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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER
SECTION 12(b) OR 12 (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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TOTAL ENTERTAINMENT INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
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INDIANA 35-1504940
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1411 Peel Street, Suite 500, Montreal, H3A 1S5
Quebec, Canada (Zip Code)
(Address of Principal Executive
Offices)
(514) 842-6999
(Issuer's telephone number)
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Securities to be registered pursuant to Section 12(b) of the Act:
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Title of Each Class Name of Each Exchange on
to be so Registered Which Each Class is to be Registered
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None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $.001 Per Share
(Title of Class)
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TABLE OF CONTENTS
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PART I.................................................................... 1
ITEM 1. DESCRIPTION OF BUSINESS......................................... 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION....... 7
ITEM 3. DESCRIPTION OF PROPERTY......................................... 10
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.. 11
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.... 12
ITEM 6. EXECUTIVE COMPENSATION.......................................... 14
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 15
ITEM 8. DESCRIPTION OF SECURITIES....................................... 16
PART II................................................................... 17
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS..................................... 17
ITEM 2. LEGAL PROCEEDINGS............................................... 17
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS................... 18
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES......................... 18
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS....................... 19
PART F/S.................................................................. F-1
PART III.................................................................. iii
ITEM 1. INDEX TO EXHIBITS............................................... iii
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PART I
Statements contained in this registration statement that are not historical
facts are forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks and uncertainties, which could cause actual results to differ
materially from estimated results. Such risks and uncertainties include,
without limitation, those detailed in ITEM 1-- "DESCRIPTION OF BUSINESS" and
ITEM 2-- "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" below.
Item 1. Description of Business
Overview
Total Entertainment Inc. (the "Company") is a holding company, which through
its two wholly-owned subsidiaries, Intercapital Global Fund, Ltd., an Antiguan
corporation ("Intercapital Global"), and Total Entertainment Canada, Ltd., a
Quebec corporation ("TE Canada"), owns and operates interactive software-based
games of chance and sports wagering facilities which are offered as an online
service accessible world-wide through the Internet.
Intercapital Global, based in The Bahamas, is the owner and operator of
several Internet casino Web sites (collectively, the "Online Casinos"),
including the site located at www.theonlinecasino.com, also known as "The
Online Casino & Sportsbook". Intercapital Global licenses the casino gaming and
sportsbook software and the electronic commerce (e-cash) and transaction
processing software utilized by the Online Casinos from Atlantic International
Entertainment Ltd, a Florida corporation ("Atlantic"). Intercapital Global
earns income through profits associated with the wagering activities of its
Online Casino users.
TE Canada, based in Montreal, Canada, provides Intercapital Global with
technical support, customer support and general administrative services.
The Company's shares of common stock, par value $.001 per share (the "Common
Stock"), currently trade on the Nasdaq over-the-counter bulletin board market
(OTCBB) under the symbol TTLN. Unless otherwise indicated, all descriptions
herein of the business of the Company shall also be deemed to include the
business of the Company's wholly-owned subsidiaries, Intercapital Global and TE
Canada.
Products and Services
Intercapital Global operates Online Casinos located at
www.theonlinecasino.com and www.slotsvegas.com ("Slotsvegas"), as well as its
bingo site located at www.bingonthenet.com and its three Asian oriented sites
located at www.dragongaming.com, www.theluckydragoncasino.com, and
www.dragonbet.com (collectively, the "Asian Sites"). The Slotsvegas site is 50%
owned by the Company; the other sites are wholly-owned.
The Online Casino games use software technology that provides enhanced sound
and graphics, and allows real time interactivity within a user's own web
browser. A customer has the option of loading and playing casino games through
their web browser with no downloading, or a customer may download either the
entire web site or individual games in order to achieve faster play. Once the
necessary software has been downloaded, a customer is required to provide
certain personal and financial information, including a user name and password,
in order to open an account. A person need not open an account in order to
browse the Online Casinos without playing any games. In order to play games and
make "live" wagers, a person must purchase electronic cash by making one or
more credit card deposits into the person's account.
Once a customer has an account balance, the customer may play various casino
style games which currently include Slots, Blackjack, Video Poker, Roulette,
Mini Baccarat, Sic Bo, Keno, Scratch Off and Bingo Blast. Many of the games
have several variations with minimum and maximum betting ranges. The customer
may also open a separate account to place wagers on sporting events, including
all major professional and
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collegiate sports and other events with respect to which a betting line (or
sportsbook) has been established by the oddsmakers in Las Vegas. Winnings (in
U.S. dollars) are automatically credited to a customer's account. Withdrawals
are effected by credit to the customer's credit card up to the amount deposited
via credit card, with the balance sent by check. A customer is free to withdraw
all or part of his winnings, review his account balance or make additional
deposits to his account at any time.
The Company does not require patrons to maintain a minimum account balance
or place any restrictions on amounts accumulated through winnings. The Company
has, however, established a maximum bet limit for new customers, although it
may, at its discretion, grant custom wagering and account options to its
regular customers based upon their established profiles. At the present time,
the Company does not intend to extend credit services to its patrons. In
addition to the foregoing, management has agreed to adhere to the Code of
Conduct of the Interactive Gaming Council, a gaming industry organization of
which the Company is a member. Among other things, the Code of Conduct requires
Interactive Gaming Council members to post loss limits and to provide referrals
and direct access to help and counseling organizations as a means to identify
and curtail compulsive gambling. Moreover, the Company's managers may suspend a
patron's account activity at any time if they suspect or observe compulsive
gambling behavior. Notwithstanding these procedures, however, there can be no
assurance that the Company will be able to successfully identify or curtail
compulsive gambling by its patrons.
The Company has designed the Online Casinos to be an entertaining,
interactive, real time playing experience that provides maximum privacy and
security to the customer. With respect to customer privacy and security, the
Company does not disclose any personal or wagering information relating to any
customer, and access to the customer's account (e.g., for account review,
deposits or cash-out) is password protected. Customers may access an Online
Casino through the use of personal computers. At present, only the Online
Casino sportsbook and not the casino games are accessible and able to be
downloaded through Web-TV. In the future, the Company anticipates that
customers will have access to the entire Online Casino through Web-TV.
New Products
The Company has recently established its own portal site located at
www.go2total.com which presently offers news, business, sports and
entertainment information, as well as free email services. The Company intends
to expand the portal site and to generate revenues therefrom by linking it to
various retail outlets that offer general products and merchandise such as
wine, books, videos, toys and other products.
In addition, the Company has recently introduced Bingo Blast, a new
interactive multi-player game created and licensed by Atlantic. Bingo Blast is
a pari-mutuel style game in which the betters wager against each other and not
against the house, thereby lowering the house exposure to zero. The Company
conducts several daily bingo sessions in which prizes can be won from both a
regular prize pool and from a progressive jackpot comprised of a percentage
collected from each card purchased. The Company plans to introduce Lotto Magic,
another new pari-mutuel style interactive game licensed from Atlantic, sometime
in the first quarter of 2000.
Technology and Infrastructure
Technical support, customer service (by email and telephone), and general
administrative services for the Online Casinos are provided by the Company's
wholly-owned Canadian subsidiary, TE Canada, out of its offices in Montreal,
Quebec.
In addition to enhanced sound and graphics software, the Online Casinos use
state-of-the-art casino gaming and sportsbook software licensed from Atlantic
pursuant to four nonexclusive, four year term License Agreements (the "License
Agreements"). Under two License Agreements dated April 9, 1999 relating to the
sportsbook and certain casino gaming software, as consideration for the
licenses granted thereunder, Intercapital Global paid Atlantic a total of
$247,500 on signing. Under the two License Agreements dated June 23, 1999
relating to Bingo Blast and Lotto Magic (which the Company intends to install
in future), as consideration for
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the licenses granted thereunder, Intercapital Global paid Atlantic a total of
$102,500 on signing. Under all of the License Agreements, the Company is
obligated to pay Atlantic a periodic royalty equal to 7% of the Company's net
winnings from all games except Lotto Magic, with respect to which the royalty
is 5%. Intercapital Global has also entered into two Software Support
Maintenance Agreements with Atlantic pursuant to which Atlantic has agreed to
provide certain maintenance and support services for the licensed software for
an initial term of one year at an aggregate cost to Intercapital Global of
$5,000 per month, subject to adjustment.
Intercapital Global has entered into an Agreement dated August 18, 1998 (the
"Processing Agreement") with MPACT Immedia Transaction Services Ltd., a Bermuda
company ("MPACT"), pursuant to which MPACT performs various credit card
approval and processing services to facilitate Online Casino transactions in
return for a weekly fee equal to 5.75% of all approved and settled credit card
transactions, subject to a minimum fee of $2,000 per month. The Processing
Agreement is terminable by Intercapital Global, with or without cause, on 15
days notice to MPACT. Intercapital Global's obligations to IMPACT under the
Agreement are personally guaranteed by Sandy J. Masselli, Jr., the Chief
Executive Officer of the Company.
The Company's network is connected to the Internet via redundant high-speed
fiber, ensuring multiple backup connections to the Internet. This high
performance network infrastructure ensures reliable and responsive game play
for the Company's users/players. The system is composed of high speed Dell
servers and 3Com networking equipment. Most of the critical system components,
such as the game servers and web servers, are distributed across multiple
machines, which protect the gaming service from failures due to malfunctioning
equipment. The highly scalable nature of the Company's system design makes
provisioning for additional capacity relatively simple. The network monitoring
staff tracks the system at all times to maintain constant awareness of the
system's operating parameters. New equipment is installed when necessary to
compensate for increased activity or anticipated peak demands for popular
events.
The high quality Internet connection at the Company's network facility in
The Bahamas is provided by The Bahamas Telephone Company (Batelco) and
contributes to responsive game play. Each gaming transaction is stored on an
SQL database that is replicated for redundancy and backed up daily to prevent
data loss, and the gaming components communicate using 128 bit encryption to
protect sensitive data from potential hackers.
Distribution and Marketing
The Company markets its Online Casinos to an international clientele
consisting of individuals located throughout the world who are at least 18
years of age and have access to the Internet through a personal computer (and,
to a limited extent, through a Web-TV). According to the International Data
Corporation, the number of Internet users is projected to grow from 142 million
people at the end of 1998 to 502 million people in 2002. In particular,
Internet use is expected to undergo significant growth in the Pacific Rim
region over the next five years. The Company also recognizes that a substantial
amount of business is now conducted over the Internet and that such business is
projected to grow significantly over the next few years.
In order to create an awareness of the Company's existence among individuals
in the target markets, the Company intends to focus its marketing efforts
primarily on traditional media advertising, online promotions, business
development, third-party relationships and social programs. In addition, the
Company has established various links at other Internet web sites which will
enable users of the other sites (e.g., Amazon.com) to link up to the Company's
web sites.
In order to expand its Asian business and to more specifically target Slots
players, the Company recently established the Asian Sites and Slotsvegas. The
Asian Sites became operational on June 15, 1999 and Slotsvegas on June 30,
1999. The Asian Sites are available in Chinese and English and contain various
gaming features oriented toward the Asian market. Slotsvegas is geared mainly
toward Slots players. Pursuant to an Amended and Restated Purchase Agreement
dated as of May 5, 1999 entered into with Summerhill Gaming Limited, a Bahamian
corporation ("SGL"), the Company sold a 50% ownership interest and equal profit
and
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loss participation in the Slotsvegas site to SGL in consideration for $500,000
(paid either in cash to the Company or to certain vendors for obligations
incurred by the Company).
In the future, the Company intends to develop online gaming sites and other
e-businesses for third parties similar to its development of the Slotsvegas
site and sale of a profit and loss interest therein. The Company anticipates
that this strategy will be linked to its overall strategy of expansion by
aligning itself with strategic local partners familiar with local laws and
customs.
To keep pace with technological changes and market conditions, the Company
intends to update its web sites on a quarterly basis. Such quarterly updates
are expected to include new games and sporting events and new versions of
existing games, as well as technological enhancements such as shorter
downloading time, improved sound and graphics and broader software
compatibility.
Competition
Given the popularity of the Internet in general and the relatively high
profit margins and low overhead associated with the Internet gambling business
in particular, especially as compared to traditional physical casinos, the
Company faces strong competition in what is expected to be a rapidly growing
global industry. The Company is aware of several other companies that currently
offer casino gambling services on the Internet similar to those of the Company.
Some of the Company's primary competitors include CryptoLogic, Inc.,
Venturetech Inc., GLC Limited, GoCall Inc., Cybergames Inc., Youbet.com.,
Internet Casinos Ltd., Wager Net Inc., Casinos of the South Pacific, World Wide
Web Casinos and Virtual Vegas. Unlike the Company, some of its competitors
offer entrepreneurs full software, accounting, marketing and other forms of
support to enable such persons to operate their own Internet casino Web sites.
The barrier to entry to most Internet markets, including the gambling
segment, is relatively low making it accessible to a wide number of entities
and individuals. In the Internet gaming industry, the required technological
and management expertise can be purchased or licensed from existing vendors.
Thus, in addition to those known competitors of the Company, several new
competitors are likely to emerge in the near future.
The Company's computer technology for the Online Casinos is characterized by
rapid and significant technological change in the computer, software and
telecommunication industries. Many entities are engaged in research and
development with respect to offering gaming services on the Internet. The
Company's competitors may develop technologies and products that are more
effective and efficient than the Company's products, and the Company's products
may be rendered obsolete by such developments. In addition, other companies
with greater technological and financial resources may develop gaming services
over the Internet with better capabilities than the Company's.
Patents, Trademarks, Licenses, Royalty Agreements
As of the date hereof, the Company does not own or otherwise control any
patents, copyrights or trademarks. As the Company's research and development
efforts progress, the Company will attempt to protect its own proprietary
technology by relying on trade secret laws and non-disclosure and
confidentiality agreements with its employees and other persons who have access
to its proprietary technology. Despite these anticipated protections, other
persons may independently develop or obtain access to the Company's technology
which would adversely effect the Company's competitive position.
The Company is obligated to pay a periodic royalty to Atlantic under the
License Agreements in consideration for the license of the casino gaming and
sportsbook software used by the Online Casinos. Substantially all of the
Company's software technology is licensed from Atlantic and the Company is
dependent upon Atlantic to maintain the software and keep it up to date. The
License Agreements are for a term of four years unless terminated by Atlantic
upon 30 days prior notice. The License Agreements are
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nonexclusive and Atlantic is free to license its casino gaming and sportsbook
software to other Internet gaming operators. It is possible, therefore, that
Atlantic may terminate the License Agreements, that its software used by the
Company may become obsolete or outdated, or that significant competitors of the
Company may become licensees of Atlantic's software. Any such developments
could have a material adverse effect on the Company's business, revenues,
operating results and financial condition.
Government Regulation
General Regulatory Environment
The Company and its subsidiaries are subject to applicable laws in the
jurisdictions in which they operate or offer services. While some jurisdictions
have attempted to restrict or prohibit Internet gaming, other jurisdictions,
such as several Caribbean countries, Australia and certain Native American
territories, have taken the position that Internet gaming is legal and/or have
adopted or are in the process of reviewing legislation to regulate Internet
gaming in such jurisdictions. As companies and consumers involved in Internet
gaming are located around the globe, there is uncertainty regarding exactly
which government has jurisdiction or authority to regulate or legislate with
respect to various aspects of the industry. Furthermore, it may be difficult to
identify or differentiate gaming-related transactions from other Internet
activities and link those transmissions to specific users, in turn making
enforcement of legislation aimed at restricting Internet gaming activities
difficult. The uncertainty surrounding the regulation of Internet gaming could
have a material adverse effect on the Company's business, revenues, operating
results and financial condition.
Pending United States Legislation and Other Existing Laws
Governments in the United States or other jurisdictions may in the future
adopt legislation that restricts or prohibits Internet gambling. After previous
similar bills failed to pass in 1998, on March 23, 1999, Senator Jon Kyl of the
United States Senate introduced a revised bill intended to prohibit and
criminalize Internet gambling. On June 17, 1999, this bill was approved by the
Senate Judiciary Committee. There can be no assurance as to whether the Kyl
bill or any similar bill will become law.
In addition, existing U.S. federal statutes and state laws could be
construed to prohibit or restrict gaming through the use of the Internet, and
there is a risk that governmental authorities may view the Company as having
violated such statutes or laws, notwithstanding the gaming licenses issued to
Intercapital Global by the governments of Honduras and The Bahamas (pending).
Several state Attorney Generals and court decisions have upheld the
applicability of state anti-gambling laws to Internet casino companies.
Accordingly, there is a risk that criminal or civil proceedings could be
initiated in the United States or other jurisdictions against the Company
and/or its employees, and such proceedings could involve substantial litigation
expense, penalties, fines, diversion of the attention of key executives,
injunctions or other prohibitions being invoked against the Company and/or its
employees. Such proceedings could have a material adverse effect on the
Company's business, revenues, operating results and financial condition.
In addition, as electronic commerce further develops, it may generally be
the subject of government regulation. There is also the risk that current laws,
which pre-date or are incompatible with Internet electronic commerce, may be
enforced in a manner that restricts the electronic commerce market. Any such
developments could have a material adverse effect on the Company's business,
revenues, operating results and financial condition.
The Company intends to minimize the potential legal risks by continuing to
conduct its Internet business from offshore locations that permit online gaming
and by increasing its marketing efforts in Asia and other foreign
jurisdictions. There is no assurance, however, that these efforts will be
successful in mitigating the substantial legal risks and uncertainties
associated with the Company's Internet gaming business.
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Research and Development
In the last two years, the Company (and its predecessors prior to the
Merger, as defined below) expended approximately $2,000,000 on research and
development activities related to the Online Casinos, including market research
and the purchase, testing and evaluation of certain computer hardware and
software, some of which is no longer in use by the Company and has been written
off. The Company intends to continue its research efforts to develop additional
Web sites, new games and sporting events and new versions of existing games, as
well as technological enhancements such as shorter downloading time, improved
sound and graphics and broader software compatibility. In general, the Company
plans to invest in new technologies and casino style games and events that add
to the entertainment value of its product and appeal to one or more selected
markets. There can be no assurance, however, that the Company will have
sufficient funds to carry out its research and development plans.
Employees and Labor Relations
The Company and its subsidiaries currently have 15 total employees, of which
10 are full time employees, none of whom are represented by labor unions. The
Company is not a party to any collective bargaining agreements or labor union
contracts, nor has it been subjected to any strikes or employment disruptions
in its history.
Business Development
The Company was incorporated on April 22, 1993 in the State of Indiana under
the name Kit Farms Inc. ("Kit"). From 1993 until 1995, Kit engaged in the
business of pet food manufacturing and processing. From 1995 until January
1998, Kit was inactive. On January 28, 1998, Mint Energy Corporation, a
Delaware corporation ("Mint"), merged with and into Kit, with Kit being the
surviving corporation (the "Merger"). Concurrently, Intercapital Global was
contributed to Kit by its shareholders, and became a wholly-owned subsidiary of
Kit. Mint and Intercapital Global had the same beneficial owners (the
"beneficial owners") at the date of the Merger. After the Merger, Kit changed
its name to the present name of the Company and in September 1998, the Company
commenced its present Internet casino business.
The Merger was effected pursuant to the terms of a Merger Agreement dated
November 17, 1997 entered into between Mint and Kit, as amended by the First
Amendment thereto dated January 15, 1998, and as further amended by certain
oral agreements in February 1998 (as amended, the "Merger Agreement"). Pursuant
to the Merger Agreement, the shareholders of Mint and Intercapital Global
received approximately 104.8 million shares of Common Stock (the "Merger
Shares") with a negotiated value of $2 million in consideration for entering
into the Merger. See PART II -- ITEM 4 -- "RECENT SALES OF UNREGISTERED
SECURITIES." Through the Merger, the shareholders and management of Mint
acquired control over the Company as the surviving entity.
Prior to the Merger, Mint owned certain Internet casino hardware and
software through its two wholly-owned subsidiaries, Online Software, Inc., a
Delaware corporation ("OSI"), and Online Casinos, Inc. a Delaware corporation
("OCI") and Intercapital Global owned a gaming license issued by the government
of Honduras. From 1996 through the date of the Merger, the beneficial owners of
these entities advanced approximately $2 million which are reflected as capital
contributions to such entities to fund expenditures relating to research and
development of the online gaming business and software. As a result of the
Merger, OSI and OCI became wholly-owned subsidiaries of the Company and were
later merged with and into the Company with the Company surviving.
Intercapital Global was organized in October 1993 as an offshore private
investment fund, and, from time to time, conducted certain investment
activities not related to the casino business on behalf of its beneficial
owners. The Merger Shares were issued to the beneficial owners of Mint and
Intercapital Global, in consideration for entering into the Merger; however, to
reduce the Company's public float, among other reasons, the beneficial owners
returned 57 million of the Merger Shares to the Company for cancellation. In
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exchange for the returned shares, the Company issued to Intercapital Global, as
agent for the beneficial owners, options to acquire 57 million additional
shares of Common Stock at an exercise price of $0.1875 per share expiring on
February 3, 2006 (the "Global Options"). The balance of 47.8 million Merger
Shares was subsequently distributed by Intercapital Global, as agent, to the
beneficial owners, which shares, together with the Global Options, were treated
as consideration for the Merger.
Pursuant to the Merger and concurrent contribution of its shares to Kit,
Intercapital Global became a wholly-owned subsidiary of the Company (and
operator of the Company's Online Casinos) and the Global Options were
transferred to Intercapital Asset Management Limited ("ICAM"), a Bahamian
corporation controlled by Sandy J. Masselli, Jr., the Chief Executive Officer
of the Company. ICAM holds the Global Options for the beneficial owners. See
PART I--ITEM 7-- "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and
"PART II--ITEM 4--RECENT SALES OF UNREGISTERED SECURITIES."
Intercapital Global is the holder of the Company's gaming licenses and the
owner and operator of the Online Casino Web sites. Intercapital Global is based
in The Bahamas and is in the process of obtaining a gaming license from the
government of The Bahamas. Intercapital Global currently holds a gaming license
from the government of Honduras pursuant to which it conducts its present
Internet casino business.
TE Canada, a wholly-owned subsidiary of the Company, was formed on October
15, 1997 in order to provide customer and technical support services to
Intercapital Global's Online Casino business.
Item 2. Management's Discussion and Analysis or Plan of Operation
Management's Discussion and Analysis of Financial Conditions and Results of
Operation
The following discussion of the financial condition and results of our
operations should be read in conjunction with our financial statements and
related notes appearing elsewhere in this Form 10-SB. Except for the historical
information contained herein, the discussion in this Form 10-SB contains
forward-looking statements that involve risks, uncertainties and assumptions
such as statements of our plans, objectives, expectations and intentions. The
cautionary statements made in this Form 10-SB should be read as being
applicable to all related forward-looking statements wherever they appear in
this document. The actual results, levels of activity, performance,
achievements and prospects could differ materially from those discussed below.
Factors that could cause or contribute to such differences include those
discussed elsewhere in this Form 10-SB.
Overview
From 1996 through August 1998, we were considered a development stage
company. Our primary activities were conducted through the OSI and OCI
subsidiaries of Mint., and consisted of the following:
. Developing our business model;
. Market research and analysis;
. Purchasing, testing and evaluating software, hardware and other related
technologies;
. Recruiting and training employees;
. Initial planning and development of our Web site, known as
www.theonlineCasino.com.
. Developing our information systems infrastructure; and
. Establishing finance and administrative functions.
On September 12, 1998 we launched the www.theonlinecasino.com Web site and
began generating revenues.
In the nine months ended September 30, 1999, we continued these initial
activities and also focused on:
. Increasing marketing activities;
. Launching new online gaming Web sites;
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. Implementing improved gaming software licensed from Atlantic
Entertainment International, Ltd.;
. Improving the functionality and appearance of the Web sites; and
. Enhancing our financial, infrastructure and administrative capabilities.
We intend to continue to increase our marketing and administrative
activities, and to increase other operating expense as required to build our
business.
We have incurred significant losses and negative cash flows from operations
in every fiscal period since inception due to the initial research, technology
infrastructure development and starting of our business. Our revenues have not
been sufficient to cover our expenses to date. In order to significantly
increase revenues we will be required to incur significant advertising and
promotional expenses. We anticipate additional revenues to occur in the fall
and winter months, when wagering on professional and college football and, to a
lesser extent basketball, and internet gaming activities as a whole, are
expected to be at their highest levels. In anticipation of an expansion of our
operations, we have recently employed additional management personnel. We
intend to employ additional personnel in such areas as sales, technical support
and finance. These actual and proposed increases in personnel will
significantly increase our selling, general and administrative expenses.
The following discussion of our financial condition and results of
operations for the period ended September 30, 1999, and September 30, 1998, and
the years ended December 31, 1998 and 1997 should be read in conjunction with
our financial statements and the related notes appearing elsewhere in the Form
10-SB.
Our limited operating history and the uncertain nature of the markets we
address or intend to address make prediction of our future results of
operations difficult. Our operations may never generate significant revenues,
and we may never achieve profitable operations. Our quarterly and annual
operating results are likely to fluctuate significantly in the future due to a
variety of factors, including the seasonal effects of the sportsbook operation,
many of which are outside our control.
Results of Operations
Revenues. Net revenues in the year ended December 31, 1998, were
approximately $170,000, while in the nine months ended September 30, 1999,
revenues were approximately $371,000. We had no revenue prior to the launch of
our Web site in September 1998. Our revenues are recognized upon completion of
the sporting event or game of chance. Sporting event revenues have a strong
seasonality towards U.S. professional and college football and basketball
seasons in the fall and winter months. Revenues from the sportsbook operations
were approximately $84,000 and $62,000 for the year ended December 31, 1998 and
the nine months ended September 30, 1999 respectively. Substantially all of the
1999 sportsbook revenues occurred in the first quarter of 1999 when both gross
volume and the hold (net winnings percentage by the Company) were higher than
in subsequent quarters. The hold on baseball games in the summer months is
typically less than the hold for football games. Revenues from the casino
operations were approximately $86,000 and $309,000 for the year ended December
31, 1998 and the nine months ended September 30, 1999, respectively. The volume
of wagering was significantly higher in the first quarter of 1999, due
principally to the seasonal effect of online activity, which typically
increases in the winter months. The increased volume typically causes the hold
to increase. During the summer months both the amount wagered and the hold
decreased. The launch of the three Asian oriented Web sites in June 1999 did
not have a significant impact on revenue during the nine months ended September
30, 1999. The Company's Web sites were essentially non-operational in May 1999,
while the gaming software was replaced with the Atlantic software products. The
launch of the Slotvegas Web site in August 1999 did not have a significant
impact on revenue during the nine months ended September 30, 1999.
Research and Development Expenses. Research and Development expense consist
principally of costs associated with the development and implementation of the
Web sites, developing a methodology for on-line gaming and investigating the
development of certain software products. Total expenses in the years ended
December 31, 1998 and 1997 were approximately $273,000 and $315,000
respectively, and $52,000 for the nine months ended September 30, 1999.
8
<PAGE>
General and Administrative Expenses. General and administrative expenses
consist primarily of salary costs and administrative functions as well as
professional service fees. Administrative expenses also include rent, office
supplies, leases of in-house computer equipment and telephone charges. Total
general and administrative expenses for the year ended December 31,1998 was
approximately $348,000 and $1,007,000 for the nine months ended September 30,
1999. This increase was primarily the result of hiring additional employees,
cost to support Web site operations and building infrastructure technologies to
support operations. Costs incurred after the launch of the Web site, consisting
principally of software licensing cost, telecommunications and Internet Service
Provider costs, amounted to approximately $269,000 and $135,000 for the year
ended December 31, 1998 and the nine months ended September 30, 1999,
respectively. Advertising costs and consulting/professional costs amounted to
$79,000 for the year ended December 31, 1998 and $327,000 in the nine months
ended September 30, 1999. The increase is a result of aggressive promotional
campaigns and the cost of filing Form 10-SB.
Depreciation and Amortization. Depreciation and amortization expenses
consist primarily of the depreciation of furniture and in-house computer and
telecommunications equipment. Total depreciation and amortization expense in
the year ended December 31, 1998 was approximately $6,000 and $35,000 for the
nine months ended September 30, 1999.
Income Taxes. We have incurred net losses for each period since inception.
Since we have not yet filed our 1996 through 1998 tax returns for Mint and
affiliates and Total Entertainment Inc., losses generated in prior years may
not be available. We are expecting to file such tax returns in the near future,
which could yield approximately $2,000,000 of net operating loss carry forwards
and deferred expenses as of December 31, 1998 for United States federal income
tax purposes, which will expire in the year 2018. Due to the uncertainty of
obtaining such benefits and of future profitability, a valuation allowance
equal to the deferred tax assets has been recorded. Changes in ownership
resulting from transactions among our stockholders and sales of common stock by
us, may limit the future annual realization of the tax net operating loss carry
forwards under Section 382 of the Internal Revenue Code of 1986.
Liquidity and Capital Resources.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. We have incurred losses since inception, and at
December 31, 1998 have a deficiency in working capital of approximately
$260,000 and approximately $910,000 as of September 30, 1999. There are also
legislative risks and uncertainties regarding on-line casinos, and certain
litigation against the Company; the cost of defending such actions could be
significant. We have financed our operations to date primarily through the
deferral of officer's salaries, advances made by affiliates and advances made
by SGL (including the sale of a 50% ownership interest in the Slotsvegas site).
Net cash provided by (used in) operating activities was approximately $8,000
in the year ended December 31, 1998 and $(12,000) in the nine month ended
September 30, 1999. In June 1999, we entered an agreement with SGL for a 50%
interest in our Slotsvegas Web site. SGL paid $150,000 in cash to the Company
and $350,000 of obligations to vendors on behalf of the Company. The total
consideration of $500,000 was recorded as deferred income. SGL has also loaned
us $259,000 through September 30, 1999 in the form of payments to vendors on
behalf of the Company and $80,000 in cash paid to the Company. The total amount
available to us under the current loan agreement with SGL is $500,000.
Our material capital commitments consist of obligations under facilities and
operating leases. We anticipate that we will experience an increase in our
capital expenditures and lease commitments consistent with our anticipated
growth in operations, infrastructure and personnel. We anticipate devoting
additional resources to building the strength of our brand name, through
increased marketing and sales efforts.
We may seek additional funding through public or private financing or other
arrangements. Adequate funds may not be available when needed or may not be
available on terms acceptable to us. If additional funds are raised by issuing
equity securities, dilution to existing stockholders could result. If funding
is insufficient at
9
<PAGE>
any time in the future, we may be unable to develop or enhance our products and
services, take advantage of business opportunities or respond to competitive
pressures, any of which could have a material adverse effect on our business,
financial condition and results of operations.
Year 2000 Compliance
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these code fields will need to accept four digit entries to distinguish
the year 2000 and 21st century dates from other 20th century dates. As a
result, computer systems and/or software products used by many companies may
need to be upgraded or replaced to solve this problem.
We have completed our internal information technology and non-information
technology assessments. Based on such assessment, we believe that our internal
software, including that licensed from Atlantic, and hardware systems will
function properly with respect to dates in the year 2000 and thereafter. We do
not expect to incur any significant costs in the future for year 2000 problems.
However, we have not developed any contingency plans in the event of a year
2000 problem nor do we intend to develop a contingency plan. We may experience
unanticipated negative consequences from year 2000 problems, including material
costs, caused by undetected errors or defects in the technology used in our
internal systems.
We have not inquired as to the year 2000 readiness of our customers, or all
of our suppliers or vendors and are unable to determine what, if any,
consequences their year 2000 failures would have on our operations, liquidity
or financial condition. However, we have requested year 2000 compliance letters
from certain of our other major vendors suppliers, but have not yet received
any responses to our requests. If our suppliers, vendors or customers
experience any year 2000 problems, it could affect the revenues of our Web
sites. In most cases, we believe that we could find replacement vendors or
suppliers who are year 2000 compliant without significant delay or expense.
However, if substantially all of our suppliers and vendors prove not to be year
2000 compliant and if we experience difficulties in finding replacement
suppliers and vendors, then our business could be materially harmed. If our
customers, suppliers and vendors experience year 2000 problems, it could result
in an interruption in, or a failure of, certain of our normal business
activities or operations. We could also be required to incur substantial
expenditures in order to adapt our services to changing technologies or to new
protocols as a result of any realized year 2000-related programming errors.
Item 3. Description of Property
The corporate headquarters and principal executive office of the Company is
located at 1411 Peel Street, Suite 500, Montreal, Quebec, Canada H3A 1S5. This
facility houses TE Canada's technical, marketing, customer support and
administrative operations. TE Canada leases approximately 3,057 square feet of
office space at these premises pursuant to a five year lease which commenced
August 1, 1999 and expires on July 31, 2004. The monthly rent is approximately
US$6.50 per square foot in years one and two, approximately US$7.10 per square
foot in year three and approximately $US7.50 per square foot in years four and
five. In addition to the rent, TE Canada is obligated to pay its proportionate
share of operating costs and taxes relating to the leased property.
Intercapital Global leases approximately 250 square feet of office space at
Devonshire House, Queen Street, Nassau, The Bahamas, pursuant to a ten month
lease expiring on May 31, 2000. The monthly rent is US$700. This facility
houses certain hardware and administrative systems and is the location of
Intercapital Global's game servers.
The Company believes that its leased properties are in good condition, are
well maintained and are adequate for the Company's current and immediately
foreseeable operating needs. Neither the Company nor its subsidiaries have any
policies regarding investments in real estate, securities, or other forms of
property.
10
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following tables set forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 1, 1999 by (i) each
person who is known by the Company to beneficially own more than five percent
of the Company's Common Stock, (ii) each of the Company's directors, (iii) each
of the executive officers named in the Summary Compensation Table set forth in
Item 6 -- "EXECUTIVE COMPENSATION", and (iv) all directors and executive
officers of the Company as a group. Unless otherwise indicated, the address of
such persons is 1411 Peel Street, Suite 500, Montreal, Quebec, Canada H3A 1S5.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock
Name and Address of Beneficial Owner Beneficially Owned/1/ Percent of Class/2/
- ------------------------------------ --------------------- -------------------
<S> <C> <C>
Sandy J. Masselli, Jr............... 73,250,000/3/ 56.8
Mitchell Brown...................... 3,500,000/4/ 5.9
Robert D. Bonnell................... 2,000,000/5/ 3.5
T. R. Anthony Malcom................ 250,000/6/ .5
Gala Tse............................ 250,000/7/ .5
Richard B. Davis.................... 250,000/8/ .5
Robert and Carole Knoblock.......... 4,140,000 7.4
294 South 200 W
Valparaiso, Indiana 46383
Intercapital Asset Management
Limited............................ 57,000,000/9/ 50.6
c/o The Royal Bank of Scotland
Shirley & Charlotte Street
Nassau, The Bahamas
All directors and executive officers
as a group (first 6 persons) ...... 79,500,000 67.7
</TABLE>
- --------
1. Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnotes and subject to community property laws, where applicable, the
persons named above have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them.
2. With respect to optionholders, the calculation of percentage ownership
assumes the exercise of the relevant option by the holder but not by other
optionholders.
3. This amount consists of (i) 10,000,000 shares of Common Stock held, directly
or indirectly, by Mr. Masselli's family and relatives, with respect to which
Mr. Masselli is in a position to exercise voting and investment power, (ii)
3,000,000 common stock options issued to Mr. Masselli, (iii) 2,500,000
common stock options issued to Mr. Masselli's brother, Joseph H. Masselli,
with respect to which Mr. Masselli is in a position to exercise voting and
investment power, (iv) 750,000 common stock options issued to Mr. Masselli's
brother, John J. Masselli, with respect to which Mr. Masselli is in a
position to exercise voting and investment power and (v) 57,000,000 common
stock options (the "Global Options") held by Intercapital Asset Management
Limited, a Bahamian corporation ("ICAM") as transferee from Intercapital
Global, with respect to which Mr. Masselli is in a position to exercise
voting and investment power. All of the 63,250,000 common stock options
referred to in clauses (ii), (iii), (iv) and (v) above are exercisable at
any time at $0.1875 per share and expire on February 3, 2006. ICAM is also
listed in the table as an additional beneficial owner of the ICAM Options.
4 2,500,000 of this amount consists of common stock options issued to
Mr. Brown. The options are exercisable at any time at $0.1875 per share and
expire on February 3, 2006.
5. This amount consists of 2,000,000 common stock options issued to
Mr. Bonnell. The options are exercisable at any time at $0.15 per share and
expire on September 30, 2006.
6. This amount consists of 250,000 common stock options issued to Mr. Malcom.
The options are exercisable at any time at $0.15 per share and expire on
September 30, 2006.
11
<PAGE>
7. This amount consists of 250,000 common stock options issued to Ms. Tse. The
options are exercisable at any time at $0.15 per share and expire on
September 30, 2006.
8. This amount consists of 250,000 common stock options issued to Mr. Davis.
The options are exercisable at any time at $0.15 per share and expire on
September 30, 2006.
9. This amount consists of the 57,000,000 Global Options issued to
Intercapital Global as an agent for the beneficial owners of Mint and
Intercapital Global. The Global Options were subsequently transferred by
Intercapital Global to ICAM. The Global Options are exercisable at any time
at $0.1875 per share and expire on February 3, 2006. Sandy J. Masselli, Jr.
is also listed in the table as an additional beneficial owner of the Global
Options.
Item 5. Directors, Executive Officers, Promoters And Control Persons
The Company's directors and executive officers, and their ages as of
November 1, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
Sandy J. Masselli, Jr..................... 37 Chairman of the Board, Chief
Executive Officer and Secretary
Mitchell Brown............................ 34 Director, President and Chief
Operating Officer
T. R. Anthony Malcom...................... 65 Director
Robert D. Bonnell......................... 54 Director
Gala Tse.................................. 41 Director
Richard B. Davis.......................... 53 Director
</TABLE>
Terms of Directors
Mr. Masselli and Mr. Brown have served as directors of the Company since
January 21, 1998. Mr. Bonnell, Mr. Malcom, Ms. Tse and Mr. Davis have served
as directors of the Company since September 30, 1998. The directors of the
Company serve as such until the next annual meeting of stockholders and until
their successors are elected and qualified.
Business Experience of Directors and Executive Officers
Sandy J. Masselli, Jr. has served as the Chairman of the Board, Chief
Executive Officer, Secretary and a Director of the Company since January 1998.
From May 1990 to the present, Mr. Masselli has served as Managing Director of
Intercapital Asset Management Company, Inc., an investment advisory company,
where he has been responsible for the selection and monitoring of investments
as well as merchant banking activities. From May 1981 until May 1990,
Mr. Masselli worked as a Vice President or Senior Vice President at several
major securities and brokerage firms, including Prudential Securities, Inc,
Drexel Burnham Lambert, Inc., Shearson Lehman Hutton, Inc. and Merrill Lynch
Pierce Fenner & Smith, Inc. He holds a Bachelor of Arts degree in Political
Science from Monmouth College and a Juris Doctor from LaSalle University.
Mitchell Brown has served as the President and Chief Operating Officer of
the Company since January 1998. He has over 10 years experience in the sales
and marketing industry. From January 1990 to December 1997, Mr. Brown worked
as a sales representative at Feldman Associates where his responsibilities
included the sale of licensed and generic toys, candy, seasonal and novelty
products. Mr Brown holds a Bachelor of Science degree in Business
Administration from Monmouth University.
T. R. Anthony Malcolm has served as a Director of the Company since
September 30, 1998. He is a Barrister and Solicitor by profession since 1958.
He is admitted to the Bar in Quebec, Ontario and British Columbia, Canada. He
was a partner at the Canadian law firm of Foster, Leggat, Colby, Rioux &
Malcolm from 1966 to 1969. In 1969, he became special counsel to the law firm
of Chauvin & Venne where he was responsible for arranging corporate
acquisitions, mergers and disposals throughout Canada, the United States
12
<PAGE>
and abroad for the North American Trust Company. In 1971, Mr. Malcolm left
Chauvin & Venne and entered the private practice of law and maintains offices
in Quebec and Ontario, Canada where he continues to practice in such capacity.
Mr. Malcolm has been appointed Deputy Municipal Judge in Montreal West; legal
advisor to and administrator for the Quebec Rental Board; and President of the
Provincial Arbitration Commission for the Town of Mount Royal.
Robert D. Bonnell has served as a Director of the Company since September
30, 1998. He has over 24 years experience in the marketing and public relations
industries. From 1992 to the present, Mr. Bonnell has served as Chairman and
Chief Executive Officer of Skiff Lake Holdings Limited, a private holding
company with positions in real estate, investments and trusts. During this
period, he also served as Chairman of Communicer, an international company
specializing in corporate communications and advice in connection with mergers
and acquisitions. Previously, Mr. Bonnell worked as Managing Director and in
other senior positions for Public & Industrial Relations, Canada's largest
public relations firm. In addition, Mr. Bonnell has in the past served as a
director of several other companies, including Windsor Investments S.A. in
Luxemburg, Tudor Deutche International and Windsor Energy Corporation in Tulsa,
Oklahoma (which position he currently holds). He holds a Bachelor of Arts
(Honors) degree in Political Science and Economics from Ricker College,
University of New Brunswick.
