 and
1997 and the related statements of operations, stockholders'
deficiency and cash flows for the years then ended and for the
period from June 9, 1995 (inception) to December 31, 1998. These
financials statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Agriceuticals Technologies, Inc. formerly known as Cambridge
Funding Group, Inc. as of December 31, 1998 and 1997 and the
results of its operations and its cash flows for the years then
ended and for the period from June 9, 1995 (inception) to
December 31, 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 1 of the accompanying financial statements, the Company
has no established source of revenue, which raises substantial
doubt about its ability to continue as a going concern.
Management's plan in regard to these matters is also discussed in
Note 1. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
MERDINGER, FRUCHTER ROSEN & CORSO, P.C.
Certified Public Accountants
Los Angeles, California
February 9, 2000
Agriceutical Technologies, Inc.
(A Development Stage Company
BALANCE SHEETS
<TABLE>
<S>
<C> <C> <C> <C>
December 31, December 31, September 30, September 30,
1998 1997 1999 (unaudited) 1998 (unaudited)
ASSETS
TOTAL ASSETS $ 0 $ 0 $ 0 $ 0
LIABILITIES AND
STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Due to officer $ 320 $ 320 $ 320 $ 320
STOCKHOLDERS' DEFICIENCY:
Common stock, $0.001 par 6,875 5,500 7,075 5,500
value,
50,000,000 shares
authorized;
6,875,000;5,500,000;
7,075,000; and 5,500,000
shares issued &
outstanding
Additional paid-in capital 3,023,625 3,163,425
Deficit accumulated during (3,030,820) (5,820) (3,170,820) (5,820)
the development stage
TOTAL STOCKHOLDERS' (320) (320) (320)
DEFICIENCY (320)
TOTAL LIABILITIES AND $ 0 $ 0 $ 0 $ 0
STOCKHOLDERS' DEFICIENCY
</TABLE>
The accompanying notes are an integral part of the financial
statements
Agriceutical Technologies, Inc.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended Year Ended For the Period Nine Months Nine Months
December 31, December 31, from June 9, Ended September Ended September
1998 1997 1995 (inception) 30, 1999 30, 1998
to December 31, (unaudited) (unaudited)
1998
REVENUE $ 0 $ 0 $ 0 $ 0 $
0
EXPENSES:
Impairment loss $3,025,000 0 $3,025,000 0 $0
on asset
Administrative $ 85 5,820 140,000 $ 0
TOTAL EXPENSES 3,025,000 85 3,030,820 140,000 $ 0
LOSS BEFORE (3,025,000) (85) (3,030,820) (140,000) $0
TAXES
PROVISION FOR 0 0 0 0 0
INCOME TAXES
NET LOSS $(3,025,000) $ (85) $(3,030,820) $(140,000) $ 0
NET LOSS PER $ (0.53) $ 0 $ (0.54) $ (0.02) $ 0
COMMON SHARE -
basic and
diluted
WEIGHTED AVERAGE 5,726,026 5,500,000 5,563,025 7,065,476 5,500,000
NUMBER OF COMMON
SHARES
OUTSTANDING -
basic and
diluted
</TABLE>
The accompanying notes are an integral part of the financial
statements.
Agriceutical Technologies, Inc.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
<TABLE>
<S>
<C> <C> <C> <C> <C>
Common Stock Common Stock Additional paid- Accumulated Total
Shares Amount in Capital Deficit
Balance, June 9, 0 $ 0 $ 0 $ 0 $
1995 0
Issuance of common 5,500,000 5,500 0 0 5,500
stock
Net loss 0 0 0 $ (5,500) (5,500)
Balance, December 5,500,000 5,500 0 (5,500) 0
31, 1995
Net loss 0 0 0 (235) (235)
Balance, December 5,500,000 5,500 0 (5,735) (235)
31, 1996
Net loss 0 0 0 (85) (85)
Balance, December 5,500,000 5,500 (5,820) (320)
31, 1997
Issuance of common 1,375,000 1,375 $3,023,625 3,025,000
stock for
acquisition of
proprietary rights
on November 15,
1998 at $2.20 per
share
Net loss 0 0 0 (3,025,000) (3,025,000)
Balance, December 6,875,000 6,875 3,023,625 (3,030,820) (320)
31, 1998
Issuance of common 200,000 200 149,800 0 150,000
stock for cash on
January 13, 1999 at
$0.75 per share
(unaudited)
Offering Costs 0 0 (10,000) 0 (10,000)
(unaudited)
Net loss 0 0 0 (140,000) (140,000)
(unaudited)
Balance, September 7,075,000 $ 7,075 $3,163,425 $(3,170,425) $ (320)
30, 1999
(unaudited)
</TABLE>
The accompanying notes are an integral part of the financial
statements.
Agriceutical Technologies, Inc.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C> <C>
For the Year For the Year For the Period For the Nine For the Nine
Ended December Ended December June 9, 1995 Months Ended Months Ended
31, 1998 31, 1997 (inception) to September 30, September 30,
December 31, 1999 (unaudited) 1998 (unaudited)
1998
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net Loss $(3,025,000) $ (85) $(3,030,820) $(140,000) $ 0
Impairment loss 3,025,000 0 3,025,000 0 0
Increase in due to 0 85 320 0 0
officer
Net cash used in 0 0 (5,500) (140,000) 0
operating
activities
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Issuance of common 0 0 5,500 140,000 0
stock for cash
Net change in cash 0 0 0 0 0
CASH AND CASH 0 0 0 0 0
EQUIVALENTS -
beginning of
period
CASH AND CASH $ 0 $ 0 $ 0 $ 0 $ 0
EQUIVALENTS - end
of period
SUPPLEMENTAL CASH
FLOW INFORMATION:
Cash paid during $ 0 $ 0 $ 0 $ 0 $ 0
the year -
Interest paid
Income taxes paid $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND INVESTING
ACTIVITIES:
During 1999, the Company purchased proprietary rights in exchange
for 1,375,000 shares of its common stock valued at $3,025,000,
which was the market value for the shares issued at the date of
issuance.
The accompanying notes are an integral part of the financial
statements.
AGRICEUTICALS TECHNOLOGIES, INC.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations
Agriceuticals Technologies, Inc. ("Company") is currently a
development stage company under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 7. The Company was
incorporated under the laws of the State of Nevada on June 9,
1995. On October 2, 1998, the Company changed its name to
Agriceuticals Technologies, Inc. It is management's objective to
operate the company in the development, promotion and sale of
para-mutual wagering games (see Note 5).
Basis of Presentation
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern.
However, the Company has no established source of revenue. This
factor raises substantial doubt about the Company's ability to
continue as a going concern. Without realization of additional
capital, it would be unlikely for the Company to continue as a
going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue in
existence. It is management's objective to seek additional
capital and commence operations through a merger with an
enterprise with operations.
Interim Financial Information
The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments,
which in the opinion of management, are necessary to fairly state
the Company's financial position, the results of operations and
cash flows for the periods presented. The results of operations
for the nine months ended September 30, 1999 are not necessarily
indicative of results for the entire year ending December 31,
1999.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased
with original maturities of three months or less to be cash
equivalents.
AGRICEUTICALS TECHNOLOGIES, INC.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Concentration of Credit Risk
From time to time the Company places its cash in what it believes
to be credit-worthy financial institutions. However, cash
balances exceed FDIC insured levels at various times during the
year.
Income Taxes
Income taxes are provided for based on the liability method of
accounting pursuant to SFAS No. 109, "Accounting for Income
Taxes". Deferred income taxes, if any, are recorded to reflect
the tax consequences on future years of differences between the
tax bases of assets and liabilities and their financial reporting
amounts at each year-end.
Loss Per Share
During 1998, the Company adopted SFAS No. 128, "Loss Per Share,"
which requires presentation of basic loss per share ("Basic LPS")
and diluted loss per share ("Diluted LPS"). The computation of
basic loss per share is computed by dividing loss available to
common stockholders by the weighted average number of outstanding
common shares during the period. Diluted loss per share gives
effect to all dilutive potential common shares outstanding during
the period. The computation of diluted LPS does not assume
conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings.
Comprehensive Income
In June 1998, the FASB issued SFAS No. 130, "Reporting
comprehensive income." SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components
in the financial statements. As of December 31, 1998, the Company
has no items that represent comprehensive income and, therefore,
has not included a schedule of Comprehensive Income in the
accompanying financial statements.
Impact of Year 2000 Issue
As of December 31, 1998, the Company does not have any computer
systems or customers and suppliers. Therefore, the issue of the
year 2000 has no effect on the Company's current activities.
NOTE 2 - ACQUISITION
On November 1, 1998, the Company acquired two proprietary
processes that would process soybeans into textured soy proteins
or isolated soy proteins. The Company's consideration for the
acquisition of these processes was the issuance of 1,375,000
shares of its common stock, valued at $3,025,000, which was the
current market price of the Company's stock as of the acquisition
date.
AGRICEUTICALS TECHNOLOGIES, INC.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Due to an inability to raise sufficient funding to pursue the
soybean processing, the Company abandoned its business plan.
Therefore, the proprietary processes were fully impaired as of
December 31, 1998 and the Company expensed the acquisition cost.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal
property. A director provides office services without charge.
Such costs are immaterial to the financial statements and,
accordingly, have not been reflected therein. The officers and
directors of the Company are involved in other business
activities and may, in the future, become involved in other
business opportunities. If a business opportunity becomes
available for the Company, such persons may face a conflict in
selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of
such conflicts.
NOTE 4 - INCOME TAXES
The reconciliation of the effective income tax rate to the
federal statutory rate is as follows:
<TABLE>
<S>
<C> <C> <C> <C>
December 31, December 31, September 30, September 30, 1998
1998 1997 1999
(Unaudited) (Unaudite
d)
Federal Income 34.00% 34.00% 34.00% 34.00%
Tax Rate
Effect of (34.00)% (34.00)% (34.00)% (34.00)%
Valuation
Allowance
Effective Income 0.00% 0.00% 0.00% 0.00%
Tax Rate
</TABLE>
Deferred tax assets and liabilities reflect the net effect of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and amounts used for
income tax purposes. Significant components of the Company's
deferred tax assets and liabilities are as follows:
<TABLE>
<S>
<C> <C> <C> <C>
December December September September
31, 1998 31, 1997 30, 1999 30, 1998
(Unaudite (Unaudited
d) )
Deferred Tax Assets
Loss Carryforwards $1,030,00 $2,000 $1,078,00 $2,000
0 0
Less: Valuation (1,030,00 (2,000) (1,078,00 (2,000)
Allowance 0) 0)
Net Deferred Tax $ $ $ $ -
Assets - - -
</TABLE>
AGRICEUTICALS TECHNOLOGIES, INC.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 4 - INCOME TAXES (continued)
At December 31, 1998 and 1997, the Company has provided a
valuation allowance for the deferred tax asset since management
has not been able to determine whether that asset is realizable.
The net change in the valuation allowance for the years ended
December 31, 1998 and 1997 and the nine months ended September
30, 1999 (unaudited) increased by $1,028,000, $0 and $48,000
(unaudited), respectively. Net operating loss carryforwards
expire starting in 2012 and 2013.
NOTE 5 - SUBSEQUENT EVENTS
Common Stock
On January 13, 1999, the Company issued 200,000 shares of its
common stock for $150,000 cash, less $10,000 selling cost.
Company Name
On July 13, 1999, the Company changed its name to Playandwin,
Inc.
Newly Created Subsidiary
In August 1999, the Company formed its Canadian subsidiary,
Playandwin Canada, Inc. ("Canada").
Acquisitions
On October 1, 1999, the Company and its' wholly owned subsidiary,
Canada, entered into a share exchange agreement to acquire 100%
of the issued and outstanding common stock of Lynx Gaming
Corporation ("Lynx") and its majority owned subsidiary P.E.S.T
Creative Gaming Corporation ("PEST"). In accordance with the
agreement, Canada i) exchanged 3,429,118 Class B nonvoting common
shares ("Exchangeable Shares") for 6,858,236 shares of Lynx's
common stock; ii) exchanged 368,857 warrants to purchase 368,857
of Exchangeable Shares at $1.70 per share, for a period of six
months after October 1, 2000, for 737,714 warrants to purchase
737,714 shares of Lynx's common stock at $0.85 per share; iii)
exchanged 57,144 Exchangeable Shares, for 114,288 shares of
PEST's common stock; and iv) exchanged 28,571 warrants to
purchase 28,571 Exchangeable Shares at $1.70 per share, for
28,571 warrants to purchase 28,571 shares of PEST's common stock
at $0.85 per share.
AGRICEUTICALS TECHNOLOGIES, INC.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Acquisitions (continued)
A Canada Exchangeable Share enables the holder to receive one
share of the Company's common stock for no consideration. The
Exchangeable Shares are convertible into shares of the Company's
common stock in three installments of 1,162,087 shares on each of
October 1, 2000, October 1, 2001 and October 1, 2002. However the
Company can call the Exchangeable Shares on the earlier of
October 1, 2004 or the occurrence of a take over bid for all of
the issued and outstanding stock of the Company. In aggregate
the Company has committed to issue 3,486,262 shares of its common
stock if the issued Exchangeable shares are converted and 397,428
shares of its common stock if the warrants are exercised.
As a result of this of this transaction, the operations of Lynx
and PEST will constitute 100% of the operations of the Company.
Accordingly, the transaction has been treated for accounting
purposes as a recapitalization of Lynx. Therefore, the continuing
financial statements will represent a continuation of the legal
subsidiary, Lynx, and not the Company, which is the legal parent.
In accounting for this transaction:
(i.) Lynx is deemed to be the purchaser and parent company for
accounting purposes. Accordingly, its net assets will be included
in the consolidated balance sheet at their historical book
values;
(ii.) Control of the net assets and business of the Company
was acquired effective October 1, 1999, the effective date. This
transaction has been accounted for as a purchase of the assets
and liabilities of the Company by Lynx. Since the Company had no
assets, liabilities or operations prior to the merger, no excess
cost over fair value of net assets acquired will be recorded.
AGRICEUTICALS TECHNOLOGIES, INC.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Master License Agreement
On October 7, 1999, PEST entered into a twenty-year master
agreement to license its Canadian and world rights of Racingo
copyright assets. Racingo is a concept developed by PEST for a
pari-mutual bingo-type wager game and lottery. PEST has developed
the concept and obtained patents and trademarks. PEST received a
one-time fee of $1,000 and 100 common shares, 125 class A shares,
175 class B shares and 250 class C shares of Racingo Investments
Ltd (a Delaware corporation), the licensee. The shares received
by PEST constitute a 10% equity investment in the voting shares
of the licensee. PEST will receive the following distributions i)
12.5% of the net income derived from the licensee's North
American Land based agreement; ii) 17.5% of the net income
derived from the licensee's North American land based operations
other than the Internet License agreement and North American Land
based agreement; 25% of all other net income derived from the
licensee.
License Agreements
On October 7, 1999, the Company entered into two individual ten-
year license agreements to use the Racingo products and
trademarks to facilitate both wagering on the Internet,
worldwide, and on- and off-track betting in North America. Also,
the two agreements provide the Company first right of refusal on
any licensing of Racingo in any venue other than the Internet and
on-and off-track betting in North America. This right of first
refusal will last until March 1, 2002. If the Company wants to
exercise its rights, it must respond to and match any bona fide
offer made to licensor by a third party within 60 days of
licensor's receipt of such an offer.
Stock Options - Consulting Agreement
The Company has a Stock Option Agreement with Penguin Petroleum
Limited ("PENGUIN"), dated December 15, 1999. Under the terms of
the Agreement, Penguin has the option to purchase 80,000 shares
of the Company's common stock in return for consulting services
for 2 years. 50,000 of those shares were exercisable until
January 17, 2000 at a price of $2.00 per share and were exercised
in January 2000, with the remaining 30,000 shares exercisable on
or before December 15, 2001, at a price of $2.00 per share. In
accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation," the fair value of these options was estimated at
$75,540 (the contract value will be pro-ratably expensed over the
life of the contract) using the Black-Scholes option-pricing
model with the following valuations and weighted-average
assumptions:
a.) 50,000 shares were valued at $32,655, with dividend yields
of 0%, expected volatility of 136%, risk-free interest rates of
5.5% and an expected life of 1 month;
b.) 30,000 shares were valued at $42,885, with dividend yields
of 0%; expected volatility of 136%, risk-free interest rates of
6.1% and an expected life of 1 year.
AGRICEUTICALS TECHNOLOGIES, INC.
(formerly known as Cambridge Funding Group, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Stock Options - Advisory Board
Four members of the advisory board were granted stock options for
an aggregate amount of 475,000 shares at a purchase price of
$2.00 per share. The options are exercisable upon grant and will
expire five years after grant. In accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation," the fair value of
these options was estimated at $409,064 (the contract value will
be pro-ratably expensed over the life of the contract of two
years) using the Black-Scholes option-pricing model with the
following valuations and weighted-average assumptions:
a.) 75,000 shares were granted on October 20, 1999 and valued at
$84,703, with dividend yields of 0%, expected volatility of 136%,
risk-free interest rates of 6.03% and an expected life of 1 year;
b.) 325,000 shares were granted on November 8, 1999 and valued
at $217,018, with dividend yields of 0%; expected volatility of
136%, risk-free interest rates of 6% and an expected life of 2
years;
c.) 75,000 shares were granted on December 4, 1999 and valued at
$107,253, with dividend yields of 0%, expected volatility of
136%, risk-free interest rates of 6.03% and an expected life of 1
year.
FINANCIAL STATEMENTS (LYNX GAMING CORP.)
Auditor's Report of Silver, Gold, Glatt & Grossman,
dated July 8, 1999
Balance Sheet as at February 28, 1999 and February 28,
1998
Statement of Operation for the years ended February 28,
1999 and February 28, 1998
Statement of Cash Flows for the years ended February
28, 1999 and February 28, 1998
Notes to Financial Statements
AUDITORS' REPORT
To the Shareholders of
Lynx Gaming Corp.
We have audited the consolidated balance sheets of Lynx Gaming
Corp. as at February 28, 1999 and 1998 and the consolidated
statements of operations and deficit and changes in financial
position for the years then ended. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as at February 28, 1999 and 1998 and the results of its
operations and the changes in its financial position for the
three years then ended in accordance with generally accepted
accounting principles.
Toronto, Ontario Chartered
Accountants
July 8, 1999
Lynx Gaming Corp.
(Incorporated under the laws of the Province of Ontario)
Consolidated Balance Sheets as at February 28, 1999 and 1998
<TABLE>
<S>
<C> <C>
1999 1998
ASSETS
CURRENT ASSETS:
Cash $479
Deposits 16,099
Due from related company (Note 65,639 81,652
3)
Total Current Assets 65,639 98,230
CAPITAL ASSETS (Note 4) 12,147 15,601
INTELLECTUAL PROPERTY 184,358 153,304
TOTAL ASSETS 262,144 267,135
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES;
Bank indebtedness (Note 5) 13,090
Accounts payable and accrued 224,599 90,797
liabilities
Loans payable (Note 6) 47,000
Total Current Liabilities 284,689 90,797
CAPITAL DEFICIENCY
CAPITAL STOCK (Note 7) 828,247 748,247
DEFICIT (850,792) (571,909)
Total Capital Deficiency (22,545) 176,338
TOTAL LIABILITIES AND CAPITAL 262,144 267,135
DEFICIT
</TABLE>
Lynx Gaming Corp.
Consolidated Statements of Operations and Deficit
For the years ended February 28, 1999 and 1998
<TABLE>
<S> <C> <C>
1999 1998
EXPENSES:
Travel and automobile 59,409 86,711
Management fees 46,976 133,194
Office salaries 42,444 27,834
Professional fees 41,727 51,906
Advertising and 39,227 62,857
promotion
Rent 28,922 18,150
Office and general 10,441 12,929
Telephone 6,283 8,634
Consulting fees 27,500
Amortization 3,454 1,952
Total Expenses 278,883 431,667
Net Loss 278,883 471,667
Deficit, Beginning of 571,909 140,242
year
Deficit, End of year 850,792 571,909
</TABLE>
See accompanying notes to financial statements & audit report
Lynx Gaming Corp.
Consolidated Statements of Changes in Financial Position
For the years ended February 28, 1999 and 1998
<TABLE>
<S> <C> <C>
1999 1998
OPERATING ACTIVITIES
Net Loss (278,883) (431,667)
Adjustment for non-cash item:
Amortization 3,454 1,952
Changes in non-cash operating 149,901 24,795
assets and liabilities (Note
8)
INVESTING ACTIVITIES
Decrease in advances from (7,475)
shareholder
Increase in intellectual (31,054) (77,823)
property
Purchase of capital assets (17,553)
Cash Expended in Investing (31,054) (102,851)
Activities
FINANCING ACTIVITIES
(Increase) decrease in advances 16,013 (81,652)
to related company
Increase in loans payable 47,000
Increase in capital stock 80,000 586,540
Cash Provided By Financing 143,013 504,888
Activities
NET CHANGE IN CASH
Cash, Beginning of year 479 3,362
Cash (Deficiency), End of year (13,090) 479
</TABLE>
See accompanying notes to financial statements & audit report
Lynx Gaming Corp.
Notes to Consolidated Financial Statements
February 28, 1999 and 1998
1. BASIS OF PRESENTATION
These financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going
concern, which assumes that the Company will be able to realize
its assets and discharge its liabilities in the normal course of
business. The Company is in significant need of additional
financing to enable it to continue its business. In the absence
of additional financial, the Company will not have sufficient
funds to meet its obligations. Management continues to look at
various alternatives to raise additional financing.
If the going concern basis was not appropriate, material
adjustments may be necessary in the carrying amounts and/or
classification of assets and liabilities and the loss for the
year reported in these financial statements.
These accounting principles are also generally accepted in the
United States in all materials respects.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Lynx Gaming Corp. and its wholly-owned subsidiary. All
significant intercompany transactions and balances have been
eliminated on consolidation.
Capital Assets
The Company records capital assets at cost. Amortization rates
are calculated to write-off the assets over their estimated
useful life as follows:
<TABLE>
<S> <C> <C>
Computer 30% declining balance
Furniture and 20% declining
equipment balance
</TABLE>
Intellectual Property
Intellectual property is recorded at cost and will be amortized
over five years once the products have been introduced in the
market place.
Use of Estimates In The Preparation Of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilties at the date of the financial statements and the
reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Earnings Per Share
The computation of earnings per share is based on the weighted
average number of common shares outstanding during the year.
Income Taxes
The Company follows the tax allocation method of accounting for
income taxes whereby earnings are charged with income taxes
relating to reported earnings.
3. DUE FROM RELATED COMPANY
Advances to related company are non-interest bearing, unsecured
and due on demand.
4. CAPITAL ASSETS
<TABLE>
<S> <C> <C> <C> <C <C>
>
1999 1998
Cost Accumulate Net Net Book
d Book Value
Amortizati Value
on
Computer $3,926 $1,590 $2,336 $3,337
Furniture and $13,62 $3,816 $9,811 $15,60
equipment 7 1
</TABLE>
5. BANK INDEBTEDNESS
Bank indebtedness bears interest at 18-21% per annum, is
unsecured and is due on demand.
6. LOANS PAYABLE
Loans payable are non-interest bearing, unsecured and due on
demand.
7. CAPITAL STOCK
Authorized
Unlimited Common Shares
Issued
<TABLE>
<S> <C> <C> <C>
See Number Amount
Note of
Below Shares
Balance as at February 28, 1997 1,362,50 $89,60
0 1
Upon issued on share for share (a) 4,120,01 72,106
exchange 2
Upon issued of treasury stock and (b) 1,313,48 586,54
private placement 6 0
Balance as at February 28, 1998 6,795,99 748,24
8 7
Upon issue of treasury stock (c) 114,284 80,000
Balance as at February 28, 1999 6,910,28 $828,2
2 47
</TABLE>
(a) On April 30, 1997, the Company issued 4,120,012 common
shares for all the issued and outstanding common shares of
P.E.S.T. Creative Gaming Corporation for consideration of
$72,106.
(b) During 1998, the Company issued 1,313,846 common shares and
418,143 purchase warrants for consideration of $586,540.
(c) During 1999, the Company issued 114,284 common shares and
57,142 purchase warrants for consideration of $80,000.
Purchase Warrants
The outstanding purchase warrants are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Expiry Date See Price $ 1999 # 1998 #
Note
Above
Eighteen months after (b), $0.85 721,53 664,393
the Company becomes a (c) P.O.P.* 5
reporting issuer
</TABLE>
It is management's intention to cancel all outstanding
purchase warrants when the Company becomes a reporting issuer.
* Public Offering Price
8. STATEMENT OF CHANGES IN FINANCIAL POSITION
Changes in non-cash operating assets and liabilities
<TABLE>
<S> <C> <C>
1999 1998
Decrease in $1,143
subscriptions receivable
Decrease (increase) in 16,099 (5,599)
deposits
Increase in accounts 133,802 29,251
payable and accrued
liabilities
$149,901 $24,795
</TABLE>
9. INCOME TAXES
The Company and its subsidiary have non-capital losses of
$835,177 which may be available to offset future income for tax
purposes. The potential tax benefits have not been reflected in
these financial statements. The losses will expire as follows:
<TABLE>
<S> <C>
2004 $140,242
2005 423,42
9
2006 271,506
$835,177
</TABLE>
10. LOSS PER SHARE
<TABLE>
<S> <C> <C>
1999 1998
Basic loss per share $(0.04) $(0.06)
Fully diluted loss $(0.04) $(0.06)
per share
</TABLE>
11. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue relates to the potential problems that may
arise due to possible date limitations in computerized systems.
The effects of the Year 2000 Issue may be experienced before, on
or after January 1, 2000 and if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant system failure, which could affect an entity's
ability to conduct normal business operations. Management is
confident that it will have programs in place to identify, test
and minimize the Company's exposure to the Year 2000 Issue. They
feel that the costs related to the Year 2000 Issue are not
material. However, it is not possible to be certain that all
aspects of the Year 2000 Issue affecting the Company, including
those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
PRO-FORMA STATEMENTS
Pro-Forma Balance Sheet as at September 30, 1999
Pro-Forma Statement of Operations for the nine month
period ended September 30, 1999
Pro-Forma Financial Information
Playandwin, Inc.
Pro-Forma Balance Sheet
As at September 30, 1999
Pro-Forma
Adjustments to
Reflect Acquisition
of Lynx Gaming Corp.
As of Oct. 1, 1999
<TABLE>
<S>
<C> <C> <C> <C> <C>
Consolidated Consolidated DR CR Adjusted Balance
Playandwin, Inc. Lynx Gaming Sheet Sept. 30,
Balance Sheet Corp. Balance 1999
Sept. 30, 1999 Sheet Sept. 30,
1999
ASSETS
CURRENT:
Due from Related $43,759 $43,759
Company
Other Receivables $1,554 11,520 $13,074
Total Current $1,554 55,279 $56,833
Assets
Capital Assets 6,767 6,767
Intellectual 122,905 122,905
Property
TOTAL ASSETS 1,554 184,951 186,505
LIABILITIES AND
STOCKHOLDERS'
EQUITY
CURRENT
LIABILITIES;
Bank Indebtedness $14,319 $14,319
Accounts Payable $52,886 181,967 234,853
and Accruals
Loans Payable 40,333 40,333
Due to Officer 320 320
TOTAL LIABILITIES 53,206 236,619 289,505
STOCKHOLDERS'
DEFICIENCY;
Common stock, $7,075 $552,165 $5,500 $553,740
$0.001 par value,
authorized
50,000,000 shares
issued and
outstanding
7,075,000 Shares
issued and
outstanding
Additional paid-in 3,163,425 3,163,425
Capital
Accumulated (3,222,152 (603,833) 5,820 (3,820,165)
Deficit
Total (51,652) (51,668) (103,000)
Sharesholders'
Deficiency
TOTAL LIABILITIES $1,554 $184,951 $186,505
AND STOCKHOLDERS'
DEFICIENCY
</TABLE>
Playandwin, Inc.
Pro-Forma Statement of Operations
For the Nine Month Period Ended September 30, 1999
Pro-Forma
Adjustments to
Reflect Acquisition
of Lynx Gaming Corp.
As of Oct. 1, 1999
<TABLE>
<S>
<C> <C> <C> <C> <C>
Consolidated Consolidated DR CR Adjusted
Playandwin, Inc. Lynx Gaming Operations
Operations Corp. Operations
EXPENSES:
Travel and $13,722 $13,722
Automobile
Consulting Fees 104,353 104,353
Professional Fees 28,912 33,189 62,101
Advertising and 7,333 7,333
Promotion
Rent 34,972 34,972
Office and 2,040 1,161 3,201
General
Telephone 956 956
Amortization 1,331 1,331
Total Expenses 191,332 36,637 $(227,969)
NET LOSS $(191,332) $(36,637)
Basic Loss Per
Share - Basic
and Diluted
Historical $(0.03)
Pro-Forma (0.02)
Weighted average
Shares
outstanding
Historical 7,065,476
Pro-Forma 10,551,737
</TABLE>
Playandwin Inc.
Pro-Forma Financial Information
On October 1, 1999, the Company's wholly-owned subsidiary,
Playandwin Canada Inc., acquired 100% of the outstanding common
shares and warrants of Lynx Gaming Corp. ("Lynx") and P.E.S.T.
Creative Gaming Corporation ("P.E.S.T.") in exchange for
3,486,261 exchangeable shares and 397,428 exchangeable warrants.
Each exchangeable share and warrant may be exchanged at the
request of its holder for one common share of Playandwin Inc.,
the legal parent. As a result of the transaction, the operations
of Lynx and P.E.S.T. will constitute 100% fo the operations of
the Company. Accordingly, the transactionhas been treated for
accounting purposes as a recapitalization of Lynx and therefore,
the continuing financial statements will represent a continuation
of the legal subsidiary, Lynx, not the Company, the legal parent.
In accounting for this transaction:
i.) Lynx is deemed to be the purchaser and parent company for
accounting purposes. Accordingly, its net assets are included in
the consolidated balance sheet at historical values;
ii.) Control of the net assets and business of the Company was
acquired effective October 1, 1999 (the "Effective Date"). This
transaction has been accounted for as a purchase of the assets
and liabilities of the Company by Lynx. Since the Company had no
assets and liabilities or operations prior to the merger, no
excess cost over fair value of net assets acquired was recorded.
Notes to Pro-Forma Financial Statements
Balance Sheet, September 30, 1999
To eliminate the equity and operations of Playandwin Inc. as of
January 1, 1998.
PRO-FORMA STATEMENTS
Pro-Forma Balance Sheet as at December 31, 1998
Pro-Forma Statement of Operations for the year ended
December 31, 1998
Pro-Forma Financial Information
Agricueticals Technologies, Inc.
Pro-Forma Balance Sheet
As at December 31, 1998
Pro-Forma
Adjustments to
Reflect Acquisition
of Lynx Gaming Corp.
As of Jan. 1, 1998
<TABLE>
<S>
<C> <C> <C> <C> <C>
Agriceuticals Consolidated DR CR Adjusted Balance
Technologies Lynx Gaming Sheet Dec. 31,
Inc. Balance Corp. Balance 1998
Sheet Dec. 31, Sheet Dec. 31,
1998 1998
ASSETS
CURRENT:
Due from Related $43,759 $43,759
Company
Capital Assets 8,098 8,098
Intellectual 122,905 122,905
Property
TOTAL ASSETS 174,762 174,762
LIABILITIES AND
STOCKHOLDERS'
EQUITY
CURRENT
LIABILITIES;
Bank Indebtedness $8,727 $8,727
Accounts Payable 149,733 149,733
and Accruals
Loans Payable 31,333 31,333
Due to Officer 320 320
TOTAL LIABILITIES 320 $189,793 $189,793
STOCKHOLDERS'
DEFICIENCY;
Common stock, $6,875 $552,165 $5,500 $553,540
$0.001 par value,
authorized
50,000,000 shares
issued and
outstanding
7,075,000 Shares
issued and
outstanding
Additional paid-in 3,023,625 3,023,625
Capital
Accumulated (3,030,820) (567,196) 5,820 (3,592,196)
Deficit
Total (320) (15,031) (15,031)
Sharesholders'
Deficiency
TOTAL LIABILITIES $174,762 $174,762
AND STOCKHOLDERS'
DEFICIENCY
</TABLE>
Agriceuticals Technologies Inc.
Pro-Forma Statement of Operations
For the Nine Month Period Ended December 31, 1998
Pro-Forma
Adjustments to
Reflect Acquisition
of Lynx Gaming Corp.
As of Jan. 1, 1998
<TABLE>
<S>
<C> <C> <C> <C> <C>
Consolidated Consolidated DR CR Adjusted
Agriceuticals Lynx Gaming Operations
Technologies Corp. Operations
Inc. Operations
EXPENSES:
Impairment Loss $3,025,000 $3,025,000
on Asset
Travel and 39,606 39,606
Automobile
Management Fees 31,317 31,317
Office Salaries 28,296 28,296
Advertising and 27,818 27,818
Promotion
Rent 26,151 26,151
Office and 19,281 19,281
General
Telephone 6,961 6,961
Amortization 4,189 4,189
Total Expenses 3,025,000 2,303 2,303
NET LOSS $(3,025,000) $(185,922) $(3,210,922)
Basic Loss Per
Share - Basic
and Diluted
Historical $(0.56)
Pro-Forma $(0.35)
Weighted average
Shares
outstanding
Historical
Pro-Forma 5,726,026
</TABLE>
Playandwin Inc.
Pro-Forma Financial Information
On October 1, 1999, the Company's wholly-owned sybsidieary,
Playandwin Canada Inc., acquired 100% of the outstanding common
shares and warrants of Lynx Gaming Corp. ("Lynx") and P.E.S.T.
Creative Gaming Corporation ("P.E.S.T.") in exchange for
3,486,261 exchangeable shares and 397,428 exchangeable warrants.
Each exchangeable share and warrant may be exchanged at the
request of its holder for one common share of Playandwin Inc.,
the legal parent. As a result of the transaction, the operations
of Lynx and P.E.S.T. will constitute 100% fo the operations of
the Company. Accordingly, the transactionhas been treated for
accounting purposes as a recapitalization of Lynx and therefore,
the continuing financial statements will represent a continuation
of the legal subsidiary, Lynx, not the Company, the legal parent.
In accounting for this transaction:
iii.) Lynx is deemed to be the purchaser and parent company
for accounting purposes. Accordingly, its net assets are included
in the consolidated balance sheet at historical values;
iv.) Control of the net assets and business of the Company was
acquired effective October 1, 1999 (the "Effective Date"). This
transaction has been accounted for as a purchase of the assets
and liabilities of the Company by Lynx. Since the Company had no
assets and liabilities or operations prior to the merger, no
excess cost over fair value of net assets acquired was recorded.
Notes to Pro-Forma Financial Statements
Balance Sheet, September 30, 1999
To eliminate the equity and operations of Playandwin Inc. as of
January 1, 1998.
EXHIBITS
2.1 Share Exchange Agreement with Lynx Gaming Corp
2.2 Share Exchange Agreement with P.E.S.T. Creative Gaming Corp.
3.1 Articles of Incorporation
3.2 By-Laws
10.1 Master License Agreement
10.2 Internet License Agreement
10.3 Letter of Agreement
10.4 On- and Off-Track Betting License Agreement
10.5 Software Development Agreement
10.6 Memorandum of Understanding
10.7 Stock Option Agreement - Penguin Petrolium Products Limited
10.8 Stock Option Agreement - Stephen Peskoff
10.9 Stock Option Agreement - Andrew DeFrancesco
10.10 Stock Option Agreement - Douglas McFadden
10.11 Stock Option Agreement - Adam Hawkins
16. Letter re change in certifying accountant
22. Subsidiaries of the registrant
Playandwin Canada, Inc. ("PWIN Canada" -
incorporated in Ontario, Canada) - 100% owned by
the Company;
Lynx Gaming Corp. ("Lynx" - incorporated in
Ontario, Canada) - 100% owned by PWIN Canada;
P.E.S.T. Creative Gaming Corp. ("P.E.S.T." -
incorporated in Ontario, Canada) - 95% owned by
Lynx Gaming Corp. and 5% owned by PWIN Canada;
Racingo Investments Ltd. ("RIL" - incorporated in
Delaware) - owned equally by P.E.S.T. Winning
Games Inc. and PacCanUs Inc.
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT is made this 30th day of August
1999,
BETWEEN
PLAYANDWIN CANADA INC.
a corporation incorporated under the laws
of the Province of Ontario
(hereinafter referred to as the "Purchaser")
OF THE FIRST PART
and
LYNX GAMING CORP.,
a corporation incorporated under the laws
of the Province of Ontario
(hereinafter referred to as "Lynx")
OF THE SECOND PART
and The Principal Shareholders of Lynx
who are listed in Schedule 2 annexed hereto
(hereinafter collectively referred to as the "Lynx
Shareholders")
OF THE THIRD PART
and
PLAYANDWIN, INC.,
a corporation incorporated under the laws
of the State of Nevada
(hereinafter referred to as "PWIN")
OF THE FOURTH PART
WHEREAS the Purchaser desires to purchase from the Lynx
Shareholders and the Lynx Shareholders desire to sell to the
Purchaser the Lynx Shares and the Lynx Warrants;
AND WHEREAS the Purchaser is a subsidiary of PWIN;
AND WHEREAS the Purchaser, PWIN and the Lynx Shareholders
desire to effect the purchase and sale of the Lynx Shares and
Lynx Warrants pursuant to the Share Exchange in accordance with
the terms and conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT, in consideration of
the mutual covenants hereinafter contained and provided for and
other good and valuable consideration (the receipt and
sufficiency of which is hereby acknowledged by the Parties), the
Parties agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions. In this Agreement, unless the context otherwise
requires, the terms set forth in Schedule 1 shall have the
meanings set forth therein.
1.2 Entire Agreement. This Agreement together with the
agreements and other documents to be delivered pursuant to this
Agreement, constitute the entire agreement between the Parties
pertaining to the Share Exchange and supersedes all prior
agreements, understandings, negotiations and discussions, whether
oral or written, and there are no warranties, representations and
other agreements between the Parties in connection with the
subject matter hereof except as specifically set forth in this
Agreement or any other agreement or document to be delivered
pursuant to 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.
1.4 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.
1.5 References. References to an article, section, subsection,
paragraph, schedule or exhibit shall be construed as references
to an article, section, subsection, paragraph, schedule or
exhibit to this Agreement, unless the context otherwise requires.
1.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the Province of Ontario
and the laws of Canada applicable in that Province.
1.7 Currency. Unless otherwise specified, the word "dollar", or
the symbol "$" refers to Canadian currency.
1.8 Schedules. The following is a list of schedules attached to
and incorporated into this Agreement by reference and deemed as
part of this Agreement.
SCHEDULE DESCRIPTION
1 Definitions
2 Principal Shareholders of Lynx
3 Lynx Financial Statements
4 Support Agreement between Purchaser and
PWIN
5 Minority Share and Warrant Exchange
Agreement
ARTICLE II
SHARE EXCHANGE
2.1 Agreement to Purchase. Upon the terms and subject to the
conditions contained in this Agreement, the Lynx Shareholders
shall sell and the Purchaser shall purchase, as of and with
effect from the opening of business on the Closing Date, the Lynx
Shares and the Lynx Warrants.
2.2 Share Exchange. The purchase and sale of the Lynx Shares and
the Lynx Warrants shall be effected by the issue of the
Exchangeable Shares and Exchangeable Warrants from the treasury
of the Purchaser to the Lynx Shareholders, pursuant to the
prospectus and registration exemptions contained in paragraphs
72(1)(j) and 35(1)(16) of the Securities Act (Ontario), in
exchange for the Lynx Shares and Lynx Warrants as set forth in
Schedule 2 (the "Share Exchange").
2.3 Exchange Ratio. The Purchaser and the Lynx Shareholders
have established for the purposes of this Agreement an exchange
ratio of one Exchangeable Share for every two Lynx Shares and
one Exchangeable Warrant for every two Lynx Warrants.
2.4 Rollover. At the option of each Shareholder, the Purchaser
covenants and agrees to elect, jointly with such Shareholder if
applicable (referred to in this section as the "Electing
Shareholder"), in accordance with the provisions of subsection
85(1) or 85.1(1) of the Income Tax Act (Canada) (the "Tax Act")
(and the corresponding provisions of any applicable provincial
tax legislation) in the prescribed form and within the prescribed
time for the purposes of the Tax Act, and shall therein agree to
elect in respect of the Lynx Shares of the Electing Shareholder
an amount as the Electing Shareholder shall direct which shall be
deemed to be the Electing Shareholder's proceeds of disposition
thereof and Purchaser's cost thereof. Notwithstanding the
foregoing, the Electing Shareholder may not direct the parties to
elect an amount which is greater than the fair market value of
the Lynx Shares or an amount which is less than the adjusted cost
base of the Lynx Shares to the Electing Shareholder. The
Electing Shareholder and the Purchaser agree to execute all such
documents and forms to make the election contemplated in this
section.
2.5 Price Adjustment. The parties hereto covenant and agree
that, in the event that any governmental taxing authority having
jurisdiction issues or proposes to issue, assessments or
reassessments of additional liability for taxes or any other
subject by reason of asserting that the Elected Amount is greater
or less than the adjusted cost base of the Lynx Shares to the
Electing Shareholder, or that the adjusted cost base of the Lynx
Shares to the Electing Shareholder is greater than or less than
the Elected Amount, then the Elected Amount shall be increased or
decreased by the difference so determined; but only to the extent
that the Elected Amount so revised is accepted by the taxing
authority, the Electing Shareholder and the Purchaser, or,
failing such acceptance is established by the courts having
jurisdiction in the matter after all rights of appeal have been
exhausted and all times for appeal have expired without appeals
having been taken by such taxing authority, the Electing
Shareholder or the Purchaser. Each of the Electing Shareholder
and the Purchaser hereby agrees to make such further elections,
enter into such acknowledgements or agreements, and do or cause
to be done such further acts and things as may be, in the opinion
of counsel, reasonably necessary to give effect to this section
and the change in the Elected Amount.
2.6 Exchangeable Shares. The Exchangeable shares to be issued
by the Purchaser pursuant to this Agreement shall be subject to
the following terms:
(a) each Exchangeable Share may be exchanged at the request
of its holder for one common share of PWIN, provided that in
the event of a consolidation, split or other reorganization
of the capital stock of the Purchaser or of PWIN, the number
of PWIN common shares issuable for each one Exchangeable
Share shall be adjusted accordingly;
(b) Of the Exchangeable Shares received by a Lynx
Shareholder on the Closing Date:
(i) none may be exchanged during the period ending on
and including the day of the first anniversary of
the Closing Date;
(ii) up to one-third (1/3) may be exchanged after said
first anniversary;
(iii) an additional one-third (1/3) may be
exchanged after the second anniversary of the
Closing Date; and
(iv) all Exchangeable Shares may be exchanged after the
third anniversary of the Closing Date.
(c) Each Exchangeable Share may be exchanged at the request
of the Purchaser at any time during the period ending on and
including the day of the fifth anniversary of the Closing
Date, and shall be exchanged upon: (i) the occurrence of a
take over bid for all of the issued and outstanding shares
of PWIN; or (ii) the day of the fifth anniversary of the
Closing Date. All Exchangeable Shares shall be automatically
exchanged on the fifth anniversary of the Closing Date.
2.7 Exchangeable Warrants. Each Exchangeable Warrant to be
issued by the Purchaser pursuant to this Agreement shall entitle
its holder to acquire one Exchangeable Share at a price of $1.70.
No Exchangeable Warrant may be exercised on or before the day of
the first anniversary of the Closing Date. The Exchangeable
Warrants shall expire eighteen (18) months after the Closing
Date.
2.8 Acknowledgement of Resale Restrictions. The Lynx
Shareholders hereby acknowledge that any Exchangeable Shares or
PWIN common shares that they receive pursuant to this Agreement
are restricted in accordance with the United States Securities
Act of 1933, as amended, and the rules promulgated thereunder.
ARTICLE III
SUPPORT AGREEMENT
3.1 Support Agreement. Concurrent with the execution of this
Agreement, PWIN and the Purchaser will enter into the Support
Agreement attached hereto as Schedule 3.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE LYNX SHAREHOLDERS
4.1 Representations and Warranties of the Lynx Shareholders.
Each of the Lynx Shareholders jointly and severally represents
and warrants to the Purchaser and PWIN as follows (to the extent
that the following representations and warranties relate to that
Lynx Shareholder) and acknowledges that the Purchaser and PWIN
are relying on these representations and warranties in connection
with the completion of the Share Exchange:
(a) Capacity to own Lynx Shares and Warrants - The Lynx
Shareholders have all necessary power, authority and
capacity to own the Lynx Shares and the Lynx Warrants.
(b) Capacity to Enter Agreement - The Lynx Shareholders have
full power, right and authority to enter into this Agreement
and to perform their obligations under it.
(c) Binding Obligation - This Agreement has been duly executed
and delivered by the Lynx Shareholders and constitutes a
valid and binding obligation of each of them.
(d) Absence of Conflict - The Lynx Shareholders are not a party
to, bound or affected by any agreement which would be
violated, breached or terminated by, or which would result
in creation or imposition of any Encumbrance upon any of the
Lynx Shares or Lynx Warrants as a consequence of the
execution and delivery of this Agreement or the consummation
of the transactions contemplated in this Agreement.
(e) Title to Lynx Shares and Lynx Warrants - The Lynx
Shareholders are the legal and beneficial owners of the Lynx
Shares and the Lynx Warrants as set forth in Schedule 2,
with good and marketable title, free and clear of any
Encumbrances.
(f) No Bankruptcy - No proceedings have been taken or authorized
by any Lynx Shareholder or by any other person in respect of
the bankruptcy, insolvency, liquidation, dissolution or
winding up as applicable, of any Lynx Shareholder.
(g) No Option - No Person, other than the Purchaser under this
Agreement, has any agreement or any right capable of
becoming an agreement or option for the purchase from the
Lynx Shareholders of any of the Lynx Shares.
(h) Disclosure - The representations and warranties of the Lynx
Shareholders in this Agreement are true, correct and do not
contain any untrue or misleading statement of a material
fact or omit to state a material fact necessary to make such
representations and warranties not misleading to the
Purchaser or PWIN.
(i) Non-Violation - The entering into of this Agreement and the
consummation of transactions contemplated herein do not and
will not conflict with, or result in a breach of, or
constitute a default under the terms or conditions of any
constating document of Lynx or a Lynx Shareholder, any
by-laws, any court or administrative order or process, any
agreement or instrument to which Lynx or a Lynx Shareholder
is party or by which it is bound.
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF LYNX
5.1 Representations and Warranties of Lynx. Lynx represents and
warrants to the Purchaser and PWIN as follows and acknowledges
that the Purchaser and PWIN are relying on these representations
and warranties in connection with the Share Exchange:
(a) Due Incorporation - Lynx is a corporation duly incorporated
and validly existing under the laws of Ontario.
(b) Capacity to Enter Agreement - Lynx has full corporate power
and authority to enter into this Agreement and to perform
its obligations under it.
(c) Due Authorization - The executing and delivery of this
Agreement and the consummation of the transactions
contemplated under it have been duly authorized by all
necessary corporate action on the part of Lynx.
(d) Binding Obligation - This Agreement has been duly executed
and delivered by Lynx and constitutes a valid and binding
obligation of it.
(e) Absence of Conflict - Lynx is not a party to, bound or
affected by any agreement which would be violated, breached
or terminated by, or which would result in the creation or
imposition of any Encumbrance upon any of the Lynx Shares as
a consequence of the execution and delivery of this
Agreement or the consummation of the transactions
contemplated in this Agreement.
(f) Regulatory Approvals - No governmental or regulatory
authorization, approval, order or consent is required on the
part of Lynx, in connection with the execution, delivery and
performance of this Agreement and the performance of Lynx's
obligations under this Agreement.
(g) No Bankruptcy - No proceedings have been taken, are pending
or authorized by Lynx or by any other person in respect of
the bankruptcy, insolvency, liquidation, dissolution or
winding up of Lynx.
(h) Authorised and Issued Capital - The authorized capital of
Lynx consists of an unlimited number of common shares, of
which 5,978,512 common shares are currently outstanding as
fully paid and non-assessable shares of Lynx. Other than
the 289,250 Lynx Warrants and 799,746 Lynx Special Warrants,
there are no other options or warrants or other rights of
any kind in existence, authorized or agreed to which could
result in any further shares or other securities of Lynx
being allotted or issued or becoming outstanding.
(i) Minute Books - The minute books of Lynx contain accurate and
complete minutes of all meetings and resolutions of the directors
and the shareholders of Lynx held or passed by signature in
writing, respectively, since the date of its incorporation. All
such meetings have been duly called and held. Lynx share
certificate books and share registers are complete and accurate.
(j) No Subsidiaries - Except for 2,260,006 common shares of
P.E.S.T. Creative Gaming Corporation, Lynx does not own any
shares in or securities of any corporate body and is not a
partner of any partnership or a member of any joint venture.
(k) Lynx's Capacity and Power - Lynx has full corporate right,
power and authority to own or lease its assets as now owned
or leased and to carry on the Lynx Business.
(l) Business - The only business carried on by Lynx is the Lynx
Business.
(m) Lynx Financial Statements - The Lynx Financial Statements
have been prepared in accordance with Canadian generally
accepted accounting principles applied on a consistent basis
throughout the periods indicated, and fairly and accurately
present, subject to immaterial variation, the financial
position, assets and liabilities (whether absolute,
contingent, accrued or otherwise) of Lynx on the dates
thereof and the financial results of Lynx for the periods
referred to in the Lynx Financial Statements.
(n) No Guarantees etc. - Lynx is not a party to or bound by any
agreement of guarantee, indemnification, assumption or
endorsement or any like commitment of the obligations,
liabilities (contingent or otherwise) or indebtedness of any
Person.
(o) Records -
(i) The Lynx Records are true and
correct and present fairly and disclose
in all material respects the actual
results of the Lynx Business.
(ii) To the best of knowledge, all
material financial transactions of Lynx
have been accurately recorded in the
Lynx Records. The Lynx Records (of a
financial nature) have been prepared in
accordance with Canadian generally
accepted accounting principles
consistently applied.
(iii) The files, documentation and information in
writing provided by Lynx to the Purchaser and PWIN in
connection with the negotiation and completion of the
transactions contemplated in this Agreement are true
and correct in all material respects.
(p) Business Agreements - There are no material agreements
relating to the Lynx Business.
(q) Litigation - There are no judgements, decrees, injunctions,
ruling or orders of any court, Governmental Authority or
arbitration, or any actions, suits, grievances or
proceedings, (whether or not on behalf of Lynx and, to the
best of knowledge, pending or threatened or involving Lynx,
or the Lynx Business) which may materially adversely affect
the Lynx Business or Lynx's assets.
(r) Disclosure - The representation and warranties of the Lynx
Shareholders in this Agreement are true, complete and
correct and do not contain any untrue or misleading
statement of a material fact.
(s) Non-Violation - The entering into of this Agreement and the
consummation of transactions contemplated herein do not and
will not conflict with, or result in a breach of, or
constitute a default under the terms or conditions of any
constating document of Lynx, any by-laws, any court or
administrative order or process, any agreement or instrument
to which Lynx is party or by which it is bound.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
6.1 Representations and Warranties of The Purchaser. The
Purchaser hereby represents and warrants to Lynx and the Lynx
Shareholders as follows and acknowledges that Lynx and the Lynx
Shareholders are relying on those representations and warranties
in connection with the Share Exchange:
(a) Due Incorporation - The Purchaser is a corporation duly
incorporated and validly existing under the laws of the
Province of Ontario.
(b) Capacity to Enter Agreement - The Purchaser has full power,
right and authority to enter into this Agreement and to
perform the obligations under it.
(c) Due Corporate Authorization - The execution and delivery of
this Agreement and the consummation of the transactions
contemplated under it have been duly authorized by all
necessary corporate action on the part of the Purchaser.
(d) Binding Obligation - This Agreement has been duly executed
and delivered by the Purchaser and constitutes a valid and
binding obligation of the Purchaser.
(e) Absence of Conflict - The Purchaser is not a party to, bound
or affected by or subject to any agreement which would be
violated, breached or terminated by, or which would result
in the creation or imposition of any Encumbrance upon any of
the Exchangeable Shares or Exchangeable Warrants as a
consequence of, the execution and delivery of this Agreement
or the consummation of the transactions contemplated in this
Agreement.
(f) Regulatory Approvals - No governmental or regulatory
authorization, approval, order or consent is required on the
part the Purchaser, in connection with the execution,
delivery and performance of this Agreement and the
performance of the Purchaser's obligations under this
Agreement.
(g) No Bankruptcy - No proceedings have been taken, are pending
or authorized by the Purchaser or by any other person in
respect to the bankruptcy, insolvency, liquidation,
dissolution or winding up of the Purchaser.
(h) Minute Books - The minute books of the Purchaser contain
accurate and complete minutes of all meetings and resolutions of
the directors and the shareholders of the Purchaser held or
passed by signature in writing, respectively, since the date of
its incorporation. All such meetings have been duly called and
held.
(i) Absence of Material Changes - Since the execution of this
Agreement:
(i) no changes have been made in the accounting
methods, practices, or policies followed by the
Purchaser;
(ii) the Purchaser has not increased, incurred or
guaranteed any debt, obligation, or liability (whether
absolute or contingent and whether or not currently due
and payable);
(iii) there has been no damage, destruction or
loss, labour trouble, or other event, development or
condition of any character (whether or not covered by
insurance) which adversely affects, or, may adversely
affect, the properties or prospects of the Purchaser;
and
(iv) the Purchaser has not paid any amount or dividend,
or otherwise made any distribution or the payment of
any kind or nature whatsoever to any non-arm's length
Person.
