<PAGE>
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As filed with the Securities and Exchange Commission on February 16, 2000
SEC Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
ULTIMATE SPORTS ENTERTAINMENT, INC.
(Name of small business issuer in its charter)
DELAWARE 2741 95-0262961
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Number) Identification No.)
incorporation or
organization)
2444 WILSHIRE BOULEVARD, SUITE 414, SANTA MONICA, CA 90403
Telephone (310) 829-9590
(Address and Telephone Number of Principal Executive Offices)
2444 WILSHIRE BOULEVARD, SUITE 414, SANTA MONICA, CA 90403
(Address of Principal Place of Business)
FREDERICK R. LICHT, PRESIDENT, ULTIMATE SPORTS ENTERTAINMENT, INC.
2444 WILSHIRE BOULEVARD, SUITE 414, SANTA MONICA, CA 90403
Telephone (310) 829-9590
(Name, Address and Telephone Number of Agent for Service)
<PAGE>
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Copies to:
Ronald N. Vance, Esq.
57 West 200 South
Suite 310
Salt Lake City, UT 84101
(801) 359-9300
(801) 359-9310 - FAX
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] __________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Unit(1) Price(1) Fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common 3,500,000 $0.75 $2,625,000 $693
Stock, $.001
par value
Common 420,000(2) $0.75 $315,000 $84
Stock, $.001
par value
TOTAL $777
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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(1) Estimated solely for purpose of calculating the registration fee
pursuant to Rule 457. This amount is based upon the average of the bid and asked
prices ($0.75) of the common stock of the Registrant as of February 10, 2000.
(2) These shares are being registered for resale by certain selling
shareholders.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
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PROSPECTUS
SUBJECT TO COMPLETION, DATED FEBRUARY 16, 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
We estimate that the range of the maximum offering price will be
between $1.00 and $3.00, and the maximum number of shares offered will be
between 1,500,000 and 3,500,000.
ULTIMATE SPORTS ENTERTAINMENT, INC.
_______ Shares of Common Stock
$______ Per Share
This offering of our shares is not underwritten. The offering is to be
made through our officers and directors, without remuneration to them. The
minimum number of shares a person must purchase is 1,000 shares. An
indeterminate number of the shares may be sold through broker/dealers who are
members of the National Association of Securities Dealers, Inc., and who will be
paid a 10% commission on sales they make.
We are escrowing proceeds from sales of the shares at Santa Monica
Bank, Santa Monica, California, until the sale of the minimum number of shares
is achieved. If the minimum amount of proceeds is not received prior to ninety
days from the date of this prospectus, which period may be extended for an
additional thirty days, at our option, all escrowed funds will be returned to
subscribers without interest or deduction. This offering will end no later than
nine months from the date of this prospectus, but may be terminated sooner in
our sole discretion.
<TABLE>
<CAPTION>
Per Share Total Amount
--------- ------------
<S> <C> <C>
The Offering: Minimum: ____ shares $ $
Maximum: ____ shares $ $
Less Selling Commissions
Minimum $ $
Maximum $ $
Proceeds to us
Minimum $ $
Maximum $ $
</TABLE>
Concurrently with this offering, we are registering for resale 420,000
shares to be offered by selling security holders.
THIS OFFERING IS HIGHLY SPECULATIVE AND INVOLVES SPECIAL RISKS
CONCERNING THE COMPANY AND ITS BUSINESS. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
<PAGE>
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
________, 2000
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary
Risk Factors
Forward Looking Statements
Use of Proceeds
Dilution
Management's Discussion and Analysis of Financial Condition and Results of Operation
Business
Management
Certain Transactions
Market Information
Principal Shareholders
Selling Shareholders
Description of Securities
Dividend Policy
Plan of Distribution
Shares Eligible For Future Sale
Legal Matters
Experts
Financial Statements
</TABLE>
<PAGE>
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PROSPECTUS SUMMARY
OUR COMPANY
We create and publish comic books depicting professional athletes as
super action heroes. Our principal executive offices are located at 2444
Wilshire Boulevard, Suite 414, Santa Monica, CA 90403, and our telephone number
at these offices is (310) 829-9590.
THE OFFERING
<TABLE>
<S> <C>
Securities offered _________ shares
Shares outstanding at February 10, 2000 7,470,000 shares
Shares outstanding after the offering _________ shares
Total public price $
Selling Commissions
Maximum Offering $
Minimum Offering $
Estimated offering expenses $65,000
Net proceeds
Maximum Offering $
Minimum Offering $
</TABLE>
We intend to use the net offering proceeds to:
- Repay existing debt;
- Pay license fees;
- Expand our sales, marketing, and advertising efforts; and
- Cover publishing costs and provide working capital.
The following summary financial information has been derived from our
consolidated financial statements which appear later in this prospectus and
should be read in conjunction with those consolidated financial statements and
related notes.
<PAGE>
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<TABLE>
<CAPTION>
For the nine
months ended For the years
October 31, ended January 31
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Net sales $ 8,225 $ 14,246 $ 15,871 $ 34,021
Gross profit (loss) (8,322) (9,599) (30,672) (1,613)
Operating loss (770,386) (155,287) (286,802) (90,991)
Net loss (770,386) (155,287) (286,802) (90,991)
Loss per share (.16) (.08) (.29) (.09)
Consolidated Balance Sheet Data:
Cash and cash equivalents $ 383,631 $-0-
Working capital (357,573) (465,899)
Total assets 681,016 130,692
Total stockholders' equity (deficit) (247,312) (393,155)
</TABLE>
RISK FACTORS
OUR LICENSE AGREEMENTS DO NOT GRANT US EXCLUSIVE RIGHTS TO PUBLISH OUR COMIC
BOOKS, WHICH MEANS THAT OTHERS COULD ENTER THE MARKET AND COMPETE WITH US.
Our existing and any future license agreements with the leagues or
players' associations are key to any success of our business. However, these
licenses are not exclusive, which means the leagues or the players' associations
could grant similar or more favorable license agreements to others. If this were
to happen in the future, we could be competing with others for the same market
share. The only exclusive contracts which we currently hold are with Karl Malone
and Chris Webber. While we are not aware of any other companies seeking to
obtain the rights from the leagues and associations to publish comic books, as
public exposure to our comic books increases, it is possible that other existing
or new comic book publishers may attempt to enter this field which would
significantly increase our competition and could decrease sales. Such a decrease
in potential sales could be significant since we believe the niche market which
we fill may be limited in number to those whose interests are both in the
professional athletes and comic books. We are not certain that the market would
be large enough to support additional publishers.
WE RELY EXCLUSIVELY UPON THE RELATIONSHIP OF OUR PRESIDENT, FREDERICK R. LICHT,
WITH THE PLAYERS, LEAGUES, AND ASSOCIATIONS TO NEGOTIATE THE CONTRACTS FOR THE
RIGHTS TO PUBLISH THE COMIC BOOKS AND THE ANCILLARY RIGHTS WE PROPOSE TO EXPLOIT
IN THE FUTURE
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We rely solely upon the relationship of our president with the
representatives of the leagues and associations, and with the players
themselves, to obtain the various rights necessary to conduct our business. If
we were to lose the services of Mr. Licht there would be a significant question
whether we could continue in our current business. We intend to obtain key man
insurance in the amount of $1,000,000 on Mr. Licht. We also intend to include in
his employment contract provisions which will prohibit him from competing with
us should he terminate his existing employment and leave the company.
EACH OF THE LICENSE AGREEMENTS IS FOR A RELATIVELY SHORT DURATION AND THERE IS
NO ASSURANCE THAT ANY OF THE AGREEMENTS WILL BE RENEWED.
Our business requires the acquisition of licensing rights from the
sports leagues and associations, and, in some cases, the professional athletes
themselves. We have a number of licenses which expire over the next few years.
Generally, the agreements do not provide for automatic renewals or extensions.
In addition, our right to market the comic books will expire when the particular
license agreement terminates. The following table sets forth each particular
license agreement which we currently hold and its expiration date:
<TABLE>
<CAPTION>
LICENSE AGREEMENT EXPIRATION DATE
----------------- ---------------
<S> <C>
Karl Malone November 1, 2000
Chris Webber March 1, 2000
Major League Baseball Players Association December 31, 2000
Major League Baseball Properties, Inc. November 30, 2000
Major League Baseball Players Alumni Association July 9, 2001
National Hockey League Players' Association June 30, 2001
</TABLE>
We will attempt to renew each license before it expires, but we have
not been given any assurances from the licensors that they will renew the
agreements. There is no assurance that if we are able to renew the license
agreements, that they will be renewed under the same terms as we currently have
under our present agreements. If we are not able to renew the license
agreements, or if the terms are not sufficient to continue business, we may not
be able to continue to operate.
THE TWO ONE-YEAR EXTENSIONS OF OUR LICENSE AGREEMENT WITH THE MAJOR LEAGUE
BASEBALL PLAYERS ASSOCIATION MAY NOT HAVE BEEN EFFECTIVE.
The Major League Baseball Players Association agreement is a one year
license which ended December 31, 1998, but which had options to extend the
initial term for two additional years, namely 1999 and 2000. But the extensions
are conditioned on several factors, including written notice to players
association of the intention to extend the license. This notice must be given no
earlier than 120 days and not later than 90 days prior to the termination of the
initial or extension period. We did not make the required written notices for
the extensions within these
<PAGE>
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periods. Also, the agreement provides that any attempted extension is "void" and
"of no effect" if any of the following events occur:
- If we have breached the agreement;
- If net sales during the license period are not sufficient to
generate actual royalty payments at least equal to the minimum
royalty payment; and
- If we fail to make timely royalty payments.
We did not met all of these conditions. First of all, the agreement
requires that during the period ended December 31, 1998, we must have produced
and marketed three different comic books, each featuring a minimum of four
different players. This did not occur. Second, sales during the initial period
were not sufficient to meet the minimum royalty payment.
The players association accepted the 1999 minimum royalty payments and
continues to work with us in the development and publication of comic books. We
are attempting to clarify the validity of the extensions, but there is no
assurance that we can accomplish this. If the extensions are invalid, and the
players association does not agree to an extension, we may not be able to
continue to publish comic books using Major League Baseball Association players.
The inability to do so could mean that we would not be able to continue our
business, since three of our existing comic books, and many of our future comic
books, are based upon this license.
THE LEAGUES AND PLAYERS' ASSOCIATIONS HAVE THE RIGHT TO APPROVE THE STORIES, ART
WORK, AND DESIGN OF THE COMIC BOOKS. CHANGES REQUIRED BY SUCH REVIEWS COULD BE
COSTLY TO US.
Under our existing license agreements, the leagues, players'
associations, and, in some cases, the players themselves, are granted the right
to review and approve of the comic books. We have experienced occasions in the
past where we have had to revise comic books at various stages of development to
meet this obligation or to maintain good relations with the licensors. In each
instance it has increased our cost of producing the particular comic book. As we
produce more comic books in the future and work with the representatives of the
leagues, associations, and players on a more regular basis, we believe we can
minimize such revisions. We submit each stage of the development of the comic
books to the representatives for their approval. In some instances changes are
requested and made. In one instance the approvals of a representative were
overridden by a superior in the league which caused us to rework much of the
development of the particular comic book. While we may not have been legally
obligated to make the changes, we made them primarily to maintain the good will
with the league. We will continue to attempt to minimize these problems in the
future, but there is no assurance that we can totally eliminate the costs of
reworking story lines, likenesses, or other aspects of the comic books during
the development stages at our cost. Our budgeted costs of publishing the comic
books includes minimal changes, and if the leagues, associations, or players
require substantial changes in a significant number of future comic books, the
funds budgeted for publication may be inadequate and we would be required to
seek additional funding or allocate funds from other business categories.
<PAGE>
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THE PUBLIC'S ACCEPTANCE OF COMIC BOOKS USING PROFESSIONAL ATHLETES AS SUPER
HEROES IS LARGELY UNTESTED, AND OUR SALES OF THIS TYPE OF COMIC BOOK IN THE PAST
IS INSUFFICIENT TO INDICATE WHETHER SIGNIFICANT SALES WILL OCCUR IN THE FUTURE.
For the two years and nine months ended October 31, 1999, we generated
$58,117 in revenues from sales of our comic books, and experienced total net
losses of $1,148,179 for the same period. To reverse this trend of operating
losses, we need to generate significant future sales. We have received purchase
orders from one of our distributors, but our distribution agreement does not
require any future or minimum purchase orders. If we do not generate more sales,
we may not be able to continue our present operations once the funds from this
offering are used.
WE HAVE BORROWED FUNDS IN THE PAST, THE TERMS OF WHICH MAY REQUIRE US TO ISSUE
ADDITIONAL SHARES OF STOCK IF THE LOAN TERM IS EXTENDED.
In October 1999 we borrowed $600,000 for operations and agreed to repay
the loan in four months. If we do not repay it on or before February 20, 2000,
we are obligated to issue 250,000 shares to the lender for each 60 day period
thereafter that the loan remains unpaid. If we do not raise the minimum amount
of this offering by February 20, 2000, or sixty days thereafter, we will be
obligated to issue the additional shares. The issuance of these shares could
significantly dilute the ownership interest of the existing shareholders.
BECAUSE WE ARE SIGNIFICANTLY SMALLER THAN OTHER COMIC BOOK PUBLISHERS, WE MAY
LACK THE FINANCIAL RESOURCES NEEDED TO CAPTURE INCREASED MARKET SHARE.
Our share of the comic book market is insignificant in comparison to
other comic book publishers. The comic book market is dominated primarily by
Marvel Comics and DC Comics, each of which has substantially greater assets,
manpower, and market share than do we. While neither of these entities publishes
a comic book using athletes as super hero characters, they do publish a
significant number of comic books using various super heroes. And while we do
not compete directly with these companies, we may compete for some of their
readers who may be interested in the sports figures in our comic books. We may
not have the resources or facilities to compete directly with these publishers.
There are a number of smaller comic book publishers, most of which have
had more experience in this industry and are better financed. While we are
familiar with a limited number of other companies which publish comic books
using athletes in stories in which they are portrayed in their particular
athletic capacity, for example as a wrestler, we are not aware of any of these
publishers using professional athletes as super action figures in their comic
books as we do. However, we will likewise compete with these publishers for
comic book readers in general, and perhaps those interested in the sports.
<PAGE>
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We are also aware of manufacturers of action figures based on athletes.
If we are successful in entering the action figure market, we will be competing
with these companies as well.
THE EXPANSION OF OUR BUSINESS INTO DIGITIZED COMICS ON THE INTERNET, THE
MANUFACTURE OF ACTION FIGURES BASED ON SUPER HEROS IN OUR COMIC BOOKS, AND
TELEVISION OR HOME VIDEO/DVD PROGRAMS BASED ON SUPER HEROS DEVELOPED BY US, IS
DEPENDENT UPON OBTAINING THE RIGHTS FROM THE LEAGUES AND THE PLAYERS'
ASSOCIATIONS.