Gala Tse has served as a Director of the Company since September 30, 1998.
She has extensive experience in marketing and distributing products in Asia.
From 1995 to 1997, she was the Director of Business Development for Hasbro Toys
Asia. From 1991 to 1995, Ms. Tse worked as an independent distributor or "Blue
Diamond Executive" based in Hong Kong for NuSkin International, a multilevel
marketing company. From 1990 to 1991, she was a Director of Royal Company Ltd.,
a Japanese toy company, responsible for setting up their Hong Kong office for
the purpose of manufacturing toys in China for export throughout South East
Asia. Since 1997, Ms. Tse has been raising a family. She holds a Bachelor of
Science degree from McGill University in Montreal.
Richard B. Davis has served as a Director of the Company since September 30,
1998. He is a Certified Public Accountant licensed to practice in New York and
New Jersey. From 1976 to the present, Mr. Davis has been engaged in the private
practice of accounting, providing services to many companies and individuals.
Prior to that time, Mr. Davis spent many years working in the tax and other
departments at several major accounting firms, including Peat Marwick, Mitchell
& Co. and Touche Ross & Co. Mr. Davis is a member of the American Institute of
Certified Public Accountants, the New York State Society of Certified Public
Accountants and the New Jersey Society of Certified Public Accountants. He
holds a Bachelor of Business Administration degree from City College of New
York.
Significant Employees
Vance P. Hein has been a Vice President of the Company since April 1, 1999
with responsibility for network administration. Mr. Hein has extensive
experience with computer network administration and information and security
systems management. From 1997 to 1998, Mr. Hein worked as Network Administrator
for Intersphere Communications Ltd., a gaming software developer located in
Plymouth Meeting, Pennsylvania, where he was responsible for the company's
network, Web server and security system for user accounts. From 1992 to 1997,
Mr. Hein was employed as Information Systems Manager by CVP Communications in
West Chester, Pennsylvania where he was responsible for all computer
operations, desktop support and software installation. In addition, from 1976
to 1984, Mr Hein served in the U.S. Navy where he had responsibilities in the
broadcast network and shipboard communication areas. Mr Hein has his MCSE
Certification and holds an MFA degree in Film & Television
Production/Information Technology from the University of Southern California,
Los Angeles, as well as a B.S. degree in Secondary Education from Clarion
University.
13
<PAGE>
Family Relationships
There are no family relationships among directors, executive officers or
other persons nominated or chosen by the Company to become officers or
executive officers.
Involvement in Certain Legal Proceedings
The Company is not aware of any material legal proceedings that have
occurred within the past five years concerning any director, director nominee,
promoter or control person which involved a criminal conviction, a pending
criminal proceeding, a pending or concluded administrative or civil proceeding
limiting one's participation in the securities or banking industries, or a
finding of securities or commodities law violations.
Item 6. Executive Compensation
Summary Compensation Table
The following table sets forth certain summary information concerning the
aggregate compensation paid to the Company's Chief Executive Officer. There
were no other executive officers of the Company who earned in excess of
$100,000 for the year ended December 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------
Awards Payouts
---------- ------------
Annual Compensation
---------------------------------- Securities
Name and Principal Underlying All Other
Position(s) Year Salary($) Bonus($) Other($) Options Compensation
------------------ ---- --------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sandy J. Masselli,
Jr. /1/ ............... 1998 100,000/2/ 0 0 63,250,000/3/ 0
Chairman of the Board
and Chief Executive
Officer................
Robert W.
Knoblock /4/ .......... 1998 0 0 0 0 0
Former Chief Executive
Officer................ 1997 0 0 0 0 0
1996 0 0 0 0 0
</TABLE>
- --------
1. Mr. Masselli became Chief Executive Officer of the Company as of January 23,
1998 as part of the Merger.
2. See Deferred Compensation Arrangements below.
3. This amount consists of (i) 3,000,000 common stock options issued to
Mr. Masselli, (ii) 2,500,000 common stock options issued to Mr. Masselli's
brother, Joseph H. Masselli, with respect to which Mr. Masselli is in a
position to exercise voting and investment power, (iii) 750,000 common stock
options issued to Mr. Masselli's brother, John J. Masselli, with respect to
which Mr. Masselli is in a position to exercise voting and investment power,
and (iv) 57,000,000 common stock options (the "ICAM Options") held by
Intercapital Asset Management Limited, a Bahamian corporation ("ICAM"), with
respect to which Mr. Masselli is in a position to exercise voting and
investment power. All of the 63,250,000 common stock options referred to in
clauses (i), (ii) (iii) and (iv) above are exercisable at any time at
$0.1875 per share and expire on February 3, 2006. The exercise price was
equal to the fair market value of the Company's Common Stock at the time of
issuance of the options.
4. Mr. Knoblock resigned as Chief Executive Officer of the Company as of
January 23, 1998 as part of the Merger.
14
<PAGE>
Stock Options
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees in Exercise Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date
---- ---------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Sandy J. Masselli, Jr.,
Chief Executive
Officer............... 63,250,000/1/ 91.3% $0.1875 February 3, 2006
</TABLE>
- --------
No options have been exercised by Mr. Masselli to date.
1. See Note 3 in "PART I--ITEM 6--EXECUTIVE COMPENSATION--Summary Compensation
Table."
Long-Term Incentive Plans
The Company made no awards to the named executive officers under any long-
term incentive plan in 1998.
Compensation of Directors
Directors of the Company do not receive any stated salary or other
compensation for their services as directors or members of committees of the
board of directors, but by resolution of the board, a fixed fee and expenses of
attendance may be allowed for attendance at each meeting. Directors of the
Company may also serve the Company in other capacities as an officer, agent or
otherwise, and may receive compensation for their services in such other
capacity.
Deferred Compensation Arrangements
Mr. Masselli, together with certain other senior officers of the Company,
have agreed to defer their annual salaries until such time as determined by the
relevant officer, without interest and not funded. The deferred salaries shall
be paid to such persons in cash or stock of the Company at such future time as
each person may elect by written notice to the Company. The total amount of
deferred officer salaries for 1998 was approximately $200,000. The Company
deferred an additional $255,000 of officers' salaries through September 30,
1999 and anticipates deferring a substantial portion of the officers' remaining
1999 salaries.
Employment Agreements
The Company is not a party to any employment or consulting agreement with
any named executive officer.
Item 7. Certain Relationships and Related Transactions
Intercapital Global Transactions
Prior to the January 1998 Merger between Kit and Mint in which the Company
was the surviving entity, Sandy J. Masselli, Jr., Chief Executive Officer of
the Company, had voting and investment control over all of Intercapital
Global's assets and outstanding shares of capital stock. Concurrent with the
Merger Intercapital Global was contributed to the Company. At the time of the
Merger, the beneficial owners of Mint and Intercapital Global were identical.
Pursuant to the Merger Agreement, Intercapital Global, in its role as agent for
the beneficial owners, received certain shares of Common Stock and options
which it subsequently distributed to or for the benefit of the beneficial
owners. See PART I--ITEM 1-- "DESCRIPTION OF BUSINESS--Business Development"
and PART II--ITEM 4--RECENT SALES OF UNREGISTERED SECURITIES."
15
<PAGE>
Personal Guaranty of MPACT Agreement
Intercapital Global has entered into an Agreement dated August 18, 1998 (the
"Processing Agreement") with MPACT Immedia Transaction Services Ltd., a Bermuda
company ("MPACT"), pursuant to which MPACT performs various credit card
approval and processing services to facilitate Online Casino transactions in
return for a weekly fee equal to 5.75% of all approved and settled credit card
transactions, subject to a minimum fee of $2,000 per month. The Processing
Agreement is terminable by Intercapital Global, with or without cause, on 15
days notice to MPACT. Intercapital Global's obligations to IMPACT under the
Agreement are personally guaranteed by Sandy J. Masselli, Jr., the Chief
Executive Officer of the Company.
Other
From time to time, certain officers and directors of the Company have
directly paid certain Company expenses. Such transactions have been recorded in
the Company's books as due to officers, and do not bear interest. There are no
scheduled terms of repayment of such amounts.
From 1996 to 1998, Mint and its subsidiaries (predecessor of the Company)
had expenses, principally for computer programming services, that included
approximately $65,000 paid to entities controlled by certain officers of the
Company. During this period, Mint also received advances which are reflected as
capital contributions in the amount of approximately $2,000,000 from the
beneficial owners. See PART I--ITEM 1--"DESCRIPTION OF BUSINESS--Business
Development."
Item 8. Description of Securities
The authorized capital stock of the Company consists of 200,000,000 shares
of Common Stock. As of October 29, 1999, 55,717,208 shares of Common Stock were
issued and outstanding.
Voting Rights; Dividends; Preemption; Redemption; Conversion; Liquidation
The holders of Common Stock (i) are entitled to one vote per share on all
matters requiring shareholder action, (ii) have no preemptive or other rights
and there are no redemption, sinking fund or conversion privileges applicable
thereto and (iii) are entitled to receive dividends as and when declared by the
board of directors out of funds legally available therefore. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities.
Transfer Agent
The Company's transfer agent is Equity Transfer Services Inc.. The transfer
agent's mailing address is Equity Transfer Services Inc., Suite 420, 120
Adelaide Street, West Toronto, Canada M5H 4C3.
16
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
other Shareholder Matters
Market Information
The Company's Common Stock is currently traded on the NASDAQ over-the-
counter bulletin board market (OTCBB) under the symbol TTLN. The following
table sets forth the range of the high and low bid quotations for the Company's
Common Stock for the periods indicated (as reported by Nasdaq). The bid
quotations set forth below reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions:
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Fiscal Year Ended December 31, 1997............................. $2.50 $0.50
</TABLE>
The bid information for 1997 is only available on an annual basis and not
for each quarter due to the lack of trading activity in the Company's (and its
predecessor's) Common Stock during that year.
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Fiscal Year Ended December 31, 1998............................. $0.47 $0.02
</TABLE>
The bid information for 1998 is only available on an annual basis and not
for each quarter due to the lack of trading activity in the Company's (and its
predecessor's) Common Stock during that year.
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Fiscal Year Ended December 31, 1999
First Quarter................................................. $2.25 $0.47
Second Quarter................................................ 1.62 0.44
Third Quarter (through September 30,1999)..................... 0.68 0.35
</TABLE>
Security Holders and Dividends
As of November 4, 1999, there were approximately 109 holders of record of
the Company's Common Stock. The Company has not declared or paid any cash
dividends on its Common Stock during the past two fiscal years and through
September 30, 1999. The Company's board of directors currently intends to
retain all earnings for use in the Company's business for the foreseeable
future. Any future payment of dividends will depend upon the Company's results
of operations, financial condition, cash requirements and other factors deemed
relevant by the Company's board of directors.
Item 2. Legal Proceedings
On October 11, 1999, the Company filed a demand for arbitration (the
"Statement of Claim") with the American Arbitration Association in Chicago,
Illinois (the "AAA Action") against Robert W. Knoblock, Carole Knoblock and
Jille Knoblock (collectively, the "Respondents"), the officers, directors
and/or principal shareholders of Kit, predecessor to the Company. Specifically,
the Company and another claimant (the "Claimants") allege that in connection
with the January 1998 Merger between Kit and Mint, the Respondents breached
certain representations and warranties they made in connection with the
outstanding number of shares and/or fraudulently misrepresented the outstanding
number of shares of Kit. The Claimants are seeking damages of $2,700,000 plus
interest, costs and attorney fees.
On November 15, 1999, the Respondents filed an answer and motion to dismiss
the Statement of Claim and have asserted various defenses in connection
therewith. Related to their defense of the AAA Action, on December 8, 1999, the
Respondents filed a separate action against the Claimants in the Porter
Superior Court in Indiana ( the "State Court Action"). In the State Court
Action, the Respondents are seeking damages in excess
17
<PAGE>
of $5.5 million arising from the Company's refusal to remove restrictive
legends on certain Company common stock certificates held by the Respondents.
The Company believes the claims asserted in the State Court Action are subject
to the mandatory arbitration provisions in the Merger Agreement and, therefore,
intends to seek dismissal of the State Court Action on that basis. In any
event, the Company intends to vigorously defend itself and believes it has a
number of valid defenses to the Respondents' claims, whether such claims are
asserted in the AAA Action or the State Court Action.
On May 4, 1999, Intersphere Communications Ltd. ("Intersphere"), a former
software vendor of the Company, brought an action against Intercapital Global
and certain of its officers in the Superior Court of Montreal for alleged
unpaid royalties of $152,780 Cdn (approximately $100,000 U.S.) in connection
with the licensing agreement between Intercapital Global and Intersphere, and
for various alleged copyright infringements involving alleged damages of
$30,000 Cdn (approximately $20,000 U.S.). The claim for unpaid royalties
against Intercapital Global has been referred to arbitration. The Company has
been advised by its Canadian counsel that this suit lacks merit and should be
of insignificant consequence to the Company.
In addition to the foregoing, the Company is involved from time to time in
various claims and lawsuits in the ordinary course of business, none of which
is expected, either singly, or in the aggregate, to have a material effect on
the Company.
Item 3. Changes in and Disagreements with Accountants
There were no changes in or disagreements with accountants on accounting and
financial disclosure for the two most recent fiscal years and through September
30, 1999.
Item 4. Recent Sales of Unregistered Securities
In connection with the January 1998 Merger between Kit (predecessor to the
Company) and Mint, the pre-Merger shareholders of Kit held approximately 7.4
million common shares of Kit and were entitled to exchange their Kit shares for
shares of Common Stock in the Company on a one for one basis. The issuance of
these shares was exempt from the registration requirements of the Securities
Act pursuant to the exemption provided by Section 4(2) thereof in that the
exchange of shares did not involve a public offering.
Shortly after the Merger, the Company issued 537,208 new shares of Common
Stock to certain officers and pre-Merger shareholders of Kit (the "Kit
Management Shareholders"). The issuance of these shares was exempt from the
registration requirements of the Securities Act pursuant to the exemption
provided by Section 4(2) thereof. No cash consideration was paid by the Kit
Management Shareholders. In consideration for these shares, the Kit Management
Shareholders agreed to the Merger.
In connection with the Merger, 104.8 million shares of Company Common Stock
(the "Merger Shares") were issued to Intercapital Global, in its role as agent
for the beneficial owners of Mint and Intercapital Global. The Merger Shares
issued to Intercapital Global represented a majority of the issued and
outstanding Common Stock of the Company; however, to reduce the Company's
public float, among other reasons, Intercapital Global returned 57 million of
the Merger Shares to the Company for cancellation. In exchange for the returned
shares, the Company issued to Intercapital Global options to acquire 57 million
additional shares of Common Stock at an exercise price of $0.1875 per share
expiring on February 3, 2006 (the "Global Options"). The balance of 47.8
million Merger Shares was subsequently distributed by Intercapital Global to
the beneficial owners, which shares, together with the Global Options, were
consideration for entering into the Merger. Intercapital Global transferred the
Global Options to Intercapital Asset Management Limited ("ICAM"), a Bahamian
corporation controlled by Sandy J. Masselli, Jr., the Chief Executive Officer
of the Company. ICAM holds the Global Options for the beneficial owners.
These Merger related issuances of stock and options by the Company to
Intercapital Global were exempt from the registration requirements of the
Securities Act pursuant to the exemptions provided by Section 4(2) thereof and
Regulation S thereunder. No cash consideration was paid by Intercapital Global
or its shareholders
18
<PAGE>
in connection with these issuances. In consideration for these shares and
options, Intercapital Global and Mint, agreed to the Merger and contributed
certain Internet related research and development, software, know-how and other
assets to the Company in connection therewith.
Item 5. Indemnification of Directors and Officers
The Company's Bylaws provide for indemnification of the Company's directors,
officers, employees and other agents of the Company to the extent and under the
circumstances permitted by the Indiana Business Corporation Law (the "IBCL").
The Company's Bylaws also provide that the Company will have the power to
purchase and maintain insurance covering its directors, officers and employees
against any liability or loss asserted against any of them and incurred by any
of them, whether or not the Company would have the power to indemnify them
against such liability under the IBCL. The Company has a pending application to
obtain directors' and officers' liability insurance.
Section 5.1 of Article V of the Bylaws of the Company provides for
indemnification of directors and officers of the Company to the fullest extent
authorized by the IBCL, and is set forth below:
Section 5.1 Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he
or she or a person of whom he or she is the legal representative is or was
a director or an officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of any
other corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to any employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is an
alleged action or failure to act in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, will be indemnified and held harmless
by the Corporation to the fullest extent authorized by the BCL, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including, without limitation, attorneys' fees, court costs, judgments,
fines, excise taxes or penalties under the Employee Retirement Income
Security Act of 1974, as amended, and amounts paid or to be paid in
settlement) reasonably incurred by such indemnitee in connection therewith;
provided, however, that except as provided in Section 5.3 with respect to
proceedings seeking to enforce rights to indemnification, the Corporation
will indemnify any such indemnitee seeking indemnification in connection
with a proceeding (or part thereof) initiated by such indemnitee only if
such proceeding (or part thereof) was authorized by the Board of Directors.
19
<PAGE>
PART F/S
Index to Financial Statements
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Report of Independent Certified Public Accountants..................... F-2
Financial Statements
Consolidated Balance Sheets.......................................... F-3
Consolidated Statements of Operations................................ F-4
Consolidated Statement of Stockholders' Equity (Deficiency).......... F-5
Consolidated Statements of Cash Flows................................ F-6
Notes to Consolidated Financial Statements........................... F-7-F-19
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
Total Entertainment Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Total
Entertainment Inc. (an Indiana corporation) and Subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of operations, cash
flows and stockholders' equity (deficiency) 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 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 audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Total
Entertainment Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended 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 shown in the financial statements,
the Company incurred a net loss of $605,486 during the year ended December 31,
1998, and, as of that date, the Company's current liabilities exceeded its
current assets by $260,079 and its total liabilities exceeded its total assets
by $107,577. There are also significant legislative risks and uncertainties
regarding on-line casino operations. In addition the Company is involved in
litigation as described in Note D-3. Although the Company's management believes
it has meritorious defenses there can be no assurance that the Company will
prevail. If the Company does not prevail it may have a material adverse impact
on the financial condition of the Company. These factors, among others, as
discussed in Note A-3 to the financial statements, raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note A-3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Parsippany, New Jersey
August 15, 1999, except for Note D-3 as to which the date is December 8, 1999
F-2
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December Dercember 31, September 30,
31, 1997 1998 1999
----------- ------------- -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash................................ $ 30,390
Accounts receivable--MPACT.......... 54,802 $ 90,909
Prepaid expense and other........... 16,241 20,276
----------- -----------
Total current assets.............. 101,433 111,185
Property and equipment
Computer equipment.................. 83,019 268,995
Less accumulated depreciation....... 6,226 41,226
----------- -----------
76,793 227,769
Deferred transaction costs............ $ 145,000
Deferred licensing fees............... 50,708 330,166
Other assets.......................... 1 25,001 25,001
----------- ----------- -----------
$ 145,001 $ 253,935 $ 694,121
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities
Accounts payable and accrued
liabilities........................ $ 145,000 $ 79,992 $ 113,615
Customer account deposits........... 51,860 176,877
Income taxes payable................ 3,900
Deferred compensation............... 200,000 455,000
Due to directors and stockholders... 25,760 15,248
Loans payable....................... 259,753
----------- ----------- -----------
Total current liabilities......... 145,000 361,512 1,020,493
Deferred income....................... 500,000
Stockholders' equity (deficiency)
Common stock, no par value; 1,000
shares authorized, issued and
outstanding at December 31, 1997... -- -- --
Common stock, $.001 par value;
authorized 200,000,000 shares;
issued and outstanding, 55,717,208
shares at December 31, 1998 and
September 30, 1999................. 55,717 55,717
Additional paid-in capital.......... 1,502,092 1,944,283 1,944,283
Accumulated deficit................. (1,502,091) (2,107,577) (2,826,372)
----------- ----------- -----------
1 (107,577) (826,372)
----------- ----------- -----------
$ 145,001 $ 253,935 $ 694,121
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended Nine months ended
-------------------------- ---------------------------
December 31, December 31, September 30, September 30,
1997 1998 1998 1999
------------ ------------ ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Gaming revenues, net.... $ $ 169,993 $ 4,833 $ 371,097
------------ ----------- ----------- -----------
Costs and expenses
Research and
development.......... 314,880 272,876 86,417 52,102
Selling, general and
administrative....... 347,477 189,963 1,006,690
Merger expenses....... 145,000 145,000
Depreciation and
amortization......... 6,226 35,000
------------ ----------- ----------- -----------
Loss before
provision for
income taxes....... (314,880) (601,586) (416,547) (722,695)
Provision (benefit) for
income taxes........... 3,900 (3,900)
------------ ----------- ----------- -----------
NET LOSS............ $ (314,880) $ (605,486) $ (416,547) $ (718,795)
============ =========== =========== ===========
Basic and diluted loss
per common share....... $ .00 $ (.01) $ (.01) $ (.01)
============ =========== =========== ===========
Weighted-average shares
outstanding used in
computing basic and
diluted loss per common
share.................. 104,800,000 60,566,954 62,273,419 55,717,208
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
Years ended December 31, 1998 and 1997 and
for the nine months ended September 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Common stock Common stock
no par value $.001 par value Additional Total
-------------- --------------------- paid-in Accumulated stockholders'
Shares Amount Shares Amount capital deficit equity
------ ------ ----------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996.................... 1,000 -- 1,187,212 $(1,187,211) $ --
Net loss for the year... (314,880) (314,880)
Advances reflected as
capital contributions... 314,880 314,880
------ ---------- ----------- ---------
Balance, December 31,
1997.................... 1,000 -- 1,502,092 (1,502,091) 1
Net loss for the year... (605,486) (605,486)
Advances reflected as
capital contributions... 497,908 497,908
Recapitalization of no
par common stock of Mint
Energy into $.001 par
value
common stock of Kit
Farms Inc., and transfer
of shares in repayment
of loans from
affiliates.............. (1,000) -- 112,717,208 $112,717 $ (112,171)
Cancellation of shares
exchanged for options... (57,000,000) (57,000) 57,000 --
------ ----------- -------- ---------- ----------- ---------
Balance, December 31,
1998.................... -- -- 55,717,208 55,717 1,944,283 (2,107,577) (107,577)
Net loss for the nine
months ended September
30, 1999 (unaudited).... (718,795) (718,795)
------ ----------- -------- ---------- ----------- ---------
Balance, September 30,
1999 (unaudited)........ -- -- 55,717,208 $ 55,717 $1,944,283 $(2,826,372) $(826,372)
====== =========== ======== ========== =========== =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Year Nine months Nine months
ended ended ended ended
December December September September
31, 1997 31, 1998 30, 1998 30, 1999
--------- --------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net loss....................... $(314,880) $(605,486) $(416,547) $(718,795)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities
Amortization of deferred
licensing fees.............. 70,992 33,000 72,583
Depreciation and
amortization................ 6,226 35,000
Merger expense............... 145,000 145,000
Expenditures paid by
directors and stockholders.. 314,880 172,876 118,917 51,700
Increase (decrease) in cash
from changes in operating
assets and liabilities
Accounts receivable........ (54,802) (583) (36,108)
Prepaid expense and other.. (16,241) (3,819) 23,465
Deferred licensing fees.... (21,700)
Other assets............... (145,000) (25,000) (25,000)
Accounts payable and
accrued liabilities....... 145,000 131,852 24,351 158,640
Income taxes payable....... 3,900 (3,900)
Deferred compensation...... 200,000 113,000 255,000
Deferred income............ -- 150,000
--------- --------- --------- ---------
Net cash provided by
(used in) operating
activities.............. 7,617 (11,681) (12,415)
--------- --------- --------- ---------
Cash flows from investing
activities
Purchase of computer
equipment..................... (2,987) (87,464)
--------- --------- --------- ---------
Net cash used in
investing activities.... -- (2,987) -- (87,464)
--------- --------- --------- ---------
Cash flows from financing
activities
Increase (decrease) in due to
directors and stockholders.... 25,760 15,633 (10,511)
Proceeds from loan............. 80,000
--------- --------- --------- ---------
Net cash provided by
financing activities.... -- 25,760 15,633 69,489
--------- --------- --------- ---------
NET INCREASE (DECREASE)
IN CASH................. 30,390 3,952 (30,390)
Cash at beginning of period...... 30,390
--------- --------- --------- ---------
Cash at end of period............ $ -- $ 30,390 $ 3,952 $ --
========= ========= ========= =========
</TABLE>
See Note H for supplementary cash flow information.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
NOTE A--BUSINESS, DESCRIPTION AND HISTORY OF COMPANY
1. Business
Total Entertainment Inc., formerly known as Kit Farms Inc. (the "Company"),
incorporated in the state of Indiana, has three wholly-owned subsidiaries,
Intercapital Global Fund Ltd. ("Intercapital Global"), an Antiguan company,
Intercapital Canada Ltd. ("Intercapital Canada"), incorporated in the Province
of Quebec, and Total Entertainment (Delaware) Inc., an inactive Delaware
company.
The Company offers software-based games of chance and sports wagering
facilities on a worldwide basis through the Internet located at
www.theonlinecasino.com, www.slotsvegas.com, www.bingoonthenet.com, as well as
three Asian-oriented sites.
Intercapital Global, the operating company, owns a gaming license issued by
the Government of Honduras and several Internet web sites. It utilizes software
for the gaming and sportsbook operations under license from Atlantic
Entertainment International Inc. ("Atlantic"), an independent software
developer. Intercapital Global accepts wagers via the Internet through an E-
commerce credit card processing agreement with MPACT Immedia Transaction
Services Ltd. ("MPACT").
Intercapital Canada provides Intercapital Global with technical and customer
support and administrative services.
From the incorporation date of Mint Energy Corporation, a Delaware company,
and its subsidiaries ("Mint Energy"), September 17, 1996, through August 31,
1998, the Company was in the development stage. The Company launched its
www.theonlinecasino.com web site on September 1, 1998. There are significant
legislative risks and uncertainties regarding on-line gaming operations (see
Note D). The Company is developing plans to enter other internet-related
business opportunities, such as e-tailing and advertising arrangements.
2. History
Kit Farms was incorporated on April 22, 1993 and was engaged in the pet food
business until 1995, when the remaining assets and liabilities were liquidated.
From that date to January 28, 1998, Kit Farms was an inactive public company
trading on the Nasdaq over-the-counter bulletin board market ("bulletin
boards").
From 1996 through 1998, Mint Energy had spent several years exploring the
possibilities of and developing software for a gaming and wagering operation
accessible through the Internet. Mint Energy had two subsidiaries, Online
Casino, Inc. and Online Software, Inc. These entities had developed a
methodology for on-line gaming and investigated developing certain software
gaming products, from 1996 through the date of merger. These entities had no
revenues or employees during this period. Funds used by Mint Energy and
subsidiaries to conduct these activities and develop the business were received
as advances which are reflected as capital contributions from Sandy J.
Masselli, Jr., Chairman of the Board and other shareholders of Mint Energy. At
the time of the merger, the shareholders of Mint and Intercapital Global were
identical (the "Beneficial Owners") (see Notes C-1 and E-2).
On January 28, 1998, and as amended, Kit Farms Inc. ("Kit Farms") merged
with Mint Energy including its subsidiaries, and the beneficial owners of
Intercapital Global contributed their share of Intercapital Global to Kit
Farms. The beneficial owners received approximately 104.8 million shares of Kit
Farms, which were valued by the parties to the transaction at approximately $2
million (based upon a negotiated market value of the thinly traded shares of
Kit Farms on the "bulletin boards" of approximately $.02 per share). The
previously existing shareholders of Kit Farms retained approximately 7.4
million of the outstanding shares, and the
F-7
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
principals of Kit Farms received an additional 537,208 shares as consideration
to complete the transaction (see Note C). The acquisition resulted in the
owners and management of Mint Energy having effective control of the combined
entity.
Kit Farms changed its name to Total Entertainment Inc. on February 19, 1998.
Under generally accepted accounting principles, the acquisition is
considered to be a capital transaction in substance, rather than a business
combination. That is, the acquisition is equivalent to the issuance of stock by
Mint Energy for the net monetary assets of Kit Farms, accompanied by a
recapitalization, and is accounted for as a change in capital structure.
Accordingly, the accounting for the acquisition is identical to that resulting
from a reverse acquisition, except that no goodwill is recorded. Under reverse
takeover accounting, the post-reverse-acquisition comparative historical
financial statements of the "legal acquirer" (Kit Farms) are those of the
"accounting acquirer" (Mint Energy).
Accordingly, the financial statements of the Company as of December 31,
1997, and for the year then ended, are the historical financial statements of
Mint Energy for the same period. Earnings per share ("EPS") calculations
reflect the Company's change in capital structure for all periods presented.
The basic structure and terms of the acquisition and related events, all of
which are deemed to have occurred simultaneously on January 28, 1998, together
with the applicable accounting effects, were as follows:
. Kit Farms acquired all of the outstanding common shares of Mint Energy,
including its subsidiaries, and the Beneficial Owners of Intercapital
Global contributed their shares of Intercapital Global to Kit Farms in
exchange for 104.8 million shares of Kit Farms. Intercapital Global
became a wholly-owned subsidiary of Kit Farms. The common stock
exchanged, in addition to the existing Kit Farms shares outstanding,
collectively resulted in the recapitalization of the Company.
. The officers and directors of Kit Farms resigned and were replaced by
Mint Energy representatives.
. The Beneficial Owners returned 57 million shares to the Company in
exchange for options to acquire 57 million shares of the Company's common
stock at $.1875 per share (the "Global options"). Intercapital Global
transferred the Global options to Intercapital Asset Management Limited.
The remaining 47.8 million shares of Kit Farms, and the Global options,
were distributed to the Beneficial Owners.
. Costs associated with the transaction were expensed.
. Kit Farms changed its name to Total Entertainment, Inc.
Intercapital Global was organized in 1993 by Mr. Maselli as an offshore
private investment fund, which from time to time, conducted certain investment
activities not related to the casino business for the benefit of the Beneficial
Owners. At the time of the merger, Mr. Maselli had voting and investment
control over all of Intercapital Global's assets and control over all
outstanding shares of capital stock issued by Intercapital Global. Intercapital
Global became a wholly-owned subsidiary of the Company when its Beneficial
Owners contributed their shares to Kit Farms as part of the merger. At the time
of the transfer of ownership, Intercapital Global held no assets or liabilities
other than the gaming license.
3. Liquidity
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company has incurred a loss since inception. At
December 31, 1998, the Company has a working capital deficiency of
F-8
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
approximately $210,000, and a deficit in stockholders' equity of approximately
$108,000. There are also significant legislative risks and uncertainties
regarding on-line casino operations. In addition the Company is involved in
litigation described in Note D-3. Although the Company's management believes
it has meritorious defenses there can be no assurance that the Company will
prevail. If the Company does not prevail, it may have a material adverse
effect on the financial condition of the Company. The Company's plans with
respect to this situation include the following:
a. Obtain $150,000 in cash and payment of $350,000 of obligations to
vendors on the Company's behalf, from Summerhill Gaming Limited ("SGL")
from the sale of a 50% profit or loss interest in the www.slotsvegas.com
website (see Note G).
b. Obtain advances from affiliated companies, officers or other sources, as
necessary, to fund operating expenses.
c. Defer officers' salaries until such time the Board of Directors
determines it is appropriate to commence payment. (See Note E-1.)
d. Obtain noninterest-bearing advances from SGL pursuant to a loan
agreement of up to $500,000, to fund operating expenses (see Note G).
Expenditures made in the first three quarters of 1999 for software
licenses, hardware, marketing, web-design and new website launch were made
from the above-referenced sources. During the fourth quarter of 1999,
management does not expect to have any significant nonrecurring or capital
expenditures, and plans to have adequate liquidity from operations including
the fall football wagering season (which Management believes is the Company's
most profitable product offering).
In view of the matters described in the previous paragraphs, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
balance sheet is dependent upon continued operations of the Company, which, in
turn, are dependent upon the Company's ability to meet its financing
requirements on a continuous basis, to maintain present financing, and to
succeed in its future operations. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
asset amounts or amounts of liabilities that might be necessary should the
Company be unable to continue in existence.
NOTE B--ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated financial statements follows:
1. Principles of Consolidation
These consolidated financial statements include the accounts of the Company
and its subsidiaries and reflect the operations of Mint Energy and affiliates
from their inception on September 17, 1996. All significant intercompany
accounts and transactions have been eliminated.
2. Fixed Assets
Computers are stated at cost and are depreciated over their estimated
useful lives of three to five years.
3. Foreign Currency Translation
The assets and liabilities of the Company's foreign operations are
translated at the exchange rates prevailing at year-end and income and
expenses are translated at the average exchange rate for the year.
F-9
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
Balance sheet gains and losses arising from translation are reflected as a
component of stockholders' equity within retained earnings. Translation gains
or losses, for the periods presented, have been included in the results of
operations and are not material.
4. Earnings (Loss) Per Share
Basic loss per share is computed by dividing the loss for the period by the
weighted average number of common shares outstanding during the period. Diluted
loss per share is computed by dividing the loss for the period by the weighted
average number of common shares adjusted for the dilutive effect of any
potential common shares issuable during the period. Since the Company had
losses during the periods presented, stock options outstanding are not included
in the diluted earnings (loss) per share calculation, as the effect would be
antidilutive. The amount of options not considered in the earnings (loss) per
share calculation because their effect was antidilutive was 69,250,000 for the
nine months ended September 30, 1999 and the year ended December 31, 1998, and
- -0- for the year ended December 31, 1997.
5. Income Taxes
Total Entertainment is responsible for filing a United States Federal income
tax return, while Intercapital Canada is responsible for filing a Canadian tax
return. Intercapital Global does not expect to file a United States corporate
income tax return. Intercapital Global is not required to file an Antiguan tax
return since it is an International Business Corporation. (See Note D-6.)
6. Concentration of Credit or Market Risk
Statement of Financial Accounting Standards No. 105 ("SFAS No. 105")
requires the disclosure of significant concentration of credit or market risk,
regardless of the degree of such risk. Financial instruments, as defined by
SFAS No. 105, which potentially subject the Company and its subsidiaries to
concentrations of risk, consist principally of cash and accounts receivable.
7. Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. Actual results could
differ from those estimates.
8. Valuation of Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards No. 121
("SFAS No. 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of." The statement requires that the Company
recognize and measure impairment losses of long-lived assets and certain
identifiable intangibles and value long-lived assets to be disposed of.
9. Research and Development
Costs associated with research and development, principally relating to
website development and e-commerce development are expensed as incurred. Such
costs also include expenditures for developing a methodology for on-line gaming
and investigating the development of certain software gaming products.
F-10
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
10. Advertising
Costs associated with advertising are expensed as incurred, and amounted to
$24,000 and $0 for the years ended December 31, 1998 and 1997, respectively.
11. Segment and Related Information
The Company operates as one segment, internet-based gaming, and follows the
requirements of SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." The total assets of the Company held in Canada and
Antigua at December 31, 1998 are $17,000 and $150,000, respectively.
Customers who log on to the Company's websites are located in countries
throughout the world. It is impractical for the Company to determine the
revenues generated from any one geographic location.
12. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
13. Revenue Recognition
Gaming revenues are recognized when the sporting event or game of chance has
been completed. Credit card deposits held by the Company for individual
customers are recorded as customer account deposits until earned by the Company
or returned to the customer. Gaming revenues are presented on a net basis
(i.e., net of customer winnings).
14. Deferred Licensing Fees
Deferred licensing fees are prepaid costs to acquire a software license,
which are amortized over the four-year term of the license agreement. The
portion which will be amortized over the next twelve months is recorded as a
current asset.
Royalty payments, based upon a percentage of winnings, are expensed as
incurred.
15. Deferred Income
At September 30, 1999, the Company recorded $500,000 as deferred income,
resulting from its agreement with Summerhill Gaming Limited ("SGL") (see Note
G). The agreement with SGL in substance represents the sale of future income
and is accounted for as deferred revenue in accordance with Emerging Issues
Task Force issue number 88-18. The amount amortized, as a reduction of expense,
will be calculated by computing the ratio of the amounts paid to SGL to
management's estimate of total payments expected to be made to SGL over four
years (which is management's estimate of the expected life of the website)
following the launch of the website, www.slotsvegas.com. At such time, if ever,
that the deferred revenue balance is fully amortized, any payments to SGL will
be charged in full to current earnings.
SGL will pay the Company 50% of net losses of the slotsvegas site;
accordingly, any future amounts received by the Company will be recorded as a
reduction of the slotsvegas site's operating expenses.
F-11
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
16. Interim Financial Statements
The accompanying consolidated balance sheet as of September 30, 1999, and
the consolidated statements of operations for the nine months ended September
30, 1999 and 1998, stockholders' equity for the nine months ended September 30,
1999, and cash flows for the nine months ended September 30, 1999 and 1998, are
unaudited. The unaudited interim financial statements have been prepared on the
same basis as the annual financial statements and, in the opinion of
management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company's financial position as of
September 30, 1999, results of operations and cash flows as of and for the nine
months ended September 30, 1999 and 1998. The financial data and other
information disclosed in these notes to the financial statements related to
these periods are unaudited. The results for the nine months ended September
30, 1999 and 1998 are not necessarily indicative of the results to be expected
for the year ending December 31, 1999.
NOTE C--CAPITAL STOCK AND STOCK OPTIONS
1. Common Stock Transactions
The Company has 200,000,000 common shares authorized at $.001 par value.
At the time of the Kit Farms merger, it had been purported that 7.37 million
shares of Kit Farms were outstanding. Subsequent to the merger, the Company was
informed that there may be additional shares outstanding, which were
subsequently cancelled by the Company. This matter is currently under
arbitration (see Note D-3). Notwithstanding the arbitration issue, the existing
stockholders of Kit Farms were to continue to hold the 7.37 million shares of
the common stock of the merged entity. Intercapital Global, in its role as
agent for the Beneficial Owners, received 104.8 million shares of common stock
of Kit Farms, with an aggregate value of approximately $2 million pursuant to
merger of Mint Energy into Kit Farms, and the contribution, by the Beneficial
Owners, of their shares of Intercapital Global. The aggregate value was
determined through negotiations among the Boards of Directors of Kit Farms and
Mint Energy, in the absence of reliable quoted market prices on the "bulletin
boards."
In February 1998, the Beneficial Owners voluntarily returned to treasury 57
million shares. The shares were subsequently cancelled by the Company. On
February 3, 1998, the Company granted an option (the "Global Option"), to
replace the returned shares, to acquire 57 million shares at $.1875 per share,
exercisable at any time through February 3, 2006, to Intercapital Global, in
its role as agent for the Beneficial Owners. Intercapital Global subsequently
transferred the option to Intercapital Asset Management Limited, an investment
management company controlled by Mr. Masselli, which has the same beneficial
owners as Mint Energy and Intercapital Global.
Intercapital Global, in its role as agent for the Beneficial Owners
subsequently distributed 47.8 million shares of common stock it received to its
Beneficial Owners, which, together with the Global Option were consideration
received for the merger.
In June 1998, the Company issued an additional 537,000 shares to the former
principal shareholders and directors of Kit Farms to facilitate the merger.
F-12
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
2. Stock Options
The Company does not have a formal stock option plan; however, the Company
has issued stock options under letter agreements to certain individuals. The
options granted had an exercise price at least equal to the fair value of the
Company's stock, and expire after eight years. The options granted vest
immediately.
As permitted by SFAS No. 123, the Company has elected to follow Accounting
Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to
Employees," method of determining compensation cost. Under APB No. 25, because
the exercise price of the Company's employee stock options equals or exceeds
the market price of the underlying stock on the date of grant, no compensation
expense is recognized for options issued to employees or Directors.
Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company had accounted for its employees' stock
options under the fair value method of that Statement. The fair value of these
options was estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
December 31,
1998
-------------------
<S> <C>
Risk-free interest rate................................ 6%
Volatility factor...................................... 129%
Expected life of options............................... 5 years and 8 years
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vested restrictions and are
fully transferable. In addition, the option valuation model requires the input
of highly subjective assumptions. Because the Company's changes in the
subjective input assumptions (such as the volatility factor of thinly traded
stock) can materially affect the fair value estimate, in management's opinion,
the existing methods do not necessarily provide a reliable single measure of
the fair value of its employees' stock options.