(j) Records - The files, documentation and information in
writing provided by the Purchaser to Lynx and the Lynx
Shareholders in connection with the negotiation and
completion of the transactions contemplated in this
Agreement are true and correct in all material respects.
(k) Litigation - There are no judgements, decrees, injunctions,
ruling or orders of any court, Governmental Authority or
arbitration, or any actions, suits, grievances or
proceedings (whether or not on behalf of the Purchaser)
pending or threatened or the Purchaser which may materially
adversely affect the Purchaser's assets.
(l) Disclosure - The representations and warranties of the
Purchaser in this Agreement are true, complete and correct
and do not contain any untrue or misleading statement of a
material fact or omit to state a material fact necessary to
make such representations and warranties not misleading to
Lynx Shareholders.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PWIN
7.1 Representations and Warranties of PWIN. PWIN hereby
represents and warrants to Lynx and the Lynx Shareholders as
follows and acknowledges that Lynx and the Lynx Shareholders are
relying on those representations and warranties in connection
with the Share Exchange:
(a) Due Incorporation - PWIN is a corporation duly incorporated
and validly existing under the laws of the State of Nevada.
(b) Capacity to Enter Agreement - PWIN has full power, right and
authority to enter into this Agreement and to perform the
obligations under it.
(c) Due Corporate Authorization - The execution and delivery of
this Agreement and the consummation of the transactions
contemplated under it have been duly authorized by all
necessary corporate action on the part of PWIN.
(d) Binding Obligation - This Agreement has been duly executed
and delivered by PWIN and constitutes a valid and binding
obligation of PWIN.
(e) Absence of Conflict - PWIN is not a party to, bound or
affected by or subject to any agreement which would be
violated, breached or terminated by, or which would result
in the creation or imposition of any Encumbrance upon any of
the PWIN Shares as a consequence of, the execution and
delivery of this Agreement or the consummation of the
transactions contemplated in this Agreement.
(f) Regulatory Approvals - No governmental or regulatory
authorization, approval, order or consent is required on the
part of PWIN, in connection with the execution, delivery and
performance of this Agreement and the performance of PWIN's
obligations under this Agreement.
(g) No Bankruptcy - No proceedings have been taken, are pending
or authorized by PWIN or by any other person in respect to
the bankruptcy, insolvency, liquidation, dissolution or
winding up of PWIN.
(i) Minute Books - The minute books of PWIN contain accurate and
complete minutes of all meetings and resolutions of the directors
and the shareholders of PWIN held or passed by signature in
writing, respectively, since the date of its incorporation. All
such meetings have been duly called and held.
(j) Absence of Material Changes - Since the execution of this
Agreement:
(i) no changes have been made in the accounting
methods, practices, or policies followed by PWIN;
(ii) PWIN has not increased, incurred or guaranteed any
debt, obligation, or liability (whether absolute or
contingent and whether or not currently due and
payable);
(iii) there has been no damage, destruction or
loss, labour trouble, or other event, development or
condition of any character (whether or not covered by
insurance) which adversely affects, or, may adversely
affect, the properties or prospects of PWIN; and
(iv) PWIN has not paid any amount or dividend, or
otherwise made any distribution or the payment of any
kind or nature whatsoever to any non-arm's length
Person.
(k) Records -
(i) All material financial
transactions of PWIN have been
accurately recorded in the PWIN Records.
The PWIN Records (of a financial nature)
have been prepared in accordance with US
generally accepted accounting principles
consistently applied.
(ii) The files, documentation and information in
writing provided by PWIN to Lynx Shareholders in
connection with the negotiation and completion of the
transactions contemplated in this Agreement are true
and correct in all material respects.
(l) Litigation - There are no judgements, decrees, injunctions,
ruling or orders of any court, Governmental Authority or
arbitration, or any actions, suits, grievances or
proceedings (whether or not on behalf of PWIN) pending or
threatened or involving PWIN which may materially adversely
affect PWIN's assets.
(m) Disclosure - The representations and warranties of PWIN in
this Agreement are true, complete and correct and do not
contain any untrue or misleading statement of a material
fact or omit to state a material fact necessary to make such
representations and warranties not misleading to Lynx
Shareholders.
ARTICLE VIII
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Subject to section 8.2, all representations and warranties
contained in this Agreement on the part of each of the parties
shall survive the Closing for a period of one (1) year from the
Closing Date, after which time, if no claim shall have been made
against a Party with respect to any incorrectness or breach of
any representation or warranty, that Party shall have no further
liability under this Agreement with respect to the representation
or warranty.
8.2 The representations, warranties, covenants and indemnities
of the Parties relating to the tax liability of the Purchaser and
Lynx shall:
(a) unless resulting from any misrepresentation made or fraud
committed in filing a return or supplying information for
the purposes of the Income Tax Act (Canada), applicable
provincial corporation tax legislation or any other
legislation imposing tax on the Purchaser and Lynx,
terminate at the expiration of the last of the limitation
periods contained in the Income Tax Act (Canada), applicable
provincial corporation tax legislation or any other
legislation imposing tax on the Purchaser and Lynx; and
(b) if based upon misrepresentation made or fraud committed in
filing a return or in supplying information for the purposes
of the Income Tax Act (Canada), applicable provincial
corporation tax legislation or any other legislation
imposing tax on the Purchaser and Lynx, survive without
limit as to time.
8.3 All statements contained in any certificate or any
instrument delivered by or on behalf of a Party pursuant to or in
connection with the transactions contemplated by this Agreement
shall be deemed to be made by such Party under this Agreement.
ARTICLE IX
COVENANTS
9.1 Conduct of Lynx Business Prior to Closing. During the
Interim Period, Lynx shall:
(a) Conduct Business in Ordinary Course - except as otherwise
contemplated or permitted by this Agreement, conduct the
Lynx Business diligently and prudently and shall not,
without the prior written consent of the Purchaser, enter
into any contracts, agreements, commitments or leases, or
undertake any activity (including allotment or issuance of
any further shares or securities of Lynx), except in the
ordinary course of the Lynx Business;
(b) Continue Insurance - continue in full force all existing
insurance policies;
(c) Comply with Laws - comply with all laws applicable to the
Lynx Business;
(d) Maintain Permits - apply for, maintain in good standing and
renew all permits, licenses, registrations and permits
necessary to enable it to carry on the Lynx Business as now
conducted; and
(e) Distributions - not pay any amount or dividend or otherwise
make any distribution to its shareholders or any non-arm's
length Person out of the normal course.
9.2 Conduct of the Purchaser and PWIN Prior to Closing. During
the Interim Period, the Purchaser and PWIN shall comply with
all laws applicable to PWIN and the Purchaser.
9.3 Access for Investigation.
(a) The Purchaser, PWIN, the Lynx Shareholders and Lynx shall
permit the other Parties and their Authorized
Representatives, until the closing Date, to have reasonable
access during normal business hours to their respective
premises and their respective Records to enable confirmation
of the accuracy of the Records and the matters represented
and warranted in Articles IV, V, VI and VII.
(b) Until the Closing Date and, in the event the termination of
this Agreement without the completion of the transactions
contemplated hereby, each of the Parties shall thereafter,
subject to subsection 9.3(c), use its best efforts to keep
confidential and not use for its own purpose (other than as
contemplated by this Agreement) any information obtained
from any other Party with respect to the other Party's
affairs. If this Agreement is terminated, all documents,
working papers and other written material obtained by the
Party from the other party in connection with this Agreement
and not previously made public (and all copies thereof)
shall be returned to the other Party promptly after such
termination.
(c) The obligation of each of the Parties under subsection
9.3(a) to keep confidential and not use any information
shall not apply to information which:
(i) becomes generally available to
the public other than as a result of a
disclosure by the Party or its
representatives in violation of this
Agreement;
(ii) was available to the Party on a non-confidential
basis prior to its disclosure by the other party or
their representatives;
(iii) becomes available to the party on a
non-confidential basis from a source other than the
other Party or its representatives, provided that such
source is not bound by a confidentiality agreement with
the other Party; or
(iv) the Party is required by law to disclose.
9.4 Closing Documents. The Ancillary Agreements and the
Conveyance Documents shall be executed and delivered by the
Parties thereto at the Closing time.
9.5 Corporate Proceedings. On or before the Closing Date, each
Party (which is a corporation) shall provide to the other Parties
certified copies of all necessary proceedings and resolutions,
corporate or otherwise, and all other necessary actions,
corporate or otherwise, authorizing the execution and delivery of
this Agreement and the matters contemplated in it.
9.6 Actions to Satisfy Closing Conditions. Each Party shall
take all such actions as are within its power to control, and
shall use its best efforts to cause other actions to be taken
which are not within its power to control, so as to ensure
compliance with any conditions set forth in this Agreement which
are for the benefit of itself or any other Party.
9.7 PWIN Proceedings. PWIN shall use its best efforts to
complete an S-4 or other suitable filing with the US Securities
and Exchange Commission so as to permit the PWIN common shares
obtained by the Lynx Shareholders under this Agreement shall be
tradeable without restriction.
ARTICLE X
CONDITIONS OF CLOSING
10.1 Conditions for the Purchaser's Benefit. The Purchaser shall
not be obliged to complete the Share Exchange unless, on the
Closing Date, each of the following conditions shall have been
satisfied:
(a) Accuracy of Representations - The representations and
warranties of the Lynx Shareholders and Lynx set forth in
sections 4.1 and 5.1, respectively, shall be true and
correct at the Closing, except as those representations and
warranties may be affected by the occurrence of events or
transactions expressly contemplated and permitted by this
Agreement, including, without limitation, those in the
ordinary course of business, and the Purchaser shall have
received a certificate from the Lynx Shareholders and Lynx
confirming the foregoing.
(b) Performance of Obligations - Lynx and the Lynx Shareholders
shall have performed all of the obligations hereunder to be
performed by them at or prior to the Closing. Lynx and the
Lynx Shareholders shall not be in breach of any agreement on
its part contained herein;
(c) Deliveries - Lynx and the Lynx Shareholders shall have
delivered or caused to be delivered to the Purchaser the
Ancillary Agreements and Conveyance Documents, and shall
deliver up to the Purchaser possession of the Lynx Shares
and Lynx Warrants, free and clear of any Encumbrances;
(d) Approvals - All necessary approvals of the directors and/or
shareholders of Lynx shall have been obtained or given, as
the case may be, on or before the Closing Time;
(e) Completion of Investigations - The investigations and
assessments contemplated in section 9.3 shall have been
completed and the Purchaser shall be satisfied with the
result of such investigations and assessments including,
without limitation, the accuracy of the Records and matters
represented and warranted in Articles IV and V;
(f) Consents, Authorizations and Registrations - All consents,
approvals, orders and authorizations of, from or
notifications to any persons or Governmental Authorities
required in connection with the completion of any of the
transactions contemplated by this Agreement, the execution
of this Agreement, the Closing or the performance of any of
the terms and conditions of this Agreement shall have been
obtained on or before the Closing Date.
There shall be no injunction or order issued preventing, and
no pending or threatened claim, action, litigation or
proceeding, judicial or administrative, or investigation
against any Party by any Governmental Authority or Person
for the purpose of enjoining or preventing the consummation
of this Agreement, or otherwise claiming that this Agreement
or the consummation thereof is improper or would give rise
to proceedings under any statute or rule of law;
(g) No Loss - During the Interim Period, there has been no
material damage to the assets of Lynx or the Lynx Business
by fire or other peril, whether or not such damage is
covered by insurance;
(h) No Material Changes - There shall have been no material
adverse changes in the Lynx Business, assets or financial
condition of Lynx during the Interim Period. For the purposes of
this subsection, the term "material adverse change" shall mean
any change in the assets, liabilities or financial condition of
Lynx or the Lynx Business that may involve material reduction,
damage, risk to or destruction of the assets, whether or not the
change is covered by insurance; and
(i) Legal Opinion - Counsel to Lynx shall deliver to counsel for
the Purchaser an opinion confirming that Lynx qualifies for the
exemption from the provisions of Part XX of the Securities Act
(Ontario) set out in s.93(1)(d) of said act.
(j) Closing of Minority Share and Warrant Exchange Agreement -
The Minority Share and Warrant Exchange Agreement shall have been
duly executed by all parties thereto, all conditions to the
closing thereof, except the closing of this Agreement, shall have
been satisfied, and the Purchased Securities held by the Vendors
(as that term is defined in the Minority Share and Warrant
Exchange Agreement) shall have been tendered to the Purchaser
pursuant to the terms of said Minority Share and Warrant Exchange
Agreement.
If any one or more of the foregoing conditions shall not have
been fulfilled on or before the Closing Date, the Purchaser may
terminate this Agreement by notice in writing to the other
Parties in which event the Purchaser shall be released from all
obligations under this Agreement and (unless the Purchaser can
show that the condition relied upon could reasonably have been
performed by the other parties) the other Parties shall also be
released from all obligations hereunder; provided, however, that
the Purchaser shall be entitled to waive compliance with any one
or more of such conditions in whole or in part if it shall see
fit to do so, without prejudice to its rights of termination in
the event of the non-fulfilment of any other condition in whole
or in part.
10.2 Conditions for the Benefit of the Lynx Shareholders. The
Lynx Shareholders shall not be obliged to complete the Share
Exchange unless, on the Closing Date, each of the following
conditions shall have been satisfied:
(a) Accuracy of Representations - The representations and
warranties of the Purchaser and PWIN set forth in sections
6.1 and 7.1 shall be true and correct at the Closing, except
as those representations and warranties may be affected by
the occurrence of events or transactions expressly
contemplated and permitted by this Agreement, and the Lynx
Shareholders shall have received certificates from the
Purchaser and PWIN confirming the foregoing.
(b) Performance of Obligations - the Purchaser shall have
performed all of the obligations hereunder to be performed
by it at or prior to the Closing and neither the Purchaser
nor PWIN shall be in breach of any agreement on its part
contained herein.
(c) Deliveries - the Purchaser shall have delivered or caused to
be delivered to Lynx Shareholders possession of the
Exchangeable Shares and Exchangeable Warrants, free and
clear of any Encumbrances.
(d) Approvals - All necessary approvals by the directors and/or
shareholders of the Purchaser and PWIN shall have been
obtained, completed or given, as the case may be, on or
before the Closing Time.
(e) Completion of Investigations - The investigations and
assessments contemplated in section 9.3 shall have been
completed and the Lynx Shareholders shall be satisfied with
the results of such investigations and assessments
including, without limitation, the accuracy of the Records
and matters represented and warranted in Articles VI and
VII.
(f) Consents, Authorizations and Registrations - All consents,
approvals, orders and authorizations of, from or
notifications to any Persons or Governmental Authorities
required in connection with the completion of any of the
transactions contemplated by this Agreement, the execution
of this Agreement, the Closing or the performance of any of
the terms and conditions of this Agreement shall have been
obtained on or before the Closing Date.
There shall be no injunction or order issued preventing, and
no pending or threatened claim, action, litigation or
proceeding, judicial or administrative, or investigation
against any Party by any Governmental Authority or Person
for the purpose of enjoining or preventing the consummation
of this agreement, or otherwise claiming that this Agreement
or the consummation thereof is improper or would give rise
to proceedings under any statute or rule of law.
(g) No Loss - During the Interim Period, there has been no
material damage to the assets of the Purchaser or PWIN by
fire or other peril, whether or not such damage is covered
by insurance.
(h) No Material Changes - There shall have been, in the
reasonable opinion of Lynx and the Lynx Shareholders, no
material adverse changes in the assets or financial
condition of the Purchaser or PWIN during the Interim
Period. For the purposes of this subsection, the term
"material adverse change" shall mean any change in the
assets, liabilities or financial condition of the Purchaser
or PWIN that may, in the reasonable opinion of Lynx and the
Lynx Shareholders involve material reduction, damage, risk
to or destruction of the assets whether or not the change is
covered by insurance.
(i) Support Agreement - PWIN and the Purchaser shall have
executed the Support Agreement on or before the Closing
Date.
If any one or more of the foregoing conditions shall not have
been fulfilled on or before the Closing Date, the Lynx
Shareholders may terminate this Agreement by notice in writing to
the Purchaser in which event the Lynx Shareholders shall be
released from all obligations under this Agreement and (unless
the Lynx Shareholders can show that the condition relied upon
could reasonably have been performed by the Purchaser or PWIN)
the Purchaser and PWIN shall also be released from all
obligations hereunder; provided, however, that the Lynx
Shareholders shall be entitled to waive compliance with any one
or more of such conditions in whole or in part if they shall see
fit to do so, without prejudice to their rights to termination in
the event of the non-fulfilment of any other condition in whole
or in part.
ARTICLE XI
INDEMNIFICATION
11.1 Mutual Indemnifications for Breaches of Warranty, etc.
Subject to section 11.3, the Purchaser and PWIN hereby covenants
and agrees with the Lynx Shareholders and Lynx and the Lynx
Shareholders and Lynx hereby covenant and agree severally with
the Purchaser and PWIN (the parties covenanting and agreeing to
indemnify another party under this Article XI are hereinafter
individually referred to as "Indemnifying Party" and the parties
that are being indemnified by another Party under this Article XI
are hereinafter individually referred to as the "Indemnified
Party") to indemnify and save harmless the Indemnified Party,
effective as and from the Closing Time, from and against any
Claims which may be made or brought against the Indemnified Party
and/or which it may suffer or incur as a result of, or arising
out of any non-fulfilment of any covenant or agreement on the
part of the Indemnifying Party under this Agreement or any
Ancillary Agreement or any incorrectness in or breach of any
representation or warranty of the Indemnifying Party contained in
this Agreement or any Ancillary Agreement.
11.2 Undisclosed Liabilities Indemnity. Notwithstanding section
11.1 and without limiting the generality of section 11.1:
(a) the Lynx Shareholders and Lynx shall indemnify the Purchaser
and PWIN from all Claims arising from liabilities or
obligations to Persons that arise from any act or failure to
act of Lynx or the Lynx Shareholders prior to the Closing
Date that is not disclosed to the Purchaser and PWIN
pursuant to Articles IV and V; and
(b) the Purchaser and PWIN shall indemnify Lynx and the Lynx
Shareholders from all Claims arising from liabilities or
obligations to Persons that arise from any act or failure to
act of the Purchaser or PWIN prior to the Closing Date that
is not disclosed to Lynx and the Lynx Shareholders pursuant
to Articles V and VI.
11.3 Limitation on Mutual Indemnification. The indemnification
obligations of each of the Parties pursuant to section 11.1 and
11.2 shall be subject to the following:
(a) the applicable limitation mentioned in Article VIII
respecting the survival of the representations and
warranties of the Parties;
(b) the indemnity obligations under section 11.2 shall survive
for a period of five (5) years from the Closing Date;
(c) there shall be no limit as to amount in respect of breaches
of the representations and warranties of the Parties other
than as specifically limited by the provisions of the
section; and
(d) an Indemnifying Party shall not be required to indemnify an
Indemnified Party until the aggregate Claims sustained by
the Indemnified Party exceeds a value of $5,000, in which
case the Indemnifying Party shall be obligated to the
Indemnified party for all Claims without limit as to amount.
11.4 Procedure for Indemnification. The following provisions
shall apply to any Claims for which an Indemnifying Party may be
obligated to indemnify an Indemnified Party pursuant to this
Agreement:
(a) upon receipt from a third party by the Indemnified Party of
notice of a Claim or the Indemnified party becoming aware of
a Claim in respect of which the Indemnified Party proposes
to demand indemnification from the Indemnifying Party, the
Indemnified Party shall give notice to that effect to the
Indemnifying Party with reasonable promptness, provided that
failure to give such notice shall not relieve an
Indemnifying Party from any liability it may have to the
Indemnified Party except to the extent that the Indemnifying
Party is prejudiced thereby;
(b) in the case of Claims arising from third parties, the
Indemnifying Party shall have the right by notice to the
Indemnified party not later than thirty (30) days after
receipt of the notice described in paragraph (i) above to
assume the control of the defense, compromise or settlement
of the Claims, provided that such assumption shall, by its
terms, be without costs to the Indemnified Party and the
Indemnifying Party shall at the Indemnified Party's request
furnish it with reasonable security against any costs or
other liabilities to which it may be or become exposed by
reason of such defense, compromise or settlement;
(c) upon the assumption of control by the Indemnifying Party as
aforesaid, the Indemnifying Party shall diligently proceed
with the defense, compromise or settlement of the Claims at
its sole expense, including employment of counsel reasonably
satisfactory to the Indemnified Party and, in connection
therewith, the Indemnified Party shall co-operate fully, but
at the expense of the Indemnifying Party, to make available
to the Indemnifying Party all pertinent information and
witnesses under the Indemnified Party's control, make such
assignments and take such other steps as in the opinion of
counsel for the Indemnifying Party are necessary to enable
the Indemnifying Party to conduct such defense; provided
always that the Indemnified Party shall be entitled to
reasonable security from the Indemnifying Party for the
expense, costs of other liabilities to which it may be or
may become exposed by reason of such co-operation;
(d) the final determination of any such Claims arising from
third parties, including all related costs and expenses,
will be binding and conclusive upon the Parties as to the
validity or invalidity, as the case may be of such Claims
against the Indemnifying Party hereunder; and
(e) should the Indemnifying Party fail to give notice to the
Indemnified Party as provided in paragraph (ii) above, the
Indemnified Party shall be entitled to make such settlement
of the Claims as in its sole discretion may appear
advisable, and such settlement or any other final
determination of the Claims shall be binding upon the
Indemnifying Party.
ARTICLE XII
CLOSING ARRANGEMENTS
12.1 Closing. The Closing shall take place at the offices of
Stewart & Associates, Barristers and Solicitors, 1 First Canadian
Place, Suite 700, 100 King Street West, Toronto M5X 1C7,
Ontario, Canada at the Closing Time on the Closing Date.
12.2 Closing Procedures. At the Closing Time:
(a) the Purchaser shall issue and deliver to the Lynx
Shareholders possession of the Exchangeable Shares and the
Exchangeable Warrants;
(b) the Lynx Shareholders shall deliver up to the Purchaser the
Lynx Shares and the Lynx Warrants;
(c) the Parties shall take or shall have taken, as the case may
be, the other actions contemplated to be taken by them at or
before the Closing contemplated in this Agreement.
12.3 Non-Waiver. No investigations made by or on behalf of the
Purchaser, PWIN, Lynx` and the Lynx Shareholders at any time
shall have the effect of waiving or diminishing the scope of or
otherwise affecting any representation, warranty or indemnity
made by or imposed upon the Parties pursuant to this Agreement.
ARTICLE XIII
GENERAL
13.1 Termination.
(1) This agreement may be terminated at any time prior to the
Closing Date:
(a) by the mutual agreement of the Parties;
(b) by the Parties if:
(i) the Share Exchange shall not have been
completed by October 1, 1999 (or such other date,
if any, as the Parties shall have agreed in
writing), if the failure to complete such purchase
and sale on or before such date is not caused by
any breach of this Agreement by the Party electing
to terminate; or
(ii) the Share Exchange would violate any
non-appealable final order, decree or judgement of
any court or governmental body having competent
jurisdiction.
(2) If this Agreement is terminated by a Party under subsection
13.1(1), such termination shall be without liability of
either Party to the other parties, or to any of their
shareholders, directors, officers, employees, agents,
consultants or representatives provided that if such
termination shall result from the wilful failure of the
Party to fulfil a condition to the performance of the other
Parties or to perform a covenant of this agreement or from a
wilful breach by the party to this Agreement, the Party
shall be fully liable for any and all damages, costs and
expenses (including, but not limited to, reasonable counsel
fees and disbursements) sustained or incurred by the other
Parties.
13.2 Expenses Except as otherwise specified herein, all costs
and expenses (including the fees and disbursements of accountants
and legal counsel) incurred in connection with this Agreement and
completion of the transactions contemplated by this Agreement
shall be paid by the Party incurring those expenses.
13.3 Time of Essence. Time shall be of the essence in all
respects of this Agreement.
13.4 Notices. Any notice or other communication which is
required or permitted to be given or made by one Party to the
others hereunder shall be in writing and shall be either
personally delivered to such Parties sent by facsimile.
Any notice shall be sent to the intended recipient at its
address as follows:
(a) to the Purchaser and/or to PWIN:
c/o Peter Tassiopoulos
155 University Avenue,
Suite 501
Toronto, Ontario
M5N 3N5
Facsimile No.: (416) 368-3870
and to Chapman & Flanagan, Ltd. at:
c/o Daniel Chapman, Esq.
2080, E. Flamingo Road
Suite 112
Las Vegas, Nevada
89119
and to Stewart & Associates at:
c/o Adam K. Szweras
Suite 700, P.O. Box 160
1 First Canadian Place
100 King Street West
Toronto, Ontario
M5X 1C7
Facsimile No.: (416) 368-7805
(b) to Lynx and/or the Lynx Shareholders at:
c/o Stewart Garner
155 University Avenue,
Suite 501
Toronto, Ontario
M5N 3N5
Facsimile No.: (416) 368-3870
and to Marilyn Bloovol at:
79 Old Forest Hill Road
Toronto, Ontario
M5P 2R6
Facsimile No.: (416) 482-2558
or at such other address as any Party may from time to time
advise the others by notice in writing. Any notice given by
personal delivery shall be deemed to be received on the date of
delivery. Any notice sent by facsimile or similar method of
recorded communication shall be deemed to have been received on
the next Business Day following the date of its transmission.
13.5 Further Assurances. The Parties shall with reasonable
diligence do all things and provide all reasonable assurances as
may be required to complete the transactions contemplated by this
Agreement, and each Party shall provide such further documents or
instruments required by any other Party as may be reasonably
necessary or desirable to give effect to this Agreement and carry
out its provisions, whether before or after the Closing.
13.6 Public Notice. All public notices to third parties and all
other publicity concerning the transactions contemplated by this
Agreement shall be jointly planned and co-ordinated by the
Parties and no Party shall act unilaterally in this regard
without the prior written approval of the other Parties, such
approval not to be unreasonably withheld.
13.7 Amendment and Waiver. No supplement, modification, waiver
or termination of this Agreement shall be binding unless executed
in writing by the party to be bound. No waiver of any of the
Provisions of this Agreement shall constitute a waiver of any
other provision (whether or not similar) nor shall such waiver
constitute a continuing waiver unless otherwise expressly
provided.
13.8 Assignment. This Agreement and the rights or obligations
hereunder or thereunder are not assignable by any Party without
the prior written consent of the other Parties, which consent
shall not be unreasonably withheld. This Agreement shall enure to
the benefit of and be binding upon the Parties and their
respective successors and permitted assigns.
13.9 Severability. Any provision of this Agreement, which is
prohibited or unenforceable in any jurisdiction, shall not
invalidate the remaining provisions hereof. Any such prohibition
or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
13.10 Governing Law. The Parties agree that this Agreement
shall be governed by the laws of the Province of Ontario, and the
federal laws of Canada applicable therein, that Ontario will be
the proper forum for any controversy arising in connection with
this Agreement and that the courts of which will be the exclusive
forums for all such suits, actions or proceedings.
13.11 Counterparts. This Agreement may be executed by the
Parties in one or more counterparts, each of which when so
executed and delivered shall be an original and such counterparts
shall together constitute one and the same instrument.
IN WITNESS WHEREOF this agreement has been executed by the
Parties each as of the day and year first before written.
THIS AGREEMENT IS HEREBY EXECUTED on the date set forth
above.
PLAYANDWIN CANADA INC.
Per:
_________________________________
A.S.O.
PLAYANDWIN, INC.
Per:
_________________________________
A.S.O.
LYNX GAMING CORP.
Per:
________________________________
A.S.O.
THE LYNX SHAREHOLDERS:
_________________________
_____________________________
Witness Stewart Garner
_________________________
_____________________________
Witness Tom Sinnott
CONSULAR INVESTMENT
CORPORATION
Per:__________________________c/s
A.S.O.
SCHEDULE 1
DEFINITIONS
"Affiliate and Associate" means an "affiliate" and "associate",
respectively, as those terms are defined in the Business
Corporation Act, 1990 (Ontario), as amended on the date
hereof.
"Agreement" means the Agreement and any instrument supplemental
or ancillary to it.
"Ancillary Agreements" means all documents, agreements,
certificates and instruments to be executed or delivered by
any Person under this Agreement including the Conveyance
Documents, the Support Agreement, and the Minority Share and
Warrant Exchange Agreement.
"Authorized Representatives" means employees, agents, counsel,
accountants and other representatives.
"Business Day" means any day other than a Saturday, Sunday or
statutory holiday in the Province of Ontario.
"Capital Expenditures" means expenditures which, in accordance
with Canadian generally accepted accounting principles
consistently applied, are chargeable to capital or fixed
assets accounts and includes expenditures in connection with
the acquisition by, purchase, erection or construction of
lands, fixed assets, plant, machinery and/or equipment,
whether fixed or moveable.
"Claims" means claims, demands, actions, causes of action,
damages, losses, costs, fines, penalties, interest,
liabilities and expenses, including, without limitation,
reasonable legal fees.
"Closing" means the completion of the Share Exchange pursuant to
this Agreement.
"Closing Date" means September 1, 1999, or such other later
date as may be agreed to by the Parties, provided that such
date shall not be later than October 1, 1999.
"Closing Time" means 2:00 p.m. (Toronto time) on the Closing Date
or such other time on the Closing Date as may be agreed to
by the Parties.
"Conveyance Documents" means all bills of sale, assignments, and
instruments of transfer, assurances, consents, and other
documents as shall be necessary to effectively transfer to
the Purchaser the Lynx Shares.
"Encumbrances" means any mortgage, charge, pledge, hypothecate,
lien, encumbrance, restriction, option, right of others or
security interest of any kind.
"Exchangeable Shares" means Class B Special Shares of the
Purchaser, being subordinate, non-voting preferred shares
authorized in an unlimited number, redeemable and
retractable subject to the terms of this Agreement.
"Exchangeable Warrants" means warrants to purchase one
Exchangeable Share each at a price of $1.70, expiring
eighteen (18) months after the Closing Date.
"Governmental Authorities" means any applicable Canadian or
non-Canadian federal, provincial and municipal agency,
ministry, crown corporation, department, inspector and
official.
"Interim Period" means the period commencing on the date of this
Agreement and ending immediately before the opening of
business on the Closing Date.
"Lynx's Business" means Lynx's Business of developing and
marketing proprietary games of chance, including but not
limited to the game known as RACINGO, either by itself or
through or in combination with its subsidiary, P.E.S.T.
Creative Gaming Corporation.
"Lynx Business Agreements" means the business agreements
undertaken in the normal course of business.
"Lynx Financial Statements" means the financial statements of
Lynx attached as Schedule 3.
"Lynx Records" means Lynx's books, records, files, including
business and financial records, documentation and
information, whether in writing or stored in any retrieval
system or database.
"Lynx Shareholders" means the registered principal shareholders
of Lynx listed in Schedule 2.
"Lynx Shares" means the common shares of Lynx owned by the Lynx
Shareholders as listed in Schedule 2.
"Lynx Special Warrants" means the special warrants held certain
persons who are not shareholders of Lynx, each special
warrant entitling its holder to 1.1 Lynx Shares and 0.55
Lynx Warrants for no further consideration, exercisable
automatically upon the completion of the transactions
contemplated in this Agreement.
"Lynx Warrants" means the warrants held by the Lynx Shareholders
as listed in Schedule 2, each warrant entitling its holder
to purchase one Lynx Share each at a price of $0.85
exercisable for 18 months after Lynx becomes a reporting
issuer.
"NASD" means the National Association of Securities Dealers.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"OSC" means the Ontario Securities Commission.
"Parties" means the parties to the Agreement and "Party" means
any one of them.
"Permits" means authorizations, registrations, permits, approvals
or licenses that can be issued or granted by Governmental
Authorities.
"Person" means an individual, body corporate, partnership,
trustee, trust, unincorporated association, executor,
administrator or legal representative.
"Purchasers Records" means the Purchaser's books, records, files,
including business and financial records, documentation and
information, whether in writing or stored in any retrieval
system or database.
"PWIN Records" means PWIN books, records, files including
business and financial records, documentation and
information, whether in writing or stored in any retrieval
system or database
"Records" means the Lynx Records, the Purchasers' Records and
PWIN Records.
"Regulatory Approval" means the approvals and consents of
applicable regulatory authorities, which are required to
complete the Share Exchange.
"Share Exchange" has the meaning attributed to it in section 2.2.
"Shareholder Approval" means approval by the holders of the
common shares of PWIN in respect to the Share Exchange.
SCHEDULE 2
LIST OF LYNX SHAREHOLDERS
Number of Number of
Shareholder Common Shares Warrants
Stewart Garner 1,105,000 nil
Tom Sinnott 530,000 25,000
Consular Investment Corporation 2,640,012 nil
SCHEDULE 3
LYNX FINANCIAL STATEMENTS
SCHEDULE 4
SUPPORT AGREEMENT
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is made as of the 30th day of August,
1999,
BETWEEN
PLAYANDWIN CANADA INC.
a corporation incorporated under the laws
of the Province of Ontario
(hereinafter referred to as the "Purchaser")
OF THE FIRST PART
and
PLAYANDWIN, INC.,
a corporation incorporated under the laws
of the State of Nevada
(hereinafter referred to as "PWIN")
OF THE SECOND PART
WHEREAS PWIN and Purchaser have entered into an agreement
(the "Share Exchange Agreement") with the principal shareholders
of Lynx Gaming Corporation ("Lynx") and an agreement (the
"Minority Share and Warrant Exchange Agreement") with the other
shareholders and holders of special warrants of Lynx whereby the
Purchaser is to acquire all of the issued and outstanding shares,
share purchase warrants and special warrants of Lynx in exchange
for shares of the Purchaser convertible into shares of PWIN (the
"Exchangeable Shares") and warrants to purchase Exchangeable
Shares;
AND WHEREAS Purchaser is a wholly-owned subsidiary of PWIN;
NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in
consideration of the mutual covenants hereinafter contained and
provided for and other good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged by the
Parties), the Parties agree as follows:
1. The Purchaser will be funded with sufficient resources,
including PWIN common shares, to permit it to satisfy its
obligations under the Share Exchange Agreement and the Minority
Share and Warrant Exchange Agreement with respect to the
Exchangeable Shares.
2. PWIN will not:
(i) take actions that prejudice holders of Exchangeable
Shares, by unduly diminishing the value of that which they
are entitled to receive on the conversion/exchange of their
shares, provided that PWIN shall not be liable hereunder for
reasonable decisions made in the ordinary course of
business, or for fluctuations in market price caused by
factors beyond its control;
(ii) split or consolidate PWIN stock without causing the
Purchaser to make a corresponding split or consolidation of
the issued and outstanding Exchangeable Shares and
Exchangeable Warrants, provided that such action is also
authorized by the shareholders of the Purchaser including
the holders of the Exchangeable Shares;
(iii) liquidate, wind up or dissolve the Purchaser while
there are Exchangeable Share outstanding.
IN WITNESS WHEREOF this agreement has been executed by the
Parties each as of the day and year first before written.
THIS AGREEMENT IS HEREBY EXECUTED on the date set forth
above.
PLAYANDWIN CANADA INC.
Per:
_________________________________
A.S.O.
PLAYANDWIN, INC.
Per:
_________________________________
A.S.O.
SCHEDULE 5
MINORITY SHARE AND WARRANT EXCHANGE AGREEMENT
MINORITY SHARE AND WARRANT EXCHANGE AGREEMENT
THIS AGREEMENT is made the 8th day of September 1999,
BETWEEN
PLAYANDWIN CANADA INC., a corporation
incorporated under the laws of the Province of
Ontario
(the "Purchaser")
OF THE FIRST PART
and LYNX GAMING CORP., a corporation
incorporated under the laws of the Province of
Ontario
("Lynx")
OF THE SECOND PART
and All the registered holders of Lynx
Shares, Lynx Warrants and/or Lynx Special Warrants
listed in Schedule 2 hereto
(the "Vendors")
OF THE THIRD PART
and PLAYANDWIN, INC., a corporation
incorporated under the laws of the State of Nevada
("PWIN")
OF THE FOURTH PART
WHEREAS the Purchaser desires to purchase from the Vendors
and the Vendors desire to sell to the Purchaser the Lynx Shares
and Lynx Warrants;
AND WHEREAS the Purchaser is a wholly-owned subsidiary of
PWIN;
AND WHEREAS the Purchaser, PWIN and Lynx have entered into
an agreement (the "Share Exchange Agreement") whereby the
Purchaser will acquire all of the common shares and share
purchase warrants of Lynx owned by the principal registered
shareholders of Lynx;
AND WHEREAS the Board of Directors of Lynx has approved the
sale of the Lynx Shares Lynx Warrants and Lynx Special Warrants
to the Purchaser;
NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in consideration of
the mutual covenants hereinafter contained and provided for and
other good and valuable consideration (the receipt and
sufficiency of which is hereby acknowledged by the Parties), the
Parties agree as follows:
1. Purchase and Sale.
(a) Previous Agreement Superseded. This Agreement supersedes
and replaces an earlier Minority Share and Warrant Exchange
Agreement made by the Parties hereto on August 30, 1999.
(b) Agreement to Purchase. Upon the terms and subject to the
conditions contained in this Agreement, the Vendors shall sell
and the Purchaser shall purchase, as of and with effect from the
opening of business on the Closing Date, the Lynx Shares, Lynx
Warrants and Lynx Special Warrants (the "Purchased Securities").
(c) Purchase Price. The purchase and sale of the Purchased
Securities shall be effected by the issue of the Exchangeable
Shares and/or Exchangeable Warrants from the treasury of the
Purchaser to the Vendors, pursuant to the prospectus and
registration exemptions contained in paragraphs 72(1)(j) and
35(1)(16) of the Securities Act (Ontario) (the "Warrant
Exchange"). The Purchaser shall issue to each Vendor:
(i) one Exchangeable Share for every two Lynx Shares held
by the Vendor;
(ii) one Exchangeable Warrant for every two Lynx Warrants
held by the Vendor; and
(iii) 0.55 Exchangeable Shares and 0.275 Exchangeable
Warrants for every one Lynx Special Warrant held by the
Vendor
(d) Fractional Shares. No fractional Exchangeable Shares or
Exchangeable Warrants shall be issued pursuant to this Agreement.
The amount of Exchangeable Shares and/or Exchangeable Warrants
issuable to each Vendor shall be rounded up to the nearest whole
Exchangeable Share or Exchangeable Warrant.
(e) Rollover. At the option of each Vendor, the Purchaser
covenants and agrees to elect, jointly with such Vendor if
applicable (referred to in this section as the "Electing
Vendor"), in accordance with the provisions of subsection 85(1)
or 85.1(1) of the Income Tax Act (Canada) (the "Tax Act") (and
the corresponding provisions of any applicable provincial tax
legislation) in the prescribed form and within the prescribed
time for the purposes of the Tax Act, and shall therein agree to
elect in respect of the Purchased Securities of the Electing
Vendor an amount as the Electing Vendor shall direct which shall
be deemed to be the Electing Shareholder's proceeds of
disposition thereof and Purchaser's cost thereof.
Notwithstanding the foregoing, the Electing Vendor may not direct
the parties to elect an amount which is greater than the fair
market value of the Purchased Securities or an amount which is
less than the adjusted cost base of the Purchased Securities to
the Electing Vendor. The Electing Vendor and the Purchaser agree
to execute all such documents and forms to make the election
contemplated in this section.
(f) Price Adjustment. The parties hereto covenant and agree
that, in the event that any governmental taxing authority having
jurisdiction issues or proposes to issue, assessments or
reassessments of additional liability for taxes or any other
subject by reason of asserting that the Elected Amount is greater
or less than the adjusted cost base of the Purchased Securities
to the Electing Vendor, or that the adjusted cost base of the
Purchased Securities to the Electing Vendor is greater than or
less than the Elected Amount, then the Elected Amount shall be
increased or decreased by the difference so determined; but only
to the extent that the Elected Amount so revised is accepted by
the taxing authority, the Electing Vendor and the Purchaser, or,
failing such acceptance is established by the courts having
jurisdiction in the matter after all rights of appeal have been
exhausted and all times for appeal have expired without appeals
having been taken by such taxing authority, the Electing Vendor
or the Purchaser. Each of the Electing Vendor and the Purchaser
hereby agrees to make such further elections, enter into such
acknowledgements or agreements, and do or cause to be done such
further acts and things as may be, in the opinion of counsel,
reasonably necessary to give effect to this section and the
change in the Elected Amount.
(g) Exchangeable Shares. The Exchangeable shares to be issued by
the Purchaser pursuant to this Agreement shall be subject to the
following terms:
(a) each Exchangeable Share may be exchanged at the request
of its holder for one common share of PWIN, provided that in
the event of a consolidation, split or other reorganization
of the capital stock of the Purchaser or of PWIN, the number
of PWIN common shares issuable for each one Exchangeable
Share shall be adjusted accordingly;
(b) Of the Exchangeable Shares received by a Lynx
Shareholder on the Closing Date:
(i) none may be exchanged during the period ending on
and including the day of the first anniversary of
the Closing Date;
(ii) up to one-third (1/3) may be exchanged after said
first anniversary;
(iii) an additional one-third (1/3) may be
exchanged after the second anniversary of the
Closing Date; and
(iv) all Exchangeable Shares may be exchanged after the
third anniversary of the Closing Date.
(c) Each Exchangeable Share may be exchanged at the request
of the Purchaser at any time during the period ending on and
including the day of the fifth anniversary of the Closing
Date, and shall be exchanged upon: (i) the occurrence of a
take over bid for all of the issued and outstanding shares
of PWIN; or (ii) the day of the fifth anniversary of the
Closing Date. All Exchangeable Shares shall be automatically
exchanged on the fifth anniversary of the Closing Date.
(g) Exchangeable Warrants. Each Exchangeable Warrant to be
issued by the Purchaser pursuant to this Agreement shall entitle
its holder to acquire one Exchangeable Share at a price of $1.70.
No Exchangeable Warrant may be exercised on or before the day of
the first anniversary of the Closing Date. The Exchangeable
Warrants shall expire eighteen (18) months after the Closing
Date.
(h) Acknowledgment of Resale Restrictions. The Vendors hereby
acknowledge that any Exchangeable Shares or PWIN common shares
that they receive pursuant to this Agreement are restricted in
accordance with the United States Securities Act of 1933, as
amended, and the rules promulgated thereunder.
(i) PWIN Proceedings. PWIN shall use its best efforts to
complete an S-4 filing with the US Securities and Exchange
Commission so as to permit the PWIN common shares obtained by the
Lynx Shareholders under this Agreement to be tradeable without
restriction.
2. Representations and Warranties of the Vendors. Each Vendor
represents and warrants to the Purchaser and PWIN as follows and
acknowledges that the Purchaser and PWIN are relying on these
representations and warranties in connection with the completion
of the purchase of the Purchased Securities:
(a) Capacity to own - The Vendor has all necessary power,
authority and capacity to own the Purchased Securities, as
the case may be.
(b) Capacity to Enter Agreement - The Vendor has full power,
right and authority to enter into this Agreement and to
perform his/her/its obligations under it.
(c) Binding Obligation - This Agreement has been duly executed
and delivered by the Vendor and constitutes a valid and
binding obligation of the Vendor.
(d) Absence of Conflict - The Vendor is not a party to, bound or
affected by any agreement which would be violated, breached
or terminated by, or which would result in creation or
imposition of any Encumbrance upon any of the Purchased
Securities as a consequence of the execution and delivery of
this Agreement or the consummation of the transactions
contemplated in this Agreement.
(e) Title - The Vendors is the legal and beneficial owner of the
Purchased Securities, as listed in Schedule 2 hereto, with
good and marketable title, free and clear of any
Encumbrances.
(f) No Bankruptcy - No proceedings have been taken or authorized
by any person in respect of the bankruptcy, insolvency,
liquidation, dissolution or winding up as applicable, of the
Vendor.
(g) No Option - No Person, other than the Purchaser under this
Agreement, has any agreement or any right capable of
becoming an agreement or option for the purchase from the
Vendor of any of the Purchased Securities.
(h) Disclosure - The representations and warranties of the
Vendor in this Agreement are true, correct and do not
contain any untrue or misleading statement of a material
fact or omit to state a material fact necessary to make such
representations and warranties not misleading to the
Purchaser or PWIN.
(i) Non-Violation - The entering into of this Agreement and the
consummation of transactions contemplated herein do not and
will not conflict with, or result in a breach of, or
constitute a default under the terms or conditions of any
constating document or by-laws of the Vendor (if the Vendor
is a corporation) or any court or administrative order or
process, agreement or instrument to which the Vendors is
party or by which he/she/it is bound.
3. Representations and Warranties of The Purchaser. The
Purchaser hereby represents and warrants to Lynx and the Vendors
the facts set forth in Article VI of the Share Exchange
Agreement, which Article V is hereby incorporated by reference
into this Agreement, and acknowledges that Lynx and the Vendors
are relying on those representations and warranties in connection
with the sale of the Purchased Securities.
4. Representations and Warranties of PWIN. PWIN hereby
represents and warrants to Lynx and the Vendors the facts set
forth in Article VII of the Share Exchange Agreement, which
Article VI is hereby incorporated by reference into this
Agreement, and acknowledges that Lynx and the Vendors are relying
on those representations and warranties in connection with the
sale of the Purchased Securities.
5. Representations and Warranties of Lynx. Lynx hereby
represents and warrants to the Purchaser and PWIN the facts set
forth in Article IV of the Share Exchange Agreement, which
Article IV is hereby incorporated by reference into this
Agreement, and acknowledges that the Purchaser and PWIN are
relying on those representations and warranties in connection
with the sale of the Purchased Securities. Lynx hereby also
represents and warrants to the Purchaser that the Lynx Special
Warrants have been duly issued to the holders thereof, as set out
in Schedule 2, and that the Lynx Special Warrants constitute a
valid and binding obligation of Lynx to issue Lynx Shares and
Lynx Warrants to the holders thereof, pursuant to the terms of
the same.
6. Survival or Representations and Warranties. Subject to
section 8(b), all representations and warranties contained in
this Agreement on the part of each of the parties shall survive
the Closing for a period of one (1) year from the Closing Date,
after which time, if no claim shall have been made against a
Party with respect to any incorrectness or in breach of any
representation or warranty, that Party shall have no further
liability under this Agreement with respect to the representation
or warranty.
7. Conditions of Closing.
(a) Conditions for the Purchaser's Benefit. The Purchaser shall
not be obliged to complete the purchase of the Purchased
Securities unless, on the Closing Date, the Share Exchange
Agreement has been executed, each of the conditions of closing
set forth in subsection 10.1 of the Share Exchange Agreement
(with the exception of the closing of the transaction
contemplated in this Agreement) has been satisfied, and the Lynx
Shares and Lynx Warrants, as those terms are defined in the Share
Exchange Agreement, have been tendered to the Purchaser pursuant
to the terms of the Share Exchange Agreement.
(b) Conditions for the Benefit of the Vendors. The Vendors
shall not be obliged to complete the sale of their Purchased
Securities unless on the Closing Date: (i) each of the conditions
set forth in subsection 10.2 of the Share Exchange Agreement
(with the exception of the closing of the transaction
contemplated in this Agreement) shall have been satisfied; and
(ii) the Lynx Shares and Lynx Warrants, as those terms are
defined in the Share Exchange Agreement, have been tendered to
the Purchaser pursuant to the terms of the Share Exchange
Agreement.
(c) If Conditions not Satisfied. If any one or more of the above-
mentioned conditions of closing have not been fulfilled on or
before the Closing Date, the Party for whose benefit said
conditions were made (the "Beneficiary") may terminate this
Agreement by notice in writing to the other Parties in which
event the Beneficiary shall be released from all obligations
under this Agreement and (unless the Beneficiary can show that
the condition relied upon could reasonably have been performed by
the other Parties) the other Parties shall also be released from
all obligations hereunder; provided, however, that the
Beneficiary shall be entitled to waive compliance with any one or
more of such conditions in whole or in part if it shall see fit
to do so, without prejudice to its rights of termination in the
event of the non-fulfilment of any other condition in whole or in
part.
8. Indemnification.
(a) Mutual Indemnification's for Breaches of Warranty, etc.
Subject to section 8(c) the Purchaser and PWIN hereby covenant
and agree with the Vendors and Lynx and the Vendors and Lynx
hereby covenant and agree severally with the Purchaser and PWIN
(the parties covenanting and agreeing to indemnify another party
under this section 8 are hereinafter individually referred to as
"Indemnifying Party" and the parties that are being indemnified
by another Party under this section 8 are hereinafter
individually referred to as the "Indemnified Party") to indemnify
and save harmless the Indemnified Party, effective as and from
the Closing Time, from and against any Claims which may be made
or brought against the Indemnified Party and/or which it may
suffer or incur as a result of, or arising out of any
non-fulfilment of any covenant or agreement on the part of the
Indemnifying Party under this Agreement or any Ancillary
Agreement or any incorrectness in or breach of any representation
or warranty of the Indemnifying Party contained in this Agreement
or any Ancillary Agreement.
(b) Undisclosed Liabilities Indemnity. Notwithstanding section
8(a) and without limiting the generality of section 8(a):
i. the Vendors and Lynx shall indemnify and save harmless the
Purchaser and PWIN from all Claims arising from liabilities or
obligations to Persons that arise from the act or failure to act
of the Vendors prior to the Closing Date that are not disclosed
to PWIN pursuant to sections 2 and 5; and
ii. the Purchaser and PWIN shall indemnify the Vendors from all
Claims arising from liabilities or obligations to Persons that
arise from the act or failure to act of the Purchaser or PWIN
prior to the Closing Date that are not disclosed to the Vendors
pursuant to sections 3 and 4.
(c) Limitation on Mutual Indemnification. The indemnification
obligations of each of the Parties pursuant to section 8(a) and
8(b) shall be subject to the following:
i. the applicable limitation mentioned in section 6 respecting
the survival of the representations and warranties of the
Parties;
ii. the indemnity obligations under section 8(b) shall survive
for a period of five (5) years from the Closing Date;
iii. there shall be no limit as to amount in respect of breaches
of the representations and warranties of the Parties other than
as specifically limited by the provisions of the section; and
iv. an Indemnifying Party shall not be required to indemnify an
Indemnified Party until the aggregate Claims sustained by the
Indemnified Party exceed a value of $5,000, in which case the
Indemnifying Party shall be obligated to the Indemnified party
for all Claims without limit as to amount.
(d) Procedure for Indemnification. The following provisions
shall apply to any Claims for which an Indemnifying Party may be
obligated to indemnify an Indemnified Party pursuant to this
Agreement:
i. upon receipt from a third party by the Indemnified Party of
notice of a Claim or the Indemnified party becoming aware of a
Claim in respect of which the Indemnified Party proposes to
demand indemnification from the Indemnifying Party, the
Indemnified Party shall give notice to that effect to the
Indemnifying Party with reasonable promptness, provided that
failure to give such notice shall not relieve an Indemnifying
Party from any liability it may have to the Indemnified Party
except to the extent that the Indemnifying Party is prejudiced
thereby;
ii. in the case of Claims arising from third parties, the
Indemnifying Party shall have the right by notice to the
Indemnified party not later than thirty (30) days after receipt
of the notice described in paragraph (i) above to assume the
control of the defense, compromise or settlement of the Claims,
provided that such assumption shall, by its terms, be without
costs to the Indemnified Party and the Indemnifying Party shall
at the Indemnified Party's request furnish it with reasonable
security against any costs or other liabilities to which it may
be or become exposed by reason of such defense, compromise or
settlement;
iii. upon the assumption of control by the Indemnifying Party as
aforesaid, the Indemnifying Party shall diligently proceed with
the defense, compromise or settlement of the Claims at its sole
expense, including employment of counsel reasonably satisfactory
to the Indemnified Party and, in connection therewith, the
Indemnified Party shall co-operate fully, but at the expense of
the Indemnifying Party, to make available to the Indemnifying
Party all pertinent information and witnesses under the
Indemnified Party's control, make such assignments and take such
other steps as in the opinion of counsel for the Indemnifying
Party are necessary to enable the Indemnifying Party to conduct
such defense; provided always that the Indemnified Party shall be
entitled to reasonable security from the Indemnifying Party for
the expense, costs of other liabilities to which it may be or may
become exposed by reason of such co-operation;
iv. the final determination of any such Claims arising from
third parties, including all related costs and expenses, will be
binding and conclusive upon the Parties as to the validity or
invalidity, as the case may be of such Claims against the
Indemnifying Party hereunder; and
v. should the Indemnifying Party fail to give notice to the
Indemnified Party as provided in paragraph (ii) above, the
Indemnified Party shall be entitled to make such settlement of
the Claims as in its sole discretion may appear advisable, and
such settlement or any other final determination of the Claims
shall be binding upon the Indemnifying Party.
9. Closing.
(a) Closing. The Closing shall take place at the offices of
Stewart & Associates, Barristers and Solicitors, 1 First Canadian
Place, Suite 700, 100 King Street West, Toronto M5X 1C7,Ontario,
Canada at the Closing Time on the Closing Date.
(b) Closing Procedures. At the Closing Time:
i. the Purchaser shall issue and deliver to the Vendors
possession of the Exchangeable Shares and Exchangeable Warrants;
ii. the Vendors shall deliver up to the Purchaser the Purchased
Securities;
iii. the Parties shall take or shall have taken, as the case may
be, the other actions contemplated to be taken by them at or
before the Closing contemplated in this Agreement.
(c) Non-Waiver. No investigations made by or on behalf of the
Purchaser, PWIN, Lynx or the Vendors at any time shall have the
effect of waiving or diminishing the scope of or otherwise
affecting any representation, warranty or indemnity made by or
imposed upon the Parties pursuant to this Agreement.