Our current license agreements with the leagues and the player's
associations are generally limited to the publication of comic books. In order
to create digitized comics on our Internet site, to commence the manufacture and
marketing of action figures, and to create live-action animated series based
upon super heros developed by us, we are required to negotiate additional
license agreements with the leagues, players' associations, and, in some cases,
the players. Leagues with their own web sites may not want digitized comics on
our web site competing with their own web site, and therefore may not grant such
rights. In addition, such electronic rights may be part of a larger package of
rights granted to other licensees which may preclude us from obtain the rights.
Also, in the case of action figures, we may be required to negotiate with the
existing manufacturing licensees. While we have commenced the negotiation
process, we have not entered into definitive arrangements or agreements and we
cannot assure you that we will be able to complete the negotiations in terms
sufficiently favorable to enter these markets.
MARKETING OF OUR COMIC BOOKS IS HEAVILY DEPENDENT ON THE IMAGE OF THE PLAYERS
USED. OUR MARKETING EFFORTS COULD BE SIGNIFICANTLY IMPAIRED IF A PLAYER'S IMAGE
IS TARNISHED IN ANY WAY.
We believe one reason people may be interested in our comic books is
the favorable image projected by the athletes used in our comic books.
Obviously, we have no control over the lives of these athletes. Should one of
them do something which would cause readers not to view them as potential super
heroes, it could materially affect our ability to market the comic books. We are
unable to predict what type of actions would affect potential sales, but
certainly anything which would negatively affect the athlete's moral character
could affect our selling efforts.
5,042,240, OR 67.5%, OF OUR TOTAL OUTSTANDING SHARES ARE RESTRICTED FROM
IMMEDIATE RESALE BUT MAY BE SOLD INTO THE MARKET IN THE NEAR FUTURE. THIS COULD
CAUSE THE MARKET PRICE OF OUR STOCK TO DROP SIGNIFICANTLY, EVEN IF OUR BUSINESS
IS DOING WELL.
After this offering, we will have outstanding ____ shares, if the
maximum offering is sold. This includes up to ___________ we are selling in this
offering, which may be resold to the public market immediately, and 420,000
restricted shares which are being registered for resale into the public market.
The remaining ________, or ____%, of our total outstanding shares, as well as
the shares being registered for resale, will become available for resale in the
public market as shown in the chart below.
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As restrictions on resale end, the market price could drop
significantly if the holders of these restricted shares sell them or are
perceived by the market as intending to sell them.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
NUMBER OF SHARES AND PERCENTAGE OF TOTAL DATE OF AVAILABILITY FOR RESALE INTO THE
OUTSTANDING AFTER OFFERING PUBLIC MARKET
- --------------------------------------------------------------------------------------------
<S> <C>
270,000/___% Immediately available, so long as the
registration statement remains effective.
- --------------------------------------------------------------------------------------------
150,000/___% Beginning April 5, 2000, due to an agreement
between us and the holder of these shares.
- --------------------------------------------------------------------------------------------
____/___% Between 90 and 365 days after the date of this
prospectus due to the requirements of the
federal securities laws.
- --------------------------------------------------------------------------------------------
1,639,600/___% Beginning one year from the date of this
prospectus, due to a lock-up agreement
between us and these shareholders.
- --------------------------------------------------------------------------------------------
</TABLE>
THE DESIGNATION OF OUR STOCK AS "PENNY STOCK" WILL MEAN THAT IT WILL BE MORE
DIFFICULT TO SELL YOUR SHARES.
Our shares are subject to Rule 15g-9 under the Exchange Act. That rule
imposes additional sales practice requirements on broker-dealers that sell
low-priced securities designated as "penny stocks" to persons other than
established customers and institutional accredited investors. The SEC's
regulations define a "penny stock" to be any equity security that has a market
price less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions. Initially our stock will be penny stock.
We cannot assure you that our shares will ever qualify for exemption from these
restrictions. For transactions covered by this rule, a broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, the
rule may affect the ability of broker-dealers to sell our shares and may affect
the ability of holders to sell their shares in the secondary market.
YOUR STOCK WILL BE DILUTED UP TO ____% FROM THE OFFERING PRICE.
If the maximum proceeds are raised, purchasers of shares will
experience immediate and substantial dilution of $____ in net tangible book
value per share, or approximately ___% of the offering price of $____ per share.
In contrast, existing shareholders paid an average price of $____ per share. If
the minimum proceeds are raised, purchasers of shares will experience immediate
and substantial dilution of $____ in net tangible book value per share, or
approximately ____% of the offering price of $____ per share. In contrast,
affiliates paid an average price of approximately $0.01 per share.
<PAGE>
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FORWARD LOOKING STATEMENTS
This prospectus contains statements that plan for or anticipate the
future. Forward-looking statements include statements about the future of the
comic book or super action hero industry, statements about our future business
plans and strategies, and most other statements that are not historical in
nature. In this prospectus forward-looking statements are generally identified
by the words "anticipate," "plan," "believe," "expect," "estimate," and the
like. Although we believe that any forward-looking statements we make in this
prospectus are reasonable, because forward-looking statements involve future
risks and uncertainties, there are factors that could cause actual results to
differ materially from those expressed or implied. For example, a few of the
uncertainties that could affect the accuracy of forward-looking statements,
besides the specific factors identified in the Risk Factors section of this
prospectus, include the following:
- protracted league labor negotiations, strikes, or lock-outs;
- changes in our business strategies; and
- a decline in consumer interest in professional sports and
athletes.
In light of the significant uncertainties inherent in the
forward-looking statements made in this prospectus, particularly in view of our
early stage of operations, the inclusion of this information should not be
regarded as a representation by us or any other person that our objectives and
plans will be achieved.
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for similar statements by existing public companies, does not
apply to our offerings.
USE OF PROCEEDS
The following table sets forth the use of estimated proceeds,
alternatively under the minimum and maximum offering, and management's present
estimate of the allocation and prioritization of net proceeds expected to be
received from this offering. If funds in excess of the minimum amount, but less
than the maximum, are received, the funds will be allocated pro rata among the
items in the table, except for the repayment of debt which will be paid in full.
Actual receipts and expenditures may vary from these estimates. Pending use of
the funds, the Company will invest the net proceeds in investment-grade,
short-term, interest bearing securities.
<PAGE>
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<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
----------- -----------
<S> <C> <C>
Gross Proceeds $ 1,200,000 $ 1,800,000
Selling commissions (120,000) (180,000)
Other offering expenses (65,000) (65,000)
----------- -----------
NET OFFERING PROCEEDS $ 1,015,000 $ 1,555,000
=========== ===========
Use of Net Proceeds
Debt Repayment(1) $ 600,000 $ 600,000
License Fees(2) 256,000 256,000
Sales, Marketing & Advertising 81,000 197,000
Additional Working Capital 78,000 502,000
----------- -----------
TOTAL $ 1,015,000 $ 1,555,000
=========== ===========
</TABLE>
- --------------------
(1) These funds were borrowed at an interest rate of 10% per annum. The
loan is due February 20, 2000. In the event of default, we will be required to
issue an additional 250,000 shares to the lender for each period of sixty days
which we remain in default. The funds were used for working capital and
approximately $20,000 of such funds were used to pay salaries to executive
officers.
(2) These funds will be used to pay approximately $50,000 in new and
existing license fees due as of January 1, 2000, and to pay approximately
$155,000 in future license fees through approximately April 15, 2001.
We estimate that the minimum net proceeds of this offering will satisfy
our cash needs for approximately 12 months. We do not anticipate that it will be
necessary to raise additional funds in the next 12 months.
DILUTION
During the years ended January 31, 1999 and 1998, and through October
31, 1999, we have issued a total of 3,850,000 shares to officers, directors,
promoters, and affiliated persons, at an average price of $0.01 per share. The
following table summarizes, as of October 31, 1999, the relative investments of
all existing shareholders and the new investors, after giving pro forma effect
to the sale of the shares by us in this offering:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
--------------------- -------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Affiliate Shares 3,850,000 ___% $10,000 ____% $0.01
New investors _______ ___% $_____ ____% $___
Total _______ $_____
</TABLE>
<PAGE>
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Our financial statements at October 31, 1999, show a net tangible book
value of ($297,312) or ($0.039) per share. Net tangible book value per share
represents the amount of our tangible assets, less total liabilities, divided by
the number of shares of common stock outstanding. Without taking into account
any further adjustments in net tangible book value after October 31, 1999, other
than to give effect to the sale of the maximum number of shares offered hereby,
and after deduction of potential selling commissions and other offering
expenses, our pro forma net tangible book value at October 31, 1999, would have
been $____ or approximately $_____ per share of common stock, representing an
increase in net tangible book value of approximately $_____ to existing
shareholders and a dilution of approximately $____ per share to new investors.
If only the minimum number of shares is sold, our pro forma net tangible book
value at October 31, 1999, would have been $_____ or approximately $______ per
share of common stock, representing an increase in net tangible book value of
approximately $_____ to existing shareholders and a dilution of approximately
$______ per share to new investors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
We experienced a gross profit deficiency and net loss of $8,233 and
$770,386, respectively, for the nine months ended October 31, 1999.
Cost of goods sold includes fixed costs of coloring, illustration and
other production costs that were not fully absorbed by current year sales
levels. Management is projecting these costs, royalty expenses and a portion of
the printing costs will be absorbed in the future through advertising revenues.
We are actively selling advertising space to companies whose consumer base is
primarily by 8 -14 year old males. The gross profit generated by the sales of
the comic books would then be available to cover the general and administrative
costs.
We invested 33% of the our general and administrative expense in
marketing and Internet development. The projected benefit from this investment
is improved name recognition with sales to follow. We have also incurred
$143,733 in professional and investor relations expenses. Management believes
that these expenses will diminish in the future. Labor costs totaled $161,894 or
22% of the general and administrative costs. Depreciation expense and
amortization of licenses were $58,844 during the period ended October 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We had a working capital deficit of $357,573 as of October 31, 1999.
Management believes that it will be able to meet current working capital,
license and debt service requirements through private placement offerings and
renegotiations of the related party debt, improved revenues and reductions in
costs. Proceeds from the offering are estimated by management to provide us with
additional working capital ranging from $1,015,000 to $1,555,000.
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CASH FLOWS FROM OPERATING ACTIVITIES
We had a net use of cash from operating activities of $792,373.
INVENTORY - Our continued expansion of our comic book lines resulted in
an increase in inventory of $131,342 as of October 31, 1999.
PAYABLES - Liabilities increased by $88,010. The liabilities include
accrued interest on related party debt of $23,945 and $178,000 in payroll
payable to corporate officers at October 31, 1999.
CASH FLOWS FROM INVESTING ACTIVITIES
We had a use of cash from investing activities during the period ended
October 31, 1999 of $56,696.
CAPITAL EXPENDITURES - We had expenditures of $14,196 for equipment
during the period ended October 31, 1999.
RELATED PARTY LOAN - We provided a related party with a loan for
$42,500.
CASH FLOWS FROM FINANCING ACTIVITIES
We realized net cash from financing activities of $1,232,699 during the
period ended October 31, 1999.
DEBT SERVICE - We obtained unsecured financing from three of our
shareholders during the nine months ended October 31, 1999. The proceeds were
used in operations and to repay previous shareholder borrowings. We reduced
related party debt and the capital lease obligation as scheduled.
ISSUANCE OF STOCK - Our limited offering in April 1999 provided the
Company with $650,000. The proceeds were used to repay debt and in our
operations.
BUSINESS
BACKGROUND AND HISTORY
We were originally incorporated under the laws of the State of Utah on
August 24, 1981, under the name "Edge Investment Company." On October 13, 1983,
we changed our name to "American Surgical Laser, Inc." We subsequently changed
domicile to Delaware by merging into a Delaware corporation formed for this
purpose. The merger was effective on April 12, 1985. The Delaware corporation
was incorporated on January 21, 1985, under the name "American
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Surgical Laser-Del, Inc." We changed our name to "Eclipse Imports, Inc." on June
10, 1997. On March 12, 1999, we changed the name to "Neurochemical Research
International, Corp." The effective date of the name change to "Ultimate Sports
Entertainment, Inc." was April 7, 1999.
We were initially formed for the purpose of investing in and managing
real property and in late 1983 we entered the laser medical research and
development field. The development activity continued until 1986 when the
project was discontinued because of lack of funds and a conflict in management.
During September 1983 we issued 5,000 shares in a public offering and
received $20,000 cash.
Effective October 12, 1983, we forward split our outstanding shares at
the rate of 3.8789- for-one. Effective July 17, 1997, we reverse split the
outstanding shares at the rate of one-for-two hundred.
In February 1999 we proposed to enter into a merger transaction with
Neurochemical Research Corp. In contemplation of the closing of the merger
transaction, we changed our name to "Neurochemical Research International,
Corp." A special meeting of shareholders was called and held on February 12,
1999, to approve the merger transaction. The shareholders voted not to proceed
with the merger, but did approve a one-for-ten reverse split of the outstanding
shares effected March 22, 1999.
On March 30, 1999, we entered into a reorganization agreement with
AllStar Arena Entertainment, a privately-held California corporation
(hereinafter the "AllStar Arena"), and the shareholders of this entity. AllStar
Arena was incorporated in the State of California on June 28, 1996, under the
name "Lobito Publishing Group" and amended its articles of incorporation to
change its name to "AllStar Arena Entertainment" on January 26, 1998. The
agreement provided that on the closing date the shareholders of AllStar Arena
would exchange all of their shares for 3,850,000 post-forward split shares of
our company, such that AllStar Arena would become a wholly owned subsidiary and
the shareholders of AllStar Arena would own approximately 54% of the outstanding
stock of our company. The closing of the reorganization agreement was held on
April 6, 1999.
Also in connection with the reorganization agreement with AllStar
Arena, we forward split the outstanding shares at the rate of four-for-one,
canceled 2,030,680 outstanding shares, and issued 1,300,000 shares in a limited
offering. As a result of the closing of the reorganization agreement, old
management resigned in favor of directors and officers who were designated by
AllStar Arena.
Unless otherwise indicated, all references to our outstanding shares
give effect to all previous stock splits.
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Immediately following the closing of the reorganization agreement, we
entered into a six-month advertising and promotional services agreement with
Noble House of Boston, Inc. wherein Noble House agreed to provide certain
advertising and promotional services. For these services some of our
shareholders transferred 350,000 shares to Noble House. Of these, 150,000 are
being offered for resale in this prospectus. In connection with the 150,000
restricted shares, we agreed to provide up to three opportunities to register
these shares at any time commencing one year from the date of the agreement and
ending four years therefrom. The initial term of the advertising and promotion
agreement with Noble House expired on October 2, 1999, and we are currently
negotiating a renewal of the agreement. However, we do not anticipate entering
into another agreement with them until after the completion of this public
offering.