Had the Company determined compensation cost for this plan in accordance
with SFAS No. 123, the Company's pro forma net loss attributable to common
stock holders and pro forma basic and diluted loss per common share would have
been as follows:
<TABLE>
<CAPTION>
Year ended
December 31,
1998
------------
<S> <C>
Pro forma net loss........................................... $(2,592,986)
Pro forma basic and diluted loss per common share............ $ (.05)
</TABLE>
F-13
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
A summary of the Company's employee and director stock option activity and
related information for the years ended December 31, 1998 and 1997, and the
nine months ended September 30, 1999, follows:
<TABLE>
<CAPTION>
Exercise Weighted-
price average
Options per share exercise price
---------- ------------- --------------
<S> <C> <C> <C>
Balance, January 1, 1997........... -- $ -- $ --
Granted............................ -- -- --
---------- ------------- -----
Balance, December 31, 1997......... -- -- --
Granted............................ 12,250,000 $.15 - $.1875 .179
---------- ------------- -----
Balance, December 31, 1998......... 12,250,000 $.15 - $.1875 .179
---------- ------------- -----
Granted............................ -- -- --
---------- ------------- -----
Balance, September 30, 1999
(unaudited)....................... 12,250,000 $.15 - $.1875 $.179
========== =====
</TABLE>
The weighted-average fair values of options granted were $.16 for the year
ended December 31, 1998.
The following table summarizes information about the shares outstanding and
exercisable for options, including the option held by Intercapital Asset
Management Limited, at December 31, 1998.
<TABLE>
<CAPTION>
Weighted-
average Weighted-
Range of remaining average
Exercise Number contractual life exercise Number
Prices outstanding in years price exercisable
-------- ----------- ---------------- --------- -----------
<S> <C> <C> <C> <C>
$.1875 66,500,000 7.1 $.1875 66,500,000
.15 2,750,000 7.75 .15 2,750,000
</TABLE>
NOTE D--COMMITMENTS AND CONTINGENCIES
1. Legislative Risks and Uncertainties
The Company and its subsidiaries are subject to applicable laws in the
jurisdictions in which they operate or offer services. While some
jurisdictions have attempted to restrict or prohibit Internet gaming, other
jurisdictions, such as several Caribbean countries, Australia and certain
Native American territories, have taken the position that Internet gaming is
legal and/or have adopted, or are in the process of reviewing, legislation to
regulate Internet gaming in such jurisdictions. As companies and consumers
involved in Internet gaming are located around the globe, there is uncertainty
regarding exactly which government has jurisdiction or authority to regulate
or legislate with respect to various aspects of the industry. Furthermore, it
may be difficult to identify or differentiate gaming-related transactions from
other Internet activities and link those transmissions to specific users, in
turn making enforcement of legislation aimed at restricting Internet gaming
activities difficult. The uncertainty surrounding the regulation of Internet
gaming could have a material adverse effect on the Company's business,
revenues, operating results and financial condition.
Pending United States Legislation and Other Existing Laws
Governments in the United States or other jurisdictions may in the future
adopt legislation that restricts or prohibits Internet gambling. After
previous similar bills failed to pass in 1998, on March 23, 1999, Senator Jon
Kyl of the United States Senate introduced a revised bill intended to prohibit
and criminalize Internet gambling.
F-14
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
On November 19, 1999, this bill was passed by the Senate. There can be no
assurance as to whether the Kyl bill or any similar bill will become law.
In addition, existing U.S. Federal statutes and state laws could be
construed to prohibit or restrict gaming through the use of the Internet, and
there is a risk that government authorities may view the Company as having
violated such statutes or laws, notwithstanding the Company's gaming licenses
issued to Intercapital Global by the governments of Honduras and the Bahamas
(Pending). Several State Attorney Generals and court decisions have upheld the
applicability of state antigambling laws to Internet casino companies.
Accordingly, there is a risk that criminal or civil proceedings could be
initiated in the United States or other jurisdictions against the Company
and/or its employees, and such proceedings could involve substantial litigation
expenses, penalties, fines, diversion of the attention of key executives,
injunctions or other prohibitions being invoked against the Company and/or its
employees. Such proceedings could have a material adverse effect on the
Company's business, revenues, operating results and financial condition.
In addition, as electronic commerce further develops, it may generally be
subject to government regulation. Current laws which predate or are
incompatible with Internet electronic commerce may be enforced in a manner that
restricts the electronics commerce market. Any such developments could have a
material adverse effect on the Company's business, revenues, operating results
and financial condition.
The Company intends to minimize the potential legal risks by continuing to
conduct its Internet business from offshore locations that permit online gaming
and by increasing its marketing efforts in Asia and other foreign
jurisdictions.
2. Operating Leases
At December 31, 1998, the Company conducted a portion of its operations in
leased facilities under operating leases expiring at various dates through July
31, 1999. The Company signed a lease for additional office premises in June
1999 for a period of five years ending July 31, 2004 for a minimum annual rent
of $31,000 plus operating costs. The Company also entered into a computer lease
in August 1999. Certain of the leases contain escalation clauses for payments
of expenses over base rent. The approximate minimum annual rental commitments
under these operating leases currently in effect at December 31, 1998 are as
follows:
<TABLE>
<S> <C>
Year ending December 31,
1999............................................................. $ 91,000
2000............................................................. 53,000
2001............................................................. 28,000
2002............................................................. 27,000
2003............................................................. 24,000
Thereafter....................................................... 21,000
--------
Total minimum payments........................................... $244,000
========
</TABLE>
Rent expense for the years ended December 31, 1998 and December 31, 1997 was
approximately $33,000 and $55,000, respectively.
F-15
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
3. Litigation
On October 11, 1999, the Company filed a demand for arbitration (the
"Statement of Claim") with the American Arbitration Association in Chicago,
Illinois (the "AAA Action") against Robert W. Knoblock, Carole Knoblock and
Jille Knoblock (collectively, the "Respondents"), the officers, directors
and/or principal shareholders of Kit, predecessor to the Company. Specifically,
the Company and another claimant (the "Claimants") allege that in connection
with the January 1998 Merger between Kit and Mint, the Respondents breached
certain representations and warranties they made in connection with the
outstanding number of shares and/or fraudulently misrepresented the outstanding
number of shares of Kit. The Claimants are seeking damages of $2,700,000 plus
interest, costs and attorney fees.
On November 15, 1999, the Respondents filed an answer and motion to dismiss
the Statement of Claim and have asserted various defenses in connection
therewith. Related to their defense of the AAA Action, on December 8, 1999, the
Respondents filed a separate action against the Claimants in the Porter
Superior Court in Indiana ( the "State Court Action"). In the State Court
Action, the Respondents are seeking damages in excess of $5.5 million arising
from the Company's refusal to remove restrictive legends on certain Company
common stock certificates held by the Respondents. The Company believes the
claims asserted in the State Court Action are subject to the mandatory
arbitration provisions in the Merger Agreement and, therefore, intends to seek
dismissal of the State Court Action on that basis. In any event, the Company
intends to vigorously defend itself and believes it has a number of valid
defenses to the Respondents' claims, whether such claims are asserted in the
AAA Action or the State Court Action.
On May 4, 1999, Intersphere Communications Ltd. ("Intersphere"), a former
software vendor of the Company, brought an action against Intercapital Global
and certain of its officers in the Superior Court of Montreal for alleged
unpaid royalties of $152,780 Cdn (approximately $100,000 US) in connection with
the licensing agreement between Intercapital Global and Intersphere, and for
various alleged copyright infringements involving alleged damages of $30,000
Cdn (approximately $20,000 US). The claim for unpaid royalties against
Intercapital Global has been referred to arbitration. The Company has been
advised by its Canadian counsel that this suit lacks merit and should be of
insignificant consequence to the Company.
The Company and its subsidiaries are a party to various claims and
litigation arising in the normal course of conducting its business. The Company
believes that these matters, taken individually, or in the aggregate, would not
have a material adverse impact on the Company's financial position or results
of operations.
4. Uncertainty Due to the Year 2000 Issue
The year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than
a date.
The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, may impact operations and financial reporting systems failure
which could affect an entity's ability to conduct normal business operations.
Management of the Company believes that internal software and hardware systems
will function properly with respect to dates in the year 2000 and thereafter.
However, the Company may experience unanticipated negative consequences from
year 2000 problems, including material costs, caused by undetected errors or
defects in the technology used in internal systems. The Company does not have a
contingency plan.
F-16
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
If the Company's suppliers, vendors or customers experience any year 2000
problems it could affect the revenues of its websites. The Company expects that
it could find replacement vendors or suppliers who are year 2000 compliant
without significant delay or expense. However, if substantially all of the
Company's suppliers and vendors prove not to be year 2000 compliant and if
difficulties are experienced in finding replacement suppliers and vendors, then
the Company's business could be materially impacted. If the Company's
customers, suppliers and vendors experience year 2000 problems, it could result
in an interruption in, or a failure of, certain normal business activities or
operations. The Company could also be required to incur substantial
expenditures in order to adapt services to changing technologies or to new
protocols as a result of any realized year 2000-related programming errors.
5. Gaming Software Contracts
On April 9, 1999, the Company signed two agreements with Atlantic granting
it the right to use new casino and sportsbook gaming software for a four-year
period ended April 9, 2003. The terms of the agreement call for the payment of
a total of $247,500 upon signing (which amount has been paid) and an obligation
to pay the licensor a royalty of 7% of the Company's gaming revenue.
On June 23, 1999, the Company signed two additional agreements with Atlantic
for the rights to two more games for a four-year period ended June 23, 2003.
Under the terms of this agreement, the Company paid $102,500 upon signing and
must pay a royalty of 5% and 7%, respectively of the Company's gaming revenue.
The payments made upon signing are recorded as deferred licensing fees and
expensed over 48 months.
The Company also signed an agreement with Atlantic for support and
maintenance of the licensed software for an initial period of one year ending
June 30, 2000, a cost of $5,000 per month, subject to adjustments.
Such agreements may be terminated by the vendor upon 30 days' notice, or the
software may become obsolete and outdated, which could have a material adverse
effect on the Company.
6. Income Tax Returns
Through December 31, 1998, Total Entertainment, its subsidiaries and its
predecessor companies including Kit Farms, had not filed all required income
tax returns or other tax returns or reports required by Federal, State, Local
or other jurisdictions. The Company will investigate and consult with
appropriate authorities shortly to establish a plan to become compliant. For
substantially all periods, these entities had not generated any taxable
profits; therefore, management believes the amount of taxes due including any
potential penalties and interest for past periods is not considered
significant.
7. Credit Card Processing Contract
In August 1998, the Company entered into an agreement with MPACT, whereby
MPACT performs various credit card approval and processing services for the
online casino operations. MPACT receives a fees equal to 7%, subsequently
reduced to 5.75% in 1999, of all approved and settled credit card transactions,
subject to a minimum of $2,000 per month. The agreement is terminable by the
Company with 15 days' notice to MPACT.
MPACT holds a security deposit of $25,000 from the Company, and has a
personal guaranty of Mr. Masselli.
F-17
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
NOTE E--RELATED PARTY TRANSACTIONS
Mr. Maselli had, and continues to have, effective control of Mint Energy and
affiliates, Intercapital Global and Intercapital Asset Management Limited.
1. Deferred Compensation
During 1998, the officers of the Company did not receive any cash
compensation for their services. Such amounts totalled approximately $200,000
and are being deferred by the Company until such time as determined by relevant
Officer. The deferred salaries shall be paid to such persons in cash or stock
of the Company at such future time as each person may elect by written notice
to the Company. The Company deferred an additional $255,000 of officers'
salaries through September 30, 1999 and anticipates deferring a substantial
portion of the officers' salaries throughout the remainder of the year.
2. Expenses Incurred by Mint Energy and subsidiaries
From 1996 to 1998, the Company's expenses included approximately $65,000
paid to entities controlled by officers of the Company, principally for
computer programming services. During this period, the Company also received
advances reflected as capital contributions in the amount of $2 million from
its Beneficial Owners for expenses relating to the research and development of
the online casino gaming business and related software.
3. Advances From Officers and Directors
From time to time, officers and directors of the Company have directly paid
certain Company expenses. Such transactions have been recorded as due to
officers, and do not bear interest. There are no scheduled terms of repayment
of such amounts.
NOTE F--INCOME TAXES
Upon filing income tax returns (see Note D-6), the Company could have net
operating losses of approximately $2 million at December 31, 1998, which could
be available to offset future United States taxable income. However, net
operating losses and other deferred expenses generated in years for which no
income tax returns have been filed, or are not accepted by the Internal Revenue
Service, may not be available. Deferred tax benefits arising from these net
operating loss carryforwards, deferred compensation and certain accruals, if
any, are fully reserved due to the uncertainty of future generation or
utilization.
Changes in ownership resulting from transactions among our stockholders and
sales of common stock by us, may limit annual realization of the tax net
operating loss carry forwards that could become available under Section 382 of
the Internal Revenue Code of 1986.
NOTE G--SUBSEQUENT EVENTS
On May 5, 1999, the Company entered into an agreement with Summerhill Gaming
Limited ("SGL") for a 50% interest in the Company's www.slotsvegas.com website.
The agreement does not specify a fixed period and remains in effect as long as
the site is in operation. In consideration for this interest, SGL paid $150,000
in cash to the Company and paid $350,000 of obligations to vendors on behalf of
the Company, the total of which was recorded as deferred income (see Note B-
15). Such amounts are non-refundable.
F-18
<PAGE>
TOTAL ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
(Information with respect to the nine months ended September 30, 1999 is
unaudited.)
The agreement requires the Company to pay SGL 50% of the net profits derived
from the Slotsvegas site, which commenced operations in July 1999, on a monthly
or other interim basis, as agreed to by the Company and SGL. To the extent that
the slotsvegas site incurs net losses, SGL will pay the Company 50% of such
amounts. Through September 30, 1999, the net profits from the Slotsvegas site
was insignificant.
As part of the agreement, SGL agreed to make short-term loans up to $500,000
to the Company for liquidity purposes. The loans bear interest at 7% per annum,
require interest payments on a monthly basis, and payment of the entire
principal balance three years from the date of issuance. Through September 30,
1999, SGL loaned the Company approximately $260,000. The loans were made in the
form of direct payments of obligations to vendors on behalf of the Company and
cash advances of $80,000.
NOTE H--SUPPLEMENTARY CASH FLOW INFORMATION
1. In 1998 and 1997, directors and stockholders made advances reflected as
capital contributions to the Company by paying certain expenses and liabilities
and acquired assets on behalf of the Company as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Software licensing fees................................ $100,000 $ --
======== ========
Computer equipment..................................... $ 80,032 $ --
======== ========
Accounts payable....................................... $145,000 $ --
======== ========
Development, selling, general and administrative
expenses.............................................. $172,876 $314,880
======== ========
</TABLE>
2. In the nine months ended September 30, 1999, SGL paid approximately
$529,000 of the Company's obligations to certain of its vendors (see Note G) as
follows:
<TABLE>
<S> <C>
Software licensing fees.......................................... $350,000
========
Software maintenance............................................. $ 27,500
========
Computer equipment............................................... $100,553
========
Selling, general and administrative expenses..................... $ 51,700
========
</TABLE>
F-19
<PAGE>
PART III
Item 1. Index To Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
2.1 Certificate of Incorporation and amendments
2.2 Bylaws
6.1 Merger Agreement dated November 17, 1997 entered into between
Mint Energy Corporation and Kit Farms Inc., as amended by the
First Amendment thereto dated January 15, 1998, and Plan of
Merger/Exchange dated January 23, 1998
6.2 License Agreements dated April 9, 1999 and June 23, 1999
between Intercapital Global Fund, Ltd. and Atlantic
International Entertainment, Ltd., and related Software
Support Maintenance Agreements
6.3 Amended and Restated Purchase Agreement dated May 5, 1999
between Intercapital Global Fund, Ltd. and Summerhill Gaming
Limited
6.4 Agreement dated August 18, 1998 between Intercapital Global
Fund, Ltd. and MPACT Immedia Transaction Services Ltd.
6.5 Equipment Lease Agreement dated August 18, 1999 between Total
Entertainment Canada, Ltd. (formerly Intercapital Canada Ltd.)
and Dell Financial Services Canada Limited
6.6 Lease Agreement dated June 22, 1999 between Marine Properties
Ltd., as Landlord, and Total Entertainment Canada, Ltd.
(formerly Intercapital Canada Ltd.), as Tenant
6.7 Lease Agreement dated July 30, 1999 between Devonshire House,
Ltd., as Landlord, and Intercapital Global Fund, Ltd., as
Tenant
6.8 Revolving Credit Note dated May 5, 1999 payable to Summerhill
Gaming Limited
</TABLE>
iii
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Total Entertainment Inc.
Date: December 14, 1999
By: /s/ Sandy J. Masselli, Jr.
----------------------------------
Name: Sandy J. Masselli, Jr.
Title: Chief Executive
Officer
<PAGE>
EXHIBIT 2.1
A R T I C L E S O F I N C O R P O R A T I O N
O F
KIT FARMS INC.
The undersigned incorporator or incorporators, desiring to form a
corporation (hereinafter referred to as the "Corporation") pursuant to the
provisions of:
(Indicate appropriate act)
XX Indiana Business Corporation Law
___Indiana Professional Corporation Act of 1983
as amended, executes the following Articles of Incorporation:
A R T I C L E I
Name
The name of Corporation is: KIT FARMS INC.
A R T I C L E I I
Registered Office and Agent
The street address of the corporation's initial registered office in
Indiana and the name of its initial registered agent at that office is:
Robert W. Knoblock,
702 East Indiana,
Kouts,
Indiana 46347
<PAGE>
ARTICLE III
Authorized Shares
Number of Shares:
The total number of shares which the Corporation is authorized to
issue is Fifty Million (50,000,000.00) at $.001 par value. At least one
class of shares is hereby authorized unlimited voting rights and is entitled
to receive net assets of the Corporation upon dissolution.
ARTICLE IV
Incorporators
The name(s) and post office address of the incorporator(s) of the
Corporation is (are):
Name Address City State
IN. 46383 Robert W. Knoblock, 294 South 200 West, Valparaiso,
IN. 46383 Carole M. Knoblock, 294 South 200 West, Valparaiso,
In Witness Whereof, the undersigned being all the incorporators of said
corporation execute these Articles of Incorporation and verify, subject to
penalties of perjury, that the statements contained herein are true.
Dated this 15th day of March, 1993.
/s/ Carole M. Knoblock CAROLE M. KNOBLOCK
---------------------------------
(Written Signature) (Printed Signature)
/s/ Robert W. Knoblock ROBERT W. KNOBLOCK
---------------------------------
(Written Signature) (Printed Signature)
This instrument prepared by: Charles Giannetto, Attorney at Law,
J. J. Stankiewicz and Associates, 7870 Broadway, Merrillville, Indiana 46410.
(219/769-1263)
<PAGE>
[LOGO] ARTICLES OF AMENDMENT OF THE ARTICLES OF INCORPORATION
State Form 38333R2/ Corporate Form No. 102 (March 1987)
Articles of Amendment (Amending Individual Articles Only)
Prescribe by Evan Bayh, Secretary of State of Indiana.
Recording Requirements-Recording of Articles of Amendment in the Office of the
County Recorder is generally no longer required by the Indiana General
Corporation Act. However, if the name of the corporation is changed by this
amendment, a certified copy of the certificate of Amendment must be filed with
the recorder of every county in which the corporation owns real estate.
Instructions: Present 2 Originally Signed and Fully Executed Copies to:
SECRETARY OF STATE
Room 155, State House
Indianapolis, Indiana 46204
(317) 232-6576
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
KIT FARMS INC.
- --------=============================================================---------
The undersigned officers of
KIT FARMS INC. #1993040891
- ------------------------------------------------------------------------------
(hereinafter referred to as the "Corporation")existing pursuant to the
provisions of:
(Indicate appropriate act )
[X] Indiana General Corporation Act [] Indiana
Professional Corporation Act of 1983
as amended (hereinafter referred to as the "Act"), desiring to give notice of
corporate action effectuating amendment of certain provisions of its Articles of
Incorporation, certify the following facts:
______________________________________________________________________________
ARTICLE 1 Amendment(s)
- ------------------------------------------------------------------------------
SECTION 1 The date of Incorporation of the corporation is:
April 8, 1993
- ------------------------------------------------------------------------------
SECTION 2 The name of the corporation following this amendment to the Articles
of Incorporation is:
KIT FARMS INC.
- ------------------------------------------------------------------------------
SECTION 3
The exact text of Article(s) III of the Articles of
-------------------------------
Incorporation is now as follows:
ARTICLES III
Authorized Shares
Number of Shares:
The total number of shares which the Corporation is authorized to
issue is Fifty Million (50,000,000.00) at $.001 par value. At least one class of
shares is hereby authorized unlimited voting rights and is entitled to receive
net assets of the Corporation upon dissolution.
_____________________________________________________________________________
<PAGE>
- --------------------------------------------------------------------------------
ARTICLE II Manner of Adoption and Vote
- --------------------------------------------------------------------------------
SECTION 1 Action by Directors:
The Board of Directors of the Corporation duly adopted a resolution
proposing to amend the terms and provisions of Article(s) III
----------------------
of the Articles of incorporation and directing a meeting of the Shareholders, to
be held on____________________________, allowing such Shareholders to vote on
the proposed amendment.
The resolution was adopted by: (select appropriate paragraph)
(a) Vote of the Board of Directors at a meeting held on __________________,
19 __________________, at which a quorum of such Board was present.
(b) Written consent executed on March 20, 1995, and signed by all members
of the Board of Directors.
- --------------------------------------------------------------------------------
SECTION 2 Action by Shareholders:
The Shareholders of the Corporation entitled to vote in respect of the
Articles of Amendment adopted the proposed amendment.
The amendment was adopted by: (select appropriate paragraph)
(a) Vote of such Shareholders during the meeting called by the Board of
Directors. The result of such vote is as follows:
TOTAL
--------------------
SHAREHOLDERS ENTITLED TO VOTE:
--------------------
SHAREHOLDERS VOTED IN FAVOR:
--------------------
SHAREHOLDERS VOTED AGAINST:
--------------------
(b) Written consent executed on _________, 19__________, and signed by all
such Shareholders.
- --------------------------------------------------------------------------------
SECTION 3 Compliance with Legal Requirements.
The manner of the adoption of the Articles of Amendment and the vote by
which they were adopted constitute full legal compliance with the provisions of
the Act, the Articles of Incorporation, and the By-Laws of the Corporation.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE III Statement of Changes Made With Respect to Any Increase In The
Number of Shares Heretofore Authorized
- --------------------------------------------------------------------------------
Aggregate Number of Shares
Previously Authorized 50,000,000.00
-----------------
Increase (indicate "o" or 150,000,000.00
"N/A" if no increase) -----------------
Aggregate Number of Shares
To Be Authorized After Effect 200,000,000.00
of This Amendment -----------------
- --------------------------------------------------------------------------------
I hereby verify subject to the penalties of perjury that the facts contained
herein are true.
- --------------------------------------------------------------------------------
Current Officer's Signature Officer's Name Printed
Robert W. Knoblock
- --------------------------------------------------------------------------------
Officer's Title
President /s/ Robert W. Knoblock
- --------------------------------------------------------------------------------
<PAGE>
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
ARTICLES OF AMENDMENT
To Whom These Presents Come, Greeting:
WHEREAS, there has been presented to me at this office, Articles of Amendment
for:
KIT FARMS INC.
and said Articles of Amendment have been prepared and signed in accordance with
the provisions of the Indiana Business Corporation Law, as amended.
The name of the corporation is amended as follows:
TOTAL ENTERTAINMENT INC.
NOW, THEREFORE, I, SUE ANN GILROY, Secretary of State of Indiana, hereby certify
that I have this day filed said articles in this office.
The effective date of these Articles of Amendment is February 19, 1998.
In Witness Whereof, I have hereunto set my
hand and affixed the seal of the State
of Indiana, at the City of Indianapolis,
this Nineteenth day of February, 1998
/s/ T.C.
---------------------------
Deputy
<PAGE>
EXHIBIT 2.2
BYLAWS
OF
TOTAL ENTERTAINMENT INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
OFFICE AND RECORDS....................................................... 1
Section 1.1 Delaware Office............................................. 1
---------------
Section 1.2 Other Offices............................................... 1
-------------
Section 1.3 Books and Records........................................... 1
-----------------
ARTICLE II
STOCKHOLDERS............................................................. 1
Section 2.1 Annual Meeting.............................................. 1
--------------
Section 2.2 Special Meetings............................................ 2
----------------
Section 2.3 Notice of Meetings.......................................... 2
------------------
Section 2.4 Quorum...................................................... 3
------
Section 2.5 Voting...................................................... 4
------
Section 2.6 Proxies..................................................... 5
-------
Section 2.7 Notice of Stockholder Business and Nominations.............. 5
----------------------------------------------
Section 2.8 Inspectors of Elections; Opening and Closing the Polls...... 9
------------------------------------------------------
Section 2.9 List of Stockholders........................................ 10
--------------------
Section 2.10 Stockholder Action by Written Consent...................... 11
-------------------------------------
ARTICLE III
DIRECTORS................................................................ 11
Section 3.1 General Powers.............................................. 11
--------------
Section 3.2 Number, Tenure and Qualifications........................... 11
---------------------------------
Section 3.3 Vacancies and Newly Created Directorships................... 12
-----------------------------------------
Section 3.4 Resignation................................................. 12
-----------
Section 3.5 Removal..................................................... 13
-------
Section 3.6 Meetings.................................................... 13
--------
Section 3.7 Quorum and Voting........................................... 14
-----------------
Section 3.8 Written Consent of Directors in Lieu of a Meeting........... 14
-------------------------------------------------
Section 3.9 Compensation................................................ 15
------------
Section 3.10 Committees of the Board of Directors....................... 15
------------------------------------
ARTICLE IV
OFFICERS................................................................. 16
Section 4.1 Elected Officers............................................ 16
----------------
Section 4.2 Election and Term of Office................................. 17
---------------------------
Section 4.3 Resignation and Removal..................................... 17
-----------------------
Section 4.4 Compensation and Bond....................................... 17
---------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 4.5 Chairman of the Board....................................... 18
---------------------
Section 4.6 President................................................... 18
---------
Section 4.7 Vice Presidents............................................. 19
---------------
Section 4.8 Treasurer................................................... 19
---------
Section 4.9 Secretary................................................... 19
---------
Section 4.10 Assistant Treasurers....................................... 20
--------------------
Section 4.11 Assistant Secretaries...................................... 20
---------------------
Section 4.12 Delegation of Duties....................................... 20
--------------------
ARTICLE V
INDEMNIFICATION AND INSURANCE............................................ 21
Section 5.1 Right to Indemnification.................................... 21
------------------------
Section 5.2 Right to Advancement of Expenses............................ 22
--------------------------------
Section 5.3 Right of Indemnitee to Bring Suit........................... 22
---------------------------------
Section 5.4 Non-Exclusivity of Rights................................... 24
-------------------------
Section 5.5 Insurance................................................... 24
---------
Section 5.6 Indemnification of Employees and Agents of the Corporation.. 24
----------------------------------------------------------
Section 5.7 Contract Rights............................................. 24
---------------
ARTICLE VI
COMMON STOCK............................................................. 25
Section 6.1 Certificates................................................ 25
------------
Section 6.2 Transfers of Stock.......................................... 25
------------------
Section 6.3 Lost, Stolen or Destroyed Certificates...................... 26
--------------------------------------
Section 6.4 Stockholder Record Date..................................... 26
-----------------------
ARTICLE VII
SEAL..................................................................... 27
Section 7.1 Seal........................................................ 27
----
ARTICLE VIII
WAIVER OF NOTICE......................................................... 28
Section 8.1 Waiver of Notice............................................ 28
----------------
ARTICLE IX
CHECKS, NOTES, DRAFTS, ETC............................................... 28
Section 9.1 Checks, Notes, Drafts, Etc.................................. 28
--------------------------
ARTICLE X
AMENDMENTS............................................................... 29
Section 10.1 Amendments................................................. 29
----------
</TABLE>
<PAGE>
Exhibit 2.2
BYLAWS
OF
TOTAL ENTERTAINMENT INC.
ARTICLE I
OFFICE AND RECORDS
Section 1.1 Delaware Office. The principal office of the Corporation
----------- ---------------
in the State of Indiana shall be located at ___________________________________
and the name and address of its registered agent is__________________________.
Section 1.2 Other Offices. The Corporation may have such other
----------- -------------
offices, either within or without the State of Indiana, as the Board of
Directors may designate or as the business of the Corporation may from time to
time require.
Section 1.3 Books and Records. The books and records of the
----------- -----------------
Corporation may be kept at the Corporation's principal executive offices in
Montreal, Canada or at such other locations outside the State of Indiana as may
from time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 2.1 Annual Meeting. The annual meeting of stockholders of
----------- --------------
the Corporation shall be held on the 15/th/ day of June of each year, unless
such day shall fall on a legal holiday, in which case such meeting shall be held
on the next day thereafter not a legal
1
<PAGE>
holiday. The annual meeting in each year shall be held at 10:00 A.M., local
time, at the principal executive offices of the Corporation, or at such other
date, time and/or place within or without the State of Indiana as may be fixed
by the Board of Directors.
Section 2.2 Special Meetings. Subject to the rights of the holders
----------- ----------------
of any series of preferred stock of the Corporation (the "Preferred Stock"), or
any other series or class of stock as set forth in the Articles of Incorporation
of the Corporation (the "Articles of Incorporation") to elect additional
directors under specified circumstances, a special meeting of the holders of
stock of the Corporation entitled to vote on any business to be considered at
any such meeting may be called only by the Chairman of the Board of the
Corporation, and shall be called by the Secretary of the Corporation at the
request of the Board of Directors pursuant to a resolution adopted by a majority
of the total number of directors which the Corporation would at the time have if
there were no vacancies (the "Whole Board"). The Board of Directors may
designate the place of meeting for any special meeting of the stockholders, and
if no such designation is made, the place of meeting shall be the principal
executive offices of the Corporation.
Section 2.3 Notice of Meetings. Whenever stockholders are required
----------- ------------------
or permitted to take any action at a meeting, unless notice is waived as
provided in Section 8.1 of these Bylaws, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
2
<PAGE>
Unless otherwise provided by law, and except as to any stockholder
duly waiving notice, the written notice of any meeting shall be given personally
or by mail, not less than ten (10) nor more than sixty (60) days before the date
of the meeting to each stockholder entitled to vote at such meeting. If mailed,
notice shall be deemed given when deposited in the mail, postage prepaid,
directed to the stockholder at his or her address as it appears on the records
of the Corporation. Any previously scheduled meeting of the stockholders may be
postponed by resolution of the Board of Directors upon public notice given prior
to the time previously scheduled for such meeting of stockholders.
When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If, however, the adjournment is for more than thirty (30)
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 2.4 Quorum. Except as otherwise provided by law or by the
----------- ------
Articles of Incorporation or by these Bylaws, at any meeting of stockholders the
holders of a majority of the voting power of the outstanding shares of the
Corporation entitled to vote generally in the election of directors (the "Voting
Stock"), either present or represented by proxy, shall constitute a quorum for
the transaction of any business at such meeting, except that when specified
business is to be voted on by a class or series voting as a class, the holders
of a majority of the shares of
3
<PAGE>
such class or series shall constitute a quorum for the transaction of such
business. The chairman of the meeting or a majority of the voting power of the
shares of Voting Stock so represented may adjourn the meeting from time to time,
whether or not there is such a quorum (or in the case of specified business to
be voted on as a class or series, the chairman or a majority of the shares of
such class or series so represented may adjourn the meeting with respect to such
specified business). No notice of the time and place of adjourned meetings need
be given except as provided in the last paragraph of Section 2.3 of these
Bylaws. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 2.5 Voting. Except as otherwise set forth in the Articles of
----------- ------
Incorporation with respect to the right of any holder of any series of Preferred
Stock or any other series or class of stock to elect additional directors under
specified circumstances, whenever directors are to be elected at a meeting, they
shall be elected by a plurality of the votes cast at the meeting by the holders
of stock entitled to vote. Whenever any corporate action, other than the
election of directors, is to be taken by vote of stockholders at a meeting, it
shall, except as otherwise required by law or by the Articles of Incorporation
or by these Bylaws, be authorized by a majority of the votes cast with respect
thereto at the meeting (including abstentions) by the holders of stock entitled
to vote thereon.
Except as otherwise provided by law, or by the Articles of
Incorporation, each holder of record of stock of the Corporation entitled to
vote on any matter at any meeting of stockholders shall be entitled to one vote
for each share of such stock standing in the name of
4
<PAGE>
such holder on the stock ledger of the Corporation on the record date for the
determination of the stockholders entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote for
directors or the vote on any other matter at a meeting shall be by written
ballot, but otherwise the method of voting and the manner in which votes are
counted shall be discretionary with the presiding officer at the meeting.
Section 2.6 Proxies. Each stockholder entitled to vote at a meeting
----------- -------
of stockholders may authorize another person or persons to act for him or her by
proxy, but no such proxy shall be voted or acted upon after three (3) years from
its date, unless the proxy provides for a longer period. Every proxy shall be
signed by the stockholder or by his duly authorized attorney. Such proxy must be
filed with the Secretary of the Corporation or his or her representative at or
before the time of the meeting.
Section 2.7 Notice of Stockholder Business and Nominations.
----------- ----------------------------------------------
(A) Annual Meeting of Stockholders.
------------------------------
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) by or at the
direction of the Chairman of the Board or the Board of Directors pursuant to a
resolution adopted by a majority of the Whole Board or (b) by any stockholder of
the Corporation who is entitled to vote at the meeting with respect to the
election of directors or the business to be proposed by such stockholder, as the
case may be, who
5
<PAGE>
complies with the notice procedures set forth in clauses (2) and (3) of
paragraph (A) of this Section 2.7 and who is a stockholder of record at the time
such notice is delivered to the Secretary of the Corporation as provided below.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (b) of paragraph (A)(1) of
this Section 2.7, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such business must be a proper
subject for stockholder action under the Indiana Business Corporation Law (the
"BCL"). To be timely, a stockholder's notice shall be delivered to the Secretary
of the Corporation at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
-------- -------
the event that the date of the annual meeting is advanced by more than thirty
(30) days, or delayed by more than sixty (60) days, from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
ninetieth (90th) day prior to such annual meeting and not later than the close
of business on the later of the sixtieth (60th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. Such stockholder's notice shall set forth
(a) as to each person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including such
person's written consent to being named in the proxy statement
6
<PAGE>
as a nominee and to serving as a director if elected; (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Section 2.7 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least eighty
(80) days prior to the first anniversary of the preceding year's annual meeting,
a stockholder's notice required by paragraph (A)(2) of this Section 2.7 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary of
the Corporation at the principal executive offices of the Corporation not later
than the close of business on the tenth (10th) day following the day on which
such public announcement is first made by the Corporation.
(B) Special Meeting of Stockholders. Nominations of persons for
-------------------------------
election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to
7
<PAGE>
be elected (i) by or at the direction of the Chairman of the Board or the Board
of Directors pursuant to a resolution adopted by a majority of the Whole Board
or (ii) by any stockholder of the Corporation who is entitled to vote at the
meeting with respect to the election of directors, who complies with the notice
procedures set forth in this paragraph (B) and who is a stockholder of record at
the time such notice is delivered to the Secretary of the Corporation as
provided below. Nominations by stockholders of persons for election to the Board
of Directors may be made at such a special meeting of stockholders if the
stockholder's notice as required by paragraph (A)(2) of this Section 2.7 shall
be delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(C) General. (1) Only persons who are nominated in accordance with
-------
the procedures set forth in this Section 2.7 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 2.7.
(2) Except as otherwise provided by law, the Articles of Incorporation
or this Section 2.7, the chairman of the meeting shall have the power and duty
to determine whether a nomination or any business proposed to be brought before
the meeting was made in accordance with the procedures set forth in this Section
2.7 and, if any proposed nomination or business is
8
<PAGE>
not in compliance with this Section 2.7, to declare that such defective
nomination or proposal shall be disregarded.
(3) For purposes of this Section 2.7, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(4) Notwithstanding the foregoing provisions of this Section 2.7, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 2.7. Nothing in this Section 2.7 shall be deemed to affect
any rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy materials with respect to a meeting of stockholders pursuant
to Rule 14a-8 under Exchange Act or (ii) of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in the
Articles of Incorporation to elect directors under specified circumstances or to
consent to specific actions taken by the Corporation.
Section 2.8 Inspectors of Elections; Opening and Closing the Polls.
----------- ------------------------------------------------------
(A) The Board of Directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are
9
<PAGE>
unable to act, at a meeting of stockholders, the chairman of the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
discharging his or her duties, shall take and sign an oath faithfully to execute
the duties of his or her ability. The inspectors shall have the duties
prescribed by the BCL.
(B) The chairman of the meeting shall fix and announce at the meeting
the time of the opening and the closing of the polls for each matter upon which
the stockholders will vote at a meeting.
Section 2.9 List of Stockholders. The officer who has charge of the
----------- --------------------
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
10
<PAGE>
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
Section 2.10 Stockholder Action by Written Consent. Subject to the
------------ --------------------------------------
rights of the holders of any series of Preferred Stock or any other series or
class of stock as set forth in the Articles of Incorporation to elect additional
directors under specified circumstances or to consent to specific actions taken
by the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation may be taken by written consent of the
stockholders in accordance with the applicable provisions of the BCL.
ARTICLE III
DIRECTORS
Section 3.1 General Powers. The business and affairs of the
----------- --------------
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws expressly
conferred upon it, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Articles of Incorporation or by these Bylaws required to be exercised or done by
the stockholders.
Section 3.2 Number, Tenure and Qualifications. Subject to the rights
----------- ---------------------------------
of the holders of any series of Preferred Stock or any other series or class of
stock as set forth in the Articles of Incorporation to elect directors under
specified circumstances, the number of directors
11
<PAGE>
shall be fixed from time to time exclusively pursuant to a resolution adopted by
a majority of the Whole Board, but shall consist of not more than nine nor less
than two directors. The directors, other than those who may be elected by the
holders of any series of Preferred Stock or any other series or class of stock
as set forth in the Articles of Incorporation, shall serve until the next annual
meeting of stockholders and until their successors are elected and qualified.
Section 3.3 Vacancies and Newly Created Directorships. Subject to the
----------- -----------------------------------------
rights of the holders of any series of Preferred Stock or any other series or
class of stock as set forth in the Articles of Incorporation to elect additional
directors under specified circumstances, vacancies resulting from death,
resignation, retirement, disqualification, removal from office or other cause,
and newly created directorships resulting from any increase in the authorized
number of directors, may be filled only by the affirmative vote of a majority of
the remaining directors, though less than a quorum of the Board of Directors,
and directors so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of office of the director being
replaced expires and until such director's successor shall have been duly
elected and qualified. No decrease in the number of authorized directors
constituting the Whole Board shall shorten the term of any incumbent director.
Section 3.4 Resignation. Any director may resign at any time upon
----------- -----------
written notice to the Corporation. Any such resignation shall take effect at the
time specified therein or, if the time be not specified, upon receipt thereof,
and the acceptance of such resignation, unless required by the terms thereof,
shall not be necessary to make such resignation effective.
12
<PAGE>
Section 3.5 Removal. Subject to the rights of the holders of any
----------- -------
series of Preferred Stock or any other series or class of stock as set forth in
the Articles of Incorporation to elect additional directors under specified
circumstances, any director may be removed from office at any time, but only for
cause and only by the affirmative vote of the holders of at least 80 percent of
the voting power of the then outstanding Voting Stock, voting together as a
single class.
Section 3.6 Meetings. Meetings of the Board of Directors, regular or
----------- --------
special, may be held at any place within or without the State of Indiana.
Members of the Board of Directors, or of any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting by such means shall constitute presence in person
at such meeting. An annual meeting of the Board of Directors shall be held at
the same place and immediately following each annual meeting of stockholders,
and no further notice thereof need be given other than this Bylaw. The Board of
Directors may fix times and places for additional regular meetings of the Board
of Directors and no further notice of such meetings need be given. A special
meeting of the Board of Directors shall be held whenever called by the Chairman
of the Board or by a majority of the Whole Board, at such time and place as
shall be specified in the notice or waiver thereof. The person or persons
authorized to call special meeting of the Board of Directors may fix the place
and time of the meetings. Notice of any special meeting shall be given to each
director at his or her business or residence in writing or by telegram or by
telephone
13
<PAGE>
communication. If mailed, such notice shall be deemed adequately delivered when
deposited in the United States mails so addressed, with postage thereon prepaid,
at least five (5) days before such meeting. If by telegram, such notice shall be
deemed adequately delivered when the telegram is delivered to the telegraph
company at least twenty-four hours before such meeting. If by facsimile
transmission, such notice shall be transmitted at least twenty-four hours before
such meeting. If by telephone, the notice shall be given at least twelve hours
prior to the time set for the meeting. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice of such meeting, except for amendments to these
Bylaws as provided under Section 10.1 of these Bylaws.