10. General.
(a) Definitions. The terms used in this Agreement shall have the
meanings set forth in Schedule 1 hereto, failing which they shall
have the meanings set forth in the Share Exchange Agreement.
(b) Entire Agreement. This Agreement together with the
agreements and other documents to be delivered pursuant to this
Agreement, constitute the entire agreement between the Parties
pertaining to the purchase and sale of the Purchased Securities
by the Purchaser, and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or
written, and there are no warranties, representations and other
agreements between the Parties in connection with the subject
matter hereof except as specifically set forth in this Agreement
or any other agreement or document to be delivered pursuant to
this Agreement.
(c) Governing Law. The Parties agree that this Agreement shall
be governed by the laws of the Province of Ontario, and the
federal laws of Canada applicable therein, that Ontario will be
the proper forum for any controversy arising in connection with
this Agreement and that the courts of which will be the exclusive
forums for all such suits, actions or proceedings.
(d) Currency. Unless otherwise specified, the word "dollar", or
the symbol "$" refers to Canadian currency.
(e) Termination. This agreement may be terminated at any time
prior to the Closing Date if the Share Exchange Agreement is
terminated pursuant to the provisions of the Share Exchange
Agreement. Such termination shall be without liability of either
Party to the other parties, or to any of their shareholders,
directors, officers, employees, agents, consultants or
representatives provided that if such termination shall result
from the wilful failure of the Party to fulfil a condition to the
performance of the other Parties or to perform a covenant of this
agreement or from a wilful breach by the party to this Agreement,
the Party shall be fully liable for any and all damages, costs
and expenses (including, but not limited to, reasonable counsel
fees and disbursements) sustained or incurred by the other
Parties.
(f) Time of Essence. Time shall be of the essence in all
respects of this Agreement.
(g) Amendment and Waiver. No supplement, modification, waiver
or termination of this Agreement shall be binding unless executed
in writing by the party to be bound. No waiver of any of the
Provisions of this Agreement shall constitute a waiver of any
other provision (whether or not similar) nor shall such waiver
constitute a continuing waiver unless otherwise expressly
provided.
(h) Assignment. This Agreement and the rights or obligations
hereunder or thereunder are not assignable by any Party without
the prior written consent of the other Parties, which consent
shall not be unreasonably withheld. This Agreement shall enure to
the benefit of and be binding upon the Parties and their
respective successors and permitted assigns.
(i) Severability. Any provision of this Agreement, which is
prohibited or unenforceable in any jurisdiction, shall not
invalidate the remaining provisions hereof. Any such prohibition
or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(j) Counterparts. This Agreement may be executed by the Parties
in one or more counterparts, each of which when so executed and
delivered shall be an original and such counterparts shall
together constitute one and the same instrument.
IN WITNESS WHEREOF this agreement has been executed by the
Parties each as of the day and year first before written.
THIS AGREEMENT IS HEREBY EXECUTED on the date set forth
above.
PLAYANDWIN CANADA INC.
Per:
_________________________________
A.S.O.
PLAYANDWIN, INC.
Per:_______________________________
__
A.S.O.
LYNX GAMING CORP.
Per:
________________________________
A.S.O.
THE HOLDERS OF LYNX
SHARES AND LYNX WARRANTS
Per:________________________________
Stewart Garner
acting as attorneys for all of
the holders of Lynx Shares and
Lynx Warrants identified in
Schedule 2 (except the holders
of the Lynx Special Warrants)
pursuant to a power of
attorney granted by the same
THE HOLDERS OF LYNX SPECIAL
WARRANTS:
______________________________ ______________________________
Witness Stephen Hunter
______________________________ ______________________________
Witness Margaret C. Hunter
______________________________ ______________________________
Witness Laura M. Hunter
TAUNTON ASSOCIATES LTD.
Per:___________________________
A.S.O.
______________________________ ______________________________
Witness Gary W. Carter
______________________________
______________________________
Witness Gerald Bone
FMF INVESTMENT GROUP S.A.
Per:___________________________
A.S.O.
TRADEWINDS INVESTMENTS LTD.
Per:___________________________
A.S.O.
B-MAC TRADING INC.
Per:___________________________
A.S.O.
G:\Corp\P\PWIN\agr\SHREXCHG-warrants final.doc
SCHEDULE 1
DEFINITIONS
"Agreement" means this Minority Share and Warrant Exchange
Agreement and any instrument supplemental or ancillary to
it.
"Ancilliary Agreement" means all documents, agreements,
certificates and instruments to be executed or delivered by
any Person under this Agreement, as well as the Share
Exchange Agreement and the Support Agreement appended as
Schedule 5 to the Share Exchange Agreement.
"Claims" means claims, demands, actions, causes of action,
damages, losses, costs, fines, penalties, interest,
liabilities and expenses, including, without limitation,
reasonable legal fees.
"Closing" means the completion of the transactions contemplated
in this Agreement.
"Closing Date" means September 15, 1999, or such other later
date as may be agreed to by the Parties, provided that the
Closing Date shall not be later than October 1, 1999.
"Closing Time" means 2:00 p.m. (Toronto time) on the Closing Date
or such other time on the Closing Date as may be agreed to
by the Parties.
"Encumbrances" means any mortgage, charge, pledge, hypothecate,
lien, encumbrance, restriction, option, right of others or
security interest of any kind.
"Exchangeable Shares" means Class B shares of the Purchaser,
being subordinate, non-voting preferred shares authorized in
an unlimited number, redeemable and retractable subject to
the terms of this Agreement.
"Exchangeable Warrants" means warrants to purchase one
Exchangeable Share each at a price of $1.70, expiring on the
fifth anniversary of the Closing Date. Each Exchangeable
Warrant shall entitle its holder to acquire one Exchangeable
Share at a price of $1.70. The Exchangeable Warrants shall
expire eighteen (18) months after the Closing Date.
"Lynx Shares" means the common shares of Lynx held by the Vendors
as set out in Schedule 2 hereto.
"Lynx Special Warrants" means the special warrants held by the
Vendors as set out in Schedule 2 hereto, each special
warrant entitling its holder to 1.1 Lynx Shares and 0.55
Lynx Warrants for no further consideration.
"Lynx Warrants" means the special share purchase warrants held by
the Vendors as set out in Schedule 2 hereto, each warrant
entitling its holder to purchase one Lynx Share each at a
price of $0.85 exercisable for 18 months after Lynx becomes
a reporting issuer.
"NASD" means the National Association of Securities Dealers.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Parties" means the parties to this Agreement and "Party" means
any one of them.
"Purchased Securities" means those Lynx Shares, Lynx Warrants and
Lynx Special Warrants of which the Vendors are the
registered and beneficial holders as set out in Schedule 2.
"Share Exchange Agreement" means the agreement dated August 30,
1999, between the Purchaser, PWIN, Lynx and the principal
shareholders of Lynx whereby the Purchaser is to acquire all
of the issued and outstanding Lynx Shares and Lynx Warrants
held by said principal shareholders of Lynx.
SCHEDULE 2
THE VENDORS
1. HOLDERS OF COMMON SHARES
<TABLE>
<S> <C> <C>
Name Shares Held Exchangeable Shares
Issuable
Colony Investments Limited 400,000 200,00
0
Marilyn H. Bloovol 50,000 25,000
Neil R.H. Burgess 5,000 2,500
Peter H. Minerson 25,000 12,500
Paul D. H. Burgess 10,000 5,000
W. A. Peneycad 25,000 12,500
R. K. R. Millar 20,000 10,000
Graham Harper 25,000 12,500
Bridget MacTavish 10,000 5,000
Gerald Bone 56,000 28,000
Martin Jeffery 10,000 5,000
Paul Esquivel 45,000 22,500
Paul O'Mahony 15,000 7,500
1112614 Ontario Inc. 10,000 5,000
Randy Kamula 5,000 2,500
Yook-Ying Ho 10,000 5,000
Baird Garvey 5,000 2,500
Stewart Smith 5,000 2,500
Gary S. Clementi 5,000 2,500
Lynda Irwin 45,000 22,500
Scott MacCannell 5,000 2,500
James R. Hapak 25,000 12,500
Jamie Wolfe 7,500 3,750
Cammie Barnier 12,500 6,250
Ed Smallwood 10,000 5,000
Kirsten Chapman 65,000 32,500
J. Stephen Hunter 60,000 30,000
Sherry-Anne Pearson 45,000 22,500
David S. Solomon 10,000 5,000
K. Island Investments Ltd. 10,000 5,000
Robert Garner 80,000 40,000
Patrick Kwan 10,000 5,000
Bill McLean 10,000 5,000
Joel Greenstein 40,000 20,000
Sheila & John Hayward 40,000 20,000
Hugh Coulson 40,000 20,000
John Finley 40,000 20,000
Robert & Anna Garner 132,500 66,250
Darren Buck 40,000 20,000
Wm. S. Gamble 40,000 20,000
Paul & Carolyn Garvey 40,000 20,000
J. Richard Day 40,000 20,000
Robert L. Thast 40,000 20,000
Deron Clements 40,000 20,000
Bob Brady 40,000 20,000
</TABLE>
2. HOLDERS OF LYNX WARRANTS
<TABLE>
<S> <C> <C>
Name Warrants Exchangeable Warrants
Held Issuable
Marilyn H. Bloovol 25,000 12,50
0
Neil R.H. Burgess 2,500 1,250
Peter H. Minerson 12,500 6,250
Gerry Columbo 2,500 1,250
Paul D. H. Burgess 5,000 2,500
W. A. Peneycad 12,500 6,250
R. K. R. Millar 10,000 5,000
Graham Harper 12,500 6,250
Bridget MacTavish 5,000 2,500
Gerald Bone 16,600 8,300
Martin Jeffery 5,000 2,500
Paul Esquivel 2,500 1,250
Paul O'Mahony 7,500 3,750
1112614 Ontario Inc. 5,000 2,500
Randy Kamula 2,500 1,250
Yook-Ying Ho 5,000 2,500
Baird Garvey 2,500 1,250
Stewart Smith 2,500 1,250
Gary S. Clementi 2,500 1,250
Lynda Irwin 2,500 1,250
Scott MacCannell 2,500 1,250
James R. Hapak 12,500 6,250
Cathy Garner 5,000 2,500
Jamie Wolfe 3,750 1,875
Cammie Barnier 6,250 3,125
Ed Smallwood 5,000 2,500
Kirsten Chapman 12,500 6,250
Nancy McClocklin 6,250 3,125
J. Stephen Hunter 10,000 5,000
Sherry-Anne Pearson 2,500 1,250
David S. Solomon 5,000 2,500
K. Island Investments Ltd. 5,000 2,500
Robert Garner 45,000 22,500
Patrick Kwan 5,000 2,500
Bill McLean 5,000 2,500
</TABLE>
3. HOLDERS OF LYNX SPECIAL WARRANTS
<TABLE>
<S> <C> <C> <C>
Name Warrants Exchangeabl Exchangeabl
Held e Shares e Warrants
Issuable Issuable
Stephen Hunter 17,200 9,460 4,73
0
Margaret C. Hunter 17,200 9,460 4,730
Laura M. Hunter 17,200 9,460 4,730
Taunton Associates Ltd. 214,286 117,858 58,929
Gary W. Carter 17,200 9,460 4,730
Gerald Bone 17,200 9,460 4,730
FMF Investment Group S.A. 142,587 78,423 39,212
Tradewinds Investments 142,587 78,423 39,212
Ltd.
B-MAC Trading Inc. 214,286 117,858 58,929
</TABLE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT dated this 27th day of September,
1999, is made
BETWEEN
PLAYANDWIN CANADA INC., a corporation
incorporated under the laws of the Province of
Ontario (the "Purchaser")
OF THE FIRST PART
and the holders of common shares and common
share purchase warrants of PEST identified in
Schedule 2 hereto (the "Vendors")
OF THE SECOND PART
and PLAYANDWIN, INC., a corporation
incorporated under the laws of the State of Nevada
("PWIN")
OF THE THIRD PART
and P.E.S.T. CREATIVE GAMING CORPORATION, a
corporation incorporated under the laws of the
Province of Ontario ("PEST")
OF THE FOURTH PART
WHEREAS the Vendors are the registered and beneficial owners
of 114,284 common shares ("Shares") and 57,142 common share
purchase warrants ("Warrants") of PEST, a corporation
incorporated under the laws of the Province of Ontario;
AND WHEREAS the Purchaser desires to purchase the Shares and
the Warrants (collectively referred to as the "Purchased
Securities") from the Vendors and the Vendors desire to sell the
Purchased Securities to the Purchaser;
AND WHEREAS the Purchaser is a wholly-owned subsidiary of
PWIN;
NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in consideration of
the mutual covenants hereinafter contained and provided for and
other good and valuable consideration (the receipt and
sufficiency of which is hereby acknowledged by the Parties), the
Parties agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions. In this Agreement, unless the context otherwise
requires, the terms set forth in Schedule 1 shall have the
meanings set forth therein.
1.2 Entire Agreement. This Agreement together with the
agreements and other documents to be delivered pursuant to this
Agreement, constitute the entire agreement between the Parties
pertaining to the Share Exchange and supersedes all prior
agreements, understandings, negotiations and discussions, whether
oral or written, and there are no warranties, representations and
other agreements between the Parties in connection with the
subject matter hereof except as specifically set forth in this
Agreement or any other agreement or document to be delivered
pursuant to 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.
1.4 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.
1.5 References. References to an article, section, subsection,
paragraph, schedule or exhibit shall be construed as references
to an article, section, subsection, paragraph, schedule or
exhibit to this Agreement, unless the context otherwise requires.
1.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the Province of Ontario
and the laws of Canada applicable in that Province.
1.7 Currency. Unless otherwise specified, the word "dollar", or
the symbol "$" refers to Canadian currency.
1.8 Schedules. The following is a list of schedules attached to
and incorporated into this Agreement by reference and deemed as
part of this Agreement.
SCHEDULE DESCRIPTION
1 Definitions
2 Vendors' Shareholdings
3 Support Agreement
ARTICLE II
SHARE EXCHANGE
2.1 Agreement to Purchase. Upon the terms and subject to the
conditions contained in this Agreement, the Vendors shall sell
and the Purchaser shall purchase the Purchased Securities as of
and with effect from the opening of business on the Closing Date.
2.2 Share Exchange. The purchase and sale of the Purchased
Securities shall be effected by the issue of Class B Special
Shares from the treasury of the Purchaser (the "Exchangeable
Shares") and of warrants to purchase Exchangeable Shares (the
"Exchangeable Warrants") to the Vendors, pursuant to the
prospectus and registration exemptions contained in paragraphs
72(1)(j) and 35(1)(16) of the Securities Act (Ontario), in
exchange for the Shares and Warrants (the "Share Exchange"), at
a ratio of two Exchangeable Shares for every one Share and two
Exchangeable Warrants for every one Warrant.
2.3 Rollover. At the option of each Vendor, the Purchaser
covenants and agrees to elect, jointly with such Vendor if
applicable, (referred to in this section as the "Electing
Vendor") in accordance with the provisions of subsection 85(1) or
85.1(1) of the Income Tax Act (Canada) (the "Tax Act") (and the
corresponding provisions of any applicable provincial tax
legislation) in the prescribed form and within the prescribed
time for the purposes of the Tax Act, and shall therein agree to
elect in respect of the Purchased Securities of the Electing
Vendor an amount as the Electing Vendor shall direct which shall
be deemed to be the Electing Vendor's proceeds of disposition
thereof and Purchaser's cost thereof. Notwithstanding the
foregoing, the Electing Vendor may not direct the parties to
elect an amount which is greater than the fair market value of
the Purchased Securities or an amount which is less than the
adjusted cost base of the Purchased Securities to the Electing
Vendor. The Electing Vendor and the Purchaser agree to execute
all such documents and forms to make the election contemplated in
this section.
2.4 Price Adjustment. The parties hereto covenant and agree
that, in the event that any governmental taxing authority having
jurisdiction issues or proposes to issue, assessments or
reassessments of additional liability for taxes or any other
subject by reason of asserting that the Elected Amount is greater
or less than the adjusted cost base of the Purchased Securities
to the Electing Vendor, or that the adjusted cost base of the
Purchased Securities to the Electing Vendor is greater than or
less than the Elected Amount, then the Elected Amount shall be
increased or decreased by the difference so determined; but only
to the extent that the Elected Amount so revised is accepted by
the taxing authority, the Electing Vendor and the Purchaser, or,
failing such acceptance is established by the courts having
jurisdiction in the matter after all rights of appeal have been
exhausted and all times for appeal have expired without appeals
having been taken by such taxing authority, the Electing Vendor
or the Purchaser. Each of the Electing Vendor and the Purchaser
hereby agrees to make such further elections, enter into such
acknowledgements or agreements, and do or cause to be done such
further acts and things as may be, in the opinion of counsel,
reasonably necessary to give effect to this section and the
change in the Elected Amount.
2.5 Exchangeable Shares. The Exchangeable Shares to be issued by
the Purchaser pursuant to this Agreement shall be subject to the
following terms:
(a) each Exchangeable Share may be exchanged at the request
of its holder for one common share of PWIN, provided that in
the event of a consolidation, split or other reorganization
of the capital stock of the Purchaser or of PWIN, the number
of PWIN common shares issuable for each one Exchangeable
Share shall be adjusted accordingly;
(b) Of the Exchangeable Shares received by a Lynx
Shareholder on the Closing Date:
(i) none may be exchanged during the period ending on
and including the day of the first anniversary of
the Closing Date;
(ii) up to one-third (1/3) may be exchanged after said
first anniversary;
(iii) an additional one-third (1/3) may be
exchanged after the second anniversary of the
Closing Date; and
(iv) all Exchangeable Shares may be exchanged after the
third anniversary of the Closing Date.
(c) Each Exchangeable Share may be exchanged at the request
of the Purchaser at any time during the period ending on and
including the day of the fifth anniversary of the Closing
Date, and shall be exchanged upon: (i) the occurrence of a
take over bid for all of the issued and outstanding shares
of PWIN; or (ii) the day of the fifth anniversary of the
Closing Date. All Exchangeable Shares shall be automatically
exchanged on the fifth anniversary of the Closing Date.
2.6 Exchangeable Warrants. Each Exchangeable Warrant to be
issued by PWIN Canada pursuant to this Agreement shall entitle
its holder to acquire one Exchangeable Share at a price of $1.70.
No Exchangeable Warrant may be exercised on or before the day of
the first anniversary of the Closing Date. The Exchangeable
Warrants shall expire eighteen (18) months after the Closing
Date.
2.7 Acknowledgment of Resale Restrictions. The Vendors hereby
acknowledge that any Exchangeable Shares or PWIN common shares
that they receive pursuant to this Agreement are restricted in
accordance with the United States Securities Act of 1933, as
amended, and the rules promulgated thereunder.
2.8 PWIN Proceedings. PWIN shall use its best efforts to
complete an S-4 filing with the US Securities and Exchange
Commission so as to permit the PWIN common shares obtained by the
Lynx Shareholders under this Agreement to be tradeable without
restriction.
2.9 Fractional Shares. No fractional Exchangeable Shares or
Exchangeable Warrants shall be issued pursuant to this Agreement.
The amount of Exchangeable Shares and/or Exchangeable Warrants
issuable to each Vendor shall be rounded up to the nearest whole
Exchangeable Share or Exchangeable Warrant.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE VENDORS AND PEST
3.1 Representations and Warranties of the Vendors. Each of the
Vendors jointly and severally represents and warrants to the
Purchaser and PWIN as follows (to the extent that the following
representations and warranties relate to that Vendor) and
acknowledges that the Purchaser and PWIN are relying on these
representations and warranties in connection with the completion
of the Share Exchange:
(a) Capacity to own Purchased Securities - The Vendors have all
necessary power, authority and capacity to own the Purchased
Securities. .
(b) Capacity to Enter Agreement - The Vendors have full power,
right and authority to enter into this Agreement and to
perform their obligations under it.
(c) Binding Obligation - This Agreement has been duly executed
and delivered by the Vendors and constitutes a valid and
binding obligation of each of them.
(d) Absence of Conflict - The Vendors are not a party to, bound
or affected by any agreement which would be violated,
breached or terminated by, or which would result in creation
or imposition of any Encumbrance upon any of the Purchased
Securities as a consequence of the execution and delivery
of this Agreement or the consummation of the transactions
contemplated in this Agreement.
(e) Title to Purchased Securities - The Vendors are the legal
and beneficial owners of the Purchased Securities as set
forth in Schedule 2 with good and marketable title, free and
clear of any Encumbrances.
(f) No Bankruptcy - No proceedings have been taken or authorized
by any Vendor or by any other person in respect of the
bankruptcy, insolvency, liquidation, dissolution or winding
up as applicable, of any Vendor.
(g) No Option - No Person, other than the Purchaser under this
Agreement, has any agreement or any right capable of
becoming an agreement or option for the purchase from the
Vendors of any of the Purchased Securities.
(h) Disclosure - The representations and warranties of the
Vendors in this Agreement are true, correct and do not
contain any untrue or misleading statement of a material
fact or omit to state a material fact necessary to make such
representations and warranties not misleading to the
Purchaser.
(i) Non-Violation - The entering into of this Agreement and the
consummation of transactions contemplated herein do not and
will not conflict with, or result in a breach of, or
constitute a default under the terms or conditions of any
constating document of the Vendor (if a corporation), any
by-laws, any court or administrative order or process, any
agreement or instrument to which the Vendor is party or by
which it is bound.
3.2 Representations and Warranties of PEST. PEST hereby
represents and warrants to the Purchaser and PWIN as follows and
acknowledges that the Purchaser and PWIN are relying on those
representations and warranties in connection with the Share
Exchange:
(a) Due Incorporation - PEST is a corporation duly incorporated
and validly existing under the laws of the Province of
Ontario.
(b) Capacity to Enter Agreement - PEST has full power, right and
authority to enter into this Agreement and to perform the
obligations under it.
(c) Due Corporate Authorization - The execution and delivery of
this Agreement and the consummation of the transactions
contemplated under it have been duly authorized by all
necessary corporate action on the part of PEST.
(d) Binding Obligation - This Agreement has been duly executed
and delivered by PEST and constitutes a valid and binding
obligation of PEST.
(e) Absence of Conflict - PEST is not a party to, bound or
affected by or subject to any agreement which would be
violated, breached or terminated by, or which would result
in the creation or imposition of any Encumbrance upon any of
the Purchased Securities as a consequence of, the execution
and delivery of this Agreement or the consummation of the
transactions contemplated in this Agreement.
(f) Regulatory Approvals - No governmental or regulatory
authorization, approval, order, consent or filing is
required on the part of PEST, in connection with the
execution, delivery and performance of this Agreement and
the performance of PEST's obligations under this Agreement.
(g) No Bankruptcy - No proceedings have been taken, are pending
or authorized by PEST or by any other person in respect to
the bankruptcy, insolvency, liquidation, dissolution or
winding up of PEST.
(h) Litigation - There are no judgements, decrees, injunctions,
ruling or orders of any court, Governmental Authority or
arbitration, or any actions, suits, grievances or
proceedings (whether or not on behalf of PEST) pending or
threatened or PEST which may materially adversely affect
PEST's assets.
(i) Disclosure - The representations and warranties of PEST in
this Agreement are true, complete and correct and do not
contain any untrue or misleading statement of a material
fact or omit to state a material fact necessary to make such
representations and warranties not misleading to the
Purchaser, PWIN Canada and PWIN.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND PWIN
4.1 Representations and Warranties of The Purchaser. The
Purchaser hereby represents and warrants to the Vendors as
follows and acknowledges that the Vendors are relying on those
representations and warranties in connection with the Share
Exchange:
(a) Due Incorporation - The Purchaser is a corporation duly
incorporated and validly existing under the laws of the
Province of Ontario.
(b) Capacity to Enter Agreement - The Purchaser has full power,
right and authority to enter into this Agreement and to
perform the obligations under it.
(c) Due Corporate Authorization - The execution and delivery of
this Agreement and the consummation of the transactions
contemplated under it have been duly authorized by all
necessary corporate action on the part of the Purchaser.
(d) Binding Obligation - This Agreement has been duly executed
and delivered by the Purchaser and constitutes a valid and
binding obligation of the Purchaser.
(e) Absence of Conflict - The Purchaser is not a party to, bound
or affected by or subject to any agreement which would be
violated, breached or terminated by, or which would result
in the creation or imposition of any Encumbrance upon any of
the Exchangeable Shares or Exchangeable Warrants as a
consequence of, the execution and delivery of this Agreement
or the consummation of the transactions contemplated in this
Agreement.
(f) Regulatory Approvals - No governmental or regulatory
authorization, approval, order, consent or filing is
required on the part of the Purchaser, in connection with
the execution, delivery and performance of this Agreement
and the performance of the Purchaser's obligations under
this Agreement.
(g) No Bankruptcy - No proceedings have been taken, are pending
or authorized by the Purchaser or by any other person in
respect to the bankruptcy, insolvency, liquidation,
dissolution or winding up of the Purchaser.
(h) Litigation - There are no judgements, decrees, injunctions,
ruling or orders of any court, Governmental Authority or
arbitration, or any actions, suits, grievances or
proceedings (whether or not on behalf of the Purchaser)
pending or threatened or the Purchaser which may materially
adversely affect the Purchaser's assets.
(i) Disclosure - The representations and warranties of the
Purchaser in this Agreement are true, complete and correct
and do not contain any untrue or misleading statement of a
material fact or omit to state a material fact necessary to
make such representations and warranties not misleading to
the Vendors.
(j) Support Agreement - the Purchaser has entered into the
support agreement with PWIN appended hereto as Schedule 3,
pursuant to which PWIN will make available its common shares
for issuance on a redemption or retraction of the
Exchangeable Shares.
4.2 Representations and Warranties of PWIN. PWIN hereby
represents and warrants to the Vendors as follows and
acknowledges that the Vendors are relying on those
representations and warranties in connection with the Share
Exchange:
(a) Due Incorporation - PWIN is a corporation duly incorporated
and validly existing under the laws of the State of Nevada.
(b) Capacity to Enter Agreement - PWIN has full power, right
and authority to enter into this Agreement and to perform
the obligations under it.
(c) Due Corporate Authorization - The execution and delivery of
this Agreement and the consummation of the transactions
contemplated under it have been duly authorized by all
necessary corporate action on the part of PWIN .
(d) Binding Obligation - This Agreement has been duly executed
and delivered by PWIN and constitutes a valid and binding
obligation of PWIN .
(e) Absence of Conflict - PWIN is not a party to, bound or
affected by or subject to any agreement which would be
violated, breached or terminated by, or which would result
in the creation or imposition of any Encumbrance upon its
common shares as a consequence of, the execution and
delivery of this Agreement or the consummation of the
transactions contemplated in this Agreement.
(f) Regulatory Approvals - No governmental or regulatory
authorization, approval, order, consent or filing is
required on the part of PWIN , in connection with the
execution, delivery and performance of this Agreement and
the performance of PWIN's obligations under this Agreement.
(g) No Bankruptcy - No proceedings have been taken, are pending
or authorized by PWIN or by any other person in respect to
the bankruptcy, insolvency, liquidation, dissolution or
winding up of PWIN .
(h) Litigation - There are no judgements, decrees, injunctions,
ruling or orders of any court, Governmental Authority or
arbitration, or any actions, suits, grievances or
proceedings (whether or not on behalf of PWIN ) pending or
threatened or PWIN which may materially adversely affect
PWIN 's assets.
(i) Disclosure - The representations and warranties of PWIN in
this Agreement are true, complete and correct and do not
contain any untrue or misleading statement of a material
fact or omit to state a material fact necessary to make such
representations and warranties not misleading to Vendors.
(j) Support Agreement - PWIN has entered into the support
agreement with the Purchaser appended hereto as Schedule 3,
pursuant to which PWIN will make available its common shares
for issuance on a redemption or retraction of the
Exchangeable Shares.
ARTICLE V
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1 All representations and warranties contained in this
Agreement on the part of each of the parties shall survive the
Closing for a period of one (1) year from the Closing Date, after
which time, if no claim shall have been made against a Party with
respect to any incorrectness or in breach of any representation
or warranty, that Party shall have no further liability under
this Agreement with respect to the representation or warranty.
5.2 All statements contained in any certificate or any
instrument delivered by or on behalf of a Party pursuant to or in
connection with the transactions contemplated by this Agreement
shall be deemed to be made by such Party under this Agreement.
ARTICLE VI
CONDITIONS OF CLOSING
6.1 Conditions for the Purchaser's Benefit. The Purchaser and
PWIN shall not be obliged to complete the Share Exchange unless,
on the Closing Date, each of the following conditions shall have
been satisfied:
(a) Accuracy of Representations - The representations and
warranties of the Vendors and PEST set forth in sections 3.1
and 3.2 respectively, shall be true and correct at the
Closing, except as those representations and warranties may
be affected by the occurrence of events or transactions
expressly contemplated and permitted by this Agreement,
including, without limitation, those in the ordinary course
of business, and the Purchaser shall have received a
certificate from the Vendors confirming the foregoing.
(b) Performance of Obligations - The Vendors shall have
performed all of the obligations hereunder to be performed
by them at or prior to the Closing. The Vendors shall not be
in breach of any agreement on its part contained herein.
(c) Deliveries - The Vendors shall have delivered or caused to
be delivered to the Purchaser the Conveyance Documents, and
shall deliver up to the Purchaser possession of the Shares,
free and clear of any Encumbrances.
(d) Approval - The Vendors shall obtain all requisite
shareholder or regulatory approvals for the Share Exchange,
and shall undertake such corporate actions as may be
necessary to authorize the performance of their obligations
under this Agreement on or before the Closing Date. The
board of directors of PEST shall have approved the transfer
of the Purchased Securities.
(e) Consents, Authorizations and Registrations - All consents,
approvals, orders and authorizations of, from or
notifications to any persons or Governmental Authorities
required in connection with the completion of any of the
transactions contemplated by this Agreement, the execution
of this Agreement, the Closing or the performance of any of
the terms and conditions of this Agreement shall have been
obtained on or before the Closing Date.
There shall be no injunction or order issued preventing, and
no pending or threatened claim, action, litigation or
proceeding, judicial or administrative, or investigation
against any Party by any Governmental Authority or Person
for the purpose of enjoining or preventing the consummation
of this Agreement, or otherwise claiming that this Agreement
or the consummation thereof is improper or would give rise
to proceedings under any statute or rule of law.
(f) No Loss - During the Interim Period, there has been no
material damage to the assets or business of PEST by fire or
other peril, whether or not such damage is covered by
insurance;
(h) No Material Changes - There shall have been no material
adverse changes in the business, assets or financial
condition of Pest during the Interim Period. For the
purposes of this subsection, the term "material adverse
change" shall mean any change in the business, assets,
liabilities or financial condition of PEST that may involve
material reduction, damage, risk to or destruction of the
assets, whether or not the change is covered by insurance.
If any one or more of the foregoing conditions shall not have
been fulfilled on or before the Closing Date, the Purchaser may
terminate this Agreement by notice in writing to the other
Parties in which event the Purchaser shall be released from all
obligations under this Agreement and (unless the Purchaser can
show that the condition relied upon could reasonably have been
performed by the other parties) the other Parties shall also be
released from all obligations hereunder; provided, however, that
the Purchaser shall be entitled to waive compliance with any one
or more of such conditions in whole or in part if it shall see
fit to do so, without prejudice to its rights of termination in
the event of the non-fulfilment of any other condition in whole
or in part.
6.2 Conditions for the Benefit of the Vendors. The Vendors
shall not be obliged to complete the Share Exchange unless, on
the Closing Date, each of the following conditions shall have
been satisfied:
(a) Accuracy of Representations - The representations and
warranties of the Purchaser and PWIN as set forth in
sections 4.1 and 4.2, respectively, shall be true and
correct at the Closing, except as those representations and
warranties may be affected by the occurrence of events or
transactions expressly contemplated and permitted by this
Agreement, and the Vendors shall have received certificates
from the Purchaser and PWIN confirming the foregoing.
(b) Performance of Obligations - the Purchaser and PWIN shall
have performed all of the obligations hereunder to be
performed by it at or prior to the Closing and the Purchaser
and PWIN shall not be in breach of any agreement on its part
contained herein.
(c) Deliveries - the Purchaser shall have delivered or caused to
be delivered to Vendors possession of the Exchangeable
Shares and Exchangeable Warrants, free and clear of any
Encumbrances.
(d) Approval - The Purchaser and PWIN shall have obtained all
requisite shareholder or regulatory approvals for the Share
Exchange, and shall undertake such corporate actions as may
be necessary to authorize the performance of their
obligations under this Agreement on or before the Closing
Date.
(e) Consents, Authorizations and Registrations - All consents,
approvals, orders and authorizations of, from or
notifications to any Persons or Governmental Authorities
required in connection with the completion of any of the
transactions contemplated by this Agreement, the execution
of this Agreement, the Closing or the performance of any of
the terms and conditions of this Agreement shall have been
obtained on or before the Closing Date.
There shall be no injunction or order issued preventing, and
no pending or threatened claim, action, litigation or
proceeding, judicial or administrative, or investigation
against any Party by any Governmental Authority or Person
for the purpose of enjoining or preventing the consummation
of this agreement, or otherwise claiming that this Agreement
or the consummation thereof is improper or would give rise
to proceedings under any statute or rule of law.
(f) No Loss - During the Interim Period, there has been no
material damage to the assets or business of the Purchaser
or PWIN Canada by fire or other peril, whether or not such
damage is covered by insurance.
(g) No Material Changes - There shall have been, in the
reasonable opinion of the Vendors, no material adverse
changes in the assets or financial condition of the
Purchaser or PWIN Canada during the Interim Period. For the
purposes of this subsection, the term "material adverse
change" shall mean any change in the assets, liabilities or
financial condition of the Purchaser that may, in the
reasonable opinion of Vendors involve material reduction,
damage, risk to or destruction of the assets whether or not
the change is covered by insurance.
If any one or more of the foregoing conditions shall not have
been fulfilled on or before the Closing Date, the Vendors may
terminate this Agreement by notice in writing to the Purchaser
and PWIN Canada in which event the Vendors shall be released from
all obligations under this Agreement and (unless the Vendors can
show that the condition relied upon could reasonably have been
performed by the Purchaser) the Purchaser shall also be released
from all obligations hereunder; provided, however, that the
Vendors shall be entitled to waive compliance with any one or
more of such conditions in whole or in part if they shall see fit
to do so, without prejudice to their rights to termination in the
event of the non-fulfilment of any other condition in whole or in
part.
ARTICLE VII
INDEMNIFICATION
7.1 Mutual Indemnification's for Breaches of Warranty, etc.
Subject to section 7.3, the Purchaser and PWIN hereby covenant
and agree with the Vendors and the Vendors hereby covenant and
agree severally with the Purchaser and PWIN (the parties
covenanting and agreeing to indemnify another party under this
Article VII are hereinafter individually referred to as
"Indemnifying Party" and the parties that are being indemnified
by another Party under this Article VII are hereinafter
individually referred to as the "Indemnified Party") to indemnify
and save harmless the Indemnified Party, effective as and from
the Closing Time, from and against any Claims which may be made
or brought against the Indemnified Party and/or which it may
suffer or incur as a result of, or arising out of any
non-fulfilment of any covenant or agreement on the part of the
Indemnifying Party under this Agreement or any Ancillary
Agreement or any incorrectness in or breach of any representation
or warranty of the Indemnifying Party contained in this
Agreement.
7.3 Limitation on Mutual Indemnification. The indemnification
obligations of each of the Parties pursuant to section 7.1 shall
be subject to the following:
(a) the applicable limitation mentioned in Article V respecting
the survival of the representations and warranties of the
Parties;
(b) there shall be no limit as to amount in respect of breaches
of the representations and warranties of the Parties other
than as specifically limited by the provisions of the
section; and
(c) an Indemnifying Party shall not be required to indemnify an
Indemnified Party until the aggregate Claims sustained by
the Indemnified Party exceeds a value of $5,000, in which
case the Indemnifying Party shall be obligated to the
Indemnified party for all Claims without limit as to amount.
7.4 Procedure for Indemnification. The following provisions
shall apply to any Claims for which an Indemnifying Party may be
obligated to indemnify an Indemnified Party pursuant to this
Agreement:
(a) upon receipt from a third party by the Indemnified Party of
notice of a Claim or the Indemnified party becoming aware of
a Claim in respect of which the Indemnified Party proposes
to demand indemnification from the Indemnifying Party, the
Indemnified Party shall give notice to that effect to the
Indemnifying Party with reasonable promptness, provided that
failure to give such notice shall not relieve an
Indemnifying Party from any liability it may have to the
Indemnified Party except to the extent that the Indemnifying
Party is prejudiced thereby;
(b) in the case of Claims arising from third parties, the
Indemnifying Party shall have the right by notice to the
Indemnified party not later than thirty (30) days after
receipt of the notice described in paragraph (i) above to
assume the control of the defense, compromise or settlement
of the Claims, provided that such assumption shall, by its
terms, be without costs to the Indemnified Party and the
Indemnifying Party shall at the Indemnified Party's request
furnish it with reasonable security against any costs or
other liabilities to which it may be or become exposed by
reason of such defense, compromise or settlement;
(c) upon the assumption of control by the Indemnifying Party as
aforesaid, the Indemnifying Party shall diligently proceed
with the defense, compromise or settlement of the Claims at
its sole expense, including employment of counsel reasonably
satisfactory to the Indemnified Party and, in connection
therewith, the Indemnified Party shall co-operate fully, but
at the expense of the Indemnifying Party, to make available
to the Indemnifying Party all pertinent information and
witnesses under the Indemnified Party's control, make such
assignments and take such other steps as in the opinion of
counsel for the Indemnifying Party are necessary to enable
the Indemnifying Party to conduct such defense; provided
always that the Indemnified Party shall be entitled to
reasonable security from the Indemnifying Party for the
expense, costs of other liabilities to which it may be or
may become exposed by reason of such co-operation;
(d) the final determination of any such Claims arising from
third parties, including all related costs and expenses,
will be binding and conclusive upon the Parties as to the
validity or invalidity, as the case may be of such Claims
against the Indemnifying Party hereunder; and
(e) should the Indemnifying Party fail to give notice to the
Indemnified Party as provided in paragraph (ii) above, the
Indemnified Party shall be entitled to make such settlement
of the Claims as in its sole discretion may appear
advisable, and such settlement or any other final
determination of the Claims shall be binding upon the
Indemnifying Party.
ARTICLE VIII
CLOSING ARRANGEMENTS
8.1 Closing. The Closing shall take place at the offices of
Stewart & Associates, Barristers and Solicitors, 1 First Canadian
Place, Suite 700, 100 King Street West, Toronto M5X 1C7,
Ontario, Canada at the Closing Time on the Closing Date.
8.2 Closing Procedures. At the Closing Time:
(a) the Purchaser shall issue and deliver to the Vendors
possession of the Exchangeable Shares and Exchangeable
Warrants;
(b) the Vendors shall deliver up to the Purchaser the Purchased
Securities;
(c) the Parties shall take or shall have taken, as the case may
be, the other actions contemplated to be taken by them at or
before the Closing contemplated in this Agreement.
8.3 Non-Waiver. No investigations made by or on behalf of any
Party at any time shall have the effect of waiving or diminishing
the scope of or otherwise affecting any representation, warranty
or indemnity made by or imposed upon the Parties pursuant to this
Agreement.
ARTICLE IX
GENERAL
9.1 Termination.
(1) This agreement may be terminated at any time prior to the
Closing Date:
(a) by the mutual agreement of the Parties;
(b) by the Parties if:
(i) the Share Exchange shall not have been
completed by October 1, 1999 (or such other date,
if any, as the Parties shall have agreed in
writing), if the failure to complete such purchase
and sale on or before such date is not caused by
any breach of this Agreement by the Party electing
to terminate; or
(ii) the Share Exchange would violate any
non-appealable final order, decree or judgement of
any court or governmental body having competent
jurisdiction.
(2) If this Agreement is terminated by a Party under subsection
9.1(1), such termination shall be without liability of
either Party to the other parties, or to any of their
Vendors, directors, officers, employees, agents, consultants
or representatives provided that if such termination shall
result from the wilful failure of the Party to fulfil a
condition to the performance of the other Parties or to
perform a covenant of this agreement or from a wilful breach
by the party to this Agreement, the Party shall be fully
liable for any and all damages, costs and expenses
(including, but not limited to, reasonable counsel fees and
disbursements) sustained or incurred by the other Parties.
9.2 Expenses Except as otherwise specified herein, all costs
and expenses (including the fees and disbursements of accountants
and legal counsel) incurred in connection with this Agreement and
completion of the transactions contemplated by this Agreement
shall be paid by the Party incurring those expenses.
9.3 Time of Essence. Time shall be of the essence in all
respects of this Agreement.
9.4 Notices. Any notice or other communication which is
required or permitted to be given or made by one Party to the
others hereunder shall be in writing and shall be either
personally delivered to such Parties sent by facsimile.
Any notice shall be sent to the intended recipient at its
address as follows:
(a) to PWIN and the Purchaser:
c/o Stewart Garner and Peter Tassiopoulos
155 University Avenue
Suite 501
Toronto, Ontario
M5N 3N5
Facsimile No.: (416) 368-3870
and to Chapman & Flanagan, Ltd. at:
c/o Dan Chapman
2080 E. Flamingo Road
Suite 112
Las Vegas, Nevada
89119
Facsimile No. (702) 650-5667
and to Stewart & Associates at:
Suite 700, P.O. Box 160
1 First Canadian Place
100 King Street West
Toronto, Ontario
M5X 1C7
Attention: Adam K. Szweras
Facsimile No.: (416) 368-7805
(b) to the Vendors at:
Colony Investments Limited
The Annex, 12 Fritholme Garden
Paget Pg. 04 Bermuda
FMF Investments S.A.
P.O. Box 58, The Arch Plaza
Providenciales, Turks & Caicos Islands
British West Indies
Dane Walton
23 Aylesbury Road
Toronto, Ontario, M9A 2M3
and to Marilyn Bloovol at:
79 Old Forest Hill Road
Toronto, Ontario
M5P 2R6
Facsimile No.: (416) 482-2558
or at such other address as any Party may from time to time
advise the others by notice in writing. Any notice given by
personal delivery shall be deemed to be received on the date of
delivery. Any notice sent by facsimile or similar method of
recorded communication shall be deemed to have been received on
the next Business Day following the date of its transmission.
9.5 Further Assurances. The Parties shall with reasonable
diligence do all things and provide all reasonable assurances as
may be required to complete the transactions contemplated by this
Agreement, and each Party shall provide such further documents or
instruments required by any other Party as may be reasonably
necessary or desirable to give effect to this Agreement and carry
out its provisions, whether before or after the Closing.
9.6 Public Notice. All public notices to third parties and all
other publicity concerning the transactions contemplated by this
Agreement shall be jointly planned and co-ordinated by the
Parties and no Party shall act unilaterally in this regard
without the prior written approval of the other Parties, such
approval not to be unreasonably withheld.
9.7 Amendment and Waiver. No supplement, modification, waiver
or termination of this Agreement shall be binding unless executed
in writing by the party to be bound. No waiver of any of the
Provisions of this Agreement shall constitute a waiver of any
other provision (whether or not similar) nor shall such waiver
constitute a continuing waiver unless otherwise expressly
provided.
9.8 Assignment. This Agreement and the rights or obligations
hereunder or thereunder are not assignable by any Party without
the prior written consent of the other Parties, which consent
shall not be unreasonably withheld. This Agreement shall enure to
the benefit of and be binding upon the Parties and their
respective successors and permitted assigns.
9.9 Severability. Any provision of this Agreement, which is
prohibited or unenforceable in any jurisdiction, shall not
invalidate the remaining provisions hereof. Any such prohibition
or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9.10 Governing Law. The Parties agree that this Agreement shall
be governed by the laws of the Province of Ontario, and the
federal laws of Canada applicable therein, that Ontario will be
the proper forum for any controversy arising in connection with
this Agreement and that the courts of which will be the exclusive
forums for all such suits, actions or proceedings.
9.11 Counterparts. This Agreement may be executed by the Parties
in one or more counterparts, each of which when so executed and
delivered shall be an original and such counterparts shall
together constitute one and the same instrument.
IN WITNESS WHEREOF this agreement has been executed by the
Parties each as of the day and year first before written.
THIS AGREEMENT IS HEREBY EXECUTED on the date set forth
above.
PLAYANDWIN CANADA INC.
Per:
________________________________
A.S.O.
PLAYANDWIN, INC.
Per:
________________________________
A.S.O.
P.E.S.T. CREATIVE GAMING
CORPORATION
Per:
________________________________
A.S.O.
THE VENDORS:
_________________________
Per:_____________________________
Witness
Stewart Garner, Secretary
of P.E.S.T. Creative
Gaming Corporation, on
behalf of the Vendors
pursuant to a power of
attorney granted to him
for this purpose
SCHEDULE 1
DEFINITIONS
"Affiliate and Associate" means an "affiliate" and "associate",
respectively, as those terms are defined in the Business
Corporation Act, 1990 (Ontario), as amended on the date
hereof.
"Agreement" means the Agreement and any instrument supplemental
or ancillary to it.
"Authorized Representatives" means employees, agents, counsel,
accountants and other representatives.
"Business Day" means any day other than a Saturday, Sunday or
statutory holiday in the Province of Ontario.
"Claims" means claims, demands, actions, causes of action,
damages, losses, costs, fines, penalties, interest,
liabilities and expenses, including, without limitation,
reasonable legal fees.
"Closing" means the completion of the Share Exchange pursuant to
this Agreement.
"Closing Date" means September 27, 1999, or such other later
date as may be agreed to by the Parties, provided that such
date shall not be later than October 1, 1999.
"Closing Time" means 2:00 p.m. (Toronto time) on the Closing Date
or such other time on the Closing Date as may be agreed to
by the Parties.
"Conveyance Documents" means all bills of sale, assignments, and
instruments of transfer, assurances, consents, and other
documents as shall be necessary to effectively transfer to
the Purchaser the Shares.
"Encumbrances" means any mortgage, charge, pledge, hypothecate,
lien, encumbrance, restriction, option, right of others or
security interest of any kind.
"Exchangeable Shares" means Class B Special Shares of the
Purchaser, being subordinate, non-voting preferred shares
authorized in an unlimited number, convertible into common
shares of PWIN.
"Exchangeable Warrants" means warrants to purchase one
Exchangeable Share each, exercisable at a price of $1.70 for
eighteen months after the Closing Date.
"Governmental Authorities" means any applicable Canadian or
non-Canadian federal, provincial and municipal agency,
ministry, crown corporation, department, inspector and
official.
"Interim Period" means the period commencing on the date of this
Agreement and ending immediately before the opening of
business on the Closing Date.
"NASD" means the National Association of Securities Dealers.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Parties" means the parties to the Agreement and "Party" means
any one of them.
"Permits" means authorizations, registrations, permits, approvals
or licenses that can be issued or granted by Governmental
Authorities.
"Person" means an individual, body corporate, partnership,
trustee, trust, unincorporated association, executor,
administrator or legal representative.
"PEST" means P.E.S.T. Creative Gaming Corporation.
"Purchaser" means Playandwin Canada Inc.
"PWIN" means Playandwin, Inc.
"Share Exchange" has the meaning attributed to it in section 2.2.
"Shares" means the common shares of PEST owned by the Vendors as
set out in Schedule 2 hereto.
"Vendors" means Colony Investments Limited, FMF Investments S.A.
and Dane Walton.
"Warrants" means warrants to purchase one common share of PEST
each exercisable at a price of $0.85 for eighteen (18)
months after the Closing Date.
SCHEDULE 2
THE VENDORS AND THEIR SHAREHOLDINGS
1. COMMON SHARES
<TABLE>
<S> <C> <C>
Name Common Shares of PEST Exchangeable Shares
Held Due
Dane Walton 28,571 14,28
6
FMF Investments 28,571 14,286
S.A.
Colony Investments 57,142 28,571
Limited
</TABLE>
2. SHARE PURCHASE WARRANTS
<TABLE>
<S> <C> <C>
Name PEST Warrants Held Exchangeable
Warrants Due
Dane Walton 14,285.5 7,14
3
FMF Investments 14,285.5 7,143
S.A.
Colony Investments 28,571 14,286
Limited
</TABLE>
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is made as of the 27th day of September,
1999,
BETWEEN
PLAYANDWIN CANADA INC.
a corporation incorporated under the laws
of the Province of Ontario
(hereinafter referred to as "PWIN Canada")
OF THE FIRST PART
and
PLAYANDWIN, INC.,
a corporation incorporated under the laws
of the State of Nevada
(hereinafter referred to as "PWIN")
OF THE SECOND PART
WHEREAS PWIN Canada has entered into an agreement (the
"Share Exchange Agreement") with three shareholders (the
"Vendors") of P.E.S.T. Creative Gaming Corporation ("PEST") to
acquire their common shares and share purchase warrants of PEST
in exchange for Class B Special Shares of PWIN Canada convertible
into shares of PWIN (the "Exchangeable Shares") and warrants to
purchase Echangeable Shares;
AND WHEREAS PWIN Canada is a wholly-owned subsidiary of
PWIN;
NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in
consideration of the mutual covenants hereinafter contained and
provided for and other good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged by the
Parties), the Parties agree as follows:
1. PWIN Canada will be funded with sufficient resources,
including PWIN common shares, to permit it to satisfy its
obligations under the Share Exchange Agreement with respect to
the Exchangeable Shares.
2. PWIN will not:
(i) take actions that prejudice holders of Exchangeable
Shares, by unduly diminishing the value of that which they
are entitled to receive on the conversion/exchange of their
shares, provided that PWIN shall not be liable hereunder for
reasonable decisions made in the ordinary course of
business, or for fluctuations in market price caused by
factors beyond its control;
(ii) split or consolidate PWIN stock without causing PWIN
Canada to make a corresponding split or consolidation of the
issued and outstanding Exchangeable Shares and Exchangeable
Warrants, provided that such action is also authorized by
the shareholders of the Purchaser including the holders of
the Exchangeable Shares;
(iii) liquidate, wind up or dissolve the Purchaser while
there are Exchangeable Share outstanding.
IN WITNESS WHEREOF this agreement has been executed by the
Parties each as of the day and year first before written.
THIS AGREEMENT IS HEREBY EXECUTED on the date set forth
above.
PLAYANDWIN CANADA INC.
Per:
_________________________________
A.S.O.
PLAYANDWIN, INC.
Per:
_________________________________
A.S.O.
ARTICLES OF INCORPORATION
of
Cambridge Funding Group, Inc.
Know all men by these present;
That the undersigned, have this day voluntarily associated
ourselves together for the purpose of forming a corporation under
and pursuant to the provisions of Nevada Revised Statutes 78.010.
to Nevada Revised Statutes 78.090 inclusive, as amended, and
certify that;
1. The name of this corporation is:
Cambridge Funding Group, Inc.
2. Offices for the transaction of any business of the
Corporation, and where meetings of the Board of Directors and of
Stockholders may be held, may be established and maintained in
any part of the State of Nevada, or in any other state,
territory, or possession of the United States.
3. The nature of the business is to engage in any lawful
activity.
4. The Capital Stock shall consist of 50,000,000 shares of
common stock, $0.001 par value.
5. The members of the governing board of the corporation shall
be styled directors, of which there shall be no less than 1. The
Directors of this corporation need not be stockholders. The first
Board of Directors is: Raymond Girard, whose address is 1700 E.
Desert Inn Road, Suite 100, Las Vegas, NV 89109.
6. This corporation shall have perpetual existence.
7. The name and address of each of the incorporators signing
these Articles of Incorporation are as follows: Raymond M.
Girard, 1700 E. Desert Inn Road, Suite 100, Las Vegas, NV 89109.
8. This Corporation shall have a president, a secretary, a
treasurer, and resident agent, to be chosen by the Board of
Directors, any person may hold two or more offices.
9. The resident agent of the Corporation shall be Raymond M.
Girard, 1700 E. Desert Inn Road, Suite 100, Las Vegas, NV 89109.
10. The Capital Stock of the corporation, after the fixed
consideration thereof has been paid or performed, shall not be
subjected to assessment, and the individual liable for the debts
and liabilities of the Corporation, and the Articles of
Incorporation shall never be amended as the aforesaid provisions.
11. No director or officer of the corporation shall be
personally liable to the corporation of any of its stockholders
for damages for breach of fiduciary duty as a director or officer
involving any act or omission of any such director or officer
provided, however, that the foregoing provision shall not
eliminate or limit the liability of a director or officer for
acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law, or the payment of dividends in
violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article of the Stockholders of the
Corporation shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a director or
officer of the Corporation for acts or omissions prior to such
repeal or modification.
I, the undersigned, being the incorporator herein above named for
the purpose of forming an corporation pursuant to the general
corporation law of the State of Nevada, do make and file these
Articles of Incorporation, hereby declaring and certifying that
the facts within stated are true, and accordingly have hereunto
set my hand this 5 day of June 1995.
/s/ Raymond M. Girard
Raymond M Girard
1700 E. Desert Inn Road, Suite
100
Las Vegas, NV 89109
Bylaws
of
Cambridge Funding Group, Inc.
(the "Corporation")
Article I
Office
The Board of Directors shall designate and the Corporation shall
maintain a principal office. The location of the principal office
may be changed by the Board of Directors. The Corporation also
may have offices in such other places as the Board may from time
to time designate. The location of the initial principal office
of the Corporation shall be designated by resolution.