In August 1999 we borrowed $100,000 from two individuals. These loans,
plus interest, were converted into 100,000 shares of common stock in February
2000.
On October 20, 1999, the Company borrowed $600,000 from The Orbiter
Fund Ltd. The loan agreement provides for a term of four months with interest of
10% per annum payable upon maturity of the loan. As an incentive for loaning the
funds to us, we issued 250,000 shares which we agreed to register for resale in
this prospectus. The loan document also provides that if we do not repay it in
full within fifteen days following its due date, we will issue an additional
250,000 shares for each sixty day period the loan remains unpaid. The lender
also has the right to convert the loan into our shares at $1.00 per share. If
the loan is converted, three of our shareholders, Frederick R. Licht, Jay
Botchman, and Martin J. Burke, III, have agreed to sell their shares in equal
amounts to the lender at $0.10 per share for each $3.00 of loaned funds
converted, up to an aggregate of 500,000 shares.
We are presently engaged in the publication of comic books depicting
professional athletes as super heroes. We are able to use these athletes because
of our license agreements with the individual athletes and the major league
players' associations. Business operations are conducted through both the parent
and the subsidiary companies without material differentiation between the two
entities. Management proposes to merge AllStar Arena into the parent company to
form a single operating entity sometime after the completion of this offering.
LICENSE AGREEMENTS
We presently have license agreements with two National Basketball
Association players: Karl Malone of the Utah Jazz and Chris Webber of the
Sacramento Kings. We also have licenses with the Major League Baseball Players
Association; Major League Baseball Properties, Inc.; and the National Hockey
League Players' Association. We have also negotiated, but not executed, license
agreements with Major League Baseball Players Alumni Association; National
Football League Properties, Inc.; and the National Football League Quarterback
Club. Set forth below is a brief description of each of these license
agreements:
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THE MALONE LICENSE
The license with Mr. Malone was entered into in November 1997 with Karl
Malone and Karl Malone Properties, Inc. and expires in November 2000. The
license grants the worldwide, exclusive right to reproduce, publish, print,
reprint, and distribute a comic book using a character based upon Mr. Malone.
However, each particular use of Mr. Malone's name or likeness requires the prior
approval of Mr. Malone. Mr. Malone has agreed to help promote the comic books by
making one personal appearance per calendar year and has agreed that he will not
impair the value of the comic books by conducting himself in any way that would
disparage or diminish the value of the developed character. The license also
grants the right to exploit the character through merchandising. The rights to
the comic books and the Malone character developed for them, or any copyrights
or trade marks associated with them, are owned 50% by each party and all
decisions affecting the use and exploitation of the character and copyrights or
trade marks are to be made jointly. The license also provides for royalty
payments to be made to Mr. Malone from the gross proceeds from the sale of the
comic books, from the amounts collected through merchandising rights, and from
the gross revenues from film, television, multimedia, and other rights. We have
agreed to indemnify Mr. Malone for any action alleging copyright or trade mark
infringement based on the comic books or regarding any contract or other
transaction involving us and Mr. Malone.
THE WEBBER LICENSE
The license with Mr. Webber was entered into in March 1997 with C.
Webb, Inc. for the services of Chris Webber, and expires in March 2000, subject
to our right to extend the contract for three additional one year terms if the
agreement has not been terminated by Mr. Webber. Mr. Webber has the right to
cancel the agreement if he does not receive $150,000 in royalty payments during
the initial term of the contract. As of December 1, 1999, we had paid $2,130 in
royalties to Mr. Webber. The license grants to us the worldwide, exclusive right
to reproduce, publish, print, reprint, and distribute a comic book using a
character based upon Mr. Webber. However, each particular use of Mr. Webber's
name or likeness requires the prior approval of Mr. Webber. Mr. Webber has
agreed to help promote the comic books by making three personal appearances per
calendar year and has agreed that he will not impair the value of the comic
books by conducting himself in any way that would disparage or diminish the
value of the developed character. The license also grants the right to exploit
the character through merchandising. The rights to the comic books and the
Webber character developed for them, or any copyrights or trade marks associated
with them, are owned 50% by each party and all decisions affecting the use and
exploitation of the character and copyrights or trade marks are to be made
jointly. The license also provides for royalty payments to be made to Mr. Webber
from the gross proceeds from the sale of the comic books, from the amounts
collected through merchandising rights, and from the gross revenues from film,
television, multimedia, and other rights. We have agreed to indemnify Mr. Webber
for any action alleging copyright or trade mark infringement based on the comic
books or regarding any contract or other transaction involving us and Mr.
Webber.
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THE MAJOR LEAGUE BASEBALL PLAYERS ASSOCIATION LICENSE
This license allows us to use the likenesses of individual players in
our comic books. The license was entered into on May 13, 1998, and provides for
an initial license period ending December 31, 1998, and two successive calendar
year renewal periods. Such renewals are subject to certain requirements,
including the marketing of a certain number of issues of comic books during the
license periods. We did not meet these requirements and the license may be void.
However, we have continued to pay the minimum royalty amounts and the Major
League Baseball Players Association has continued to accept these payments. The
license grants the non-exclusive right to publish and market comic books in the
United States and Canada featuring animated cartoon super-heroes based on Major
League Baseball Association players. The agreement also provides for royalties
to be paid by us based upon sales of the comic books and establishes minimum
royalties to renew the license. The content of each comic book is subject to the
prior approval of the Major League Baseball Players Association. Following the
termination of the license, we have no further right to market the comic books.
The agreement also requires us to indemnify the association against any actions
involving it arising out of our acts or omissions. We must also maintain
liability insurance.
THE MAJOR LEAGUE BASEBALL PROPERTIES LICENSE
This license permits us to use the league and team names and logos in
our comic books. The license was entered into on September 23, 1999, and
provides for an initial license period ending November 30, 2000, with an
automatic extension through December 31, 2001, so long as the licensor does not
lose its licenses with the teams. Prior to the expiration of the license
agreement, the parties agree to discuss in good faith the renewal of the
agreement for an additional period. The license grants the non-exclusive right
to use the Major League Baseball logos, league names, teams, and the all-star
game, division, league, and world series. The agreement also provides for
royalties to be paid by us based upon sales of the comic books and establishes
minimum royalties to be paid against actual royalties earned. The content of
each comic book is subject to the prior approval of the licensor. Following the
termination of the license, we have no further right to market the comic books.
The agreement also requires us to indemnify the licensor against any actions
involving it arising out of our acts or omissions. We must also maintain
liability insurance.
THE MAJOR LEAGUE BASEBALL PLAYERS ALUMNI ASSOCIATION LICENSE
This license will allow us to use the trademarks and service marks
associated with the Major League Baseball Players Alumni Association. As
presently negotiated, it will expire on July 9, 2001. The license will grant to
us the non-exclusive right to use the marks in our comic books. The form of the
agreement also provides for royalties to be paid by us based upon sales of the
comic books and establishes guaranteed minimum royalties to be paid against
actual royalties earned. The content of each comic book will be subject to the
prior approval of the association. Following the termination of the license, we
will have no further right to market the comic books.
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The form of the agreement also requires us to indemnify the association against
any actions involving it arising out of our acts or omissions. We will also be
required to maintain liability insurance. We anticipate entering into the
definitive agreement upon completion of this offering and the payment of the
advance payments that will be due under the agreement.
PROPOSED NATIONAL FOOTBALL LEAGUE PROPERTIES LICENSE AND NATIONAL
FOOTBALL LEAGUE QUARTERBACK CLUB LICENSE
We have negotiated contracts with National Football League Properties,
Inc., which entity also represents the National Football League Quarterback
Club, to use the league marks and the likenesses of the team players in comic
books. The agreements would be for an initial term of one year and would require
minimum royalty guarantees of $29,720 and advance payments of $15,211. We
anticipate entering into the definitive agreements upon completion of this
offering and the payment of the advance payments that will be due under the
agreements.
THE NATIONAL HOCKEY LEAGUE PLAYERS' ASSOCIATION LICENSE
The National Hockey League Players' Association License was entered
into on July 1, 1999, and terminates automatically on June 30, 2001. The license
grants to us the non-exclusive right to publish and market comic books
throughout the world featuring National Hockey League players. However, the
players retain the option not to participate in the agreement. As of the date of
this prospectus, only one such player has indicated he will not participate in
the agreement. The agreement also provides for royalties to be paid by us based
on sales of the comic books and establishes minimum annual royalties. The
content of each comic book is subject to the approval of the association.
Following the termination of the license, we have no further right to market the
comic books. The agreement also requires us to indemnify the association against
any actions involving it arising out of our acts or omissions. We must also
maintain publisher's liability insurance.
PUBLICATION OF COMIC BOOKS
As of January 26, 2000, we had published four comic books: WEBBER'S
WORLD, featuring Chris Webber; THE MAILMAN, featuring Karl Malone; COSMIC SLAM,
featuring Jeff Bagwell, Sammy Sosa, Dave Justice, and Mark McGwire, and THE
SHORTSTOP SQUAD featuring Derek Jeter, Cal Ripken, Jr., Alex Rodriguez, and
Barry Larkin. Each of the comic books consists of a single story featuring one
or more well-known sports figures as super heroes. Stories for the comic books
are developed, and in some cases written, by management. In other cases we
retain free lance writers to work with us to develop and write the stories and
the dialogue. Upon completion of the story, we hire illustrators to create the
black and white drawings to correspond to the story and dialogue. Finally, the
book is sent to a coloring house or a freelance colorist to include the color
for the illustrations. We are currently negotiating with design firms which
could perform all of these functions for us.
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Once the particular issue of the comic book has been composed,
illustrated and colored, it is down-loaded onto a disk and forwarded to the
printer to create the plates for printing. We have used Quebecor Printing of
Montreal, Canada, as our sole printer of the comic books. We believe that
Quebecor is one of only two printers in North America which is capable of
printing comic books of the quality required by us. We also believe that the
risk is low that Quebecor could not continue to print our comic books in the
future under the same terms and similar costs as in the past. If for any reason
Quebecor could not print the comic books, we believe that suitable printers
could be located overseas which could print the comic books at the same or near
the cost charged by Quebecor; however, shipping costs could be significantly
greater.
After the comic books have been printed, they are shipped for storage
to Quebecor's warehouse in New York. The comic books are then shipped from the
warehouse either directly to the client or to a distributor.
The retail price of our comic books is from $2.95 to $4.95, with most
being offered at $3.95. This is higher than the retail prices of most other
comic books which are sold at between $1.95 to $3.95, with most at $2.75 per
issue. One reason for the higher price of our comic books is our expense of
paying royalties to the professional players and the leagues which would not be
required in connection with most other comic books.
We have also completed two comic books featuring National Football
League athletes. These comic books are ready to go to the printer and we hope to
release these in February 2000. We have four baseball comic books which are in
the development stage and which we hope to release in April 2000. We are also
developing four hockey comic books which we believe will be ready for release
this year.
MARKETING
The first two comic books published by us, WEBBER'S WORLD and THE
MAILMAN, were distributed through direct mail campaigns and newspaper
advertisements and at stadiums. THE MAILMAN has been sold primarily to the
concessionaires at the stadium in Salt Lake City, Utah, at which Karl Malone
plays his home games, and also by direct mail campaigns. Prior to and during the
basketball season, we contact the concessionaires and solicit purchase orders
for the comic books which are then shipped directly to the stadiums from the
warehouse in New York. WEBBER'S WORLD has been sold by direct mail and through
advertisements in the Sacramento, California, newspapers.
Beginning with the baseball comic books we have introduced a broader
marketing plan. In addition to offering the comic books to concessionaires in
the stadiums where the athletes play, we have also placed regional
advertisements in newspapers to solicit direct customer orders. Also, we have
negotiated an arrangement with Diamond Comic Distributors, Inc. to distribute
our comic books throughout the United States and Canada. As of January 11, 2000,
Diamond published seven of our comic books in their catalogue for their retail
distributers and agreed to
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add new issues as they are published. Purchase orders from Diamond will require
three weeks delivery time. Upon receipt of such an order, we will contact the
printer to run an appropriate number of comic books and ship them directly to
Diamond. So long as the comic books are delivered on time, Diamond has agreed to
purchase all comic books ordered and not to return any unsold copies. We are
also negotiating with a national distributor of publications to newsstands to
distribute the comic books and with a national publication for collectibles in
which advertisements for the comic books could be placed. Since these
arrangements would likely involve returns of unsold comic books, we are also
negotiating for an outlet for our unsold books.
We continue to offer our comic books in the stadiums and for our
baseball comic books, we have entered into an exclusive agreement with MJ Sports
to distribute our non-premium baseball comic books in the stadiums beginning
January 1, 2000, through the 2000 baseball world series.
We have entered into a two year agreement with Comic Cavalcade which
commenced September 1, 1999, in which Comic Cavalcade manages our comic book
orders made via a toll-free telephone number and orders shipped to stadiums.
They also handle credit card orders and disburse these funds to us. We can
terminate the agreement upon thirty days notice, but we must pay a penalty of
$250 times the number of months remaining in the agreement.
We have also developed a promotional plan to sell comic books developed
for an individual team and offered at the team's stadium in conjunction with
promotional programs of the team. At December 31, 1999, we had not consummated
agreements with any team.
PROPOSED BUSINESS
With the funds from this offering, we are proposing to broaden our
current business to include the creation of animated characters based on the
super heroes portrayed in the comic books, the manufacture and sale of
merchandise associated with the super hero athletes, and the sale of the comic
books and merchandise on cable network shopping channels and on the Internet.
We are negotiating with Film Roman, Inc. to produce a short animated
pilot cartoon using the athlete super heroes from our comic books. If the
negotiations are successful, we would assign our rights from the players,
leagues, and players' associations to Film Roman in order to create the pilot.
If the pilot is successful, Film Roman would also have the merchandising rights
to the products associated with the animation series and we would receive
royalties. It is anticipated that Film Roman would pay for the production of the
pilot. We are also negotiating with the various professional athletic leagues
and players' associations to secure the rights to create animated series using
the professional athletes and to manufacture and sell the merchandise associated
with the series. Our current license agreements do not provide such rights. We
are also required to negotiate with the licensee which holds the distribution
rights for such products with the leagues.
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We have created a web site which includes information about our company
and its products. We also intend to offer digitized comics developed
specifically for the web site. We do not anticipate commencing the project until
we have secured the necessary rights from the professional sports leagues and
players' associations. The present license agreements held by us do not provide
such rights.
We are also negotiating with the companies which hold the license to
manufacture action figures using professional athletes. We hope to enter into
agreements which would permit us to manufacture and market action figures based
upon characters developed for our comic books. In order to accomplish this, we
will need to negotiate agreements with the manufacturers and the leagues and
player's associations.
We are negotiating with several entities which specialize in promoting
limited edition and signed articles on television home shopping programs. If the
negotiations are successful, we anticipate that signed copies of our comic books
published in special limited editions will be offered on cable home shopping
channels by the first company willing to commit to a significant initial order.