Section 3.7 Quorum and Voting. A whole number of directors equal to
----------- -----------------
at least a majority of the Whole Board shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if there
be less than a quorum, a majority of the directors present may adjourn the
meeting from time to time, and no further notice thereof need be given other
than announcement at the meeting which shall be so adjourned. Except as
otherwise provided by law, by the Articles of Incorporation, or by these Bylaws,
the vote of a majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
Section 3.8 Written Consent of Directors in Lieu of a Meeting. Any
----------- -------------------------------------------------
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board of Directors or of such
14
<PAGE>
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
of such committee.
Section 3.9 Compensation. Directors may receive compensation for
----------- ------------
services to the Corporation in their capacities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the Board
of Directors.
Section 3.10 Committees of the Board of Directors. The Board of
------------ ------------------------------------
Directors may from time to time, by resolution passed by majority of the Whole
Board, designate one or more committees, each committee to consist of one or
more directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. The resolution of the
Board of Directors may, in addition or alternatively, provide that in the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he, she or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it, except as otherwise provided by law.
Unless the resolution of the Board of Directors expressly so provides, no such
committee shall have the power or authority to declare a dividend or to
15
<PAGE>
authorize the issuance of stock. Any such committee may adopt rules governing
the method of calling and time and place of holding its meetings. Unless
otherwise provided by the Board of Directors, a majority of any such committee
(or the member thereof, if only one) shall constitute a quorum for the
transaction of business, and the vote of a majority of the members of such
committee present at a meeting at which a quorum is present shall be the act of
such committee. Each such committee shall keep a record of its acts and
proceedings and shall report thereon to the Board of Directors whenever
requested so to do. Any or all members of any such committee may be removed,
with or without cause, by resolution of the Board of Directors, passed by a
majority of the Whole Board.
ARTICLE IV
OFFICERS
Section 4.1 Elected Officers. The elected officers of the
----------- ----------------
Corporation shall be a Chairman of the Board, a President, a Secretary and a
Treasurer, and may also include one or more Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers. All officers chosen
by the Board of Directors shall each have such powers and duties as generally
pertain to their respective offices, subject to the specific provisions of this
Article IV, together with such other powers and duties as from time to time may
be conferred by the Board of Directors or any committee thereof. The Chairman of
the Board shall be chosen from among the directors. Any number of such offices
may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity. The Board of Directors may
appoint, and may delegate power to appoint, such other officers, agents and
16
<PAGE>
employees as it may deem necessary or proper, who shall hold their offices or
positions for such terms, have such authority and perform such duties as may
from time to time be determined by or pursuant to authorization of the Board of
Directors.
Section 4.2 Election and Term of Office. The elected officers of the
----------- ---------------------------
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to Section
4.3 of these Bylaws, each officer shall hold office until his or her successor
shall have been duly elected and shall have qualified or until his or her death
or until such officer shall resign.
Section 4.3 Resignation and Removal. Any officer may resign at any
----------- -----------------------
time upon written notice to the Corporation. Any elected officer may be removed
by a majority of the members of the Whole Board, with or without cause, at any
time. The Board of Directors may delegate such power of removal as to officers,
agents and employees not elected by the Board of Directors. Such removal shall
be without prejudice to a person's contract rights, if any, but the appointment
of any person as an officer, agent or employee of the Corporation shall not of
itself create contract rights.
Section 4.4 Compensation and Bond. The compensation of the officers
----------- ---------------------
of the Corporation shall be fixed by the Board of Directors, but this power may
be delegated to any
17
<PAGE>
officer in respect of other officers under his or her control. The Corporation
may secure the fidelity of any or all of its officers, agents or employees by
bond or otherwise.
Section 4.5 Chairman of the Board. The Chairman of the Board shall
----------- ---------------------
preside at all meetings of stockholders and of the Board of Directors. The
Chairman of the Board shall be responsible for the general management of the
affairs of the Corporation, shall make reports to the Board of Directors and the
stockholders and shall perform all duties incidental to such office which may be
required by law and all such other duties as are properly required by the Board
of Directors. Except where by law the signature of the President is required,
the Chairman of the Board shall possess the same power as the President to sign
all certificates, contracts and other instruments of the Corporation which may
be authorized by the Board of Directors. The Chairman of the Board shall see
that all orders and resolutions of the Board of Directors and of any committee
thereof are carried into effect.
Section 4.6 President. The President shall act in a general
----------- ---------
executive capacity and shall assist the Chairman of the Board in the
administration and operation of the Corporation's business and general
supervision of its policies and affairs. The President shall, in the absence of
or because of the inability to act of the Chairman of the Board, perform all
duties of the Chairman of the Board and preside at all meetings of stockholders
and of the Board of Directors. The President may sign, alone or with the
Secretary or any other proper officer of the Corporation authorized by the Board
of Directors, certificates, contracts and other instruments of the Corporation
as authorized by the Board of Directors.
18
<PAGE>
Section 4.7 Vice Presidents. Each Vice President shall have such
----------- ---------------
powers and perform such duties as the Board of Directors, the Chairman of the
Board or the President may from time to time prescribe. In the absence or
inability to act of the President, unless the Board of Directors shall otherwise
provide, the Vice President who has served in that capacity for the longest time
and who shall be present and able to act, shall perform all the duties and may
exercise any of the powers of the President.
Section 4.8 Treasurer. The Treasurer shall have charge of all funds
----------- ---------
and securities of the Corporation, shall endorse the same for deposit or
collection when necessary and deposit the same to the credit of the Corporation
in such banks or depositaries as the Board of Directors may authorize. He or she
may endorse all commercial documents requiring endorsements for or on behalf of
the Corporation and may sign all receipts and vouchers for payments made to the
Corporation. He or she shall have all such further powers and duties as
generally are incident to the position of Treasurer or as may be assigned to him
or her by the Chairman of the Board, the President or the Board of Directors.
Section 4.9 Secretary. The Secretary shall record all the
----------- ---------
proceedings of the meetings of the stockholders and directors in a book to be
kept for that purpose and shall also record therein all action taken by written
consent of directors in lieu of a meeting. He or she shall attend to the giving
and serving of all notices of the Corporation. He or she shall have custody of
the seal of the Corporation and shall attest the same by his or her signature
whenever required. He or she shall have charge of the stock ledger and such
other books and papers as the
19
<PAGE>
Board of Directors may direct, but he or she may delegate responsibility for
maintaining the stock ledger to any transfer agent appointed by the Board of
Directors. He or she shall have all such further powers and duties as generally
are incident to the position of Secretary or as may be assigned to him or her by
the President or the Board of Directors.
Section 4.10 Assistant Treasurers. In the absence or inability to
------------ --------------------
act of the Treasurer, any Assistant Treasurer may perform all the duties and
exercise all the powers of the Treasurer. An Assistant Treasurer shall also
perform such other duties as the Treasurer or the Board of Directors may assign
to him or her.
Section 4.11 Assistant Secretaries. In the absence or inability to
------------ ---------------------
act of the Secretary, any Assistant Secretary may perform all the duties and
exercise all the powers of the Secretary. An Assistant Secretary shall also
perform such other duties as the Secretary or the Board of Directors may assign
to him or her.
Section 4.12 Delegation of Duties. In case of the absence of any
------------ --------------------
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or upon
any director.
20
<PAGE>
ARTICLE V
INDEMNIFICATION AND INSURANCE
Section 5.1 Right to Indemnification. Each person who was or is made
----------- ------------------------
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director
or an officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of any other corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to any employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the BCL, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, excise taxes or penalties under
the Employee Retirement Income Security Act of 1974, as amended, and amounts
paid or to be paid in settlement) reasonably incurred by such indemnitee in
connection therewith; provided, however, that except as provided in Section 5.3
-------- -------
with respect to proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee seeking indemnification in
connection with a proceeding (or part
21
<PAGE>
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors.
Section 5.2 Right to Advancement of Expenses. The right to
----------- --------------------------------
indemnification conferred in Section 5.1 shall include the right to be paid by
the Corporation the expenses (including attorneys' fees) incurred in defending
any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the BCL requires, an
-------- -------
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Section 5.2 or otherwise.
Section 5.3 Right of Indemnitee to Bring Suit. If a claim under
----------- ---------------------------------
Section 5.1 or Section 5.2 is not paid in full by the Corporation within thirty
(30) days after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover
22
<PAGE>
an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right of an advancement of expenses) it shall be a defense that,
and (ii) in any suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the indemnitee
has not met any applicable standard for indemnification set forth in the BCL.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of such action that indemnification of the indemnitee is proper
in the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the BCL, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or stockholders)
that the indemnitee has not met such applicable standard of conduct, shall
create a presumption that the indemnitee has not met the applicable standard of
conduct or, in the case of such a suit brought by the indemnitee, be a defense
to such suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article V or
otherwise shall be on the Corporation.
23
<PAGE>
Section 5.4 Non-Exclusivity of Rights. The right to indemnification
----------- -------------------------
and the advancement of expenses conferred in this Article V shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation, provision of
these Bylaws, agreement, vote of stockholders or disinterested directors or
otherwise.
Section 5.5 Insurance. The Corporation may maintain insurance, at
----------- ---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the BCL.
Section 5.6 Indemnification of Employees and Agents of the
----------- ----------------------------------------------
Corporation. The Corporation may, to the extent authorized from time to time by
- -----------
the Board of Directors, grant rights to indemnification, and rights to the
advancement of expenses, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article V with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
Section 5.7 Contract Rights. The rights to indemnification and to
----------- ---------------
the advancement of expenses conferred in Section 5.1 and Section 5.2 shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
24
<PAGE>
ARTICLE VI
COMMON STOCK
Section 6.1 Certificates. Certificates for stock of the Corporation
----------- ------------
shall be in such form as shall be approved by the Board of Directors and shall
be signed in the name of the Corporation by the Chairman of the Board, the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary. Such certificates may be sealed with
the seal of the Corporation or a facsimile thereof. Any of or all the signatures
on a certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the date of issue.
Section 6.2 Transfers of Stock. Transfers of stock shall be made
----------- ------------------
only upon the books of the Corporation by the holder, in person or by duly
authorized attorney, and on the surrender of the certificate or certificates for
the same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require. The
Board of Directors shall have the power to make all such rules and regulations,
not inconsistent with the Articles of Incorporation and these Bylaws and the
BCL, as the Board of Directors may deem appropriate concerning the issue,
transfer and registration of certificates for stock of the
25
<PAGE>
Corporation. The Board of Directors may appoint one or more transfer agents or
registrars of transfers, or both, and may require all stock certificates to bear
the signature of either or both.
Section 6.3 Lost, Stolen or Destroyed Certificates. The Corporation
----------- --------------------------------------
may issue a new stock certificate in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the
Corporation may require the owner of the lost, stolen or destroyed certificate
or his or her legal representative to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate. The Board of Directors may require such owner to
satisfy other reasonable requirements as it deems appropriate under the
circumstances.
Section 6.4 Stockholder Record Date. In order that the Corporation
----------- -----------------------
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which shall not be more than sixty nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other action.
26
<PAGE>
If no record date is fixed by the Board of Directors, (l) the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
date on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held, and (2) the
record date for determining stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
- -------- -------
adjourned meeting.
Only such stockholders as shall be stockholders of record on the date
so fixed shall be entitled to notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend or other
distribution, or to exercise such rights in respect of any such change,
conversion or exchange of stock, or to participate in such action, as the case
may be, notwithstanding any transfer of any stock on the books of the
Corporation after any record date so fixed.
ARTICLE VII
SEAL
Section 7.1 Seal. The seal of the Corporation shall be circular in
----------- ----
form and shall bear, in addition to any other emblem or device approved by the
Board of Directors, the name of the Corporation, the year of its incorporation
and the words "Corporate Seal" and "Indiana". The
27
<PAGE>
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or in any other manner reproduced.
ARTICLE VIII
WAIVER OF NOTICE
Section 8.1 Waiver of Notice. Whenever notice is required to be
----------- ----------------
given to any stockholder or director of the Corporation under any provision of
the BCL or the Articles of Incorporation or these Bylaws, a written waiver
thereof, signed by the person or persons entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to the giving of such
notice. In the case of a stockholder, such waiver of notice may be signed by
such stockholder's attorney or proxy duly appointed in writing. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice.
ARTICLE IX
CHECKS, NOTES, DRAFTS, ETC.
Section 9.1 Checks, Notes, Drafts, Etc. Checks, notes, drafts,
----------- ---------------------------
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such
28
<PAGE>
officer or officers or person or persons as the Board of Directors or a duly
authorized committee thereof may from time to time designate.
ARTICLE X
AMENDMENTS
Section 10.1 Amendments. These Bylaws may be amended, added to,
------------ ----------
rescinded or repealed at any meeting of the Board of Directors or of the
stockholders, provided that notice of the proposed change was given in the
--------
notice of the meeting and, in the case of the Board of Directors, in a notice
given no less than twenty-four hours prior to the meeting; provided, however,
-------- -------
that, in the case of amendments by stockholders, notwithstanding any other
provisions of these Bylaws or any provision of law which might otherwise permit
a lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of stock required by law, the Articles of
Incorporation or these Bylaws, the affirmative vote of the holders of at least
80 percent of the voting power of the then outstanding shares of Voting Stock,
either present or represented by proxy, voting together as a single class, shall
be required to alter, amend or repeal any provision of these Bylaws.
29
<PAGE>
EXHIBIT 6.1
MINT ENERGY CORPORATION
308 MAIN STREET, ALLENHURST, NEW JERSEY, U.S.A
------------------------------------------------------
Entered into this 17th day of November, 1997.
By and between: KIT FARMS, INC., duly incorporated according to the laws of
Indiana, having its principal offices at Suite 188, 2843
Calument Avenue, Valparasio, Indiana, 46383, herein represented
by Charles Giannetto, General Counsel and Vice President and
R.W. Knoblock, President, herein referred to as:
"KIT"
and: MINT ENERGY CORPORATION, duly incorporated in the State of
Delaware, with principal offices at 308 Main Street,
Allenhurst, New Jersey 07711, herein represented by Sandy J.
Masselli, Jr. and herein after referred to as:
"MINT"
This agreement sets forth the principal business terms on which the parties
agree to this merger called the "Acquisition Transaction".
PART 1
1.01 Kit will acquire all of the issued and outstanding shares in the capital
of Mint for a purchase price to consist of 80% of the issued and outstanding
shares in the capital of Kit Farms, Inc. at the time of the acquisition.
1.02 The Acquisition Transaction shall be subject to the following conditions
to be performed for the benefit of the Investor at or prior to the closing:
a) Kit shall have no more than 7.2 million common share issued and
-----------
outstanding and no options, warrants or other securities outstanding or
other than as described in its financial statements dated in November of
1997 and/or pursuant to stock options granted under its stock option plan,
and except for anything remaining outstanding stock options there shall be
no agreements, commitments or arrangements to issue shares or other
securities of Kit Farms, Inc.
b) all corporate, legal and regulatory proceedings, approvals and consents
which are reasonably considered necessary shall be taken or obtained
in connection with the
<PAGE>
1.03 The Acquisition Transaction shall be subject to the following conditions
to be performed for the benefit of both parties at or prior to the Acquisition
Transaction;
a) all corporate, legal and regulatory proceedings, approvals and consents
which are reasonably considered necessary by the General Counsel for Kit
Farms shall have been taken or obtained in connection with the Acquisition
Transaction including, if required, the obtaining of the consent of the
shareholders of Kit Farms;
b) shall have completed all due diligence examinations and procedures, as it
deems fit and shall be satisfied with the results thereof, acting
reasonably;
PART II
2.01 Forwith upon mutual execution of this Agreement;
a) both parties shall make full disclosure (and its authorized
representatives) of its financial positions and conditions, businesses,
operations, assets, liabilities and such other matters or information
relevant or material to the Acquisition Transaction (all of the foregoing,
collectively "Information") that may reasonably require, and;
b) both parties shall be entitled to make such examinations and investigations
(including by their authorized representatives) of the Information
possessed by or in the control, as it may reasonably require, and for this
purpose, on reasonable notice, shall be entitled to consult with the
respective advisors and to have access to the premises, for the inspection
and production of have relevant books, records, financial statements and
other data it deems appropriate;
c) Mint Energy shall make available to Kit, or at its direction, an amount not
to exceed $10,000.00 of which Kit Farms acknowledges receipt of, on account
of anticipated expenses to be incurred by Kit Farms in connection with the
preparation of the documentation and carrying out of due diligence. Such
sum will not be subject to repayment by Kit Farms, Inc.
d) Mint shall provide to Kit, within ten (10) days after the execution of this
Agreement and prior to the closing of this Acquisition Transaction, audited
financial statements prepared in accordance with GAAP for Mint setting
forth a net asset value in an amount not less than $33,000,000 US Dollars
(Thirty three million) in talc reserves or other provable mineral reserves,
or mineral processing contracts. In the event that Mint is unable to
provide said financial statement within said ten (10) days, this Agreement
shall be null and void and of no further force and effect and without
recourse to Kit and its officers and directors.
<PAGE>
Kit shall provide to Mint after the execution of this Agreement and prior
to the closing of the Acquisition Transaction, an audited financial
statement for Kit prepared in accordance with GAAP, disclosing all of the
known liabilities of Kit, whether absolute or contingent. Mint and or the
Surviving Company shall not be liable for any debts or liabilities not
disclosed on said audit.
e) all shares necessary to complete the Acquisition Transaction shall be
issued from Treasury.
f) each party of this agreement shall take all reasonable necessary steps to
maintain the confidentiality of the other's Information.
PART III
2.02 Upon completion of the audits required in Article 2.01 (d) above, the
parties shall forwith complete the closing of the Acquisition Transaction.
a) the new name of the Surviving Company shall be Western Minerals, Mining and
Manufacturing, Inc. ("WMMM"), and shall be domiciled in the State of
Delaware.
The Transfer Agent for WMMM shall be:
Mellon Bank, 1818 Market Street, Philadelphia, PA.
b) all validly issued and outstanding shares of Kit shall be converted on
a one for one basis in WMMM.
c) the officers and directors of Kit at closing shall provide their written
resignations and full mutual releases of Kit and each other from any and
all claims, charges, compensation, debts or liabilities (whether absolute
or contingent) in connection with the business of Kit prior to the
execution of the Agreement.
2.03 Kit and Mint each shall co-operate in good faith with the other with a
view to:
a) obtaining on a timely basis any regulatory or other consent, approval or
exemption reasonably required in connection with the Acquisition
Transaction; and
b) completing any necessary filing with any regulatory authority.
c) it is the express intention or the parties for this Acquisition
Transaction to qualify as a tax free reorganization pursuant to the
Internal Revenue Code of 1986, as amended and rules and regulations
pursuant thereto [Rule 368 (a)(1)(c)].
<PAGE>
d) both parties acknowledge and agree that any transfer of securities pursuant
to this Agreement and Acquisition Transaction shall constitute an exempt
isolated transaction and the securities received in such transfer and
exchange do not have to be registered under federal or state securities
laws and regulations.
Such co-operation shall include, without limitation, the provision of
Information necessary therefore.
e) Mint acknowledges the significant problem of share dilution to former Kit
shareholders subsequent to the closing of the Acquisition Transaction, and
Mint hereby agrees to issue no new shares of WMMM unless for full and fair
consideration.
2.04 Each agrees that they shall:
a) not take any steps, directly or indirectly, which may in any way adversely
affect the Acquisition Transaction;
b) immediately disclose to the other parties any material change in relation
to its affairs (by executing this agreement each signatory hereby confirms
that it has no knowledge of any such material change which has occurred
prior to the date hereof has not been generally disclosed), and;
c) not solicit, initiate or encourage submissions of proposals or offers from
any other person, entity or group relating to, or facilitate or encourage
any effort or attempt involving; an amalgamation, recapitalization,
liquidation or winding-up of, or other business combination or similar
transaction involving it and any other party (each an "Extraordinary
Business Combination"); and further agrees it will not participate in any
negotiations regarding, or (except as require by law) furnish to any other
person, entity or group, any information with respect to, or otherwise
co-operate in any way with, or assist or participate in any Extraordinary
Business Combination.
2.05 This Acquisition Transaction shall be completed on or before the later of
December 1, 1997. The effective date for this Acquisition Transaction
shall be November 17, 1997.
2.06 The standard Terms and Conditions attached hereto as Exhibit A are made a
part of this Agreement as though fully set forth herein.
<PAGE>
MINT ENERGY CORPORATION
by: /s/ Sandy Masselli
----------------------------------
on behalf of the shareholders
Dated this 17/th/ day of November, 1997
--
KIT FARMS, INC.
by: /s/ Robert W. Knoblock
----------------------------------
R.W. Knoblock
President
by: /s/ Charles Gionnetto
----------------------------------
Charles Gionnetto
Vice President
Attest:
/s/ Carole M. Knoblock
- ---------------------------------
Carole M. Knoblock
Secretary
<PAGE>
EXHIBIT A
STANDARD TERMS AND CONDITIONS
1. HEADINGS. The subject headings of the paragraphs of this Agreement
--------
included for the purpose of convenience only, and shall not affect the
construction and interpretation of any of its provisions.
2. MODIFICATION and WAIVER. This Agreement constitutes the entire
-----------------------
Agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
understandings of the parties. No supplement, modification, or amendment of
this Agreement shall be binding unless executed in writing by all of the
parties. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver.
No waiver shall be binding unless executed in writing by the party making
the waiver.
3. COUNTER-PARTS. This Agreement may be executed simultaneously in one or
-------------
more counter-parts, or by facsimile, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
4. RIGHTS OF PARTIES. Nothing in this Agreement, whether express or
-----------------
implied, is intended to confer any rights or remedies under of by reason of this
Agreement on any persons other than the parties to it and their respective legal
representatives, successors or assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over against any party to this
Agreement.
5. ASSIGNMENT. This Agreement shall be binding on, and shall inure to
----------
the benefit of, the parties to it and their respective legal representatives,
successors and assigns.
6. ARBITRATION and GOVERNING LAW. Any controversy or claim arising out
-----------------------------
of or relating to this Agreement, or the making, performance, or interpretation
thereof, including the issues of fraud, misrepresentation, recision, or audits,
shall be settled by arbitration in Chicago, Illinois, in accordance with the
Commercial Rules of the Amercian Arbitration Association then existing, and
judgment on the arbitration award may be entered in any Court having
jurisdiction over the subject matter of the controversy, the arbitrators shall
apply the corporate and commercial law of Delaware.
<PAGE>
7. SPECIFIC PERFORMANCE. Each parties' obligations under this Agreement
--------------------
are unique. If any party should default in its obligations under this Agreement,
the parties each acknowledge that it would be extremely impracticable to measure
the resulting damages; accordingly, the non-defaulting party, in addition to any
other available rights or remedies, may suit in equity for specific performance,
and the parties expressly waive the defense that a remedy in damages will be
adequate. Notwithstanding any breach or default by any of the parties of any of
their respective representations, warranties, covenants, or agreements under
this Agreement, if the shares of Kit and converted to WMMM, after the closing,
each of the parties waive any right that it may have to rescind this Agreement
or the transaction contemplated by it, provided, however, this waiver shall not
affect any other rights or remedies available to the parties under this
Agreement or under law.
8. COSTS I legal action or any arbitration or other proceeding is
-----
bought for the enforcement of this Agreement, or because of any legal dispute,
breach, default, or misrepresentation, in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorney's fees and other relief to which it or
they may be entitled.
9. SEVERABILITY To the extent any provision of this Agreement shall be
------------
determined to be invalid or unforceable, such provision shall be deleted from
this Agreement, and the validity and enforceability of the remainder of such
provision and of this Agreement shall be unaffected.
10. NOTICES All notices under this Agreement shall be in writing and
_______
shall be properly addressed to the party entitled to receive said notice, at the
last known address and or fax of said part, and mailed in the United States
mail, postage prepaid, by first class registered or certified.
NOTICES TO MINT AND WMMM AT:
Attn.: Sandy J. Masselli, Jr., Esq.
308 Main Street
Allenhurst, New Jersey 07711
Facsimile (732) 663-1313
TO KIT AT:
Attn.: Charles Gionnetto, Esq.
Suite 188
2843 Calumet Ave. North
Valparaiso, IN 46383
Facsimile (219) 477-6595
11. TERMINATION This Agreement shall remain in force and effect from the
-----------
date hereof unless terminated in writing with the mutual consent of both
parties.
<PAGE>
12. AUTHORITY Both parties acknowledge that by execution of this
---------
Agreement they have the right, power, legal capacity, and authority to enter
into, and perform their respective obligations under this Agreement. The
execution and delivery of this Agreement by the corporations have been duly
authorized by their respective Board of Directors.
13. GOVERNING LAW This Agreement shall be construed in accordance with
-------------
and governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first written.
MINT ENERGY, INC
By: /s/ Sandy J. Masselli
--------------------------------
Sandy J. Masselli, Jr. Esq.
Its President
KIT FARMS, INC
By: /s/ Robert W. Knoblock
--------------------------------
R.W. Knoblock
Its President
By: /s/ Charles Giannetto
--------------------------------
Charles Giannetto
Its Vice President
ATTEST AS TO KIT FARMS:
/s/ Carole M. Knoblock
- ----------------------
Carole M. Knoblock
Secretary
<PAGE>
FIRST AMENDMENT TO
MINT ENERGY AGREEMENT
THIS AMENDMENT, made and entered into this 15th day of January, 1998 by and
among Mint Energy Corporation, ("MINT') and KIT Farms Inc., ("KIT").
WHEREAS, pursuant to the terms of that certain Merger Agreement between the
parties dated November 17, 1997 ("Merger Agreement"), for the merger and
acquisition of certain talc reserve assets of MINT by KIT, and
WHEREAS, subsequent to the execution of that Merger Agreement, the parties
had certain discussions concerning the delay in acquiring said talc reserve
assets and the parties are desirous of merging and acquiring certain other
assets on a timely basis, for which MINT has provided due diligence valuations
to KIT.
NOW THEREFORE, for the covenants and representations contained in this
Amendment, and other good and valuable consideration, the parties agree to
amend said Merger Agreement as follows:
PART II Paragraph 2.01 (d) is hereby stricken in its entirety and rewritten
to read as follows:
2.01 (d) MINT has provided to KIT independent business valuations for
certain computer software assets and entertainment assets with
a total value of Fifteen Million USD ($15,000,000.00).
PART III Paragraph 2.02 (a) is hereby stricken in its entirety and
rewritten to read as follows:
2.02 (a) the new name of the Surviving Company shall be Total
Entertainment Inc. ("TNTC"), and shall be domiciled in the
State of Delaware. The Transfer Agent for TNTC shall be Colonial
Stock Transfer, 455 East 400 South, Salt Lake City, Utah 84111.
PART III Paragraph 2.05 is hereby stricken in its entirety and rewritten to
read as follows:
2.05 This Acquisition Transaction shall be completed
on or before February 1, 1998. The effective
date of this Acquisition Transaction shall be
November 17, 1997.
It is hereby further understood and agreed by the parties hereto, that
by execution of this Amendment, they have not changed any of the remaining terms
and conditions of the above identified Merger Agreement in any manner whatsoever
or any exhibits attached thereto and the terms of the Merger Agreement shall
remain in full force and effect. This Amendment shall be made a part of and
attached to the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed his Amendment on the day and
year first above written.
MINT ENERGY CORPORATION
/s/ Sandy J. Masselli, Jr.
--------------------------
By: Sandy J. Masselli, Jr.
Its President
KIT FRAMS INC.
/s/ Robert W. Knoblock
--------------------------
By: Robert W. Knoblock
Its President
/s/ Charles Giannetto
--------------------------
By: Charles Giannetto
Its Vice President
<PAGE>
[SEAL OF THE STATE OF INDIANA APPEARS HERE]
---------------------------
ARTICLES OF MERGER SUE ANNE GILROY
State Form 39036 (R4/6-95) SECRETARY OF STATE
State Board of Accounts Approved 1995 CORPORATIONS DIVISION
305 W. Washington Street
Rm. E018
Indianapolis, IN 46204
Telephone: (317)232-6576
---------------------------
INSTRUCTIONS: Use 8 1/2" x 11" white paper
for inserts. Indiana Code 23-1-40-1
Present original and two (2) et. seq.
copies to address in upper right
corner of this form. FILING FEE: $90.00
Please TYPE or PRINT.
Upon completion of filing the
Secretary of State will issue
a receipt.
- --------------------------------------------------------------------------------
ARTICLES OF MERGER/SHARE EXCHANGE
OF
MINT ENERGY CORPORATION
----------------------------------------------------------
(hereinafter "the nonsurviving corporation(s)")
- --------------------------------------------------------------------------------
INTO
KIT FARMS INC. # 1993040891
----------------------------------------------------------
(hereinafter "the surviving corporation")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE I-SURVIVING CORPORATION
- --------------------------------------------------------------------------------
SECTION 1
- ------------
The name of the corporation surviving the merger is KIT FARMS INC.
----------------------
such name [_] has [X] has not (designate which) been changed as a result of
the merger.
- --------------------------------------------------------------------------------
SECTION 2
- ------------
a. The surviving corporation is a domestic corporation existing pursuant to
the provisions of the Indiana Business Corporation Law incorporated on
APRIL 22, 1993.
-----------------
b. The surviving corporation is a foreign corporation incorporated under the
laws of the state of __________________ and [_] qualified [_] not qualified
(designate which) to do business in Indiana.
If the surviving corporation is qualified to do business in Indiana, state the
date of qualification:________________________.
(If Application for Certificate of Authority is filed concurrently herewith
state "Upon approval of Application for Certificate of Authority".)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE II-NONSURVIVING CORPORATION(S)
- --------------------------------------------------------------------------------
The name, state of incorporation, and date of incorporation or qualification (if
applicable) respectively, of each Indiana domestic corporation and Indiana
qualified foreign corporation, other than the survivor, which is party to the
merger are as follows:
- --------------------------------------------------------------------------------
Name of Corporation
MINT ENERGY CORPORATION
- --------------------------------------------------------------------------------
State of Domicile Date of incorporation or qualification in Indiana
(if applicable)
DELAWARE N/A
- --------------------------------------------------------------------------------
Name of Corporation
- --------------------------------------------------------------------------------
State of Domicile Date of incorporation or qualification in Indiana
(if applicable)
- --------------------------------------------------------------------------------
Name of Corporation
- --------------------------------------------------------------------------------
State of Domicile Date of incorporation or qualification in Indiana
(if applicable)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE III-PLAN OF MERGER OR SHARE EXCHANGE
- --------------------------------------------------------------------------------
The Plan of Merger or Share Exchange, containing such information as
required by Indiana Code 23-1-40-1(b), is set forth in "Exhibit A"
attached hereto and made a part hereof ATTACHED
- --------------------------------------------------------------------------------
<PAGE>
PLAN OF MERGER/EXCHANGE
FOR
KIT FARMS INC.
On this 23rd day of January, 1998, in accordance with the Indiana Business
Law Code Secs. 23-1-40-1 and 2, the following Plan of Merger/Exchange is adopted
by the Board of Directors of Mint Energy Corporation ("Mint"), a Delaware
corporation and KIT Farms Inc. ("KIT"), an Indiana corporation.
1. Names of corporations.
The name of the corporation planning to merger into KIT Farms Inc. is Mint
Energy Corporation and the name of the surviving corporation is KIT Farms Inc.
2. Terms and conditions of Merger.
The terms and conditions of the merger are set forth in that Merger
Agreement dated November 17, 1997 and Amendment thereto date January 15, 1998
attached hereto and made a part hereof as Exhibits A & B.
3. Manner of conversion of shares.
The manner of conversion of securities is set forth in Exhibit A, so after
the merger/exchange the shareholders on the date of the merger of Mint shall own
80% of KIT Farms Inc. There is no other cash or property, in whole or part,
that is part of this transaction. The surviving shareholders of KIT shall
receive shares in TNTC on a one for one basis for all validly issued and
outstanding shares held in KIT at the time of the merger.
4. Amendments to Articles of Incorporation
The parties mutually agree that after the merger/exchange Article I of KIT
Farms Inc Articles of Incorporation shall be amended to change the name of the
surviving corporation to Total Entertainment Inc. ("TNTC").
IN WITNESS WHEREOF, the respective Board of Directors of Mint and KIT
parties have executed this Plan of Merger on the day and year first above
written.
MINT ENERGY CORPORATION KIT FARMS INC.
/s/ Sandy J. Masselli, Jr. /s/ Robert W. Knoblock
- ------------------------ ----------------------
Sandy J. Masselli, Jr. Robert W. Knoblock
Director
/s/ Mitchell Brown /s/ Carole M. Knoblock
- ------------------------ ----------------------
Mitchell Brown Carole M. Knoblock
Director Director
/s/ Joseph Masselli /s/ Charles Giannetto
- ------------------------ ----------------------
Joseph Masselli Charles Giannetto
Director Director
<PAGE>
EXHIBIT 6.2
Atlantic International Entertainment, Ltd.
SALES AGREEMENT
This License Agreement ("Agreement") is made this 9th day of April, 1999,
between Atlantic International Entertainment, Ltd., a Florida corporation, whose
registered office address is 200 E. Palmetto Park Road, Suite 200, Boca Raton,
Florida 33432, USA ("AIE"), and Intercapital Global Fund, Ltd. ("Licensee"),
whose registered office address is: One High Street, St. John, Antigua. Licensee
and AIE agree as follows:
1. Definitions
1.1. "Code" means computer programming object code, which is substantially
or entirely in binary form, which is directly executable by a computer
without the intervening steps of compilation or assembly.
1.2. "Licensed Software" means releases of the commercially available ICE
software product and related online documentation. ICE includes the
following games, (Blackjack, Video Poker, Roulette, Slots, Mini
Baccarat, Sic Bo, Keno and Scratch Off).
1.3. "Upgrade" means maintenance modifications and enhancements that modify
the Licensed Software.
2. Responsibilities of Licensee
2.1. Licensee agrees to pay for the Licensed Software at the prices set
forth in Section 7.
2.2. Licensee agrees to participate in the AIE training program for support
and use of Licensed Software.
2.3. Licensee shall provide a valid gaming license to AIE prior to
installation of Licensed Software.
2.4. Licensee shall provide the completed instalation checklist to AIE
prior to installation.
2.5. Licensee shall ensure the proper preparation of the installation site.
2.6. Licensee shall purchase hardware per AIE's hardware requirement
specifications.
3. Responsibilities of AIE
3.1. AIE shall provide one copy of the Licensed Software.
3.2. AIE shall provide copies of Upgrades to the Licensed Software.
3.3. AIE shall provide on site installation of Licensed Software at no
additional fee.
3.4 AIe shall provide three days training to Lincensee in Boca Raton or at
the Licensee site during installation at no additional fee.
3.5. AIE shall provide one customized lobby graphics screen, customized
card back design, customized coin design and room lobbies at no
additional fee.
4. Public Relations
4.1. AIE is granted the right to make a public announcement referencing the
Licensee.
4.2. Licensee agrees not to change or remove any AIE mark on Licensed
software.
5. Ownership and Licenses
5.1. Intellectual Property
5.1.1. AIE retains sole and exclusive ownership of all worldwide
copyrights, patents, trade secrets, know-how and other
intellectual property right in and to the Licensed Software
and Upgrades as they exist now or in the future.
5.1.2. Licensee acknowledges that AIE owns all right, title and
interest in the AIE name and logotype and mark and is the
owner of certain other AIE registered or common law trademarks
and tradenames. Licensee acknowledges that Licensee will not
use or acquire any interest in any of these trademarks or trade
names by virtue of this Agreement, or the activities of either
of us under it.
5.1.3. AIE acknowledges that Licensee owns all right title and
interest in the Licensee name and logotype. AIE acknowledges
that it will not acquire any interest in the Licensee name or
mark by virtue of this Agreement or the activities of either
of us under it.
6. AIE grants to Licensee
6.1. AIE grants to Licensee, and its subsidiaries, a nonexclusive license
under copyrights, know-how and trade secrets to use, display, execute
in object Code only one copy of the Licensed Software. The "one" copy
of software may not be shared or used concurrently by multiple, or
differently named or identified websites.
7. Fees and Payments
7.1 Licensee shall purchase the Licensed Software for the following
amount $150,000.00, with a credit for existing software in the amount
-----------
of $75,000.00. The remaining balance of $75,000.00 shall constitute
the new purchase price and will be due at signing of this Agreement,
and Seven (7%) of Net win as a royalty. Additionally Intercapital
Global Fund, Ltd., will purchase a second ICE software system for the
purchase price of $35,000.00 at signing of this Agreement. The
----------
purchase price shall be paid as follows: $35,000.00 due upon signing
of this Agreement and Seven (7%) of the Net win paid as a royalty,
paid quarterly.
1
<PAGE>
7.2. AIE grants Intercapital Global Fund, Ltd. the ability to purchase up
to two (2) additional casinos for the following purchase price:
Intercapital Global Fund, Ltd. will pay $35,000.00 upon contract
signing AND a further sum of seven (7%) of the Net win as a royalty,
paid monthly.
7.3. Licensee shall send all payments, referencing this Agreement to:
Atlantic International Entertainment, Ltd. 200 East Palmetto Park
Road., Suite 200 Boca Raton, Fl. 33432.
7.4. The fees payable by Licensee are exclusive of taxes. Licensee shall
pay or reimburse AIE for all taxes, including sales or use taxes,
however designated, imposed as a result of the existence or operation
of this Agreement, except income and franchise tax imposed on AIE by
any government entity. If applicable, Licensee may, in lieu of paying
sales and/or use taxes, furnish to AIE a tax exemption certificate,
which is acceptable to the appropriate taxing authority.
7.5. In the event payment is not made when due, all amounts over due shall
bear interest at the rate of 1.5% per month or, if lower; AIE retains
the right to terminate the licensed software until such time as all
payments are paid in full.
8. Warranty and Indemnification
8.1. Warranty Disclaimer
8.1.1. The Licensed Software and any Upgrades are provided "as is"
with no representations or warranties of any kind, whether
express or implied, including without limitation, implied
warranties of MERCHANTABILITY and/or fitness for a particular
purpose. AIE does warrant that the Licensed Software, Upgrades
and/or use of either or both of them will not infringe any
intellectual property rights of third parties.
8.1.2. AIE does not warrant any hardware or non-AIE software or
operating system software.
9. Term and Termination
9.1. This Agreement shall be effective as of the last date on the
signature page hereof ("Effective Date") and shall continue for a
minimum of four(4) years unless terminated by AIE with AIE giving
written notice to the other with a least thirty (30) days prior
notice.
9.2. AIE shall have the right to terminate this Agreement for material
breach by the other party. Termination shall become effective sixty
(60) days after written notice to the Licensee has been sent. Such
notice shall specifically identify the nature of the breach and state
an intent to terminate in the event the breach is not cured within
said sixty-(60) day's period. Written notice shall be signed by an
authorized representative and shall be sent in accordance with
Subsection 14.12, "Notices."
9.3. Upon termination or expiration of the Agreement, the Licensee will
return all Licensed Software to AIE.
9.4. Survival After Termination or Expiration
9.4.1. The provisions of Section 5 "Ownership and Licenses," Section
7 "Fees and Payments," Section 8 "Warranty and
Indemnification," Section 9 "Term and Termination," Section 10
"Limitation of Liability," Section 11 "Compliance with Laws,"
Section 12 "Confidential Information," Section 13 "Force
Majeure," Section 14 "General," shall survive and continue
beyond any expiration or termination of this Agreement, except
that licenses granted to Licensee by AIE shall not survive if
the agreement is terminated for a material breach by Licensee.
10. Limitation of Liability
10.1. In no event will either party be liable to the other for any
incidental or special damages, lost profits, lost savings, or any
other consequential damages regardless of the form of action, even if
such party has been advised of the possibility of such damages,
resulting from the subject matter of this Agreement.
11. Compliance with Laws
11.1. Each party will comply with all applicable laws and regulations and
ordinances including, but not limited to, the regulations of the U.S.
Government relating to the export of commodities and technical data
insofar as they relate to the activities under this Agreement. Each
party hereby gives its written assurance that neither products nor
any technical data provided by the other party under this Agreement,
is intended to be shipped, directly or indirectly, to the prohibited
countries identified by the U.S. Government.
12. Confidential Information
12.1. All Confidential information exchanged by the parties shall be in
accordance with a Mutual Confidential Information Agreement.