Article II
Shareholders Meetings
1. Annual Meetings
The annual meeting of the shareholders of the Corporation shall be
held at such place within or without the State of Nevada as
shall be set forth in compliance with these Bylaws. The
meeting shall be hold on the Third Friday of September of
each year. If such day is a legal holiday, the meeting shall
be on the next business. day. This meeting shall be for the
election of Directors and for the transaction of such other
business as may property come before it.
2. Special Meetings
Special meetings of shareholders, other than those regulated by
statute, may be called by the President upon written request
of the holders of 50% or more of the outstanding shares
entitled to vote at such special meeting. Written notice of
such meeting stating the place, the date and hour of the
meeting, the purpose or purposes for which it is called, and
the name of the person by whom or at whose direction the
meeting is called shall be given.
3. Notice of Shareholders Meeting
The Secretary shall give written notice stating the place, day,
and hour of the meeting and in the case of a special meeting,
the purpose or purposes for which the meeting is called,
which shall be delivered not less than ten or more than fifty
days before the date of the meeting, either personally or by
mail to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed
to the shareholder at their address as it appears on the
books of the Corporation, with postage thereon prepaid.
Attendance at the meeting shall constitute a waiver of notice
thereof.
4. Place of Meeting
The Board of Directors may designate any place, either within or
without the State of Nevada, as the place of meeting for any
annual meeting or for any special meeting called by the Board
of Directors. A waiver of notice signed by all shareholders
entitled to vote at a meeting may designate any place, either
within or without the State of Nevada, as the place for the
holding of such meeting. If no designation is made, or if a
special meeting is otherwise called, the place of meeting
shall be the principal office of the Corporation.
5. Record Date
The Board of Directors may fix a date not less than ten nor more
than fifty days prior to any meeting as the record date for
the purpose of determining shareholders entitled to notice of
and to vote at such meetings of the shareholders, The
transfer books may be closed by the Board of Directors for a
stated period not to exceed fifty days for the purpose of
determining shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders
for any other purpose.
6. Quorum
A majority of the outstanding shares of the Corporation entitled
to vote, represented in person or by proxy, shall constitute
a quorum at a meeting of shareholders. If less than a
majority 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 a
meeting resumed after any such adjournment at which a quorum
shall be present or represented, any business may be
transacted, which might have been transacted at the meeting
as originally noticed,
7. Voting
A holder of an outstanding share, entitled to vote at a meeting,
may vote at such meeting in person or by proxy. Except as may
otherwise be provided in the currently filed Articles of
Incorporation, every shareholder shall be entitled to one
vote for each share standing in their name on the record of
shareholders. Except as herein or in the currently filed
Articles of Incorporation otherwise provided, all corporate
action shall be determined by a majority of the vote's cast
at a meeting of shareholders by the holders of shares
entitled to vote thereon
8. Proxies
At all meetings of shareholders, a shareholder may vote in person
or by proxy executed in writing by the shareholder or by
their duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary of the Corporation before or at the
time of the meeting. No proxy shall be valid after six months
from the date of its execution, unless otherwise provided in
the proxy.
9. Informal Action by Shareholders
Any action required to be taken at a meeting of the shareholders.
may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by a
majority of the shareholders entitled to vote with respect to
the subject matter thereof.
Article III
Board of Directors
1. General Powers
The business and affairs of the Corporation shall be managed by
its Board of Directors The Board of Directors may adopt such
rules and regulations for the conduct of their meetings and
the management of the Corporation as they appropriate under
the circumstances. The Board shall have authority to
authorize changes in the Corporation's capital structure.
2. Number, Tenure and Qualification
The number of Directors of the Corporation shall be a number
between one and five, as the Directors may by resolution
determine from time to time. Each of the Directors shall hold
office until the next annual meeting of shareholders and
until their successor shall have been elected and qualified.
3. Regular Meetings
A regular meeting of the Board of Directors shall be held without
other notice than by this Bylaw, immediately after and, at
the same place as the annual meeting of shareholders. The
Board of Directors may provide, by resolution, the time and
place for the holding of additional regular meetings without
other notice than this resolution.
4. Special Meetings
Special meetings of the Board of Directors may be called by order
of the Chairman of the Board or the President. The Secretary
shall give notice of the time, place and purpose or purposes
of each special meeting by mailing the same at least two days
before the meeting or by telephone, telegraphing or
telecopying the same at least one day before the meeting to
each Director. Meeting of the Board of Directors may be held
by telephone conference call.
5. Quorum
A majority of the members of the Board of Directors shall
constitute a quorum for the transaction of business, but less
than a quorum may adjourn any meeting from time to time until
a quorum shall be present whereupon the meeting may be held,
as. adjourned. without further notice. At any meeting at
which every Director shall be present, even though without
any formal notice, any business may be transacted.
6. Manner of Acting
At all meetings of the Board of Directors, each Director shall
have one vote. The act of a majority of Directors present at
a meeting shall be the act of the full Board of Directors,
provided that a quorum is present.
7. Vacancies
A vacancy in the Board of Directors shall be deemed to exist in
the case of death, resignation. or removal of any Director,
or if the authorized number of Directors is increased, or if
the shareholders fail, at any meeting of the shareholders, at
which any Director is to be elected, to elect the full
authorized number of Director to be elected at that meeting.
8. Removals
Directors may be removed, at any lime, by a vote of the
shareholders holding a majority of the shares outstanding and
entitled in vote. Such vacancy shall be filled by the
Directors then in office, though less than a quorum, to hold
office until the next annual meeting or until their successor
is duly elected and qualified, except that any directorship
to be filled by election by the shareholders at the meeting
at which the Director is removed. No reduction of the
authorized number of Directors shall have the effect of
removing any Director prior to the expiration of their term
of office.
9. Resignation
A Director may resign at any time by delivering written
notification thereof to the President or Secretary of the
Corporation. A resignation shall become effective upon its
acceptance by the Board of Directors; provided, however, that
if the Board of Directors has not acted thereon within ten
days from the date of its delivery, the resignation shall be
deemed accepted.
10. Presumption of Assent
A Director of the Corporation who is present at a meeting of the
Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action(s)
taken unless their dissent shall be placed in the minutes of
the meeting or unless he or she shall file their written
dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or
shall toward such dissent by registered mail to the Secretary
of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
11. Compensation
By resolution of the Board of Directors, the Directors may be paid
their expenses, if any, of attendance at each meeting of the
Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation
therefor.
12. Emergency Power
When, due to a national disaster or death, a majority of the
Directors are incapacitated or otherwise unable to attend the
meetings and function as Directors, the remaining members of
the Board of Directors shall have all the powers necessary to
function as a complete Board, and for the purpose of doing
business and filling vacancies shall constitute a quorum,
until such time as all Directors can attend or vacancies can
be filled pursuant to these Bylaws.
13. Chairman
The Board of Directors may elect from its own number a Chairman of
the Board, who shall preside at all meetings of the Board of
Directors, and shall perform such other duties as may be
prescribed from time to time by the Board of Directors. The
Chairman may by appointment fill any vacancies on the Board
of Directors.
Article IV
Officers
1. Number
The Officers of the Corporation shall be a President, one or more
Vice Presidents, a Secretary, and a Treasurer, each of whom
shall be elected by a majority of the Board of Directors.
Such other Officers and assistant Officers as may be deemed
necessary may be elected or appointed by the Board of
Directors. In its discretion, the Board of Directors, may
leave unfilled for any such period as it may determine any
office except those of President and Secretary. Any two or
more offices may be held by the same person. Officers may or
may not be Directors or shareholders of the Corporation.
2. Election and Term of Office
The Officers of the Corporation to be elected by the Board of
Directors shall be elected annually by the Board of Directors
at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of
Officers shall not be held at such meeting, such election
shall be held as soon thereafter as convenient. Each Officer
shall hold office until their successor shall have been duly
elected and shall have qualified or until their death or
until they shall resign or shall have been removed in the
manner hereinafter provided.
3. Resignations
Any Officer may resign at any time by delivering a written
resignation either to the President or to the Secretary.
Unless otherwise specified therein, such resignation shall
take effect upon delivery.
4. Removal
Any Officer or agent may be removed by the Board of Directors
whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an Officer or
agent shall not of itself create contract rights Any such
removal shall require a majority vote of the Board of
Directors, exclusive of the Officer in question if he or she
is also a Director.
5. Vacancies
A vacancy in any office because of death. resignation, removal,
disqualification or otherwise, or if a new office shall be
created, may be filled by the Board of Directors for the un-
expired portion of the term.
6. President
The President shall be the chief executive and administrative
Officer of the Corporation. He or she shall preside at all
meetings of the stockholders and, in the absence of the
Chairman of the Board, at meetings of the Board of Directors.
He or she shall exercise such duties as customarily pertain
to the office of President and shall have general and active
supervision over the property, business, and affairs of the
Corporation and over its several Officers, agents, or
employees other than those appointed by the Board of
Directors. He or she may sign execute and deliver in the name
of the Corporation powers of attorney, contracts, bonds and
other obligations, and shall perform such other duties as may
be prescribed from time to time by the Board of Directors or
by the Bylaws.
7. Vice President
The Vice President shall have such powers and perform such duties
as may be assigned to him by the Board of Directors or the
President, in the absence or disability of the President, the
Vice President designated by the Board or the President shall
perform the duties and exercise the powers of the President.
A Vice President may sign and execute contracts and other
obligations pertaining to the regular course of their duties,
8. Secretary
The Secretary shall keep the minutes of all meetings of the
stockholders and of the Board of Directors and to the extent
ordered by the Board of Directors or the President, the
minutes of meetings of all committees. He or she shall cause
notice to be given of meetings of stockholders, of the Board
of Directors, and of any committee appointed by the Board. He
or she shall have custody of the corporate seal and general
charge of the records, documents and papers of the
Corporation not pertaining to the performance of the duties
vested in other Officers, which shall at all reasonable times
be open to the examination of any Directors. He or she may
sign or execute contracts with the President or a Vice
President thereunto authorized in the name of the Corporation
and affix the seal of the Corporation thereto. He or she
shall perform such other duties as may be prescribed from
time to time by the Board of Directors or by the Bylaws.
9. Treasurer
The Treasurer shall have general custody of the collection and
disbursement of funds of the Corporation. He or she shall
endorse on behalf of the Corporation for collection checks,
notes and other obligations, and shall deposit the same to
the credit of the Corporation in such bank or banks or
depositories as the Board of Directors may designate. He or
she may sign, with the President or such other persons as may
be designated for the purpose of the Board of Directors, all
bills of exchange or promissory notes of the Corporation. He
or she shall enter or cause to be entered regularly in the
books of the Corporation full and accurate account of all
monies received and paid by him on account of the
Corporation; shall at all reasonable times exhibit his (or
her) books and accounts to any Director of the Corporation
upon application at the office of the Corporation during
business hours; and, whenever required by the Board of
Directors or the President, shall render a statement of his
(or her) accounts. The Treasurer shall perform such other
duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws.
10. Other Officers
Other Officers shall perform such duties and shall have such
powers as may be assigned to them by the Board of Directors.
11. Salaries
The salaries or other compensation of the Officers of the
Corporation shall be fixed from time to time by the Board of
Directors, except that the Board of Directors may delegate to
any person or group of persons the power to fix the salaries
or other compensation of any subordinate Officers or agents.
No Officer shall be prevented from receiving any such salary
or compensation by reason of the fact that he or she is also
a Director of the Corporation.
12. Surety Bonds
In case the Board of Directors shall so require, any Officer or
agent of the Corporation shall execute to the Corporation a
bond in such sums and with such surely or sureties, as the
Board of Directors may direct, conditioned upon the faithful
performance of his (or her) duties to the Corporation,
including responsibility for negligence and for the
accounting for all property, monies or securities of the
Corporation, which may come into his (or her) hands.
Article V
Contracts, Loans, Checks And Deposits
1. Contracts
The Board of 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 loan or advance shall be contracted on behalf of the
Corporation, no negotiable paper or other evidence of its
obligation under any loan or advance shall be issued in its
name, and no property of the Corporation shall be mortgaged,
pledged, hypothecated or transferred as security for the
payment of any loan, advance, indebtedness or liability of
the Corporation unless and except as authorized by the Board
of Directors. Any such authorization may be general or
confined to specific instances.
3. 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
Board of Directors may select, or as may be selected by an
Officer or agent of the Corporation authorized to do so by
the Board of Directors.
4. Checks and Drafts
All notes, drafts, acceptances, checks, endorsements and evidence
of indebtedness of the Corporation shall be signed by such
Officer or Officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from
time to time may determine. Endorsements for deposits to the
credit of the Corporation in any of its duly authorized
depositories shall be made in such manner as the Board of
Directors may from time to time determine.
5. Bonds and Debentures
Every bond or debenture issued by the Corporation shall be in the
form of an appropriate legal writing, which shall be signed
by the President or Vice President and by the Treasurer or by
the Secretary, and sealed with the seal of the Corporation.
The seal may be facsimile, engraved or printed. Where such
bond or debenture is authenticated with the manual signature
of an authorized officer of the Corporation or other trustee
designated by the indenture of trust or other agreement under
which such security is issued, the signature of any of the
Corporation's Officers named thereon may be facsimile. In
case any Officer who signed, or whose facsimile signature has
been used on any such bond or debenture, shall cease to be an
Officer of the Corporation for any reason before the same has
been delivered by the Corporation, such bond or debenture may
nevertheless be adopted by the Corporation and issued and
delivered as though the person who signed it or whose
facsimile signature has been used thereon had not ceased to
be such Officer.
Article VI
Capital Stock
1. Certificate of Share
The shares of the Corporation shall be represented by certificates
prepared by the Board of Directors and signed by the
President. The signatures of such Officers upon a certificate
may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the
Corporation itself or one of its employees. All certificates
for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the
shares represented thereby are issued, with 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 canceled
except that in case of a lost, destroyed or mutilated
certificate, a new one may be issued therefor upon such terms
and indemnity to the Corporation as the Board of Directors
may prescribe.
2. Transfer of Shares
Transfer of shares of the Corporation shall be made only on the
stock transfer books of the Corporation by the holder of
record thereof or by his (or her) legal representative, who
shall furnish proper evidence of authority to transfer, or by
his (or her) attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the
Corporation, and on surrender for cancellation of the
certificate for such shares. The person in whose name shares
stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
3. Transfer Agent and Registrar
The Board of Directors of the Corporation shall have the power to
appoint one or more transfer agents and registrars. for the
transfer and registration of certificates of stock of any
class, and may require that stock certificates shall be
countersigned and registered by one or more of such transfer
agents and registrars.
4. Lost or Destroyed Certificates
The Corporation may issue a new certificate to replace any
certificate theretofore issued by it alleged to have been
lost or destroyed. The Board of Directors may require the
owner of such a certificate or his (or her) legal
representative to give the Corporation a bond in such sum and
with such sureties as the Board of Directors may direct to
indemnity the Corporation as transfer agents and registrars,
if any, against claims that may be made on account of the
issuance of such now certificates. A new certificate may be
issued without requiring any bond.
5. Registered Shareholders.
The Corporation shall he entitled to treat the holder of record of
any share or shares of stock as the holder thereof, in fact,
and shall not be bound to recognize any equitable or other
claim to or on behalf of this Corporation to any and all of
the rights and powers incident to the ownership of such stock
at any such meeting and shall have power and authority to
execute and deliver proxies and consents on behalf of this
Corporation in connection with the exercise by this
Corporation of the rights and powers incident to the
ownership of such stock. The Board of Directors, from time to
time, may confer like powers upon any other person or
persons.
Article VII
Indemnification
No Officer or Director shall be personally liable for any
obligations of the Corporation or for any duties or obligations
arising out of any acts or conduct of said Officer or Director
performed for or on behalf of the Corporation. The Corporation
shall and does hereby indemnify and hold harmless each person and
their heirs and administrators who shall serve at any time
hereafter as a Director or Officer of the Corporation from and
against any and all claims, judgments and liabilities to which
such persons shall become subject by reason of their having
heretofore or hereafter been a Director or Officer of the
Corporation, or by reason of any action alleged to have
heretofore or hereafter taken or omitted to have been taken by
him as such Director or Officer, and shall reimburse each such
person for all legal and other expenses reasonably incurred by
him in connection with any such claim or liability, including
power to defend such persons from all suits or claims as provided
for under the provisions of the Nevada Corporate statutes;
provided, however, that no such persons shall be indemnified
against, or be reimbursed for, any expense incurred in connection
with any claim or liability arising out of his (or her) own
negligence or willful misconduct The rights accruing to any
person under the foregoing provisions of this section shall not
exclude any other right to which he or she may lawfully be
entitled, nor shall anything herein contained restrict the right
of the Corporation to indemnify or reimburse such person in any
proper case even though not specifically herein provided for. The
Corporation, its Directors. Officers, employees and agents shall
be fully protected in taking any action or making any payment, or
in refusing so to do in reliance upon the advice of counsel.
Article VIII
Notice
Whenever any notice is required to be given to any shareholder or
Director of the Corporation under the provisions of the Articles
of Incorporation, or under the provisions of the Nevada Corporate
statutes, 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. Attendance at any meeting shall constitute a waiver of
notice of such meetings, except where attendance is for Me
express purpose of objecting to the holding of that meeting.
Article IX
Amendments
These Bylaws may be altered, amended, repealed, or new Bylaws
adopted by a majority of the entire Board of Directors at any
regular or special meeting. Any Bylaw adopted by the Board may be
repealed or changed by the action of the shareholders.
Article X
Fiscal Year
The fiscal year of the Corporation shall be fixed and may be
varied by resolution of the Board of Directors.
Article XI
Dividends
The Board of Directors may at any regular or special meeting, as
they deem advisable, declare dividends payable out of the surplus
of the Corporation.
Article XII
Corporate Seal
The seal of the Corporation shall be in the form of a circle and
shall bear the name of the Corporation and the year of
incorporation per sample affixed hereto.
Dated: June 9, 1995 Cambridge Funding Group,
Inc.
/s/ Peter E. Berney
Peter E. Berney
President
MASTER LICENSE AGREEMENT
THIS AGREEMENT made as of the 7th day of October, 1999
B E T W E E N :
WINNING GAMES INC., a
company incorporated under
the laws of the State of
Illinois (hereinafter
called "Winning")
OF THE FIRST PART
- and -
PACCANUS INC., a company
incorporated under the laws
of the Province of Ontario
(hereinafter called
"PacCanUs")
OF THE SECOND PART
-and-
P.E.S.T. CREATIVE GAMING
CORPORATION, a company
incorporated under the laws
of the Province of Ontario
(hereinafter called "PEST")
OF THE THIRD PART
-and-
RACINGO INVESTMENTS LTD., a
company incorporated under
the laws of the State of
Delaware (hereinafter,
called the "Licensee")
OF THE FOURTH PART
WHEREAS Winning is the registered owner of the U.S. RACINGO
Rights and RACINGO Patent;
AND WHEREAS PEST is the registered owner of the Canadian
RACINGO Rights, World RACINGO Rights and Copyright Assets;
AND WHEREAS PacCanUs has a fifty (50%) percent beneficial
interest in the Canadian RACINGO Rights, World RACINGO Rights and
Copyright Assets;
AND WHEREAS Winning, PEST and PacCanUs wish to grant an
exclusive license to the Licensee and the Licensee wishes to
acquire an exclusive license, to use, utilize, develop,
advertise, market, promote, sell, distribute and exploit in any
way, the RACINGO Patent, U.S. RACINGO Rights, Canadian RACINGO
Rights, World RACINGO Rights, Copyright Assets and the
Documentation;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the mutual covenants and Agreements contained herein, and of
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
covenant and agree each with the other as follows:
1. Definitions
In this Agreement :
(a) "Agreement" means this Agreement and any instrument
supplemental or ancillary to it;
(b) "Ancillary Agreements" means all documents, agreements,
certificates and instruments to be executed or delivered by
any Person under this Agreement including the Unanimous
Shareholders Agreement;
(c) "Authorized Representatives" means employees, agents,
counsel, accountants and other representatives authorized to
act on behalf of a party hereto or the Licensee;
(d) "Business Day" means any day other than a Saturday, Sunday
or statutory holiday in the Province of Ontario, or federal
holiday in the United States of America;
(e) "Canadian RACINGO Rights" means all the right, title and
interest and all goodwill in the Canadian trademark RACINGO (the
subject of an application by PEST to register the trademark,
application number 767,826), the Canadian trademark SUPER RACINGO
(the subject of an application by PEST to register the trademark,
application number 767,827), the Canadian trademark RACINGO
HORSHOE DESIGN (the subject of an application by PEST to register
the trademark, application number 856,030), the Canadian
trademark RACINGO GOIN' BIG TIME (the subject of an application
by PEST to register the trademark, application number 856,029),
and the Canadian trademark SULKY DESIGN (the subject of an
application by PEST to register the trademark, application number
767,828) and any and all other right, title and interest and all
goodwill in RACINGO in the territory of Canada, and any
respective Documentation;
(f) "Claims" means claims, demands, actions, causes of action,
damages, losses, costs, fines, penalties, interest, liabilities
and expenses, including, without limitation, reasonable legal
fees;
(g) "Copyright Assets" means the copyright assets more fully
identified in Schedule "A" hereto, and the respective
Documentation;
(h) "Documentation" means all documentation relating to the
RACINGO Patent, U.S. RACINGO Rights, Canadian RACINGO Rights,
World RACINGO Rights, RACINGO Trademarks and Copyright Assets,
respectively, including but not limited to all technical
documentation, system designs and specifications, flow charts,
record and file layouts, memoranda, correspondence and other such
documentation containing or relating to the design or structure
of the RACINGO Patent, U.S. RACINGO Rights, Canadian RACINGO
Rights, World RACINGO Rights, RACINGO Trademarks or Copyright
Assets, respectively, and any other type of information or
material, (in whatever form, whether human or machine readable,
and in whatever media, existing) relating to the RACINGO Patent,
U.S. RACINGO Rights, Canadian RACINGO Rights, World RACINGO
Rights or Copyright Assets, respectively, that was prepared by or
for Winning, PEST or PacCanUs (as the case may be);
(i) "Dollars" shall mean United States dollars;
(j) "Governmental Authorities" means any applicable Canadian,
American or non-Canadian and non-American, federal, provincial,
state and municipal agency, ministry, crown corporation,
department, inspector and official;
(k) "Licensed Assets" means and includes the RACINGO Patent,
U.S. RACINGO Rights, Canadian RACINGO Rights, World RACINGO
Rights, RACINGO Trademarks, Copyright Assets, and the relevant
Documentation;
(l) "Licensors" means Winning, PEST and PacCanUs, collectively;
(m) "Parties" means the parties to the Agreement and "Party"
means any one of them;
(n) "Patent and Trademark Developers" means the true and
complete list of all persons set forth in Schedule "B" hereto who
either alone or in concert with others, developed, invented,
discovered, derived, designed, modified, corrected or maintained
the RACINGO Patent and/or the U.S. RACINGO Rights, and their
respective Documentation;
(o) "Permits" means authorizations, registrations, permits,
approvals or licenses that can be issued or granted by
Governmental Authorities;
(p) "Person" means an individual, body corporate, partnership,
trustee, trust, unincorporated association, executor,
administrator or legal representative;
(q) "RACINGO" means the pari-mutuel bingo-type wager game and
lottery identified by the RACINGO Trademarks, the Copyright
Assets, and all associated know-how, intellectual property and
other materials utilized in the execution of the RACINGO game as
held by the Licensors, including the RACINGO Patent, the RACINGO
Trademarks, and the RACINGO game developed by PEST that was test
marketed in Connecticut, the rules and regulations of which are
appended hereto as Schedule "C";
(r) "RACINGO Patent" means the United States Patent No.
5,518,239 dated May 21, 1996, regarding a lottery racing
sweepstake issued to William H. Johnston and owned by Winning;
(s) "RACINGO Trademarks" means the trademark RACINGO owned by
Winning in the United States and the subject of its application
to register the trademark, Application No. 75/331,278; and the
Canadian trademark RACINGO (the subject of an application by PEST
to register the trademark, application number 767,826), the
Canadian trademark SUPER RACINGO (the subject of an application
by PEST to register the trademark, application number 767,827),
the Canadian trademark RACINGO HORSHOE DESIGN (the subject of an
application by PEST to register the trademark, application number
856,030), the Canadian trademark RACINGO GOIN' BIG TIME (the
subject of an application by PEST to register the trademark,
application number856,029), and the Canadian trademark SULKY
DESIGN (the subject of an application by PEST to register the
trademark, application number 767,828), all owned by PEST in
Canada; and the European trademark RACINGO owned by PEST, the
subject of an application by PEST to register the trademark,
application number 642,728;
(t) "Shares" means 1,000 common shares, 1,000 Class A Shares,
1,000 Class B Shares, and 1,000 Class C Shares all in the capital
of the Licensee;
(u) "Territory" means the entire world;
(v) "Trademark and Copyright Developers" means the true and
complete list of all persons set forth in Schedule "D" hereto who
either alone or in concert with others, developed, invented,
discovered, derived, designed, modified, corrected or maintained
the Canadian RACINGO Rights, the World RACINGO Rights, and/or the
Copyright Assets, and their respective Documentation;
(w) "Unanimous Shareholders' Agreement" means the unanimous
shareholders' agreement appended hereto as Schedule "E";
(x) "U.S. RACINGO Rights" means all the right, title and
interest and all the goodwill in the United States trademark
RACINGO, the subject of an application by Winning to register the
trademark, Application No. 75/331,278, and any and all other
right, title and interest and all of the goodwill in RACINGO in
the territory of the United States of America;
(y) "Voting Shares" means the common shares of Licensee; and
(z) "World RACINGO Rights" means all the right, title and
interest and all of the goodwill in the European trademark
RACINGO owned by PEST, the subject of an application by PEST to
register the trademark, application number 642,728, and any and
all other right, title and interest and all of the goodwill in
RACINGO which PEST currently holds or PEST or the Licensee may in
the future acquire or establish world-wide, excepting the
territories of the United States of America and Canada.
2. Grant of License
2.1 The Licensors hereby grant the Licensee an exclusive license
to use the Licensed Assets with respect to the use, utilisation,
development, advertising, marketing, promotion, sale,
distribution and exploitation in any way, of RACINGO in the
Territory for a term of twenty (20) years from the date hereof.
This license includes the right to manage, develop, market,
promote and create derivative works of the Licensed Assets. The
ownership of all such derivative works shall be governed by the
provisions of Article 4 of this Agreement.
2.2 PEST and PacCanUs hereby grant the Licensee the exclusive
right to display, reproduce, copy, transmit or license the
Copyright Assets and any relevant Documentation, and the
exclusive right to create derivative works from the Copyright
Assets.
2.3 The Licensors hereby grant the Licensee an exclusive license
to use the RACINGO Trademarks and the Copyright Assets within
the Territory in connection with the advertising, promotion, use,
operation and sale of the Licensed Assets for the term of this
Agreement.
2.4 As between the Licensors and the Licensee, the Licensors
retain title to their assets licensed hereunder and do not convey
any proprietary interest therein to the Licensee other than the
rights specified herein.
2.5 The Licensee shall have the right to sub-license all or any
part of the Licensed Assets without the consent of the Licensors,
provided that the Licensee shall oblige each of its sub-licensees
to enter into an agreement with the Licensee whereby the sub-
licensee shall be bound by predominantly the same terms,
conditions and obligations as the Licensee with respect to the
Licensed Assets sub-licensed.
3. Payment for the License
3.1 The Licensee shall pay a one-time license fee of $1,000.00
to Winning for the U.S. RACINGO Rights and RACINGO Patent.
3.2 The Licensee shall pay a one-time license fee of $1,000.00
to PEST and PacCanUs for the Canadian RACINGO Rights, the World
RACINGO Rights and the Copyright Assets.
3.3 All license fees for the Licensed
Assets payable under this Agreement
shall be paid and satisfied upon the
execution of this Agreement by the
issuance of the Shares from the treasury
of the Licensee, in the following
proportions:
Winning - 500 common shares, 450 Class A Shares,
450 Class B Shares, and 375 Class C Shares;
PEST - 100 common shares, 125 Class A Shares,
175 Class B Shares, and 250 Class C Shares;
PacCanUs - 400 common shares, 425 Class A Shares,
375 Class B Shares, and 375 Class C Shares.
4. Development and Ownership Of New
Technologies and Variations of the
RACINGO
Trademark
4.1 The Parties contemplate that in the course of its business,
Licensee or its sub-licensees may develop new technologies or
processes for use in connection with the conduct and licensing of
RACINGO and related RACINGO goods and services. In the event
such new technologies or processes consist of or contain
patentable material, all rights in such material for use:
(i) in the United States shall be and are hereby assigned to
Winning, including all rights to apply for patent protection
of such technologies or processes; and
(ii) anywhere outside the United States shall be and are hereby
assigned to PEST who shall hold it subject to PacCanUs'
fifty percent (50%) beneficial interest, including all
rights to apply for patent protection of such technologies
or processes,
provided, however, that Winning, PEST and PacCanUs shall and do
hereby grant Licensee an exclusive license to use such
technologies or processes for the term of this Agreement to the
same extent and pursuant to the same conditions Winning has
licensed the RACINGO Patent to Licensee pursuant to this
Agreement.
4.2 The Parties contemplate that in the course of its business,
Licensee or its sub-licensees may develop variations of the
RACINGO trademarks for use in connection with the conduct and
licensing of RACINGO and related RACINGO goods and services. In
the event of such trademark development, Licensee shall be
responsible for the clearance and selection of all such
variations of the RACINGO trademarks. Licensee's use of
variations of the RACINGO marks shall be subject to the
Licensors' prior written approval which shall not be unreasonably
withheld. All rights in variations on RACINGO marks used:
(i) in the United States shall be owned by Winning and Winning
shall promptly register such marks with the United States
Patent and Trademark Office; and
(ii) outside of the United States shall be owned by PEST who
shall hold it subject to PacCanUs' fifty percent (50%)
beneficial interest, and PEST shall promptly register such
marks in the relevant jurisdictions,
provided, however, that Winning, PEST and PacCanUs shall and do
hereby grant Licensee an exclusive license to use variations of
the RACINGO marks developed pursuant to the terms of this
Agreement for the term of this Agreement to the same extent and
pursuant to their same conditions that Licensor has licensed the
RACINGO trademarks to Licensee pursuant to this Agreement.
5. General Representations and Warranties of the Parties
Each Party represents and warrants to each other Party as
follows, and acknowledges that each of the other Parties is
relying on the accuracy of each such representation and warranty
in entering into this Agreement and licensing the Licensed
Assets:
5.1 Corporation organisation and standing: The Party is a
corporation duly organised, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and is
duly qualified to do business and is in good standing as a
foreign corporation in all other jurisdictions where the nature
of its business or the ownership or leasing of its property
requires such qualification, except where failure to be so
qualified would not have a material adverse effect on the Party
or its business or assets.
5.2 Power and capacity: The Party has all power and capacity
required to execute, deliver, and perform this Agreement, and to
license those of the Licensed Assets to which it has valid title.
5.3 Authorisation and enforceability: The execution, delivery,
and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorised by all necessary corporate action on the part of the
Party. This Agreement is a legal, valid, and binding obligation
of the Party, enforceable against it in accordance with its
terms. When executed and delivered by the parties thereto, all
instruments, agreements, writings, consents, assignments and
other documentation as delivered by the Party pursuant to this
Agreement will each constitute a legal, valid, and binding
obligation of the Party, enforceable against it in accordance
with its terms.
5.4 No Bankruptcy: No proceedings have been taken, are pending
or authorised by the Party or by any other person in respect to
the bankruptcy, insolvency, liquidation, dissolution or winding
up of the Party.
5.5 No violation. Neither the execution nor the delivery of this
Agreement nor the consummation of the transactions contemplated
hereby (including, without limitation, the assignment of all
contracts and licences to be assigned to Licensee hereunder) will
conflict with, violate, or result in a breach of any of the
terms, conditions, or provisions of, or constitute a default
under, or (with or without the giving of notice or the passage of
time or both) entitle any party to terminate or declare a default
under the constating documents or by-laws of the Party or any
contract, agreements, lease, licence, or instrument or any
judgement or decree to which the Party is a party or to or by
which the Party or those Licensed Assets owned by the Party may
be subject or bound.
5.6 Consents, Authorizations and Registrations - All consents,
approvals, orders and authorizations of, from or notifications to
any persons or Governmental Authorities required in connection
with the completion of any of the transactions contemplated by
this Agreement, the execution of this Agreement, or the
performance of any of the terms and conditions of this shall
have been obtained on or before the execution of this Agreement.
There shall be no injunction or order issued preventing, and no
pending or threatened claim, action, litigation or proceeding,
judicial or administrative, or investigation against any Party by
any Governmental Authority or Person for the purpose of enjoining
or preventing the consummation of this Agreement, or otherwise
claiming that this Agreement or the consummation thereof is
improper or would give rise to proceedings under any statute or
rule of law.
6. Representations, Warranties and Covenants of Winning
Winning represents and warrants to each of the Licensee,
PEST and PacCanUs, as stated below, and acknowledge that each of
the Licensee, PEST and PacCanUs, is relying on the accuracy of
each such representation and warranty in entering into this
Agreement and licensing the Licensed Assets:
6.1 List of Developers: Schedule "B" sets forth a true and
complete list of all Patent and Trademark Developers being
persons who either alone or in concert with others, developed,
invented, discovered, derived, designed, modified, corrected or
maintained the U.S. RACINGO Rights and RACINGO Patent and their
respective Documentation
6.2 Identity of Developers: All of the Patent and Trademark
Developers are:
(a) employees or former employees of Winning all of whose work
or access with respect to any of the U.S. RACINGO Rights and
RACINGO Patent occurred within the scope and in the regular
course of their employment, on the business premises of
Winning, and using only the equipment of Winning; or
(b) independent contractors or former independent
contractors of Winning, all of whom have or as of
Closing will have executed valid and binding written
assignments of all rights in any inventions or works
produced pursuant to the relationship or relating to
any of the U.S. RACINGO Rights and RACINGO Patent in
form and substance reasonably satisfactory to Licensee
and its counsel.
6.3 Winning rights - Protection and Infringement
(a) Secrecy. Winning has taken reasonable security measures
to protect the secrecy, confidentiality, and value of
the RACINGO Patent and the U.S. RACINGO Rights, and all
confidential information and trade secrets related
thereto. Neither the relevant Documentation nor any
other proprietary information relating thereto, in
whole or in any material part, has every been copied,
released, distributed, removed from Winning's premises
or in any way disclosed to any person; except that:
(i) standard back-up copies and working copies have
been made and maintained securely under the sole
control of Winning;
(ii) the RACINGO Patent and the U.S. RACINGO Rights
have each been properly issued by the United
States Patent and Trademark Office; and
(iii) the Patent and Trademark Developers have used
and had access to such materials and information
solely within the scope of their employment or
contractual relationships, pursuant to valid,
binding and enforceable obligations of
confidentiality with respect thereto, and all the
Patent and Trademark Developers have returned all
such materials to Winning and retained no copies
thereof.
(b) Infringement of third party rights. To best of the
knowledge and belief of Winning, aside from any
infringement with regard to the Canadian RACINGO
Rights, World RACINGO Rights and the Copyright Assets,
no infringement of any patent, copyright, mask work,
trade mark or service mark, or misappropriation or
violation of any other party's proprietary right by
Winning has occurred or results from the use, copying,
modification, manufacture, marketing, promotion or
distribution of the U.S. RACINGO Rights and RACINGO
Patent, and no claim or threat thereof has been made in
respect of any of the foregoing matters, and its use,
copying, modification distribution, licensing and
commercial exploitation by Licensee, and its use by
customers, will not infringe upon or violate any rights
of any third party.
(c) Infringement of Winning rights. Other than with regard
to the Canadian RACINGO Rights, World RACINGO Rights,
the Copyright Assets, and a bingo betting game called
Bingo Bet being conducted in Arkansas, Winning has no
knowledge of any past or present infringement of,
misappropriation or violation of, breach of any
material obligations with respect to, or other
impairment of any of the U.S. RACINGO Rights and
RACINGO Patent or unauthorised use of the U.S. RACINGO
Rights and RACINGO Patent.
6.4 RACINGO Patents and U.S. RACINGO Rights
(a) Title. Winning has good and marketable right and title
to all of the U.S. RACINGO Rights and RACINGO Patent
and has the right to grant the license so granted to
the Licensee pursuant the provisions of Article 2
herein; and the U.S. RACINGO Rights and RACINGO Patent
is not subject to any contract of sale or licence lien,
mortgage, security interest, pledge, encumbrance,
charge, claim, or restriction of any kind.
(b) Vested Title. Upon execution and delivery to Licensee
of this Agreement, and the other instruments of license
or transfer provided for herein, Winning shall continue
to be vested with good and marketable title to the U.S.
RACINGO Rights and RACINGO Patent, free and clear of
all liens, mortgages, security interests, pledges,
encumbrances, charges, claims, and restrictions of any
nature whatsoever, and upon the license of the U.S.
RACINGO Rights and RACINGO Patent to Licensee in
accordance with this Agreement, no further right or
license or permission or consent is or will be required
for Licensee to use, copy, or modify the U.S. RACINGO
Rights and RACINGO Patent, or (other than with respect
to the Canadian RACINGO Rights and the Copyright
Assets) to manufacture, market, distribute and support
RACINGO and any other products contemplated therein.
(c) No Restrictions. The U.S. RACINGO Rights and RACINGO
Patent are not subject to any contractual or
governmental restriction which might prohibit the
consummation of the transactions contemplated by this
Agreement or the use thereof.
(d) Related Company. For the purposes of establishing
rights in the RACINGO Rights as a result of its use of
this mark in the United States, Licensee shall be
considered a related company to Winning and all rights
in the U.S. RACINGO Rights in the United States shall
inure to the benefit of Winning.
6.5 Finders' fees. There are no claims for any brokerage
commissions or finders' fees (or any basis therefor) relating to
the transactions contemplated by this Agreement resulting from
any action taken by Winning or any affiliate or agent thereof.
6.6 Accuracy of schedules. All schedules provided pursuant to
this Agreement are true and complete, and Winning has delivered
to Licensee complete and correct copies of all documents referred
to (or which in any material way relate to the matters set forth)
in such schedules.
6.7 Disclosure. No representation or warranty by Winning herein
contained, and no statement made in any schedule hereto or
certificate furnished in connection with the transactions
contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits to state any material fact
necessary to make the statements contained therein not
misleading.
7. Representations and Warranties of PEST
PEST represents and warrants to each of the Licensee,
Winning and PacCanUs, as stated below, and acknowledge that each
of the Licensee, Winning and PacCanUs, is relying on the accuracy
of each such representation and warranty in entering into this
Agreement and licensing the Licensed Assets:
7.1 Finders' fees. There are no claims for any brokerage
commissions or finders' fees (or any basis therefor) relating to
the transactions contemplated by this Agreement resulting from
any action taken by PEST or any affiliate or agent thereof.
7.2 Accuracy of schedules. All schedules provided pursuant to
this Agreement are true and complete, and PEST has delivered to
Licensee complete and correct copies of all documents referred to
(or which in any material way relate to the matters set forth) in
such schedules.
7.3 Disclosure. No representation or warranty by PEST herein
contained, and no statement made in any schedule hereto or
certificate furnished in connection with the transactions
contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits to state any material fact
necessary to make the statements contained therein not
misleading.
8. Representations and Warranties of PacCanUs
PacCanUs represents and warrants to each of the Licensee,
PEST and Winning as stated below, and acknowledge that each of
the Licensee, PEST and Winning, is relying on the accuracy of
each such representation and warranty in entering into this
Agreement and licensing the Licensed Assets:
8.1 Finders' fees. There are no claims for any brokerage
commissions or finders' fees (or any basis therefor) relating to
the transactions contemplated by this Agreement resulting from
any action taken by PacCanUs or any affiliate or agent thereof.
8.2 Accuracy of schedules. All schedules provided pursuant to
this Agreement are true and complete, and PacCanUs has delivered
to Licensee complete and correct copies of all documents referred
to (or which in any material way relate to the matters set forth)
in such schedules.
8.3 Disclosure. No representation or warranty by PacCanUs herein
contained, and no statement made in any schedule hereto or
certificate furnished in connection with the transactions
contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits to state any material fact
necessary to make the statements contained therein not
misleading.
9. Additional Representation, Warranties and Covenants of PEST
and PacCanUs
PEST and PacCanUs represent and warrant to each of the
Licensee and Winning as stated below and acknowledges that each
of the Licensee and Winning are relying on the accuracy of each
such representation and warranty in entering into this Agreement
and licensing the Licensed Assets:
9.1 List of Developers: Schedule "D" sets forth a true and
complete list of the Trademark and Copyright Developers being all
persons who either alone or in concert with others, developed,
invented, discovered, derived, designed, modified, corrected or
maintained any or all of the Canadian RACINGO Rights, the World
RACINGO Rights, and the Copyright Assets and the respective
Documentation
9.2 Identity of Developers: All of the Trade Mark and Copyright
Developers are:
(a) employees or former employees of PEST and PacCanUs, all of
whose work or access with respect to any of the Canadian
RACINGO Rights, the World RACINGO Rights or Copyright Assets
occurred within the scope and in the regular course of their
employment, on the business premises of PEST or PacCanUs,
and using only the equipment of PEST or PacCanUs; or
(b) independent contractors or former independent contractors of
PEST or PacCanUs, all of whom have or as of Closing will
have executed valid and binding written assignments of all
rights in any inventions or works produced pursuant to the
relationship or relating to any of the Canadian RACINGO
Rights, the World RACINGO Rights or Copyright Assets in form
and substance reasonably satisfactory to Licensee and its
counsel.
9.3 PEST and PacCanUs rights - Protection and Infringement
(a) Secrecy. PEST and PacCanUs have taken reasonable
security measures to protect the secrecy,
confidentiality, and value of the Canadian RACINGO
Rights, the World RACINGO Rights and the Copyright
Assets, and all confidential information and trade
secrets related thereto. Neither the relevant
Documentation nor any other proprietary information
relating thereto, in whole or in any material part, has
every been copied, released, distributed, removed from
PESTs' or PacCanUs' premises or in any way disclosed to
any person; except that:
(i) standard back-up copies and working copies have
been made and maintained securely under the sole
control of PEST or PacCanUs; and
(ii) the Trademark and Copyright Developers have used
and had access to such materials and information
solely within the scope of their employment or
contractual relationships, pursuant to valid,
binding and enforceable obligations of
confidentiality with respect thereto, and all the
Trademark and Copyright Developers have returned
all such materials to PEST and PacCanUs and
retained no copies thereof.
(b) Infringement of third party rights. To best of the
knowledge and belief of PEST and PacCanUs, aside from
any infringement with regard to the U.S. RACINGO Rights
and RACINGO Patent and the possible infringement with
regard to a bingo betting game called Bingo Bet being
conducted in Arkansas, no infringement of any patent,
copyright, mask work, trade mark or service mark, or
misappropriation or violation of any other party's
proprietary right by PEST and PacCanUs has occurred or
results from the use, copying, modification,
manufacture, marketing, promotion or distribution of
the Canadian RACINGO Rights, the World RACINGO Rights
and Copyright Assets, and no claim or threat thereof
has been made in respect of any of the foregoing
matters, and its use, copying, modification
distribution, licensing and commercial exploitation by
Licensee, and its use by customers, will not infringe
upon or violate any rights of any third party.
(c) Infringement of PEST and PacCanUs Rights. Other than
with regard to the, U.S. RACINGO Rights, the RACINGO
Patent, and a bingo betting game called Bingo Bet being
conducted in Arkansas, neither PEST nor PacCanUs have
any knowledge of any past or present infringement of,
misappropriation or violation of, breach of any
material obligations with respect to, or other
impairment of any rights of PEST or PacCanUs, with
regard to the Canadian RACINGO Rights, the World
RACINGO Rights or the Copyright Assets or any
unauthorised use of the Canadian RACINGO Rights, the
World RACINGO Rights or Copyright Assets. Autotote
Systems Inc. currently owns software it developed at
the behest of PEST which is necessary for execution of
computerised application of RACINGO, but Autotote
Systems Inc. has no rights whatsoever with regard to
RACINGO and therefore cannot utilise said software
without the express consent of PEST and PacCanUs.
9.4 Canadian RACINGO Rights, World RACINGO Rights and Copyright
Assets
(a) Title. PEST and PacCanUs have good and marketable right
and title to all of the Canadian RACINGO Rights, the
World RACINGO Rights and Copyright Assets, and have the
right to grant the licence so granted to the Licensee
pursuant to the provisions of Article 2 herein; and
none of the Canadian RACINGO Rights, World RACINGO
Rights or Copyright Assets are subject to any contract
of sale or licence lien, mortgage, security interest,
pledge, encumbrance, charge, claim, or restriction of
any kind.
(b) Vested Title. Upon execution and delivery to Licensee
of this Agreement, and the other instruments of license
provided for herein, PEST and PacCanUs shall continue
to be vested with good and marketable title to the
Canadian RACINGO Rights, the World RACINGO Rights and
Copyright Assets, free and clear of all liens,
mortgages, security interests, pledges, encumbrances,
charges, claims, and restrictions of any nature
whatsoever, and upon license of the Canadian RACINGO
Rights, the World RACINGO Rights and Copyright Assets
to Licensee in accordance with this Agreement, no
further right or license or permission or consent is or
will be required for Licensee to use, copy, or modify
the Canadian RACINGO Rights, the World RACINGO Rights
and Copyright Assets, or (other than with respect to
the U.S. RACINGO Rights and the RACINGO Patent) to
manufacture, market, distribute and support RACINGO and
any other products contemplated therein.
(c) No Restrictions. None of the Canadian RACINGO Rights,
the World RACINGO Rights or Copyright Assets are
subject to any contractual or governmental restriction
which might prohibit the consummation of the
transactions contemplated by this Agreement or the use
thereof.
(d) Related Company. For the purposes of establishing
rights in the RACINGO Trademark as a result of its use
of this mark in Canada and worldwide, except in the
United States, Licensee shall be considered a related
company to PEST and PacCanUs and all rights in the
Canadian RACINGO Rights and World RACINGO Rights in
Canada and worldwide, except in the United States,
shall inure to the benefit of Pest and PacCanUs.
10. Representations, Warranties and Covenants of the Licensee
The Licensee represents, warrants and covenants to each of
PEST, PacCanUs and Winning as stated below, and acknowledges that
PEST, PacCanUs and Winning are relying on the accuracy of each
such representation, warranty and covenant in entering into this
Agreement and licensing the Licensed Assets:
10.1 Regulatory Approvals: No governmental or regulatory
authorisation approval, order, consent or filing is required on
the part of the Licensee, in connection with the execution,
delivery and performance of this Agreement and the performance of
the Licensee's obligations under this Agreement.
10.2 Finders' Fees: There are no claims for any brokerage
commissions or finders' fees (or any basis therefor) relating to
the transactions contemplated by this resulting from any action
taken by Licensee or any affiliate or agent thereof.
10.3 Shares: The Shares shall be duly and validly issued and
outstanding as fully paid and non-assessable and upon Closing the
Shares shall represent all of the share capital of the Licensee.
Other than as itemised in the Unanimous Shareholders Agreement,
appended hereto as Schedule "E" (to be entered into upon
execution of this Agreement) there are no other shareholders of
the Licensee. Other than as contemplated by this Agreement and
the Schedules attached hereto, there is no option or other right
of any kind in existence, authorised or agreed to which could
result in any further shares or the securities of the Licensee
being allotted or issued or becoming outstanding.
10.4 Bona Fides: The Licensee will not challenge the bona fides
of the Licensed Assets while this Agreement is in force.
10.5 Title: The Licensee agrees that it will not during the term
of this Agreement, or thereafter, challenge the title or any
rights of the Licensors in and to the Licensed Assets or attack
the validity of this license.
10.6 Business and Marketing Plan: The Licensee shall jointly
develop with the Licensors as soon as reasonable practical
business and marketing plans for RACINGO and use commercially
reasonable efforts to promote and facilitate the commercial and
financial viability of RACINGO. The Licensee shall, using
commercially reasonable efforts, continue to develop the business
and marketing plans for the RACINGO so that it has an opportunity
to succeed in the gaming market. Quarterly meetings shall be
held between the Licensee and the Licensors for the purpose of
developing, adjusting and modifying, if necessary, the business
and marketing plans, such consultation meetings to be held in
person or via telephone.
10.7 Software: The Licensee assumes the risk as to the quality
and performance of any software which has been or will be created
for the facilitation and operation of RACINGO.
10.8 Authorised Licensee: The Licensee will identify itself as
an authorised licensee of the Licensed Assets (including the
patents and RACINGO Trademarks contained therein) and not as the
owner of the Licensed Assets.
10.9 Taxes and License Fees: The Licensee will pay any and all
sales and use taxes levied or based upon the price of the
Licensed Assets and the license fees payable related to the
Licensed Assets.
10.10 Use of Trademarks: The Licensee shall use the RACINGO
Trademarks only in connection with the use, operation, marketing,
promotion, advertising or sale of RACINGO and in a manner which
complies with the standards of quality and service which are
usual for and are followed by the Licensee in offering and
providing similar services, which standards of quality are hereby
expressly acknowledged and affirmed by the Licensors as being
acceptable standards for the use, operation, marketing,
promotion, advertising or sale of RACINGO Licensed Assets. The
Licensors shall have the right to examine the nature and manner
of all uses to which the Licensee may put the RACINGO Trademarks
to ensure material conformity with these standards of quality,
and the Licensee shall make such changes to its use of the
RACINGO Trademarks as may reasonably be requested by the
Licensors.
10.11 Quality Control: The Licensee agrees to maintain the
quality of the Licensed Assets and the advertising, promotion,
and packaging therefor consistent with the quality of the
Licensors' present use, advertising, promotion and packaging of
the Licensed Assets, which quality standards have been mutually
agreed upon by the Parties. The Licensee shall promptly submit
to the Licensors copies of all goods, advertising, promotional or
packaging materials to be used with the Licensed Assets as may
reasonably be requested by the Licensors. The Licensee shall
make such changes to said goods, advertising, promotional or
packaging materials as may reasonably be requested by the
Licensors.
10.12 Conform to Legal Requirements: The Licensee shall
conform to all existing and yet-to-be determined legal
requirements of each and every jurisdiction in which it shall
use, operate or market the Licensed Assets, including all laws of
each such jurisdiction governing patents, trademarks and other
intellectual property rights.
10.13 Protection or Registration of Licensee Rights: The
Licensee agrees to assist Licensors, at the Licensors' expense,
to the extent necessary in the procurement of any protection or
registration for the Licensed Assets, or to protect any of the
Licensors' rights to the Licensed Assets. If the Licensee so
desires, the Licensor shall commence or prosecute any claims or
suits necessary to protect the Licensed Assets and the Parties'
rights thereto, either in its own name or in the name of the
Licensee or with the Licensee joined as a party thereto. The
Parties shall notify each other in writing of any infringements
or limitations by others in the Licensed Assets for goods or
services which are the same as or similar to those covered by
this Agreement which may come to either Party's attention.
11. Indemnification
11.1 Mutual Indemnifications for Breaches of Warranty, etc. -
Subject to section 11.3, the Licensee hereby covenants and agrees
with the Licensors and the Licensors hereby covenant and agree
severally with the Licensee, and the Licensors hereby covenant
and agree severally with each other (the parties covenanting and
agreeing to indemnify another party under this Article 11 are
hereinafter individually referred to as "Indemnifying Party" and
the parties that are being indemnified by another Party under
this Article 11 are hereinafter individually referred to as the
"Indemnified Party") to indemnify and save harmless the
Indemnified Party, effective as and from the Closing Time, from
and against any Claims which may be made or brought against the
Indemnified Party and/or which it may suffer or incur as a result
of, or arising out of:
(a) any non-fulfilment of any covenant or on the part of
the Indemnifying Party under this Agreement or any Ancillary
Agreement, or any incorrectness in or breach of any
representation or warranty of the Indemnifying Party
contained in this Agreement or any Ancillary Agreement; or
(b) any alleged or actual infringement of any third party's
trademark, copyright, patent, or other intellectual property
rights, or any alleged or actual misappropriation of any
third party's trade secrets by any one or more of the
Licensors; or
(c) the violation by the Licensee of any law, regulation or
other legal requirement as a result of the Licensee's use,
operation or marketing of the Licensed Assets; or
(d) the Licensee's use of the Licensed Assets.
11.2 Undisclosed Liabilities Indemnity - Notwithstanding Article
11.1 and without limiting the generality of Article 11.1
(a) the Licensors shall indemnify the Licensee from all Claims
arising from liabilities or obligations to Persons that
arise from the act or failure of Licensors prior to the
Closing Date that are not disclosed to the Licensee pursuant
to Articles 5, 6, 7, 8 and 9, respectively; and
(b) the Licensee shall indemnify the Licensors from
all Claims arising from liabilities or obligations to
Persons that arise from the act or failure to act of
the Licensee prior to the Closing Date that are not
disclosed to the Licensors pursuant to Article 10.
11.3 Limitation on Mutual Indemnification - The indemnification
obligations of each of the Parties pursuant to Article 11.1 and
11.2 shall be subject to the following:
(a) the provisions of Articles 5, 6, 7, 8, 9 and 10 shall
survive termination of this Agreement for any reason, for a
period of two (2) years.;
(b) the indemnity obligations under Article 11.2 shall
survive the termination of the Agreement for any
reason, for a period of two (2) years;
(c) there shall be no limit as to amount in respect of
breaches of the representations and warranties of the
Parties other than as specifically limited by the
provisions of the Article; and
(d) an Indemnifying Party shall not be required to
indemnify an Indemnified Party until the aggregate
Claims sustained by the Indemnified Party exceed a
value of $5,000, in which case the Indemnifying Party
shall be obligated to the Indemnified party for all
Claims without limit as to amount.