COMPETITION
We believe that our comic books will appeal to a certain niche audience
which is interested in both sports and comic books. In general, we compete with
publishers of other comic books, such as Marvel Comics and DC Comics. We believe
most of these comic book companies may be better financed and have longer
operating histories than do we.
GOVERNMENT REGULATION
We are not subject to any significant government regulations, except as
may relate to compliance with the corporate laws of the States of Delaware and
California.
EMPLOYEES
At December 1, 1999, we had four full-time employees, including two
members of management. We also employ one part-time person.
TRADEMARKS AND COPYRIGHTS
On June 4, 1999, we filed for a federal trademark for "Ultimate Sports
Force" and in January 2000 we filed for a federal trademark for "Ultimate Sports
Entertainment, Inc." We have received preliminary notification from the examiner
that there may be a conflict with "Ultimate Sports Force," but we may not know
for more than one year whether we will be issued such trademark.
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DESCRIPTION OF FACILITIES AND EQUIPMENT
We lease approximately 1,156 square feet of office space located at our
principal executive offices at 2444 Wilshire Boulevard, Suite 414, Santa Monica,
California. The office space is leased under a three year lease which commenced
on May 15, 1999, and terminates on May 31, 2002. The initial base rent for the
space is $2,255 per month, plus our share of common space expenses. The monthly
base rent increases to $2,323 commencing June 1, 2000, and to $2,393 commencing
June 1, 2001. The lease grants to us the right to extend the lease for one
additional three-year period.
We also lease some of our computer equipment under a three year lease
which commenced in December 1998. The value of the leased equipment at the time
of the lease was $9,016 and we have the option to purchase the equipment at the
end of the lease at the greater of the then fair market value or 15% of the
original value of the equipment. Monthly payments are $313. The lease is
personally guaranteed by Joseph Yukich, a former officer and director of AllStar
Arena, by Martin Burke, III, a former director, and by Paul Fairchild, a former
officer.
LEGAL PROCEEDINGS
We are not a party to any material pending legal proceedings or
government actions, including any material bankruptcy, receivership, or similar
proceedings. We do not believe that there are any material proceedings to which
any director, officer or affiliate of our company, any owner of record of
beneficially of more than five percent of our common stock, or any associate of
any such director, officer, affiliate of ours, or security holder is a party
adverse to us or has a material interest adverse to us. However, Paul Fairchild,
a former officer has notified us through his attorney that he may seek damages
against us because of his termination. We do not believe that this action would
have a material adverse effect upon us.
REPORTS TO OUR SECURITY HOLDERS
Our fiscal year ends on January 31st. We do not presently intend to
furnish our shareholders with annual reports. However, we intend to become a
reporting company and file annual, quarterly, and current reports, and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the SEC's public reference room at 450 fifth Street,
N.W., Washington D.C. 20549. You can request copies of these documents, upon
payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings are also available to the public on the SEC Internet site
at http://www.sec.gov.
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MANAGEMENT
GENERAL
The following table sets forth our current sole director and executive
officer, his age, and all offices and positions. Directors are elected for a
term of one year and until his successor is elected and qualified. Annual
meetings are to be scheduled by the Board of Directors. Officers are elected by
the Board of Directors and hold office until their successors are chosen and
qualified.
<TABLE>
<CAPTION>
Name Age Position Director Since
---- --- -------- --------------
<S> <C> <C> <C>
Frederick R. Licht 32 Director, President, CEO 1999
Secretary/Treasurer, & CFO
</TABLE>
FREDERICK R. LICHT, has been the president and chief executive officer
of AllStar Arena since 1999. From 1994 to January 1999, he was self-employed as
an attorney representing professional athletes. Mr. Licht graduated from
Brandeis University in 1989 with a bachelor of arts degree. He received his
juris doctor degree from UCLA School of Law in 1992.
The Board of Directors has no nominating, auditing or compensation
committee. There are no arrangements or understandings between Mr. Licht and any
other person(s) pursuant to which he was selected as an officer or director.
COMPENSATION OF EXECUTIVE OFFICERS
We have agreed to provide Mr. Licht with a two year employment contract
beginning retroactively to January 1, 1999. We paid him $7,500 per month during
the first year and will pay him $10,000 per month during the second year. We
anticipate completing the definitive employment contract during the first
quarter of 2000.
COMPENSATION OF DIRECTORS
Directors are permitted to receive fixed fees and other compensation
for their services as directors, as determined by the Board of Directors. We
have decided to pay our directors a fee of $10,000 per year for serving as a
director. This fee was paid to Mr. Martin Burke, III, a former director during
this current year; Mr. Licht has deferred his fee until it can be paid out of
profits, if any.
STOCK OPTION PLAN
We have adopted a stock option plan, pursuant to which we are
authorized to grant options to purchase up to 1,000,000 shares of our common
stock to our key employees, officers,
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directors, consultants, and other independent advisors. Awards under the plan
will consist of both non-qualified and incentive stock options. We cannot grant
incentive stock options until the plan is approved by the shareholders.
The plan is administered by the Board of Directors which will determine
the persons to whom awards will be granted, the number of awards to be granted
and the specific terms of each grant, including the vesting thereof, subject to
the provisions of the plan.
Persons who are eligible to participate in the plan include the
following:
- Employees, as to both incentive and non-qualified options;
- Non-employee members of the Board, as to non-qualified
options; and
- Consultants and other independent advisors, as to
non-qualified options.
In connection with qualified stock options, the exercise price of each
option may not be less than 100% of the fair market value of the common stock on
the date of grant, or 110% of the fair market value in the case of a grantee
holding more than 10% of our outstanding stock. The aggregate fair market value
of shares for which qualified stock options are exercisable by such employee, or
10% shareholder, during any calendar year may not exceed $100,000. Nonqualified
stock options granted under the plan may be granted at a price determined by the
Board of Directors, not to be less than the fair market value of the common
stock on the date of grant.
No option may be granted to be exercised more than 10 years after the
grant date. The terms of options outstanding at the time of a persons cessation
of service, death, permanent disability, or misconduct are reduced to the
following periods, but not to exceed the original term:
- Three months after cessation of services, except by reason of
death, permanent disability, or misconduct;
- Twelve months after the optionee's death or permanent
disability; and
- Immediately upon termination for misconduct.
The Plan also contains provisions affecting outstanding options in the
case of certain corporate transactions or in the event of a change of control.
If we should enter into a merger or consolidation, or in the event of a tender
or exchange offer, in which securities representing more than 50% of the voting
control are transferred to an outside party, or if we should sell, transfer, or
dispose of all, or substantially all of our assets, we could accelerate the
vesting and termination dates of these options. We could also elect to terminate
outstanding purchase rights associated with the options. In the alternative, the
options could be assumed and adjusted for the particular corporate transaction.
At January 25, 2000, no outstanding options were held by the executive
officers, directors, and principal shareholders.
<PAGE>
Page 29 of 45
CERTAIN TRANSACTIONS
In April 1999, the shareholders of AllStar Arena Entertainment,
including Frederick R. Licht, Martin J. Burke, III, and Joseph Yukich, current
or former officers, directors, and/or principal shareholders, exchanged shares
of stock of this company for the shares which they currently hold in our
company. These persons paid substantially less for their shares than the
offering price in this offering.
In November 1999 we sold 250,000 warrants to Deborah Fensterheim, the
wife of Asher Fensterheim, an attorney for us. The warrants are exercisable at
$2.00 per share at any time until October 31, 2004. The warrant certificate
provides for a "cashless" exercise by surrendering the number of warrants having
a fair market value equal to or greater than the required total exercise price.
The warrant certificate also provides for registration rights of the underlying
shares.
Also in November 1999 we issued 20,000 shares to our counsel, Ronald N.
Vance, in connection with the preparation of this registration statement. These
shares are included for resale in this prospectus.
In April 1999 we loaned $42,500 to Joseph Yukich, a former officer and
director of AllStar Arena. These funds are secured by the stock received by Mr.
Yukich in the reverse acquisition transaction between AllStar Arena and us. The
loan includes interest at 5% per annum from the date of the loan. The loan is
due upon the expiration of the one-year holding period of Rule 144 which should
occur in April 2000. The loan may be repaid by tendering to us the number of
shares equal in market value to the amount of the outstanding loan, plus accrued
interest, or by selling the shares, provided that the net proceeds of such sales
are used to repay the loan, plus accrued interest. If shares are used to repay
the loan directly, the market value of the shares shall be determined by the
average bid price of the stock for the five trading days immediately preceding
the due date of the loan.
MARKET INFORMATION
Our shares were quoted on the OTC Electronic Bulletin Board beginning
August 11, 1998, through November 1999; they are currently quoted on the Pink
Sheets. Based upon the limited volume of trading, we do not believe that there
exists an established market for our stock. The table below sets forth for the
periods indicated the high and low bid quotations as reported by the Trading and
Marketing Services Department of NASDAQ. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down, or commission and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Quarter High Low
<S> <C> <C> <C>
FISCAL YEAR ENDED Third $0.1250 -0-
JANUARY 31, 1999 Fourth $0.3125 $0.0938
</TABLE>
<PAGE>
Page 30 of 45
<TABLE>
<S> <C> <C> <C>
FISCAL YEAR ENDED
JANUARY 31, 2000 First $3,9375 $0.1250
Second $3.0625 $1.6563
Third $3.00 $0.75
Fourth $0.75 $0.375
</TABLE>
At January 13, 2000, we had outstanding options to purchase 342,500
shares and outstanding warrants to purchase 250,000 shares. The options were
issued under our existing stock option plan.
None of the shares of common stock is subject to outstanding options or
warrants to purchase, or securities convertible into our common stock, except as
otherwise describe in this prospectus. Except as set forth herein, none of the
shares is being, nor have any shares proposed to be, publicly offered by us.
However, we have granted registration rights to the selling shareholders to
register up to 420,000 of the outstanding restricted shares and to Deborah
Fensterheim to register the shares underlying the warrants granted to her.
As of January 7, 2000, there were approximately 478 holders of record
of our shares as reported to us by our transfer agent.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the
shares common stock ownership as of February 10, 2000, of each person who is
known to us to be the beneficial owner of more than five percent of our common
stock; by each of our executive officers and directors; and by executive
officers and directors as a group. Such information was furnished to us by such
persons or was obtained from information provided by the transfer agent.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
- ------------------- -------------------- ----------------
Before Offering After Offering
--------------- --------------
Min. Max.
---- ----
<S> <C> <C> <C> <C>
Frederick R. Licht 1,038,750 13.9%
2444 Wilshire Boulevard
Suite 414
Santa Monica, CA 90403
Executive officers and
directors as a group (1 person) 1,038,750 13.9%
Martin J. Burke III 710,750 9.51%
1380 Golf Court
Woodbridge, CA 95258
</TABLE>
<PAGE>
Page 31 of 45
<TABLE>
<S> <C> <C> <C> <C>
Joseph Yukich 392,500 5.25%
16035 East Marlinton Dr.
Whittier, CA 90604
</TABLE>
SELLING SHAREHOLDERS
An aggregate of up to 420,000 shares issued previously may be offered
for resale by the investors listed below. The following table sets forth certain
information with respect to each selling security holder. We will not receive
any of the proceeds from the sale of these securities. There are no material
relationships between any of the selling security holders and us, or any of our
predecessors or affiliates, nor have any such material relationships existed
within the past three years, except as otherwise set forth in this prospectus.
Except as described below, no selling security holder will beneficially own any
of our securities if the selling security holders' shares are sold. Each of the
selling security holders intends to offer and sell all of the securities listed
below.
<TABLE>
<CAPTION>
Number of
Securities to % of
Number of Number of be Beneficially Class
Name of Selling Securities Securities Owned on Comple- After
Shareholder Beneficially Owned Being Offered tion of Offering Offering
- ----------- ------------------ ------------- ---------------- --------
<S> <C> <C> <C> <C>
The Orbiter Fund,
Ltd. 250,000 250,000 -0- -0-
Ronald N. Vance 44,000 20,000 24,000 *
Noble House of
Boston, Inc. 169,000 150,000 19,000 *
</TABLE>
- -------------------
*Less than 1%
The sale of the shares by the selling security holders may be effected
from time to time in transactions in the over-the-counter market or in
negotiated transactions or otherwise. These transactions may include block
transactions by or for the account of the selling security holders. Sales may be
made at fixed prices which may be changed, at market prices, if any, prevailing
at the time of sale, or at negotiated prices.
The selling security holders may effect these transactions by selling
their shares directly to purchasers, through broker-dealers acting as agents for
the selling security holders or to broker-dealers who may purchase the
securities as principals and thereafter sell the securities from time to time in
the over-the-counter market, if any, in negotiated transactions or otherwise.
These broker-dealers, if any, may receive compensation in the form of discounts,
concessions or
<PAGE>
Page 32 of 45
commissions from the selling security holders or the purchasers for whom the
broker dealers may act as agents or to whom they may sell as principals or
otherwise, which compensation as to a particular broker-dealer may exceed
customary commissions.
Under applicable rules and regulations under the Securities Exchange
Act, any person engaged in the distribution of the selling security holders'
shares may not simultaneously engage in market making activities with respect to
any of our securities for a period of at least two, and possibly nine, business
days prior to the start of any distribution.
The selling security holders and broker-dealers, if any, acting in
connection with these sales might be deemed to be underwriters within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
We will attempt to maintain the effectiveness of the registration
statement of which this prospectus is a part for at least 180 days for the
selling security holders.
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue 50,000,000 shares of common stock, par value
$.001 per share. As of February 10, 2000, we had outstanding 7,470,000 shares.
All common shares are equal to each other with respect to voting, and dividend
rights, and are equal to each other with respect to liquidations rights. Special
meetings of the shareholders may be called by the president, the Board of
Directors, or upon the request of holders of at least one-tenth of the
outstanding voting shares. Holders of common shares are entitled to one vote at
any meeting of the shareholders for each common share they own as of the record
date fixed by the Board of Directors. At any meeting of shareholders, a majority
of the outstanding common shares entitled to vote, represented in person or by
proxy, constitutes a quorum. A vote of the majority of the common shares
represented at a meeting will govern, even if this is substantially less than a
majority of the common shares outstanding. Holders of shares are entitled to
receive such dividends as may be declared by the Board of Directors out of funds
legally available therefor, and upon liquidation are entitled to participate pro
rata in a distribution of assets available for such a distribution to
shareholders. There are no conversion, pre-emptive or other subscription rights
or privileges with respect to any share. Reference is made to our Articles of
Incorporation and Bylaws, as well as to the applicable statutes of the State of
Delaware, for a more complete description of the rights and liabilities of
holders of shares. The shares do not have cumulative voting rights, which means
that the holders of more than fifty percent of the common shares voting for
election of directors may elect all the directors if they choose to do so. In
such event, the holders of the remaining shares aggregating less than fifty
percent will not be able to elect directors.