13. Force Majeure
13.1. Neither party to this Agreement shall be liable for its failure to
perform any of its obligations hereunder during any period in which
such performance is delayed by circumstances beyond its reasonable
control, including but not limited to: fire, act of nature, or,
embargo, riot or the intervention of any government authority,
provided that the party suffering such delay immediately notifies the
other party of the delay
2
<PAGE>
14. General
14.1. Neither party may assign any of its rights or obligations under this
Agreement to any third party without the express written consent of
the other; provided, however, either party shall be permitted to
assign this Agreement and the rights and licenses hereunder to any
assignee, transferee, or "spin off" of substantially all of the
assets of the organization that has responsibility for the Licensed
Software.
14.2. Except as otherwise expressly provided herein, the rights and
remedies of the parties provided in this Agreement shall not be
exclusive and are in addition to any other rights and remedies
provided at law or in equity.
14.3. Each party, including its servants, agents and employees, is deemed
to be an independent contractor and not an agent, joint venturer,
employee, or representative of the other, and neither party may
create any obligations or responsibilities on behalf of or in the
name of the other party.
14.4. If any provision of this Agreement is held illegal or unenforceable
by any court of competent jurisdiction, such provision shall be
modified to the minimal extent required to make it legal and
enforceable, consistent with the spirit and intent of the Agreement.
If such provision cannot be so modified, the provision shall be
deemed separable from the remaining provisions of this Agreement and
shall not affect or impair the validity or enforceability of the
remaining provisions of this Agreement.
14.5. This Agreement shall be governed by the laws of the State of Florida
applicable to agreements made and performed entirely within such
jurisdiction except that the conflict of laws provisions of the
State of Florida relating to determination of the applicable forum
law to be used shall not apply.
14.6. No rights or licenses are granted hereunder, expressly or by
implication or estoppel, to assign or grant, any rights or licenses
to any trademarks of either party, or to any inventions of either
party except as may be expressly provided herein.
14.7. The failure of either party to enforce, in any one or more
instances, any of the terms or conditions of the Agreement shall not
be construed as a waiver of the future performance of any such term
or condition.
14.8. Nothing contained in this Agreement shall prevent either party from
entering into agreements with third parties which are similar to
this Agreement, or from independently developing (either through
third parties or through the use of its own personnel), or from
acquiring from third parties, technologies or product or services
which are similar to and competitive with that of the other party.
14.9. Neither party shall disclose the existence or terms and conditions
of the Agreement to third parties except with prior written
agreement of the other party or in response to order of a court or
government agency.
14.10. Except for actions to recover payments under this Agreement, no
actions, regardless of form, arising out this Agreement, may be
brought by either party more than one (1) year after the cause of
action has arisen.
14.11. This Agreement expresses the entire agreement and understanding of
the parties with respect to the subject matter hereof and supersedes
all prior oral or written agreements, commitments and understandings
pertaining to the subject matter hereof. Any modifications of or
changes to this Agreement shall be in writing and signed by both
parties.
14.12. Notices
14.12. Notices under this Agreement shall be addressed to:
To AIE: Atlantic International Entertainment, Ltd.
200 East Palmetto Park Road, Suite 200
Boca Raton, FL 33432
ATTN: Sr. V.P. of Operations/General Manager
To Intercapital Global Fund, Ltd.
One High Street
St. John, Antigua
ATTN:
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
Atlantic International Entertainment, Ltd.
By: /s/ Karen S. Welch By:
------------------- ------------------
Signature Signature
Print Name Karen S. Welch Print Name
-------------- ---------------
<PAGE>
Atlantic International Entertainment, Ltd.
SALES AGREEMENT
The License Agreement ("Agreement") is made this 9th day of April, 1999, between
Atlantic International Entertainment, Ltd., a Florida corporation, whose
registered office address is 200 E. Palmetto Park Road, Suite 200, Boca Raton,
Florida 33432, USA ("AIE"), and Intercapital Global Fund, Ltd. ("Licensee"),
whose registered office address is; One High Street, St. John, Antigua.
Licensee and AIE agree as follows:
1. Definitions
1.1. "Code" means computer programming object code, which is substantially
or entirely in binary form, which is directly executable by a computer
without the intervening steps of compilation or assembly.
1.2. "Licensed Software" means releases of the commercially available
webSports(TM) software product and related user's manuals.
1.3. "Upgrade" means maintenance modifications and enhancements that modify
the Licensed Software.
2. Responsibilities of Licensee
2.1. Licensee agrees to pay for the Licensed Software at the prices set
forth in Section 7.
2.2. Licensee agrees to participate in the AIE training program for support
and use of Licensed Software.
2.3. Licensee shall provide a valid gaming license to AIE prior to
installation of Licensed Software.
2.4. Licensee shall provide the completed installation checklist to AIE
prior to installation.
2.5. Licensee shall ensure the proper preparation of the installation site.
2.6. Licensee shall purchase the hardware as identified by AIE.
3. Responsibilities of AIE
3.1. AIE shall provide one copy of the Licensed Software.
3.2. AIE shall provide copies of Upgrades to the Licensed Software.
3.3. AIE shall provide on site installation of Licensed Software at no
additional fee.
3.4. AIE shall provide three days training to Licensee in Boca Raton or at
the Licensee site during installation at no additional fee.
3.5. AIE shall provide one customized lobby graphics screen at no
additional fee.
4. Public Relations
4.1. AIE is granted the right to make a public announcement referencing the
Licensee.
4.2. Licensee agrees not to change or remove any AIE mark on Licensed
Software.
5. Ownership and Licenses
5.1. Intellectual Property
5.1.1. AIE retains sole and exclusive ownership of all worldwide
copyrights, patents, trade secrets, know-how and other
intellectual property right in and to the Licensed Software and
Upgrades as they exist now or in the future.
5.1.2 Licensee acknowledges that AIE owns all right, title and
interest in the AIE name and logotype and mark and is the owner
of certain other AIE registered or common law trademarks and
tradenames. Licensee acknowledges that Licensee will not use or
acquire any interest in any of these trademarks or trade names
by virtue of this Agreement, or the activities of either of us
under it.
5.1.3. AIE acknowledges that Licensee owns all right title and
interest in the Licensee name and logotype. AIE acknowledges
that it will not acquire any interest in the Licensee name or
mark by virtue of this Agreement or the activities of either of
us under it.
6. AIE grants to Licensee
6.1. AIE grants to Licensee, and its subsidiaries, a nonexclusive license
under copyrights, know-how and trade secrets to use, display, execute
in object Code only one copy of the Licensed Software. The "one" copy
of software may not be shared or used concurrently by multiple, or
differently named or identified websites.
7. Fees and Payments
7.1. Licensee shall purchase the Licensed Software for $165,000.00, with a
credit for existing software in the amount of $82,500.00. The
remaining balance of shall be paid as follows: $82,500.00 due at
---------
signing of this agreement, and Seven (7%) of Net win as a royalty.
Additionally, Intercapital Global Fund, Ltd. will purchase a second
webSports software system for the purchase price of $25,000.00. The
---------
purchase price shall be paid as follows, $25,000.00 due upon signing
of this agreement, and Seven (7%) of Net win as a royalty, paid
quarterly.
<PAGE>
7.2. AIE grants Intercapital Global Fund, Ltd. the ability to purchase up
to two (2) additional webSports software systems for the following
purchase price: Intercapital Global Fund, Ltd. will pay $25,000.00
upon contract signing AND a further sum of seven (7%) of the Net win
as a royalty, paid monthly.
7.3. Licensee shall send all payments, referencing this Agreement to:
Atlantic International Entertainment, Ltd. 200 East Palmetto Park
Road., Suite 200 Boca Raton, Fl. 33432.
7.4. The fees payable by Licensee are exclusive of taxes. Licensee shall
pay or reimburse AIE for all taxes, including sales or use taxes,
however designated, imposed as a result of the existence or operation
of this Agreement, except income and franchise tax imposed on AIE by
any government entity. If applicable, Licensee may, in lieu of paying
sales and/or use taxes, furnish to AIE a tax exemption certificate,
which is acceptable to the appropriate taxing authority.
7.5. In the event payment is not made when due, all amounts over due shall
bear interest at the rate of 1.5% per month or, if lower; AIE retains
the right to terminate the licensed software until such time as all
payments are paid in full.
8. Warranty and Indemnification
8.1. Warranty Disclaimer
8.1.1. The Licensed Software and any Upgrades are provided "as is"
with no representations or warranties of any kind, whether
express or implied, including without limitation, implied
warranties of MERCHANTABILITY and/or fitness for a particular
purpose. AIE does warrant that the Licensed Software, Upgrades
and/or use of either or both of them will not infringe any
intellectual property rights of third parties.
8.1.2. AIE does not warrant any hardware or non-AIE software or
operating system software.
9. Term and Termination
9.1. This Agreement shall be effective as of the last date on the signature
page hereof ("Effective Date") and shall continue for a minimum of
four (4) years unless terminated by AIE with AIE giving written notice
to the other with at least thirty (30) days prior notice.
9.2. AIE shall have the right to terminate this Agreement for material
breach by the other party. Termination shall become effective sixty
(60) days after written notice to the Licensee has been sent. Such
notice shall specifically identify the nature of the breach and state
an intent to terminate in the event the breach is not cured within
said sixty (60) day's period. Written notice shall be signed by an
authorized representative and shall be sent in accordance with
Subsection 14.12, "Notices."
9.3. Upon termination or expiration of the Agreement, the Licensee will
return all Licensed Software to AIE.
9.4. Survival After Termination or Expiration
9.4.1. The provisions of Section 5 "Ownership and Licenses," Section 7
"Fees and Payments," Section 8 "Warranty and Indemnification,"
Section 9 "Term and Termination," Section 10 "Limitation of
Liability," Section 11 "Compliance with Laws," Section 12
"Confidential Information," Section 13 "Force Majeure," Section
14 "General," shall survive and continue beyond any expiration
or termination of this Agreement, except that licenses granted
to Licensee by AIE shall not survive if the agreement is
terminated for a material breach by Licensee.
10. Limitation of Liability
10.1. In no event will either party be liable to the other for any
incidental or special damages, lost profits, lost savings, or any
other consequential damages regardless of the form of action, even if
such party has been advised of the possibility of such damages,
resulting from the subject matter of this Agreement.
11. Compliance with Laws
11.1. Each party will comply with all applicable laws and regulations and
ordinances including, but not limited to, the regulations of the U.S.
Government relating to the export of commodities and technical data
insofar as they relate to the activities under this Agreement. Each
party hereby gives its written assurance that neither products nor
any technical data provided by the other party under this Agreement,
is intended to be shipped, directly or indirectly, to the prohibited
countries identified by the U.S. Government.
12. Confidential Information
12.1. All Confidential information exchanged by the parties shall be in
accordance with a Mutual Confidential Information Agreement.
13. Force Majeure
13.1. Neither party to this Agreement shall be liable for its failure to
perform any of its obligations hereunder during any period in which
such performance is delayed by circumstances beyond its reasonable
control, including but not limited to: fire, act of nature, or,
embargo, riot or the intervention of any government authority,
provided that the party suffering such delay immediately notifies
the other party of the delay.
2
<PAGE>
14. General
14.1. Neither party may assign any of its rights or obligations under this
Agreement to any third party without the express written consent of
the other; provided, however, either party shall be permitted to
assign this Agreement and the rights and licenses hereunder to any
assignee, transferee, or "spin off" of substantially all of the
assets of the organization that has responsibility for the Licensed
Software.
14.2. Except as otherwise expressly provided herein, the rights and
remedies of the parties provided in this Agreement shall not be
exclusive and are in addition to any other rights and remedies
provided at law or in equity.
14.3. Each party, including its servants, agents and employees, is deemed
to be an independent contractor and not an agent, joint venturer,
employee, or representative of the other, and neither party may
create any obligations or responsibilities on behalf of or in the
name of the other party.
14.4. If any provision of this Agreement is held illegal or unenforceable
by any court of competent jurisdiction, such provision shall be
modified to the minimal extent required to make it legal and
enforceable, consistent with the spirit and intent of the Agreement.
If such provision cannot be so modified, the provision shall be
deemed separable from the remaining provisions of this Agreement and
shall not affect or impair the validity or enforceability of the
remaining provisions of this Agreement.
14.5. This Agreement shall be governed by the laws of the State of Florida
applicable to agreements made and performed entirely within such
jurisdiction except that the conflict of laws provisions of the State
of Florida relating to determination of the applicable forum law to
be used shall not apply.
14.6. No rights or licenses are granted hereunder, expressly or by
implication or estoppel, to assign or grant, any rights or licenses
to any trademarks of either party, or to any inventions of either
party except as may be expressly provided herein.
14.7. The failure of either party to enforce, in any one or more instances,
any of the terms or conditions of the Agreement shall not be
construed as a waiver of the future performance of any such term or
condition.
14.8. Nothing contained in this Agreement shall prevent either party from
entering into agreements with third parties which are similar to this
Agreements, or from independently developing (either through third
parties or through the use of its own personnel), or from acquiring
from third parties, technologies or product or services which are
similar to and competitive with that of the other party.
14.9. Neither party shall disclose the existence or terms and conditions
of the Agreement to third parties except with prior written
agreement of the other party or in response to order of a court or
government agency.
14.10. Except for actions to recover payments under this Agreement, no
actions, regardless of form, arising out this Agreement, may be
brought by either party more than one (1) year after the cause of
action has arisen.
14.11. This Agreement expresses the entire agreement and understanding of
the parties with respect to the subject matter hereof and supersedes
all prior oral or written agreements, commitments and understandings
pertaining to the subject matter hereof. Any modifications of or
changes to this Agreement shall be in writing and signed by both
parties.
14.12. Notices
14.12.Notices under this Agreement shall be addressed to:
To AIE: Atlantic International Entertainment, Ltd.
200 East Palmetto Park Road, Suite 200
Boca Raton, FL 33432
ATTN: Sr. V.P. of Operations/General Manager
To Licensee: Intercapital Global Fund, Ltd.
One High Street
St. John, Antigua
ATTN:_______________________
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of the date first written above.
Atlantic International Entertainment, Ltd. Intercapital Global Fund, Ltd.
By: /s/ Karen S. Welch By: _________________________
-----------------------------
Signature Signature
Print Name Karen S. Welch Print Name __________________
-----------------------
3
<PAGE>
Atlantic International Entertainment, Ltd.
Software Support Maintenance Agreement
THIS AGREEMENT (hereinafter Agreement), made and entered into by and
between Atlantic International Entertainment, Ltd., a Florida based corporation,
having its principal place of business at 200 E. Palmetto Park Rd., Ste. 200,
Boca Raton, FL 33432 (hereinafter referred to as Atlantic); and Intercapital
Global Fund, Ltd. having its principal place of business at: One High Street,
St. John, Antigua.
(Hereinafter referred to as Customer).
1. DEFINITIONS
For the purpose of this Agreement, the following terms shall have the
meanings ascribed to them.
EFFECTIVE DATE. The term Effective Date shall mean first date of signing of this
Agreement.
IMPROVEMENTS. Improvements to the Licensed Software are designated by a change
to the products release indicator (up to the next whole number release).
Improvements generally comprise maintenance modifications or minor enhancements
to functionality. Improvements exclude versions. Versions are comprised of
significant enhancements to functionality. If there is any issue whether a new
release is an Improvement or a version, it shall be within Atlantic" sole
discretion to much such determination.
LICENSED SOFTWARE. The term Licensed Software shall mean the computer program(s)
as detailed in Attachment A. The Licensed Software shall include Improvements as
defined above. Licensed Software will be distributed in Object Code only format.
OBJECT CODE. Object Code shall exist solely of code, substantially or entirely
in binary form which is directly executable by a computer after suitable
processing, but without the intervening steps of compilation or assembly. Object
Code shall not include any Source Code.
TECHNICAL INFORMATION. The term Technical Information shall mean the material
supplied by Atlantic in printed form or on magnetic media which supports the
Licensed Software and describes its installation, operation, or maintenance.
USER. The entity or persons, including but not limited to employees or
contractors who are licensed to run the Licensed Software.
AIE/Confidential
<PAGE>
II. MAINTENANCE AND SUPPORT SERVICES
Standard Software Maintenance Services Shall include: Telephone maintenance
support of the Licensed Software. Said maintenance and support shall be
available Monday through Friday, 8:00AM - 6:00PM EST, exclusive of holidays at
(561) 393-6685. The Customer Support Center number after 6:00PM is 888-580-0980.
. Improvements that are made generally available on the current version.
. Technical Information updates to support Improvements.
. A thirty(30) day warranty period on the media.
. PC Anywhere is required for Support and Maintenance services.
If a Customer from time to time desires to obtain maintenance and support
services other than those specified above, or desires to obtain services to
accomplish modifications or enhancements to the Licensed Software not covered by
this Agreement, Customer may notify Atlantic of the services desired and, such
services shall be provided at the then current fees.
III. INTELLECTUAL PROPERTY
Any Improvements in the form of new or partial programs or documentation,
Technical Information and maintenance and support information, that may be
provided during the terms of this Agreement by Atlantic shall remain proprietary
to Atlantic and title thereto remains with Atlantic. All applicable rights to
patents, copyrights, trademarks, trade secrets and other intellectual or
proprietary rights and interests in the Licensed Software and Improvements
thereto by Atlantic are and shall remain with Atlantic. The Customer shall not
sell, transfer, publish, disclose, display, or otherwise make available the
Licensed Software or Improvements thereto or copies thereof to others, with
exception of the access to the Client. Customer agrees to secure and protect
each program, software product, and copies thereof in a manner consistent with
the maintenance of Atlantic's rights therein and to take appropriate action by
instruction or agreement with its employees who are permitted access to each
program or software product to satisfy its obligations hereunder. All copies of
the Licensed Software, or Improvements, including translations, compilations,
partial copies with modifications, and updated works by Atlantic are the
property of Atlantic.
IV. WARRANTIES
Atlantic warrants that the Licensed Software and Improvements thereto shall
operate in accordance with the provided Technical Information.
Atlantic warrants that sole title to the Atlantic copyright of Licensed
Software and Improvements resides in Atlantic, and that Atlantic has full power
and authority to enter into and carry out this Agreement.
Atlantic shall use its best efforts to promptly correct program errors when
such errors are reported to Atlantic. Atlantic will use its best efforts to
provide Improvements to
2
<PAGE>
Licensed Software if necessary to repair the error and eliminate the adverse
effects on the Customer of the non-conformity.
V. LIMITATIONS AND EXCLUSIONS OF WARRANTIES
1. Atlantic's warranties do not extend to operation of any hardware
configuration, nor in any operating environment (e.g., operating system)
2. Atlantic's warranties do not apply to:
a) Any copy of the Licensed Software that is re-engineered by any person other
than Atlantic; nor
b) Malfunctions resulting from use of the Licensed Software other than in
accordance with the most current Technical Information provided by Atlantic;
nor
c) Bugs or irregularities caused by defects, problems, or failures of hardware
or software not provided by Atlantic; nor
d) Bugs or irregularities caused by gross negligence of Customer or any other
person except Atlantic.
3.EXCEPT FOR ATLANTIC'S WARRANTY THAT THE LICENSED SOFTWARE WILL OPERATE AS
DEFINED IN THE TECHNICAL INFORMATION, ATLANTIC EXPRESSLY DISCLAIMS ANY WARRANTY
THAT THE FUNCTIONS PERFORMED BY THE LICENSED SOFTWARE WILL MEET ADDITIONAL
CUSTOMER REQUIREMENTS OR WILL OPERATE IN THE COMBINATIONS THAT MAY BE SELECTED
FOR USE BY CUSTOMER.
THE EXPRESS WARRANTIES AND EXPRESS REPRESENTATIONS SET FORTH IN THIS
AGREEMENT ARE IN LIEU OF, AND ATLANTIC DISCLAIMS, ANY AND ALL OTHER WARRANTIES,
CONDITIONS, OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN), WITH
RESPECT TO THE SOFTWARE SUPPORT MAINTENANCE AGREEMENT, INCLUDING ANY AND ALL
IMPLIED WARRANTIES.
V1. LIMITATION OF LIABILITY
1. ATLANTIC EXPRESSLY DISCLAIMS, AND CUSTOMER AGREES NOT TO ASSERT, ANY
LIABILITY FOR INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES ARISING EITHER
DIRECTLY OR INDIRECTLY FROM OPERATION OF THE LICENSED SOFTWARE, INCLUDING BUT
NOT LIMITED TO LIABILITY FOR LOST OR CORRUPTED DATA OF CUSTOMER, IN NO EVENT
SHALL EITHER PARTY BE LIABLE FOR ANY INCIDENTIAL, CONSEQUENTIAL OR SPECIAL
DAMAGES ARISING FROM THIS AGREEMENT OR USE OF LICENSED SOFTWARE.
3
<PAGE>
2. IN NO EVENT SHALL ATLANTIC BE LIABLE FOR ANY DAMAGES RESULTING FROM LOSS OF
DATA OR USE, LOST PROFITS OR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES. NOTWITHSTANDING ANYTHING IN THE AGREEMENT TO THE CONTRARY,
ATLANTIC'S ENTIRE LIABILITY TO CUSTOMER FOR DAMAGES OR LOSSES SHALL NOT
EXCEED THE AMOUNT PAID BY CUSTOMER UNDER THE AGREEMENT PRIOR TO SUCH DAMAGE
OR LOSS UP TO A MAXIMUM OF THE THEN CURRENT APPLICABLE YEARLY MAINTENANCE
FEES FOR THE SOFTWARE.
VII. TERM AND TERMINATION
1. Except as otherwise provided herein, this Agreement shall commence on the
Effective Date and continue for a period of 12 months. Automatic renewal is
assumed.
2. Upon termination of this Agreement:
a) Neither party shall have any further obligation to perform any duties
hereunder.
b) If this Agreement is terminated by Atlantic prior to the end of any year for
which an annual fee for maintenance and support has been paid by Customer,
Atlantic shall refund to Customer a pro rata portion of said annual fee
corresponding to the unexpired portion of that year.
VII. FEES
1. Payments shall be made according to the terms and conditions defined in
Attachment A.
2. The fees stated in Attachment A are only in effect for the initial term of
the Agreement. Standard Software Maintenance Services fees may vary from year
to year. Customer will be notified at least 60 days prior to the Effective
Date of any change in fees.
3. Unless otherwise specified, payment for Maintenance and Support Services
shall begin thirty (30) days after installation and continue to be due every
thirty (30) days from that date specified. If Customer fails to make payment
on the date such payment is due, written notice shall be sent to the
Customer. Customer shall have ten (10) days in which to make payment.
Following this grace period, Atlantic may discontinue services until Customer
has remedied the delinquency. Any past due payments shall be subject to late
fees equal to 1.5% per month.
4. Two ICE software systems and two webSports software systems operating out of
the same location shall constitute one service fee per product category.
4
<PAGE>
IX. MISCELLANEOUS PROVISIONS
ASSIGNMENT. Neither this Agreement nor any interest herein may be assigned, in
whole or in part, by Customer without prior written consent of Atlantic, except
that, without securing such prior consent, Customer may assign this Agreement to
any acquirer of substantially all of the business of such party to which the
subject matter hereof relates, or to any affiliate or successor must assume in
writing all obligations herein.
CONSTRUCTION, APPLICABLE LAW, AND PLACE OF PERFORMANCE. This Agreement shall be
deemed to be made and entered into pursuant to the laws of the State of Florida.
NOTICE. All notices, statements, and reports required or permitted by this
Agreement shall be in writing and deemed to have been effectively given and
received: five (5) days after the date of dispatch by certified or registered
mail, postage prepaid; or other courier service; and in the case of telecopied
notice on the date that confirmation is sent by the receiving party to the
sending party addressed as follows:
For ATLANTIC: For CUSTOMER:
Atlantic International Entertainment, Ltd. Intercapital Global Fund, Ltd.
200 E. Palmetto Park Rd. Ste. 200 One High Street
Boca Raton, FL 33432 St. John, Antigua
Tel: 561.393.6685 Tel: 514-878-9400
Fax: 561.393.1485 Fax: 514-878-6335
Either party may change its address for the purpose of this paragraph by notice
pursuant to this paragraph.
FORCE MAJEURE. Neither party to this Agreement shall be liable for its failure
to perform any of its obligations hereunder during any period in which such
performance is delayed by circumstances beyond its reasonable control, including
but not limited to: fire, act of nature, or embargo, riot, or the intervention
of any government authority, provided that the party suffering such delay
immediately notifies the other party of the delay.
SEVERABILITY. The provisions of this Agreement are severable, and in the event
any provision is determined to be invalid or unenforceable, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
WAIVER. The waiver of a default hereunder by one party may be effected only by
written acknowledgement signed by the other party and shall constitute a waiver
of any
5
<PAGE>
other default. The failure of either party to enforce any right or remedy for
any one default shall not be deemed a waiver of said right or remedy if the
default persists or if future defaults are committed, nor shall such failure in
any way affect the validity of this Agreement or any part hereof.
INDEPENDENT PARTIES. Nothing in this Agreement shall be deemed to constitute,
create, give effect to or otherwise recognize a partnership, joint venture or
formal business entity of any kind between the parties hereto; and the rights
and obligations of the parties shall be limited to those expressly set forth
herein.
ENTIRE UNDERSTANDING. This written instrument constitutes the entire
understanding and agreement between the parties with respect to the subject
matter hereof, integrates all prior understandings and agreements with respect
thereto, and shall not be varied, amended, or supplemented except in writing of
even or subsequent date, executed by the parties.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of 9th
day of April 1999.
<TABLE>
<S> <C>
Atlantic International Entertainment, Ltd. Intercapital Global Fund, Ltd.
Signature: /s/ Karen S. Welch Signature: /s/ Sandy J. Masselli Jr. Esq.
------------------------- --------------------------------
Name: KAREN S. WELCH Name: Sandy J. masselli Jr. Esq.
------------------------- --------------------------------
Title: Sr. VP OPERATIONS/GM Title: Attorney In Fact
------------------------- --------------------------------
Date: 4/9/99 Date: 9 April 1999
-------------------------- --------------------------------
</TABLE>
6
<PAGE>
ATTACHMENT A
FEES FOR SERVICES:
- -------------------------------------------------------------------------------
Description Individual Price
- -------------------------------------------------------------------------------
1 year - ICE Casino Standard Software $2,000.00/monthly or $20,000.00 annually
Maintenance Services
1 Year webSports(TM) Standard Software $1000.00 Monthly or $10,000.00 annually
Maintenance Service
- -------------------------------------------------------------------------------
TOTAL: $
-----------------
NOTE: Yearly maintenance price is only applicable when paid in full prior to
applicable calendar year of service.
<PAGE>
AIE Version 2 Gaming System Hardware Requirements
PRODUCT: AIE Gaming System
VERSION: AIE Version 2 Gaming System
SQL Server Configuration
- ------------------------
. Pentium-II 450 MHZ PCI Bus with dual processors [OR LARGER]
. 512 MB System Memory (RAM)
. 1 PCI SCSI III Adapter (for tape drive if not included)
. Raid 5 PCI Controller
. Three 9.1 GB SCSI Hard Disk Drives, configured. for RAID 5 Controller.
. 4mm DAT SCSI Tape Backup
. 8x CD-Rom (or higher)
. SVGA Monitor
. Mouse
. Keyboard
. Two(2) 10/100 Mbs Ethernet Network Cards
. Uninterruptible Power Supply (minimum 600 VA)
. Windows NT Server 4.0 with Service Pack 4 (10 user)
. Microsoft's SQL Server Version 6.5, with server pack 4
. Microsoft Internet License for SQL 6.5
. Cheyenne ARCSERVE Enterprise Edition Tape Backup Software
. ArcServe open files agent
. ArcServe SQL Server agent
IIS Server Configurations
- -------------------------
. Pentium-II 450 MHZ PCI Bus with dual processors [OR LARGER]
. 512 MB System Memory (RAM)
. Raid 5 PCI Controller
. Three 9.1 GB SCSI Hard Disk Drives, configured for RAID 5 Controller.
. 8x CD-Rom (or higher)
. SVGA Monitor
. Mouse
. Keyboard
. Two(2) 10/100 Mbs Ethernet Network Cards
. Uninterruptible Power Supply (minimum 600 VA)
. Windows NT Server 4.0 with Service Pack 4 (10 user)
. Microsoft's Internet Information Server (version 4)
. PC Anywhere (version 8)
1
<PAGE>
System Administrator Workstation Configuration
- ----------------------------------------------
. Pentium 266 MHZ (OR LARGER)
. 128 MB RAM (OR HIGHER)
. 4G Hard Disk
. SVGA Monitor
. Mouse
. Keyboard
. One (1) 10/100 Mbs Ethernet Network Card
. Uninteruptible Power Supply (minimum 250 VA)
. Windows NT workstation 4.0 with Service Pack 3
. Standard Windows NT Browser (Microsoft Internet Explorer 4.x, Netscape
Communicator 4.xx)
. Access to Internet via any Internet Service Provider
Additional Equipment/Supplies
- -----------------------------
Equipment
. Two(2) 10/100 Ethernet Hubs - 4 Port (or higher)
. Cisco 2514 Router (minimum) (generally supplied by ISP) or 2516
. Black & White Printer (optional)
Supplies
. Category 5UTP cabling with RJ45 Connectors
. 4MM DAT Tapes
. Printer Paper (optional)
2
<PAGE>
Atlantic International Entertainment, Ltd.
SALES AGREEMENT
This License Agreement ("Agreement") is made this 23/rd/ day of June, 1999,
between Atlantic International Entertainment, Ltd., a Florida corporation, whose
registered office address is 200 E, Palmetto Park Road, Suite 200, Boca Raton,
Florida 33432, USA ("AIE"), and Intercapital Global Fund, Ltd. ("Licensee"),
whose registered office address is: One High Street, St. John, Antigua.
Licensee and AIE agree as follows:
1. Definitions
1.1. "Code" means computer programming object code, which is substantially
or entirely in binary form, which is directly executable by a computer
without the intervening steps of compilation or assembly.
1.2. "Licensed Software" means AIE Lotto Magic (TM) Version 1.0 software
product and related online documentation.
1.3. "Upgrade" means maintenance modifications and enhancements that modify
the Licensed Software.
2. Responsibilities of Licensee
2.1. Licensee agrees to pay for the Licensed Software at the prices set
forth in Section 7.
2.2. Licensee agrees to participate in the AIE training program for support
and use of Licensed Software.
2.3. Licensee shall provide a valid gaming license to AIE prior to
installation of Licensed Software.
2.4. Licensee shall provide the completed installation checklist to AIE
prior to installation.
2.5. Licensee shall ensure the proper preparation of the installation site.
2.6. Licensee shall purchase hardware per AIE's hardware requirement
specifications.
3. Responsibilities of AIE
3.1. AIE shall provide one copy of the Licensed Software.
3.2. AIE shall provide copies of Upgrades to the Licensed Software.
3.3. AIE shall provide on site installation of Licensed Software at no
additional fee.
3.4. AIE shall provide three days training to Licensee in Boca Raton or at
the Licensee site during installation at no additional fee.
3.5. AIE shall provide one customized lobby graphics screen at no
additional fee.
4. Public Relations
4.1. AIE is granted the right to make a public announcement referencing the
Licensee.
4.2. Licensee agrees not to change or remove any AIE mark on Licensed
Software.
5. Ownership and Licenses
5.1. Intellectual Property
5.1.1. AIE retains sole and exclusive ownership of all worldwide
copyrights, patents, trade secrets, know-how and other
intellectual property right in and to the Licensed Software and
Upgrades as they exist now or in the future.
5.1.2. Licensee acknowledges that AIE owns all right, title and
interest in the AIE name and logotype and mark and is the owner
of certain other AIE registered or common law trademarks and
tradenames. Licensee acknowledges that Licensee will not use or
acquire any interest in any of these trademarks or trade names
by virtue of this Agreement, or the activities of either of us
under it.
5.1.3. AIE acknowledges that Licensee owns all right title and
interest in the Licensee name and logotype. AIE acknowledges
that it will not acquire any interest in the Licensee name or
mark by virtue of this Agreement or the activities of either of
us under it.
6. AIE grants to Licensee
6.1. AIE grants to Licensee, and its subsidiaries, a nonexclusive
license under copyrights, know-how and trade secrets to use,
display, execute in object Code only one copy of the Licensed
Software. The "one" copy of software may not be shared or used
concurrently by multiple, or differently named or identified
websites.
7. Fees and Payments
7.1. Licensee shall purchase the Licensed Software for a ninety (90)
day test period in the amount of $20,000.00 paid upon signing of
----------
this Agreement AND five percent (5%) of Net Win as a royalty,
paid monthly. If Licensee retains the AIE Lotto Magic (TM)
Version 1.0 system beyond ninety (90) days, an additional
$00,000.00 shall be due AND five percent (5%) of Net Win as a
----------
royalty, paid quarterly after the initial ninety (90) day period.
7.2. Licensee shall send all payments, referencing this Agreement to:
Atlantic International Entertainment, Ltd. 200 East Palmetto Park
Road., Suite 200 Boca Raton, FL. 33432.
<PAGE>
7.3. The fees payable by Licensee are exclusive of taxes. Licensee shall
pay or reimburse AIE for all taxes, including sales or use taxes,
however designated, imposed as a result of the existence or operation
of this Agreement, except income and franchise tax imposed on AIE by
any government entity. If applicable, Licensee may, in lieu of paying
sales and/or use taxes, furnish to AIE a tax exemption certificate,
which is acceptable to the appropriate taxing authority.
7.4. In the event payment is not made when due, all amounts over due shall
bear interest at the rate of 1.5% per month or, if lower: ALE retains
the right to terminate the lincensed software until such time as all
payments are paid in full.
8. Warranty and Indemnification
8.1. Warranty Disclaimer
8.1.1. The Licensed Software and any Upgrades are provided "as is"
with no representations or warranties of any kind, whether
express or implied, including without limitation, implied
warranties of MERCHANT ABILITY and/or fitness for a particular
purpose. AIE does warrant that the Licensed Software, Upgrades
and/or use of either or both of them will not infringe any
intellectual property rights of third parties.
8.1.2. AIE does not warrant any hardware or non-AIE software or
operating system software,
9. Term and Termination
9.1. This Agreement shall be effective as of the last date on the
signature page hereof ("Effective Date") and shall continue for a
minimum of four (4) years unless terminated by AIE with AIE giving
written notice to the other with at least thirty (30) days prior
notice.
9.2. AIE shall have the right to terminate this Agreement for material
breach by the other party. Termination shall become effective sixty
(60) days after written notice to the Licensee has been sent. Such
notice shall specifically identify the nature of the breach and state
an intent to terminate in the event the breach is not cured within
said sixty-(60) day's period. Written notice shall be signed by an
authorized representative and shall be sent in accordance with
Subsection 14.12. "Notices."
9.3. Upon termination or expiration of the Agreement, the Licensee will
return all Licensed Software to AIE.
9.4. Survival After Termination or Expiration
9.4.1. The provisions of Section 5 "Ownership and Licenses,"
Section 7 "Fees and Payments," Section 8 "Warranty and
Indemnification." Section 9 "Term and Termination," Section 10
"Limitation of Liability," Section 11 "Compliance with Laws,"
Section 12 "Confidential Information," Section 13 "Force
Majeure," Section 14 "General," shall survive and continue
beyond any expiration or termination of this Agreement, except
that licenses granted to Licensee by AIE shall not survive if
the agreement is terminated for a material breach by Licensee.
10. Limitation of Liability
10.1. In no event will either party be liable to the other for any
incidental or special damages, lost profits, lost savings, or any
other consequential damages regardless of the form of action, even if
such party has been advised of the possibility of such damages,
resulting from the subject matter of this Agreement.
11. Compliance with Laws
11.1. Each party will comply with all applicable laws and regulations and
ordinances including, but not limited to, the regulations of the U.S.
Government relating to the export of commodities and technical data
insofar as they relate to the activities under this Agreement. Each
party hereby gives its written assurance that neither products nor
any technical data provided by the other party under this Agreement,
is intended to be shipped, directly or indirectly, to the prohibited
countries identified by the U.S. Government.
12. Confidential Information
12.1. All Confidential information exchanged by the parties shall be in
accordance with a Mutual Confidential Information Agreement.
13. Force Majeure
13.1. Neither party to this Agreement shall be liable for its failure to
perform any of its obligations hereunder during any period in which
such performance is delayed by circumstances beyond its reasonable
control, including but not limited to: fire, act of nature, or,
embargo, riot or the intervention of any government authority,
provided that the party suffering such delay immediately notifies the
other party of the delay.
14. General
14.1. Neither party may assign any of its rights or obligations under this
Agreement to any third party without the express written consent of
the other; provided, however, either party shall be permitted to
assign this Agreement and the rights and licenses hereunder to any
assignee, transferee, or "spin off" of substantially all of the
assets of the organization that has responsibility for the Licensed
Software.
14.2. Except as otherwise expressly provided herein, the rights and
remedies of the parties provided in this Agreement shall not be
exclusive and are in addition to any other rights and remedies
provided at law or in equity.
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<PAGE>
14.3. Each party, including its servants, agents and employees, is deemed
to be an independent contractor and not an agent, joint venturer,
employee, or representative of the other, and neither party may create
any obligations or responsibilities on behalf of or in the name of
the other party.
14.4. If any provision of this Agreement is held illegal or unenforceable by
any court of competent jurisdiction, such provision shall be modified
to the minimal extent required to make it legal and enforceable,
consistent with the spirit and intent of the Agreement. If such
provision cannot be so modified, the provision shall to deemed
separable from the remaining provisions of this Agreement and shall
not affect or impair the validity or enforceability of the remaining
provisions of this Agreement.
14.5. This Agreement shall be governed by the laws of the State of Florida
applicable to agreements made and performed entirely within such
jurisdiction except that the conflict of laws provisions of the State
of Florida relating to determination of the applicable forum law to be
used shall not apply.
14.6. No rights or licenses are granted hereunder, expressly or by
implication or estoppel, to assign or grant, any rights or licenses to
any trademarks of either party, or to any inventions of either party
except as may be expressly provided herein.
14.7. The failure of either party to enforce, in any one or more instances,
any of the terms or conditions of the Agreements shall not be
construed as a waiver of the future performance of any such terms or
condition.
14.8. Nothing contained in this Agreement shall prevent either party from
entering into agreements with third parties which are similar to this
Agreement, or from independently developing (either through third
parties or through the use of its own personnel), or from acquiring
from third parties, technologies or product or services which are
similar to and competitive with that of the other party.
14.9. Neither party shall disclose the existence or terms and conditions of
the Agreement to third parties except with prior written agreement of
the other party or in response to order of a court or government
agency.
14.10.Except for actions to recover payments under this Agreement, no
actions, regardless of form, arising out this Agreement, may be
brought by either party more than one (1) year after the cause of
action has arisen.
14.11.This Agreement expresses the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements, commitments and understandings
pertaining to the subject matter hereof. Any modifications of or
changes to this Agreement shall be in writing and signed by both
parties.
14.12.Notices.
14.12.1 Notices under this Agreement shall be addressed to:
To AIE: Atlantic International Entertainment, Ltd.
200 East Palmetto Park Road, Suite 200
Boca Raton, FL 33432
ATTN: Sr. V.P. of Operations/General Manager
To: Intercapital Global Fund, Ltd
One High Street
St. John, Antigua
ATTN: Alex Kennedy
Or
1260 Rue Cresent
Suite #201
Montreal Quebec, Canada H3G 2A9
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of the date first written above.
Atlantic International Entertainment, Ltd. Intercapital Global Fund, Ltd
/s/ Karen S Welch /s/ Alex Kennedy
By:---------------------------------------- By:--------------------------
Signature Signature
KAREN S. WELCH ALEX KENNEDY
Print Name:--------------------------------- Print Name:------------------
3
<PAGE>
Atlantic International Entertainment, Ltd.
SALES AGREEMENT
This License Agreement ("Agreement") is made this 23/rd/ day of June, 1999,
between Atlantic International Entertainment, Ltd., a Florida corporation, whose
registered office address is 200 E. Palmetto Park Road, Suite 200, Boca Raton,
Florida 33433, USA ("AIE"), and Intercapital Global Fund, Ltd. ("Licensee"),
whose registered office address is: One High Street, St. John, Antigua.
Licensee and AIE agree as follows:
1. Definitions
1.1. "Code" means computer programming object code, which is substantially
or entirely in binary form, which is directly executable by a computer
without the intervening steps of compilation or assembly.
1.2. "Licensed Software" means AIE Bingo Blast(TM) Version 1.0 software
product and related online documentation.
1.3. "Upgrade" means maintenance modifications and enhancements that modify
the Licensed Software.
2. Responsibilities of Licensee
2.1. Licensee agrees to pay for the Licensed Software at the prices set
forth in Section 7.
2.2. Licensee agrees to participate in the AIE training program for support
and use of Licensed Software.