11.4 Procedure for Indemnification - The following provisions
shall apply to any Claims for which an Indemnifying Party may be
obligated to indemnify an Indemnified Party pursuant to this
Agreement:
(a) upon receipt from a third party by the Indemnified
Party of notice of a Claim or the Indemnified party
becoming aware of a Claim in respect of which the
Indemnified Party proposes to demand indemnification
from the Indemnifying Party, the Indemnified Party
shall give notice to that effect to the Indemnifying
Party with reasonable promptness, provided that failure
to give such notice shall not relieve an Indemnifying
Party from any liability it may have to the Indemnified
Party except to the extent that the Indemnifying Party
is prejudiced thereby;
(b) in the case of Claims arising from third parties,
the Indemnifying Party shall have the right by notice
to the Indemnified party not later than thirty (30)
days after receipt of the notice described in paragraph
(i) above to assume the control of the defence,
compromise or settlement of the Claims, provided that
such assumption shall, by its terms, be without costs
to the Indemnified Party and the Indemnifying Party
shall at the Indemnified Party's request furnish it
with reasonable security against any costs or other
liabilities to which it may be or become exposed by
reason of such defence, compromise or settlement;
(c) upon the assumption of control by the Indemnifying
Party as aforesaid, the Indemnifying Party shall
diligently proceed with the defense, compromise or
settlement of the Claims at its sole expense, including
employment of counsel reasonably satisfactory to the
Indemnified Party and, in connection therewith, the
Indemnified Party shall co-operate fully, but at the
expense of the Indemnifying Party, to make available to
the Indemnifying Party all pertinent information and
witnesses under the Indemnified Party's control, make
such assignments and take such other steps as in the
opinion of counsel for the Indemnifying Party are
necessary to enable the Indemnifying Party to conduct
such defence; provided always that the Indemnified
Party shall be entitled to reasonable security from the
Indemnifying Party for the expense, costs of other
liabilities to which it may be or may become exposed by
reason of such co-operation;
(d) the final determination of any such Claims arising
from third parties, including all related costs and
expenses, will be binding and conclusive upon the
Parties as to the validity or invalidity, as the case
may be of such Claims against the Indemnifying Party
hereunder; and
(e) should the Indemnifying Party fail to give notice
to the Indemnified Party as provided in paragraph (ii)
above, the Indemnified Party shall be entitled to make
such settlement of the Claims as in its sole discretion
may appear advisable, and such settlement or any other
final determination of the Claims shall be binding upon
the Indemnifying Party.
12. Non-Competition
12.1 During the term of this Agreement, the Licensors shall not,
either alone or in partnership or with any other person, firm or
corporation, as principal, agent, shareholder or in any other
manner carry on or be engaged in or concerned with or interested
in, directly or indirectly, or advise, lend money to, guarantee
the debts or obligations of, or permit its name or any part
thereof to be used or employed by any person, firm or corporation
engaged in or interested in any business which sells, licenses,
distributes or otherwise markets products similar to RACINGO or
other products that are directly competitive with RACINGO (i.e.
lottery games relating to horse racing) within the territories of
the United States of America or Canada, or any other territory in
the world in which the Licensee is operating, has targeted or
intends to target for development.
12.2 For a term of two (2) years following the termination or
expiry of this Agreement, the Licensors shall not, either alone
or in partnership or with any other person, firm or corporation,
as principal, agent, shareholder or in any other manner carry on
or be engaged in or concerned with or interested in, directly or
indirectly, or advise, lend money to, guarantee the debts or
obligations of, or permit its name or any part thereof to be used
or employed by any person, firm or corporation engaged in or
interested in any business which sells, licenses, distributes or
otherwise markets RACINGO outside of their respective
territories. For greater certainty, the respective territories
of the Licensors upon the termination or expiry of this Agreement
are as follows:
(a) Winning - the territory of the United States
of America
(b) PEST and PacCanUs - all territories outside the
territory of the
United States of America.
13. Confidentiality
13.1 The Licensee and the Licensors acknowledge and agree that
the information which the Licensors have provided or will provide
in connection with this Agreement, including, without limitation,
the terms and conditions of this Agreement, are and shall be
confidential and proprietary to the Licensors, and that the
information which the Licensees have provided or will provide in
connection with this Agreement or the development of RACINGO, are
and shall be confidential and proprietary to the Licensee. Such
confidential information includes, but is not limited to, any
information of any kind whatsoever regarding the Licensors'
businesses or the Licensee's business. The Licensors and the
Licensee agree not to use or disclose to any third party the
confidential information without the prior written consent of the
parties with the proprietary interest in the respective
confidential information. Moreover, the Licensors and the
Licensee agree to restrict dissemination of particular
confidential information to only those persons in their
respective organisations who must have access to such
confidential information in order for the Licensee or the
Licensors, respectively, to perform their obligations under this
Agreement. The obligations of the Licensors and the Licensee
with regard to any confidential information shall not apply in
respect of such information that (i) the Licensors or the
Licensee, as the case may be, authorise the other party to
disclose to third parties by prior written authorisation, (ii) is
or becomes available in the public domain, other than by an act
or omission of the Licensee or the Licensors, respectively or any
employee, agent or other person acting for or on behalf of the
Licensors or the Licensee, (iii) is lawfully acquired by the
Licensee or the Licensors, as the case may be, from another
source without restriction or (iv) is ordered to be disclosed by
a court, administrative agency or other governmental body with
jurisdiction over the parties, provided the disclosing party will
first have provided the other parties with prompt written notice
of such required disclosure and will take reasonable steps to
allow the other parties to seek a protective order with respect
to the confidentiality of the information required to be
disclosed. The Licensee and the Licensors will promptly
cooperate with each other assist each other in connection with
obtaining such protective order, at the expense of the party with
the proprietary interest in the confidential information.
13.2 The Licensee and the Licensors shall cause their respective
employees or third parties to whom they discloses confidential
information in order to perform their obligations hereunder to
abide by the foregoing confidentiality provisions.
13.3 Upon the termination of this Agreement, the Parties shall
promptly return such confidential information to the Party with
the proprietary interest in said confidential information (and
any copies, extracts and summaries thereof), with the written
consent of the Party with the proprietary interest, shall
promptly destroy such confidential information (and any copies,
extracts and summaries thereof) and, with respect to
electronically stored copies, delete such records from any
storage unit.
13.4 The restrictions in this Article 14 shall continue for a
period of two (2) years after the termination of this Agreement.
14. Termination
14.1 The term of this Agreement shall begin on the date hereof
and shall continue for a period of twenty (20) years, subject to
extension or renewal by the mutual agreement of the Parties, and
may not be terminated for any reason whatsoever without the
express written consent of the Licensee.
14.2 If one or more of the following events of default shall
occur, the non-defaulting Party shall have the right, upon
receipt of the consent of the Licensee, to terminate this
Agreement forthwith:
(a) A Party applies for or consents to the appointment of a
receiver, trustee or similar office for it or any
substantial part of its property or assets, or any such
appointment is made without such applications of consent by
such Party and remain undischarged for a period of sixty
(60) days; or
(b) A Party consents to the institution of a petition,
application, answer, consent, default or otherwise of any
bankruptcy, insolvency or reorganisation and any such
proceeding as instituted against such Party remains
undischarged for a period of sixty (60) days.
15. General
15.1 Notices: All notices, demand or other communications
required to be made or given pursuant to the terms of this
Agreement shall be in writing and shall be delivered personally,
by overnight courier, by facsimile or by prepaid registered post,
to the parties at their respective addresses as hereinafter set
out, or such other addresses as the parties may subsequently
advised in writing. Any notice, demand or other communication
mailed shall be deemed to be received on the fifth (5th) day of
business next following the date of mailing, if delivered
personally shall be deemed to have been received on the actual
day of delivery, and if delivered by facsimile or by overnight
courier, shall be deemed to have been received on the first day
of business next following the date the same as faxed or
delivered by the sender to the courier. In the event that the
government postal service shall be disrupted due to strike,
lockout or otherwise, all notices, demands or other
communications shall be delivered personally or by courier. The
following shall be the addresses for the deliver of notices of
each of the parties:
For the Licensee:
RACINGO Investments Ltd.
c/o CorpAmerica Inc.
30 Old Rudnick Lane
Dover, Delaware 19901
Fax: (302)736-4301
With copies to:
Stewart & Associates, Barristers & Solicitors
P.O. Box 160, Suite 700
1 First Canadian Place, 100 King Street West
Toronto, Ontario M5X 1C7
Attention: Adam Szweras
Fax: (416)368-7805
-and to-
Aylesworth, Thompson, Phelan, O'Brien
Suite 3000, Royal Bank Plaza, South Tower
200 Bay Street
Toronto, Ontario M5J 2J1
Attention: James G. McPherson
Fax: (416) 865-1398
-and to-
Marshall, O'Toole, Gerstein, Murray & Borun
6300 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606-6402
Attention: Anthony Nimmo
Fax: (312) 474-0448
For Winning:
Winning Games Inc.
P.O. Box 308
8600 West North Avenue
Maywood, Illinois 60153
Attention: William H. Johnston
Fax: (708) 343-2564
With a copy to:
Marshall, O'Toole, Gerstein, Murray & Borun
Attorneys at Law
6300 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606-6402
Attention: Anthony Nimmo
Fax: (312) 474-0448
For PEST:
c/o Intravest Capital Group Inc.
155 University Avenue, Suite 501
Toronto, Ontario
M5H 3B7
Attention: Stewart Garner
Fax: (416)368-3870
With a copy to:
Stewart & Associates, Barristers & Solicitors
P.O. Box 160, Suite 700
1 First Canadian Place, 100 King Street West
Toronto, Ontario M5X 1C7
Attention: Adam Szweras
Fax: (416)368-7805
-and to-
Aylesworth, Thompson, Phelan, O'Brien
Suite 3000, Royal Bank Plaza, South Tower
200 Bay Street
Toronto, Ontario M5J 2J1
Attention: James G. McPherson
Fax: (416) 865-1398
For PacCanUs
1920 Yonge Street
Toronto, Ontario
M4S 3E4
Attention: Mr. Ken Lee
Fax: (416)487-4668
With a copy to:
Aylesworth, Thompson, Phelan, O'Brien
Suite 3000, Royal Bank Plaza, South Tower
200 Bay Street
Toronto, Ontario M5J 2J1
Attention: James G. McPherson
Fax: (416) 865-1398
15.2 Further Assurances: Each of the parties shall from time to
time both before and after the Closing Date take or cause to be
taken such action and execute and deliver or cause to be executed
and delivered to the other such documents and further assurances
as may, in the reasonable opinion of counsel for the other, be
necessary or advisable to give effect to this Agreement.
15.3 Time: Time shall be of the essence of this Agreement.
15.4 Assignment: Subject to the right of the Licensee to sub-
license the Licensed Assets as provided in Article 2.5, this
Agreement shall not be assigned by any party without the written
consent of the other and shall enure to the benefit of and be
binding upon the parties and their respective successors and
permitted assigns.
15.5 Severability: Should any provision or provisions of this
Agreement be illegal or unenforceable, it or they shall be
considered separate and severable from the Agreement and its
remaining provisions shall remain in force and be binding upon
the parties hereto as though the said illegal or unenforceable
provision or provisions had never been included.
15.6 Enurement: This Agreement shall enure to the benefit of and
be binding upon each of the parties hereto and upon their
respective successors and permitted assigns.
15.7 Entire Agreement: This Agreement and the attached Schedules
(including the Unanimous Shareholders Agreement) constitute the
entire agreement between the parties with respect to the subject-
matter and supersede all prior negotiations and understandings.
No provision may be amended or waived except in writing. This
Agreement shall be read with all changes of gender or number
required by the context.
15.8 Counterparts: This Agreement may be executed by the parties
hereto in two or more counterparts, all of which taken together
shall constitute one document and any facsimile transmission of
this document shall be treated as if it were an original.
15.9 Headings: The headings in this Agreement do not affect its
interpretation.
15.10 Governing Law: This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware,
and each of the parties irrevocably accedes to the jurisdiction
of the courts of Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement
under the lands of their duly authorized officers in that regard
as of the day and year first above written.
P.E.S.T. CREATIVE GAMING
CORPORATION
Per:
_____________________________
Stewart Garner
WINNING GAMES INC.
Per:
_____________________________
William H. Johnston
PACCANUS INC.
Per:
_____________________________
John Hayter
RACINGO INVESTMENTS LTD.
Per:
_____________________________
John Hayter
RACINGO INVESTMENTS LTD.
Per:
_____________________________
Stewart Garner
RACINGO INVESTMENTS LTD.
Per:
_____________________________
William H. Johnston
SCHEDULE "A"
COPYRIGHT ASSETS
<TABLE>
<S> <C> <C> <C>
TITLE COUNTRY DATE REGISTERED REGISTRATION
NUMBER
Sulky and Rider Canada Jan. 20, 1995
Racingo Game Card Canada Jan. 20, 1995
Racingo Rules Canada Feb. 23, 1995
Racingo Races Card Canada Sept. 11, 1996
Racingo Rules and Canada Sept. 11, 1996
Regulations
Racingo In The Money Canada` Sept. 11, 1996
Card
Super Racingo Race Canada Sept. 11, 1996
Card
Racingo Play for the Canada Sept. 11, 1996
Day Card
Sulky and Rider U.S. Jan. 24, 1995
Racingo Rules U.S. Jan. 24, 1995
Racingo Rules and U.S. Sept. 24, 1996
Regulations
</TABLE>
SCHEDULE "B"
RACINGO PATENT AND U.S. RACINGO RIGHTS
PATENT AND TRADEMARKS DEVELOPERS
1. William H. Johnston.
SCHEDULE "C"
RACINGO RULES AND REGULATIONS
SCHEDULE "D"
CANADIAN RACINGO RIGHTS, WORLD RACINGO RIGHTS AND COPYRIGHT
ASSETS TRADEMARK AND COPYRIGHT DEVELOPERS
1. Earl Clements
SCHEDULE "E"
UNANIMOUS SHAREHOLDERS' AGREEMENT
UNANIMOUS SHAREHOLDERS AGREEMENT
THIS AGREEMENT made as of the 7th day of October, 1999.
B E T W E E N:
P.E.S.T. CREATIVE GAMING CORPORATION, a corporation
incorporated under the laws of the Province of
Ontario,
(hereinafter sometimes called "PEST")
OF THE FIRST PART
- and -
WINNING GAMES INC., a corporation incorporated under
the laws of the State of Illinois,
(hereinafter sometimes called "Winning")
OF THE SECOND PART
- and -
PACCANUS INC., a corporation incorporated under the
laws of the Province of Ontario,
(hereinafter sometimes called the "PacCanUs")
OF THE THIRD PART.
- and -
RACINGO INVESTMENTS LTD., a corporation incorporated
under the laws of the State of Delaware,
(hereinafter sometimes called the "Corporation")
OF THE FOURTH PART
WHEREAS the Corporation has been incorporated by articles
and certificate of incorporation dated October 7, 1999,
(collectively, the "Articles");
AND WHEREAS the Shareholders are the owners of all the
issued and outstanding common shares in the capital of the
Corporation as set out in Article Two hereof;
AND WHEREAS the parties hereto have entered into this
Agreement for the purposes of, inter alia, (i) setting forth the
manner in which the affairs of the Corporation shall be
conducted; (ii) providing for their respective rights and
obligations arising out of or in connection with the operations
and affairs of the Corporation; and (iii) governing the transfer
of Shares in the Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the premises and the terms and conditions herein contained,
the receipt and sufficiency of which are hereby acknowledged by
each of the parties hereto, the parties hereto agree with each
other as follows:
ARTICLE 1.
INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires:
(a) "Agreement" shall mean this Agreement and all preambles,
recitals and schedules hereto, along with any amendments hereto
or thereto;
(b) "Articles" shall mean the certificate and articles of
incorporation of the Corporation, as amended from time to time,
and attached hereto as Schedule "A";
(c) "Authorized Capital" shall mean the authorized capital of
the Corporation as set forth in the Articles;
(d) "Board of Directors" shall mean the board of directors of
the Corporation as constituted from time to time, and "Director"
or "Directors" shall mean a member or members of the Board of
Directors, respectively;
(e) "Business Plan" shall have the meaning so attributed in
Article 5.1 (e) herein;
(f) "By-Laws" shall mean the by-laws of the Corporation, as
amended and supplemented from time to time;
(g) "Class A Shares" shall mean the class A shares in the
capital of the Corporation, with the attributes so provided in
the Articles of the Corporation;
(h) "Class B Shares" shall mean the class B shares in the
capital of the Corporation, with the attributes so provided in
the Articles of the Corporation;
(i) "Class C Shares" shall mean the class C shares in the
capital of the Corporation, with the attributes so provided in
the Articles of the Corporation;
(j) "Common Shares" shall mean the Common Shares in the capital
of the Corporation, with the attributes so provided in the
Articles of the Corporation;
(k) "Intellectual Property" means the right, title and interest
in and to the patent, trademarks, copyrights, trade secrets,
technology and know-how identified in subsection 1.1(o) below, as
well as any documentation, in any form, pertaining thereto;
(l) "Internet RACINGO License Agreement" shall mean the license
agreement between the Corporation and Playandwin Inc. dated the
7th day of October, 1999, attached hereto as at Schedule "D";
(m) "North American On- and Off-Track Betting RACINGO License
Agreement" shall mean the license agreement between the
Corporation and Playandwin Inc. dated the 7th day of October,
1999, attached hereto as Schedule "E";
(n) "North American TVGN RACINGO License Agreement" shall mean
the license agreement to be concluded between the Corporation and
The TV Games Network Inc.;
(o) "RACINGO" shall mean the pari-mutuel bingo-type wager game
and lottery identified by the following trademarks:
(i) RACINGO owned by Winning in the United States and
the subject of its application to register the
trademark, Application No. 75/331,278;
(ii) RACINGO owned by PEST in Canada (subject to
PacCanUs' 50% beneficial interest therein) and the
subject of its application to register the
trademark, Application Number 767,826;
(iii) SUPER RACINGO owned by PEST in Canada
(subject to PacCanUs' 50% beneficial interest
therein) and the subject of its application to
register the trademark, Application Number
767,827;
(iv) RACINGO HORSHOE DESIGN owned by PEST in
Canada (subject to PacCanUs' 50% beneficial
interest therein) and the subject of its
application to register the trademark,
Application Number 856,030;
(v) RACINGO GOIN' BIG TIME owned by PEST in Canada (subject to
PacCanUs' 50% beneficial interest therein) and the subject of its
application to register the trademark, Application Number
856,029;
(vi) SULKY DESIGN owned by PEST in Canada (subject to PacCanUs'
50% beneficial interest therein) and the subject of its
application to register the trademark, Application Number
767,828; and
(vii) RACINGO owned by PEST in Europe (subject to PacCanUs'
50% beneficial interest therein) and the subject of its
application to register the trademark, Application Number
642,728;
which trademarks are all being exclusively licensed by
Winning, PEST and PacCanUs to the Corporation; and all
associated know-how, intellectual property and other
materials utilized in the execution of the RACINGO game
as held by the Licensee, including United States Patent
No. 5,518,239 issued to William H. Johnston on May 21,
1996, and owned by Winning, regarding a lottery racing
sweepstakes, which patent has been licensed to the
Corporation, and the RACINGO game developed by PEST
that was test marketed in Connecticut, the rules and
regulations of which are appended hereto as Schedule
"C".
(p) "Related Transferee" has the meaning ascribed thereto in
section 6.3 hereof;
(q) "Related Transferor" has the meaning ascribed thereto in
section 6.3 hereof;
(r) "Shareholders" shall mean collectively such of the parties
to this Agreement as are at the relevant time holders of Shares
in the capital of the Corporation and "Shareholder" shall mean
such parties individually;
(s) "Shares" shall mean each of the Common Shares, the Class A
Shares, the Class B Shares and the Class C Shares;
(t) "Total Disability" shall mean physical or mental disability
or infirmity of such an extent that the person suffering
therefrom is unable to resume and continue his customary work
activities for the Corporation within a period of six (6) months
from the commencement of such disability or infirmity; and
(u) "Voting Shares" shall mean the Common Shares in the capital
of the Corporation as defined above.
1.2 The following are the schedules attached to and incorporated
in this Agreement by reference and deemed to be part hereof:
Schedule A - Articles
Schedule B - By-laws
Schedule C - RACINGO Rules and Regulations
Schedule D - Internet RACINGO License Agreement
Schedule E - North American Land Based RACINGO License
Agreement
ARTICLE 2.
SHARE OWNERSHIP
2.1 (a) The Shareholders acknowledge that, as of the date
hereof, the Authorized Capital consists of an unlimited amount of
Common Shares, Class A Shares, Class B Shares and Class C Shares
of which 1,000 Common Shares, 1,000 Class A Shares, 1,000 Class B
Shares and 1,000 Class C Shares will presently be issued and
outstanding as fully paid and non-assessable, and the parties
holding same are as follows:
NAME NO. AND TYPE OF SHARES HELD
PEST 100 Common Shares
PacCanUs 400 Common Shares
Winning 500 Common Shares
PEST 125 Class A Shares
PacCanUs 425 Class A Shares
Winning 450 Class A Shares
PEST 175 Class B Shares
PacCanUs 375 Class B Shares
Winning 450 Class B Shares
PEST 250 Class C Shares
PacCanUs 375 Class C Shares
Winning 375 Class C Shares
(b) All share certificates issued by the Corporation to the
shareholders shall have the following legend imprinted
thereon:
"THESE SHARES ARE SUBJECT TO RESTRICTIONS ON THEIR
TRANSFER AS CONTAINED IN A SHAREHOLDERS AGREEMENT DATED
* AND IN APPLICABLE LAW. [A FULL COPY OF THE TEXT
THEREOF IS OBTAINABLE ON DEMAND AND WITHOUT FEE FROM
THE CORPORATION.]"
All instruments issued by the Corporation that are
convertible into shares or evidence the right to acquire shares
shall contain a legend to similar effect.
(c) The Shareholders shall submit the certificates representing
the Shares held by each of them prior to the execution of this
Agreement to the Corporation in order that the legend set forth
in subsection 2.1(b) hereof may be imprinted thereon.
(d) Only Common Shares have voting rights in the governance of
the Corporation and its business.
2.2 Each Shareholder hereby represents and warrants to and
covenants with each of the other parties hereto that the Shares
held by the Shareholder are and shall be owned beneficially by
the said Shareholder and not as nominee of any party, free and
clear of all mortgages, charges, pledges or other encumbrances.
The representations and warranties contained in this section 2.3
shall not merge in the closing of this Agreement.
2.3 (a) In the event of the allotment and issuance of
additional shares in the capital stock of the Corporation,
other than those Shares presently allotted and issued, the
same shall first be offered to the Shareholders on a pro
rata basis equal to the number of Shares in the particular
type of capital stock of the Corporation being issued that
is held by each of them at such date.
(b) In the event that any of the Shares in the capital
stock of the Corporation offered to the Shareholders
pursuant to subsection 2.3(a) are not purchased and paid for
by a particular Shareholder, all or a portion of such shares
may be purchased by the other Shareholders at their option
on a pro rata basis equal to the number of Shares (including
those Shares they may have purchased pursuant to subsection
2.3(a)) in the same type of capital stock of the Corporation
as that being issued that is held by each of them at such
date.
2.4 Dividends will be distributed by the Corporation to the
shareholders of the Corporation in the following manner:
(a) Class A Shares will have dividend rights only to income
earned by the Corporation from the Internet RACINGO Licence
Agreement, the North American Land Based RACINGO Licence
Agreement, or TVGN RACINGO Licence Agreement, or from any other
revenues from licenses granted to Playandwin Inc. or its
affiliates;
(b) Class B Shares will have dividend rights only to income
earned by the Corporation from any North American licencing or
active business other than income from the Internet RACINGO
Licence Agreement, the North American Land Based RACINGO Licence
Agreement, the TVGN RACINGO Licence Agreement or from any other
revenue from licence granted to Playandwin Inc. or its
affiliates;
(c) Class C Shares will have dividend rights to all income
streams earned by the Corporation from any licencing or active
business outside North America or any other income streams not
allocated herein to the Class A Shares or the Class B Shares; and
(d) No dividends will be issued for the Common Shares.
2.5 Upon the sale of all of the Shares to a third party or third
parties, the purchase price for all of the Shares will be
apportioned between the different classes of the Class A, Class B
and Class C Shares based on the relative value of the dividends
granted within the proceeding two (2) years .
2.6 All general expenses of the Corporation will be paid before
any dividends are issued, and said general expenses will be
deducted from the respective gross income stream (being the gross
income stream from the Internet RACINGO Licence Agreement, the
North American Land Based RACINGO Licence Agreement, or TVGN
RACINGO Licence Agreement on the one hand, other North American
based income on the second hand, and gross income from non-North
American sources and all other sources, on the third hand) on a
pro rata basis in proportion to the respective gross income
stream's contribution to the entire gross income of the
Corporation.
ARTICLE 3.
FINANCIAL
3.1 The Shareholders acknowledge that additional capital may be
required by the Corporation from time to time and that it is
their intention that such capital requirements shall be
contributed as to percent ownership of Common Shares of the
Corporation. Financing made available to the Corporation by the
Shareholders shall be on terms and conditions competitive with
financing available from United States financial institutions or
on terms and conditions otherwise unanimously agreed to by the
other Shareholders. Additional financing, unless otherwise
agreed to by the Shareholders, shall be obtained to the greatest
extent possible by borrowing from a chartered bank or an other
acceptable interim lender.
3.2 Unless otherwise agreed to among all of the Shareholders,
any guarantees, indemnities, pledges of credit or other like
agreements with respect to the indebtedness of the Corporation
which a lender or proposed lender to the Corporation requests a
Shareholder to enter into as a condition to the lender advancing
funds to the Corporation shall (regardless of the terms of, or
who executes, the aforesaid agreements) be borne by all of the
Shareholders in proportion to the number of Shares held by each
Shareholder.
3.3 The Shareholders agree, provided they or their nominees form
a majority on the Board of Directors, that at the request of the
Board of Directors they shall subordinate all shareholder
advances and their entitlement to any interest thereunder to
permanent financing or other borrowing by the Corporation to the
extent required by the Board of Directors.
ARTICLE 4.
BOARD OF DIRECTORS AND MANAGEMENT
4.1 The Board of Directors shall consist of three (3) Directors,
and each Shareholder shall be entitled to nominate one (1)
Director who shall be elected to the Board of Directors. The
Shareholders shall elect each nominee to the Board and shall not
reject or fail to elect any said nominees. The Shareholders
shall empower the Board of Directors to set the number of
Directors and to appoint new Directors if it so desires. The
quorum for Board of Director meetings shall be three (3), and if
at a meeting of the Board of Directors there is no quorum, the
Board of Directors present at such meeting shall adjourn the
meeting for a period of no less than 48 hours at which adjourned
meeting the quorum shall be as required above.
4.2 Each Shareholder will vote at all meetings of the
Shareholders, and if such Shareholder is a Director at all
meetings of the Directors, and act in all other respects in
connection with the corporate proceedings of the Corporation in
such manner at to insure that the individuals who are the
nominees of the Shareholders are elected and appointed and
maintained in place from time to time as Directors. No
Shareholder shall exercise his voting rights to remove a Director
without the consent of the Shareholder that nominated such
Director. In the event that a vacancy shall occur on the Board of
Directors each Shareholder shall exercise his voting rights to
fill such vacancy with a nominee of the Shareholder who nominated
the vacating Director.
4.3 (a) The By-laws shall provide, inter alia, that:
(i) the Directors shall meet at least quarterly;
(ii) the Chairman of a meeting of the Directors shall not have a
tie-breaking or "casting" vote; and
(iii) the reasonable direct expenses of each of the Directors
incurred in connection with their activities as Directors shall
be paid by the Corporation.
(b) The parties hereto acknowledge that the By-Laws of the
Corporation shall provide that all contracts, documents
or instruments in writing requiring the signature of
the Corporation must be signed by at least two
directors. The parties hereto agree to cause the Board
of Directors to pass and deposit with the Corporation's
banker a banking resolution which shall appoint those
parties so designated by the Board of Directors of the
Corporation with signing authority on the
Corporation's behalf.
4.4 The parties agree to cause the Board of Directors to elect
William Johnston as President, Joe Warwick as Vice-President and
Stewart Garner as Secretary of the Corporation. In the event
that a vacancy shall occur in the office of President, Vice-
President or Secretary, each Shareholder agrees to exercise its
voting rights to fill such a vacancy with a nominee of the
Shareholder whose representative or officer is, or who nominated,
such vacating officer.
4.5 Any matter recorded in the minutes of a meeting of the
Directors or the Shareholders of the Corporation as having been
approved or agreed upon by resolution or otherwise shall be
deemed, for the purposes hereof, to have been consented to by a
Shareholder only if the consent of such Shareholder shall have
been indicated in writing whether by endorsement of such minutes
or otherwise.
4.6 The auditors and accountants of the Corporation shall be
agreed upon by all of the shareholders, unanimously, and such
auditors and accountants shall, at the fiscal year end of the
Corporation and at such other times as they may be reasonably
requested by any of the Shareholders, make an audit of or
examine, as the Shareholders require, the books and accounts of
the Corporation and for such purposes they shall have access to
all books of account, records and all vouchers, cheques, papers
and documents of or which may relate to the Corporation,
including those of the Shareholders to the extent to which such
books, records, vouchers, cheques, papers and documents relate to
the Corporation.
ARTICLE 5.
FUNDAMENTAL CHANGES
5.1 No action of the Corporation shall be taken without the
unanimous consent of the Shareholders holding Voting Shares on
any of the following matters:
(a) any amendments to the Articles or By-Laws;
(b) any change in the number of members of the Board of
Directors from that provided for herein and any action which
would derogate from the rights to nominate and elect Directors as
set out above;
(c) any sale, transfer or other disposal of all or a substantial
part of the assets and undertaking of the Corporation, or any
acquisition or disposition by the Corporation of any property
(other than inventory acquired or disposed of in the ordinary
cause of business) having a value in excess of fifty thousand
dollars;
(d) the issue or transfer of Shares or any obligations, charges,
debts or other instruments convertible into Shares or involving
rights to vote;
(e) the winding up, dissolution or termination of the
Corporation;
(f) any material change in the undertaking of any business or
operation by the Corporation, or any transaction out of the
ordinary course of business of the Corporation including the
cancellation of any material agreements or consenting to the
cancellation of any material agreements of the Corporation;
(g) the payment of any dividends, redemption or repurchase of
any Shares by the Corporation or the making of any distribution
(including bonuses) to Shareholders or Directors;
(h) purchasing, leasing as an agent, acquiring, selling or
disposing of any real property (including any leasehold interest
therein) or other material assets;
(i) transferring, assigning, charging, selling or in any other
manner encumbering or disposing of the interest of any of the
Shareholders hereto as a creditor of the Corporation with respect
to shareholder's loans;
(j) purchasing, leasing as an agreement, acquiring, selling or
disposing of any real estate property (including leasehold
interests therein) or other material assets to arm's length
parties;
(k) appointing a receiver, seeking bankruptcy protection or any
voluntary assignment into bankruptcy; and
(l) preparing and approving a business plan ("Business Plan").
5.2 No action by the Corporation shall be taken on any of the
following matters without the consent of Shareholders holding
three-quarters (3/4) of the Voting Shares:
(a) the borrowing of any amount by the
Corporation which, either alone or in conjunction with other
indebtedness of the Corporation outstanding at the time,
exceeds in the aggregate $10,000;
(b) the making of capital expenditures which, either alone or in
conjunction with other capital expenditures in any given
financial year of the Corporation, exceed in the aggregate
$50,000;
(c) entering into by the Corporation of any contract or other
commitment out of the ordinary course of the Corporation's
business or any contract or commitment which has a term exceeding
one (1) year; or
(d) the employment of any person whose gross annual salary
exceeds $25,000.
5.3 The Shareholders shall cause their respective nominee
Directors to act in accordance with the terms of sections 5.1 and
5.2 and shall be strictly responsible for the actions of their
respective nominees.
5.4 If a Business Plan proposes any of the actions dealt with in
section 5.1, those actions shall be deemed to have received the
unanimous consent of the Shareholders if the Business Plan was
approved unanimously by the Shareholders pursuant to section 5.1.
ARTICLE 6.
GENERAL RESTRICTIONS
ON TRANSFER OF SHARES
6.1 Except as hereinafter provided in this Agreement, no
Shareholder shall transfer by sale, gift, bequest or otherwise,
or encumber by pledge, assignment, mortgage, charge or otherwise,
or otherwise dispose of or cease to be the holder of (the
foregoing being collectively referred to in this Article as
"transfer") any of the Shares of which it is at any time the
registered or beneficial owner, without the prior written consent
of the other Shareholders.
6.2 In the case of any permitted transfer to any person other
than another Shareholder, no such transfer shall be made, shall
be effective or shall be registered on the books of the
Corporation until the proposed transferee becomes a shareholder
party to this Agreement by executing the Corporation's
counterpart of this Agreement and such other instruments as
counsel for the Corporation shall advise.
6.3 If any Shareholder (a "Related Transferor") shall request
the other Shareholders to permit the transfer of any Shares held
by the Related Transferor to (i) a member of the immediate family
of the Related Transferor, (ii) a trust all the beneficiaries of
whom are members of the immediate family of the Related
Transferor, or (iii) a company owned and controlled by the
Related Transferor alone or together with member of the immediate
family of the Related Transferor (the persons described in (i),
(ii) and (iii) being herein referred to as "Related Transferees")
the other Shareholders shall not unreasonably withhold or delay
giving such consent to the proposed transfer as may be required
under the applicable provisions of the Articles and of this
Agreement. No such transfer from a Related Transferor to a
Related Transferee shall be made, shall be effective or shall be
registered on the books of the Corporation until the Related
Transferee becomes a Shareholder party to this Agreement by
executing the Corporation's counterpart of this Agreement and
such other instruments as counsel for the Corporation shall
advise, and the Related Transferee has executed and delivered
such instruments as shall be advised by counsel for the
Corporation as necessary to vest in the Related Transferor, in a
legally effective manner, absolute discretion to vote for and on
behalf of the Related Transferee at all meetings of Shareholders
of the Corporation.
6.4 Upon any transferee of Shares becoming a Shareholder party
to this Agreement, such transferee shall, with respect to the
Shares acquired and held by such transferee, have the same rights
and obligations under this Agreement as the transferor of such
Shares had under this Agreement with respect to such Shares, and
any reference in this Agreement to the transferring party shall
be deemed to be a reference to and including the transferee
party.
6.5 If any Shareholder is a body corporate, then control of such
Shareholder may not be changed, directly or indirectly, whether
by operation of law or otherwise, without the prior written
consent of the other Shareholders. If such prior consent is not
obtained, and control of a corporate Shareholder changes as
aforesaid, then such Shareholder shall be deemed to be a
"Retiring Party" for the purposes of section 7.1 hereof.
6.6 If any Shareholder is a body corporate, it has the right to
section off up to forty percent (40%) of its Shares to key
employees or contract personnel who are integral to the success
of RACINGO, subject only to the condition that said assignees
become a party to this Agreement.
1
ARTICLE 1.
DEATH, TOTAL DISABILITY,
BANKRUPTCY, ETC.
7.1 In the event a Shareholder:
(a) dies; or
(b) meets the requirements of Total Disability; or
(c) is declared bankrupt, makes an assignment for the
benefit of creditors, or has a receiving order
made against it; or
(d) has taken steps to voluntarily dissolve or wind-
up, or a court of competent jurisdiction requires
it to be wound-up; or
(e) is deemed a "Retiring Shareholder" pursuant to
section 6.5; or
(f) becomes subject to an order under the Family Law
Act, 1986 (Ontario) or any successor legislation
thereto or under the matrimonial laws of any
jurisdiction requiring its Shares be transferred,
charged, encumbered, attached, seized or sold; or
(g) is in breach of or in default under any of the
provisions of this Agreement for greater than
thirty (30) days after having received written
notice of same from the Corporation;
such Shareholder shall be deemed a "Retiring Party".
7.2 (a) The other Shareholders shall have the option to
purchase all (but not less than all) of the Shares
owned by the Retiring Party on, unless otherwise agreed
among them, a pro rata basis equal to the number of
Shares then held by each Shareholder, which option
shall be exercised by giving written notice to the
Retiring Party or his Personal Representative and to
the Corporation within thirty (30) days of the said
event. The Shares shall be purchased for a price and
in the manner calculated and set forth in Sections 7.3
through 7.6 hereof.
(b) If any Shareholder does not take up his option for his
pro rata proportion of the Shares of the Retiring Party
pursuant to subsection 7.2(a), the unclaimed Shares
shall be used to satisfy any request made by any other
Shareholders who have indicated in their written
notice, above, that they desire to purchase Shares in
excess of their pro rata proportion. The Corporation
shall, forthwith after the expiry of the option period
specified above, notify in writing those Shareholders
who indicated a desire to purchase Shares in excess of
their initial pro rata proportion of the existence and
nature of the unclaimed Shares, which Shares are to be
taken up by the notified Shareholders on a pro rata
basis equal to the number of Shares (including those
taken up by them pursuant to subsection 7.2(a)) then
held by each Shareholder, or as otherwise agreed to
among such Shareholders. Such Shareholders shall have
thirty (30) days from the date of the delivery by the
Corporation of the aforesaid notice to give written
notice to the Retiring Party or his Personal
Representative and to the Corporation of their exercise
of this supplemental option.
(c) In the event the other Shareholders do not exercise the
above options so as to have purchased all (and not less
than all) of the Shares owned by the Retiring Party (in
which case none of the Shares of the Retiring Party
shall be sold to the other Shareholders pursuant to
section 7.2), the Corporation shall have the option to
purchase for cancellation all (but not less than all)
of the Shares owned by the Retiring Party, which option
shall be exercised by giving written notice to the
Retiring Party or his Personal Representative and the
other Shareholders within thirty (30) days of the
expiry of the option period specified in subsection
7.2(b), for a price and in the manner calculated and
set forth in sections 7.3 through 7.6 hereof.
7.3 The purchase price for any Shares to be purchased pursuant
to the provisions of this Article Seven shall be equal to the
fair market value of such Shares at the date that written notice
is given by the purchasing Shareholders or the Corporation, as
the case may be, (hereinafter referred to as the "Purchaser"), of
their/its intention to purchase the Shares of the Retiring Party.
If the Purchaser and the Retiring Party, or his Personal
Representative, are unable to agree as to the fair market value
of the Shares to be purchased, such determination shall be made
by an independent valuator, agreed upon by them or chosen
pursuant to the provisions of the Uniform Arbitration Law
(Delaware) (in this Article Seven referred to as the "Valuator").
7.4 In arriving at the valuation, the Valuator shall:
(a) be given such access to and copies of such documents as
he shall reasonably request, including from the Corporation;
(b) determine the fair market value per Share and
instrument convertible into Shares of the Units as of the
appropriate date without premium for control or discount for
minority;
(c) refer to and use as a guideline the valuation, if any,
last determined pursuant to the provisions of this Article
7; and
(d) consider any written representations which either the
Purchaser or Retiring Party may make.
The valuation determined by the Valuator in accordance with this
Article 7 shall be binding upon all of the parties hereto.
7.5 Unless other terms of sale are agreed to by the parties to
the sale, the terms of any sale under this Article Seven shall be
as follows:
(a) a minimum of ten per cent (10%) of the total
purchase price shall be paid at the time of closing by
certified check against delivery of the relevant share
certificates duly endorsed in blank with signatures
guaranteed;
(b) the Purchaser shall execute and deliver to the
Retiring Party a promissory note in an amount equal to
the unpaid balance of the purchase price at the time of
closing (if there are multiple Purchasers, each
Purchaser shall execute and deliver to the Retiring
Party a promissory note which shall be in an amount
equal to that proportion of the unpaid balance of the
purchase price that the Shares purchased by each
Purchaser are to the total number of Shares sold by the
Retiring Party), and the unpaid balance, if any, from
time to time outstanding of the purchase price shall
bear interest from the time of closing at a rate per
annum equal to the prime lending rate charged by the
Corporation's bankers, plus two percent (2%), and such
principal and interest shall be paid in ten (10) equal
annual consecutive installments commencing one (1) year
from the time of closing;
(c) default of any payment of principal or interest
shall, at the option of the holder of the promissory
note, cause the entire balance thereof to mature,
provided that the Purchaser may prepay the same in
whole or in part, in reverse order of maturity, without
notice or bonus payments;
(d) the closing shall be at 10:00 o'clock a.m. at the registered
office of the Corporation on the ninety (90) days following the
event causing one of the Shareholders to become a Retiring Party;
(e) on closing, the Retiring Party shall tender his
resignation(s) or the resignation(s) of his nominee(s) from the
Board of Directors and as officer(s) of the Corporation; and
(f) if the Retiring Party refuses or neglects to complete the
sale for any reason, the Purchaser shall have the right, upon
payment of the purchase price to the credit of the Retiring Party
in any chartered bank in the City of Toronto or the City of
Chicago for and on behalf of and in the name of the Retiring
Party or its nominee or nominees, to execute and deliver such
transfers, resignations and other documents as may be necessary
or desirable in order to complete the transaction, and to that
end the Retiring Party hereby irrevocably constitutes the
Purchaser his true and lawful attorney to complete the
transaction and execute on behalf of the Retiring Party every
document necessary or desirable in that behalf.
ARTICLE 8.
RIGHT OF FIRST REFUSAL
8.1 Except in cases where Article Seven and Subarticle 6.6 which
shall supersede the provisions hereof, would apply, no
Shareholder shall entertain offers for the purchase of his Shares
nor make agreements for the sale, transfer or assignment of his
Shares except upon compliance with this Article Eight and subject
to the terms and conditions hereinafter set forth:
(a) no sale, transfer or assignment of Shares shall be
considered by a Shareholder (the "Selling Shareholder")
unless he shall have first received a bona fide offer (the
"Third Party Offer") in writing from a third party (the
"Third Party") dealing at arm's length with the Selling
Shareholder, which Third Party shall be a responsible
purchaser of good business reputation, to purchase all of
the Shares of the Selling Shareholder, which offer shall be
irrevocable for a period of sixty (60) days, and shall
provide that the purchase price shall be payable in cash at
the time of closing;
(b) if the conditions of paragraph 8.1(a) are satisfied and
the Selling Shareholder is prepared to accept the Third
Party Offer, the Selling Shareholder shall, within ten (10)
days of the receipt of such offer, deliver a copy of the
Third Party Offer, together with the Selling Shareholder's
offer (the "Selling Shareholder's Offer") to sell all of the
Shares of the Selling Shareholder to the other Shareholders
upon the same terms and conditions as are contained in the
Third Party Offer;
(c) the Shareholders receiving the Selling Shareholder's
Offer shall have the first right and option to purchase on
a pro rata basis the Shares to be sold by the Selling
Shareholder for a period of thirty (30) days from the date
of receipt of the Selling Shareholder's Offer such right and
option to be exercised before the expiration of such thirty
(30) days by notice in writing;
(d) if the other Shareholders accept the Selling
Shareholder's Offer within the time stipulated, they shall
purchase on a pro rata basis (unless they otherwise agree
and so stipulate in their notice of acceptance) all of the
Shares owned by the Selling Shareholder upon the same terms
and conditions as are contained in the Third Party Offer;
(e) if one or more of the other Shareholders is prepared to
purchase his pro rata portion of the Shares (the "Accepting
Party" or "Accepting Parties", as the case may be), but the
other Shareholder or Shareholders are not so prepared, then
the Accepting Party or Accepting Parties shall have the
first right and option to purchase all of the Shares of the
Selling on a pro rata basis equal to the number of Shares
held by the Accepting Parties, upon the same terms and
conditions as are contained in the Third Party offer; and,
(f) if the other Shareholders do not accept the Selling
Shareholder Offer within the time stipulated in paragraph
8.1(c) hereof or if the Accepting Party or Accepting Parties
elect not to exercise the right and option set out in
paragraph 8.1(e) hereof or do not exercise the said right
and option within the time stipulated, the Selling
Shareholder shall accept the offer of, and complete the
transaction with, the Third Party in accordance with the
Third Party Offer.
8.2 If the completion of any sale of Shares to a Third Party in
accordance with this Article Eight would result in the said Third
Party acquiring more than ten per cent (10%) of the Shares, each
of the Shareholders receiving the offer of the Selling
Shareholder (hereinafter referred to as the "Offerees") shall
have the further right, to be exercised by notice in writing to
the Selling Shareholder within the time limited for the
acceptance of the Selling Shareholder's Offer, to require the
Selling Shareholder to sell to the Third Party all but not less
than all of the Shares owned or controlled by each Offeree upon
the same terms and conditions as are contained in the Third Party
Offer. If any of the Offerees exercise such right, the Selling
Shareholder shall not complete the sale of its Shares unless all
of the Shares of such Offerees who shall have so exercised such
right are also sold to the Third Party on the same terms and
conditions as are contained in the Third Party Offer.
8.3 The provisions of section 8.1 shall, in any event, be
subject to the compliance by the Selling Shareholder and the
Third Party with applicable law and the obtaining of requisite
approvals for transfer thereunder. The time periods referred to
in section 8.1 shall be extended by the amount of time of any
delay or delays occasioned by a regulatory or governmental agency
which is required to give approval to a transfer thereunder.
ARTICLE 9.
CONFIDENTIALITY AND NON-COMPETITION
9.1 (a) It is essential to the success of the Corporation that
the business and affairs of the Corporation be kept in the
strictest confidence. In the event of the termination of
this Agreement, each party, and in the event a Shareholder
ceases to be a Shareholder, such Shareholder shall, until
the expiry of two (2) years from such event, keep all
information pertaining to or concerning the Corporation
(other than as hereinafter provided) in the strictest
confidence and not disclose any such information to a third
person other than:
(i) an Affiliate, Associate or Parent Corporation of
the party where it is necessary for the purposes
of the Corporation that such Affiliate, Associate
or Parent Corporation receive the information and
provided that the recipient Affiliate, Associate
or Parent Corporation enters into an agreement
with the Corporation under which such Affiliate,
Associate or Parent Corporation agrees not to use
such information for any purpose other than those
of the Corporation and to be bound by the
provisions of this section 9.1;
(ii) a governmental or other authority to which the
disclosure is required by law and where there is
no reasonable means to avoid such disclosure; or
(iii) a court determining the rights of the parties
under this Agreement.
(b) The terms "Affiliate," "Associate" and "Parent Corporation"
as used in this Article Fourteen shall have the respective
meanings ascribed thereto in the General Corporation Law
(Delaware), as amended
9.2 No party shall be obligated to keep in confidence or shall
incur any liability for disclosure of information to a third
party (the "recipient") of the nature aforesaid which:
(a) was already known to the recipient at the time of its
receipt as a result of the activities of the Corporation;
(b) was permitted to be disclosed by the party from whom it was
obtained;
(c) has been public or is otherwise within the public domain at
the time of its disclosure to the recipient;
(d) comes into the public domain without any breach of this
Agreement; or
(e) becomes known or available to the recipient other than as a
result of the activities of the Corporation but without any
breach of this Agreement by a party.
9.3 (a) During the term of this Agreement, the Shareholders
shall not, either alone or in partnership or with any other
person, firm or corporation, as principal, agent,
shareholder or in any other manner carry on or be engaged in
or concerned with or interested in, directly or indirectly,
or advise, lend money to, guarantee the debts or obligations
of, or permit its name or any part thereof to be used or
employed by any person, firm or corporation engaged in or
interested in any business which sells, licenses,
distributes or otherwise markets products similar to RACINGO
or other products that are directly competitive with RACINGO
(i.e. lottery games relating to horse racing) within the
territories of the United States of America or Canada, or
any other territory in the world in which the Corporation or
its licensees are operating, has targeted or intends to
target for development.
(b) For a term of two (2) years following the termination
or expiry of this Agreement, the Shareholders shall not,
either alone or in partnership or with any other person,
firm or corporation, as principal, agent, shareholder or in
any other manner carry on or be engaged in or concerned with
or interested in, directly or indirectly, or advise, lend
money to, guarantee the debts or obligations of, or permit
its name or any part thereof to be used or employed by any
person, firm or corporation engaged in or interested in any
business which sells, licenses, distributes or otherwise
markets RACINGO outside of their respective territories. For
greater certainty, and for the purpose of this subsection
only, the respective territories of the Shareholders upon
the termination or expiry of this Agreement are as follows:
(i) Winning - the territory of the United
States of America
(ii) PEST and PacCanUs - all territories outside
the territory of the
United States of America.
(c) The restrictions in subsection 9.3(a) and (b) are
acknowledged by each Shareholder to be separate, distinct
and severable covenants and to be reasonable and valid and
all defenses to the strict enforcement thereof by each other
party hereto are hereby waived by each Shareholder.
9.4 Nothing in subsection 9.3(a) shall operate to prevent a
Shareholder or the Corporation or an Affiliate, Associate or
Parent Corporation of any of them from:
(a) owning in the aggregate not more than ten per cent
(10%) of the outstanding shares of any corporation, the
shares of which are listed for trading on any stock exchange
or which trade on the over-the-counter market, provided that
such shareholding does not constitute de facto control of
such corporation; or
(b) acquiring any business (whether by the purchase of
shares, assets or otherwise) for bona fide commercial
reasons where an incidental part of such business would
otherwise be prohibited by subsection 9.3(a); provided that
the Shareholder or the Corporation or Affiliate, Associate
or Parent Corporation, as the case may be, uses his best
efforts to divest himself upon reasonable terms and with all
reasonable speed of such incidental part.
ARTICLE 10.
ARBITRATION
10.1 In the event that any disagreement arises between any of the
parties hereto with reference to this Agreement or any matter
arising hereunder and upon which the parties cannot agree (other
than a matter governed by the provisions of Article Seven hereof)
then every such disagreement shall be referred to arbitration
pursuant to the provisions of the Uniform Arbitration Act
(Delaware) and in accordance with the provisions of this Article
Ten.
10.2 The reference to arbitration shall be to one (1) arbitrator,
which shall be unanimously chosen by the Parties hereto.
10.3 There shall be no appeal from any award of the arbitrators.
ARTICLE 11
DISTRIBUTION OF ASSETS UPON DISSOLUTION
11.1 Upon the dissolution of the Corporation, the assets of the
Corporation shall be distributed in the following manner:
(a) All right, title and interest in all Intellectual
Property and goodwill relating to RACINGO in the United
States of America shall be assigned to Winning;
(b) All right, title and interest in all Intellectual
Property and goodwill relating to RACINGO outside the United
States of America shall be assigned to PEST who shall hold
said assets subject to PacCanUs' fifty percent (50%)
beneficial interest in said assets;
(c) Any other assets of the Corporation shall be
distributed to the shareholders based on their respective
shareholdings of the Class A Shares.
ARTICLE 12.
GENERAL
12.1 Each of the parties severally agrees to indemnify each of
the other parties hereto against, and reimburse each of the other
parties for, any and all liabilities which such other party or
parties may incur or become subject to and amounts which such
other party or parties may pay or be required to pay which are in
excess of the proportionate share of the liabilities and
obligations of the parties under the terms of this Agreement,
provided that nothing in this section 12.1 shall in any way be
deemed to or shall require any party to incur any liability or
provide any funds other than as may be expressly provided for in
any other provisions of this Agreement.
12.2 No consent or waiver, expressed or implied, by any party
hereto of any breach or default by any other party hereto in the
performance of his obligations hereunder shall be deemed or
construed to be a consent to or waiver of any other breach or
default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part
of any party to complain of any act or failure to act of any
other party or to declare the other party in default,
irrespective of how long such failure continues, shall not
constitute a waiver by the first mentioned party of his rights
hereunder.
12.3 This Agreement shall continue to be effective
notwithstanding the sale of Shares by a Shareholder howsoever,
and this Agreement shall be binding upon the remaining
Shareholders so long as there are at least two (2) Shareholders.
12.4 Any provisions of this Agreement prohibited by the laws of
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition without invalidating the
remaining terms and provisions hereof.
12.5 The Shareholders agree to sign all such documents and do all
such things as may be necessary or desirable (including causing
his shares to be voted, whether at a meeting of Shareholders or
by way of resolution in writing) to more completely and
effectively carry out the terms and intentions of this Agreement
and to cause the Corporation to act in the manner contemplated by
this Agreement. Each Shareholder shall ensure that his
nominee(s), if any, on the Board of Director of the Corporation
acts in such a manner as to give effect to the provisions of this
Agreement. If a Shareholder's nominee fails to act in such
manner as to give effect to the provisions of this Agreement,
such Shareholder shall cooperate in taking all such actions as
may be necessary from time to time to remove any such nominee
from the Board of Directors. Each Shareholder shall and does
hereby give all consents, and shall cause his nominee
Director(s), if any, to give such consents, if any, which may be
necessary for the purpose of effecting any transfer of any Share
of the Corporation which is required or permitted by this
Agreement.
12.6 Each corporate Shareholder represents and warrants to the
other parties:
(a) that it has been duly incorporated and is validly subsisting
as a Corporation in good standing under the laws of its
jurisdiction of incorporation and is duly licensed and qualified,
or shall take steps to obtain such qualification on notice from
Corporation that qualification is required all jurisdictions
wherein the nature of its assets or the business transacted by it
makes such licensing or qualification necessary;
(b) that it has the corporate power to own its assets, carry on
its business as presently conducted and to enter into and perform
its obligations under this Agreement;
(c) that this Agreement has been duly authorized, executed and
delivered by it and constitutes a valid and binding obligation
enforceable against it in accordance with its terms;
(d) that the execution, delivery and performance of this
Agreement will not violate any provisions of any indenture,
agreement or other instrument to which it is a party or by which
it is bound or be in conflict with, result in a breach of, or
constitute a default under any such indenture, agreement or other
instrument or result in the creation or imposition of a lien,
charge or encumbrance of any nature whatsoever upon any of its
property or assets;
(e) that there are no suits or proceedings pending, or to its
knowledge threatened, in any court or before any regulatory
commission, board or other administrative governmental agency
against or affecting it which will have a material adverse effect
on its financial condition or business; and
(f) that all the foregoing representations and warranties shall
be deemed to be continuing.