<PAGE>
Page 33 of 45
REGISTRATION RIGHTS OF OUTSTANDING SHARES
In April 1999, one of our shareholders transferred 150,000 restricted
shares of our stock to Noble House of Boston, Inc. for marketing and promotional
services rendered by them. In connection with the agreement for the services
rendered by Noble House, we entered into a Registration Rights Agreement which
provides both demand and piggy-back registration rights. Under the demand
rights, the holders of at least 50% of the shares issued to Noble House have the
right to request registration of the shares up to three times through April 5,
2003. Noble House has also agreed to lock up these shares and not sell them
prior to April 5, 2000. The agreement also provides for reciprocal
indemnification if either party furnishes information containing an untrue or
alleged untrue statement of material fact which is contained in the registration
statement.
In October 1999, we issued 250,000 shares to The Orbiter Fund Ltd. in
connection with a loan by that entity to us in the amount of $600,000. In
connection with the transaction, we agreed to use our best efforts to include
the 250,000 shares in our next registration statement.
In November 1999, we issued 20,000 shares to Ronald N. Vance, P.C., our
counsel, as partial consideration for preparation of this registration
statement. We agreed to include these shares in this registration statement.
Also in November 1999 we sold 250,000 warrants to Deborah Fensterheim.
The warrant certificate provides both piggy-back and demand registration rights.
If we file a registration statement in the future, except in connection with any
stock option plan, stock purchase plan, savings or similar plan or an
acquisition, merger, or exchange of stock, Ms. Fensterheim will have the right,
at our expense, to include the shares underlying the warrants. She has waived
her right to have such shares included in this offering. She also has the right
to demand that such shares be included in a registration statement subsequent to
this one if one is not otherwise filed prior to December 31, 2000. We would bear
the full cost of preparing and filing such registration statement.
TRANSFER AGENT
The transfer agent for our common stock is Interwest Transfer Company,
Inc., 1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117.
DIVIDEND POLICY
We have not declared or paid any cash dividends as yet on the common
stock and the Board of Directors has not yet decided on a dividend policy.
Whether dividends will be paid will be determined by the Board of Directors and
will necessarily depend on our earnings, financial condition, capital
requirements and other factors. The Board of Directors has no current plans to
declare any dividends in the foreseeable future.
<PAGE>
Page 34 of 45
PLAN OF DISTRIBUTION
This offering is being conducted by us, through Mr. Licht, our sole
officer and director. The minimum amount of this offering is ____ and all of
these shares must be sold if any are to be sold. The maximum number of shares to
be sold in this offering is ____. The cash offering price is $_____ per share.
The common stock may also be offered and sold through participating
brokers/dealers who are members of the NASD. We will pay a maximum commission of
10% of the offering price for shares sold by these broker/dealers. The minimum
subscription is 1,000 shares. We will not pay a commission to Mr. Licht for
sales made by him. We and participating broker/dealers may further agree to
indemnify each other against certain liabilities, including liabilities arising
under the Securities Act of 1933. No one, including us or any broker/dealer, has
made any commitment to purchase any or all of the shares offered hereby. Rather,
Mr. Licht will use his best efforts to find purchasers for the minimum shares
until ______, 2000, subject to an extension in our sole discretion for an
additional period not to exceed thirty days. The maximum duration of the
offering will be until ____, 2000.
All proceeds from subscriptions with respect to the first ______ shares
will be deposited promptly with Santa Monica Bank, as escrow agent for this
offering pursuant to the terms of a Funds Escrow Agreement. All of the proceeds
of this offering will be deposited in the escrow account no later than noon of
the business day next following receipt. In the event that the minimum number of
shares is not sold, on or before ninety days from the date of this prospectus,
subject to an additional period not to exceed thirty days, all funds will be
refunded promptly to subscribers in full without deduction therefrom or interest
thereon. If the minimum proceeds are received before expiration of the minimum
offering period, the funds will be disbursed to us. Subsequent proceeds will be
immediately disbursed to us. During the offering period or any extension
thereof, no subscriber will be entitled to a refund of any subscription. We
reserve the right to accept or reject any subscription, in whole or in part.
We anticipate making sales of the shares to residents of the states of
______, ______ and _______, as well as other persons resident in other states
who have expressed an interest in our company, or persons we believe may be
interested in purchasing our shares. We may sell shares to these persons only if
they reside in a state in which we are permitted to sell the shares.
Our officers, directors, present shareholders and persons associated
with them, may purchase some of the shares offered hereby. However, officers,
directors, present shareholders and their associates will not be permitted to
purchase more than twenty percent of the shares to be sold hereunder and these
shares will be held by those persons for investment and not for distribution. To
the extent that these persons acquire shares in the offering, the number of
shares required to be purchased by new investors to reach the minimum will be
reduced by a like amount. Any of these sales will be made on the same terms and
conditions as sales made to other purchasers. No proceeds from this offering
will be used to finance any purchases of shares by officers, directors, present
shareholders or their associates.
<PAGE>
Page 35 of 45
PRICING THE COMMON STOCK
The offering price of our shares of common stock was determined
arbitrarily by us. In arriving at that price, our board of directors took into
account such factors as the current market price of our shares, our lack of
significant history and operations, our assets, plan of operation, and
anticipated costs of our continued development and operation. However, the
offering price of the shares should not be understood as an indication of the
value of the shares offered or an assurance that you will be able to resell
these shares for an amount equal to or more than the offering price. The
offering price of the shares bears no necessary relationship to the market
price, our assets, book value, lack of earnings, net worth or other recognized
criterion of value.
In as much as we have not retained an underwriter or broker/dealer to
assist in this offering, the offering price has not been arrived at through a
process of arms-length negotiation. Accordingly, new investors bear a
disproportionate risk to that of existing shareholders attendant to the fact
that the offering price was arrived at arbitrarily, rather than by arms-length
bargaining.
DELIVERY OF COMMON STOCK
We intend to timely issue certificates for the shares after completion
of the minimum offering, and thereafter upon receipt and acceptance of
additional subscriptions. We will forthwith mail such certificates directly to
investors at their addresses as set forth in their subscription agreements.
LOCK-UP OF SHARES
Frederick R. Licht, our sole officer and director, Martin Burke, III, a
former director and principal shareholder, and Jay Botchman, a shareholder, have
entered into an agreement not to sell, pledge, hypothecate, transfer, or
otherwise dispose of 80% of any shares of common stock owned by them for a
period of 12 months from the date of this prospectus, unless required pursuant
to the loan agreement with The Orbiter Fund Ltd. The shares subject to the
lock-up consist of 1,639,600 shares owned by these parties.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have ________ outstanding
shares. Of those, the _______ shares being offered in this offering, will,
subject to any applicable state law restrictions on secondary trading, be freely
tradeable without restriction under the Securities Act, except that any shares
purchased by "affiliates," as that term is defined in Rule 144 under the
Securities Act, will be subject to the resale limitations of Rule 144. Also,
420,000 outstanding restricted shares are being registered for resale. Of these
shares, 270,000 are available for resale immediately, and 150,000 will be
available for resale beginning April 5, 2000.
<PAGE>
Page 36 of 45
The remaining 4,622,240 shares are "restricted" within the meaning of
Rule 144 under the Securities Act, and are not being registered for resale. Of
this number, approximately 9,988 shares may be eligible for immediate sale in
the public market without restriction under Rule 144(k). In the reverse
acquisition transaction between us and AllStar Arena which closed on April 6,
1999, we issued 3,850,000 restricted shares to the shareholders of AllStar. All
but 1,639,600 of these shares will be available for resale beginning
approximately April 6, 2000, or ninety days after the date of this prospectus,
whichever is later; the remaining shares are subject to the lock-up agreement
and will not be eligible for resale until at least one year from the date of
this prospectus.
In general, under Rule 144, as currently in effect, any person who has
beneficially owned restricted shares for at least one year, is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of our then outstanding shares, or the average weekly trading
volume of our stock during the four calendar weeks immediately preceding the
date on which notice of the sale is filed with the SEC. Sales pursuant to Rule
144 are also subject to certain requirements relating to manner of sale, notice
and availability of current public information about us. A person who is not
deemed to have been an affiliate at any time during the 90 days immediately
preceding the sale and whose restricted shares have been fully-paid for two
years since the later of the date they were acquired from us, or the date they
were acquired from one of our affiliates, may sell these restricted shares under
Rule 144(k) without regard to the limitations and requirements described above.
Restricted shares may not be resold under Rule 144 until ninety days from the
date of this prospectus, regardless of when the one year holding period expires.
We cannot predict the effect, if any, that sales of shares under Rule
144 or the availability of shares for sale will have on the market price of our
stock prevailing from time to time. We are unable to estimate the number of
shares that may be sold in the public market under Rule 144, because the amount
will depend on the trading volume in, and market price for, our stock and other
factors. Nevertheless, sales of substantial amounts of shares in the public
market, or the perception that sales of these shares could occur, could
adversely affect the market price of our stock.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
us by Ronald N. Vance, P.C., Attorney at Law, Salt Lake City, Utah. Mr. Vance is
the beneficial owner of 44,000 shares. Of these, 20,000 were received as partial
consideration for representing us in the preparation of the registration
statement of which this prospectus is a part.
EXPERTS
Our financial statements for the year ended January 31, 1999 and 1998,
included in this prospectus have been examined by Pritchett, Siler & Hardy,
P.C., Certified Public Accountants.
<PAGE>
Page 37 of 45
The financial statements examined by the Certified Public Accountants have been
included in reliance upon their audit report.
FINANCIAL STATEMENTS
We have attached to this prospectus copies of our audited financial
statements as of January 31, 1999 and 1998, consisting of balance sheets at
January 31, 1999 and 1998, and the related statements of operations,
stockholders' deficit and cash flows for the years ended January 31, 1999 and
1998. We have also included unaudited financial statements for October 31, 1999,
consisting of a balance sheet as of October 31, 1999, and the related statements
of operations, stockholders' equity, and cash flows for the nine months ended
October 31, 1999 and 1998.
<PAGE>
[LETTERHEAD]
ACCOUNTANT'S DISCLAIMER OF OPINION
Board of Directors
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
Santa Monica, California
The accompanying balance sheet of Ultimate Sports Entertainment, Inc. and
Subsidiary as of October 31, 1999 and the related statements of operations,
stockholders' deficit and cash flows for the nine months ended October 31, 1999
and 1998 were not audited by us and, accordingly, we do not express an opinion
on them.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
January 13, 2000
Salt Lake City, Utah
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
October 31,
1999
-----------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 383,631
Inventory 182,501
Accounts receivable (net of $4,800 allowance) --
-----------
Total Current Assets 566,132
-----------
PROPERTY AND EQUIPMENT, net 21,334
-----------
OTHER ASSETS
Refundable deposits 1,050
License agreements 50,000
Receivable from shareholder 42,500
-----------
Total Other Assets 93,550
-----------
$ 681,016
-----------
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 178,372
Accrued expenses 33,905
Notes payable - related party 708,500
Current portion of capital lease obligation 2,928
-----------
Total Current Liabilities 923,705
LONG-TERM OBLIGATIONS:
Capital lease obligation, less current portion 4,623
-----------
Total Long-Term Obligations 4,623
-----------
928,328
-----------
STOCKHOLDERS' (DEFICIT):
Common stock, $.001 par value, 50,000,000
shares authorized, 7,632,457 shares issued
and outstanding 7,632
Additional paid in capital 918,597
Retained (deficit) (1,173,541)
-----------
Total Stockholders' (Deficit) (247,312)
-----------
$ 681,016
-----------
</TABLE>
The accompanying notes are an integral part of this unaudited consolidated
financial statement.
-2-
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Nine Month
Period Ended
October 31,
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
SALES, net of returns and discounts $ 8,225 $ 14,246
COST OF GOODS SOLD 16,547 23,845
--------- ---------
GROSS LOSS (8,322) (9,599)
--------- ---------
OPERATING EXPENSES:
General and administrative 743,846 134,997
--------- ---------
Total Operating Expenses 743,846 134,997
--------- ---------
LOSS FROM OPERATIONS (752,168) (144,596)
--------- ---------
OTHER EXPENSE:
Interest expense (18,218) (10,691)
--------- ---------
Total Other (Expense) (18,218) (10,691)
--------- ---------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (770,386) (155,287)
CURRENT TAX EXPENSE -- --
DEFERRED TAX EXPENSE -- --
--------- ---------
NET LOSS $(770,386) $(155,287)
--------- ---------
LOSS PER COMMOM SHARE $ (.16) $ (.08)
--------- ---------
</TABLE>
The accompanying notes are an integral part of this unaudited consolidated
financial statement.
-3-
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
FOR THE PERIOD FROM JANUARY 31, 1997
THROUGH OCTOBER 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional
---------------------------- Paid in Retained
Shares Amount Capital (Deficit)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, January 31, 1997 1,950,000 $ 1,950 $ 8,050 $ (25,362)
Net loss for the year ended
January 31, 1998 -- -- -- (90,991)
----------- ----------- ----------- -----------
BALANCE, January 31, 1998 1,950,000 1,950 8,050 (116,353)
Net loss for the year ended
January 31, 1999 -- -- -- (286,802)
----------- ----------- ----------- -----------
BALANCE, January 31, 1999 1,950,000 1,950 8,050 (403,155)
Issued common stock for
cash at $.50 per share 1,300,000 1,300 648,700 --
Issued common stock for
subsidiary 3,850,000 3,850 (3,850) --
Issued common stock for
forgiveness of debt at $.50
per share 532,457 532 265,696 --
Net loss for the nine month
period ended October 31, 1999 -- -- -- (770,386)
----------- ----------- ----------- -----------
BALANCE, October 31, 1999 7,632,457 $ 7,632 $ 918,596 $(1,173,541)
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of this unaudited consolidated
financial statement.
-4-
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
For the Nine Month
Period Ended
October 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (770,386) $ (155,287)
----------- -----------
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 2,595 16,373
Bad debt expense 4,800 3,631
Changes in assets and liabilities:
(Increase) in other assets 18,750 950
(Increase) decrease in accounts receivable (4,800) 18,039
(Increase) in inventory (131,342) (21,363)
Increase (decrease) in accounts payable 85,190 (17,800)
Increase in accrued expenses 5,577 6,930
(Increase) in bank overdraft (1,957) 8,399
Increase (decrease) in taxes payable (800) 800
----------- -----------
Total Adjustments (21,987) (839)
----------- -----------
Net Cash (Used) by Operating Activities (792,373) (136,328)
----------- -----------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Purchase of equipment (14,196) (1,251)
Increase in shareholder advance (42,500) (5,000)
----------- -----------
Net Cash (Used) by Investing Activities (56,696) (6,251)
----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from common stock issuance 650,000 --
Proceeds from notes payable - related party 708,500 125,000
Payments on notes payable - related party (123,660) (29,421)
Payments on capital lease obligations (2,142) --
Proceeds from short-term borrowings -- 50,000
----------- -----------
Net Cash Provided by Financing Activities 1,232,698 145,579
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 383,631 $ --
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -- --
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 383,631 $ --
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ --
Income taxes $ -- $ --
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the period ended October 31, 1999:
The Company issued 3,850,000 shares of stock in a non-cash acquisition
account for as a reorganization of the Company.