2.3. Licensee shall provide a valid gaming license to AIE prior to
installation of Licensed Software.
2.4. Licensee shall provide the completed installation checklist to AIE
prior to installation.
2.5. Licensee shall ensure the proper preparation of the installation site.
2.6. Licensee shall purchase hardware per AIE's hardware requirement
specifications.
3. Responsibilities of AIE
3.1. AIE shall provide one copy of the Licensed Software.
3.2. AIE shall provide copies of Upgrades to the Licensed Software.
3.3. AIE shall provide on site installation of Licensed Software at no
additional fee.
3.4. AIE shall provide three days training to Licensee in Boca Raton or at
the Licensee site during installation at no additional fee.
3.5. AIE shall provide one customized lobby graphics screen at no
additional fee.
4. Public Relations
4.1. AIE is granted the right to make a public announcement referencing the
Licensee.
4.2. Licensee agrees not to change or remove any AIE mark or Licensed
Software.
5. Ownership and Licenses
5.1. Intellectual Property
5.1.1. AIE retains sole and exclusive ownership of all worldwide
copyrights, patents, trade secrets, know-how and other
intellectual property right in and to the Licensed Software and
Upgrades as they exist now or in the future.
5.1.2. Licensee acknowledges that AIE owns all right, title and
interest in the AIE name and logotype and mark and is the owner
of certain other AIE registered or common law trademarks and
tradenames. Licensee acknowledges that Licensee will not use or
acquire any interest in any of these trademarks or trade names
by virtue of this Agreement, or the activities of either of us
under it.
5.1.3. AIE acknowledges that Licensee owns all right title and interest
in the Licensee name and logotype. AIE acknowledges that it will
not acquire any interest in the Licensee name or mark by virtue
of this Agreement or the activities of either of us under it.
6. AIE grants to Licensee
6.1. AIE grants to Licensee, and its subsidiaries, a nonexclusive license
under copyrights, know-how and trade secrets to use, display, execute
in object Code only one copy of the Licensed Software. The "one" copy
of software may not be shared or used concurrently by multiple, or
differently named or identified websites.
7. Fees and Payments
7.1. Licensee shall purchase four (4) Licenses of the Licensed Software for
the amount of $110,000.00 to be paid upon signing of this Agreement
-----------
AND Seven (7%) of Net Win as a royalty, paid monthly.
7.2. Licensee shall send all payments, referencing this Agreement to:
Atlantic International Entertainment, Ltd. 200 East Palmetto Park
Road., Suite 200 Boca Raton, Fl. 33432.
7.3. The fees payable by Licensee are exclusive of taxes. Licensee shall
pay or reimburse AIE for all taxes, including sales or use taxes,
however designated, imposed as a result of the existence or operation
of this Agreement, except income and
1
<PAGE>
franchise tax imposed on AIE by any government entity. If applicable,
Licensee may, in lieu of paying sales and/or use taxes, furnish to
AIE a tax exemption certificate, which is acceptable to the
appropriate taxing authority.
7.4. In the event payment is not made when due, all amounts over due shall
bear interest at the rate of 1.5% per month or, if lower; AIE retains
the right to terminate the licensed software until such time as all
payments are paid in full.
8. Warranty and Indemnification
8.1. Warranty Disclaimer
8.2. The Licensed Software and any Upgrades are provided "as is" with no
representations or warranties of any kind, whether express or implied,
including without limitation, implied warranties of MERCHANTABILITY
and/or fitness for a particular purpose. AIE does warrant that the
Licensed Software, Upgrades and/or use of either or both of them will
not infringe any intellectual property rights of third parties.
8.3. AIE does not warrant any hardware or non-AIE software or operating
system software.
9. Term and Termination
9.1. This Agreement shall be effective as of the last date on the signature
page hereof ("Effective Date") and shall continue for a minimum of four
(4) years unless terminated by AIE with AIE giving written notice to the
other with at least thirty (30) days prior notice.
9.2. AIE shall have the right to terminate this Agreement for material breach
by the other party. Termination shall become effective sixty (60) days
after written notice to the Licensee has been sent. Such notice shall
specifically identify the nature of the breach and state an intent to
terminate in the event the breach is not cured within said sixty-(60)
day's period. Written notice shall be signed by authorized
representative and shall be sent in accordance with Subsection 14.12.
"Notices."
9.3. Upon termination or expiration of the Agreement, the Licensee will
return all Licensed Software to AIE.
9.4. Survival After Termination or Expiration.
9.4.1. The provisions of Section 5 "Ownership and Licenses," Section 7
"Fees and Payments," Section 8 "Warranty and Indemnification,"
Section 9 "Term and Termination," Section 10 "Limitation of
Liability," Section 11 "Compliance with Laws," Section 12
"Confidential Information," Section 13 "Force Majeure," Section
14 "General," shall survive and continue beyond any expiration
or termination of this Agreement, except that licenses granted
to Licensee by AIE shall not survive if the agreement is
terminated for a material breach by Licensee.
10. Limitation of Liability
10.1.In no event will either party be liable to the other for any incidental
or special damages, lost profits, lost savings, or any other
consequential damages regardless of the form of action, even if such
party has been advised of the possibility of such damages, resulting
from the subject matter of this Agreement.
11. Compliance with Laws
11.1.Each party will comply with all applicable laws and regulations and
ordinances including, but not limited to, the regulations of the U.S.
Government relating to the export of commodities and technical data
insofar as they relate to the activities under this Agreement. Each
party hereby gives its written assurance that neither products nor any
technical data provided by the other party under this Agreement, is
intended to be shipped, directly or indirectly, to the prohibited
countries identified by the U.S. Government.
12. Confidential Information
12.1.All Confidential information exchanged by the parties shall be in
accordance with a Mutual Confidential Information Agreement.
13. Force Majeure
13.1.Neither party to this Agreement shall be liable for its failure to
perform any of its obligations hereunder during any period in which
such performance is delayed by circumstances beyond its reasonable
control, including but not limited to: fire, act of nature, or,
embargo, riot or the intervention of any government authority, provided
that the party suffering such delay immediately notifies the other
party of the delay.
14. General
14.1.Neither party may assign any of its rights or obligations under this
Agreement to any third party without the express written consent of
the other: provided, however, either party shall be permitted to
assign this Agreement and the rights and licenses hereunder to any
assignee, transferee, or "spin off" of substantially all of the assets
of the organization that has responsibility for the Licensed Software.
14.2.Except as otherwise expressly provided herein, the rights and remedies
of the parties provided in this Agreement shall not be exclusive and
are in addition to any other rights and remedies provided at law or in
equity.
14.3.Each party, including its servants, agents and employees, is deemed to
be an independent contractor and not an agent, joint venturer,
employee, or representative of the other, and neither party may create
any obligations or responsibilities on behalf of or in the name of the
other party.
2
<PAGE>
14.4. If any provision of this Agreement is held illegal or unenforceable by
any court of competent jurisdiction, such provision shall be modified
to the minimal extent required to make it legal and enforceable,
consistent with the spirit and intent of the Agreement. If such
provision cannot be so modified, the provision shall be deemed
separable from the remaining provisions of this Agreement and shall
not affect or impair the validity or enforceability of the remaining
provisions of this Agreement.
14.5. This Agreement shall be governed by the laws of the State of Florida
applicable to agreements made and performed entirely within such
jurisdiction except that the conflict of laws provisions of the State
of Florida relating to determination of the applicable forum law to be
used shall not apply.
14.6. No rights or licenses are granted hereunder, expressly or by
implication or estoppel, to assign or grant any rights or licenses to
any trademarks of either party, or to any inventions of either party
except as may be expressly provided herein.
14.7. The failure of either party to enforce, in any one or more instances,
any of the terms or conditions of the Agreement shall not be construed
as a waiver of the future performance of any such term or condition.
14.8. Nothing contained in this Agreement shall prevent either party from
entering into agreements with third parties which are similar to this
Agreement, or from independently developing (either through third
parties or through the use of its own personnel), or from acquiring
from third parties, technologies or product or services which are
similar to and competitive with that of the other party.
14.9. Neither party shall disclose the existence or terms and conditions of
the Agreement to third parties except with prior written agreement of
the other party or in response to order of a court or government
agency.
14.10. Except for actions to recover payments under this Agreement, no
actions, regardless of form, arising out this Agreement, may be
brought by either party more than one (1) year after the cause of
action has arisen.
14.11. This Agreement expresses the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements, commitments and understandings
pertaining to the subject matter hereof. Any modifications of or
changes to this Agreement shall be in writing and signed by both
parties.
14.12. Notices
14.12.1 Notices under this Agreement shall be addressed to:
To AIE: Atlantic International Entertainment Ltd.
200 East Palmetto Park Road, Suite 200
Boca Raton, FL 33432
ATTN: Sr. V.P. of Operations/General Manager
To: Intercapital Global Fund, Ltd.
One High Street
St. John, Antigua
ATTN: Alex Kennedy
Or
1260 Rue Crescent
Suite #201
Montreal Quebec, Canada H3G 2A9
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
Atlantic International Entertainment, Ltd. Intercapital Global Fund, Ltd.
By: /s/ Karen S. Welch By: /s/ Alex Kennedy
--------------------------- ---------------------------
Signature Signature
Print Name: Karen S. Welch Print Name: Alex Kennedy
------------------- -------------------
3
<PAGE>
Atlantic International Entertainment, Ltd.
Software Support Maintenance Agreement
THIS AGREEMENT (hereinafter Agreement), made and entered into by and between
Atlantic International Entertainment, Ltd., a Florida based corporation, having
its principal place of business at 200 E. Palmetto Park Rd., Ste, 200, Boca
Raton, FL 33432 (hereinafter referred to as Atlantic): and Intercapital Global
Fund, Ltd. having its principal place of business at: One High Street, St. John,
Antigua (hereinafter referred to as Customer).
1. DEFINITIONS
For the purpose of this Agreement, the following terms shall have the meanings
ascribed to them.
EFFECTIVE DATE. The term Effective Date shall mean first date of signing of this
Agreement.
IMPROVEMENTS. Improvements to the Licensed Software are designated by a change
to the products release indicator ( up to the next whole number release).
Improvements generally comprise maintenance modifications or minor enhancements
to functionality. Improvements exclude versions. Versions are comprised of
significant enhancements to functionality. If there is any issue whether a new
release is an Improvement or a version, it shall be within Atlantic" sole
discretion to much such determination.
LICENSED SOFTWARE. The term Licensed Software shall mean the computer program(s)
as detailed in Attachment A. The Licensed Software shall include Improvements as
defined above. Licensed Software will be distributed in Object Code only format.
OBJECT CODE. Object Code shall exist solely of code, substantially or entirely
in binary form which is directly executable by a computer after suitable
processing, but without the intervening steps of compilation or assembly. Object
Code shall not include any Source Code.
TECHNICAL INFORMATION. The term Technical Information shall mean the material
supplied by Atlantic in printed form or on magnetic media which supports the
Licensed Software and describes its installation, operation, or maintenance.
USERS. The entity or persons, including but not limited to employees or
contractors who are licensed to run the Licensed Software.
1
<PAGE>
II. MAINTENANCE AND SUPPORT SERVICES
Standard Software Maintenance Services Shall include: Telephone maintenance
support of the Licensed Software. Said maintenance and support shall be
available Monday through Friday, 8:00AM - 6:00PM EST, exclusive of holidays at
(561) 393-6685. The Customer Support Center number after 6:00PM is 888-580-0980.
. Improvements that are made generally available on the current version.
. Technical Information updates to support Improvements.
. A thirty (30) day warranty period on the media.
. PC Anywhere is required for Support and Maintenance services.
. No other software can reside on the IIS or database servers at anytime.
If a Customer from time to time desires to obtain maintenance and support
services other than those specified above, or desires to obtain services to
accomplish modifications or enhancements to the Licensed Software not covered by
this Agreement, Customer may notify Atlantic of the services desired and, such
services shall be provided at the then current fees.
III. INTELLECTUAL PROPERTY
Any Improvements in the form of new or partial programs or documentation,
Technical Information and maintenance and support information, that may be
provided during the terms of this Agreement by Atlantic shall remain proprietary
to Atlantic and title thereto remains with Atlantic. All applicable rights to
patents, copyrights, trademarks, trade secrets and other intellectual or
proprietary rights and interests in the Licensed Software and Improvements
thereto by Atlantic are and shall remain with Atlantic. The Customer shall not
sell, transfer, publish, disclose, display, or otherwise make available the
Licensed Software or Improvements thereto or copies thereof to others, with
exception of the access to the Client. Customer agrees to secure and protect
each program, software product, and copies thereof in a manner consistent with
the maintenance of Atlantic's rights therein and to take appropriate action by
instruction or agreement with its employees who are permitted access to each
program or software product to satisfy its obligations hereunder. All copies of
the Licensed Software, or Improvements, including translations, compilations,
partial copies with modifications, and updated works by Atlantic are the
property of Atlantic.
IV. WARRANTIES
Atlantic warrants that the Licensed Software and Improvements thereto shall
operate in accordance with the provided Technical Information.
2
<PAGE>
Atlantic warrants that sole title to the Atlantic copyright of Licensed Software
and Improvements resides in Atlantic, and that Atlantic has full power and
authority to enter into and carry out this Agreement.
Atlantic shall use its best efforts to promptly correct program errors when such
errors are reported to Atlantic. Atlantic will use its best efforts to provide
Improvements to Licensed Software if necessary to repair the error and eliminate
the adverse effects on the Customer of the non-conformity.
V. LIMITATIONS AND EXCLUSIONS OF WARRANTIES
1. Atlantic's warranties do not extend to operation of any hardware
configuration, nor in any operating environment (e.g., operating system)
2. Atlantic's warranties do not apply to:
a) Any copy of the Licensed Software that is re-engineered by any person other
than Atlantic; nor
b) Malfunctions resulting from use of the Licensed Software other than in
accordance with the most current Technical Information provided by Atlantic;
nor
c) Bugs or irregularities caused by defects, problems, or failures of hardware
or software not provided by Atlantic; nor
d) Bugs or irregularities caused by gross negligence of Customer or any other
person except Atlantic.
3. EXCEPT FOR ATLANTIC'S WARRANTY THAT THE LICENSED SOFTWARE WILL OPERATE AS
DEFINED IN THE TECHNICAL INFORMATION, ATLANTIC EXPRESSLY DISCLAIMS ANY WARRANTY
THAT THE FUNCTIONS PERFORMED BY THE LICENSED SOFTWARE WILL MEET ADDITIONAL
CUSTOMER REQUIREMENTS OR WILL OPERATE IN THE COMBINATIONS THAT MAY BE SELECTED
FOR USE BY CUSTOMER.
THE EXPRESS WARRANTIES AND EXPRESS REPRESENTATIONS SET FORTH IN THIS AGREEMENT
ARE IN LIEU OF, AND ATLANTIC DISCLAIMS, ANY AND ALL OTHER WARRANTIES,
CONDITIONS, OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN), WITH
RESPECT TO THE SOFTWARE SUPPORT MAINTENANCE AGREEMENT, INCLUDING ANY AND ALL
IMPLIED WARRANTIES.
VI. LIMITATION OF LIABILITY
1. ATLANTIC EXPRESSLY DISCLAIMS, AND CUSTOMER AGREES NOT TO ASSERT, ANY
LIABILITY FOR INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES ARISING EITHER
DIRECTLY OR INDIRECTLY FROM OPERATION OF THE LICENSED SOFTWARE, INCLUDING
BUT NOT LIMITED TO LIABILITY FOR LOST OR CORRUPTED DATA OF CUSTOMER.
3
<PAGE>
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INCIDENTAL, CONSEQUENTIAL
OR SPECIAL DAMAGES ARISING FROM THIS AGREEMENT OR USE OF LICENSED SOFTWARE.
2. IN NO EVENT SHALL ATLANTIC BE LIABLE FOR ANY DAMAGES RESULTING FROM LOSS OF
DATA OR USE, LOST PROFITS OR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, NOTWITHSTANDING ANYTHING IN THE AGREEMENT TO THE CONTRARY,
ATLANTIC'S ENTIRE LIABILITY TO CUSTOMER FOR DAMAGES OR LOSSES SHALL NOT
EXCEED THE AMOUNT PAID BY CUSTOMER UNDER THE AGREEMENT PRIOR TO SUCH DAMAGE
OR LOSS UP TO A MAXIMUM OF THE THEN CURRENT APPLICABLE YEARLY MAINTENANCE
FEES FOR THE SOFTWARE.
VII. TERM AND TERMINATION
1. Except as otherwise provided herein, this Agreement shall commence on the
Effective Date and continue for a period of 12 months. Automatic renewal is
assumed.
2. Upon termination of this Agreement:
a) Neither party shall have any further obligation to perform any duties
hereunder.
b) If this Agreement is terminated by Atlantic prior to the end of any year for
which an annual fee for maintenance and support has been paid by Customer,
Atlantic shall refund to Customer a pro rata portion of said annual fee
corresponding to the unexpired portion of that year.
VII. FEES
1. Payments shall be made according to the terms and conditions defined in
Attachment A.
2. The fees stated in Attachment A are only in effect for the initial term of
the Agreement. Standard Software Maintenance Services fees may vary from
year to year. Customer will be notified at least 60 days prior to the
Effective Date of any change in fees.
3. Unless otherwise specified, payment for Maintenance and Support Services
shall begin thirty (30) days after installation and continue to be due every
thirty (30) days from that date specified. If Customer fails to make payment
on the date such payment is due, written notice shall be sent to the
Customer. Customer shall have ten (10) days in which to make payment.
Following this grace period, Atlantic may discontinue services until
Customer has remedied the delinquency. Any past due payments shall be
subject to late fees equal to 1.5% per month.
4
<PAGE>
IX. MISCELLANEOUS PROVISIONS
ASSIGNMENT. Neither this Agreement nor any interest herein may be assigned, in
whole or in part, by Customer without prior written consent of Atlantic, except
that, without securing such prior consent, Customer may assign this Agreement to
any acquirer of substantially all of the business of such party to which the
subject matter hereof relates, or to any affiliate or successor must assume in
writing all obligations herein.
ESCROW. AIE will escrow source code at the Customer's expense for service only,
not to enhance or develop the licensed product in the event AIE should go out of
business.
CONSTRUCTION, APPLICABLE LAW, AND PLACE OF PERFORMANCE. This Agreement shall be
deemed to be made and entered into pursuant to the laws of the State of Florida.
NOTICE. All notices, statements, and reports required or permitted by this
Agreement shall be in writing and deemed to have been effectively given and
received: five (5) days after the date of dispatch by certified or registered
mail, postage prepaid; or other courier service; and in the case of telecopied
notice on the date that confirmation is sent by the receiving party to the
sending party addressed as follows:
For ATLANTIC: For CUSTOMER:
Atlantic International Entertainment, Ltd. Intercapital Global Fund, Ltd.
200 E. Palmetto Park Rd. Ste. 200 One High Street
Boca Raton, FL 33432 St. John, Antigua
Or
1260 Rue Cresent
Suite #201
Montreal Quebec, Canada H3G 2A9
Tel: 561.393.6685 Tel: 1514-878-9400
Fax: 561.393.1485 Fax: 1514-878-6335
Either party may change its address for the purpose of this paragraph by notice
pursuant to this paragraph.
FORCE MAJEURE. Neither party to this Agreement shall be liable for its failure
to perform any of its obligations hereunder during any period in which such
performance is delayed by circumstances beyond its reasonable control, including
but not limited to: fire,
5
<PAGE>
act of nature, or embargo, riot, or the intervention of any government
authority, provided that the party suffering such delay immediately notifies the
other party of the delay.
SEVERABILITY. The provisions of this Agreement are severable, and in the event
any provision is determined to be invalid or unenforceable, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
WAIVER. The waiver of a default hereunder by one party may be effected only by
written acknowledgement signed by the other party and shall constitute a waiver
of any other default. The failure of either party to enforce any right or remedy
INDEPENDENT PARTIES. Nothing in this Agreement shall be deemed to constitute,
create, give effect to or otherwise recognize a partnership, joint venture or
formal business entity of any kind between the parties hereto; and the rights
and obligations of the parties shall be limited to those expressly set forth
herein.
ENTIRE UNDERSTANDING. This written instrument constitutes the entire
understanding and agreement between the parties with respect to the subject
matter hereof, integrates all prior understandings and agreements with respect
thereto, and shall not be varied, amended, or supplemented except in writing of
even or subsequent date, executed by the parties.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of
29 day of June 1999
Atlantic International Entertainment, Ltd. Intercapital Global Fund, Ltd.
Signature: /s/ Karen S. Welch Signature: /s/ Alex Kennedy
------------------- --------------------
Name: Karen S. Welch Name: Alex Kennedy
------------------- --------------------
Title: Sr. VP Operations/GM Title: Vice President
------------------- --------------------
Date: June 28, 1999 Date: 28 June, 99
------------------- --------------------
6
<PAGE>
27,500 X 4 = 110,000 BINGO BLAST
20,000 X 1 = 20,000 LOTTO MAGIC
ONE FREE ALL BINGOS $1,000 MONTHLY - TOTAL $12,000 ANNUALLY.
ONLY ITEM IS LOTTO. NO MAINTENANCE SAME SERVER.
ATTACHMENT A
<TABLE>
<CAPTION>
FEES FOR SERVICES:
<S> <C>
- --------------------------------------------------------------------------------
Description Individual Price
- --------------------------------------------------------------------------------
1 Year Lotto Magic(TM) Standard Software $1000 Monthly or $1,000 annually
Maintenance Services, ONE FEE FOR ALL
LOTTERIES $1000 Monthly or $10,000 annually
1 Year Bingo Blast(TM) Standard Software
Maintenance Services -
- --------------------------------------------------------------------------------
TOTAL: $ 12,000
-------
</TABLE>
NOTE: Yearly maintenance price is only applicable when paid in full prior to
applicable calender year of service.
AIE/Confidential
<PAGE>
EXHIBIT 6.3
AMENDED AND RESTATED PURCHASE AGREEMENT
This Amended and Restated Purchase Agreement ("Agreement") is entered into
as of May 5, 1999 by and between Intercapital Global Fund, Ltd., a corporation
organized under the laws of Antigua and Barbuda ("IGF"), and Summerhill Gaming
Limited, a corporation organized under the laws of the Bahamas ("SGL"), and
supersedes all previous agreements.
WHEREAS, IGF is engaged in the Internet gaming business and is in the
process of establishing an Internet casino and sports book website known as
www.slotsvegas.com ("Slotsvegas"); and
- ------------------
WHEREAS, SGL desires to purchase a fifty (50%) percent ownership interest
in Slotsvegas and the right to an equal profit and loss participation therein
(such interest and right hereinafter the "Slotsvegas Participation").
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:
Section 1. Purchase of Slotsvegas Participation. (a) IGF hereby sells and
------------------------------------
transfers to SGL, and SGL hereby purchases and accepts from IGF, the Slotsvegas
Participation in consideration for $500,000 in cash (the "Purchase Price") to be
paid by SGL to IGF upon execution of this Agreement. Such advance payment is
non-refundable under any circumstances. Upon receipt of the Purchase Price and
commencement of operations at the Slotsvegas site, IGF shall maintain a separate
set of books and records which will account for the assets, liabilities,
profits, losses and other operations associated with the Slotsvegas site. The
profit or loss, for purposes of defining the Slotsvegas Participation (the"net
profits") shall mean: (i) the net gaming winnings, (ii) less expenses directly
attributable to the operation of the website, licensing fees, ISP charges,
credit card processing fees, advertising costs, etc..., (iii) less allocatable
overhead costs attributable to the website operation, operating salaries,
customer service, depreciation, maintenance, office supplies, etc..., as
determined based upon the relative percentage of revenues of the Slotsvegas
website over all revenues of IGF's parent company, Total Entertainment Inc.,
(iv) plus proceeds from the sale of the website to a third party, (v) plus any
other revenues or expenses attributable to the website.
(b) The assets of the Slotsvegas website shall consist of the preferred
software licensing costs, hardware and software used specifically in the website
and accounts receivable from IGF's credit card processor. The liabilities of
the Slotsvegas website shall consist of customer accounts payable and accrued
expenses relating to the operation of the website. IGF shall pay over to SGL on
a monthly basis or such other interim basis as the parties may agree, one-half
of the estimated net profits derived from the Slotsvegas site, as determined in
accordance with generally accepted accounting principles in the United States.
Within 90 days following the end of each fiscal year, the parties shall
reconcile and adjust such interim payments to the actual net profits or losses
based upon the annual audited financial statements of IGF (or its parent, Total
Entertainment Inc.).
<PAGE>
(c) Should the operation of the Slotsvegas website cease on a permanent
basis, for any reason, then the calculation of the net profits, as previously
defined, shall be discontinued and neither IGF or SGL shall be required to fund
any further expenses, except as required by applicable law. To the extent the
net profit of the Slotsvegas website is negative (i.e a loss), then SGL is
required to fund 50 % of such loss to IGF on same payment terms as discussed
above.
Section 2. Responsibilities. IGF shall be responsible for creating,
----------------
maintaining and operating the Slotsvegas site and, in connection therewith,
shall supply all necessary hardware, software, technical support and
maintenance. IGF shall also be responsible for management, marketing and all
other matters with respect to the Slotsvegas site. SGL shall have no management,
operational or other rights or responsibilities with respect to the Slotsvegas
site.
Section 3. Liquidity Advances. From time to time upon request of IGF, SGL
------------------
may make short-term loans to IGF for liquidity purposes (the "Liquidity
Advances"). If SGL elects to make Liquidity Advances, the parties shall agree on
the maturity, interest rate and other terms and conditions thereof. The
Liquidity Advances shall not affect the parties' rights and responsibilities
hereunder with respect to the Slotsvegas site.
Section 4. Representations and Warranties of IGF. IGF represents and
-------------------------------------
warrants to SGL as of the date hereof as follows:
(a) IGF has full power and authority to execute, deliver and perform
this Agreement and the agreements and instruments to be executed and delivered
by it hereunder, and has taken all action and secured all consents necessary to
authorize the execution, delivery and performance by it of this Agreement and
the agreements and instruments to be executed and delivered by it hereunder.
(b) This Agreement has been duly executed and delivered by IGF, and
this Agreement constitutes the legal, valid and binding obligation of IGF,
enforceable against it in accordance with its terms.
(c) The execution, delivery and performance by IGF of this
Agreement does not violate, conflict with, or constitute (with or without the
giving of notice or passage of time or both) a default under any provisions of
(i) any order, writ, injunction, judgment, decree, law, statute, rule or
regulation applicable to IGF or to the Slotsvegas site, or (ii) any note,
indenture, mortgage, deed of trust or other instrument or agreement to which IGF
is a party or by which it is bound or subject.
(d) IGF has obtained all approvals, authorizations, consents,
licenses, franchises, orders, certificates and all other permits of, and has
made all filings with, any governmental authority which is required for the
ownership of Slotsvegas or the conduct of an Internet gaming business thereon.
(e) IGF has good title to Slotsvegas and shall deliver to SGL good
title to the Slotsvegas Participation free and clear of all liens, tax liens,
mortgages, security interests,
2
<PAGE>
encumbrances, claims or similar adverse interests of any kind or character, and
has full right, power, and authority to sell, convey and transfer the Slotsvegas
Participation in accordance with the terms of this Agreement.
(f) To IGF's knowledge, as of the date hereof, no litigation,
investigation or proceeding by or before any court or governmental authority or
arbitrator is pending or threatened against IGF with respect to Slotsvegas or
affecting any of the property or assets of Slotsvegas, and IGF is not a party to
or subject to the provisions of any order, writ, injunction, decree or judgment
of any governmental authority in connection with the on-going operations of
Slotsvegas.
(g) Except those previously obtained, no consent, authorization,
approval, permit or order of, waiver by, or notice or declaration to, or
registration, qualification or filing with, any governmental authority or other
person pursuant to any applicable laws or agreements, is required on the part of
IGF in connection with IGF's execution, delivery or performance of this
Agreement or the consummation of any of the transactions contemplated hereby.
Section 5. Representations and Warranties of SGL. SGL represents and
-------------------------------------
warrants to IGF as of the date hereof as follows:
(a) SGL is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, and has the
power and authority to own its properties and to carry on its business as
presently conducted.
(b) SGL has the power and authority to execute, deliver and perform
this Agreement, and has taken all action necessary to authorize its execution,
delivery and performance of this Agreement, and the agreements and instruments
to be executed and delivered by it hereunder.
(c) This Agreement has been duly executed and delivered by SGL, and
this Agreement constitutes the legal, valid and binding obligation of SGL,
enforceable against it in accordance with its terms.
Section 6. Further Assurances. At any time and from time to time after
------------------
the date hereof, each party will use its best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things reasonably
requested by the other party to make effective the transactions contemplated by
this Agreement.
Section 7. Expenses. Except as otherwise provided herein, all expenses
--------
incurred by or on behalf of the parties hereto in connection with this Agreement
shall be borne solely by the party who incurred the charge.
Section 8. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed given (a) on the date of delivery if delivered
personally; (b) on the date after delivery in the continental United States to a
reputable nationally recognized overnight courier service prepaid and with
instruction to deliver the next morning; or (c) three (3) days after being
3
<PAGE>
mailed by registered or certified mail (return receipt requested) to the parties
at the address set forth on the signature page hereof (or at such other address
for a party as shall be specified by like notice).
Section 9. Entire Agreement; Amendment. This Agreement constitutes the
---------------------------
entire agreement and understanding between the parties pertaining to the subject
matter hereof, and supersedes all prior agreements, understandings,
negotiations and discussions of the parties, whether written or oral. No
amendment, supplement, or modification of this Agreement shall be binding or
effective unless executed in writing and signed on behalf of each party.
Section 10. Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of New York, without reference to
conflicts of laws principles.
Section 11. Assignment. No party may assign this Agreement or any rights
----------
or obligations hereunder without first obtaining the written consent of the
other party. Any attempted or purported assignment by either party in violation
of this Section 11 shall be null and void.
Section 12. Binding Effect. This Agreement shall be binding upon, and
--------------
shall inure to the benefit of and be enforceable by, the parties hereto and
their respective successors and permitted assigns. This Agreement is for the
sole benefit of the parties hereto and nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon any person, other than
the parties and their successors and permitted assigns, any right, remedy or
claim under or by reason of this Agreement.
Section 13. Waivers. Any term or provision of this Agreement may be
-------
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. The failure of any party hereto to enforce at
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, nor in any way to affect the validity of this Agreement or
any part hereof or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach.
Section 14. Partial Invalidity. Wherever possible, each provision hereof
------------------
shall be interpreted in such manner as to be effective and valid under
applicable laws, but in case any one or more or the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or provisions would
result in such a material change as to cause completion of the transactions
contemplated hereby to be unreasonable.
4
<PAGE>
Section 15. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
INTERCAPITAL GLOBAL FUND, LTD.
By: /s/ Sandy J. Masselli
--------------------------------------
Name: Sandy J. Masselli
Title: Chief Executive Officer
Address for Notices:
1411 Peel Street, Suite 500
Montreal, Quebec, Canada H3A 155
SUMMERHILL GAMING LIMITED
By: /s/ Donald Dorfman
--------------------------------------
Name: DONALD DORFMAN, Phd.
Title: ATTNY-IN-FACT/V.P.
Address for Notices:
QUEEN STREET
-----------------------------------------
DEVONSHIRE HOUSE
-----------------------------------------
NASSAU, BAHAMAS
-----------------------------------------
5
<PAGE>
EXHIBIT 6.4
AGREEMENT dated this 18 day of Aug 1998
BY AND BETWEEN: MPACT IMMEDIA TRANSACTION SERVICES LTD., a legal person
having a place of business at Clarendon House, Church
Street, Hamilton, Bermuda, herein represented by Mr. Joel
Leonoff, duly authorised as he so declares,
(hereinafter referred to as "MPACT")
AND: Intercapital Global Fund, Ltd., a legal person having a
place of business at One High Street, PO Box 1302, St. John,
Antigua, West Indies, herein represented by Mr. Sandy
Masselli, duly authorised as he so declares,
(hereinafter referred to as the "Client")
SECTION I - PREAMBLE
1.1 WHEREAS the Client is desirous of engaging the services of MPACT to
process, verify, settle, confirm, report and perform value added services
on certain transactions relating to the business operations of Client (the
"Processing Services");
1.2 WHEREAS MPACT is desirous of providing the Processing Services to the
Client subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION II - PROCESSING SERVICES
2.1 Subject to the terms and conditions set forth in this Agreement, MPACT
hereby agrees to provide the Processing Services to the Client.
Specifically, the Processing Services shall include the following:
2.1.1 real-time online authentication and approval of the credit card
information (namely, the card number and expiration date) for
each credit card transaction processed by the Processing Services
(the "Credit Card Transactions");
2.1.2 real-time online confirmation and approval that the relevant card
number accounts have sufficient credit available to cover the
amounts of the Credit Card Transactions;
2.1.3 settlements of the Credit Card Transactions that have been
approved based on positive credit card information, positive
credit availability and positive
<PAGE>
2
electronic mail verification to the extent that same are used;
2.1.4 the use of MPACT's electronic mail verification system and
of an address verification system for the purposes hereof and
the issuance of approvals based upon the electronic mail
response;
2.1.5 crediting back customers' cards upon electronic instructions
from the Client;
2.1.6 monthly written confirmations (on a calendar basis) to the
Client regarding the status of the Credit Card Transactions
including the total credit card deposits, returns, Charge-
Backs pending and Charge-Backs processed; and
2.1.7 daily reporting with respect to deposits and returns for the
preceding twenty-four (24) hours.
2.2 Nothing herein grants the Client any rights whatsoever in any of
MPACT's transaction or other software, and any use thereof by the
Client beyond the requirements of the Processing Services shall be
subject to separate agreement.
2.3 Each Tuesday of each calendar week, MPACT shall remit to the Client
the amount collected by MPACT in respect of Credit Card Transactions
processed, net of the credits identified in subsection 2.1.5 above
(the "Remittances"), subject to the deductions, and reserves set forth
in section III below.
SECTION III - FEES AND RESERVES
3.1 In consideration for Processing Services, the Client agrees to pay to
MPACT the following non-refundable fees:
3.1.1 seven percent (7.00%) of all approved and settled Credit Card
Transactions, subject to a minimum monthly fee of two thousand
dollars ($2,000);
3.1.2 Client shall pay an initial setup fee in the amount of two
thousand five hundred dollars ($2,500.00) upon execution of
this agreement;
3.1.3 Client shall reimburse MPACT for all approved and settled
Credit Card Transactions which are at any time refused, debited
or charged back by the relevant bank or credit card company for
any reason whatsoever ("Charge-Backs");
3.1.4 Client shall pay a fee in the amount of ten dollars ($10.00)
plus any incremental fees and expenses charged or debted by the
banks or credit card companies for each Charge-Back; and
3.2 Client hereby authorizes MPACT to deduct from the Remittances the amounts
<PAGE>
3
owing under subsection 3.1 above. In the event that the Remittances are
insufficient to pay the amounts owing by the Client to MPACT, the Client
shall pay the balance thereof within seven (7) business days following
receipt of MPACT's written invoice for such amount.
3.3 Client hereby further authorizes MPACT to deduct from the Remittances and
establish a reserve account (the "Reserve Account") to ensure MPACT's
recovery of any liabilities owed it or reasonably anticipated to be owed to
it by the Client pursuant to this Agreement including, without limitation,
all liabilities, in respect of actual and/or potential post-termination
Charge-Backs, post-termination fees, and charges, indemnifications and
expenses due or anticipated to be due to MPACT from Client. The Reserve
Account shall be funded and/or replenished by MPACT's withholding from the
Remittances. The amount of the Reserve Account shall be maintained in
amounts consistent with the provisions set forth in subsection 3.6 below.
3.4 As additional security for the payment of the obligations by the Client,
the Client agrees to provide MPACT with a security deposit (the "Security
Deposit") in the amount of twenty-five thousand dollars ($25,000.00). The
Security Deposit shall be maintained at this amount throughout the term of
this Agreement and for a period of seven (7) months thereafter, and the
Client agrees to pay any deficiency into the Security Deposit upon notice
of such deficiency from MPACT. The Security Deposit shall be made by the
Client to MPACT upon the execution of this Agreement.
3.5 As continuing and collateral security for the due and punctual payment of
any and all amounts now owing or which may hereafter become owing to MPACT
by the Client under this Agreement (the "Obligations"), as same may be
amended, renewed, extended or supplemented, the Client hereby charges and
hypothecates in favour of MPACT, with effect as of and from this date, all
right, title and interest of the Client in and to the Remittances, Security
Deposit and Reserve Account and all funds therein comprised. The Client
undertakes not to grant to any other person any hypothecary or other
security interest of equal or superior rank to MPACT's in the Remittance,
Security Deposit or Reserve Account. The Client further undertakes, upon
notice by MPACT and at its expense, to execute and register such documents
as may be necessary or desirable to perfect MPACT's first-ranking security
interest therein.
3.6 During the initial six (6) month period of the term of this Agreement,
MPACT shall deduct fifteen percent (15%) from the Remittances to fund the
Reserve Account. Thereafter, MPACT shall continue to retain within the
Reserve Account the aggregate amount of fifteen percent (15%) of the
Remittances for the six (6) most recent months of the term of this
Agreement. All interest which may accrue with respect to the Reserve
Account shall be for the sole account of Client and shall be paid twice per
year.
<PAGE>
4
3.7 MPACT shall have the right to withdraw from the Reserve Account any and
all amounts owned to it hereunder upon one day's notice. MPACT shall
have the additional right to withdraw from the Security Deposit any and
all amounts owed to it hereunder should the Client fail to pay such
amounts within five business days of written default of payment notice to
the Client. MPACT's rights to sums owed to it by Client pursuant to this
Agreement shall in no way be limited by the balance or existence of the
Reserve Account or the Security Deposit. MPACT's rights with respect to
the Reserve Account and the Security Deposit shall survive the
termination of this Agreement.
3.8 All interest which may accrue in respect of the Security Deposit and the
Reserve Accounts shall be for the sole account of MPACT. Notwithstanding
the forgoing, in the event that MPACT terminates this Agreement without
cause pursuant to subsection 5.2 below, MPACT agrees that, as and from
the date of such termination, all interest which may accrue in respect of
Security Deposit and Reserve Account shall be for the account of and be
paid or credited to the Client.
3.9 As amounts become payable to either party under this Agreement and unless
otherwise agreed in writing, the party making the payment shall do so by
facilitating a wire transfer to a pre-designated account stipulated by
the other party. Payments shall be deemed to be made upon the date of
transfer from the transferor's bank.
3.10 The Client shall be responsible for the payment of any and all
applicable sales or other taxes due upon the Credit Card Transactions.
SECTION IV - INDEMNIFICATION AND LIMITATION OF LIABILITY
4.1 The Client shall jointly and severally defend and held harmless MPACT
against and in respect to any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries, and
deficiencies, including interest, penalties and reasonable attorney fees
that MPACT shall incur or suffer, that arise, result from, or relate to
any breach of or failure by the Client to perform any of its
representations, warranties, covenants or agreements in this Agreement or
in any schedule, supplemental agreement, appendix or other instrument
furnished or to be furnished to Client under this Agreement.
4.2 MPACT's liability to Client with respect to any Credit Card Transaction
shall not exceed the amount represented by the transaction record in
connection with such Credit Card Transaction, less the applicable fees
payable to MPACT hereunder.
4.3 ALL WARRANTIES EXPRESSED OR IMPLIED INCLUDING, BUT NOT LIMITED TO,
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR
PURPOSE OF THE PROCESSING SERVICES OR OF ANY OTHER SERVICES PROVIDED BY
MPACT HEREUNDER ARE HEREBY DISCLAIMED BY MPACT, ITS AFFILIATES, AGENTS
AND LICENSORS. IN ADDITION, MPACT, ITS AFFILIATES, AGENTS AND LICENSORS
SHALL NOT BE LIABLE
<PAGE>
5
FOR ANY INCIDENTAL, CONSEQUENTIAL, OR OTHER DAMAGES, LOSSES OR CLAIMS IN
ANY WAY CONNECTED WITH OR ARISING OUT OF THE USE OF THE PROCESSING SERVICES
OR ANY OTHER SERVICES PROVIDED BY MPACT HEREUNDER.
4.4 MPACT, its affiliates, agents or licensors shall not be liable for any loss
resulting from erroneous statements or errors in transmission, nor for any
loss resulting from any delay, interruption or failure to perform hereunder
due to any circumstances beyond MPACT's reasonable control including,
without limitation, acts of god, fire, explosion, earthquake, riot, war,
sabotage, accident, embargo, storms, strikes, lockouts, any interruption,
failure or defects in Internet, telephone, or other interconnect services
or in electronic or mechanical equipment MPACT's obligations hereunder
shall be suspended during any of the foregoing circumstances, which
suspension shall not be a cause for termination of this agreement by the
Client
SECTION V - TERM AND TERMINATION
5.1 This Agreement shall be effective commencing on the date first mentioned
above (the "Effective Date") until the first anniversary of the Effective
Date, and thereafter shall be renewed automatically for additional
consecutive three (3) month periods, unless earlier terminated in
accordance with the terms of subsections 5.2, 5.3 or 5.4 hereof.