12.7 Any and all written notice or written communication given or
required to be given to a party hereunder may be delivered, or,
provided postal service shall not be interrupted or threatened
with interruption, mailed in Canada by registered mail, and shall
be deemed:
(a) in the case of delivery to such party to have been duly
given when the same is personally delivered to the party if
an individual or to an officer of the party if the party is
a corporation;
(b) if addressed to such party at its address set forth in
the records of the Corporation, and in the case of the
Corporation at its registered office address, in the case of
dispatch by registered mail, to have been duly given at 5:00
o'clock in the afternoon (local time of the sender) on the
4th day after the same was deposited with the post office.
12.8 Nothing in this Agreement shall be deemed in any way or for
any purpose to constitute any party a partner of, or a member of
a joint venture or joint enterprise with, any other party to this
Agreement in the conduct of any business or otherwise.
12.9 Time shall be of the essence in this Agreement.
12.10 This Agreement constitutes the entire agreement among
the parties and shall not be modified, amended or assigned except
with the consent in writing of all of the parties hereto. A
consent to any assignment required hereunder may be arbitrarily
or unreasonably withheld until the proposed assignee executes and
delivers such documents as, in the opinion of the legal counsel
of the Corporation, are necessary to oblige himself or itself
hereunder.
12.11 This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware and the federal
laws of the United States of America applicable therein, and the
courts of such State shall have exclusive jurisdiction to
ascertain any action in connection with this Agreement.
12.12 If at the time of any sale of Shares as contemplated in
this Agreement:
(a) there are any loans outstanding from the Corporation to
the selling Shareholder(s) or vice versa, such loans shall
be paid; and
(b) there are any securities or covenants lodged by the
selling Shareholder(s) with any person or institution or any
personal guarantees given by the selling Shareholder(s) or
his nominee(s) to secure any indebtedness, liability or
obligation of the Corporation, the remaining parties to this
Agreement shall use their best efforts to have the selling
Shareholder(s) and any nominee(s) released therefrom.
If, notwithstanding such best efforts, the releases as aforesaid
are not obtained, the remaining parties shall deliver to the
selling Shareholder(s) their indemnity in writing indemnifying
the selling Shareholder(s) and his nominee(s) from any and all
liabilities thereunder.
12.13 Wherever the singular and masculine are used in this
Agreement, they shall be construed as if the plural or the
feminine or the neuter had been used, where the context or the
party or parties so requires, and the rest of the sentence shall
be construed as if the grammatical and terminological changes
thereby rendered necessary had been made.
12.14 This Agreement may be executed by the parties in
counterparts and when all parties have executed at least as many
counterparts as there are parties, all of such counterparts shall
be deemed to be originals and all such counterparts taken
together shall constitute one and the same agreement. Each party
to this Agreement shall receive a complete set of originally
signed counterparts hereof, and the set provided to the
Corporation shall be kept in the minute book of the Corporation.
12.15 This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their Personal
Representatives, successors and permitted assigns and any
reference to a right or an obligation of a party hereto shall be
deemed to include a reference to such Personal Representatives,
successors and permitted assigns to the extent that the context
requires.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement as of the date and year first above written.
P.E.S.T. CREATIVE GAMING
CORPORATION
Per:
_____________________________
Stewart
Garner
WINNING GAMES
INC.
Per:
_____________________________
William H.
Johnston
PACCANUS INC.
Per:
_____________________________
John Hayter
RACINGO INVESTMENTS LTD.
Per:
_____________________________
John Hayter
RACINGO INVESTMENTS LTD.
Per:
_____________________________
Stewart Garner
RACINGO INVESTMENTS LTD.
Per:
_____________________________
William H. Johnston
INTERNET LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made as of the 7th day of October,
1999,
BETWEEN:
RACINGO INVESTMENTS LTD.,
a company incorporated under the laws of the State of
Delaware
(hereinafter called the "Licensor")
OF THE FIRST PART
-and-
PLAYANDWIN, INC.,
a corporation incorporated under the laws of the State of
Nevada,
(hereinafter called "PWIN")
OF THE SECOND PART
WHEREAS the Licensor is the Exclusive
licensee of certain intellectual property rights and know-how to
a pari-mutuel bingo-type wager game known as RACINGO and
variations thereof, as more fully described in this Agreement,
pursuant to a licence (the "Master License") granted by P.E.S.T.
Creative Gaming Corporation, PacCanUs Inc., and Winning Games
Inc. (collectively known as the "Master Licensors") on October
7th, 1999;
AND WHEREAS the Licensor desires to grant to PWIN a license
to use and to sub-license the use of said intellectual property
rights and know-how, as more fully described in this Agreement;
AND WHEREAS PWIN desires to receive a license to use and to
sub-license the use of such intellectual property rights and
agrees to pay a fee for such rights pursuant to the terms and
conditions set forth in this Agreement;
AND THEREFORE, in consideration of the foregoing, which are
a part hereof, and of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
1. 1. DEFINITIONS
(a) "Dollars" or "$" shall mean United States dollars.
(b) "Effective Date" shall mean the 7th day of October, 1999.
(c) "Jackpot" shall mean the pool or pools of funds (as
applicable), funded in accordance with this Agreement and the
RACINGO game rules attached hereto as Schedule "B" and, from
which prize moneys will be disbursed to winners in the RACINGO
game in accordance with the RACINGO rules attached hereto as
Schedule "B".
(d) "Licensed Product" shall mean the intellectual property
rights and know-how of the Licensor identified under the terms
"RACINGO", "RACINGO Copyrights", "RACINGO Patent" and "RACINGO
Trademarks" below as they apply to On-Line wagering utilizing the
RACINGO Copyrights, the RACINGO Patent and the RACINGO
Trademarks, and shall specifically not include the previously
licensed products and other venues identified in Schedule "C"
hereto.
(e) "Licensor" shall mean Racingo Investments Ltd..
(f) "Master Licence" shall mean the licence over the
intellectual property rights and know-how of the Licensor
identified under the terms "RACINGO", "RACINGO Copyrights",
"RACINGO Patent" and "RACINGO Trademarks" below granted by the
Master Licensors to Racingo Investments Ltd. on October 7th,
1999.
(g) "Master Licensors" shall mean P.E.S.T. Creative Gaming
Corporation, PacCanus Inc. and Winning Games Inc..
(h) "Offer" shall have the meaning set forth in Section 8(b)
below.
(i) "On-Line" shall mean activities taking place via the
Internet, by which is meant the worldwide network of computers
utilizing the TCP/IP protocol, commonly understood to provide
some or all of the following features, among others: electronic
mail, file transfers through File Transfer Protocol, Telnet
access to local and remote computers, UseNet Newsgroups, Gopher
access to information on local and remote computers, Wide Area
Information Servers, and World Wide Web access.
(j) "PWIN's Right of First Refusal" shall have the meaning set
forth in Section 8(b) below.
(k) "RACINGO" means the pari-mutuel bingo-type wager game and
lottery identified by the RACINGO Trademarks and all associated
RACINGO Copyrights, know-how, intellectual property and other
materials utilized in the execution of the RACINGO game as held
by the Licensor, including United States Patent No. 5,518,239
issued to William H. Johnston on May 21, 1996, regarding a
lottery racing sweepstakes game, which patent has been licensed
to Licensor, and also including the RACINGO game developed by
P.E.S.T. Creative Gaming Corp. that was test marketed in
Connecticut, the rules and regulations of which are appended
hereto as Schedule "B".
(l) "RACINGO Copyrights" means the copyright assets more fully
identified in Schedule "D" hereto, and their respective
documentation.
(m) "RACINGO Patent" means the United States Patent No.
5,518,239 dated May 21, 1996, regarding a lottery racing
sweepstake issued to William H. Johnston and owned by Winning
Games Inc.;
(n) "RACINGO Trademarks" means the trademark RACINGO owned by
Winning in the United States and the subject of his application
to register the trademark, Application No. 75/331,278; and the
Canadian trademark RACINGO (the subject of an application by PEST
to register the trademark, application number 767,826), the
Canadian trademark SUPER RACINGO (the subject of an application
by PEST to register the trademark, application number 767,827),
the Canadian trademark RACINGO HORSHOE DESIGN (the subject of an
application by PEST to register the trademark, application number
856,030), the Canadian trademark RACINGO GOIN' BIG TIME (the
subject of an application by PEST to register the trademark,
application number856,029), and the Canadian trademark SULKY
DESIGN (the subject of an application by PEST to register the
trademark, application number 767,828), all owned by PEST in
Canada; and the European trademark RACINGO owned by PEST, the
subject of an application by PEST to register the trademark,
application number 642,728, which trademarks have been
exclusively licensed by William H. Johnston and P.E.S.T. Creative
Gaming Corp. to Licensor.
(o) "Territory" shall mean the entire geographical area of the
world excluding the venues identified in Schedule "C" hereof.
2. GRANT OF LICENSE
(a) The Licensor hereby grants PWIN an exclusive right to use or
to sub-license the use of the Licensed Product in connection with
and to facilitate On-Line wagering.
(b) The Licensor hereby grants PWIN an exclusive licence to use
or sub-license the use of the RACINGO Trademarks in connection
with the advertising, promotion, and sale of the Licensed Product
in the Territory throughout the term of this agreement, and to
conduct On-Line sales of merchandise branded with the RACINGO
Trademarks provided that any use of the RACINGO Trademarks
(including by a licensee of PWIN) shall be subject to the quality
control provisions set out in subsection 4(c)(xi) of this
Agreement.
(c) The Licensor hereby grants PWIN the exclusive right to
display, reproduce, copy, transmit or license the works covered
by the RACINGO Copyrights in connection with the Licensed
Product, and the exclusive right to create derivative works from
the RACINGO Copyrights for use in connection with the Licensed
Product, provided that such use (including use by a licensee of
PWIN)shall be subject to the quality control provisions set out
in subsection 4(c)(xi) of this Agreement.
(d) The rights granted in subsections 2(a), 2(b), and 2(c) above
include the right to manage, develop, market, promote and create
derivative works of the Licensed Product, provided that such
rights are subject to the quality control provisions set out in
subsections 4(c)(xi) and 4(c)(xii) of this Agreement. Any
derivative works so created, including improvement patents,
software, copyrights, trademarks and all right, title interest
thereto shall enure to and be assigned to the Licensor or as
directed by the Licensor as required by the Master License.
(e) The Licensor expressly acknowledges and agrees that the
exclusive license granted above precludes the Licensor's use or
sub-licensing of the use of the Licensed Product in connection
with or to facilitate On-Line wagering throughout the Territory
throughout the term of this Agreement. The Licensor retains the
right to use or to license the use of the Licensed Product in
connection with any goods, services and activities other than On-
Line wagering in the Territory, including but not limited to On-
and Off-Track RACINGO hereto or In-Home use of RACINGO (as such
terms are defined in Schedule "C").
(f) Notwithstanding subsections 2(a) to 2(d) above, the Licensor
grants no license or right thereunder that it is not licensed to
grant under the Master License.
(g) PWIN acknowledges that the Licensor retains all rights to
the Licensed Product provided hereunder, subject to the Master
License, and that the licence granted by the Licensor herein does
not convey any proprietary interest in the Licensed Product to
PWIN other than the license as specified herein.
3. PAYMENT
(a) PWIN shall pay the Licensor for the rights to the Licensed
Product granted hereunder in accordance with the formula and
pursuant to the terms set forth in Schedule A below.
(b) PWIN shall maintain complete, clear, accurate records of all
payments received by PWIN, its affiliates, or any other party
with whom it has contracted in regard to the RACINGO game in
connection with its use of the Licensed Product. Such records
shall be maintained by PWIN relating to PWIN's use of the
Licensed Products. The Licensor shall have the right at its
expense to have an inspection and audit of all the relevant
accounting and sales books and records of PWIN conducted by an
auditor reasonably acceptable to all parties. Such audit shall be
performed under strict confidentiality pursuant to a written
agreement consistent with the confidentiality obligations set
forth in Section 7 below. Any such audit shall be conducted only
upon reasonable written notice during normal business hours.
4. REPRESENTATIONS, WARRANTIES AND CONVENANTS
(a) Each party represents, warrants and covenants to the others
that:
i. It is a corporation duly organized, validly existing and in
good standing under the laws of the state or province or country
of its incorporation and has all requisite power and authority to
enter into and perform its obligations under this Agreement;
ii. This Agreement when executed will become the legal, valid
and binding obligation of the party which shall be enforceable
against the party in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization and other similar laws relating to the rights of
creditors generally;
iii. To the best of each party's present knowledge, there is no
material action, suit or proceeding pending against it nor, to
the best of its knowledge; threatened against it which is likely
to materially adversely affect its performance of its obligations
hereunder, nor, to the best of its knowledge, are there any
existing acts or conditions which are reasonably expected to be a
proper basis for any such action, suit or proceeding;
iv. This Agreement creates no agency relationship between the
parties hereto, and nothing herein contained shall be construed
to place the parties in the relationship of partners or joint
venturers, and neither party shall have the power to obligate or
bind the other in any manner whatsoever; and
v. It is not insolvent or bankrupt.
(b) The Licensor represents, warrants and covenants to PWIN that
to the best of the Licensor's present knowledge:
i. The Licensed Product shall perform in accordance with its
written specifications, if any;
ii. The Licensor is the exclusive licensee of the entire and
unencumbered exclusive license in and to the RACINGO Trademarks
and has the full right to use, license, and protect its rights in
the RACINGO Trademarks for the term of this Agreement;
iii. The Licensor is the exclusive licensee of the entire and
unencumbered exclusive license in and to the RACINGO Copyright
and has the full right to use, license, and protect its rights in
the RACINGO Copyrights for the term of this Agreement;
iv. The Licensor is the exclusive licensee of the entire and
unencumbered exclusive license in and to the Licensed Product,
including the RACINGO Patent, and has the right to grant PWIN the
licence to use the Licensed Product free of any liens, claims or
encumbrances for the term of this Agreement, and there is no
litigation pending against the Licensor which would limit,
restrict or prevent PWIN quiet use and enjoyment of the Licensed
Product;
v. applications to register the RACINGO Trademarks have been
duly made and are in good standing under the laws of the
jurisdictions where they have been applied for, and the Licensor
hereby agrees to register said trademarks and maintain them in
good standing under all applicable laws;
vi. The RACINGO Patent has been duly applied for by and issued
by the relevant authorities to, and is owned by, Winning Games
Inc., and the RACINGO Patent remains valid and enforceable;
vii. The RACINGO Copyrights have been duly registered and are in
good standing under the laws of their respective jurisdictions as
set out in Schedule "D" hereto;
viii. To the best of the Licensor's knowledge, aside from the
possible infringement with regard to a bingo betting game called
Bingo Bet being conducted in Arkansas, and the software developed
by Autotote Systems Inc. for P.E.S.T. Creative Gaming Corporation
for a computer application of RACINGO, no person or company is
infringing on the Licensor's right, title and interest in and to
the RACINGO Trademarks, RACINGO Copyrights, RACINGO Patent or the
Licensed Product in the Territory, and the Licensor's use of the
RACINGO Trademarks, RACINGO Copyright or the Licensed Product in
the United States and Canada does not infringe on the
intellectual property rights of any other person or company;
ix. The Licensor shall indemnify and hold PWIN and its
directors, officers and employees harmless from and against any
losses, damages and expenses with respect to any claim, action or
proceeding taken or threatened by any person, firm, corporation
or other entity relating to the business of the Licensor or
relating to any breach by the Licensor of any provisions of the
Agreement;
(c) PWIN further represents, warrants and covenants that:
i. PWIN will not challenge the Licensor's or the Master
Licensors' rights in and to the RACINGO Trademarks, RACINGO
Copyrights, RACINGO Patent or Licensed Product during the term of
this Agreement and for a period of two (2) years thereafter;
ii. PWIN agrees that it will not during the term of this
Agreement, or for a period of two (2) years thereafter, challenge
the license or any rights of the Licensor or the Master Licensors
in and to the RACINGO Trademarks, RACINGO Copyrights, RACINGO
Patent or Licensed Product, or attack the validity of this
license;
iii. PWIN further agrees that upon the expiry of the RACINGO
Patent it will continue to use the Licensed Product and the
patented matter contained therein only pursuant to this
Agreement, or, in the event this Agreement is terminated,
pursuant to a license from the Licensor or its Master Licensors;
iv. PWIN shall develop, as soon as is reasonable, practical
business and marketing plans for On-Line RACINGO, and shall use
commercially reasonable efforts to promote and facilitate the
commercial and financial viability of On-Line RACINGO;
v. PWIN shall, using commercially reasonable efforts, continue
to develop the business and marketing plans for On-Line RACINGO
to place itself in a situation to take advantage of opportunities
in the On-Line gaming market. PWIN shall report on its efforts
to the Licensor on a quarterly basis, and annual consultation
meetings shall be held between PWIN and the Licensor for the
purpose of reviewing and planning the development of On-Line
RACINGO;
vi. PWIN assumes the risk as to the quality and performance of
any software which has been or will be created by PWIN or on its
behalf for the facilitation and operation of the Licensed
Product;
vii. PWIN shall indemnify and hold the Licensor and its
directors, officers and employees harmless from and against any
losses, damages and expenses with respect to any claim, action or
proceeding taken or threatened by any person, firm, corporation,
governmental or regulatory body (of any level of government) or
other entity relating to the business of PWIN or relating to any
breach by PWIN of any provisions of the Agreement;
viii. PWIN will identify itself as an authorized licensee of
the Licensed Product (including the patents contained therein)
and of the RACINGO Trademarks, RACINGO Patent and RACINGO
Copyrights, and not as the owner of the Licensed Product, RACINGO
Copyrights, RACINGO Patent or the RACINGO Trademarks;
ix. During the term of this Agreement, PWIN shall be considered
a "related company" to the Licensor and the Master Licensors for
the purpose of establishing and maintaining rights in the RACINGO
Trademarks and any new marks developed by PWIN for use in
connection with the Licensed Product, and all rights in these
marks shall enure to the benefit of the Licensor and the Master
Licensors;
x. PWIN will pay any and all sales and use taxes levied or
based upon the price of the Licensed Product and any and all
license fees payable related to the Licensed Product;
xi. PWIN shall use the RACINGO Trademarks only in connection
with the Licensed Product and in a manner which complies with the
standards of quality and service which are usual for and are
followed by PWIN in offering and providing similar services,
which standards of quality are hereby expressly acknowledged,
affirmed and adopted by Licensor as being acceptable standards
for the offering, sale, provision and use of the Licensed
Product. Licensor shall have the right to examine the nature and
manner in which PWIN offers and provides the Licensed Product to
ensure material conformity with these standards of quality.
xii. PWIN agrees to maintain the quality of the advertising,
promotion, and packaging of the Licensed Product at a level
consistent with the quality of the Licensor's present use,
advertising, promotion and packaging thereof, which quality
standards have been mutually agreed upon by the Parties. Said
quality standards shall be reviewed and, if agreed by the
Parties, amended once per year on each anniversary of the
Effective Date. At each such review, PWIN shall provide to the
Licensor samples of all advertising, promotion or packaging
materials used in the preceding year or proposed to be used in
the following year. In the event said samples do not conform
with the accepted standards of quality and use, Licensor shall
advise PWIN, which will take reasonable steps to conform its use
of the RACINGO Trademarks or the Licensed Product to these
standards. If Licensor does not advise PWIN of any such
nonconformity within forty-eight (48) hours of its receipt of
said materials for inspection, this will constitute express
acceptance of and acknowledgement that the materials conform to
the aforesaid standards. When using the RACINGO Trademarks or
the Licensed Product under this Agreement, PWIN agrees to comply
substantially with all laws pertaining to the use of trademarks
in force in the Territory.
xiii. PWIN agrees to assist Licensor, at the Licensor's
expense, to the extent necessary, in the procurement of any
protection or registration for the RACINGO Trademarks or the
Licensed Product, or to protect any of Licensor's rights to the
RACINGO Trademarks or the Licensed Product. If PWIN so desires,
Licensor shall commence or prosecute any claims or suits
necessary to protect the RACINGO Trademarks or the Licensed
Product and the Parties' rights thereto, either in its own name
or in the name of PWIN or with PWIN joined as a party thereto.
The Parties shall notify each other in writing of any
infringements or imitations by others in the RACINGO Trademarks
or the Licensed Product for goods or services which are the same
as or similar to those covered by this Agreement which may come
to either Party's attention. PWIN shall not institute any suit
or take any action on account of any such infringements or
imitations without first obtaining the written consent of the
Licensor so to do, which consent shall not be unreasonably
withheld.
xiv. PWIN shall guarantee adequate funding for the market launch
of the Licensed Product including but not limited to:
(1) the costs of software development;
(2) an initial Jackpot guarantee of $250,000;
(3) sufficient marketing capital to successfully
launch the Licensed Product once at least fifteen
(15) On-Line licensed betting establishments have
agreed to host On-Line RACINGO on their Internet
sites; and
(4) pay all out-of-pocket expenses of said market
launch, including expenses incurred by the
Licensor and the Master Licensors that have been
pre-approved by PWIN.
xv. PWIN shall establish a permanent office in the United States
of America and employ, at its own expense, such personnel as are
necessary to carry out PWIN's duties hereunder;
xvi. PWIN agrees that all Jackpots will be co-mingled where
commercially feasible and permitted by law;
xvii. Insofar as PWIN is not otherwise contractually
restricted from doing so, PWIN hereby covenants that it will, if
so requested in writing by the Licensor, negotiate in good faith
with any person or company which is licensed by the Licensor to
deliver the RACINGO game through a non-On-line medium ("Other
Licensed Party") including without limitation, Other Licensed
Parties licensed with regard to the venues outlined in Schedule
"C" hereto, with the aim of concluding a sublicense or hyperlink
arrangement for On-line RACINGO with such Other Licensed Party,
within PWIN's usual sublicense or hyperlink format. "Hyperlink
arrangement" shall mean an arrangement whereby PWIN's On-Line
facility for On-Line RACINGO shall be made accessible to users of
the Other Licensed Party's On-Line facility.
(d) Except as expressly provided in this agreement, the Licensor
and PWIN make no warranty, express or implied, including any
warranty of merchantability or fitness for a particular purpose,
with respect to the rights to the Licensed Product or the RACINGO
Trademarks granted hereunder including any warranties which may
be implied by the United Nations Convention on Contracts for the
International Sale Of Goods, which implied warranties are hereby
specifically excluded from this Agreement.
5. INTELLECTUAL PROPERTY INDEMNITY
(a) During the term of this Agreement, the Licensor will defend
and hold PWIN harmless from any claim, suit or proceeding brought
against PWIN based on a claim that the Licensed Product, RACINGO
Copyrights or RACINGO Trademarks or PWIN's use of the Licensed
Product, RACINGO Copyrights, or RACINGO Trademarks infringes any
third party's trademark, copyright, patent or other intellectual
property right, or misappropriates a third party's trade secrets
("Claim"), and PWIN shall provide all reasonable information and
assistance requested by the Licensor (at the Licensor's expense)
to handle the defence or settlement of any such Claim.
(b) If the Licensed Product is held to infringe or
misappropriate the rights of any third party and its use is
enjoined, or the Licensor reasonably believes such use may become
enjoined, the Licensor may, at its own expense and at its option,
within a commercially reasonable time frame: (i) procure for PWIN
the right to continue use of the Licensed Product, (ii) replace
the Licensed Product with a non-infringing product of
substantially equivalent function or (iii) modify the Licensed
Product so it becomes non-infringing without substantially
detracting from its function. If none of the foregoing is
reasonably acceptable to PWIN and the use of the Licensed Product
enjoined, PWIN may terminate the Agreement, and PWIN shall cease
use of the Licensed Product.
(c) Licensor shall defend and hereby agrees to hold PWIN
harmless against any claims, suits or proceedings arising solely
out of the use by PWIN of the RACINGO Trademarks, RACINGO
Copyrights or the patent contained in the Licensed Product as
authorized in this Agreement, and PWIN shall provide all
reasonable information and assistance required by the Licensor
(at the Licensor's expense) to handle the defence or settlement
of any such claim, suit or proceeding.
(d) PWIN shall defend and hereby agrees to hold Licensor
harmless against any losses, including any award of damages, the
cost of litigation and attorney fees, incurred by reason of any
claims by third parties against Licensor based on or involving
PWIN's advertising, offering, sale, performance, or use of the
Licensed Product or any other goods or services under the RACINGO
Trademarks.
(e) The foregoing states the Licensor's entire liability and
PWIN's sole and exclusive remedy with respect to any infringement
or misappropriation of any patent, trademarks, trade secrets or
other intellectual property rights of any third party by PWIN.
6. LIMITATION OF LIABILITY
In no event shall any party be liable to the other party for any
indirect, special or consequential damages including, without
limitation, those based on loss of business opportunities,
whether or not the Licensor or PWIN had or should have had any
knowledge, actual or constructive, that such damages might be
incurred. Notwithstanding anything to the contrary, the
limitations of liability set forth in this section will not apply
to (i) a breach by the Licensor or PWIN of the confidentiality
obligations set forth in section 7 below resulting in a material
adverse effect on PWIN, (ii) fraud, acts of gross negligence, or
wilful misconduct, or (iii) the indemnification obligations set
forth in section 5 above.
7. CONFIDENTIALITY
(a) The Licensor acknowledges and agrees that the information
PWIN has provided or will provide in connection with this
Agreement, including, without limitation, the terms and
conditions of this Agreement, are and shall be confidential and
proprietary to PWIN. Such confidential information includes, but
is not limited to, any information of any kind whatsoever
regarding PWIN's business. The Licensor agrees not to use or
disclose to any third party the confidential information of PWIN
with the prior written consent of PWIN. Moreover, the Licensor
agrees to restrict dissemination of particular confidential
information to only those persons in its organization who must
have access to such confidential information in order for the
Licensor to perform its obligations under this Agreement. The
Licensor's obligations with regard to any confidential
information shall not apply in respect of such information that
(i) PWIN authorizes the Licensor to disclose to third parties by
prior written authorization, (ii) is or becomes available in the
public domain, other than by an act or omission of the Licensor
or any employee, agent or other person acting for or on behalf of
the licensor, (iii) is lawfully acquired by the Licensor from
another source without restriction or (iv) is ordered to be
disclosed by a court, administrative agency or other governmental
body with jurisdiction over the parties, provided the licensor
will first have provided PWIN with prompt written notice of such
required disclosure and will take reasonable steps to allow PWIN
to seek a protective order with respect to the confidentiality of
the information required to be disclosed. The Licensor will
promptly co-operate with and assist PWIN in connection with
obtaining such protective order, at PWIN's expense.
(b) The Licensor shall cause every employee or third party to
whom the Licensor discloses confidential information in order to
perform its obligations hereunder to abide by the foregoing
confidentiality provisions.
(c) Upon the termination of this Agreement, the Licensor shall
promptly return such confidential information (and any copies,
extracts and summaries thereof) to PWIN or, with PWIN's written
consent, shall promptly destroy such confidential information
(and any copies, extracts and summaries thereof) and, with
respect to electronically stored copies, delete such records from
any storage unit.
(d) PWIN acknowledges and agrees that the information and
Licensed Product the Licensor has provided or will provide in
connection with this Agreement, including, without limitation,
the terms and conditions of this Agreement, contain and/or are
confidential and proprietary information belonging to the
Licensor. Such confidential information includes, but is not
limited to, any information of any kind whatsoever regarding the
Licensor's business. PWIN agrees not to use or disclose to any
third party the confidential information of the Licensor without
the prior written consent of the Licensor. Moreover, PWIN agrees
to restrict dissemination of particular confidential information
to only those persons in its organization who must have access to
such confidential information in order for PWIN to perform their
obligations under this Agreement. PWIN's obligations with regard
to any confidential information shall not apply in respect of
such information that (i) the Licensor authorizes PWIN to
disclose to third parties by prior written authorization, (ii) is
or becomes available in the public domain, other than by an act
or omission of PWIN or any employee, agent or other person acting
for or on behalf of PWIN (iii) is lawfully acquired by PWIN from
another source without restriction or (iv) is ordered to be
disclosed by a court, administrative agency or other governmental
body with jurisdiction over the parties, provided that PWIN will
first have provided the Licensor with prompt written notice of
such required disclosure and will take reasonable steps to allow
the Licensor to seek a protective order with respect to the
confidentiality of the information required to be disclosed.
PWIN will promptly cooperate with and assist the Licensor in
connection with obtaining such protective order, at the
Licensor's expense.
(e) PWIN shall cause any employee or third party to whom PWIN
discloses confidential information in order to perform its
obligations hereunder to abide by the foregoing confidentiality
provisions.
(f) Upon the termination of this Agreement, PWIN shall promptly
return such confidential information (and any copies, extracts
and summaries thereof) to the Licensor or, with the Licensor's
written consent, shall promptly destroy such confidential
information (and any copies, extracts and summaries thereof) and,
with respect to electronically stored copies, delete such records
from any storage unit.
(g) The restrictions in this section 7 shall continue for a
period of two (2) years after the termination of this Agreement.
8. TERMINATION
(a) The term of this Agreement shall begin on the Effective Date
and shall continue for a period of ten (10) years, unless
terminated earlier pursuant to this Section 8. Such term shall,
at PWIN's discretion, automatically renew for an additional
period of ten (10) years on the same terms save this right of
renewal.
(b) The Parties may by mutual agreement further extend the term
of this Agreement beyond the twenty years provided for. If the
parties are unable to agree on new terms and conditions for any
such further renewal term, the Licensor agrees to give PWIN
written notice of any bona fide offer by a third party to license
the Licensed Product received by the Licensor, with such notice
to include the terms of such offer (the "Offer"). PWIN shall
then have thirty (30) days from its receipt of such notice to
elect to match the Offer ("PWIN's Right of First Refusal"). If
PWIN elects not to match the Offer or fails to respond to the
Licensor within thirty (30) days, the Licensor shall be free at
that time to pursue a license arrangement with such third party.
If a license arrangement with such third party is not entered
into by the Licensor, any subsequent bona fide offers by third
parties to license the Licensed Product received by the Licensor
shall be subject to PWIN's Right of First Refusal described
above. If PWIN elects to match an Offer, the parties shall
promptly negotiate in good faith a definitive agreement which
incorporates the terms of such offer.
(c) If one or more of the following events of default shall
occur, the non-defaulting party shall have the right to terminate
this Agreement:
i. A party breaches any material term or condition of this
Agreement in any material respect, and such breach remains
uncured or no steps have been taken to cure such breach
within ninety (90) days after the defaulting party has
written notice of such uncured breach; or
ii. PWIN applies for or consents to the appointment of a
receiver, trustee or similar office for it or any
substantial part of its property or assets, or any such
appointment is made without such applications of consent by
such party and remain undischarged for a period of ninety
(90) days; or
iii. PWIN consents to the institution of a petition, application,
answer, consent, default or otherwise of any bankruptcy,
insolvency or reorganization and any such proceeding as
instituted against such party remains undischarged for a
period of ninety (90) days; or
iv. PWIN fails to satisfy its payment obligations to the
Licensor, as more specifically detailed in Schedule A
hereto, and such payment obligation remains outstanding
sixty (60) days after the defaulting party has written
notice of such outstanding debt;
provided that if there is a dispute as to the applicability or
application of this section, this Agreement shall not be
terminated until the final decision of the arbitrators
provided for in subsection 9(m) hereof has been delivered to
the Parties.
(c) In the event this Agreement is terminated for an uncured
material breach of its terms, including the events of default set
out in subsection 8(c) above, the licenses granted in section 2
hereof shall terminate forthwith, PWIN's Right of First Refusal
shall be null and void, and PWIN shall have no further right to
continue to use the Licensed Product or the RACINGO Trademarks.
(d) Upon the termination of this Agreement for any reason, (i)
the terminating party shall promptly return or destroy all
confidential information pursuant to Section 7 above and (ii)
PWIN shall pay the Licensor all fees and expenses due and owing
at the time of such termination.
(e) Neither the Licensor or PWIN shall be considered in breach
of this Agreement or liable for any expense, loss or damage
resulting from delay or prevention of performance caused by any
act beyond its reasonable control, including if such lack of
control is related to acts of God, strikes, acts of terrorism, or
any other cause whatsoever, whether similar or dissimilar to
those enumerated above, beyond the reasonable control of the
party. In the event of any delay arising by reason of the
foregoing, the time for performance shall be extended for the
duration of the delay.
9. MISCELLANEOUS
(a) Notice. All notices, demands, requests, reports, approvals
and other communications which may be or are required to be
given, served or sent pursuant to this Agreement shall be in
writing and shall be hand delivered, telefaxed/telecopied to the
below listed numbers with the originals to follow thereafter or
sent by recognised overnight carrier or mailed by first class,
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Licensor:
Racingo Investments Ltd.
c/o CorpAmerica Inc.
30 Old Rudnick Lane
Dover, Delaware 19901
USA
Facsimile: (302)736-4301
With an additional copy to:
Anthony Nimmo
Marshall, O'Toole, Gerstein
6300 Sears Tower, 233 South Wacker Drive
Chicago, Illinois 60606-6042
Telephone: (312) 474-6300
Facsimile: (312) 474-0448
With an additional copy to:
James G. McPherson
Aylesworth, Thompson, Phelan, O'Brien
Suite 3000, Royal Bank Plaza, South Tower
200 Bay Street, Toronto, Ontario M5J 2J1
Telephone: (416)777-4026
Facsimile: (416) 865-1398
If to PWIN:
c/o Peter Tassiopoulos
Playandwin, Inc.
155 University Avenue, Suite 501
Toronto, Ontario M5N 3N5
Telephone: (416) 368-6665 ext. 14
Facsimile: (416) 368-3870
With an additional copy to:
Adam K. Szweras
Stewart & Associates
Suite 710, P.O. Box 160
1 First Canadian Place, 100 King Street West
Toronto, Ontario M5H 7C3
Telephone: (416) 368-7881
Facsimile: (416) 368-7885
Notices shall be effective when properly sent and received.
Any party can notify the others of an address change pursuant
to this notice provision.
(b) Severability. In the event any one or more of the
provisions of the Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the remaining provisions of
this Agreement shall be unimpaired and the parties will
negotiate in good faith to substitute a provision of like
economic intent and effect.
(c) Relationship of the Parties. The parties to this agreement
expressly state and understand that the obligations and rights
hereunder in no way constitute them as partners, joint ventures
or otherwise related in any way and that no party has any power
to bind or commit the other party in any way to a third party or
parties under this Agreement. However, during the term of this
Agreement, PWIN will shall be considered a "related company" to
the Licensor and the Master Licensors for the purpose of
establishing and maintaining rights in the RACINGO Trademarks and
any new marks developed by PWIN for use in connection with the
Licensed Product.
6
(a) Binding Agreement This Agreement shall be binding upon and
shall inure to the benefits of the parties hereto and their
respective successors and permitted assigns. It is the explicit
intention of the parties hereto that no person or entity, other
than the parties hereto, is or shall be entitled to bring any
action or enforce any provision of this Agreement against either
of the parties hereto, and that the covenants, undertakings and
agreements se forth in this Agreement shall be solely for the
benefit of and shall be enforceable only by the parties hereto or
their respective successors or permitted assigns.
(b) Assignment. PWIN may assign this Agreement to one of PWIN's
affiliates or subsidiaries without the consent of the Licensor,
so long as PWIN continues to guarantee to the Licensor the due
performance (including but not limited to the payment of money)
of PWIN's obligation hereunder by the assignee. In such a case,
the term PWIN used herein shall include PWIN's assignee.
Otherwise, neither the Licensor nor PWIN may assign this
Agreement or any of its rights or obligations hereunder without
the prior written consent of the other party and any attempted or
purported assignment, delegation or other transfer in violation
of this paragraph shall be void.
(c) Sub-License. PWIN may sub-license its rights hereunder to
the Licensed Product, RACINGO Trademarks, RACINGO Patent or
RACINGO Copyrights to any third party without the consent of the
Licensor, provided that such sub-license shall be on the same
terms and conditions as the license granted herein and subject to
the quality control provisions set out in subsection 4(c)(xi) of
this Agreement.
(d) Amendment; No Waiver. This Agreement may not be amended,
altered or modified except by an instrument in writing signed by
both parties. No failure or delay by any party in exercising any
right hereunder shall operate as a waiver thereof and no single
or partial exercise of any right shall preclude any other or
further exercise thereof or the exercise of any other right
hereunder.
(e) Restriction. This license is solely for the use of RACINGO
and the RACINGO Trademarks in On-Line wagering in the Territory.
(f) Survival. The provisions of section 1 (Definitions),
Section 3 (Payment), Section 4 (Representations, Warranties and
Covenants), Section 5 (Intellectual Property Indemnity), Section
6 (Limitation of Liability), Section 7 (Confidentiality), Section
8 (Term/Termination), and Section 9 (Miscellaneous) will survive
the termination of this Agreement. If no survival period is
specified in said sections, the provisions thereof shall survive
the termination of this Agreement for a period of four (4) years.
(g) Entire Agreement. This Agreement and all Exhibits attached
hereto set forth the entire understanding of the parties with
respect to the subject matter hereof and supersede any prior
agreements and understandings, both written and oral, which may
have existed between the parties with respect to the subject
matter hereof.
(h) Governing Law. The parties agree that this Agreement is
made in and under the laws of the Licensor's incorporating
jurisdiction, but for convenience to both parties this Agreement
shall be governed by the laws of the State of Delaware, USA,
which will be the proper forum for any controversy arising in
connection with this Agreement and the courts of which will be
the exclusive forum for all such suits, actions or proceedings.
(i) Counterparts. This Agreement may be executed in counterparts
which, taken together, shall constitute one Agreement and any
party may execute this Agreement by signing such counterpart.
(j) Arbitration. Any dispute, disagreements or conflicts which
cannot be worked out to a mutually acceptable conclusion between
the parties shall be submitted to mandatory binding, final
arbitration under the provisions of the Delaware Voluntary
Alternative Dispute Resolution Act.
(k) Time of the Essence. Time shall be of the essence of this
Agreement.
(l) Effective on Signing. This Agreement shall take effect upon
the signing of this Agreement by the appropriate Parties.
IN WITNESS WHEREOF, authorized officers of the undersigned
have caused this Agreement to be duly executed on their behalf,
as to the day and year first herein set forth.
PLAYANDWIN, INC.
Per:
_____________________________
Stewart Garner
RACINGO INVESTMENTS LTD.
Per:
_____________________________
John Hayter
RACINGO INVESTMENTS LTD.
Per:
_____________________________
Stewart Garner
RACINGO INVESTMENTS LTD.
Per:
_____________________________
William H. Johnston
G:\Corp\P\PWIN\Racingo\Licences to PWIN\License agr internet
6oct99.doc
SCHEDULE A
Payment Formula
The license fee to be paid by Playandwin, Inc. ("PWIN") to the
licensor for the use of the Licensed Product in the Territory
during the term of this Agreement shall be one percent (1%) of
gross revenues derived by PWIN that result from or are
attributable to use of the Licensed Product by PWIN for On-Line
wagering in the Territory, as further described by the following
formula:
License Fee = 0.01 x PWIN Gross Licensed Product Revenues
Licensed Product Revenues include income derived by PWIN from:
(i) the sale of RACINGO On-Line tickets; (ii) television or
promotion rights relating to On-Line RACINGO; and (iii) the On-
Line sale of merchandise branded with the RACINGO Trademarks.
Payment of the fees to the Licensor will be calculated and paid
quarterly by PWIN to the Licensor, with a year-end
reconciliation. All fees and accounts payable hereunder shall be
due and payable by PWIN within thirty (30) days following the end
of such quarter. The parties acknowledge and agree that PWIN
shall pay the fees as directed by the Licensor. PWIN shall be
notified of such bank account in writing signed by the Licensor,
prior to the date the first payment is due. Any substitution of
such bank account shall be upon written notice to PWIN, signed by
the Licensor. Payment by PWIN in accordance with such
instructions shall satisfy the PWIN's obligation to pay the
licensor under Article 3 of this Agreement. All charges under
this Agreement shall be paid in U.S. dollars and exclude all
taxes other than customs, duties or charges of any kind
(including, without limitation, withholding or value added taxes)
imposed by any federal, state or local governmental entity for
products or services provided under this Agreement.
SCHEDULE "B"
RACINGO GAME RULES
SCHEDULE "C"
PRODUCTS EXCLUDED
FROM THE DEFINITION OF "LICENSED PRODUCTS" IN THE LICENSE
AGREEMENT
The license granted over the Licensed Products in this
Agreement shall not include any intellectual property rights
and know-how of the Licensor identified under the terms
"RACINGO", "RACINGO Patent", "RACINGO Copyrights" and
"RACINGO Trademarks" as they apply to wagering utilizing
RACINGO, the RACINGO Copyrights, RACINGO Patent and the
RACINGO Trademarks in or delivered by the following venues:
(i) any cruise ship, other than one travelling on the
Mississippi river;
(ii) any betting establishment located on an
Indian/Native/Aboriginal/First Nations reserve;
(iii) any in-flight betting establishment, owned and
operated by an airline;
(iv) any bingo hall or group of bingo halls linked by a local
area network, duly licensed by the relevant governmental
authority of the jurisdiction in which it is located;
(v) On- and Off-Track RACINGO (previously licensed product); or
(vi) In-Home RACINGO;
all of which are sometimes collectively referred to as "Other
Venues".
"On- and Off-Track" shall mean any betting or wagering
method owned or operated by a horse racing track, greyhound
racing track or Licensed Off-Track Betting Establishment,
including but not limited to on-track betting via mutuel
tellers and SAM machines, track-owned OTB parlors, or track
telephone account betting, which channels wagers into that
tracks primary pari-mutuel pool. "Licensed Off-Track Betting
Establishment" shall mean any betting establishment duly
licensed by the relevant governmental authority in the
jurisdiction in which it is located, which provides
facilities for betting on horse or greyhound races. "In-
Home" shall mean within the private residence of individuals
residing in the territory delivered by The TV Games Network,
through its existing wagering platforms (as to be agreed
upon between PWIN and the Licensor).
SCHEDULE "D"
RACINGO COPYRIGHTS
<TABLE>
<S> <C> <C>
TITLE COUNTRY REGISTERED
Sulky and Rider Canada Jan. 20,
1995
Racingo Game Card Canada Jan. 20, 1995
Racingo Rules Canada Feb. 23, 1995
Racingo Races Card Canada Sept. 11, 1996
Racingo Rules and Canada Sept. 11, 1996
Regulations
Racingo In The Money Canada` Sept. 11, 1996
Card
Super Racingo Race Card Canada Sept. 11, 1996
Racingo Play for the Canada Sept. 11, 1996
Day Card
Sulky and Rider U.S. Jan. 24, 1995
Racingo Rules U.S. Jan. 24, 1995
Racingo Rules and U.S. Sept. 24, 1996
Regulations
</TABLE>
February 2, 2000
Stewart Garner, President
Playandwin, Inc.
155 University Avenue
Suite 501
Toronto, Ontario
Canada M5H3B7
Fax: 416-368-3870
Dear Mr. Garner:
This letter will confirm your agreement to retain our firm,
Private Capital Group, Inc. ("PCG"), on a non-exclusive and "best
efforts basis", as a consultant to introduce your company,
Playandwin, Inc. ("WIN"), may complete a capital transaction,
("Transaction"). A Transaction may include a merger of your firm
of your firm with another company or an acquisition, in which
your firm is either acquired or is the acquirer, or a funding in
which WIN obtains equity of debt capital. For this introduction
for our facilitation of a satisfactory Transaction, PCG is to
receive a cash finder's fee equal to Seven Percent (7%) of all
monies received by you as consideration for these efforts. Such a
fee arrangement would apply to the total Transaction due for a
merger, acquisition or an equity investment. Any follow-up
investment made by an investor identified by PCG, directly or
indirectly, within twenty-four months from initial funding shall
be subject to a three percent (3%) finder's fee.
WIN will also issue warrants to PCG, or its designee, equal to
five Percent (5%) of the total amount of transaction value or of
funds raised. Such warrants will have an exercise price of
Transaction terms which shall have not less than a life of five
(5) years from the date of issuance. The warrants will have the
same registration rights as the warrants issued to an underwriter
in an IPO. This fee is in consideration for these efforts. Any
follow-up investment made by an investor or institution
identified by PCG, directly or indirectly, within twenty-four
months from initial funding shall be subject to the same fees.
All finders' fees shall be due and payable in full by WIN after
closing and funding of any Transaction. Fees will be payable to
our firm or assigns. If any fees that are due and payable to PCG
are not paid at the Transaction closing and funding, then WIN
will pay all PCG's costs of collection and related our-of-pocket
expenses. We understand that WIN shall be under no obligation to
accept a merger acquisition, financing or investment from anyone
unless such terms are satisfactory to WIN.
WIN specifically authorizes PCG to deliver a copy of this
agreement to lender investor and authorizes lender/investor to
deduct fee due PCG directly from the first proceeds of the
funding and pay said sum directly to PCG.
If this agreement meets with your approval, please acknowledge by
signing below and delivering a copy to me, so that we may
immediately begin our efforts. I want to thank you for this
opportunity to work with you. I will look forward to a successful
relationship.
Sincerely,
/s/ Donald G. Huggins, Jr.
Donald G. Huggins, Jr. President
Accepted and agreed to this 2 day of February, 2000
/s/ Stewart Garner
Stewart Garner, President
ON- AND OFF-TRACK BETTING LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made as of the 7th day of October,
1999,
BETWEEN:
RACINGO INVESTMENTS LTD.,
a company incorporated under the laws of the State of
Delaware
(hereinafter called the "Licensor")
OF THE FIRST PART
-and-
PLAYANDWIN, INC.,
a corporation incorporated under the laws of the State of
Nevada,
(hereinafter called "PWIN")
OF THE SECOND PART
WHEREAS the Licensor is the Exclusive
licensee of certain intellectual property rights and know-how to
a pari-mutuel bingo-type wager game known as RACINGO and
variations thereof, as more fully described in this Agreement,
pursuant to a licence (the "Master License") granted by P.E.S.T.
Creative Gaming Corporation, PacCanus Inc., and Winning Games
Inc. (collectively known as the "Master Licensors") on October
7th, 1999;
AND WHEREAS the Licensor desires to grant to PWIN a license
to use or sub-license the use of said intellectual property
rights and know-how, as more fully described in this Agreement;
AND WHEREAS PWIN desires to receive a license to use or sub-
license the use of such intellectual property rights and agrees
to pay a fee for such rights pursuant to the terms and conditions
set forth in this Agreement;
AND THEREFORE, in consideration of the foregoing, which are
a part hereof, and of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
1. 1. DEFINITIONS
(a) "Dollars" or "$" shall mean United States dollars.
(b) "Effective Date" shall mean the 7th day of October, 1999.
(c) "Jackpot" shall mean the pool or pools of funds, funded in
accordance with this Agreement and the RACINGO game rules
attached hereto as Schedule "B", from which prize moneys will be
disbursed to winners in the RACINGO game in accordance with the
RACINGO rules attached hereto as Schedule "B".
(d) "Licensed Off-Track Betting Establishment" shall mean any
betting establishment which provides facilities for betting on
horse or greyhound races and which is duly licensed by the
relevant governmental authority in the jurisdiction in which it
is located.
(e) "Licensed Product" shall mean the intellectual property
rights and know-how of the Licensor identified under the terms
"RACINGO", "RACINGO Copyrights", "RACINGO Patent" and "RACINGO
Trademarks" below as they apply to On- and Off-Track wagering
utilizing RACINGO, the RACINGO Patent, the RACINGO Copyrights and
the RACINGO Trademarks, and shall specifically not include the
previously licensed products and venues identified in Schedule
"C" hereto.
(f) "Licensor" shall mean Racingo Investments Ltd..
(g) "Master Licence" shall mean the licence over the
intellectual property rights and know-how of the Licensor
identified under the terms "RACINGO", "RACINGO Copyrights",
"RACINGO Patent" and "RACINGO Trademarks" below granted by the
Master Licensors to Racingo Investments Ltd. on October 7th,
1999.
(h) "Master Licensors" shall mean P.E.S.T. Creative Gaming
Corporation, PacCanus Inc. and Winning Games Inc..
(i) "Offer" shall have the meaning set forth in Section 8(b)
below.
(j) "On- and Off-Track" shall mean any betting or wagering
method owned or operated by a horse racing track, greyhound
racing track or Licensed Off-Track Betting Establishment,
including but not limited to on-track betting via mutuel tellers
and SAM machines, track-owned OTB parlors, or track telephone
account betting, which channels wagers into that tracks primary
pari-mutuel pool.
(k) "PWIN's Right of First Refusal" shall have the meaning set
forth in Section 8(b) below.
(l) "RACINGO" means the pari-mutuel bingo-type wager game and
lottery identified by the RACINGO Trademarks and all associated
RACINGO Copyrights, know-how, intellectual property and other
materials utilized in the execution of the RACINGO game as held
by the Licensor, including United States Patent No. 5,518,239
issued to William H. Johnston on May 21, 1996, regarding a
lottery racing sweepstakes game, which patent has been licensed
to Licensor, and also including the RACINGO game developed by
P.E.S.T. Creative Gaming Corp. that was test marketed in
Connecticut, the rules and regulations of which are appended
hereto as Schedule "B".
(m) "RACINGO Copyrights" means the copyright assets more fully
identified in Schedule "D" hereto, and their respective
documentation.
(n) "RACINGO Trademarks" means the trademark RACINGO owned by
Winning in the United States and the subject of his application
to register the trademark, Application No. 75/331,278; and the
Canadian trademark RACINGO (the subject of an application by PEST
to register the trademark, application number 767,826), the
Canadian trademark SUPER RACINGO (the subject of an application
by PEST to register the trademark, application number 767,827),
the Canadian trademark RACINGO HORSHOE DESIGN (the subject of an
application by PEST to register the trademark, application number
856,030), the Canadian trademark RACINGO GOIN' BIG TIME (the
subject of an application by PEST to register the trademark,
application number856,029), and the Canadian trademark SULKY
DESIGN (the subject of an application by PEST to register the
trademark, application number 767,828), all owned by PEST in
Canada; and the European trademark RACINGO owned by PEST, the
subject of an application by PEST to register the trademark,
application number 642,728, which trademarks have been
exclusively licensed by William H. Johnston and P.E.S.T. Creative
Gaming Corp. to Licensor.
(o) "Territory" shall mean the territory of Canada, Mexico and
the United States of America including the State of Hawaii but
not including any overseas territories, dependencies or
protectorates, nor any venue identified in Schedule "C" hereto.
2. GRANT OF LICENSE
(a) The Licensor hereby grants PWIN an exclusive right to use or
sub-license the use of the Licensed Product in connection with
and to facilitate On- and Off-Track wagering, including the
manufacture, marketing and sale of merchandise branded with the
RACINGO Trademarks.
(b) The Licensor hereby grants PWIN an exclusive licence to use
or sub-license the use of the RACINGO Trademarks in connection
with the advertising, promotion, and sale of the Licensed Product
in the Territory throughout the term of this agreement, and to
sell merchandise branded with the RACINGO Trademarks other than
On-Line (as that term is defined in Schedule "C" hereto),
provided that any use of the RACINGO Trademarks (including by a
licensee of PWIN) shall be subject to the quality control
provisions set out in subsection 4(c)(xi) of this Agreement.
(c) The Licensor hereby grants PWIN the exclusive right to
display, reproduce, copy, transmit or license works covered by
the RACINGO Copyrights in connection with the Licensed Product,
and the exclusive right to create derivative works from the
RACINGO Copyrights for use in connection with the Licensed
Product, provided that such use (including use by a licensee of
PWIN) shall be subject to the quality control provisions set out
in subsection 4(c)(xi) of this Agreement.
(d) The rights granted in subsections 2(a), 2(b), and 2(c) above
include the right to manage, develop, market, promote and create
derivative works of the Licensed Product, provided that such
rights are subject to the quality control provisions set out in
subsections 4(c)(xi) and 4(c)(xii) of this Agreement. Any
derivative works so created including improvement patents,
software, copyrights, trademarks and all right, title interest
thereto shall enure to and be assigned to the Licensor or as
directed by the Licensor as required by the Master License.
(e) The Licensor expressly acknowledges and agrees that the
exclusive license granted above precludes the Licensor's use or
licensing of the Licensed Product in connection with or to
facilitate On- and Off-Track wagering throughout the Territory
throughout the term of this Agreement. The Licensor retains the
right to use or to license the use of the Licensed Product in
connection with any goods, services and activities other than On-
and Off-Track wagering in the Territory.
(f) Notwithstanding subsections 2(a) to 2(d) above, the Licensor
grants no license or right thereunder that it is not licensed to
grant under the Master License.
(g) PWIN acknowledges that the Licensor retains all rights to
the Licensed Product provided hereunder, subject to the Master
License, and that the licence granted by the Licensor herein does
not convey any proprietary interest in the Licensed Product to
PWIN other than the license as specified herein.
3. PAYMENT
(a) PWIN shall pay the Licensor for the rights to the Licensed
Product granted hereunder in accordance with the formula and
pursuant to the terms set forth in Schedule A below.