For the period ended October 31, 1998:
The Company entered into a capital lease for equipment valued
at $9,917.
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
-5-
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND BASIS OF PRESENTATION - Ultimate Sports Entertainment, Inc.
[Parent] and AllStar Entertainment [Subsidiary] (the Company) was
originally incorporated under the laws of the State of Utah on August 24,
1981, under the name "Edge Investment Company." On October 13, 1983, the
Company changed its name to "American Surgical Laser, Inc." The Company
changed its domicile to Delaware by merging into a Delaware corporation
formed for this purpose. The merger was effective on April 12, 1985. The
Delaware corporation was incorporated on January 21, 1985, under the name
"American Surgical Laser-Del, Inc." The Company changed its name to
"Eclipse Imports, Inc." on June 10, 1997. On March 12, 1999, the Company
changed its name to "Neurochemical Research International, Corp." The
effective date of the name change to "Ultimate Sports Entertainment, Inc."
was April 7, 1999.
The Company initially formed for the purpose of investing in and managing
real property and in late 1983 entered the laser medical research and
development field. The development activity continued until 1986 when the
project was discontinued because of lack of funds and a conflict in
management. The Company is currently engaged in the manufacturing and
marketing of comic books. The Company's principal markets are
geographically disbursed throughout the United States.
INVENTORIES - Inventories are stated at the lower of cost or market value
using the first-in, first-out method [SEE NOTE 4].
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." This statement requires an asset and liability approach for
accounting for income taxes [SEE NOTE 9].
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Expenditures for repairs and maintenance are charged to operating expense
as incurred. Expenditures for additions and betterments that extend the
useful lives of property and equipment are capitalized, upon being placed
in service. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation or amortization are removed from the
accounts and any resulting gain or loss is included in operations.
DEPRECIATION - Depreciation of equipment is computed using the
straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lease period or the estimated
useful life of the improvements, whichever is less.
LOSS PER SHARE - Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings Per Share," requires the Company to present basic loss per share
and dilutive earnings (loss) per share when the effect is dilutive. The
computation of loss per share is based on the weighted average number of
shares outstanding during the period presented. [SEE NOTE 8].
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION - Revenue is recognized when the product is shipped.
-6-
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
RECENTLY ENACTED ACCOUNTING STANDARDS - Statement of Financial Accounting
Standards (SFAS) No. 132, "Employer's Disclosure about Pensions and Other
Postretirement Benefits", SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", SFAS No. 134, "Accounting for
Mortgage-Backed Securities..." and SFAS No. 135, "Rescission of FASB
Statement No. 75 and Technical Corrections" were recently issued. SFAS No.
132, 133, 134 and 135 have no current applicability to the Company or their
effect on the financial statements would not have been significant.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimated by management.
NOTE 2 - RECAPITALIZATION
On April 6, 1999 the Parent acquired all of the outstanding stock of the
Subsidiary by issuing 3,850,000 post-split shares of common stock for all
of the outstanding shares of AllStar Arena Entertainment which made it a
wholly owned Subsidiary. The Company also issued 1,300,000 post split
shares of common stock at $.50 per share in a limited offering preceding
the closing of the agreement pursuant to Rule 504 of Regulation D. The
proceeds of the offering were transferred to AllStar at the closing. The
acquisition was accounted for as a recapitalization of the Subsidiary as
the shareholders of the Subsidiary controlled the combined Company after
the acquisition. There was no adjustment to the carrying values of the
assets or liabilities of the Parent or the Subsidiary as a result of the
recapitalization. The consolidated financial statements include the
accounts of the Parent and the Subsidiary. All significant intercompany
transactions between Parent and Subsidiary have been eliminated in
consolidation.
NOTE 3 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at cost, less
accumulated depreciation and amortization as of October 31, 1999:
<TABLE>
<CAPTION>
1999
-----------
<S> <C>
Office equipment $ 24,113
-----------
24,113
Less: accumulated depreciation (2,779)
-----------
21,334
-----------
</TABLE>
Depreciation expense for the period ended October 31,1999 amounted to $2,595.
-7-
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVENTORIES
Inventories consist of the following at October 31, 1999:
<TABLE>
<S> <C>
Finished goods $ 35,916
Work-in-progress 146,585
-----------
Total Inventory $ 182,501
-----------
</TABLE>
NOTE 5 - ACCRUED LIABILITIES
The following is a summary of accrued liabilities as of October 31, 1999:
<TABLE>
<CAPTION>
1999
-----------
<S> <C>
Payroll costs $ 7,623
Accrued interest 23,945
Royalties payable 2,337
-----------
$ 33,905
-----------
</TABLE>
NOTE 6 - NOTES PAYABLE - RELATED PARTY
The following is a summary of notes payable to related parties, as of
October 31, 1999:
<TABLE>
<CAPTION>
1999
------------
<S> <C>
12% unsecured note payable
to a shareholder due February 13
2000 with interest 100,000
10% unsecured note payable
to a shareholder due February 20,
2000, with interest 600,000
Unsecured advance from a
shareholder 8,500
------------
$ 708,500
Less: current portion (708,500)
------------
$ --
------------
</TABLE>
-8-
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - LEASE OBLIGATIONS
CAPITAL LEASE - During the year ended January 31, 1999, the Company entered
into a capital lease of computer equipment which expires in December 2001.
The asset and liability under the capital lease was recorded at $9,917.
Depreciation expense for the period ended October 31, 1999 amounted to
$2,480.
Total future minimum lease payments, executory costs and current portion of
capital lease obligations are as follows:
Future minimum lease payments for the period ended October 31:
<TABLE>
<CAPTION>
Period ending October 31, Lease Payments
------------------------- --------------
<S> <C>
2000 $ 4,042
2001 4,042
2002 673
2003 -
--------
Total future minimum lease payments $ 8,757
Less: amounts representing interest and executory costs (1,206)
--------
Present value of the future minimum lease payments 7,551
Less: current portion (2,928)
--------
Capital lease obligations - long-term $ 4,623
--------
</TABLE>
OPERATING LEASE - The Company has entered into a building lease for its
office and production facility. The lease on the facility expires in May,
2002, and may be extended by mutual agreement on a year-to-year basis. The
lease can be canceled if either side provides written notice one year in
advance. Lease expense for the period ended October 31, 1999 amounted to
$24,701. Following is a schedule of minimum annual rental payments for the
next five years.
<TABLE>
<CAPTION>
Period Ending Minimum Annual
October 31, Rental Payments
----------- ---------------
<S> <C>
1999 $ 27,084
2000 27,084
2001 6,771
2002 --
2003 --
--------
$ 60,939
--------
</TABLE>
-9-
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - LOSS PER SHARE
The following data show the amounts used in computing loss per share and
the effect on income and the weighted average number of shares of potential
dilutive common stock for the period ended October 31, 1999:
<TABLE>
<CAPTION>
For the Period Ended
October 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Loss from continuing operations available
to common stockholders $ (770,386) $ (155,287)
Weighted average number of common
shares outstanding used in basic earnings
per share 4,791,000 1,950,000
----------- -----------
Weighted number of common shares and
potential dilutive common shares
outstanding used in dilutive earnings per
share N/A N/A
----------- -----------
</TABLE>
Dilutive loss per share was not presented, as its effect is anti-dilutive.
NOTE 9 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards.
The Company has available at October 31,1999, unused operating loss
carryforwards of approximately $1,173,541 which may be applied against
future taxable income and which expire in various years from 2010 through
2018. The amount of and ultimate realization of the benefits from the
operating loss carryforwards for income tax purposes is dependent, in part,
upon the tax laws in effect, the future earnings of the Company, and other
future events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the amount of the
loss carryforwards, therefore, no deferred tax asset has been recognized
for the loss carryforwards. The net deferred tax asset is approximately
$399,000 as of October 31,1999, respectively, with an offsetting valuation
allowance at each year end of the same amount resulting in a change in the
valuation allowance of approximately $ 261,800 during the nine month period
ended October 31, 1999.
-10-
<PAGE>
ULTIMATE SPORTS ENTERTAINMENT, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 10 - CAPITAL STOCK
COMMON STOCK - During June 1996, the Company issued 1,950,000 shares of its
previously authorized, but unissued common stock for cash. Total proceeds
from the sale of stock amounted to $10,000 (or $0.01 per share).
During April 1999, the Company completed a 504(D) limited offering. The
Company issued 1,300,000 shares of its previously authorized, but unissued
common stock for cash. Total proceeds from the sale of stock amounted to
$650,000 (or $.50 per share).
NOTE 11 - RELATED PARTY TRANSACTIONS
NOTES PAYABLE TO STOCKHOLDERS - From June 1996 through January 1999,
shareholders of the Company loaned the Company $462,275 at various interest
rates between 9% and 15% compounding yearly. At October 31, 1999, accrued
interest amounted to $32,007.
RECEIVABLE FROM SHAREHOLDER - During the period ended October 31, 1999, the
Company advanced a shareholder $42,500.
NOTE 12 - GOING CONCERN
The Company has incurred significant losses during 1999 and 1998, has
current liabilities in excess of current assets at October 31, 1999, and
has a stockholders' deficit. These items raise substantial doubt about the
ability of the Company to continue as a going concern.
Management's plans in regards to these matters are as follows:
Management is proposing to raise necessary additional funds not
provided by operations through loans and/or through additional sales of
its common stock. Management believes that it can improve operations,
refinance debt, convert debt to equity, and reduce expenses. Management
believes that a combination of these efforts will be necessary to
continue operations.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities
that might be necessary should the Company be unable to obtain additional
financing, establish profitable operations or realize its plans.
NOTE 13 - SUBSEQUENT EVENTS
PROPOSED PUBLIC OFFERING OF COMMON STOCK - The Company is proposing to make
a public offering of 3,500,000 shares of common stock at a price of $1.00
per share. The Company plans to file a registration statement with the
United States Securities and Exchange Commission on Form SB-2 under the
Securities Act of 1933. An offering price of $1.00 per unit has arbitrarily
been determined by the Company. The offering will be managed by the Company
without any underwriter. The units will be offered and sold by the
directors and officers of the Company, who will receive no reimbursement of
expenses actually incurred on behalf of the Company in connection with the
offering. An undetermined number of shares may be sold through
broker/dealer who are members of the National Association of Securities
Dealer, Inc. and who will be paid a 10% commission on any sale they make.
The Company estimates it will incur stock offering costs of approximately
$65,000, but any such costs will be deferred and netted against the
proceeds of the proposed public stock offering.
-11-
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
Santa Monica, California
We have audited the accompanying balance sheet of AllStar Arena Entertainment
(formerly Lobito Publishing Group, Inc.) as of January 31, 1999, and the related
statements of operations, stockholders' (deficit) and cash flows for the years
ended January 31, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 financial position of AllStar Arena Entertainment
(formerly Lobito Publishing Group, Inc.) as of January 31, 1999 and the results
of their operations and their cash flows for the years ended January 31, 1999
and 1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has current liabilities in excess of current assets and
has a stockholders' (deficit), raising substantial doubt about its ability to
continue as a going concern. Management's plans in regards to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
August 18, 1999
Salt Lake City, Utah
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
January 31,
1999
---------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ --
Inventory 51,159
---------
Total Current Assets 51,159
PROPERTY AND EQUIPMENT, net 9,733
OTHER ASSETS 69,800
---------
$ 130,692
---------
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Bank overdraft $ 1,957
Accounts payable 93,182
Accrued expenses 51,803
Taxes payable 800
Notes payable - related party 366,412
Current portion of capital lease obligation 2,904
---------
Total Current Liabilities 517,058
LONG-TERM OBLIGATIONS:
Capital lease obligation, less current portion 6,789
---------
Total Long-Term Obligations 6,789
---------
Total Liabilities 523,847
---------
STOCKHOLDERS' (DEFICIT):
Common stock, $.01 par value, 1,000,000
shares authorized, 1,000,000 shares
issued and outstanding 10,000
Additional paid in capital --
Retained (deficit) (403,155)
---------
Total Stockholders' (Deficit) (393,155)
---------
$ 130,692
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
2
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
January 31,
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
SALES, net of returns and discounts $ 15,871 $ 34,021
COST OF GOODS SOLD 46,543 35,634
--------- ---------
GROSS PROFIT (LOSS) (30,672) (1,613)
--------- ---------
OPERATING EXPENSES:
General and administrative 178,668 61,944
Selling expenses 53,217 15,933
--------- ---------
Total Operating Expenses 231,855 77,877
--------- ---------
LOSS FROM OPERATIONS (262,557) (79,490)
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense (22,433) (9,253)
Loss on disposal of assets (1,812) (2,248)
--------- ---------
Total Other (Expense) (24,245) (11,501)
--------- ---------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (286,802) (90,991)
CURRENT TAX EXPENSE -- --
DEFERRED TAX EXPENSE -- --
--------- ---------
NET LOSS $(286,802) $ (90,991)
--------- ---------
LOSS PER COMMOM SHARE $ (.29) $ (.09)
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
STATEMENT OF STOCKHOLDERS' (DEFICIT)
FOR THE YEARS ENDED JANUARY 31, 1999, AND 1998
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid in Retained
Shares Amount Capital (Deficit)
--------- --------- ------------- ---------
<S> <C> <C> <C> <C>
BALANCE, January 31, 1997 1,000,000 $ 10,000 $ -- $ (25,362)
Net loss for the year ended
January 31, 1998 -- -- -- (90,991)
--------- --------- ------------- ---------
BALANCE, January 31, 1998 1,000,000 10,000 -- (116,353)
Net loss for the year ended
January 31, 1999 -- -- -- (286,802)
--------- --------- ------------- ---------
BALANCE, January 31, 1999 1,000,000 $ 10,000 $ -- $(403,155)
--------- --------- ------------- ---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
For the Years Ended
January 31,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net loss $(286,802) $ (90,991)
--------- ---------
Adjustments to reconcile net loss
to net cash used by operating activities:
Non-cash expense -- 14,267
Depreciation and amortization 381 670
Loss on disposal of equipment 1,812 2,248
Changes in assets and liabilities:
(Increase) in other assets (50,417) (19,383)
(Increase) Decrease in accounts receivable 18,039 (18,039)
(Increase) in inventory (41,309) (9,850)
Increase in accounts payable 72,320 20,862
Increase in accrued expenses 42,117 9,686
Increase in bank overdraft 1,755 202
Increase in taxes payable 800 --
--------- ---------
Total Adjustments 45,498 (663)
--------- ---------
Net Cash (Used) by Operating Activities (241,304) (90,328)
--------- ---------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Purchase of equipment (2,009) (2,918)
--------- ---------
Net Cash (Used) by Investing Activities (2,009) (2,918)
--------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from notes payable - related party 339,400 85,938
Payments on notes payable - related party (95,863) (4,000)
Payments on capital lease obligations (224) --
--------- ---------
Net Cash Provided by Financing Activities 243,313 81,938
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ -- $ (11,308)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -- 11,308
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ -- $ --
--------- ---------
</TABLE>
[CONTINUED]
5
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
For the Years Ended
January 31,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ --
Income taxes $ -- $ --
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the year ended January 31, 1999:
The Company entered into a capital lease for equipment valued
at $9,917.