5.2 Notwithstanding subsection 5.1, MPACT shall have the right to terminate
this Agreement immediately: (i) in the event of breach by the Client of its
representation, warranties or obligations under this Agreement or (ii) in
the event that the Client is delinquent in any payment hereunder ten (10)
days after the same has become due, MPACT may also terminate this Agreement
with or without cause upon twenty (20) business days' written notice to
Client.
5.3 Notwithstanding subsection 5.1, Client may terminate this Agreement with
or without cause, upon fifteen (15) business days written notice to MPACT.
Client's use of MPACT's services hereunder are completely at will and non-
exclusive.
5.4 Notwithstanding subsection 5.1, the parties agree that either of them may,
by notice to the other party, initiate negotiations on amendments to this
Agreement where such amendments would take effect on as of the six (6)
month anniversary of the Effective Date. In the event that notice to
negotiate has been given by a party hereunder, but the parties have failed
to reach agreement on amendments by such six (6) month anniversary, this
Agreement shall terminate on such six (6) month anniversary.
5.5 Upon any termination of this Agreement, the Client shall immediately
discontinue the use of all of the Processing Services. All provisions
regarding indemnification, warranty, liability and limits thereon, and
confidentiality and/or protection of proprietary rights and trade secrets
shall survive indefinitely or until the expiration
<PAGE>
6
of any time period specified elsewhere in this Agreement with respect to
the provision in question, and termination of this Agreement shall not
relieve the Client of its obligations to pay accrued fees.
5.6 Upon any termination of this Agreement, MPACT shall be entitled to retain
as security for the payment of the Obligations each of the Security Deposit
and the Reserve Account for a period of seven (7) months thereafter.
SECTION VI - REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CLIENT
6.1 The Client hereby agrees to abide by the following good business practices:
6.1.1 to offer for sale through its Web Site only products and services
that are available for delivery in the normal course of the
Client's business, based upon the type of product or service
being offered; and
6.1.2 to offer products or services for sale only if the Client has
legitimate rights to market and sell such products or services.
6.2 The Client hereby represents and warrants to MPACT that throughout the term
of this Agreement:
6.2.1 it will maintain the value and reputation of MPACT to the best of
its reasonable ability;
6.2.2 it will conduct its business affairs in an ethical manner and in
accordance with the terms and intent of this Agreement, and in
compliance with all applicable government regulations;
6.2.3 it shall not use the Processing Services in connection with any
illegal or fraudulent business activities; and
6.2.4 it shall not permit or authorize any other person to use the
Processing Services.
6.3 The Client acknowledges to MPACT that they are independent contractors and
that nothing herein shall be construed as creating a joint venture or
partnership between them. For greater certainty, the Client acknowledges
that MPACT is not involved in the Client's business.
6.4 The Client agree that, at any time and from time to time during the term of
this Agreement, MPACT shall have the right to post a banner of its design
on the application/deposit page of website(s)incorporating Processing
Services, without any charge whatsoever to MPACT and in addition to any
other rights it may have hereunder.
<PAGE>
7
SECTION VII - GUARANTORS
7.1 As a primary inducement to MPACT to enter into this Agreement, the
undersigned (the "Guarantors"), being all the registered and beneficial
shareholders of the Client, by signing this Agreement, jointly and
severally, unconditionally and irrevocably, guarantee the continuing full
and faithful performance and payment by Client of each of its duties and
obligations to MPACT pursuant to this Agreement, whether before or after
termination or expiration and whether or not any of the Guarantors has
received notice of any amendment. If Client breaches this Agreement MPACT
may proceed directly against any or all of the Guarantors or any other
persons or entity responsible for the performance of this Agreement,
without first exhausting its remedies against any other person or entity
responsible therefor to it, or any security held by MPACT.
SECTION VIII - AMENDMENTS
8.1 MPACT may amend this Agreement at any time by mailing written notice to
Client of any amendment at least thirty (30) days prior to the effective
date of the amendment, which amendment shall not (without Client's written
consent) modify or retroactively affect or apply to fees, reserves or
transactions occurring prior to the effective date of the amendment. The
amendment shall become effective on the date specified by MPACT unless
MPACT receives Client's notice of termination of this Agreement before such
effective date.
SECTION IX - NOTICES
9.1 Any notice, demand, request or other communication required or permitted to
be given under this Agreement shall be faxed (to MPACT at _______________
and to Client at 514-878-6335) delivered personally, or sent to the other
party by prepaid registered mail, return receipt requested, at the
addresses first hereinabove set out or to such other address as either
party may have previously indicated to the other in writing in accordance
with the foregoing. Any such notice, request, demand or communication
shall be deemed to have been received on the day it was delivered
personally, on the fifth (5th) day following mailing, unless there is a
disruption of any kind of postal service in Canada, in which event all
deliveries shall be made personally or by fax, or on the business day after
the date of a faxed notice.
SECTION X - MISCELLANEOUS
10.1 This Agreement together with supplemental agreements, appendixes and
schedules constitutes the entire agreement between the parties pertaining
to the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations and understandings of the
parties. No waiver of any of the provisions in this Agreement shall be
deemed or shall constitute, a waiver of any other provision, whether or
not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the
<PAGE>
8
Party making the waiver.
10.2 The Client may not assign this Agreement, or any rights hereunder,
directly or by operation of law, without the prior written consent of
MPACT which consent may be withheld for any reason in MPACT's sole
discretion. For purposes of this Agreement assignment shall include,
but not be limited to, transfer of control of the Client and any
ownership change which results in a new majority owner.
10.3 The Client shall be liable for and shall indemnify and reimburse MPACT
for any and all attorneys' fees and other costs and expenses paid or
incurred by MPACT in the enforcement of this Agreement, or in
collecting any amounts due from the Client hereunder, or resulting
from any breach of any of the terms or conditions of this Agreement.
10.4 All remedies of either party hereunder are cumulative and may be
exercised concurrently or separately. The exercise of any one remedy
shall not be deemed to be an election of such remedy and shall not
preclude the exercise of any other remedy. No failure on the part of
either party to exercise and no delay in exercising any right or
remedy hereunder shall operate as a waiver of such right or remedy.
10.5 If any provision of this Agreement is held invalid or unenforceable by
any court of final jurisdiction, it is the intent of the parties that
all other provisions of this Agreement be construed to remain fully
valid, enforceable and binding on the parties.
10.6 The subject headings of the paragraphs and subparagraphs of this
Agreement are included for convenience only and shall not affect the
construction or interpretation of any of its provisions.
10.7 Reference to "this Agreement" include any supplementary agreements,
addendum, appendixes and amendments and any other agreements,
schedules appendixes and amendments promulgated by MPACT and furnished
to the Client from time to time.
10.8 All dollar amounts referred to in this Agreement are in United States
funds.
IN WITNESS WHEREOF, the parties have signed as of the date first hereinabove
mentioned.
MPACT IMMEDIA TRANSACTION SERVICES LTD.
<PAGE>
9
per: /s/ Mr. Joel Leonoff per: /s/ Mr. Sandy Masselli
-------------------------- -----------------------------
Mr. Joel Leonoff Mr. Sandy Masselli
Guarantors:
- ----------
per: /s/ Mr. Sandy Masselli
--------------------------
Mr. Sandy Masselli
<PAGE>
EXHIBIT 6.5
[LOGO APPEARS HERE]
- --------------------------------------------------------------------------------
LESSEE INFORMATION:
Lessee: INTERCAPITAL CANADA LTEE.
Address: 1260 RUE CRES, MONTREAL, PQ. H3G 2A9
Contact Name/Title: ALEX KENNEDY Phone#: 514.842 6999 Fax# 514-849-4244
- -------------------------------------------------------------------------------
CO-LESSEE
CO-Lessee:
Address:
Contact Name/Title:
- --------------------------------------------------------------------------------
LEASE DETAILS
- -------------------------------------------------------------------------------
Equipment Location (if SAME AS ABOVE
different from Lessee
address):
- -------------------------------------------------------------------------------
Equipment Description: 10 - DIM XPS T550 (Q#1383929) & 2 POWEREDGE 2300
(Q#1383962)
- --------------------------------------------------------------------------------
PURCHASE OPTION (See Section 10)
- -------------------------------------------------------------------------------
Option Date: End of Lease Term Option Fair Market Value, plus applicable taxes
- --------------------------------------------------------------------------------
LEASE TERM RENTAL PAYMENT TOTAL ADVANCE RENTAL
36 35 months @ $790.21 1 month @ $24694.00
(No. of Months) (plus applicable taxes) (plus applicable taxes)
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS
In this Commercial Lease (together with any addenda and amendments made to it
from time to time as permitted, referred to as "this Lease"). (a) the words
"you" and "your" refer to the Lessee and the Co-Lessee named above and (b) the
words "we", "us" and "our" refer to the Lessor named below and its successors
and assigns. Our address is 155 Gordon Baker Road, Suite 501, Toronto, Ontario,
M2H 3N5. Our GST Reg. No. is R885258797 and our QST Reg. No. is 1020537597.
1. Lease.
We lease to you and you lease from us the property described in the Lease
Details, together with all additions and accessories attached to it or supplied
with it (the "Equipment") on the terms of this Lease.
2. Term.
The term of this Lease will start 14 days following shipment to you of the
Equipment (the "Start Date") and, unless terminated earlier or renewed in
accordance with the terms of this Lease, will continue to the end of the Initial
Lease Term (see Lease Details). When you receive the Equipment, you will inspect
it and all software that accompanies the Equipment (the "Software") to determine
if they are in good working order. On the Start Date, you will be conclusively
considered to have accepted the Equipment and the Software for all purposes of
this Lease, unless you have otherwise notified us in writing before such date.
3. Rent; Pre-authorized Payments.
You will pay us the Rental Payment (see Lease Details) on the Start Date and on
the same date of each following month (or the last day of the month if there is
no such date) during the term of this Lease. You will pay us the Total Advance
Rental (see Lease Details) when you return to us the Lease signed by you and it
will be applied by us against your first Rental Payment. You will pay us on
demand interest on all amounts payable under this Lease (including interest) not
paid when due, both before and after judgment, until paid, at an annual rate
equal to the lesser of 18% per annum and the highest interest rate permitted by
law, compounded monthly. Your obligation to pay in full all amounts due under
this Lease is absolute and unconditional under all circumstances and is not and
will not be subject to abatement, reduction or set-off for any reason. You
authorize us to make withdrawals from the account identified in the attached
sample cheque for payment of all amounts due under this Lease. You direct the
financial institution at which your account is located to debit such account for
such withdrawals and such financial institution has no duty to determine whether
withdrawals it debits to your account comply with such authorization. Any
cancellation by you of this authorization will be effective on the 10th day
following receipt by us of your written notice of cancellation.
4. Equipment Selection; Warranties and Limit of Liability.
You acknowledge that you have selected the Equipment and the Software and its
supplier and/or manufacturer and have not relied on our skill or judgement in
any way in selecting the Equipment or the Software. We have not made or given
any warranties, representations or conditions of any kind whatsoever with
respect to the Equipment, the Software or this Lease (whether express, implied,
statutory or otherwise). If you encounter any problems with the Equipment or the
Software, including if it fails to function or is unacceptable for any reason,
your only claim will be against the related supplier and/or manufacturer and you
agree that we will not be liable to you for any damages whatsoever relating to
the Equipment or the Software. All warranties of the supplier and/or
manufacturer in respect of the Equipment are transferred by us to you, to the
extent transferrable. In the event the Equipment is returned by you or
repossessed by us, all such warranties will be deemed to have been transferred
back to us free and clear of any lien, security interest, adverse claim or
_______________________________________________________________________________
COMMERCIAL LEASE NO: 282812-001 DFSC101 (04/98) Page 1
<PAGE>
other encumbrance (a "Lien").
5. Ownership of Equipment Software.
We are the owner of the Equipment, but not the Software. You have no rights to
the Equipment or the Software, except as provided in this Lease and, in the case
of the Software, the applicable Software licence. You will keep the Equipment
and the Software free and clear of any Lien other than in our favour and, in the
case of the Software, the licensor thereof.
6. Equipment Location, Use and Maintenance; Name Change.
Except for mobile Equipment (e.g. laptop computers), you will use the Equipment
only at the address shown in Lessee Information on Page 1 of this Lease or the
Equipment Location (see Lease Details), as applicable. For mobile Equipment, you
will not use or permit the use of such Equipment outside the province or
territory shown in Lessee Information on Page 1 of this Lease for more than 30
consecutive days, without first giving us written notice. You will use the
Equipment only for your internal business purposes and will not use the
Equipment unlawfully of unsafely. You will, at your expense, maintain the
Equipment in good working order and as required by any applicable warranty and
will not make any alterations or additions to the Equipment without our prior
written consent. Any alterations or additions to the Equipment (whether
consented to or not) will become and remain our property. We may inspect the
Equipment at any reasonable time. You will use the Software in accordance with
all applicable software licences. You will promptly notify us in writing of any
change in your name or your address.
7. Insurance.
During the term of this Lease, you will keep the Equipment fully insured against
physical loss or damage, naming us as first loss payee, and will obtain and
maintain public liability and third party property insurance, naming us as an
additional insured. At our request, you will give us satisfactory evidence of
the required insurance.
8. Loss and Damage.
You are responsible for any loss or damage to the Equipment from any cause at
all, whether or not insured, until all of your obligations under this Lease have
been fulfilled. You will promptly notify us of any such loss or damage and of
any insurance claims pertaining to the Equipment. If the Equipment is lost or
damaged beyond repair, you will immediately pay us the Liquidated Damages Amount
(see Section 13(c)) at such time.
9. Taxes
You will pay, when due, all taxes (other than our income taxes) and other
charges imposed by any governmental authority on or in connection with this
Lease, any payments made under it, the Equipment or the Software.
10. Purchase Options; Lease Term; Renewals; Return.
(a) If you are not in default under this Lease, you will have an option to
purchase the Equipment at the end of the Lease Term (see Lease Details) at the
applicable Option Price (see Lease Details). "Fair Market Value" means the price
(as determined by us, acting reasonably) for the Equipment assuming that it is
in good repair. If you do not agree with our determination of the Equipment's
Fair Market Value, the Fair Market Value of the Equipment will be determined, at
your expense, by an independent appraiser selected by us. You will give us at
least 60 days' notice prior to the applicable Option Date that you will be
purchasing the Equipment and will pay to us the applicable Option Price at least
30 days before the applicable Option Date. After such notice and payment, but
provided that you are not in default under this Lease, our right, title and
interest in the Equipment will be sold to you on the applicable Option Date on
an "as is, where is" basis, without any recourse, representation, warranty or
condition from us (express, implied, statutory or otherwise), except that the
Equipment is being sold by us to you free of any Lien created by us.
(b) If at the end of the Lease Term you do not or are not entitled to exercise
the purchase option at such time or do not return the Equipment to us as
provided in Section 10(c), this Lease will be automatically renewed on a
continuing month-to-month basis at the end of the Lease Term on the same terms
as during the Lease Term (except to the extent modified in this Section). You
will pay us for each month or part month beyond the Lease Term an amount equal
to the Rental Payment in effect during the last month of the Lease Term. you can
terminate this automatic renewal by sending us written notice. Such termination
will be effective 30 days after our receipt of such notice, provided that you
have paid all amounts owing by you under this Lease and have returned the
Equipment to us as provided in Section 10(c) by that termination date.
(c) Unless you have purchased the Equipment under Section 10(a) or this Lease
has been renewed under Section 10(b), at the end of the Lease Term or any
termination of this Lease, you will, at your expense and risk, promptly
disassemble, crate and return the Equipment and all copies of the Software to us
at the address we designate in writing, in the same condition it was delivered,
except for ordinary wear and tear.
11. Indemnity.
You will indemnify us from all losses, claims, costs, expenses, damages, actions
and liabilities whatsoever, including legal fees on a solicitor and own client
basis, in connection with or arising from this Lease, any payments made under
it, the Equipment, the Software and the installation, possession, ownership,
leasing, use and return of the Equipment and the Software.
12. Default.
You will be in default under this Lease if any of the following occurs: (a) you
fail to pay when due any amount payable under this Lease; (b) you fail to comply
with any other requirement under this Lease or any requirement under any other
agreement with us and such failure continues for 5 days after we notified you in
writing of it; (c) a proceeding is started by or against any Lessee or Co-Lessee
who signs this Lease or any guarantor of your obligations under this Lease,
under any bankruptcy, insolvency, winding-up or other similar law, any such
Lessee, Co-Lessee or guarantor becomes bankrupt or insolvent, or if any of such
Lessee's or Co-Lessee's creditors or any government authority seizes the
Equipment or the Software; or (d) any such Lessee, Co-Lessee or guarantor dies
or moves to another country.
13. Remedies.
If you are in default under this Lease, we may do one or more of the following
(a) require you to return the Equipment and the Software as provided in Section
10(c); (b) take possession of any Equipment or Software wherever it is; (c)
terminate this Lease and require you to immediately pay us, as a genuine
pre-estimate of liquidated damages and not as a penalty, an amount (the
"Liquidated Damages Amount") equal to the sum of (i) the present value
(calculated using a discount rate of 6% per annum) of all unpaid Rental Payments
to the end of the Lease Term and our reasonable estimate of the Option Price as
at the end of the Lease Term if you had not been in default under this Lease and
(ii) all other amounts due or that become due under this Lease; (d) store or
dispose of the Equipment or any part thereof, at public or private sale or other
disposition for cash or credit and no such terms as we will determine; and (e)
exercise any other remedy available to us, whether at law, in equity or
otherwise. We will apply the net proceeds from any sale or other disposition of
the Equipment (after we have deducted all costs of such sale or other
disposition) against the amounts that you owe us. You will pay us any amount you
still owe us, unless we are prevented by law from suing you for the balance. All
costs and expenses we incur due to your default under this Lease will be paid by
you on demand. All of our remedies are cumulative and not alternative.
14. Administration.
You consent to us conducting a personal investigation or credit check on you in
connection with our preparation of this Lease or at any time or from time to
time during the term of
<PAGE>
this Lease and for that purpose you will provide us with all credit and
financial information we reasonably require. You further authorize any person,
including any financial institution with whom you deal, to communicate to us any
of your financial information, upon either our oral or written request. Any
document we send to you under this Lease and any demand for payment will be
conclusively considered to have been received by you (a) when we deliver or send
by facsimile the document or demand to you or (b) on the 10th day after we mail
it to you, at the latest address we have for you in our records.
15. Assignment.
You will not sell, sublease, sublicense, transfer or otherwise dispose of or
give up possession of the Equipment, the Software or any part thereof or your
interests in any of it, without our prior written consent. We may sell, assign,
transfer or otherwise dispose of, or grant a Lien in, all or any portion of our
right, title and interest in the Equipment, the Software or this Lease to anyone
else, without notice to you or your consent. You will not assert against any
transferee of all or any of our rights and benefits under this Lease, any
claims, defences, set-offs, deductions or counterclaims which you may now or in
the future be entitled to assert against us nor rely on any breach by us of any
of the terms of this Lease as a basis to terminate this Lease or any of your
obligations under this Lease. Subject to the foregoing, this Lease is binding
and will ensure to the benefit of the parties and their respective heirs,
personal representative, successors and permitted assigns, as applicable.
16. Your Obligations Performed by Us.
If you fail to perform any obligation under this Lease, we may, at our option,
perform the obligation, without waiving or curing any breach of this Lease
resulting from such failure, and you will reimburse us on demand for all amounts
we pay to do so.
17. Governing Law.
This Lease will be governed by the laws of the province or territory shown in
Lessee information on Page 1 of this Lease.
18. Miscellaneous.
All of your obligations under this Lease will survive the termination of this
Lease to the extent required for their full observance and performance. This
Lease contains the entire agreement between you and us. No change or amendment
to this Lease will be effective, unless in writing and signed by you and us.
References in this Lease to "including" will mean "including, without
limitation". No waiver by us of any default under this Lease or any of our
remedies will be effective unless in writing. Any such waiver is not a waiver by
us of any other later default, whether similar or not, or a waiver of our right
to exercise our remedies in the future. Any provision of this Lease which is
unenforceable in any jurisdiction will, as to such jurisdiction be ineffective
only to the extent of such unenforceability without invalidating the remaining
provisions of this Lease. The headings in this Lease are for convenience only
and will not affect the construction or interpretation of this Lease. References
to Sections in this Lease are to Sections of this Lease. You will give us such
further assurances and do such acts and execute such documents as we may require
to give effect to this Lease and to protect our rights herein. This document and
all related documents have been written in the English language at the express
request of the parties. Le present document ainsi que tous documents s'y
rattachant ont ete rediges en langue anglaise a la demande expresse des parties.
19. Provincial Consents and Waivers.
(a) Quebec. For individuals in Quebec only: You hereby authorize and consent to
------
us gathering credit information about you and giving such information to others
in accordance with applicable law. The object of the file which will be kept
about you is to assist us in making our decisions with respect to your
application, answering questions about your file in general, monitoring,
evaluating, servicing and collecting your indebtedness and developing and
implementing customer programs. You agree that the personal information in your
file may be used to make relevant decisions in order to achieve the objects
referred to above and will be made available only to our employees and advisors
for the purposes of their duties or as prescribed by applicable law. You agree
that your file may be kept at our offices from time to time which are currently
located at the address set out on the first page of this Lease. (b)
Saskatchewan. If a corporation, you agree that The Limitation of Civil Rights
- ------------
Act (Saskatchewan), as amended from time to time, will have no application to
our rights, powers or remedies under this Lease or any other agreement renewing
or extending or collateral to this Lease.
- --------------------------------------------------------------------------------
YOU HAVE KEPT A COMPLETED COPY OF THIS LEASE SIGNED BY YOU. YOU HAVE READ, AND
YOU AGREE TO BE BOUND BY, ALL OF ITS TERMS. THIS LEASE WILL NOT BE BINDING ON US
UNTIL WE SIGN IT. NO OTHER TERMS (WRITTEN OR ORAL) CHANGE, REDUCE OR OTHERWISE
AFFECT YOUR OBLIGATIONS IN ANY WAY. IF A LESSEE AND CO-LESSEE SIGN THIS LEASE,
YOU UNDERSTAND THAT EACH OF YOU IS INDIVIDUALLY LIABLE, AND ALL OF YOU ARE
COLLECTIVELY LIABLE, FOR ALL OBLIGATIONS IMPOSED ON YOU BY THIS LEASE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Executed this 18 day of Aug., 1999. Executed this 18 day of Aug., 1999.
LESSEE: INTERCAPITAL CANADA LTEE C0-LESSEE:
By: /s/ Sandy John Masselli By: /s/ Stephen F. Savage
---------------------------------- --------------------------------
Name/Title: Sandy John Masselli, Jr / Pres Name/Title: Stephen F. Savage / V.P.
---------------------------------- --------------------------------
</TABLE>
LESSOR: DELL FINANCIAL SERVICES CANADA LIMITED
[VOIDED CHEQUE]
<PAGE>
EXHIBIT 6.6
DATED:
------------------------------------------
BY and BETWEEN:
MARINE PROPERTIES LTD.
LANDLORD
-and-
INTER CAPITAL CANADA. INC.
TENANT
----------------------------------------
LEASE
----------------------------------------
MARINE BUILDING
Montreal, Quebec
<PAGE>
<TABLE>
<CAPTION>
LEASE INDEX
<S> <C>
INTENT OF LEASE 1
PREMISES 1
USE OF PREMISES 1
TERM 2
MINIMUM RENT 2
PAYMENT OF MONIES 3
MOVEABLE HYPOTEC 3
UTILITIES 4
BUSINESS AND WATER TAXES 4
OTHER TAXES 4
OPERATING COSTS AND TAXES 5
INSURANCE 6
DAMAGE OR DESTRUCTION OF PREMISES OR BUILDING 7
ASSIGNMENT AND SUBLEASE 8
ADDITIONAL COVENANTS OF THE TENANT 8
MAINTENANCE, REPAIRS, REPLACEMENTS, ADDITIONS,
ALTERATIONS, INSTALATIONS 9
DEFAULT 10
RESPONSIBILITY AND DAMAGES 11
NOTICE 12
RIGHT OF ENTRY 13
TERMINATION OF LEASE 13
RELOCATION WITHIN THE BUILDING 13
BROKERAGE COMMISSION 14
SUBORDINATION 14
RENOVATION RIGHTS 14
SIGNAGE 14
SPECIAL CONDITIONS 15
ADDITIONAL CHARGES 15
EXPIRATION OF THE TERM OF THE LEASE 15
EXPROPRIATION 16
MISCELLANEOUS 16
SCHEDULE A' - RULES AND REGULATIONS 18
SCHEDULE B' - TENANTS WORK 20
- LANLORD'S WORK 20
SCHEDULE C' - CERTIFICATE OF INSURANCE 21
</TABLE>
<PAGE>
LEASE
AGREEMENT OF LEASE ENTERED INTO AS OF THE DAY OF
June 1999
BETWEEN:
MARINE PROPERTIES LTD., a body politic and corporate, duly incorporated
according to Law hereinafter referred to as (the "Landlord");
OF THE FIRST PART
AND:
INTER CAPITAL CANADA INC., a body politic and corporate, having its head
office in the City Montreal of herein acting and represented by Alex
Kennedy, its President, authorised for these purposes by virtue of a
Resolution of its Board of Directors enacted in March of 1997, a certified
copy of which Resolution is attached hereto, hereinafter referred to as
(the "Tenant"),
OF THE SECOND PART
ARTICLE 1
INTENT OF LEASE
1.1 It is the intent of the parties that this Lease shall be absolutely
net to the Landlord except as expressly hereinafter set out. Any amount and
any obligation, which is not expressly declared to be that of the Landlord,
shall be deemed to be the obligation of the Tenant to be performed by and
at the expense of the Tenant.
ARTICLE 2
PREMISES
2.1 For and in consideration of the rent, covenants, agreements and
conditions hereinafter contained on the part of the Tenant to be
respectively paid, kept, observed and performed, the Landlord hereby
leases to the Tenant, and the Tenant hereby leases from the Landlord,
certain premises in the building situated at 1411 Peel Street, Montreal,
Quebec (the "Building") consisting of approximately three thousand fifty-
seven (3,057) square feet of rentable area, being part of the fifth floor,
and bearing suite 500, as shown on the floor plan as Schedule "B", (the
"Premises").
The Premises are situated in the Building erected on Subdivisions One, Two,
Three and Four of the original Lot number One Thousand Four Hundred and
Fifty-Eight (Lot 1458-1-2-3-4) on the Official Plan and Book of Reference
of the St-Antoine Ward, Registration Division of Montreal (the "Land").
(The said Building and Land sometimes hereinafter being referred to as the
"Property".)
ARTICLE 3
USE OF PREMISES
3.1 The Tenant covenants that the Leased Premises shall be used solely
for:
Online game service and provides entertainment management,
marketing & consulting services, as well as automated transaction
processing and proprietary software for Internet clients.
<PAGE>
-2-
3.2 During the term of the lease, the Tenant undertakes at all times to
continuously, actively and diligently conduct its business in the whole of the
Premises in an up-to-date, high class, reputable and efficient manner.
3.3 Tenant hereby acknowledges that the Landlord will suffer substantial
damage and serious and irreparable injury if the Premises are abandoned or left
vacant at any time during the term of the Lease, or if the Tenant does not
comply with the provisions of 3.1 and 3.2, even if the Tenant continues to pay
rent as required under this Lease.
ARTICLE 4
TERM
4.1 The term of this lease shall be of five, (5) years and shall commence at
12:00 hours on the first (1) day of August, Nineteen Hundred and NINETY-NINE
(1999) the "Commencement Date" and shall expire at 24:00 hours on the (31) day
of July, (2004), (the "Term").
4.2 DELAYED POSSESSION AND COMMENCEMENT DATE
If Landlord is delayed in delivering possession of all or any portion of the
Premises to Tenant by the Commencement Date, then, unless such delay is
principally caused by, or attributable to Tenant, its servants, agents or
independent contractors, Tenant will take possession of the Premises when they
are delivered to it by the Landlod. Tenant will have a thirty (30) day free
rent/operating cost for construction purposes, commencing from the time that
possession is delivered to it by the Landlord. Should the foregoing delayed
possession occur, this Lease will not be void nor voidable by the Tenant, nor
will Landlord be liable to Tenant for any loss or damages resulting from any
delay in delivering possession of the premises to Tenant. For the sake of
clarity, the rent and additional rent due by the Tenant will be payable
commencing thirty (30) days from the delivery of possession to the Tenant.
Should the Tenant take possession of a portion of the Premises after the expiry
of the thirty (30) day period referred to above, it will pay rent is respect
thereof from the date that such possession is so taken.
ARTICLE 5
MINIMUM RENT
5.1 During the Term, the Tenant agrees to pay to the Landlord as minimum rent
("Minimum Rent"):
The base or minimum rent per square foot per annum for the rentable area
of the premises will be:
Years 1&2 @ TEN DOLLARS ($10.00) net psf of gross rentable area
Year 3 @ ELEVEN DOLLARS ($11.00) net psf of gross rentable area
Years 4&5 @ TWELVE DOLLARS ($12.00) net psf of gross rentable area
5.11 The said rentals shall be payable in equal, consecutive monthly
instalments in advance on the first (1st) day of each month, commencing on
the date hereof.
<PAGE>
-3-
ARTICLE 6
PAYMENT OF MONIES
6.1 The Minimum Rent, all additional rent, and all other amounts payable by
the Tenant to or for the account of the Landlord shall be paid in lawful money
of Canada immediately when due, without the necessity of any demand thereof, at
the Landlord's address set forth in Article 18 or at any other place which the
Landlord may designate in writing. All amounts to be paid by the Tenant to or
for the account of the Landlord, whether or not referred to as rent, shall be
deemed to be rent. All such amounts shall be paid without deduction, abatement,
compensation, or set-off, the Tenant hereby waiving and renouncing to all
claims, set-off and compensation against any amounts due hereunder, save and
except as expressly provided herein.
6.2 Any amount not paid when due shall bear interest at the rate charged by
the Royal Bank of Canada to its most credit-worthy commercial customers plus 2%
per annum payable and compounded monthly.
6.3 The obligations of the Tenant to make any outstanding payments shall
survive the expiration or early termination of this Lease.
6.4 The acceptance by the Landlord of any post-dated cheque or money owing
for rent after its due date is to be considered as a mode of collection only,
without novation of, nor derogation from, any of Landlord's right, recourses and
actions in virtue of this Lease which demands punctual payment of all
obligations.
MOVEABLE HYPOTHEC
6.5
(a) As continuing and collateral security for the due and punctual payment of
Rent and all other amounts now owing or which may hereafter become owing
to the Landlord by the Tenant under this Lease, as same may be amended,
renewed, extended or supplemented, and as continuing and collateral
security for the due and punctual performance and fulfilment of all other
obligations, covenants and agreements of the Tenant contained in this
Lease, as same may be amended, renewed, extended or supplemented, the
Tenant hereby hypothecates in favour of the landlord, with effect as of
and from this date, for the sum of fifty thousand dollars ($50,000.00)
and interest thereon at the Stipulated Rate in force on the date hereof
(being 13% per annum), calculated semi-annually, not in advance, all of
the rights, title and interests of the Tenant in and to the following
universality (hereinafter referred to as the "University"):
(i) the university of all moveable improvements, equipment,
machinery, furniture and trade fixtures of every kind, present &
future, located on or upon the Premises or used directly or
indirectly in connection with the business of the Tenant carried
on at the Premises, including all indemnities or proceeds paid
under insurance contracts or policies pertaining to or covering
such moveables.
(ii) The universality of all property in stock, raw material,
fixtures, present and future, situated on or upon the Premises or
used directly or indirectly in connection with the business of
the Tenant carried on at the premises, including all indemnities
or proceeds paid under insurance contracts or policies pertaining
to or covering such moveables.
<PAGE>
-4-
(b) The hypothec herein created in favour of the Landlord shall be construed
as a floating hypothec under Article 2715 of the Civil Code of Quebec.
(c) The security hereby created is without delivery.
(d) Upon the occurrence of an Event of Default the security herby constituted
shall become enforceable and the landlord shall forthwith be entitled to
exercise any and all of the rights provided for in Chapter V of Title III
of Book VI of the Civil Code of Quebec and in the Code of Civil Procedure
of Quebec.
(e) However, should the Tenant obtain a bona fide financing for the operation
of its business in the Premises from a Canadian chartered bank or other
reputable financial lending institution acceptable to Landlord acting
reasonably (the Tenant's Lender), the Landlord shall execute, at the cost
of the Tenant, a subordination agreement in favour of such bona fide
financing in a form and contents satisfactory to the Landlord and its legal
counsel, provided that Tenant pays to the landlord all costs incurred in
relation thereto, including without restriction legal costs, acting
reasonably and that, no security granted or to be granted to the Tenant's
Lender shall affect or in any manner whatsoever charge any asset which is
or may, under the Lease, become the property of the Landlord.
ARTICLE 7
UTILITIES
(Article deleted intentionally).
ARTICLE 8
BUSINESS AND WATER TAXES
8.1 The Tenant shall pay business and water taxes and other similar taxes,
rates, duties, levies, assessments, and charges imposed upon or in respect of
the personal property, inventory, leasehold improvements, machinery, equipment,
or fixtures of the Tenant, or upon the business carried on in the Premises, and
all other taxes, rates, duties, levies, assessments, and charges which are or
may be payable by the Tenant as a Tenant and occupant of the Premises. If by
law, regulation or otherwise, any such tax is made payable by the landlords or
proprietors, or if the mode of collecting any such tax be so altered as to make
the Landlord liable, therefore, instead of the Landlord, the Tenant shall pay to
the Landlord forthwith upon demand the amount of any such tax imposed on the
Landlord as a result of such change.
ARTICLE 9
OTHER TAXES
9.1 In the event that a value added tax, sales tax or similar tax shall be
imposed by any competent fiscal authority, the said tax shall be payable by the
Tenant at the same time as rental and/or additional rental to the entire
exoneration of Landlord, notwithstanding that the law may stipulate that such a
tax is payable by Landlord.
<PAGE>
-5-
ARTICLE 10
OPERATING COST AND TAXES
10.1 In this Lease "Proportionate Share and/or Proportionate Shares"
means, and the parties hereby agree that, for the purposes of this Lease, the
Proportionate Share of Tenant shall be deemed to be as follows:
a) For purposes of calculating Operating Costs as defined hereinbelow:
percent (3.98%) and;
b) For Taxes defined hereinbelow:
percent (2.24%).
"Operating Costs" means in any fiscal period designated by the Landlord,
all expenses, costs and disbursements of every kind and nature
(determined for each fiscal period on an accrual basis) incurred by or on
behalf of the Landlord with respect to and for the operation, maintenance,
repair, replacement, security and management of the Property, all without
duplication. Without in any way limiting the generality of the foregoing,
Operating Costs shall include the following:
c) wages, including fringe benefits of persons directly employed or engaged in
the operation, maintenance, repair, replacement, security and management
of the Property;
d) costs of goods and services supplied, used or incurred directly in the
operation, maintenance, repair, replacement, security, and management of
the Property, including heating, ventilating and air-conditioning costs,
the cost of providing cleaning, janitor, supervisory, maintenance and
security services, the cost of operating elevators, including the freight
elevator, escalators (including the escalators to the Premises), stairways,
the cost of providing hot and cold water, electricity and other utilities
and services, the cost of maintenance of and repairs to the Property and
any equipment, machinery or apparatus, and the cost of window cleaning,
snow and ice removal;
e) business and water taxes and governmental impositions not otherwise charged
directly by Tenants;
f) cost of insurance as may be carried by the Landlord in respect of or
attributable to the Property or related thereto, including without
limitation all risk insurance against fire and other perils, and liability
regarding casualties, injuries, and damages, and rental income insurance;
g) the cost of any modification and additions to the Building or the machinery
and equipment therein where, in the reasonable opinion of the Landlord,
such expenditure may reduce Operating Costs or the cost of any additional
equipment or machinery required by law, or in the Landlord's reasonable
opinion, for the benefit or safety of the persons using the Building;
h) the total annual amortisation of capital (on a straight line basis over the
useful life or such other period reasonably determined by the Landlord) and
interest on the unamortized capital of the cost of all machinery,
equipment, supplies, repairs, replacements, modifications and improvements
which in the Landlord's reasonable opinion have an estimated useful life
longer than one fiscal year of the Landlord, and the cost whereof has not
previously been charged to the Tenant the Landlord warrants that all
amounts which, in accordance with generally accepted accounting principles
may be treated as capital items, shall be amortised as aforesaid rather
than expensed;
i) administrative costs equal to 15% of all taxes, costs and expenses incurred
by the Landlord in maintaining, operating and supervising the Property;
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j) increments in the cost of borrowing money, the Tenant agreeing
that it shall be responsible for a Proportionate Share of any
additional interest payable by the Landlord during the term of the
present Lease or the renewal of the Landlord's existing first
mortgage loan to the extent that the principal amount of such loan
does not exceed the original principal amount of the existing
first mortgage loan. "Tax", "Taxes" means all taxes, rates duties,
levies, assessments, or charges whatsoever (including local
improvement taxes and rates) attributable to and levied in respect
of the Property payable by the Landlord to any duly constituted
authority whether federal, provincial, municipal, school or
otherwise, and includes tax on paid-up capital (or portion thereof
reasonably attributable to the Property if applicable) and any
taxes, rates, duties, levies, assessments, or charges which may in
the future be levied in addition to or in substitution for taxes
currently levied, and also includes any and all costs and expenses
incurred, paid or payable by the Landlord in contesting or
appealing any such taxes, rates, duties, levies, assessments or
charges.
10.2 The Tenant shall within 5 days of receipt of a statement from
the Landlord setting forth the Operating Costs and Taxes, and the
Tenant's Proportionate Share thereof, pay the Proportionate Share to
the Landlord.
10.3 The Landlord may for any fiscal period estimate the
Proportionate Share and notify the Tenant in writing of the estimated
Proportionate Share. The amount so estimated should be payable in
equal monthly instalments in advance on the same day as the monthly
instalments of Minimum Rent. The Landlord may, from time to time,
alter the fiscal period selected, in which case, and in the case where
only a broken portion of the fiscal period is included within the term
of this Lease, the appropriate adjustment in monthly payments shall be
made. From time to time during the fiscal period, the Landlord may re-
estimate any of the foregoing on a reasonable basis for such fiscal
period or broken portion thereof, in which event the Landlord shall
notify the Tenant in writing of such re-estimate and fix monthly
instalments for the then remaining balance for such fiscal period or
broken portion thereof, such that, after giving credit for the
instalments paid to the Landlord on the basis of the previous estimate
or estimates, the entire estimated Proportionate Share will have been
paid during such fiscal period or broken portion thereof. As soon as
practicable after the expiration of each fiscal period, the Landlord
shall make a final determination of the Proportionate Share thereof
for such fiscal period and (if applicable) broken portion thereof and
notify the Tenant, and the Landlord and Tenant shall immediately make
the appropriate re-adjustment and payments and repayments. Operating
expenses and taxes for the year ending December 31/st/, 1999, shall
not exceed $13./psf of gross rental area of the premises. The
operating expenses and taxes shall not increase by more than 4% per
year 2, 3, 4 & 5 of the Term.
ARTICLE 11
INSURANCE
11.1 The Tenant shall at its sole cost and expense take out and at
all times keep in force:
11.1.1 comprehensive public liability insurance in favour of the
Landlord and the Tenant covering such risks and in such amounts
acceptable to the Landlord, it being understood and agreed that in no
case shall such insurance is in an amount of less than ONE MILLION
DOLLARS ($1,000,000);
11.1.2 all risk property damage insurance covering all Improvements
(as hereinafter defined) made by the Tenant to the Premises, and all
trade fixtures, inventory and property of the Tenant on the Premises,
in amounts equal at all times to no less than the full replacement
cost thereof;
11.1.3 such other insurance as the Landlord may from time to time
reasonably require.
11.2 All contracts of insurance required to be maintained under the
provisions of this
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Lease shall be issued by companies and approved by the Landlord, acting
reasonably, and shall be signed by each insurer, and such policy shall indicate
the Landlord as co-insured to the extent of its interest. Each policy shall
contain an undertaking by the insurer to give the Landlord at least thirty (30)
days' prior written notice of cancellation or modification.