(b) PWIN shall maintain complete, clear, accurate records of all
payments received by PWIN, its affiliates, or any other party
with whom it has contracted in regard to the RACINGO game in
connection with its use of the Licensed Product. Such records
shall be maintained by PWIN relating to PWIN's use of the
Licensed Products. The Licensor shall have the right at its
expense to have an inspection and audit of all the relevant
accounting and sales books and records of PWIN conducted by an
auditor reasonably acceptable to all parties. Such audit shall be
performed under strict confidentiality pursuant to a written
agreement consistent with the confidentiality obligations set
forth in Section 7 below. Any such audit shall be conducted only
upon reasonable written notice during normal business hours.
4. REPRESENTATIONS, WARRANTIES AND CONVENANTS
(a) Each party represents, warrants and covenants to the others
that:
i. It is a corporation duly organized, validly existing and in
good standing under the laws of the state or province or country
of its incorporation and has all requisite power and authority to
enter into and perform its obligations under this Agreement;
ii. This Agreement when executed will become the legal, valid
and binding obligation of the party which shall be enforceable
against the party in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization and other similar laws relating to the rights of
creditors generally;
iii. To the best of each party's present knowledge, there is no
material action, suit or proceeding pending against it nor, to
the best of its knowledge; threatened against it which is likely
to materially adversely affect its performance of its obligations
hereunder, nor, to the best of its knowledge, are there any
existing acts or conditions which are reasonably expected to be a
proper basis for any such action, suit or proceeding;
iv. This Agreement creates no agency relationship between the
parties hereto, and nothing herein contained shall be construed
to place the parties in the relationship of partners or joint
venturers, and neither party shall have the power to obligate or
bind the other in any manner whatsoever; and
v. It is not insolvent or bankrupt.
(b) The Licensor represents, warrants and covenants to PWIN that
to the best of the Licensor's present knowledge:
i. The Licensed Product shall perform in accordance with its
written specifications, if any;
ii. The Licensor is the exclusive licensee of the entire and
unencumbered exclusive license in and to the RACINGO Trademarks
and has the full right to use, license, and protect its rights in
the RACINGO Trademarks for the term of this Agreement;
iii. The Licensor is the exclusive licensee of the entire and
unencumbered exclusive license in and to the RACINGO Copyright
and has the full right to use, license, and protect its rights in
the RACINGO Copyrights for the term of this Agreement;
iv. The Licensor is the exclusive licensee of the entire and
unencumbered exclusive license in and to the Licensed Product,
including the RACINGO Patent, and has the right to grant PWIN the
licence to use the Licensed Product free of any liens, claims or
encumbrances for the term of this Agreement, and there is no
litigation pending against the Licensor which would limit,
restrict or prevent PWIN quiet use and enjoyment of the Licensed
Product;
v. applications to register the RACINGO Trademarks have been
duly made and are in good standing under the laws of the
jurisdictions where they have been applied for, and the Licensor
hereby agrees to register said trademarks and maintain them in
good standing under all applicable laws;
vi. The RACINGO Patent has been duly applied for by and issued
to Winning Games Inc. by the relevant authorities, is owned by
Winning Games Inc., and remains in good standing;
vii. The RACINGO Copyrights have been duly registered and are in
good standing under the laws of their respective jurisdictions as
set out in Schedule "D" hereto;
viii. To the best of the Licensor's knowledge, aside from the
possible infringement with regard to a bingo betting game called
Bingo Bet being conducted in Arkansas, and the software developed
by Autotote Systems Inc. for P.E.S.T. Creative Gaming Corporation
for a computer application of RACINGO, no person or company is
infringing on the Licensor's right, title and interest in and to
the RACINGO Trademarks, RACINGO Copyrights, RACNGO Patent or the
Licensed Product in the Territory, and the Licensor's use of the
RACINGO Trademarks, RACINGO Copyright or the Licensed Product in
the United States and Canada does not infringe on the
intellectual property rights of any other person or company;
ix. The Licensor shall indemnify and hold PWIN and its
directors, officers and employees harmless from and against any
losses, damages and expenses with respect to any claim, action or
proceeding taken or threatened by any person, firm, corporation
or other entity relating to the business of the Licensor or
relating to any breach by the Licensor of any provisions of the
Agreement;
(c) PWIN further represents, warrants and covenants that:
i. PWIN will not challenge the Licensor's or the Master
Licensors' rights in and to the RACINGO Trademarks, RACINGO
Copyrights, RACINGO Patent or Licensed Product during the term of
this Agreement and for a period of two (2) years thereafter;
ii. PWIN agrees that it will not during the term of this
Agreement, or for a period of two (2) years thereafter, challenge
the license or any rights of the Licensor or the Master Licensors
in and to the RACINGO Trademarks, RACINGO Copyrights, RACINGO
Patent or Licensed Product, or attack the validity of this
license;
iii. PWIN further agrees that upon the expiry of the RACINGO
Patent it will continue to use the Licensed Product and the
patented matter contained therein only pursuant to this
Agreement, or, in the event this Agreement is terminated,
pursuant to a license from the Licensor or its Master Licensors;
iv. PWIN shall develop, as soon as is reasonable, practical
business and marketing plans for On- and Off-Track RACINGO, and
shall use commercially reasonable efforts to promote and
facilitate the commercial and financial viability of On- and Off-
Track RACINGO;
v. PWIN shall, using commercially reasonable efforts, continue
to develop the business and marketing plans for On- and Off-Track
RACINGO to place itself in a situation to take advantage of
opportunities in the On- and Off-Track gaming market. PWIN shall
report on its efforts to the Licensor on a quarterly basis, and
annual consultation meetings shall be held between PWIN and the
Licensor for the purpose of reviewing and planning the
development of On- and Off-Track RACINGO;
vi. PWIN assumes the risk as to the quality and performance of
any software which has been or will be created by PWIN or on its
behalf for the facilitation and operation of the Licensed
Product;
vii. PWIN shall indemnify and hold the Licensor and its
directors, officers and employees harmless from and against any
losses, damages and expenses with respect to any claim, action or
proceeding taken or threatened by any person, firm, corporation,
governmental or regulatory body (of any level of government) or
other entity relating to the business of PWIN or relating to any
breach by PWIN of any provisions of the Agreement;
viii. PWIN will identify itself as an authorized licensee of
the Licensed Product (including the patents contained therein)
and of the RACINGO Trademarks, RACINGO Patent and RACINGO
Copyrights, and not as the owner of the Licensed Product, RACINGO
Copyrights or the RACINGO Trademarks;
ix. during the term of this Agreement, PWIN shall be considered
a "related company" to the Licensor and the Master Licensors for
the purpose of establishing and maintaining rights in the RACINGO
Trademarks and any new marks developed by PWIN for use in
connection with the Licensed Product, and all rights in these
marks shall enure to the benefit of the Licensor and the Master
Licensors;
x. PWIN will pay any and all sales and use taxes levied or
based upon the price of the Licensed Product and the license fees
payable related to the Licensed Product;
xi. PWIN shall use the RACINGO Trademarks only in connection
with the Licensed Product and in a manner which complies with the
standards of quality and service which are usual for and are
followed by PWIN in offering and providing similar services,
which standards of quality are hereby expressly acknowledged,
affirmed and adopted by Licensor as being acceptable standards
for the offering, sale, provision and use of the Licensed
Product. Licensor shall have the right to examine the nature and
manner in which PWIN offers and provides the Licensed Product to
ensure material conformity with these standards of quality.
xii. PWIN agrees to maintain the quality of the advertising,
promotion, and packaging of the Licensed Product at a level
consistent with the quality of the Licensor's present use,
advertising, promotion and packaging thereof, which quality
standards have been mutually agreed upon by the Parties. Said
quality standards shall be reviewed and, if agreed by the
Parties, amended once per year on each anniversary of the
Effective Date. At each such review, PWIN shall provide to the
Licensor samples of all advertising, promotion or packaging
materials used in the preceding year or proposed to be used in
the following year. In the event said samples do not conform
with the accepted standards of quality and use, Licensor shall
advise PWIN, which will take reasonable steps to conform its use
of the RACINGO Trademarks or the Licensed Product to these
standards. If Licensor does not advise PWIN of any such
nonconformity within forty-eight (48) hours of its receipt of
said materials for inspection, this will constitute express
acceptance of and acknowledgement that the materials conform to
the aforesaid standards. When using the RACINGO Trademarks or
the Licensed Product under this Agreement, PWIN agrees to comply
substantially with all laws pertaining to the use of trademarks
in force in the Territory.
xiii. PWIN agrees to assist Licensor, at the Licensor's
expense, to the extent necessary, in the procurement of any
protection or registration for the RACINGO Trademarks or the
Licensed Product, or to protect any of Licensor's rights to the
RACINGO Trademarks or the Licensed Product. If PWIN so desires,
Licensor shall commence or prosecute any claims or suits
necessary to protect the RACINGO Trademarks or the Licensed
Product and the Parties' rights thereto, either in its own name
or in the name of PWIN or with PWIN joined as a party thereto.
The Parties shall notify each other in writing of any
infringements or imitations by others in the RACINGO Trademarks
or the Licensed Product for goods or services which are the same
as or similar to those covered by this Agreement which may come
to either Party's attention. PWIN shall not institute any suit
or take any action on account of any such infringements or
imitations without first obtaining the written consent of the
Licensor so to do, which consent shall not be unreasonably
withheld.
xiv. PWIN shall provide a minimum of $3,000,000 for funding of
the market launch of the Licensed Product once a sufficient
number of horse-racing tracks, with an aggregate annual betting
volume of $5,000,000,000, have agreed to participate in the
launch or to host On- and Off-Track RACINGO. If PWIN determines
that more capital is needed for bona fide business expansion,
PWIN shall be solely responsible to make it available.
xv. PWIN shall:
(1) establish a permanent office in the United States
of America;
(2) employ, at its own expense, such personnel as are
necessary to carry out PWIN's duties hereunder;
(3) negotiate and prepare contracts with horse racing
tracks, greyhound racing tracks, and Licensed Off-
Track Betting Establishments in the Territory to
allow the use of the Licensed Product at said
tracks and betting establishments; and
(4) pay all out-of-pocket expenses related to the
market launch of the Licensed Product, including
expenses incurred by the Licensor and the Master
Licensors that have been pre-approved by PWIN.
xvi. PWIN shall seed and maintain a minimum Jackpot of
$1,000,000. All Jackpots will be co-mingled where commercially
feasible and permitted by law.
(d) Except as expressly provided in this agreement, the Licensor
and PWIN make no warranty, express or implied, including any
warranty of merchantability or fitness for a particular purpose,
with respect to the rights to the Licensed Product or the RACINGO
Trademarks granted hereunder including any warranties which may
be implied by the United Nations Convention on Contracts for the
International Sale Of Goods, which implied warranties are hereby
specifically excluded.
5. INTELLECTUAL PROPERTY INDEMNITY
(a) During the term of this Agreement, the Licensor will defend
and hold PWIN harmless from any claim, suit or proceeding brought
against PWIN based on a claim that the Licensed Product, RACINGO
Copyrights or RACINGO Trademarks or PWIN's use of the Licensed
Product, RACINGO Copyrights, or RACINGO Trademarks infringes any
third party's trademark, copyright, patent or other intellectual
property right, or misappropriates a third party's trade secrets
("Claim"), and PWIN shall provide all reasonable information and
assistance requested by the Licensor (at the Licensor's expense)
to handle the defence or settlement of any such Claim.
(b) If the Licensed Product is held to infringe or
misappropriate the rights of any third party and its use is
enjoined, or the Licensor reasonably believes such use may become
enjoined, the Licensor may, at its own expense and at its option,
within a commercially reasonable time frame: (i) procure for PWIN
the right to continue use of the Licensed Product, (ii) replace
the Licensed Product with a non-infringing product of
substantially equivalent function or (iii) modify the Licensed
Product so it becomes non-infringing without substantially
detracting from its function. If none of the foregoing is
reasonably acceptable to PWIN and the use of the Licensed Product
enjoined, PWIN may terminate the Agreement, and PWIN shall cease
use of the Licensed Product.
(c) Licensor shall defend and hereby agrees to hold PWIN
harmless against any claims, suits or proceedings arising solely
out of the use by PWIN of the RACINGO Trademarks, RACINGO
Copyrights or the RACINGO Patent as authorized in this Agreement,
and PWIN shall provide all reasonable information and assistance
required by the Licensor (at the Licensor's expense) to handle
the defence or settlement of any such claim, suit or proceeding.
(d) During the term of this Agreement PWIN shall defend and
hereby agrees to hold Licensor harmless against any losses,
including any damage awards, the cost of litigation and attorney
fees, incurred by reason of any claims by third parties against
Licensor based on or involving PWIN's advertising, offering,
sale, performance, or use of the Licensed Product or any other
goods or services under the RACINGO Trademarks.
(e) The foregoing states the Licensor's entire liability and
PWIN's sole and exclusive remedy with respect to any infringement
or misappropriation of any patent, trademarks, trade secrets or
other intellectual property rights of any third party by PWIN.
6. LIMITATION OF LIABILITY
In no event shall any party be liable to the other party for any
indirect, special or consequential damages including, without
limitation, those based on loss of business opportunities,
whether or not the Licensor or PWIN had or should have had any
knowledge, actual or constructive, that such damages might be
incurred. Notwithstanding anything to the contrary, the
limitations of liability set forth in this section will not apply
to (i) a breach by the Licensor or PWIN of the confidentiality
obligations set forth in section 7 below resulting in a material
adverse effect on PWIN, (ii) fraud, acts of gross negligence, or
wilful misconduct, or (iii) the indemnification obligations set
forth in section 5 above.
7. CONFIDENTIALITY
(a) The Licensor acknowledges and agrees that the information
PWIN has provided or will provide in connection with this
Agreement, including, without limitation, the terms and
conditions of this Agreement, are and shall be confidential and
proprietary to PWIN. Such confidential information includes, but
is not limited to, any information of any kind whatsoever
regarding PWIN's business. The Licensor agrees not to use or
disclose to any third party the confidential information of PWIN
with the prior written consent of PWIN. Moreover, the Licensor
agrees to restrict dissemination of particular confidential
information to only those persons in its organization who must
have access to such confidential information in order for the
Licensor to perform its obligations under this Agreement. The
Licensor's obligations with regard to any confidential
information shall not apply in respect of such information that
(i) PWIN authorizes the Licensor to disclose to third parties by
prior written authorization, (ii) is or becomes available in the
public domain, other than by an act or omission of the Licensor
or any employee, agent or other person acting for or on behalf of
the licensor, (iii) is lawfully acquired by the Licensor from
another source without restriction or (iv) is ordered to be
disclosed by a court, administrative agency or other governmental
body with jurisdiction over the parties, provided the licensor
will first have provided PWIN with prompt written notice of such
required disclosure and will take reasonable steps to allow PWIN
to seek a protective order with respect to the confidentiality of
the information required to be disclosed. The Licensor will
promptly cooperate with and assist PWIN in connection with
obtaining such protective order, at PWIN's expense.
(b) The Licensor shall cause each employee or third party to
whom the Licensor discloses confidential information in order to
perform its obligations hereunder to abide by the foregoing
confidentiality provisions.
(c) Upon the termination of this Agreement, the Licensor shall
promptly return such confidential information (and any copies,
extracts and summaries thereof) to PWIN or, with PWIN's written
consent, shall promptly destroy such confidential information
(and any copies, extracts and summaries thereof) and, with
respect to electronically stored copies, delete such records from
any storage unit.
(d) PWIN acknowledges and agrees that the information and
Licensed Product the Licensor has provided or will provide in
connection with this Agreement, including, without limitation,
the terms and conditions of this Agreement, contain and are
confidential and proprietary information belonging to the
Licensor. Such confidential information includes, but is not
limited to, any information of any kind whatsoever regarding the
Licensor's business. PWIN agrees not to use or disclose to any
third party the confidential information of the Licensor without
the prior written consent of the Licensor. Moreover, PWIN agrees
to restrict dissemination of particular confidential information
to only those persons in its organization who must have access to
such confidential information in order for PWIN to perform their
obligations under this Agreement. PWIN's obligations with regard
to any confidential information shall not apply in respect of
such information that (i) the Licensor authorizes PWIN to
disclose to third parties by prior written authorization, (ii) is
or becomes available in the public domain, other than by an act
or omission of PWIN or any employee, agent or other person acting
for or on behalf of PWIN (iii) is lawfully acquired by PWIN from
another source without restriction or (iv) is ordered to be
disclosed by a court, administrative agency or other governmental
body with jurisdiction over the parties, provided that PWIN will
first have provided the Licensor with prompt written notice of
such required disclosure and will take reasonable steps to allow
the Licensor to seek a protective order with respect to the
confidentiality of the information required to be disclosed.
PWIN will promptly cooperate with and assist the Licensor in
connection with obtaining such protective order, at the
Licensor's expense.
(e) PWIN shall cause any employee or third party to whom PWIN
discloses confidential information in order to perform its
obligations hereunder to abide by the foregoing confidentiality
provisions.
(f) Upon the termination of this Agreement, PWIN shall promptly
return such confidential information (and any copies, extracts
and summaries thereof) to the Licensor or, with the Licensor's
written consent, shall promptly destroy such confidential
information (and any copies, extracts and summaries thereof) and,
with respect to electronically stored copies, delete such records
from any storage unit.
(g) The restrictions in this section 7 shall continue for a
period of two (2) years after the termination of this Agreement.
8. TERMINATION
(a) The term of this Agreement shall begin on the Effective Date
and shall continue for a period of ten (10) years, unless
terminated earlier pursuant to this Section 8. Such term shall
automatically renew, at PWIN's discretion, for an additional
period of ten (10) years on the same terms save this right of
renewal.
(b) The Parties may by mutual agreement extend the term of this
Agreement beyond the twenty years provided for in subsection 8(a)
above. If the Parties are unable to agree on new terms and
conditions for any further renewal term, the Licensor agrees to
give PWIN written notice of any bona fide offer by a third party
to license the Licensed Product received by the Licensor, with
such notice to include the terms of such offer (the "Offer").
PWIN shall then have thirty (30) days from its receipt of such
notice to elect to match the Offer ("PWIN's Right of First
Refusal"). If PWIN elects not to match the Offer or fails to
respond to the Licensor within thirty (30) days, the Licensor
shall be free at that time to pursue a license arrangement with
such third party. If a license arrangement with such third party
is not entered into by the Licensor, any subsequent bona fide
offers by third parties to license the Licensed Product received
by the Licensor shall be subject to PWIN's Right of First Refusal
described above. If PWIN elects to match an Offer, the parties
shall promptly negotiate in good faith a definitive agreement
which incorporates the terms of such offer.
(c) If one or more of the following events of default shall
occur, the non-defaulting party shall have the right to terminate
this Agreement:
i. A party breaches any material term or condition of this
Agreement in any material respect, and such breach remains
uncured or no steps have been taken to cure such breach
within ninety (90) days after the defaulting party has
written notice of such uncured breach; or
ii. PWIN applies for or consents to the appointment of a
receiver, trustee or similar office for it or any
substantial part of its property or assets, or any such
appointment is made without such applications of consent by
such party and remain undischarged for a period of ninety
(90) days; or
iii. PWIN consents to the institution of a petition, application,
answer, consent, default or otherwise of any bankruptcy,
insolvency or reorganization and any such proceeding as
instituted against such party remains undischarged for a
period of ninety (90) days; or
iv. PWIN fails to satisfy its payment obligations to the
Licensor, as more specifically detailed in Schedule A
hereto, and such payment obligation remains outstanding
sixty (60) days after the defaulting party has written
notice of such outstanding debt;
provided that if there is a dispute as to the applicability or
application of this section, this Agreement shall not be
terminated until the final decision of the arbitrators
provided for in subsection 9(m) hereof has been delivered to
the Parties.
(c) In the event this Agreement is terminated for an uncured
material breach of its terms, including the events of default set
out in subsection 8(d) above, the licenses granted in section 2
hereof shall terminate forthwith, PWIN's Right of First Refusal
shall be null and void, and PWIN shall have no further right to
continue to use the Licensed Product or the RACINGO Trademarks.
(d) Upon the termination of this Agreement for any reason, (i)
the terminating party shall promptly return or destroy all
confidential information pursuant to Section 7 above and (ii)
PWIN shall pay the Licensor all fees and expenses due and owing
at the time of such termination.
(e) Neither the Licensor or PWIN shall be considered in breach
of this Agreement or liable for any expense, loss or damage
resulting from delay or prevention of performance caused by any
act beyond its reasonable control, including if such lack of
control is related to acts of God, strikes, acts of terrorism, or
any other cause whatsoever, whether similar or dissimilar to
those enumerated above, beyond the reasonable control of the
party. In the event of any delay arising by reason of the
foregoing, the time for performance shall be extended for the
duration of the delay.
9. MISCELLANEOUS
(m) Notice. All notices, demands, requests, reports, approvals
and other communications which may be or are required to be
given, served or sent pursuant to this Agreement shall be in
writing and shall be hand delivered, telefaxed/telecopied to the
below listed numbers with the originals to follow thereafter or
sent by recognized overnight carrier or mailed by first class,
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Licensor:
Racingo Investments Ltd.
c/o CorpAmerica Inc.
30 Old Rudnick Lane
Dover, Delaware 19901
USA
Facsimile: (302)736-4301
With an additional copy to:
Anthony Nimmo
Marshall, O'Toole, Gerstein
6300 Sears Tower, 233 South Wacker Drive
Chicago, Illinois 60606-6042
Telephone: (312) 474-6300
Facsimile: (312) 474-0448
With an additional copy to:
James G. McPherson
Aylesworth, Thompson, Phelan, O'Brien
Suite 3000, Royal Bank Plaza, South Tower
200 Bay Street, Toronto, Ontario M5J 2J1
Telephone: (416)777-4026
Facsimile: (416) 865-1398
If to PWIN:
c/o Stewart Garner
Playandwin, Inc.
155 University Avenue, Suite 501
Toronto, Ontario M5N 3N5
Telephone: (416) 368-6665 ext. 14
Facsimile: (416) 368-3870
With an additional copy to:
Adam K. Szweras
Stewart & Associates
Suite 710, P.O. Box 160
1 First Canadian Place, 100 King Street West
Toronto, Ontario M5H 7C3
Telephone: (416) 368-7881
Facsimile: (416) 368-7885
Notices shall be effective when properly sent and received.
Any party can notify the others of an address change pursuant
to this notice provision.
(a) Severability. In the event any one or more of the
provisions of the Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the remaining provisions of
this Agreement shall be unimpaired and the parties will
negotiate in good faith to substitute a provision of like
economic intent and effect.
(b) Relationship of the Parties. The parties to this agreement
expressly state and understand that the obligations and rights
hereunder in no way constitute them as partners, joint ventures
or otherwise related in any way and that no party has any power
to bind or commit the other party in any way to a third party or
parties under this Agreement. However, during the term of this
Agreement, PWIN will shall be considered a "related company" to
the Licensor and the Master Licensors for the purpose of
establishing and maintaining rights in the RACINGO Trademarks and
any new marks developed by PWIN for use in connection with the
Licensed Product.
(c) Binding Agreement This Agreement shall be binding upon and
shall inure to the benefits of the parties hereto and their
respective successors and permitted assigns. It is the explicit
intention of the parties hereto that no person or entity, other
than the parties hereto, is or shall be entitled to bring any
action or enforce any provision of this Agreement against either
of the parties hereto, and that the covenants, undertakings and
agreements se forth in this Agreement shall be solely for the
benefit of and shall be enforceable only by the parties hereto or
their respective successors or permitted assigns.
(d) Assignment. PWIN may assign this Agreement to one of PWIN's
affiliates or subsidiaries without the consent of the Licensor,
so long as PWIN continues to guarantee to the Licensor the due
performance (including but not limited to the payment of money)
of PWIN's obligation hereunder by the assignee. In such a case,
the term PWIN used herein shall include PWIN's assignee.
Otherwise, neither the Licensor nor PWIN may assign this
Agreement or any of its rights or obligations hereunder without
the prior written consent of the other party and any attempted or
purported assignment, delegation or other transfer in violation
of this paragraph shall be void.
(e) Sub-License. PWIN may sub-license its rights hereunder to
the Licensed Product, RACINGO Trademarks, RACINGO Patent or
RACINGO Copyrights to any third party without the consent of the
Licensor, provided that such sub-license shall be on the same
terms and conditions as the license granted herein and subject to
the quality control provisions set out in subsection 4(c)(xi) of
this Agreement.
(f) Amendment; No Waiver. This Agreement may not be amended,
altered or modified except by an instrument in writing signed by
both parties. No failure or delay by any party in exercising any
right hereunder shall operate as a waiver thereof and no single
or partial exercise of any right shall preclude any other or
further exercise thereof or the exercise of any other right
hereunder.
(g) Restriction. This license is solely for the use of RACINGO
and the RACINGO Trademarks in On- and Off-Track wagering in the
Territory.
(h) Survival. The provisions of section 1 (Definitions),
Section 3 (Payment), Section 4 (Representations, Warranties and
Covenants), Section 5 (Intellectual Property Indemnity), Section
6 (Limitation of Liability), Section 7 (Confidentiality), Section
8 (Term/Termination), and Section 9 (Miscellaneous) will survive
the termination of this Agreement. If no survival period is
specified in said sections, the provisions thereof shall survive
the termination of this Agreement for a period of four (4) years.
(i) Entire Agreement. This Agreement and all Exhibits attached
hereto set forth the entire understanding of the parties with
respect to the subject matter hereof and supersede any prior
agreements and understandings, both written and oral, which may
have existed between the parties with respect to the subject
matter hereof.
(j) Governing Law. The parties agree that this Agreement is
made in and under the laws of the Licensor's incorporating
jurisdiction, but for convenience to both parties this Agreement
shall be governed by the laws of the State of Delaware, USA,
which will be the proper forum for any controversy arising in
connection with this Agreement and the courts of which will be
the exclusive forum for all such suits, actions or proceedings.
(k) Counterparts. This Agreement may be executed in counterparts
which, taken together, shall constitute one Agreement and any
party may execute this Agreement by signing such counterpart.
(l) Arbitration. Any dispute, disagreements or conflicts which
cannot be worked out to a mutually acceptable conclusion between
the parties shall be submitted to mandatory binding, final
arbitration under the provisions of the Delaware Voluntary
Alternative Dispute Resolution Act.
(m) Time of the Essence. Time shall be of the essence of this
Agreement.
(n) Effective on Signing. This Agreement shall take effect upon
the signing of this Agreement by the appropriate Parties.
IN WITNESS WHEREOF, authorized officers of the undersigned
have caused this Agreement to be duly executed on their behalf,
as to the day and year first herein set forth.
PLAYANDWIN, INC.
Per:
_____________________________
Stewart Garner
RACINGO INVESTMENTS LTD.
Per:
_____________________________
John Hayter
RACINGO INVESTMENTS LTD.
Per:
_____________________________
Stewart Garner
RACINGO INVESTMENTS LTD.
Per:
_____________________________
William H. Johnston
G:\Corp\P\PWIN\Racingo\Licences to PWIN\License agr landbased
6oct99.doc
SCHEDULE A
Payment Formula
The license fee to be paid by Playandwin, Inc. ("PWIN") to the
licensor for the use of the Licensed Product in the Territory
during the term of this Agreement shall be one half of one
percent (0.5%) of gross revenues derived by PWIN that result from
or are attributable to use of the Licensed Product by PWIN for On-
and Off-Track wagering in the Territory, as further described by
the following formula:
License Fee = 0.005 x PWIN Gross Licensed Product Revenues
Licensed Product Revenues include income derived by PWIN from:
(i) the sale of On- and Off-Track RACINGO tickets; (ii)
television or promotion rights relating to On- and Off-Track
RACINGO; and the sale of merchandise branded with the RACINGO
Trademarks and do not include On-Line (as that term is defined in
Schedule "C" hereto) sales of RACINGO or merchandise branded with
the RACINGO Trademarks. Payment of the fees to the Licensor will
be calculated and paid quarterly by PWIN to the Licensor, with a
year-end reconciliation. All fees and accounts payable hereunder
shall be due and payable by PWIN within thirty (30) days
following the end of such quarter. The parties acknowledge and
agree that PWIN shall pay the fees as directed by the Licensor.
PWIN shall be notified of such bank account in writing signed by
the Licensor, prior to the date the first payment is due. Any
substitution of such bank account shall be upon written notice to
PWIN, signed by the Licensor. Payment by PWIN in accordance with
such instructions shall satisfy the PWIN's obligation to pay the
licensor under Article 3 of this Agreement. All charges under
this Agreement shall be paid in U.S. dollars and exclude all
taxes other than customs, duties or charges of any kind
(including, without limitation, withholding or value added taxes)
imposed by any federal, state or local governmental entity for
products or services provided under this Agreement.
SCHEDULE "B"
RACINGO GAME RULES
SCHEDULE "C"
PRODUCTS EXCLUDED
FROM THE DEFINITION OF "LICENSED PRODUCTS" IN THE LICENSE
AGREEMENT
The license granted over the Licensed Products in this
Agreement shall not include any intellectual property rights
and know-how of the Licensor identified under the terms
"RACINGO", "RACINGO Patent", "RACINGO Copyrights" and
"RACINGO Trademarks" as they apply to wagering utilizing
RACINGO, the RACINGO Copyrights, RACINGO Patent and the
RACINGO Trademarks in or delivered by the following venues:
(i) any cruise ship, other than one travelling on the
Mississippi river;
(ii) any betting establishment located on an
Indian/Native/Aboriginal/First Nations reserve;
(iii) any in-flight betting establishment, owned and
operated by an airline;
(iv) any bingo hall or group of bingo halls linked by a local
area network, duly licensed by the relevant governmental
authority of the jurisdiction in which it is located;
(v) On-Line RACINGO (previously licensed product); or
(vi) In-Home RACINGO;
all of which are sometimes collectively referred to as
"Other Venues".
"On-Line" shall mean via the Internet, by which is meant the
worldwide network of computers commonly understood to
provide some or all of the following features, among others:
electronic mail, file transfers through File Transfer
Protocol, Telnet access to local and remote computers,
UseNet Newsgroups, Gopher access to information on local and
remote computers, Wide Area Information Servers, and World
Wide Web access. "Internet" shall mean the world-wide
network of computers commonly understood to provide some or
all of the following features, among others: electronic
mail, file transfers through File Transfer Protocol, Telnet
access to local and remote computers, UseNet Newsgroups,
Gopher access to information on local and remote computers,
Wide Area Information Servers, and World Wide Web access.
"In-Home" shall mean within the private residence of
individuals residing in the territory delivered by The TV
Games Network, through its existing wagering platforms (as
to be agreed upon between PWIN and the Licensor).
SCHEDULE "D"
RACINGO COPYRIGHTS
<TABLE>
<S> <C> <C>
TITLE COUNTRY REGISTERED
Sulky and Rider Canada Jan. 20,
1995
Racingo Game Card Canada Jan. 20, 1995
Racingo Rules Canada Feb. 23, 1995
Racingo Races Card Canada Sept. 11, 1996
Racingo Rules and Canada Sept. 11, 1996
Regulations
Racingo In The Money Canada` Sept. 11, 1996
Card
Super Racingo Race Card Canada Sept. 11, 1996
Racingo Play for the Canada Sept. 11, 1996
Day Card
Sulky and Rider U.S. Jan. 24, 1995
Racingo Rules U.S. Jan. 24, 1995
Racingo Rules and U.S. Sept. 24, 1996
Regulations
</TABLE>
SOFTWARE DEVELOPMENT AGREEMENT FOR
THE PLAYANDWIN WEB SITE
BETWEEN:
PLAYANDWIN, INC.
- and -
INTERNET SPORTS NETWORK INC.
made as of the ___ day of January, 2000
THIS SOFTWARE DEVELOPMENT AGREEMENT FOR THE PLAYANDWIN
WEB SITE is made as of the ___ day of January, 2000.
BETWEEN:
PLAYANDWIN, INC.,
a corporation incorporated under
the laws of the State of Nevada
(herein referred to as "PlayandWin")
OF THE FIRST PART
- and -
INTERNET SPORTS NETWORK INC.,
a corporation incorporated under the
laws of the
State of Florida,
(herein referred to as "ISNI")
OF THE SECOND PART
WHEREAS PlayandWin and ISNI wish to enter into an
Agreement whereby ISNI would create and establish certain
contests or games necessary to implement the project set out in
the Scoping Document;
NOW THEREFORE this Agreement witnesseth that in
consideration of good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 In this Agreement, the following terms shall have the
following meanings respectively ascribed thereto:
(1) "Acceptance Period" means a certain period of time
commencing on satisfactory completion of each of the milestones
set out in the Schedule of Deliverables as more particularly
defined in Article 8;
(2) "Acceptance Testing" means the procedures to be followed by
parties hereto and the independent testing firm retained and paid
by PlayandWin as more particularly set out on Schedule "A" to
this Agreement;
(3) " Affilliate" shall mean any corporation or entity that
controls, is controlled by or is under common control with a
Party, as the context indicates;
(4) "Agreement" means this agreement and the Schedule appended
hereto;
(5) "Arbitrator" means a person or entity mutually agreed upon
by PlayandWin and ISNI;
(6) "Article" means an article of this Agreement;
(7) "Business" means the business of PlayandWin which is the
development, marketing, promotion, sale and operation of a
particular pari-mutuel, `bingo-type' wagering system known as
Racingo, both offline and online. PlayandWin plans to introduce
interactive Internet gambling based games and the marketing and
sale of ancillary products. The first game to be developed is to
be Fantasy Racingo, an online version of the offline game
Racingo;
(8) "Commencement Date" means the date on which ISNI receives
written notification from the Escrow Agent that it has received
the payment contemplated by Section 4.1(a);
(9) "Confidential Information" means all information received by
one party from the other in connection with the Project,
excluding that information which:
(i) is or becomes generally available to the public
other than as a result of a disclosure by one
party to the other party;
(ii) was available to one party on a non-confidential
basis prior to its disclosure by the other party;
or
(iii) becomes available to one party on a non-
confidential basis from a source other than the
other party, who is not otherwise bound by a
confidentiality agreement with one party or is not
otherwise prohibited, either by statute or common
law, from disclosing such information to third
parties.
(10) "Construction and Testing" means the development phase that
produces the live interactive version of the Research, Design and
Creative Concepts and the testing of the PlayandWin Web Site by
ISNI;
(11) "Content" shall mean data, text, information, graphics,
Links, Marks, and other material, in any form or medium
whatsoever, and whether owned by PlayandWin or by a third party,
that is provided or supplied by the PlayandWin to ISNI for use as
part of the PlayandWin Web Site and Fantasy Racingo;
(12) "Design Revisions" means the revisions by ISNI to the
Research, Design and Creative Concepts;
(13) "Force Majeure" means the circumstances where the failure of
a party to perform its obligations under this Agreement, in whole
or in part, is caused by an act of force majeure, including, but
not limited to, an act of God, strike, walkout, public enemy,
war, civil commotion, riots, judicial or governmental order,
other requirement of law or any other cause beyond the reasonable
control of such party;
(14) " "Intellectual Property Claim" means an action for
infringement as more particularly described in Section 7.6;
(15) "Link" shall mean a URL hidden behind a formatting option
that may take the form of a coloured item of text (such as a URL
description), logo, button, banner or image and which allows a
user to automatically and directly transfer to such other URL,
that is, to move to or between Internet pages, sites or within a
document; the term shall also include the act of moving to or
between such locations as the context may require;
(16) "Mark" shall mean any trademark, trade name, service mark,
design mark, logo, emblem, domain name, URL or other distinctive
brand element (whether registered or not) used to identify
PlayandWin or ISNI or their respective products or services (as
the case may be);
(17) "Net Revenue" shall mean gross revenues generated by Playand
Win or ISNI from advertising, sponsorship or other forms of
revenue less any direct third party costs related thereto;
(18) "Fantasy Racingo game" means the interactive fantasy,
application and gaming system to be designed and developed by
ISNI for PlayandWin;
(19) "Project" means all of the services to be provided by ISNI
to PlayandWin pursuant to this Agreement and is comprised of the
following phases; (i) Research, Design and Creative Concepts,
(ii) Design Revisions, (iii) Construction and Testing, and (iv)
Deployment;
(20) "Research, Design and Creative Concepts" means the detailed
design and testing creative specifications that will by used by
ISNI to build the Fantasy Racingo game as more particularly
described in Section 2.2;
(21) "Schedule of Deliverables" means the services to be provided
by ISNI to PlayandWin during the Research, Design and Creative
Concepts phase as identified by milestones, deliverables, budget,
date of completion and payment amount on the Schedule of
Deliverables appended as Schedule "A" to this Agreement;
(22) "Scoping Document" means the document to be prepared by ISNI
and captioned "Scoping Document - Final" dated on or about
Feburary 15, 2000 as mutually amended by PlayandWin and ISNI
setting out the objectives and requirements to design and develop
the Fantasy Racingo game;
(23) "Section" means a section of this Agreement;
(24) "Termination Event" means a circumstance which may
constitute a ISNI default or a PlayandWin default as more
particularly described in Sections 5.2 and 5.3 respectively;
(25) "Year 2000 Compliant" means that neither the performance nor
functionality of the PlayandWin Web Site is affected by dates
prior to, during or after the year 2000 and in particular that
all software, applications and systems designed and developed by
ISNI for PlayandWin are architected to enable the following
capabilities:
(1) (i) Date, data, century recognition;
(2) (ii) Calculations that accommodate same century, cross
century, multi century formulas and date values;
(iii) Date data interface values that reflect and include the
indication of the century or correctly imply the century;
(3) (iv) Year 2000 is recognized as a leap year; provided that
all other inter-facing technology designed and developed by
parties other than ISNI exchange accurate date and date related
data with the software applications and systems designed and
developed by ISNI.
ARTICLE 2 - SERVICES
2.1 ISNI Services
Subject to the terms and conditions of this Agreement and in
compliance with the time lines specified herein, ISNI will
develop the Fantasy Racingo game and all related software,
applications and systems for the fully functional operation
of the Fantasy Racingo game in accordance with the Final
Scoping Document. The games will be operated, hosted and
maintained by ISNI.
2.2 Design and Creative Concepts
The first phase of the Project shall be the establishment of
the detailed design and testing creative specifications and
visual representations that will be used by ISNI to
construct the Fantasy Racingo game. In this phase the
functional and technical details are addressed on a micro
level by the interface and technical team of ISNI in order
to determine the manner in which the applications will
function in the front and back end of the Fantasy Racingo
game. ISNI will complete sufficient research and testing to
validate its design assumptions, methodologies and software
selection. Upon completion of the Research Design and
Creative Concepts, PlayandWin and its advisors shall approve
in writing, the "look and feel" characteristics, graphic
user interface, Content, Links, artistic elements and
specifications, such approval not to be unreasonably
withheld or delayed.
2.3 Experimental Development of a Prototype
As part of the Research Design and Creative Concepts phase,
ISNI will provide a prototype for demonstration purposes
only which will illustrate the functionality and the look
and feel of the application but will not execute all of the
functional aspects of the Project. PlayandWin acknowledges
that the look and feel of this prototype may not be the same
as the final look and feel of the application. This
prototype shall be completed and made available to
PlayandWin within a commercially reasonable period
subsequent to signing of the Agreement but not later than
ninety (90) days from the date of this Agreement.
2.4 Construction and Testing
The third phase of the Project shall be the construction and
testing of the Fantasy Racingo game in which the quality
assurance procedures of ISNI will ensure that the Fantasy
Racingo game operates completely error free in all material
respects and such quality assurance procedure shall include:
1) Unit Testing - as individual components are developed, they
will undergo testing routines as unique entities;
2) System Testing - as soon as the Fantasy Racingo game is
complete, each "unit" is integrated and becomes a fully
functional web application and is tested as part of the system;
3) Use of Testing - an internal Fantasy Racingo launch will
occur upon completion of the system testing.
1.2
4) ISNI shall have no responsibility for errors or defects
arising from interfacing applications, software and systems
designed and developed by parties other than ISNI.
2.5 Time to Complete
The Research, Design and Creative Concepts, Design
Revisions, Construction and Testing, and Deployment phases
of the Project shall be completed in accordance with the
milestones and timelines specified in the Schedule of
Deliverables.
ARTICLE 3 - PLAYANDWIN SERVICES
PlayandWin acknowledges that ISNI's obligations in Article 2
of this Agreement are expressly conditional upon PlayandWin:
1) providing adequate access to all computer systems and
software required to complete the Project;
2) providing adequate access to all PlayandWin personnel
involved with the Project;
3) completing all tasks that are assigned to PlayandWin in the
Final Scoping Document in a timely manner;
4) providing content as specified in the Final Scoping
Document; and
5) purchasing on a timely basis all hardware and software
including, but not limited to, any licenses and support, database
licenses and other items identified in the Final Scoping
Document.
ARTICLE 4 - PAYMENT TERMS
4.1 Payments by PlayandWin
PlayandWin shall pay the amount of the ISNI fees as per
schedule "B". .
Ongoing Payments by PlayandWin
4.2 (a)On completion of each milestone, ISNI shall notify the independent
testing firm retained and paid by PlayandWin and provide the
independent testing firm with all relevant materials, documents
and information with respect to the services rendered by ISNI in
connection with that milestone. The independent testing firm
shall use its best efforts to issue a report within seven (7)
days and, in any event, no later than fourteen (14) days from its
receipt of such materials, documents and information regarding
its opinion as to the number of deficiencies, if any, and the
classification of such deficiencies in accordance with Schedule
"B". PlayandWin shall release payments to ISNI within three (3)
business days from its receipt of a report from the independent
testing firm in accordance with Schedule "B".
(b) If the independent testing firm identifies certain remedial work
that needs to be performed in order to have the milestone
satisfactorily completed, ISNI shall undertake such remedial work
or if the independent testing firm does not issue a report within
fourteen (14) days of its receipt of the aforesaid notification
from ISNI, the independent testing firm shall be deemed to
confirm that the milestone has been satisfactorily completed. In
the event of a dispute between ISNI and the independent testing
firm retained by PlayandWin, the matter shall be referred to
arbitration and the decision of the Arbitrator shall be final and
binding upon PlayandWin and ISNI shall comply with the decision
of the arbitrator with respect to the release of funds;
4.3 Expenses
In addition to the fees to be paid to ISNI pursuant to this
Agreement, ISNI will also be reimbursed for all reasonable
disbursements and expenses that are incurred in the normal
course of the Project, provided that any item of expense in
excess of two hundred ($200.00) dollars shall require the
written pre-approval of PlayandWin. Such reasonable
disbursements and expenses will include, but not be limited
to, reasonable travel expenses, storage media, and long
distance calls and a one (1%) per cent administrative fee
charged by ISNI on all disbursements and expenses permitted
by this Section 4.3.
4.4 Invoicing
ISNI shall issue the appropriate invoices to PlayandWin at
the appropriate times as Milestones are completed as
specified in the Scope of Work. All such invoices shall be
payable by PlayandWin in accordance with Section 4.2(b).
ISNI shall not invoice PlayandWin for any additional costs
that have not been approved in writing by PlayandWin. The
invoices issued by ISNI shall contain detailed time records.
Amounts which are outstanding after thirty (30) days from
the date of the invoice will be charged interest at the rate
of one (1%) per cent per month.
4.5 Taxes
The fees payable by PlayandWin to ISNI pursuant to this
Agreement are exclusive of federal, provincial, sales, duty
or other taxes now or hereafter levied or imposed on such
fees. All applicable taxes to be paid by PlayandWin will be
added to the invoice amount and shown as a separate line
item. It is acknowledged that no GST shall be levied on
fees or expenses charged to PlayandWin as PlayandWin is a
non-resident of Canada.
4.6 No Variation from Fees
ISNI and PlayandWin acknowledge that the fees set out in the
Schedule of Deliverables are intended as fixed and final
costs except that ISNI may increase such fees by an amount
not to exceed five (5%) per cent and on completion of the
Design Revisions phase of the Project such fees may not be
increased by ISNI by more than five (5%) per cent.
4.7 Arbitrator's Fees
The fees of the Arbitrator charged in connection with this
Agreement shall be paid exclusively by the party losing the
arbitration as determined by the Arbitrator. The initial
deposit of two thousand, five hundred dollars required on
account of the Arbitrator's fees shall be established by
each of PlayandWin and ISNI contributing one thousand, two
hundred fifty ($1,250) dollars.
ARTICLE 5 - TERM AND TERMINATION
5.1 Term
This Agreement shall commence on the date of this Agreement
and will continue in effect until terminated pursuant to
Section 5.2 or 5.3.
--
pwinf10m
5.2 Termination Event Due to ISNI Default
Any one of the following will constitute a "Termination
Event" as a result of a ISNI default:
If ISNI fails:
(1) (i) to substantially perform any of the services set out in
Article 2 or fails to meet the milestones specified in the
Schedule of Deliverables or the time periods stipulated in
Article 2 by two (2) weeks or more;
(2) (ii) to perform, satisfy or comply with any other material
obligations, covenants or other provisions contained in this
Agreement; and in each case, such failure remains unremedied (if
capable of being remedied) for a period of fourteen (14) days
after PlayandWin has given written notice thereof to ISNI;
(iii)If ISNI fails to perform or is otherwise in breach of
its obligations under this Agreement for an aggregate
period of sixty (60) days during the term of this
Agreement by reason of Force Majeure;
(iv) The bankruptcy or insolvency of ISNI, the filing against
ISNI of a petition in bankruptcy, the making of an assignment for
the benefit of a creditor, the appointment of a receiver, or the
institution by or against ISNI of any other type of insolvency
proceeding; and
(v) If ISNI shall fail to satisfactorily perform the services or
make any royalty payments as they come due as contemplated in
section 10.2 hereof.
5.3 Termination Event Due to PlayandWin Default
Any one of the following will constitute a "Termination
Event" as a result of a PlayandWin default:
1.2 If PlayandWin fails:
(1) (i) to substantially perform any of its functions and
obligations outlined in the Final Scoping Document;
(2) (ii) to perform, satisfy or comply with any other material
obligations, covenants or other provisions contained in the
Agreement;
and in each case such failure remains unremedied
(if capable of being remedied) for a period of
fourteen (14) days after ISNI has given written
notice thereof to PlayandWin;
(iii)If PlayandWin fails to perform or is
otherwise in breach of its obligations under this
Agreement for an aggregate period of sixty (60)
days during the term of this Agreement by reason
of Force Majeure;
(iv)The bankruptcy or insolvency of PlayandWin,
the filing against PlayandWin of a petition in
bankruptcy, the making of an assignment for the
benefit of a creditor, the appointment of a
receiver, or the institution by or against
PlayandWin of any other type of insolvency
proceeding; and
(v)If PlayandWin fails to make the
payments as contemplated by Section
4.1(a) and 4.1(b) within the times
prescribed for such payments.
5.4 Obligations of ISNI upon Termination by PlayandWin
Upon the termination of this Agreement as a result of a
Termination Event, as defined in Section 5.2, ISNI agrees
that it will return all content and other materials
belonging to PlayandWin .
5.5 Obligations of PlayandWin upon Termination by ISNI
Upon the termination of this Agreement as a result of a
Termination Event, as defined in Section 5.3, PlayandWin
will be responsible for payment of any unpaid fees to date,
not in dispute, and any accrued interest on outstanding
amounts. With respect to any work in progress for its
services rendered by ISNI but not billed to PlayandWin, the
Arbitrator shall be requested to make a determination on the
value of such work in progress to PlayandWin and PlayandWin
shall be responsible for paying the amount of the
Arbitrator's determination to ISNI.
5.6 Provisions Which Operate Following Termination
Notwithstanding any termination of this Agreement for any
reason whatsoever, the provisions of Article 6, Article 7,
Article 10 and any other provision of this Agreement
necessary to give efficacy thereto shall continue in full
force and effect following any such termination.
ARTICLE 6 - CONFIDENTIALITY
Each party agrees:
(a) except as required by law, to keep for a period of five
(5) years all Confidential Information confidential and
not to disclose or reveal any Confidential Information
to any person other than those employed by a party or
engaged on behalf of a party who are actively and
directly participating in the Project or who otherwise
need to know the Confidential Information for the
purpose of the Project and to cause those persons to
observe the terms of this provision; and
(b) not to use the Confidential Information for any purpose
other than in connection with the Project.
Each party will be responsible for its breach of the
terms of this provision or the breach by the persons
entitled to the Confidential Information referred to in
paragraph (a) above.
In the event that a party is requested pursuant to, or
required by applicable law, or, regulation, or, by legal process,
to disclose any Confidential Information, such party agrees that
it will provide the other party with prompt notice of such
request(s) to enable it to seek a protective order or other
appropriate remedy.
In addition, unless otherwise required by law, neither
party nor its representatives will, or without the other party's
prior written consent, disclose to any person (other than those
actively and directly participating in the Project) any
information about the Project, or the terms, conditions or other
facts relating thereto.
Each party agrees to indemnify and save harmless the
other party from all costs, liabilities and any expenses
whatsoever arising from the unauthorized disclosure of
confidential information contrary to this provision.
Each party acknowledges that the other party will
suffer irreparable injury in the event of a breach or threatened
breach of this confidentiality provision. Each party further
agrees that in such event, the other party shall be entitled,
without prejudice to the rights and remedies available to it, to
equitable relief, including an injunction to enjoin any breach
of, or, any threatened breach or, an order to enforce specific
performance, of any part of this confidentiality provision.
It is further understood and agreed that no delay or
failure by a party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege hereunder.
ARTICLE 7 - INTELLECTUAL PROPERTY RIGHTS
7.0 Ownership
ISNI Ownership It is expressly acknowledged and agreed that
ISNI or its licensors are the owners of all Content of ISNI,
all ISNI Technology, all deliverables set out in the
Schedule of Deliverables and in the Scoping Document and all
other materials created by or for ISNI and incorporated into
the games and contests provided hereunder (together, the
"ISNI Intellectual Property") and Play andWin has no right,
title or interest, whether by way of license or otherwise,
in the ISNI Intellectual Property except as may be expressly
provided for in this Agreement.
7.1 Assignment of Intellectual Property Rights
ISNI shall be the owner of all of the Intellectual Property
Rights, including, without limitation all developed source
code and PlayandWin assigns all Intellectual Property
Rights to ISNI from time to time immediately on the creation
of such rights, including, without limiting the generality
of the foregoing, all development created by PlayandWin or
its agents related to the games or contests. ISNI may in
its absolute discretion attend to the registration of
copyright or such other registrations of the Intellectual
Property Rights that it deems appropriate. PlayandWin agrees
that ISNI, its assignees and their licensees are not
required to designate PlayandWin or its employees or
representatives as the author of any developments.
PlayandWin hereby waives and will waive and will cause each
of its employees and representatives to waive in whole in
favour of ISNI all rights of integrity and other moral
rights which PlayandWin of its employees or representatives
may have in the developments in order to permit ISNI to
modify, edit and incorporate the developments into the ISNI
Games.
7.2 Non-Compete
ISNI shall not use the proprietary software, applications,
and systems that has been developed under this Agreement for
PlayandWin to design or develop software, applications, and
systems for a game or contest that are substantially similar
to the Racingo game for any person, firm or corporation
involved in a business that is directly competitive with
PlayandWin's Business as currently carried on as at the date
of this Agreement.
7.3 License
During the term of this Agreement and any renewal hereof,
ISNI grants to Customer the right to create Links from the
Customer Site to the ISNI Site for purpose of accessing the
ISNI Games for its customers in the Defined Territory.
During the term of this Agreement PlayandWin grants a non
exclusive royalty free, irrevocable, perpetual license to
ISNI to create Links from PlayandWin's web site to ISNI's
server for the purpose of accessing the games, and a license
to use, reproduce, modify, edit, copy, distribute and/or
display the PlayandWin Content in ISNI's games and contests,
advertising, marketing and promotional material relating to
the ISNI games and contests or any part thereof and on any
and all of its website(s).
7.4 Enhancements
All enhancements, modifications and improvements to the
software, applications and systems designed and developed by
ISNI for the PlayandWin , shall be owned by ISNI.
7.5 Intellectual Property Indemnification
Each party agrees to indemnify the other party in the event
that any of the Content, intellectual property or other
materials provided to the other party infringe the
intellectual property rights of any corporation or person.
Each party agrees to indemnify the other and save it
harmless from any and all costs, including reasonable legal
costs, loss damages, liability, claims and demands
(collectively an "Intellectual Property Claim") in excess of
$100,000 incurred by or made against either party to the
extent that either parties's performance of its obligations
under this agreement infringes any such intellectual
property rights. Each party agrees to pay all damages,
costs, and legal fees awarded therein against either party
provided that either party promptly notifies the other party
in writing, of an Intellectual Property Claim.
7.6 Claim for Infringement
If the Fantasy Racingo game developed by ISNI is determined
by a final judgment of a court of competent jurisdiction to
constitute an infringement of any other parties intellectual
property rights and, as a result, the permitted use of the
PlayandWin Web Site is prohibited, ISNI will, in addition to
honoring the foregoing indemnity in Section 7.5, at its sole
option and expense, either:
1.3 1) procure from the owner of the infringed
intellectual property rights such intellectual property rights
for the benefit of PlayandWin;
1.4 2) modify the Fantasy Racingo game or the
infringing part or parts thereof so that it is non-infringing or
replace same with a substitute of equal quality approved by
PlayandWin, acting reasonably, provided that the substitute will
perform substantially to the same or better level of performance
and functionality; or
3) subject to Section 10.2, refund the fees already received
from PlayandWin for the work performed on the module in which the
infringement resulted.
7.7 Limit of Liability
NO PARTY GIVES ANY REPRESENTATIONS, WARRANTIES, COVENANTS
AND CONDITIONS, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY OTHER IMPLIED WARRANTIES Of MERCHANTABLE
QUALITY, ANY IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR
PURPOSE AND ANY IMPLIED WARRANTIES ARISING FROM COURSE OF
DEALING OR COURSE OF PERFORMANCE.