For the year ended January 31, 1998:
None
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND BASIS OF PRESENTATION - AllStar Arena Entertainment [the
Company] (a California corporation incorporated June 26, 1996, formerly
Lobito Publishing Group, Inc.), is engaged in the manufacturing and
marketing of Comic Books. The Company's principal markets are
geographically disbursed throughout the United States.
INVENTORIES - Inventories at January 31, 1999 and 1998, consist of comic
books. Inventories are stated at the lower of cost or market value using
the first-in, first-out method [SEE NOTE 5].
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." This statement requires an asset and liability approach for
accounting for income taxes [SEE NOTE 10].
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Expenditures for repairs and maintenance are charged to operating expense
as incurred. Expenditures for additions and betterments that extend the
useful lives of property and equipment are capitalized, upon being placed
in service. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation or amortization are removed from the
accounts and any resulting gain or loss is included in operations.
DEPRECIATION - Depreciation of equipment is computed using the
straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lease period or the estimated
useful life of the improvements, whichever is less.
LOSS PER SHARE - Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings Per Share," requires the Company to present basic earnings (loss)
per share and dilutive earnings per share when the effect is dilutive. The
computation of loss per share is based on the weighted average number of
shares outstanding during the period presented. [See Note 9]
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION - Revenue is recognized when the product is shipped.
RECENTLY ENACTED ACCOUNTING STANDARDS - Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income", SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits", SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", and SFAS No. 134, "Accounting for Mortgage-Backed
Securities..." were recently issued. These accounting standards have no
current applicability to the Company or their effect on the financial
statements would not have been significant.
7
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimated by management.
NOTE 2 - GOING CONCERN
The Company has incurred significant losses during 1999 and 1998, has
current liabilities in excess of current assets of $465,899 at January 31,
1999, and has a stockholders' (deficit) of $393,155. These items raise
substantial doubt about the ability of the Company to continue as a going
concern.
Management's plans in regards to these matters are as follows:
Management is proposing to raise necessary additional funds not
provided by operations through loans and/or through additional sales of
its common stock. Management believes that it can improve operations,
refinance debt, convert debt to equity, and reduce expenses. Management
believes that a combination of these efforts will be necessary to
continue operations.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities
that might be necessary should the Company be unable to obtain additional
financing, establish profitable operations or realize its plans.
NOTE 3 - OTHER ASSETS
Other assets consist of a one year License Agreement with Major League
Baseball for the use of its name and likeness in the comic books produced
by the Company in the amount of $68,750. The License Agreement at January
31, 1999 has a cost basis of $75,000 and are being amortized over the term
of the license which expires December 31, 1999 and a security deposit on
the leased office space in the amount of $1,050.
NOTE 4 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment under a capital lease
[SEE NOTE 8] - at cost, less accumulated depreciation and amortization as
of January 31, 1999:
<TABLE>
<CAPTION>
1999
-----
<S> <C>
Office equipment $ 9,917
Less: accumulated depreciation (184)
-----
9,733
-----
</TABLE>
Depreciation expense for the year ended January 31, 1999, amounted to $184.
8
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - INVENTORIES
Inventories consist of the following at January 31, 1999:
<TABLE>
<CAPTION>
1999
------
<S> <C>
Finished goods $ 34,036
Work-in-progress 17,123
------
$ 51,159
------
</TABLE>
NOTE 6 - ACCRUED LIABILITIES
The following is a summary of accrued liabilities as of January 31, 1999:
<TABLE>
<CAPTION>
1999
------
<S> <C>
Accrued payroll $ 15,329
Accrued interest - related party 32,007
Royalties payable 4,467
------
$ 51,803
------
</TABLE>
ROYALTIES PAYABLE - The Company has entered into two Royalty Agreements
with Famous Sports Athletes. The agreements call for a 10% percent Royalty
of total sales in the comic books in which they are featured.
NOTE 7 - NOTES PAYABLE - RELATED PARTY
The following is a summary of notes payable to related parties, as of
January 31, 1999:
<TABLE>
<CAPTION>
1999
--------
<S> <C>
9% unsecured note payable to a related party,
due on demand [SEE NOTE 11] $ 100,000
9% unsecured note payable to a shareholder,
due on demand 42,655
12% unsecured demand note payable to a
shareholder 49,757
15% unsecured demand note payable to a
shareholder 60,000
12% unsecured demand note payable to a
shareholder 114,000
--------
$ 366,412
Less: current portion (366,412)
--------
$ --
--------
</TABLE>
9
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - NOTES PAYABLE - RELATED PARTY [CONTINUED]
Future maturities of notes payable - related party are summarized as
follows:
<TABLE>
<CAPTION>
Year
----------
<S> <C>
2000 $ 366,412
2001 --
2002 --
2003 --
Thereafter --
---------
$ 366,412
---------
</TABLE>
NOTE 8 - LEASE OBLIGATIONS
CAPITAL LEASE - During the year ended January 31, 1999, the Company entered
into a capital lease of computer equipment which expires in December 2001.
The asset and liability under the capital lease was recorded at $9,917.
Depreciation expense for the year ended January 31, 1999 amounted to $184.
Total future minimum lease payments, executory costs and current portion of
capital lease obligations are as follows:
Future minimum lease payments for the years ended January 31,
<TABLE>
<CAPTION>
Year ending January 31, Lease Payments
--------------------- --------------
<S> <C>
2000 $ 4,042
2001 4,042
2002 3,705
2003 -
-------
Total future minimum lease payments $ 11,789
Less: amounts representing interest and executory costs (2,096)
-------
Present value of the future minimum lease payments 9,693
Less: current portion (2,904)
-------
Capital lease obligations - long-term $ 6,789
-------
</TABLE>
10
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - LEASE OBLIGATIONS [CONTINUED]
OPERATING LEASE - The Company has entered into a building lease for its
office and production facility. The lease on the facility expires on April
30, 1999, and may be extended by mutual agreement on a year-to-year basis.
The lease can be canceled if either side provides written notice one year
in advance. Lease expense for the years ended January 31, 1999 amounted to
$12,600. Following is a schedule of minimum annual rental payments for the
next five years.
<TABLE>
<CAPTION>
Year Ending Minimum Annual
December 31, Rental Payments
------------ ---------------
<S> <C>
1999 $ 3,150
2000 --
2001 --
2002 --
2003 --
------
$ 3,150
------
</TABLE>
Subsequent to January 31, 1999 the Company cancelled the lease and entered
into a new lease [SEE NOTE 11]
NOTE 9 - LOSS PER SHARE
The following data show the amounts used in computing loss per share and
the effect on income and the weighted average number of shares of potential
dilutive common stock for the years ended January 31, 1999:
<TABLE>
<CAPTION>
For the Years Ended
January 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Loss from continuing operations available
to common stockholders (Numerator) $ (286,802) $ (90,991)
Weighted average number of common
shares outstanding used in basic earnings
per share (Denominator) 1,000,000 1,000,000
----------- -----------
Weighted number of common shares and
potential dilutive common shares
outstanding used in dilutive earnings per
share N/A N/A
----------- -----------
</TABLE>
Dilutive loss per share was not presented, as its effect is anti-dilutive.
11
<PAGE>
ALLSTAR ARENA ENTERTAINMENT
(formerly Lobito Publishing Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - INCOME TAXES
The components of the provision for income taxes are summarized as follows:
<TABLE>
<S> <C>
Currently payable
Federal $ --
State --
------
Provision for income taxes $ --
------
</TABLE>
As of January 31, 1999, the Company had a net operating loss carryforwards
for federal purposes of approximately $403,155 that may be offset against
future taxable income. The carryforwards expires between 2012 and 2019. As
of January 1, 1999, the net deferred income tax assets have been offset by
a valuation allowance, which has increased by $97,513 for the period
As of January 1, 1999, deferred income taxes related to the net operating
loss carryforwards and temporary differences are summarized as follows:
<TABLE>
<S> <C>
Net operating loss carryforwards $ 403,155
Valuation allowance (403,155)
---------
Deferred income tax asset $ --
---------
</TABLE>
NOTE 11 - SUBSEQUENT EVENTS
REORGANIZATION - On April 6, 1999, the Company became a wholly owned
subsidiary of Ultimate Sports Entertainment, Inc. (a Delaware corporation).
The shareholders of the Company exchanged all of the outstanding shares of
the Company for shares of Ultimate Sports Entertainment, Inc.
REORGANIZATION - During April 1999, the Company reorganized its management
by replacing its president and chief financial officer.
OFFICE LEASE - During May 1999, the Company cancelled an operating lease
and entered into a new three year office lease. The monthly amount of
$2,257 includes utilities.
DEBT CONVERSION - Subsequent to January 31, the Company entered into
additional debt of $550,000. This debt of $550,000 along with a note
payable-related of $100,000 was subsequently converted to equity of $650,00
in connection with the merger with Ultimate Sports.
12
<PAGE>
Page 38 of 45
[OUTSIDE BACK COVER]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary
Risk Factors
Forward Looking Statements
Use of Proceeds
Dilution
Management's Discussion and Analysis of Financial Condition and Results of Operation
Business
Management
Certain Transactions
Market Information
Principal Shareholders
Selling Shareholders
Description of Securities
Dividend Policy
Plan of Distribution
Shares Eligible For Future Sale
Legal Matters
Experts
Financial Statements
</TABLE>
Until _____, 2000, (ninety days after the date of this prospectus) all
dealers that effect transactions in these securities may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
Page 39 of 45
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 1. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
expressly authorizes a Delaware corporation to indemnify its officers,
directors, employees, and agents against claims or liabilities arising out of
such persons' conduct as officers, directors, employees, or agents for the
corporation if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the Company. Article VI of the
Bylaws of the Company provides that the corporation shall indemnify its
officers, directors, and agents to the fullest extent permitted under Delaware
law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
Item 2. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection
with the offering described in the registration statement:
<TABLE>
<S> <C>
Registration Fee $ 390
Blue Sky Fees 2,000
Accounting Fees and Expenses 24,000
Legal Fees and Expenses 30,000
Printing and Engraving 5,000
Transfer Agent Fees 500
Miscellaneous 3,110
-------
Total Expenses $65,000
</TABLE>
Item 3. Undertakings
(a) The Company hereby undertakes that it will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to (i) include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration
<PAGE>
Page 40 of 45
statement; and (iii) include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) For the purpose of determining liability under the Securities Act
of 1933, treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time shall be
the initial BONA FIDE offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The Company will:
(1) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in the form of a prospectus filed by
the Company under Rule 424(b) (1) or (4) or 497(h) under the Act as part of this
registration statement as of the time the Commission declared it effective.
(2) For any liability under the 1933 Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and that the offering of
the securities at that time as the initial bona fide offering of those
securities.
(e) The Company will use a sticker amendment if between 5% and 10% of the shares
subject to the lock-up agreement attached as an exhibit to this registration
statement are released from this agreement. If greater than 10% of such shares
are released, the Company will file a post-effective amendment to this
registration statement.
<PAGE>
Page 41 of 45
Item 4. Unregistered Securities Issued or Sold Within Three Years
In February 1997 the Company issued 6,000 shares each (adjusted for
subsequent stock splits) of the Common Stock of the Company to two of its
directors, Layne Meriwether and Darryl Meiwether. These shares were subsequently
canceled for failure of consideration. It also issued 6,000 shares to Mark
Meriwether. Such shares were issued without registration under the Act by reason
of the exemption from registration afforded by the provisions of Section 4(2)
thereof as transactions by an issuer not involving any public offering. Each of
the stock certificates received by the named parties contained restrictive
legends pursuant to Rule 144. No underwriting discounts or commissions were paid
in connection with such issuance.
In March 1997 the Company issued 13,333 shares each (adjusted for
subsequent stock splits) of the Common Stock of the Company to two of its
directors, Layne Meriwether and Darryl Meiwether. These shares were subsequently
canceled for failure of consideration. It also issued 13,333 shares to Mark
Meriwether. Such shares were issued without registration under the Act by reason
of the exemption from registration afforded by the provisions of Section 4(2)
thereof as transactions by an issuer not involving any public offering. Each of
the stock certificates received by the named parties contained restrictive
legends pursuant to Rule 144. No underwriting discounts or commissions were paid
in connection with such issuance.
In June 1997 the Company issued 800,000 shares (adjusted for subsequent
stock splits) of Common Stock of the Company to the two shareholders of Eclipse
Imports, Inc., in a stock for stock exchange. Such securities were issued
without registration under the Act by reason of the exemption from registration
afforded by the provisions of Section 4(2) thereof, as transactions by an issuer
not involving any public offering. Each of the shareholders of Eclipse delivered
appropriate investment representations to the Company with respect to such
transaction and consented to the imposition of restrictive legends upon the
certificates evidencing such securities. No underwriting discounts or
commissions were paid in connection with such issuance.
In November 1997 the Company issued 1,099,684 shares (adjusted for
subsequent stock splits) of Common Stock of the Company to various persons
without registration in a limited public offering pursuant to Rule 504
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933 and Section 3(b) thereunder. Aggregate proceeds were $10,997. No
underwriting discounts or commissions were paid in connection with such
issuances.
In July 1998 the Company issued 38,666 shares (adjusted for subsequent
stock splits) of Common Stock of the Company to Betty L. Meriwether. Such
securities were issued without registration under the Act by reason of the
exemption from registration afforded by the provisions of Section 4(2) thereof,
as transactions by an issuer not involving any public offering. The stock
certificate received by the named party contained a restrictive legend pursuant
to Rule 144. No underwriting discounts or commissions were paid in connection
with such issuance.
<PAGE>
Page 42 of 45
In September 1998 the Company issued 800,000 shares (adjusted for
subsequent stock splits) of Common Stock of the Company to Mark L. Meriwether,
the president of the Company. Such securities were issued without registration
under the Act by reason of the exemption from registration afforded by the
provisions of Section 4(2) thereof, as transactions by an issuer not involving
any public offering. The stock certificate received by the named party contained
a restrictive legend pursuant to Rule 144. No underwriting discounts or
commissions were paid in connection with such issuance.
In October 1998 the Company issued 2,000,000 shares each (adjusted for
subsequent stock splits) of Common Stock of the Company to Trinamix, Inc. and
Joe Cowan for $10,000. Such securities were issued without registration under
the Act by reason of the exemption from registration afforded by the provisions
of Section 4(2) thereof, as transactions by an issuer not involving any public
offering. The stock certificates received by the named parties contained
restrictive legends pursuant to Rule 144. No underwriting discounts or
commissions were paid in connection with such issuance.