11.3 The Tenant thereof shall promptly deliver each policy and every renewal to
the Landlord sixty (60) days, acting reasonably, prior to the expiration of the
policy then in force, with evidence of payment of the premiums thereon. In the
event that the Tenant shall at any time fail to take out, pay for, maintain,
or deliver any of the insurance policies provided for in this Lease, the
Landlord may, but shall not be obliged to, without notice to or demand upon the
Tenant, and without waiving or releasing the Tenant from any obligation
hereunder, effect any such insurance coverage and pay the premiums thereof. The
Landlord may thereupon charge the amount of the premiums to the Tenant with
interest on the amount thereof at the rate charged by the Royal Bank of Canada
to its most credit-worthy commercial customers plus 2% per annum payable and
compounded monthly. The Tenant hereby covenants and agrees to pay same to the
Landlord forthwith upon receipt from the Landlord of a notice stating the amount
thereof paid by it and the date of payment, and the Tenant agrees that any and
all of such amounts so paid by the Landlord shall be recovered by the Landlord
as additional rent.
11.4 The Landlord shall take out and at all times keep in force such insurance
against such perils and in such amounts as a prudent owner of similar properties
and carrying on a similar business would carry.
11.5 Tenant shall pay all extra premiums of insurance, both on said building
and on the property of other Tenants therein that the Company with which the
premises may be insured shall exact, either from the Lessor or from the Tenants
of the building in consequence of the business carried on therein by the Lessee
or anything brought into, or stored in, the said premises by the Lessee.
ARTICLE 12
DAMAGE OR DESTRUCTION OF PREMISES OR BUILDING
12.1 If and whenever during the term of this Lease, the Premises shall be
destroyed or damaged by fire, lightning, tempest, vandalism, act of God, or any
other cause of whatsoever nature, the Tenant shall give prompt written notice
thereof to the Landlord.
12.2 In the event of damage to or destruction of the Building or the Premises
or a part thereof by fire or other cause of whatsoever nature, including that
set forth in paragraph 12.1 hereof, the Lease shall not be rescinded or
terminated notwithstanding the provisions of the Civil Code unless Landlord, in
its absolute and entire discretion, elects to cancel this Lease.
12.3 If any damage or injury by fire or any other cause to the Building or the
leased Premises, whether partial or not, is due to the fault or neglect of
Tenant, Tenant's officers, agents, employees, servants, visitors or licencees,
without prejudice to any other rights of subrogation of Landlord's insurer,
Tenant shall be liable for all costs and damages and the damages may be repaired
by Landlord at Tenant's expense and in no event shall there be an apportionment
or abatement of rent.
12.4 In the event of a rebuilding or repair of the Building, the Landlord shall
not be obligated to rebuild the Building or any part thereof according to the
original plans and specifications. Tenant shall be solely responsible for the
rebuilding and repair of its Premises, unless the gross fault or gross
negligence of Landlord caused the damage or destruction.
12.5 In the event of rebuilding or repair of the Premises, and the Landlord
requiring Tenant to vacate the Premises during the period of such rebuilding,
Tenant undertakes and agrees to vacate the Premises during such period and to
reintegrate the Premises five (5) days following notice that the Premises are
again ready for occupancy by the Tenant. In no case shall there be any abatement
of rental of whatsoever nature, it being
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understood and agreed, however, that the Landlord shall proceed if it so elects
to proceed, with due diligence.
12.6 The Tenant shall have no recourse against the Landlord in the event of
any damage or destruction to the Building or the Premises from whatsoever cause
other than due to the gross fault or gross negligence of Landlord.
ARTICLE 13
ASSIGNMENT AND SUBLEASE
13.1 Without prior written consent of the Landlord which shall not be
unreasonably withheld, the Tenant shall not assign, transfer or other encumber
this Lease or any part thereof or any of the Tenant's rights, title or interest
thereto or therein, or sublet the whole or any part of the Premises, or permit
the Premises or any part thereof to be used by another, provided, however, that
Tenant may assign this Lease and sublet the Premises to a subsidiary of Tenant,
without having to obtain the Landlord's consent.
Furthermore, if the Tenant wishes to so assign, sublet, or transfer the
whole or any part of the Premises to a third party other than a subsidiary of
the Tenant, it must submit to the Landlord a copy of the offer to so sublet,
transfer or assign the whole or any portion of the said Premises together with
the request for consent. In such circumstances, the Landlord shall have fifteen
(15) days from receipt thereof to match the terms and conditions of the said
offer to sublet, or, at the Landlord's option, to cancel the present Lease as of
the effective commencement date of such sublet, transfer or assignment, consent
to such subletting, or refuse such consent by registered letter postmarked
within such delay.
The Landlord's refusal of consent shall be deemed reasonable (without in
any way restricting the Landlord's right to refuse its consent on other
reasonable grounds) where the assignee or subtenant proposed by the Tenant is
then a Tenant of the Building and the Landlord has or will have during the next
ensuing six (6) months suitable space for rent in the Building.
Notwithstanding the above, if any assignment, transfer or sublet takes
place, the Tenant shall remain jointly and severely responsible for the payment
of all sums due or to become due hereunder, and all the other terms, clauses,
and conditions hereof, and does hereby waive the benefits of division and
discussion.
13.2 TRANSFER BY LANDLORD
The Landlord shall be entitled to transfer all or part of its rights
under the present Lease to a third party, whether by sale or otherwise. In the
event of such transfer, to the extent that such transferee or purchaser assumes
Landlord's obligations under this Lease, the Landlord shall be released from any
and all obligations to the Tenant.
ARTICLE 14
ADDITIONAL COVENANTS OF THE TENANT
14.1 In addition to the covenants, agreements, terms and conditions contained
herein on the part of the Tenant to be performed or observed, the Tenant further
covenants and agrees:
14.1.1 to promptly pay or cause to be paid to the Landlord the rent and any
other sums of money which may become due hereunder whether deemed rent or not at
the time and in the manner herein mentioned and to observe and perform and to
permit no violation of any covenant, agreement, term, and condition herein
contained on the part of the Tenant to be performed or observed;
14.1.2 at its sole cost and expense to keep the Premises in a clean, wholesome
and sanitary condition, free and clear of all waste, paper, and other substances
which could be a nuisance or liable to occasion fire, and to cause all dirt,
rubbish, garbage, and
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other refuse or matter on or about the Premises to be carefully collected and
deposited in containers provided by the Tenant and disposed of at the sole cost
and expense of the Tenant;
14.1.3 at its sole cost and expense, promptly to comply with all laws and
ordinances, and the orders, rules, regulations, and requirements of all federal,
provincial regional and municipal governments and appropriate departments,
commissions, boards and offices thereof, as well as the orders, rules and
regulations of the board of fire, underwriters having jurisdiction where the
Premises are situated, or any other body now and hereafter constituted
exercising similar functions, which may be applicable to the Premises;
14.1.4 not to leave the Premises unoccupied or vacant (and surrender of the keys
shall not be necessary in order that the Premises may be deemed unoccupied or
vacant). Acceptance of the surrender of this Lease shall not be effective unless
made in writing and signed by the Landlord.
14.1.5 to keep and maintain upon the Premises during the entire term of the
Lease or any renewal thereof sufficient furniture, fixtures and inventory, free
and clear of any liens, encumbrances or charges of whatever nature, and in full
ownership by the Tenant, sufficient to guarantee the payment of six (6) months'
rental and additional rental to the Landlord.
ARTICLE 15
MAINTENANCE, REPAIRS, REPLACEMENTS,
ADDITIONS, ALTERATIONS, INSTALLATIONS
15.1 The Tenant shall, at its own cost and expense, keep and maintain the
Premises in good order and condition, the whole as a careful owner would do.
15.2 The Landlord shall be entitled, at any time and from time to time, with
reasonable notice, to enter and examine the state of repair, maintenance, and
order of the Premises. The Landlord may give notice to the Tenant requiring
that the Tenant perform all maintenance and effect all repairs and replacements
to which it is obliged pursuant to the terms hereof. Failure of the Landlord to
give such notice shall not, however, relieve the Tenant from its obligations
under section 14.1. In the event that the Tenant fails to commence such
maintenance, repairs, or replacements within fifteen (15) days of the Landlord's
notice and to complete the same with reasonable diligence, the Landlord shall
have the right, but not the obligation, to elect, at its sole discretion, to
cause the repairs, maintenance, or replacements to be undertaken, and to charge
the Tenant thereof, acting reasonably.
Notwithstanding the foregoing, in the event of an emergency, the Landlord
shall have the immediate right, but not the obligation, without prior notice to
the Tenant, to cause such repairs, maintenance, or replacements to be
undertaken, and to charge the Tenant thereof acting reasonably.
15.3 The Tenant shall not make additions, installations, alterations,
improvements, changes or additions to the Premises or any part thereof
(collectively the "Improvements") without prior written consent of the Landlord,
which shall not be unreasonably withheld. As a condition precedent to obtaining
the Landlord's consent, the Tenant shall submit to the Landlord:
15.3.1 the plans and specifications relating to the Improvements;
15.3.2 all necessary permits from the appropriate public authorities;
15.3.3 the name of its contractor and proof, satisfactory to the Landlord, that
such contractor is adequately insured against risks which a prudent contractor
would normally insure against;
15.3.4. proof, satisfactory to the Landlord, that the Tenant's contractor is in
good
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standing with the Commission des Accidents du Travail.
15.4 The cost of the Improvements shall be the sole
responsibility of the Tenant and if any payment in respect thereof is
made by the Landlord, the same shall be immediately repayable to the
LandLord by the Tenant and collectible as additional rent.
15.5 Should any privilege at any time be registered against the
Premises or any part thereof for work, labour, services, or material
ordered by the Tenant, or for the cost of which the Tenant may in any
way be obligated, the Tenant shall have same discharged within thirty
(30) days after it has been notified of the registration thereof.
Notwithstanding the foregoing, the Tenant shall not be required to
effect such discharge provided that it is contesting the amount or
validity of such privilege and provided further that it has, if so
requested by the Landlord, deposited into court or with a third party
mutually acceptable to the Tenant and the Landlord, the amount of the
privileged claim plus a reasonable amount for costs as estimated or
approved by the Landlord.
15.6 At the expiration or earlier termination of this Lease, all
Improvements shall become the property of the Landlord, without any
compensation therefor being allowed to the Tenant.
15.7 The Tenant may at the expiration or earlier termination of
this Lease or at any time or from time to time during the Term, as may
be necessary for the conduct of its business, take, remove, and carry
away from the Premises, all fittings, plant, machinery, utensils,
safes, vaults, and other articles upon the Premises in the nature of
trade fixtures, but the Tenant shall in such removal do no damage to
the Premises or shall make good any damage which may occasion thereto.
The Tenant agrees that it will not, save as aforesaid, or in the event
that it is substituting therefor new trade fixtures, remove any trade
fixtures of any kind owned by the Tenant from the Premises until all
rent due or to become due under this Lease during the Term herein
provided for is fully paid.
15.8 At the expiration or earlier termination of this Lease, the
Tenant shall deliver the Premises to the Landlord in as good order and
condition as at the commencement of this Lease, reasonable wear and
tear accepted.
ARTICLE 16
DEFAULT
16.1 The Tenant shall be in default hereunder:
16.1.1 if it fails to pay any instalment of Minimum Rent when due
or other amount required to be paid hereunder within five (5) days
of demand therefor from the Landlord;
16.1.2 if the Tenant fails to observe or perform any other
covenant, agreement, term or condition contained herein on its part to
be performed or observed and either:
16.1.2.1 fails to cure such failure within ten (10) business days of
notice thereof from the Landlord, or
16.1.2.2 if such failure cannot be cured within the said ten (10)
business day period, fails, following such notice, to proceed promptly
with due diligence to cure same and thereafter to prosecute the curing
of such failure with due diligence, or
16.1.3 if the Tenant has adjudicated a bankrupt, or makes an
assignment for the benefit of creditors or commences proceedings under
any winding-up act or become subject to any other insolvency
legislation, or
16.1.4. if the Tenant sublets without Landlords consent, the
Premises or any part thereof or assigns its rights hereunder or
abandons the Premises or ceases to carry on an active business within
the Premises, or
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16.1.5 if any process of execution be enforced or levied against the Tenant or
any of its property, or if a receiver, trustee, or sequestrator be appointed to
the Tenant's property or any part thereof.
16.2 In the event of default, the Landlord may re-enter and take possession
of the Premises by force or otherwise, as it may deem fit, as though the Tenant
was holding over after the expiration of the Term without any right whatsoever.
In the event of default, the Landlord may either terminate this Lease,
or it may from time to time without terminating the Tenant's obligations under
this Lease, make alterations and repairs considered by the Landlord necessary to
facilitate reletting, and relet the Premises or any part thereof as agent of the
Tenant for such term or terms and at such rentals, and upon such other terms and
conditions as the Landlord in its reasonable discretion considers advisable.
Upon each reletting, all rent and other monies received by the Landlord from the
reletting shall be applied, first to the payment of indebtedness other than rent
due hereunder from the Tenant to the Landlord, second to the payment of costs
and expenses of reletting, including brokerage and solicitors' fees, and costs
of the alterations and repairs, and third to the payment of rent due and unpaid
hereunder. The residue, if any, shall be held by the Landlord and applied in
payment of future rent as it becomes due and payable. If the rent received from
reletting during a month is less than the rent to be paid during that month by
the Tenant, the Tenant shall pay the deficiency to the Landlord. The deficiency
shall be calculated and paid monthly. No re-entry by the Landlord shall be
construed as an election on its part to terminate this Lease unless a written
notice of that intention is given to the Tenant. Despite reletting without
termination, the Landlord may elect at any time to terminate this Lease for a
previous breach. If Landlord re-lets the premises for a period that is equal to
or surpasses the length of the present lease, the lease shall be terminated and
all obligations of the Tenant shall be null & void.
16.3 In the event of termination of this Lease, the Landlord shall be
entitled to recover from the Tenant all damages it suffers by reason of the
Tenant's default, which the parties acknowledge, shall include:
16.3.1 the cost of recovery, including the cost of alterations and repairs
considered by the Landlord necessary to facilitate reletting; and,
16.3.2 reasonable legal fee; and,
16.3.3 the worth at the time of termination of the excess, if any, of the
amount of rent reserved in this Lease for the remainder of the Term over the
then rental of the Premises for the remainder of the Term; and,
16.3.4 the aggregate rent for the unexpired portion of the Term.
The Tenant agrees to pay the Landlord the foregoing amounts immediately upon
termination of this Lease as damages and not as a penalty.
16.4 The Landlord shall, over and above the rights herein enumerated, have
all legal rights and remedies permitted by and available under the laws of the
Province of Quebec for the collection of any rent due or to become due
hereunder, and for the seizure and sale of any property liable as security for
payment of such rent.
ARTICLE 17
RESPONSIBILITY AND DAMAGES
17.1 The Landlord shall be entitled, at its sole option, and without
liability or obligation to Tenant, to discontinue or modify any services
required of it under this Lease during such time as may be necessary, or as
Landlord may deem advisable, by reason of accident, or for purposes of effecting
repairs, replacements, alterations or improvements; and without limiting the
foregoing, Landlord shall not be liable to Tenant or others for direct or
indirect damages or discomfort by reason of failure or any reason to supply the
said services or any of them, or for interruption to Tenant's
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business, the Landlord, however, undertaking to correct any such failure and/or
to effect such repairs, replacements, alterations, or improvements with
reasonable diligence.
17.2 The Landlord shall not be liable nor responsible in any way for any
personal or consequential injury of any nature whatsoever that may be suffered
or sustained by the Tenant or any employee, agent or customer of the Tenant or
any other person who may be upon the Leased Premises or for any loss of or
damage or injury to any property belonging to the Tenant or to its employees or
to any other person which such property is on the Leased Premises and in
particular (but without limiting the generality of the foregoing) the Landlord
shall not be liable for any damage or damages of any nature whatsoever to any
such property caused by the failure by reason of a breakdown or other cause, to
supply adequate drainage, snow or ice removal, or by reason of the interruption
of any public utility or service or in the event of steam, water, rain or snow
which may leak into, issue, or flow from any part of the Building or from the
water, steam, sprinkler, or draining pipes or plumbing works of the same, or
from any other place or quarter or for any damage caused by anything done or
omitted by any other Tenant of the Building, but the Landlord shall use all
reasonable diligence to remedy such condition, failure or interruption of
service when not directly or indirectly attributable to the Tenant, after notice
of same, when it is within its power and obligation to do so. Nor shall the
Tenant be entitled to any abatement or rental in respect of any such condition,
failure or interruption of service.
Without restricting the foregoing, Landlord shall not be liable for any
other damage to or loss, theft, or destruction of property, or death of, or
injury to, persons at any time in or on the Premises or in or about the
Building, however occurring, except that directly caused by the gross negligence
of Landlord. Notwithstanding the foregoing, liability of Landlord shall under no
circumstances extend to any property other than normal office furniture which
term, without limiting its normal meaning shall not include items such as
displays, valuable articles, securities, specie, papers, or other similar items.
Tenants shall give to Landlord prompt written notice of any accident to or
defect in the water pipes, gas pipes, heating or air-conditioning equipment when
supplied by Landlord, electric light, elevators, wires or other service of any
portion of the Premises.
The Tenant shall indemnify and save harmless the Landlord from all claims,
actions or demands whatsoever resulting from the events referred to in second
paragraph of clause 17.2, as well as from any act or omission of the Tenant, its
agents, customers and employees.
The Landlord, its agents, servants, employees or contractors shall not be
liable for any damage suffered to the Leased Premises or the contents thereof by
reason of the Landlord, its agents, servants, employees or contractors entering
upon the Leased Premises to undertake any examination thereof or any work
therein or in the case of any emergency.
17.3 Tenant covenants and agrees that it shall protect, save and keep the
Landlord harmless and indemnified against any penalty or damage or change
imposed for any violation of any laws or ordinances occasioned by the Tenant or
those connected with the Tenant, and that it shall protect, indemnify, save and
keep harmless the Landlord against any and all damage or expense arising out of
any accident or other occurrence on or within the Premises causing injury to any
person or property and against any and all damage or expense arising out of any
failure of Tenant in any respect to comply with and perform of the requirements
and provisions of this Lease and that such obligation to indemnify shall survive
the termination of this Lease.
ARTICLE 18
NOTICE
18.1 Any notice, election, demand, declaration or request which may be or is or
are
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required to be given or made pursuant to this Lease shall be given or
made in writing, and shall be delivered to the party for whom it is
intended or mailed by prepaid registered mail:
18.1.1 in the case of the Landlord, addressed to:
1411 Peel Street
Suite 700
Montreal, Quebec
H3A 1S5
or such other address as Landlord may from time to time advise Tenant
by notice in writing:
18.1.2 in the case of the Tenant, addressed to:
1260 Crescent
Suite 200
Montreal, Quebec
H3G 2A9
The Tenant elects domicile at the premises hereby leased for the
purpose of service of all instruments in connection with any
proceedings taken hereunder.
18.1.3 The date of receipt of any such notice, election, demand,
declaration, or request, shall be deemed to be the date of delivery of
same, if delivered personally or if mailed as aforesaid on the third
business day following the date of such mailing, provided that if at
the next date of such mailing, the postal service in Canada is on
strike, such notice, election, demand, or request shall be served
personally.
ARTICLE 19
RIGHT OF ENTRY
19.1 During the last six months of the Term or one of the Option
Periods as the case may be, the Landlord, with notice, may
enter the Premises for reasonable periods during business hours
to exhibit the Premises to prospective lessees. At any time
during the Term or one of the Option Periods, the Landlord may
enter the premises for reasonable periods during business hours
to exhibit the Premises to prospective purchasers.
ARTICLE 20
TERMINATION OF LEASE
20.1 Should a decision by the Landlord, or his successor(s) in
title, be made to demolish the building in whole or in part, for any
reason, then in such event the Landlord, or his successor(s) in title,
shall have the right to cancel the existing lease by giving the Tenant
a six (6) month prior written notice to such effect. In such event,
the Tenant agrees that it will vacate the leased Premises forthwith
upon the expiry of the said six (6) month period, and the Tenant shall
not have the right to any compensation or damages for such early
termination.
ARTICLE 21
RELOCATION WITHIN THE BUILDING
21.1 The Landlord shall have the right from time to time to relocate
the Tenant in the Building to other equivalent premises in the
Building by giving the Tenant a thirty-(30) day written notice. In
such event, the Landlord shall reimburse Tenant for its
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reasonable out of pocket disbursements too physically move & install
the assets from the premises to the new premises. In addition,
Landlord shall compensate the Tenant for the undepreciated cost of the
Tenant's improvements left in the Premises. Tenant shall provide proof
of such cost.
ARTICLE 22
BROKERAGE COMMISSION
22.1 As per Commission Agreement with T.C.B. International, Inc.,
dated May 20/th/, 1999.
ARTICLE 23
SUBORDINATION
23.1 It is an essential condition of this Lease that all rights of
the Tenant hereunder will be subordinated to the rights of any
hypothecate creditor or of any other assignee of Landlord's rights
under this Lease, and that Tenant recognise any such Secured Lender or
assignee as Landlord or assignee as Landlord herein.
ARTICLE 24
RENOVATIONS RIGHTS
24.1 The Landlord shall have the right from time to time to make such
renovations to the Building, as it deems necessary to enhance the
character, quality and reputation of the Building. The Tenant
undertakes to co-operate with the Landlord to facilitate such
renovations and agrees that during the period of such renovations, it
will not be entitled to any reduction in rentals, or to the recovery
of damages from the Landlord resulting from loss of business during
the period of renovations.
ARTICLE 25
SIGNAGE
25.1 The Tenant agrees not to paint, affix, nor display anything,
including, without limitation, any advertisement or notice ("Signage")
to the exterior of the Premises without, in each instance, the prior
written approval of the Landlord. Further, if the Landlord, acting
reasonably, objects to any Signage in any part of the interior of the
Premises, which is visible from the exterior thereof, Tenant shall
forthwith remove same at Tenant's cost and expense.
25.2 The Tenant shall erect and maintain an identification sign or
signs of a type or types and in a location or locations specified in
writing by the Landlord, design subject to Landlords approval and
after having received all necessary permits and/or authorisations. Any
such sign shall remain the property of the Tenant, shall be maintained
by the Tenant at its sole cost and expense, and Tenant shall pay for
the electricity consumed by such sign.
25.3 Landlord shall place, if space is available, Tenant's corporate
name(s) in both the English and French languages and suite number onto
the Building directory and in the hallways on Tenant's floor(s) in a
form and style of lettering equivalent to Landlord's other tenants in
the Building. Landlord shall provide Tenant with Tenant's name(s), in
a form and style of lettering in accordance with Building standards,
which landlord shall install on the entrance door of Premises. The
Tenant reserves the right to request that the Landlord announce more
than one name in the above areas up to a maximum of four names as
designated by the Tenant.
ARTICLE 26
<PAGE>
-15-
SPECIAL CONDITIONS
26.1 Provided Tenant is not in default under this Lease at the time of exercise
of its right by virtue of this article, Tenant shall have the right to renew
this Lease for a further period of five years (5) commencing on August 1/st/,
2004 and terminating on July 31/st/, 2009. In the event that the tenant wishes
to exercise this right, it shall give the landlord written notice by prepaid
registered mail of its intention to renew, at least nine (9) months prior to the
date of expiration of the term, failing which is right to renew herein granted
shall lapse and be null and void ipso facto. All the terms and conditions as
contained in the Lease shall remain the same except that the Minimum Rent shall
be negotiated and shall not be less than the amount paid in the last lease year.
Should no agreement be reached at least three (3) months prior to the expiration
of the Term, said option to renew shall become null and void, and the Lease
shall expire.
ARTICLE 27
ADDITIONAL CHARGES
27.1 Tenant & Landlord shall pay their own legal costs for the negotiation
of the present Lease.
ARTICLE 28
EXPIRATION OF THE TERM OF THE LEASE
Subject to Article 20.1 hereof, Tenant shall give Landlord six (6) months'
written notice prior to the date of expiration of this Lease or any renewal
thereof, of its intention to vacate the Premises, failing which Landlord may, at
its option, give written notice to tenant within a period of no less than thirty
(30) days before the date of expiration of this Lease or any renewal that this
Lease is renewed for a further period of (12) months from the said date of
expiration under the same terms and conditions as herein set forth. If neither
of the notices hereinabove described is given, the present Lease shall terminate
ipso facto and without notice or demand on the date foreseen for expiry of this
Lease, and any continued occupation of the Premises by the Tenant shall not have
the effect of extending the period or of renewing the present Lease for any
period of time, the whole notwithstanding any provisions of law, and the Tenant
shall be presumed to occupy the Premises against the will of the Landlord, who
shall thereupon be entitled to make use of any and all remedies provided by law,
provided, however, that Landlord shall have the right of its sole option, in the
event of any such continued occupation by Tenant to give to Tenant at any time,
written notice that Tenant may continue to occupy the Premises under a tenancy
from month to month in consideration of a rental equal to twice the monthly
instalment of Minimum Rent provided for in the present Lease for the month
immediately preceding the expiry of this Lease, and the Tenant shall also pay
its Proportionate Share of the Operating Costs and taxes for such period, and
all other terms and conditions of the present Lease shall remain applicable.
28.2 In the event where, notwithstanding written opposition by the Landlord,
Tenant should continue to occupy the Leased Premises, for any reason whatsoever,
after the expiry of the present Lease, the Landlord shall be entitled to claim
from the Tenant its Proportionate Share of Operating Costs and taxes, as well as
a penalty for its failure to vacate the Premises for each month or portion of a
month during which such occupancy will have lasted. For the first month of such
occupancy, the penalty shall be equal to twice the monthly instalment of Minimum
Rent provided for in the present Lease for the month immediately preceding the
expiry of this Lease. This monthly penalty shall be increased by one hundred
percent (100%) automatically and on a monthly basis, the first day of each
additional month, without prejudice to all other rights and/or recourses of the
Landlord, namely and without restricting the generality of the foregoing, to any
recourses such as injunction, expulsion, seizure and/or damages that the
Landlord may deem necessary to exercise together with the herein above penalty
clause.
<PAGE>
-16-
ARTICLE 29
EXPROPRIATION
29.1 If the whole or any part of the Building shall be expropriated or
taken in any manner for any public or quasi-public use or purpose, the
Landlord, at its option, may terminate the Lease upon giving notice in
writing to the Tenant that the term thereof shall expire upon the day when
possession is required for such purpose or upon a date to be fixed by the
Landlord for such termination, whereupon the Landlord shall have no
liability towards the Tenant of any nature whatsoever. Nothing herein
contained shall be deemed to diminish the indemnity claim of either the
Tenant or Landlord against the expropriating authority. Landlord shall have
no obligations to contest any expropriation proceeding.
ARTICLE 30
MISCELLANEOUS
30.1 This Lease may not be registered, except by memorial. If this Lease is
registered by memorial, the Tenant agrees to cause the registration to be
radiated upon the termination of this Lease, hereby constituting the
Landlord its attorney for such purposes.
30.2 This Lease shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, legal
representatives, successors, and assigns.
30.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument. The headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
30.4 Each Article and Section of this Lease, and any part thereof, shall be
interpreted separately, and the nullity of any Article or Section or any
part thereof, shall not render the remaining parts of the lease null.
30.5 Landlord shall have the right, from time to time, to make reasonable
rules and regulations for the operation, safety, and cleanliness, of the
Building, and when forwarded to the Tenant, such rules and regulations
shall form part of this Lease. The Rules and Regulations annexed hereto as
Schedule "A" form part of this Lease.
30.6 This Lease shall be governed by and construed in accordance with the
laws of the Province of Quebec.
30.7 The parties hereto declare that they have required that this Lease be
drawn in the English language. Les parties aux presentes declarent qu'elles
ont exige que le present bail soit redige en langue anglaise.
30.8 The tender of the present lease document to the Tenant by the Landlord
does not constitute an offer to lease. Landlord shall, in no event be bound
by the terms hereof, unless and until it shall have executed the lease
document.
30.9 The rider annexed hereto forms part of this Lease.
30.9.1 The Schedule "B" annexed hereto forms part of this Lease.
IN WITNESS WHEREOF the parties have executed this Lease as of the date
first mentioned above.
<PAGE>
-17-
MARINE PROPERTIES LTD.
________________________ Per:________________________
Witness Mr. Sheldon Mintzberg
Landlord
________________________ Per:________________________
Witness Mr. Elliott Aintabi
Landlord
INTER CAPITAL CANADA. INC.
/s/ Linda Per: /s/ Alex Kennedy
------------------------- -----------------------
Witness Mr. Alex Kennedy
President
<PAGE>
-18-
SCHEDULE "A"
RULES AND REGULATIONS
1. The sidewalks, entries, passages and staircases shall not be obstructed
or used by the Tenant, its agents or servants for any purpose other than ingress
to and egress from the offices. The Landlord reserve entire control of the
sidewalks, entries, corridors and passages not within the premises, washrooms,
lavatories, air conditioning, closets, fan rooms, janitor's closets, electrical
closets and other closets, stairs, flues, stacks, pipe stafts, ducts and all
parts of the building employed for the common benefit of the Tenants, and shall
have the right to place such signs and appliances therein, as they may deem
advisable, provided that ingress to egress from the premises is not impaired
thereby. Furthermore, nothing shall be thrown by the Tenant, the officers,
clerks, or servants of the Tenant out of the windows or doors, or down the
passage or lightwells of the building.
2. The Landlord shall have the exclusive right to prescribe the weight and
proper positions of metal safes or machinery as well as the right to prescribe
the weight and position of any floor load. All damage done to the building or
premises by moving or using heavy equipment of any description or furniture
contrary to the Landlord's prescriptions shall be repaired at the expense of the
Tenant. No such equipment or furniture shall be moved unless a time therefore
has been arranged with and consented to by the Landlord.
3. The Tenant shall not permit the introduction into the premises or the
building of any machine or mechanical device of any nature whatsoever which
may be liable to cause objectionable noise or vibration or be injurious to the
premises or building.
4. Canvassing, soliciting and peddling in the building are prohibited.
5. Furniture, bulky articles and construction materials, which the Tenant
may require from time to time for the construction of internal partitions or for
the purpose of effecting alterations or improvements shall be carried to the
premises at such hour and in such manner as the Landlord, may reasonably
designate. Any damage, which may be caused to the building or the premises by
the carrying of such furniture, bulky articles or construction materials to or
from the premises shall be at the responsibility and cost of the Tenant.
6. Any hand trucks, carryalls, or similar appliances used for the delivery or
receipt of merchandise or equipment shall be equipped with rubber tires, side
guards and such other safeguards as the Landlord shall require.
7. If any apparatus used or installed by the Tenant requires a permit as a
condition for its installation, the Tenant must file a copy of such permit
with the Landlord.
8. The Tenant shall give the Landlord prompt written notice of any accident
to or defect in water or gas pipes, heating or sprinkler system in the demised
premises, of which he is aware.
9. The Tenant shall not permit or allow any employee or other person to
conduct any business, enterprise of any kind in or from the premises other
than that specifically provided for in the present lease.
10. No animals or birds shall be brought or kept in or about the premises or
the building.
11. No auction sales shall be allowed in the premises of the building.
12. The Tenant shall be responsible for the cleaning of any drapes and/or
curtains that may be installed by the Tenant in the premises.
<PAGE>
-19-
13. The water closets and other water apparatus shall not be used for
any purpose but those for which they are constructed, and no
sweepings, rubbish, rags, ashes, chemicals or other substances shall
be thrown therein.
14. The Tenant will not do anything nor permit anything to be done on
the Leased Premises or in the said building which may be injurious or
annoying to the Landlord or to any person lawfully on the premises of
the Landlord, or anything which the Landlord may reasonably deem to be
a nuisance, or which may be calculated to damage the business or
reputation of the Landlord, or the satisfaction operation of the
building, and the Tenant shall not do or permit anything to be done in
or upon the Leased Premises or the building which will in any way
obstruct or interfere with the rights of any Tenants or persons having
business with them, or permit any employees to smoke or congregate in
the halls of the said building, or do or permit anything to be done or
bring or keep anything upon the Leased Premises or in said building
which will, in any way, increase the risk of fire, and/or the rate of
fire insurance on the building or any part thereof or on any property
kept therein, or conflict with the laws relating to fires or with the
regulations of the Fire Department and/or Health Department, or with
any of the Rules, Regulations, By-Laws and/or Ordinances of the
Government Agencies, and/or the Fire Underwriters and/or of any lawful
authority.
15. The Tenant shall not be permitted to use or keep in the said
building any coal oil, gasoline, burning fluid, or other inflammable,
explosive or illuminating materials, except such as are permitted by
the Fire Underwriter's Association.
16. The Tenant, when closing the premises, during the day or evening,
shall have all windows closed, to avoid possible damage from fire,
storms, rain or freezing, and will not shut off the radiators when the
premises are locked.
<PAGE>
-20-
SCHEDULE "B"
Attached to and forming part of the Lease between
MARINE PROPERTIES LTD.
as LANDLORD
INTER CAPITAL CANADA INC.
as TENANT
Dated:____________________________
CONSTRUCTION OF LEASED PREMISES
TENANT'S WORK
-------------
Notwithstanding the foregoing, after completion of Landlord's work and
saidforthherein, the Tenant will do such further work as is necessary
for the carrying out of its business.
SATELLITE DISH
Tenant, under its own expense, shall be permitted to install a
satellite dish on the roof of the building.
LANDLORD'S WORK
---------------
According to lease:
a) Landlord will clean existing carpet and repair as needed in
accordance to schedule "B" attached hereto.
b) Landlord will paint premises according to Tenants choice of color
from Landlords samples
c) Landlord will modify walls & ensure standard plugs & air
conditioning is in working order in accordance to schedule "B"
attached hereto.
<PAGE>
-21-
SCHEDULE "C"
CERTIFICATE OF INSURANCE
This is to certify that the Policy or Policies as described below have been
issued to the insured named below and are in force at this time. If the said
insurance is cancelled, changed or lapsed during its term in such a manner as to
effect this Certificate, thirty (30) days written notice of such change,
cancellation or lapse will be mailed to the party designated below for whom this
certificate is issued.
I. Name and address of party to whom the Certificate is issued:
II. Name of insured:
III. Location of Operations to which this Certificate applies:
IV. Policy No:
V. Insurer:
VI. Expiry Date:
VII. Type of Insurance:
<PAGE>
SCHEDULE "B"
[PLAN APPEARS HERE]
<PAGE>
LEASE
This Lease is made on July 30, 1999
BETWEEN the Tenant(s) Intercapital Global Fund, Ltd. whose address is One
High Street, St. Johns, Antigua referred to as the "Tenant" AND the Landlord
Devonshire House, Ltd. referred to as the "Landlord" whose address is Devonshire
House, Queen Street, The Bahamas, Nassau. The word "Tenant" means each Tenant
named above.
1. Property. The Tenant agrees to rent from the Landlord and the Landlord
agrees to lease to the Tenant the Office Suite located at Devonshire House,
Queen Street, The Bahamas, Nassau, referred to as the "office"
2. Term. The term of this Lease will begin on August 1, 1999, and ending May
31, 2000. The Landlord is not responsible if the Landlord cannot give the
Tenant posession of the office at the start of this Lease. However, rent will
only be charged from the date on which possession of the office is made
available to the Tenant. If the Landlord cannot give possession within 30 days
after the starting date, the Tenant may cancel this Lease.
3. Rent. The Tenant agrees to pay $700.00, as rent to be paid as follows:
$700.00 per month, due on the 1/st/ day of each month. The first payment of rent
and any security deposit is due upon signing of this Lease by the Tenant. The
Tenant must pay a late charge of $55.00, for each payment that is more than 10
days late. This late charge is due with the monthly rent payment.
4. Security deposit. The Tenant has deposited $700.00, which the Landlord as
security that the Tenant will comply with all the terms of this Lease. If the
Tenant complies with the terms of this Lease, the Landlord will return this
deposit within 30 days after the end of the Lease, including any extension. The
Landlord may use as much of the deposit as necessary to pay for damages
resulting from the Tenant's occupancy. If this occurs prior to Lease
termination, The Landlord may demand that the Tenant replaces the amount of the
security Deposit used by the Landlord. If the Landlord sells the property, the
Landlord may transfer the deposit to the new owners for the Tenant's benefit.
The Landlord will notify the Tenant of any sale and transfer of the deposit.
5. Landlord's Agent. The Landlord authorizes the following person(s) to
manage the property on behalf of the Landlord (name(s) and address(es): N/A
<PAGE>
6. Use of Property. OFFICE SUITE
7. Utilities. The Landlord will pay for the following utilities:
(X)cold water (X)hot water (X)electricity
(X)heat ( )air conditioning ( )gas
The Tenant will pay for the following utilities:
( )cold water ( )hot water ( )electricity
( )heat (X)air conditioning-at $50.00 per month ( )gas
Validity of Lease. IF a clause or provision of this Lease is legally invalid,
the rest of this Lease remains in effect.
Parties. The Landlord and each of the Tenants are bound by this
Lease. All parties who lawfully succeed to their rights and responsibilities
are also bound.
Entire Lease. All promises the Landlord has made are contained in this
written Lease. This Lease can only be changed by an agreement in writing by
both the Tenant and the Landlord.
Signatures. The Landlord and the Tenant agree to the terms of this
Lease. If the Lease is made by a corporation, its proper corporate offices
sign and its corporate seal is affixed.
/s/ O.B.
-------------------------------
Devonshire House, Ltd.
/s/ S.M.
--------------------------------
Intercapital Global Fund, Ltd.
<PAGE>
EXHIBIT 6.8
REVOLVING CREDIT NOTE
---------------------
$ 500,000 May 5, 1999
FOR VALUE RECEIVED, the undersigned, Intercapital Global Fund, Ltd. 1411
Peel Street, Suite 500, Montreal, Quebec, Canada H3A 1S5 ("Maker"), hereby
promises to pay Summerhill Gaming Limited ("Lender") at Devonshire House, Queen
Street, Nassau, The Bahamas, or at such other place as Lender may from time to
time designate in writing, the principal sum of $500,000 or so much thereof as
shall be advanced by Lender to Maker hereunder from time to time as set forth on
the grid annexed hereto as Exhibit A, together with interest at the rate of 7%
per annum. Interest on the outstanding principal of this Note shall be payable
quarterly on each January 1, April 1, July 1, and October 1, during the term
hereof beginning on January 1, 2000. The outstanding principal balance and all
accrued and unpaid interest thereon shall be due and payable in full on May 5,
2002. The date and amounts advanced, as set forth on the annexed grid, shall be
conclusive evidence as to the principal balance of this Note, absent manifest
error.
1. Prepayment. Maker may prepay this note in whole or in part at any
time without prepayment premium or penalty. Any prepayment shall be credited
first to accrued and unpaid interest and then to outstanding principal.
2. Events of Default. If any of the following conditions, events or
acts shall occur:
(a) The dissolution of the Maker; or
(b) The Maker's insolvency, assignment for the benefit of creditors,
application for the appointment of a receiver, the commencement
by the Maker of a voluntary case under any provision of the
Federal Bankruptcy Code (the "Code") or amendments thereto or any
other federal or state law affording relief to debtors; or there
shall be commenced against the Maker any such proceedings,
application or an involuntary case under the Code which
proceeding, application or involuntary case is not dismissed or
withdrawn within 90 days of commencement or filing, as the case
may be; or
(c) The failure by the Maker, following 30 days' written notice of
the same, to make any payments of any amounts of principal or
accrued interest under this Note as and when the same shall
become due and payable; or
(d) The admission in writing of the Maker's inability to pay its
debts as they mature;
then in any such event, while such event is continuing, the Maker shall have the
right to declare an event of default hereunder ("Event of Default") and the
indebtedness evidenced by this Note shall become due and payable, both as to
principal and interest, without presentment, demand,
<PAGE>
protest or other notice of any kind, all of which are hereby expressly waived,
notwithstanding anything contained herein to the contrary.
3. Waiver. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
4. Restriction on transfer. This Note is non-negotiable and may not be
sold, transferred, pledged, assigned, or hypothecated without the prior written
consent of the Maker.
5. Amendments. This Note may not be modified, discharged or otherwise
changed except by a writing duly executed by the Maker and the Lender.
6. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has executed this Note the date first
written above.
INTERCAPITAL GLOBAL FUND, LTD.
By: /s/ Sandy J. Masselli, Jr.
---------------------------------
Sandy J. Masselli, Jr.
Chief Executive Officer
<PAGE>
EXHIBIT A
---------
GRID
----
Amount of the advances made by Summerhill Gaming Limited to Intercapital Global
Fund, Ltd. and payments of principal of such loans:
<TABLE>
<CAPTION>
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DATE ADVANCE INITIALED BY
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<S> <C> <C>
As of June 30, 1999 $179,753
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</TABLE>