In addition not withstanding anything contained in this agreement
each parties liability to the other Party in all other
circumstances shall be strictly limited to direct damages (which,
for greater certainty, shall not include any indirect, third
party, special, incidental, consequential or exemplary expenses,
costs, liability, loss or damage whatsoever (even if that Party
has been advised of the possibility of such damages), not. to
exceed the amounts payable by PlayandWin to ISNI under this
agreement paid preceding twelve (12) months, and in any event,
not more than One Million Dollars ($1,000,000).In no event shall
ISNI be liable whatsoever for any claims relating to the games or
contests, including, without limitation, that any round of the
games or contests has been incorrectly or improperly performed,
or the failure to award a player for winning any round if such
failure was either out of ISNI's reasonable control, including,
if any third party provided ISNI incorrect information, and ISNI
shall not be liable for failing to verify such information.
ARTICLE 8 - ACCEPTANCE PERIOD
Commencing on the date that ISNI notifies PlayandWin in
writing that it has satisfactorily completed the Deployment
phase of the Project. PlayandWin's independent testing firm
shall have one hundred and twenty (120) days (the
"Acceptance Period"), to verify that the Fantasy Racingo
game is performing substantially in accordance with the
specifications set out in the Final Scoping Document and the
Research, Design and Creative Concepts. If, during the
Acceptance Period, PlayandWin in writing notifies ISNI of a
defect, ISNI shall correct such defect within ten (10) days
(or such longer period of time as may be consented to by
PlayandWin, acting reasonably), at no additional charge to
PlayandWin.
The Acceptance Period will expire at the earlier of: the
date PlayandWin provides written acceptance of the Fantasy
Racingo game;
1) one hundred and twenty (120) days following the commencement
of the Acceptance Period if ISNI has not been notified, in
writing, of any non-compliance with the PlayandWin Web Site; or
2) one hundred and twenty (120) days following written
notification from ISNI that any defect noted by PlayandWin's
independent testing firm has been corrected, provided that
PlayandWin concurs that such defect has been corrected and that
ISNI has not been notified of any additional defect.
ARTICLE 9 - MODIFICATIONS AND MAINTENANCE
9.1 Additions and Modifications to the PlayandWin Web Site
Content
ISNI acknowledges that up-dating the contents of the Racingo
game agrees that, upon receiving new or modified content
from PlayandWin, the Fantasy Racingo game will be updated in
accordance with the ongoing maintenance agreement to be
negotiated between the parties and described in Section 9.3.
9.2 Additional Modifications to Specifications
ISNI agrees, within seven (7) days of receiving additional
detailed specifications from PlayandWin, to provide a
quotation to PlayandWin for each requested function (other
than those already described in Article 2) or modifications
thereto, including the elapsed time to develop, test and
implement the requested functions and all documents
including source code. Upon acceptance from PlayandWin,
ISNI agrees to implement such additional specifications or
modifications in a prompt and timely fashion, according to
the agreed implementation period set out in the quotation.
9.3 Termination of Maintenance Period
PlayandWin acknowledges that ISNI will be relieved of its
obligations pursuant to this Article 9 if and only to the
extent that any error, malfunction or defect in the system
is caused by any action or inaction of PlayandWin or any
software or other intellectual property provided by
PlayandWin or installed by PlayandWin without ISNI's
involvement.
ARTICLE 10 - ADVERTISING AND SPONSORSHIP REVENUE
10.1 Advertising and Sponsorship Revenue
INSI shall have the non-exclusive right to sell all
advertising and sponsorship on PlayandWin and Affiliate web
sites, subject to PlayandWin advertising guidelines and
mutually agreed upon rate card rates . INSI and its
Affiliates shall be entitled to retain all advertising and
sponsorship Net Revenues generated as a result, subject to
the royalty payments to PlayandWin set out in section 10.2
PlayandWin reserves the right to reject any advertising or
sponsorship which it, in its sole discretion, acting
reasonably, determines is in contravention of PlayandWin
advertising guidelines.
10.2 Royalties to Play and Win
INSI and its Affiliates shall pay an
annual royalty equal to twenty (20%)
percent of all advertising and
sponsorship Net Revenues generated by
INSI and its Affiliates sell all
advertising and sponsorship on
PlayandWin and Affiliate web sites.
Royalty payments shall be payable
quarterly within thirty days of each
quarter end.
10.3 Royalties to INSI
Play and Win and its Affiliates shall pay an annual royalty
equal to twenty (20%) percent of all advertising,
sponsorship or other Net Revenues generated by Play and Win
and its Affiliates from Fantasy Racingo or the PlayandWin
Web site. Royalty payments shall be payable quarterly within
thirty days of each quarter end.
ARTICLE 11 - MUTUAL INDEMNITY
11.1 Indemnification
Both during and after the termination of this Agreement,
each party shall indemnify and save harmless the other and
its employees, officers, directors, agents and others for
whom it is responsible at law, from any and all claims at
law or in equity, and expenses relating to those claims,
that may arise and any loss, cost, expense or damage that
the indemnified party may incur or suffer in connection with
the subject matter of this Agreement including, without
limiting the generality of the foregoing, a breach of the
confidentiality obligation set out in Article 6, except to
the extent that the claims are caused by indemnified
party's own negligence or misconduct. Provided that in no
event shall either party be liable to the other for a claim
for indemnification in an amount exceeding $1,000,000 plus
the total development costs of the game plus all royalties
paid to INSI. In the interest of certainty, it is
acknowledged and agreed that ISNI shall not be liable for
the products and services received by PlayandWin from third
parties or the failure of PlayandWin to secure the
appropriate gaming licenses.
ARTICLE 12 - YEAR 2000 COMPLIANT
2.1. Year 2000
All applications, systems and software being designed and
developed by ISNI with respect to this Agreement are Year
2000 Compliant. ISNI shall have no responsibility for
errors or defects arising from interfacing applications,
software and systems designed and developed by parties other
than ISNI that are not Year 2000 Compliant.
ARTICLE 13 - GENERAL
13.1 Governing Law
This Agreement shall be exclusively governed by, and
construed in accordance with, the laws applicable in the
Province of Ontario, Canada (without reference to conflicts
of laws principles). All courts within the Province of
Ontario, Canada shall have the exclusive jurisdiction to
adjudicate any dispute arising out of this Agreement. Each
Party hereby: (a) submits and attorns to the exclusive
jurisdiction of the federal or provincial courts located in
Toronto, Ontario; and (b) consents to service of process
being effected upon the other Party by registered mail sent
to the address set forth in this Agreement; (c) agrees not
to seek, request, claim or pursue trial by jury; and (d)
agrees not to seek, request, claim or pursue any right,
claim or entitlement to any punitive or exemplary damages
whatsoever.
13.2 Invalidity of Provision
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction will, as to that
jurisdiction, be ineffective to the extent of the
prohibition or unenforceability without invalidating the
remaining provisions and any such prohibited or
unenforceable provision will not invalidate or render
unenforceable such provision in any other jurisdiction. For
any provision so severed there will be deemed substituted a
like provision to accomplish the intent of the parties as
closely as possible to the provision as drafted, as
determined by any court or arbitrator having jurisdiction
over any relevant proceedings, to the extent permitted by
the applicable law.
13.3 Entire Agreement
This Agreement and its schedule constitutes the entire
agreement between the parties pertaining to the subject
matter thereof. There are no warranties, conditions, or
representations (including any that may be implied by
statute) and there are no agreements in connection with such
subject matter except as specifically set forth or referred
to herein. No reliance is placed on any warranty,
representation, opinion, advice or assertion of fact made by
any party or its directors, officers, employees or agents,
except to the extent that the same has been reduced to
writing and included as a term of this Agreement.
13.4 Independent Contractor
ISNI acknowledges that, in performing the terms and
conditions set forth in this Agreement, ISNI is working as
an independent contractor. Nothing in this Agreement should
be construed as or shall constitute a partnership or joint
venture between ISNI and PlayandWin.
13.5 Notices
Any notice to be given hereunder shall be deemed to have
been duly given if reduced to writing, signed by or on
behalf of the party giving such notice and delivered by
hand, mailed by prepaid registered mail or transmitted by
telecopier and addressed as follows:
to PlayandWin : PlayandWin, Inc.
Suite 501
155 University Avenue,
Toronto, Ontario
M5H 3B7
Attention: Stewart Garner, President
Telecopier: (416) 368-3870
to ISNI: Internet Sports Network Inc.
225 Richmond Street West, Suite 403,
Toronto, Ontario
M5V 1W2
Attention: Leo Nat
Telecopier: 416-599-8228
Copy to: Donahue & Partners
Barristers and Solicitors
Suite 1800
222 Bay Street
Toronto, Ontario
M5K 1H6
Attention: Anthony Kramreither
Telecopier: 416-943-2735
Or at such other address or telecopier number as any party
hereto may have specified in writing and given to the other
party.
Any notice given by registered mail shall be deemed to have
been received by the parties to whom the same is addressed
on the fifth (5th) business day following the day upon which
such notice has been deposited in a post office with postage
and cost of registration prepaid. Any notice given by hand
or by telecopier shall be deemed to have been received by
the parties to whom such notice is so delivered on the
following business day.
13.6 Time
Time shall be of the essence in this Agreement.
13.7 Currency in United States Funds
All references to currency in this Agreement are references
to lawful currency of the United States.
13.8 Assignment
This Agreement may not be assigned by ISNI without the
written consent of PlayandWin. This Agreement may be
assigned by PlayandWin to a non-arm's length corporation
without the consent of ISNI, provided that PlayandWin
remains jointly and severally responsible with its assignee
for all obligations under this Agreement.
13.9 Acknowledgement
ISNI may include a discreet one-line statement to the effect
that it is the developer of PlayandWin's Web Site on
PlayandWin's Web Site, in a location format to be specified
by PlayandWin, but may include no other mention of its name
or services anywhere else on PlayandWin's Web Site. If
desired by ISNI, the mention of its name may include a
hypertext link to its home page.
1
SCHEDULE "A"
Description Of Racingo Game and Rules
HOW TO PLAY RACINGO
1.) TO PLAY
Select 3 (three) horses in each of the three designated races to
finish first, second or third or ask for a "quick pick". Then
match the numbers picked on your RACINGO card with the official
numbers of the horses finishing 1st, 2nd, or 3rd, in each of the
designated races. The picks do not have to be in the exact order
of finish for you to mark your card. Multiple cards may be played
simultaneously.
2.) TO WIN
POOL A: Match the numbers of either shaded diagonal line;
POOL B: Match the numbers of the four unshaded squares;
POOL C: Match the numbers to complete the shaded "X";
POOL D: Match all nine numbers on your RACINGO card in any order
in the designated
races;
POOL E: Match all nine numbers in the exact order of finish.
3.) LATE SCRATCHES
When a late scratch occurs and it effects your RACINGO card, the
next highest appropriate number will be substituted.
A copy of the rules may be obtained by any patron upon request.
The five game pools will be funded equally from the amounts
wagered.
RULES
1.) RACINGO is a proposition wager, which is based upon the
outcome of three designated pari-mutual races. It is played by
matching the numbers on a RACINGO ticket (see figure 1) with the
numbers of the betting interests finishing first, second or third
in the designated races, not necessarily in exact order. RACINGO
has no connection with any other pool.
2.) This wager may be places at all ticket-issuing machines and
may require the use of printed bet slips. The minimum
denomination of RACINGO tickets will be $2.00. A copy of these
rules may be obtained by any OTB patron upon request. Notice of
the availability of these rules will be prominently displayed.
3.) The takeout for this wager will be twenty-five (25) percent.
4.) The races, which are part of this wager, will be
predetermined and will be indicated in the racing information
provided to OTB patrons. The official results of each leg will be
based on the official order of finish as posted by the host track
stewards.
5.) In the event of a scratch of a betting intest after wagering
has begun on RACINGO, substitution will be to the next highest
unused runner available. In the event that the highest runner is
used or scratched, substitution will proceed via a wrap-around
method to the lowest numbered runner and come forward until an
available runner has been reached. Substitution for scratched
entries will always begin with the lowest numbered scratched
entry in that leg of the wager. Substitutions will take place
only after all official scratches have been posted by the host
track stewards in the official results of each leg.
Example:
Selection Available Runners
1-9-11 1 2 3 4 5 6 7 8 9 10 11 12
Scratch 11
xx
Scratch 12
xx
Scratch 1 xx
1 is substituted with 2
9
11 is substituted with 3. The new wager is 2-9-3.
11-1-9 is replaced with 3-2-9
6.) If less than three (3) betting interests finish a given leg,
that leg will be scratched. If a leg is scratched for any reason,
no additions to the jackpot prizes will be made and that entire
current RACINGO pool will be refunded. If there are more than 12
betting interests in a race, 13, 14 etc. will be part of the
field and will be considered as one betting interest.
7.) In the event of a dead heat(s) in any of the three legs,
squares on RACINGO tickets containing any of the dead heated
entries in that leg shall be considered matching squares. Squares
containing dead heated entries in the correct order of finish in
that leg shall be considered exact matching squares pursuant to
qualification for prize E as detailed below.
8.) Program numbers are synonymous with saddlecloth numbers.
9.) Wagering on RACINGO will cease prior to running of the first
RACINGO leg which is run, regardless of its order on the RACINGO
ticket.
10.) RACINGO will consist of the following prizes categories (see
figure 2):
A) The DIAGINAL
B) The DIAMOND
C) The X
D) The FULL CARD IN ANY ORDER (JACKPOT) (Excluding the FULL
CARD IN ANY EXACT ORDER)
11.) Determination of Winners- Winners for each prize will be
determined by matching squares on the RACINGO ticket in the
patterns as described below (see figure 2):
A) Matching Squares
1.) For Prizes, A, B, C and D a matching square is defined as a
square which contains the program number of a betting interest
finishing either first or second or third in that RACINGO leg.
The order of the betting interest on the RACINGO ticket for that
race does not need to be exact in order for a given square to be
a match.
2.) For Prize E a matching square is defined as a square which
contains the program number of a betting interest finishing first
or second or third in that RACINGO leg in the exact position it
finished in the race.
B) Winning Tickets- Winning RACINGO tickets are determined as
follows:
1.) For Prize A- The DIAGONAL- Matching three (3) squares on the
ticket in one of the following patterns:
a) upper left with middle center and lower right, or
b) lower left with middle center and upper right
2.) For Prize B- The DIAMOND- Matching four (4) squares on the
ticket in the
following pattern:
middle left with upper and lower center and middle right.
3) For Prize C- The X- Matching five (5) squares on the
ticket in the following
pattern:
upper and lower left with middle center and upper and
lower right.
4) For Prize D- The FULL CARD IN ANY ORDER (Excluding the
FULL CARD IN
EXACT ORDER) - Matching all squares on the ticket
disregarding the exact order
of finish for first, second and third in each race.
5) For Prize E- The FULL CARD IN EXACT ORDER- Matching all
squares on the
ticket. All selections must appear on the ticket in
exact order of finish for first,
second and third. In the event of a dead heat(s) for
any position a square will be
considered an exact match if it contains any of the
betting interests dead heated for
that position.
Within each prize category all winning tickets will be calculated
as in a Win pool.
Additional matching squares on any winning ticket will be
disregarded.
12) Each winning ticket will qualify for only one prize based on
the following order of precedence:
1) Prize E
2) Prize D
3) Prize C
4) Prize B
5) Prize A
Prize amounts will be based on the pari-mutual distribution of
each prize category. The order of precedence will determine the
prize category in which a particular winning ticket is
calculated.
13) The net amount if the RACINGO pool will allocated to the
various prize categories as follows:
1. Prize A - 20 percent
2. Prize B - 20 percent
3. Prize C - 20 percent
4. Prize D - 20 percent
5. Prize E - 20 percent
The payoff for each prize will be separately calculated on a pari-
mutual basis considering both the number of winning dollars
qualifying for that particular prize and the total amount
allocated to that prize category plus any applicable carryover as
in the case of Prized D and E.
Prizes D and E are separate Jackpot prizes. The pool for each
jackpot prize will consist of the current allocation of the net
RACINGO pool plus applicable carryover, if any. If no winning
tickets are sold for a particular Jackpot pool, 100 percent of
that total pool will then be carried over to the next RACINGO
wager. In the event that there is no pari-mutual ticket properly
issued which correctly designates a winner for a specific lower
prize (A, B or C) the portion of the net pool allocated for that
prize will be divided equally and added to the carryover or
distribution of the Jackpot prizes (D and E).
14) In the event that the Association decides to discontinue
this wager, the current pool allocation to the Jackpot prizes
plus any applicable carryovers will be distributed on a specific
date chosen by the Association, pending at leas two weeks notice
to the public, and in the following manner:
Prize E: If no winning tickets are sold matching all squares
on the ticket in the exact of finishing for first, second and
third, the winning payoff for Prize D will be the sum of the
net pool for Prize E and the net pool from Prize D;
Prize D: If no winning tickets are sold matching all squares
on the ticket in the exact order of finish for first, second
and third for Prize E AND if no winning tickets are sold
matching all squares on the ticket in any order of finish for
first, second and third for Prize D, then the net pool from
Prize E plus the net pool from Prize D will be added to the
pool for Prize C; should no winning tickets be sold for Prize
D yet winning tickets should be sold for Prize E, then the net
pool from Prize D will be added to the net pool for the next
prize category down the list (C, B or A), based on the order
of precedence, containing at least one winning ticket, but if
no winning ticket is sold for prizes C, B or A then the net
pool for Prize D will be added to Prize E;
Prize C: If a winning ticket is sold matching five squares in
the pattern of upper and lower left with middle center and
upper and lower right, the winning payoff for Prize C will be
the sum of the net pool from Prize E, the net pool from Prize
D and net pool from Prize C; (assumes no winning tickets from
Prizes E and D).
If no winning tickets are sold matching five squares in the
pattern of upper and lower left with middle center and upper
and lower right for Prize C AND if no winning tickets are sold
for Prizes E and D then the net pool from Prize E and the net
pool from Prize D and the net pool from Prize C will be added
to the net pool for Prize B;
Prize B: If no winning ticket is sold matching four squares
in the pattern of middle left with upper and lower center and
middle right, for Prize B AND if no winning tickets are sold
for Prizes E, D and C then the net pool from Prizes E, D, C
and B will be added to the net pool for Prize A.
Prize A: If no winning ticket(s) is sold matching three
squares on a ticket in either of the following patterns: a)
upper left with middle center and lower right, or b) lower
left with middle center and upper right for Prize A, then the
net pool from Prizes E, D, C, B and A will be paid to all
ticket holders of the current RACINGO wager.
15) Quick Pick will be available. Anything NOT marked on a bet
slip will be a Quick Pick number.
SCHEDULE "B"
Payments
For the purposes of this Agreement, the following shall apply:
Payment for Statement of Work
In consideration of the services performed by ISNI as described
in the Statement of Work, PlayandWin shall pay ISNI as per the
conditions below:
Amount Due Date Due
$25,000 Due upon signing of this Agreement.
$106,650 Due30 days upon completion of the
creative and project specifications by
ISNI and their approval by Playand Win.
This approval will not be unreasonably
withheld or delayed.
$195,525 Due upon the successful launch of the
Fantasy Racingo game software as
developed by ISNI.
$53,325 Due 60 days following the successful
launch of the Racingo game software as
developed by ISNI and written approval
from Play and Win of successful launch
of the FantasyRacingo game. This
approval will not be unreasonably
withheld or delayed.
________
$380,000 Total Amount Payable
All amounts in US currency
NON-BINDING MEMORANDUM OF UNDERSTANDING
This memorandum of understanding is made as of the 7th day of
February, 2000,
BETWEEN:
AUTOTOTE SYSTEMS, INC., a Delaware corporation,
("Autotote")
and
PLAYANDWIN, INC., a Nevada corporation,
("PWIN")
WHEREAS:
(A.) PWIN is a company listed on the NASD Over-The-Counter
Bulletin Board ("OTC BB") whose business model is based on the
creation of and delivery of new games within the global gaming
environment. The games developed are, and will continue to be,
delivered under license from Racingo Investments Ltd. through
both off-line (on- and off-track betting facilities) ("On-and Off-
track Racingo") and on-line (Internet) ("On-Line Racingo")
distribution channels.
(B.) PWIN helped to create and develop, and is licensed to
operate, a pari-mutuel game known as "Racingo", which is a
combination of horse racing, bingo and lottery game and is
described on Exhibit A.
(C.) Autotote is a leading technology supplier and operator of
wagering systems, related equipment and gaming venues in North
America and around the world. Autotote provides technology,
services and operations management primarily to two major
segments of the industry: (i) pari-mutuel wagering; and (ii)
government-sponsored or licensed lotteries.
(D.) The software for Racingo (the "Racingo Software"), as
described on Exhibit B, has been developed for "the test market"
by Autotote. The Racingo Software is fully functional and has
been tested by Autotote at the Connecticut off-track betting
facility meeting the beta test requirement.
(E.) The parties had become aware of U.S. Patent No. 5,518,239
owned by William H. Johnston, who also claimed common rights to
the name "Racingo" and Exhibit C describes the procedures whereby
PWIN has eliminated any patented claim by Mr. Johnston.
(F.) Autotote wishes to enter into a cross-license and joint
marketing agreement with PWIN in support of the market launch of
Racingo in North America initially, and to expand into
international markets (the "Racingo Rollout"), and PWIN wishes to
enter into such an agreement with Autotote for the same purpose.
This memorandum of understanding ("Memorandum") will confirm the
nature and extent of the parties' discussions to date in respect
of the proposed joint venture. The parties intend to proceed to
the drafting and execution of definitive formal agreements in
respect of all of the essential elements of such transactions.
This Memorandum is not intended to be legally binding, pending
the execution of definitive formal agreements. This Memorandum
confirms that as of the date hereof, the parties have agreed as
follows:
A. Responsibilities:
1. PWIN shall be responsible for:
a.) establishing PWIN corporate offices in the United States,
Europe and Asia as are required to support the Racingo Rollout;
b.) determining sales and marketing strategies for Racingo;
c.) funding of all sales and marketing programs for Racingo;
d.) providing personnel and materials for racetrack promotional
programs;
e.) continuing development and enhancements to Racingo in
conjunction with the Autotote development team; and
f.) establishing a fund for million-dollar (US$) jackpots ( the
"Jackpot Pool").
Autotote shall be responsible for:
a) providing to PWIN, at no extra cost, full and exclusive
use of the Racingo Software for On-Line Racingo and On-
and Off-track Racingo only (as circumscribed by the
licenses therefor granted to PWIN by Racingo
Investments Ltd.), it being understood that the
foregoing versions of Racingo include any "fantasy"
Racingo variants (not based on actual bets) conducted
at or through their respective venues;
b) providing to PWIN technology (software and hardware)
for common pool wagering for On-Line Racingo worldwide,
and for On- and Off-track Racingo in North America and
in such other territory for which PWIN may obtain a
license to conduct and market On- and Off-track
Racingo;
c) providing hosting and interface services for On- and
Off-track Racingo in the United States of America, and
in such other territory for which PWIN may obtain a
license to conduct and market On- and Off-track
Racingo, through one or more Autotote servers
("Autotote Hubs");
d) providing hosting and interface services for On-Line
Racingo worldwide through one or more Autotote Hubs;
e) providing PWIN, on a monthly basis, with a statement of
work outlining any additional developments or
enhancements required for the Racingo Software and the
costs associated with this work. PWIN shall approve all
such developments, enhancements and costs on an ongoing
basis prior to the work commencing;
f) completing of upgrades required to the Autotote
software to ensure seamless integration of Racingo into
the Autotote Hubs;
g) during the installation and testing of the Racingo
Software on the Autotote Hubs, and the construction and
testing of the Autotote Hubs containing the Racingo
Software (collectively known as the "Racingo System"),
Autotote shall implement adequate quality assurance
procedures to ensure that the Racingo System operates
in accordance with normal totalisator standards, and
such quality control procedures shall include but not
be limited to:
i) unit testing - as individual components are
developed, they will undergo testing routines as
unique entities; and
ii) system testing - as soon as the Racingo System is
complete, each unit is integrated and becomes a
fully functional part of the system and is tested
as part of the system;
h) making such filings as are required to approve the
Racingo Software for gaming license purposes on a State
by State basis;
i) Autotote will use reasonable efforts to represent
Racingo to the pari-mutuel industry in the most
favorable manner possible;
j) using existing personnel on a full-time basis to
schedule and coordinate the Racingo wager, and using
reasonable efforts to ensure that Racingo has a large
and competitive field size;
k) providing accounting services to handle payments to
tracks, money room transfers, royalties, commissions to
partners, direct and indirect expenses. Monthly
expenses will be completed and analyzed and provided to
PWIN in both hard copy and electronic formats so that
PWIN can load the data into its computer system;
l) electronically transmitting Racingo programs to
participating sites;
m) providing PWIN with restricted computer access and
reports in the Autotote system in order that analysis
of wagering trends and racing products are available.
PWIN and Autotote shall review these analyses in order
to determine the most popular signals, the largest
possible fields for the Racingo product and develop new
ways to build wagering on the bet;
n) providing telephone betting service in the United
States to wager on Racingo;
o) including Racingo information on the Connecticut web
site (_______________); and
p) posting official Racingo results on the Connecticut web
site as well as past performance lines and upcoming
Racingo events.
B. Software
1. Autotote agrees to place the source code for the most recent
version of the Racingo Software in escrow ( the "Escrow Copy")
with a mutually agreed upon escrow agent, such copy to be updated
for all new developments, enhancements, bug fixes or other
necessary changes on a quarterly basis. Upon the insolvency or
bankruptcy of Autotote or the making of an assignment to its
creditors:
a) ownership of the Racingo Software and of all
intellectual property rights therein shall
automatically vest in PWIN without any further action
on the part of Autotote or PWIN;
b) the Escrow Copy shall be released to PWIN; and
c) PWIN shall grant to Autotote a non-exclusive license to
use the Racingo Software.
2. Subject to the provisions of section B.1 above, Autotote
shall remain at all times the owner of the intellectual property
rights to the Racingo Software.
3. PWIN shall use reasonable efforts to cause Racingo
Investments Ltd. to enter into definitive formal agreements with
PWIN and Autotote, whereby Racingo Investments Ltd. will enter
into the same definitive formal agreements with Autotote that
Autotote will enter into with PWIN pursuant to this Memorandum,
on the same terms, upon the occurrence of the earlier of the
following events:
a) PWIN breaches any material term of a definitive formal
license to use the Racingo Software to be granted by
Autotote, and such breach continues uncured for a
period of sixty (60) days;
b) PWIN's licenses for On-Line Racingo and On- and Off-
Track Racingo are terminated, other than by the expiry
of the term of said licenses; or
c) PWIN becomes insolvent or bankrupt or makes an
assignment to its creditors.
4. a) If PWIN breaches any material term of any definitive
formal agreement to be entered into by PWIN and Autotote,
and such breach continues uncured for a period of sixty (60)
days, said agreement(s) shall be terminated forthwith upon
notice by Autotote.
b) If Autotote breaches any material term of any
definitive formal agreement to be entered into by PWIN and
Autotote, and such breach continues uncured for a period of
sixty (60) days, said agreement(s) shall be terminated
forthwith upon notice by PWIN.
c) No breach by Autotote of any provision in a definitive
formal agreement to be entered into by Autotote and PWIN
dealing with the services to be provided by Autotote under
s.A.2.(b)-(p) shall in any way affect PWIN's license to use
the Racingo Software.
C. Representations and Warranties
1. In the definitive formal agreements Autotote shall provide
such representations and warranties to the PWIN on various
matters usual in technology and services agreements, including as
follows:
a.) accurate accounting and sales operations will be conducted
by Autotote for PWIN;
b.) the PWIN Racingo System shall operate in accordance with
standard totalisator service practices including liquidated
damages (applicable to both parties), a daily and yearly cap on
liability and exclusion of Incidental and Consequential damages;
c.) accurate data will be produced with respect to the Racingo
System;
d.) it has sufficient redundant systems to ensure that the
Racingo System is operational on the above described bases; and
e.) obtain a gaming license for Racingo in each state where it
is required by law.
2. In the definitive formal agreements PWIN shall provide such
representations and warranties to Autotote on various matters
usual in technology and services agreements, including as
following:
a.) it shall at all times maintain no less than US$1 million in
the Jackpot Pool as of the commencement of the Racingo Rollout;
b.) it will have available US$3 million for the launch and
marketing programs for the Racingo Rollout; and
c.) the representations and warranties made in Schedule "C"
hereto are true and accurate as of the date hereof.
D. Financial Statements
1. Autotote will provide PWIN with audited financial results of
Racingo on an annual basis.
2. PWIN shall have the right to examine the records of Autotote
with respect to Racingo at any time on ten days' notice. This
examination shall be at PWIN's costs unless the examination shall
determine errors of greater than a 5% margin resulting therefrom,
in which case Autotote shall bear PWIN's examination costs.
E. Fees
1. Autotote shall receive a fee equal to 23% of PWIN's gross
revenues (the "Take-Out") from the sale of On-Line Racingo
worldwide, and from the sale of On- and Off-track Racingo in the
United States of America and such other jurisdiction for which
PWIN may obtain a license to conduct or market On- and Off-track
Racingo (i.e. if PWIN has a Take-Out of 6.5% of wagers then
Autotote shall receive a fee equal to 1.5% of wagers).This clause
is subject to a minimum fee of 1.25% of all wagers on Racingo for
Autotote.
2. In the case of any sale of On-Line Racingo or On- and Off-
track Racingo for which Autotote is not the tote supplier, then:
a.) the above fees will not apply;
b.) PWIN will still be allowed to use the Racingo Software for
such On-Line Racingo or On- and Off-track Racingo; and
c.) Autotote will receive 5% of PWIN's gross revenues from each
such sale.
3. If Autotote provides Racingo to a racing track for which it
is not the pari-mutuel supplier it shall be entitled to charge
that track a transaction or interface fee of 0.125%.
F. Term
The term of the definitive formal agreements shall be five (5)
years with PWIN's option to renew for an additional five (5)
years.
G. Non-competition
During the term of this agreement, Autotote shall not, either
alone or in partnership or with any other person, firm or
corporation, as principal, agent, shareholder or in any other
manner carry on or be engaged in or concerned with or
interested in, directly or indirectly, or advise, lend money
to, guarantee the debts or obligations of, or permit its name
or any part thereof to be used or employed by any person, firm
or corporation engaged in or interested in any business which
sells, licenses, distributes or otherwise markets products
similar to Racingo anywhere in the world. PWIN will not,
without Autotote's consent, conclude any arrangement similar
to the one described herein with any other person or entity.
H. Confidential Information
The parties acknowledge the confidential nature of information
furnished by each party hereunder in order to carry business
as contemplated by this agreement ("Confidential
Information"). Each party agrees not to use or disclose any of
the Confidential Information except for the purposes
contemplated by this agreement. Each party further
acknowledges that irreparable harm and damage will result if
any of the Confidential Information is improperly used or
disclosed. In the event of a breach or threatened breach of
this provision, each party shall, in addition to any other
remedies which may be available, be entitled to injunctive and
other equitable relief in any court of competent jurisdiction.
Confidential Information shall not include information in the
public domain, rightfully acquired by a third party, already
known or internally developed without breach of this
agreement.
I. Intellectual Property Indemnity
PWIN will indemnify and hold Autotote harmless from any claim,
suit or proceeding brought against it based on a claim that
PWIN has infringed or is infringing any third party's
trademark, copyright, patent or other intellectual property
right in or with respect to Racingo, or misappropriated a
third party's trade secrets ("Claim") concerning Racingo,
including but not limited to U.S. Patent No. 5,518,239 owned
by William H. Johnston and/or Winning Games Inc., and U.S.
Trademark application No. 75/331,278.
J. General
Within 72 hours of the execution of this non-binding
memorandum of understanding, the execution of this memorandum
shall be announced to the public in a press release approved
by both PWIN and Autotote. PWIN and Autotote shall make all
public announcements relating to Racingo jointly, and all such
public announcements shall be approved by both PWIN and
Autotote prior to publication.
K. Binding Effect and Assignability.
This memorandum of understanding is binding upon the
successors of each Party and is not assignable.
L. Governing Law.
This agreement shall be construed and governed in accordance
with the internal laws of the State of New York.
M. Severability.
Any term or provision of this agreement which is invalid or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this agreement or
affecting the validity or enforceability of any of the terms
or provisions of this agreement in any other jurisdiction.
N. Counterparts.
This agreement may be executed in one or more counterparts and
all such counterparts shall constitute an agreement binding on
all parties notwithstanding that all the parties are not
signatories to the original or the same counterpart.
O. Compliance.
PWIN specifically acknowledges that Autotote is subject to the
gaming and licensing requirements of various jurisdictions and
is obliged to take reasonable efforts to determine the
suitability of its business associates. PWIN agrees to
cooperate fully with Autotote in providing it with any
information, of whatever nature, that Autotote deems necessary
or appropriate in assuring itself that PWIN possesses the good
character, honesty, integrity, and reputation applicable to
those engaged in the gaming industry and specifically
represents that there is nothing in PWIN's background,
history, or reputation that would be deemed unsuitable under
the standards applicable to the gaming industry. This contract
is subject to the approval of Autotote Corporation's Corporate
Compliance Committee. If, during the term of the contract,
Autotote is notified by any regulatory agency that the conduct
of business with PWIN will jeopardize Autotote's license or
ability to be licensed or if Autotote concludes that PWIN
fails to meet the above criteria, this contract shall
terminate upon written notice by Autotote.
P. Board Approval.
Any final agreements shall be subject to the approval of each
party's respective Board of Directors.
IN WITNESS WHEREOF, each of the parties has caused this agreement
to be signed in its respective name by one or more of its
officers thereunto duly authorised, as of the date first above
written.
AUTOTOTE SYSTEMS, INC.
Per: /s/ Brooks Pierce
Brooks Pierce, President
PLAYANDWIN, INC.
Per: Stewart Garner
Stewart Garner, President
EXHIBIT "A"
RACINGO
EXHIBIT "B"
RACINGO SOFTWARE
EXHIBIT "C"
THE STATUS OF WILLIAM H. JOHNSTON'S CLAIMS TO RACINGO
William H. Johnston applied for and obtained U.S. Patent No.
5,518,239 dated May 21, 1996 for a racing lottery sweepstakes
game called "RACINGO". He assigned this patent to Winning Games
Inc., an Illinois company that he controls. Winning Games Inc.
applied for a trademark over "RACINGO" in the U.S., application
no. 75/331,278.
Winning Games Inc., Paccanus Inc., and P.E.S.T. Creative Gaming
Corporation formed Racingo Investments Ltd., a Nevada company
owned by the three of them, and entered into a shareholders'
agreement to govern their ownership of Racingo Investments.
Winning, Paccanus and P.E.S.T. then entered into a Master License
Agreement dated October 7, 1999, under which they gave to Racingo
Investments an exclusive twenty (20) year license to sell,
market, and use the Racingo game, and all patents, trademarks,
copyrights and other intellectual property rights associated with
Racingo. By the terms of the Master License Agreement, Winning,
Paccanus and P.E.S.T. are precluded from carrying on any business
involving Racingo or any game similar to Racingo.
Racingo Investments then granted to Playandwin, Inc., an
exclusive license for on-line (Internet) Racingo and an exclusive
license for on- and off-track Racingo ("land-based Racingo").
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of the 15th day of December, 1999
BETWEEN:
PLAYANDWIN, INC., a company incorporated under the laws of
the State of Nevada (the "Company")
OF THE FIRST PART
AND
PENGUIN PETROLIUM PRODUCTS LIMITED, a company incorporated
under the laws of the Province of Ontario (the "Holder")
OF THE SECOND PART
WHEREAS the Holder is a consultant to the Company.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of
the services provided by the Holder to the Company, and other
good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by both parties hereto, the parties
hereby agree as follows:
1. The Company hereby grants to the Holder upon the terms and
conditions herinafter contained, the sole and excusive right and
option to purchase all or any part of 80,000 common shares of its
capital as fully paid and non-assessable shares, 50,000
exercisable until 5:00 p.m. (Eastern Standard Time) on or before
Monday January 17, 2000 with the remaining 30,000 exercisable on
the 2nd anniversary of the date hereof (the "Expiry Date"), at a
price of US$2.00 per share (the "Optioned Shares"), the grant of
such option being subject always to the provisions as to earlier
termination as set out in paragraph 2 hereof.
2. (a) The option granted to the Holder shall cease and
determine upon the Holder's death provided that the Holder's
personal representatives shall be entitled to purchase all or any
part of the Optioned Shares if they exercise the option and
tender payment within six (6) months of the date of death.
3. If the Holder at any time and from time to time during the
option period desires to purchase any of the Optioned Shares, the
Holder may do so by giving notice to the Company at its
Registered Office or Head Office within the time or times herein
limited for exercise of the option and by tendering to the
Company at its Registered Office or Head Office the Holder's
certified cheque in favour of the Company in the full amount of
the purchase price payable hereunder, or through the conversion
of indebtedness outstanding as the date of such notice, for such
number of the shares comprised in the election.
4. The option granted under this Agreement is non-assignable
and non-transferable.
5. (a) In the event of the issuance of additional shares of
the Company for a consideration, if the issued and outstanding
shares of the Company are changed by a subdivision,
consolidation, stock split, reverse stock split, reduction in
capital or by any other capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation
shall effected, then, as a condition of such reorganization,
reclassification, consolidation or merger, this option shall be
adjusted and lawful and adequate provision shall be made whereby
the Holder hereof shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions
specified in this Option Agreement and in lieu of th eshares of
the Company immediately theretofore purchaseable and receivable
upon the exercise of the rights represented hereby, such shares
of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares
equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization,
reclassification, consolidation or merger not taken place, and in
any such case appropriate provision shall be made with respect to
the rights and interest of the Holder to the end that the
provisions hereof (including without limitation provisions for
adjustments of the option price and of the number of shares
purchasable upon conversion of this option) shall thereafter by
applicable, as nearly as may be in relation to any shares of
stock, securities or assets thereafter deliverable upon the
exercise hereof.
(b.) As evidence of the kind and amount of shares or other
securities or property which the Holder shall have the right to
purchase after any such reorganization, reclassification, change,
consolidation, merger or amalgamation, the Company may accept the
certificate or opinion of any firm of independent accountants
(who may be the auditors for the Company) with respect thereto.
(c.) Nothing in this paragraph shall in any way extend the time
within which the option may be exercised.
6. This Agreement shall be governed by the laws of the State of
Nevada and the federal laws of the United States of America
applicable therein.
7. Time shall be of the essence of this Agreement.
8. This Agreement shall ensure to the benefit of the Holder and
shall to the extent hereinbegore provided ensure to the benefit
of the Holder's heirs, executors and administrators.
IN WITNESS WHEREOF, the parties hereto have cuased these presents
to be executed as and from the day, month and year first written
above.
PLAYANDWIN, INC.
Per: /s/ Stewart Garner
Stewart Garner
PENGUIN PETROLIUM PRODUCTS LIMITED
Per: /s/ William H. Johnston
William H. Johnston
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of the 24th day of November, 1999
BETWEEN:
PLAYANDWIN, INC., a company incorporated under the laws of
the State of Nevada (the "Company")
OF THE FIRST PART
AND
STEPHEN PESKOFF, a member of the Advisory Board (the
"Holder")
OF THE SECOND PART
WHEREAS the Holder is a consultant to the Company.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of
the services provided by the Holder to the Company, and other
good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by both parties hereto, the parties
hereby agree as follows:
9. The Company hereby grants to the Holder upon the terms and
conditions herinafter contained, the sole and excusive right and
option to purchase all or any part of 250,000 common shares of
its capital as fully paid and non-assessable shares, exercisable
until November 24, 2004, at a price of US$2.00 per share (the
"Optioned Shares"), the grant of such option being subject always
to the provisions as to earlier termination as set out in
paragraph 2 hereof.
10. (a) The option granted to the Holder shall cease and
determine upon the Holder's death provided that the Holder's
personal representatives shall be entitled to purchase all or any
part of the Optioned Shares if they exercise the option and
tender payment within six (6) months of the date of death.
11. If the Holder at any time and from time to time during the
option period desires to purchase any of the Optioned Shares, the
Holder may do so by giving notice to the Company at its
Registered Office or Head Office within the time or times herein
limited for exercise of the option and by tendering to the
Company at its Registered Office or Head Office the Holder's
certified cheque in favour of the Company in the full amount of
the purchase price payable hereunder, or through the conversion
of indebtedness outstanding as the date of such notice, for such
number of the shares comprised in the election.
12. The option granted under this Agreement is non-assignable
and non-transferable.
13. (a) In the event of the issuance of additional shares of
the Company for a consideration, if the issued and outstanding
shares of the Company are changed by a subdivision,
consolidation, stock split, reverse stock split, reduction in
capital or by any other capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation
shall effected, then, as a condition of such reorganization,
reclassification, consolidation or merger, this option shall be
adjusted and lawful and adequate provision shall be made whereby
the Holder hereof shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions
specified in this Option Agreement and in lieu of th eshares of
the Company immediately theretofore purchaseable and receivable
upon the exercise of the rights represented hereby, such shares
of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares
equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization,
reclassification, consolidation or merger not taken place, and in
any such case appropriate provision shall be made with respect to
the rights and interest of the Holder to the end that the
provisions hereof (including without limitation provisions for
adjustments of the option price and of the number of shares
purchasable upon conversion of this option) shall thereafter by
applicable, as nearly as may be in relation to any shares of
stock, securities or assets thereafter deliverable upon the
exercise hereof.
(b.) As evidence of the kind and amount of shares or other
securities or property which the Holder shall have the right to
purchase after any such reorganization, reclassification, change,
consolidation, merger or amalgamation, the Company may accept the
certificate or opinion of any firm of independent accountants
(who may be the auditors for the Company) with respect thereto.
(c.) Nothing in this paragraph shall in any way extend the time
within which the option may be exercised.
14. This Agreement shall be governed by the laws of the State of
Nevada and the federal laws of the United States of America
applicable therein.
15. Time shall be of the essence of this Agreement.
16. This Agreement shall ensure to the benefit of the Holder and
shall to the extent hereinbegore provided ensure to the benefit
of the Holder's heirs, executors and administrators.
IN WITNESS WHEREOF, the parties hereto have caused these presents
to be executed as and from the day, month and year first written
above.
PLAYANDWIN, INC.
Per: /s/ Stewart Garner
Stewart Garner
HOLDER
Per: /s/ Stephen Peskoff
Stephen Peskoff
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of the 5th day of October, 1999
BETWEEN:
PLAYANDWIN, INC., a company incorporated under the laws of
the State of Nevada (the "Company")
OF THE FIRST PART
AND
ANDREW DEFRANCESCO, a member of the Advisory Board (the
"Holder")
OF THE SECOND PART
WHEREAS the Holder is a consultant to the Company.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of
the services provided by the Holder to the Company, and other
good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by both parties hereto, the parties
hereby agree as follows:
17. The Company hereby grants to the Holder upon the terms and
conditions herinafter contained, the sole and excusive right and
option to purchase all or any part of 250,000 common shares of
its capital as fully paid and non-assessable shares, exercisable
until November 24, 2004, at a price of US$2.00 per share (the
"Optioned Shares"), the grant of such option being subject always
to the provisions as to earlier termination as set out in
paragraph 2 hereof.
18. (a) The option granted to the Holder shall cease and
determine upon the Holder's death provided that the Holder's
personal representatives shall be entitled to purchase all or any
part of the Optioned Shares if they exercise the option and
tender payment within six (6) months of the date of death.
19. If the Holder at any time and from time to time during the
option period desires to purchase any of the Optioned Shares, the
Holder may do so by giving notice to the Company at its
Registered Office or Head Office within the time or times herein
limited for exercise of the option and by tendering to the
Company at its Registered Office or Head Office the Holder's
certified cheque in favour of the Company in the full amount of
the purchase price payable hereunder, or through the conversion
of indebtedness outstanding as the date of such notice, for such
number of the shares comprised in the election.
20. The option granted under this Agreement is non-assignable
and non-transferable.
21. (a) In the event of the issuance of additional shares of
the Company for a consideration, if the issued and outstanding
shares of the Company are changed by a subdivision,
consolidation, stock split, reverse stock split, reduction in
capital or by any other capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation
shall effected, then, as a condition of such reorganization,
reclassification, consolidation or merger, this option shall be
adjusted and lawful and adequate provision shall be made whereby
the Holder hereof shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions
specified in this Option Agreement and in lieu of th eshares of
the Company immediately theretofore purchaseable and receivable
upon the exercise of the rights represented hereby, such shares
of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares
equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization,
reclassification, consolidation or merger not taken place, and in
any such case appropriate provision shall be made with respect to
the rights and interest of the Holder to the end that the
provisions hereof (including without limitation provisions for
adjustments of the option price and of the number of shares
purchasable upon conversion of this option) shall thereafter by
applicable, as nearly as may be in relation to any shares of
stock, securities or assets thereafter deliverable upon the
exercise hereof.
(b.) As evidence of the kind and amount of shares or other
securities or property which the Holder shall have the right to
purchase after any such reorganization, reclassification, change,
consolidation, merger or amalgamation, the Company may accept the
certificate or opinion of any firm of independent accountants
(who may be the auditors for the Company) with respect thereto.
(c.) Nothing in this paragraph shall in any way extend the time
within which the option may be exercised.
22. This Agreement shall be governed by the laws of the State of
Nevada and the federal laws of the United States of America
applicable therein.
23. Time shall be of the essence of this Agreement.
24. This Agreement shall ensure to the benefit of the Holder and
shall to the extent hereinbegore provided ensure to the benefit
of the Holder's heirs, executors and administrators.
IN WITNESS WHEREOF, the parties hereto have caused these presents
to be executed as and from the day, month and year first written
above.
PLAYANDWIN, INC.
Per: /s/ Stewart Garner
Stewart Garner
HOLDER
Per: /s/ Andrew DeFrancesco
Andrew DeFrancesco
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of the 24th day of November, 1999
BETWEEN:
PLAYANDWIN, INC., a company incorporated under the laws of
the State of Nevada (the "Company")
OF THE FIRST PART
AND
DOUGLAS MCFADDEN, a member of the Advisory Board (the
"Holder")
OF THE SECOND PART
WHEREAS the Holder is a consultant to the Company.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of
the services provided by the Holder to the Company, and other
good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by both parties hereto, the parties
hereby agree as follows:
25. The Company hereby grants to the Holder upon the terms and
conditions herinafter contained, the sole and excusive right and
option to purchase all or any part of 250,000 common shares of
its capital as fully paid and non-assessable shares, exercisable
until November 24, 2004, at a price of US$2.00 per share (the
"Optioned Shares"), the grant of such option being subject always
to the provisions as to earlier termination as set out in
paragraph 2 hereof.
26. (a) The option granted to the Holder shall cease and
determine upon the Holder's death provided that the Holder's
personal representatives shall be entitled to purchase all or any
part of the Optioned Shares if they exercise the option and
tender payment within six (6) months of the date of death.
27. If the Holder at any time and from time to time during the
option period desires to purchase any of the Optioned Shares, the
Holder may do so by giving notice to the Company at its
Registered Office or Head Office within the time or times herein
limited for exercise of the option and by tendering to the
Company at its Registered Office or Head Office the Holder's
certified cheque in favour of the Company in the full amount of
the purchase price payable hereunder, or through the conversion
of indebtedness outstanding as the date of such notice, for such
number of the shares comprised in the election.
28. The option granted under this Agreement is non-assignable
and non-transferable.
29. (a) In the event of the issuance of additional shares of
the Company for a consideration, if the issued and outstanding
shares of the Company are changed by a subdivision,
consolidation, stock split, reverse stock split, reduction in
capital or by any other capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation
shall effected, then, as a condition of such reorganization,
reclassification, consolidation or merger, this option shall be
adjusted and lawful and adequate provision shall be made whereby
the Holder hereof shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions
specified in this Option Agreement and in lieu of th eshares of
the Company immediately theretofore purchaseable and receivable
upon the exercise of the rights represented hereby, such shares
of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares
equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization,
reclassification, consolidation or merger not taken place, and in
any such case appropriate provision shall be made with respect to
the rights and interest of the Holder to the end that the
provisions hereof (including without limitation provisions for
adjustments of the option price and of the number of shares
purchasable upon conversion of this option) shall thereafter by
applicable, as nearly as may be in relation to any shares of
stock, securities or assets thereafter deliverable upon the
exercise hereof.
(b.) As evidence of the kind and amount of shares or other
securities or property which the Holder shall have the right to
purchase after any such reorganization, reclassification, change,
consolidation, merger or amalgamation, the Company may accept the
certificate or opinion of any firm of independent accountants
(who may be the auditors for the Company) with respect thereto.
(c.) Nothing in this paragraph shall in any way extend the time
within which the option may be exercised.
30. This Agreement shall be governed by the laws of the State of
Nevada and the federal laws of the United States of America
applicable therein.
31. Time shall be of the essence of this Agreement.
32. This Agreement shall ensure to the benefit of the Holder and
shall to the extent hereinbegore provided ensure to the benefit
of the Holder's heirs, executors and administrators.
IN WITNESS WHEREOF, the parties hereto have caused these presents
to be executed as and from the day, month and year first written
above.
PLAYANDWIN, INC.
Per: /s/ Stewart Garner
Stewart Garner
HOLDER
Per: /s/ Douglas McFadden
Douglas McFadden
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of the 24th day of November, 1999
BETWEEN:
PLAYANDWIN, INC., a company incorporated under the laws of
the State of Nevada (the "Company")
OF THE FIRST PART
AND
ADAM HAWKINS, a member of the Advisory Board (the "Holder")
OF THE SECOND PART
WHEREAS the Holder is a consultant to the Company.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of
the services provided by the Holder to the Company, and other
good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by both parties hereto, the parties
hereby agree as follows:
33. The Company hereby grants to the Holder upon the terms and
conditions herinafter contained, the sole and excusive right and
option to purchase all or any part of 250,000 common shares of
its capital as fully paid and non-assessable shares, exercisable
until November 24, 2004, at a price of US$2.00 per share (the
"Optioned Shares"), the grant of such option being subject always
to the provisions as to earlier termination as set out in
paragraph 2 hereof.
34. (a) The option granted to the Holder shall cease and
determine upon the Holder's death provided that the Holder's
personal representatives shall be entitled to purchase all or any
part of the Optioned Shares if they exercise the option and
tender payment within six (6) months of the date of death.
35. If the Holder at any time and from time to time during the
option period desires to purchase any of the Optioned Shares, the
Holder may do so by giving notice to the Company at its
Registered Office or Head Office within the time or times herein
limited for exercise of the option and by tendering to the
Company at its Registered Office or Head Office the Holder's
certified cheque in favour of the Company in the full amount of
the purchase price payable hereunder, or through the conversion
of indebtedness outstanding as the date of such notice, for such
number of the shares comprised in the election.
36. The option granted under this Agreement is non-assignable
and non-transferable.
37. (a) In the event of the issuance of additional shares of
the Company for a consideration, if the issued and outstanding
shares of the Company are changed by a subdivision,
consolidation, stock split, reverse stock split, reduction in
capital or by any other capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation
shall effected, then, as a condition of such reorganization,
reclassification, consolidation or merger, this option shall be
adjusted and lawful and adequate provision shall be made whereby
the Holder hereof shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions
specified in this Option Agreement and in lieu of th eshares of
the Company immediately theretofore purchaseable and receivable
upon the exercise of the rights represented hereby, such shares
of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares
equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization,
reclassification, consolidation or merger not taken place, and in
any such case appropriate provision shall be made with respect to
the rights and interest of the Holder to the end that the
provisions hereof (including without limitation provisions for
adjustments of the option price and of the number of shares
purchasable upon conversion of this option) shall thereafter by
applicable, as nearly as may be in relation to any shares of
stock, securities or assets thereafter deliverable upon the
exercise hereof.
(b.) As evidence of the kind and amount of shares or other
securities or property which the Holder shall have the right to
purchase after any such reorganization, reclassification, change,
consolidation, merger or amalgamation, the Company may accept the
certificate or opinion of any firm of independent accountants
(who may be the auditors for the Company) with respect thereto.
(c.) Nothing in this paragraph shall in any way extend the time
within which the option may be exercised.
38. This Agreement shall be governed by the laws of the State of
Nevada and the federal laws of the United States of America
applicable therein.
39. Time shall be of the essence of this Agreement.
40. This Agreement shall ensure to the benefit of the Holder and
shall to the extent hereinbegore provided ensure to the benefit
of the Holder's heirs, executors and administrators.
IN WITNESS WHEREOF, the parties hereto have caused these presents
to be executed as and from the day, month and year first written
above.
PLAYANDWIN, INC.
Per: /s/ Stewart Garner
Stewart Garner
HOLDER
Per: /s/ Adam Hawkins
Adam Hawkins
CHANGE IN ACCOUNTANTS
Securities and Exchange Commission
450 Fifth St. N.W.
Washington, D.C. 20549
We audited the financial statements of Lynx Gaming Corporation
for the year ended February 28, 1999 and February 28, 1998. We
have reviewed the Company's comments concerning this decision to
change to a different firm for preparation of the September 30,
1999 financial statements. We agree with the statements made by
the Company.
/s/ Silver Gold Glatt & Grossman LLP
Silver Gold Glatt & Grossman LLP
Toronto, Ontario
March 20, 2000
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Playandwin, Inc.
By: /s/ Stewart Garner
Stewart Garner, President