In April 1999 the Company issued 3,850,000 shares of Common Stock of
the Company to the shareholders of AllStar Arena Entertainment. The shares were
issued in a reverse acquisition transaction between the Company and AllStar, in
which such shareholders exchanged all of their shares for the shares of the
Company. Such securities were issued without registration under the Act by
reason of the exemption from registration afforded by the provisions of Section
4(2) thereof, as transactions by an issuer not involving any public offering.
Each of the shareholders of AllStar delivered appropriate investment
representations to the Company with respect to such transaction and consented to
the imposition of restrictive legends upon the certificates evidencing such
securities. No underwriting discounts or commissions were paid in connection
with such issuance. The Company determined that each shareholder was a
sophisticated investor, or that the shareholder's representative was
sophisticated.
Also in April 1999 the Company issued 1,300,000 shares of Common Stock
of the Company for an aggregate of $650,000 to various persons without
registration in a limited public offering pursuant to Rule 504 promulgated by
the Securities and Exchange Commission under the Securities Act of 1933 and
Section 3(b) thereunder. No underwriting discounts or commissions were paid in
connection with such issuances.
In November 1999 the Company issued a loan document and 250,000 shares
of Common Stock of the Company to The Orbiter Fund Ltd. The securities were
issued in connection with a loan of $600,000 to the Company by such fund. Such
securities were issued without registration under the Act by reason of the
exemption from registration afforded by the provisions of Section 4(2) thereof,
as transactions by an issuer not involving any public offering. The Orbiter Fund
delivered appropriate investment representations to the Company with respect to
such transaction and consented to the imposition of restrictive legends upon the
certificates evidencing such securities. No underwriting discounts or
commissions were paid in connection with such issuance. Management believes that
the representative of the fund is a sophisticated investor.
<PAGE>
Page 43 of 45
Also in November 1999 the Company issued 20,000 shares to Ronald N.
Vance, P.C. in connection with legal services provided by him. Such shares were
issued without registration under the Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof as transactions
by an issuer not involving any public offering. Mr. Vance delivered appropriate
investment representations to the Company with respect to such issuance and
consented to the imposition of a restrictive legend upon the certificate
evidencing such securities. No underwriting discounts or commissions were paid
in connection with such issuance. Mr. Vance is a sophisticated investor.
Also in November 1999 the Company sold 250,000 warrants to Deborah
Fensterheim. Such warrants were issued without registration under the Act by
reason of the exemption from registration afforded by the provisions of Section
4(2) thereof as transactions by an issuer not involving any public offering.
Mrs. Fensterheim delivered appropriate investment representations to the Company
with respect to such issuance and consented to the imposition of a restrictive
legend upon the certificate evidencing such securities. No underwriting
discounts or commissions were paid in connection with such issuance. The
purchaser representative for Mrs Fensterheim is sophisticated.
In August 1999 the Company issued promissory notes to Roger Tichenor
and James Skalko for $50,000 each. In January 2000 the Company issued 100,000
shares of Common Stock in connection with the conversion of such loans. Such
notes and shares were issued without registration under the Act by reason of the
exemption from registration afforded by the provisions of Section 4(2) thereof
as transactions by an issuer not involving any public offering. Each party
delivered appropriate investment representations to the Company with respect to
such issuances and consented to the imposition of restrictive legends upon the
certificates evidencing such securities. No underwriting discounts or
commissions were paid in connection with such issuance. Management believes that
these individuals are sophisticated investors.
In January 1999 the Company granted 342,500 options to various
employees and consultants. Such options were granted without registration under
the Act by reason of the exemption from registration afforded by Rule 701
promulgated by the Securities and Exchange Commission. No underwriting discounts
or commissions were paid in connection with such issuance. Each of these persons
was either an employee of the Company or a business consultant who provided bona
fide services which were not in connection with the offer or sale of securities
in a capital raising transaction and not directly or indirectly to promote or
maintain a market for the Company's securities.
Item 5. Exhibits
The exhibits set forth in the following index of exhibits are filed as
a part of this registration statement.
<PAGE>
Page 44 of 45
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Location
<S> <C> <C>
1.1 Funds Escrow Agreement (to be filed by amendment)
2.1 Reorganization Agreement with AllStar Arena, as amended
3.1 Articles of Incorporation, as amended
3.2 By-Laws of the Company currently in effect
4.1 Form of certificate evidencing shares of Common Stock
5.1 Opinion re Legality
10.1 Lock-up Agreement
10.2 Webber License Agreement (Confidential treatment has been requested for
a portion of this exhibit)
10.3 Malone License Agreement (Confidential treatment has been requested for
a portion of this exhibit)
10.4 MLB Properties License Agreement (Confidential treatment has been
requested for a portion of this exhibit)
10.5 MLB Players Association License Agreement
(Confidential treatment has been requested for a
portion of this exhibit)
10.6 Form of MLB Players Alumni Association License
(Confidential treatment has been requested for a
portion of this exhibit)
10.7 Form of NFL Properties License (Confidential treatment has been
requested for a portion of this exhibit)
10.8 Form of NFL Quarterback Club License (Confidential
treatment has been requested for a portion of this
exhibit)
10.9 NHL Players' Association License Agreement
(Confidential treatment has been requested for a
portion of this exhibit)
10.10 Diamond Comic Distribution Agreement
10.11 MJ Sports Agreement
10.12 Comic Cavalcade Agreement
10.13 Office Lease
10.14 Madison Leasing Agreement
10.15 Noble House of Boston, Inc. Advertising and Promotional
Services Agreement
10.16 The Orbiter Fund Ltd. Loan Agreement
10.17 Stock Option Plan
10.18 Stock Option Grant Form with Schedule of Option Holders
10.19 Warrant Certificate for Deborah Fensterheim
10.20 Tichenor Promissory Note
10.21 Skalko Promissory Note
21.1 List of Subsidiaries
23.1 Consent of Pritchett, Siler & Hardy, P.C.
23.2 Consent of Ronald N. Vance (contained in
Exhibit 5.1 above) --
</TABLE>
<PAGE>
Page 45 of 45
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned in the city of Los
Angeles, State of California, on the 15th day of February 2000.
ULTIMATE SPORTS ENTERTAINMENT, INC.
By: /s/ Frederick R. Licht, President and Chief
Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Date: February 15, 2000 /s/ Frederick R. Licht, Director, Chief Financial
Officer, and Principal Accounting Officer
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), entered
into this 30th day of March 1999, is by, between, and among Neurochemical
Research International Corp., a publicly held Delaware corporation
(hereinafter the "Purchaser"), AllStar Arena Entertainment, Inc., a
privately-held California corporation (hereinafter the "Private Company"),
and the shareholders of the Private Company who are listed on Schedule "A"
hereto and have executed Subscription Agreements in the form attached in
Schedule "B" hereto (the "Shareholders").
RECITALS:
WHEREAS, the Purchaser wishes to acquire, and the Shareholders, by
executing Schedule "B" hereto, are willing to sell, all of the outstanding
stock of the Private Company in exchange solely for a part of the voting
stock of the Purchaser whereby the Shareholders would acquire a controlling
interest of the Purchaser; and
WHEREAS, the parties hereto intend to qualify such transaction as a
tax-free exchange pursuant to Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended;
NOW, THEREFORE, based upon the stated premises, which are
incorporated herein by reference, and for and in consideration of the mutual
covenants and agreements set forth herein, the mutual benefits to the parties
to be derived herefrom, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
approve and adopt this Agreement and Plan of Reorganization and mutually
covenant and agree with each other as follows:
1. Shares to be Transferred and Shares to be Issued.
1.1 On the Closing Date the Shareholders shall transfer to
the Purchaser certificates for the number of shares of the common stock of
the Private Company described in Schedule "A," attached hereto and
incorporated herein, which in the aggregate shall represent not less than 80%
of the issued and outstanding shares of the common stock of the Private
Company at Closing.
1.2 In exchange for the transfer of the common stock of the
Private Company pursuant to subsection 1.1. hereof, the Purchaser shall on
the Closing Date and contemporaneously with such transfer of the common stock
of the Private Company to it by the Shareholders issue and deliver to the
Shareholders the number of shares of common stock of the Purchaser specified
on Schedule "A" hereof such that the Shareholders shall own approximately 55%
of the outstanding common stock of the Purchaser (including shares to be
issued pursuant to subsection 4.14 hereof).
2. Representations and Warranties of the Private Company. The
Private Company represents and warrants to the Purchaser as set forth below.
These representations and warranties
<PAGE>
are made as an inducement for the Purchaser to enter into this Agreement and,
but for the making of such representations and warranties and their accuracy,
the Purchaser would not be a party hereto.
2.1 Organization and Authority. The Private Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California with full power and authority to enter into
and perform the transactions contemplated by this Agreement. The Private
Company does not have any subsidiaries or own any interest in any other
entity.
2.2 Capitalization. As of the date of the Closing, the
Private Company will have a total of no more than 3,850,000 shares of common
stock issued and outstanding. All of the shares will have been duly
authorized and validly issued and will be fully paid and nonassessable. There
are no options, warrants, debentures, conversion privileges, or other rights,
agreements, or commitments obligating the Private Company to issue or to
transfer from treasury any additional shares of capital stock of any class.
Schedule "A" accurately sets forth all of the shareholders of record of the
Private Company and the number of shares held of record by each Shareholder.
2.3 Directors and Officers. The names and titles of all
directors and officers of the Private Company as of the date of this
Agreement are as follows: Frederick R. Licht, Director and President, Martin
Burke, Director, and Paul Fairchild, Secretary.
2.4 Performance of This Agreement. The execution and
performance of this Agreement and the transfer of stock contemplated hereby
have been authorized by the board of directors of the Private Company.
2.5 Financials. True copies of the financial statements of
the Private Company for the period ended October 31, 1998, (unaudited) have
been furnished to the Purchaser. Said financial statements are true and
correct in all material respects and present an accurate and complete
disclosure of the financial condition of the Private Company as of October
31, 1998, and the earnings for the periods covered, in accordance with
generally accepted accounting principles applied on a consistent basis.
2.6 Liabilities. There are no material liabilities of the
Private Company, whether accrued, absolute, contingent or otherwise, which
arose or relate to any transaction of the Private Company, its agents or
servants occurring prior to October 31, 1998, which are not disclosed by or
reflected in said financial statements. As of the date hereof, there are no
known circumstances, conditions, happenings, events or arrangements,
contractual or otherwise, which may hereafter give rise to liabilities,
except in the normal course of business of the Private Company.
2.7 Absence of Certain Changes or Events. Except as set
forth in this Agreement, since October 31, 1998, there has not been (i) any
material adverse change in the business, operations, properties, level of
inventory, assets, or condition of the Private Company, or (ii) any damage,
destruction, or loss to the Private Company (whether or not covered by
<PAGE>
insurance) materially and adversely affecting the business, operations,
properties, assets, or conditions of the Private Company.
2.8 Litigation. There are no legal, administrative or other
proceedings, investigations or inquiries, product liability or other claims,
judgments, injunctions or restrictions, either threatened, pending, or
outstanding against or involving the Private Company or its subsidiaries, if
any, or their assets, properties, or business, nor does the Private Company
or its subsidiaries know, or have reasonable grounds to know, of any basis
for any such proceedings, investigations or inquiries, product liability or
other claims, judgments, injunctions or restrictions. In addition, there are
no material proceedings existing, pending or reasonably contemplated to which
any officer, director, or affiliate of the Private Company or as to which any
of the Shareholders is a party adverse to the Private Company or any of its
subsidiaries or has a material interest adverse to the Private Company or any
of its subsidiaries.
2.9 Taxes. All federal, state, foreign, county and local
income, profits, franchise, occupation, property, sales, use, gross receipts
and other taxes (including any interest or penalties relating thereto) and
assessments which are due and payable have been duly reported, fully paid and
discharged as reported by the Private Company, and there are no unpaid taxes
which are, or could become a lien on the properties and assets of the Private
Company, except as provided for in the financial statements of the Private
Company, or have been incurred in the normal course of business of the
Private Company since that date. All tax returns of any kind required to be
filed have been filed and the taxes paid or accrued. There are no disputes as
to taxes of any nature payable by the Private Company.
2.10 Hazardous Materials. No hazardous material has been
released, placed, stored, generated, used, manufactured, treated, deposited,
spilled, discharged, released, or disposed of on or under any real property
currently or previously owned or leased by the Private Company or any of its
subsidiaries.
2.11 Accuracy of All Statements Made by the Private
Company. No representation or warranty by the Private Company in this
Agreement, nor any statement, certificate, schedule, or exhibit hereto
furnished or to be furnished by or on behalf of the Private Company pursuant
to this Agreement, nor any document or certificate delivered to the Purchaser
by the Private Company pursuant to this Agreement or in connection with
actions contemplated hereby, contains or shall contain any untrue statement
of material fact or omits or shall omit a material fact necessary to make the
statements contained therein not misleading.
3. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Private Company as set forth below. These
representations and warranties are made as an inducement for the Private
Company to enter into this Agreement and, but for the making of such
representations and warranties and their accuracy, the Private Company would
not be parties hereto.
3.1 Organization and Good Standing. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware with full
<PAGE>
power and authority to enter into and perform the transactions contemplated
by this Agreement. The Purchaser does not have any subsidiaries or own any
interest in any other entity.
3.2 Capitalization. The Purchaser has a total of 3,980,680
shares of common stock presently issued and outstanding (taking into account
the four-for-one forward split of the outstanding shares effective March 30,
1999). All of the shares will have been duly authorized and validly issued
and will be fully paid and nonassessable. Except for the Purchaser's
obligations hereunder with respect to the shares to be issued pursuant to
subsections 1.2 and 5.14 hereof, there are no options, warrants, debentures,
conversion privileges, or other rights, agreements, or commitments obligating
the Purchaser to issue or to transfer from treasury any additional shares of
capital stock of any class. The Purchaser has three classes of stock
authorized, namely 11,000,000 shares of common stock, par value $.001;
9,000,000 shares of Class B common stock, par value $.001; and 1,000,000
shares of preferred stock, par value $.001. The Purchaser has no shares of
Class B common stock or preferred stock outstanding. As of the Closing, the
Articles of Incorporation, as amended, of the Purchaser (the "Purchaser
Articles") and as currently in effect shall remain unchanged, except as
provided herein.
3.3 Performance of This Agreement. The execution and
performance of this Agreement and the issuance of stock contemplated hereby
have been authorized by the board of directors of the Purchaser.
3.4 Financials. True copies of the financial statements of
the Purchaser for the fiscal years ended December 31, 1997 (audited) and 1998
(unaudited) have been delivered by the Purchaser to the Private Company. The
audited financial statements have been examined and certified by Andersen
Andersen & Strong, Certified Public Accountants. Said financial statements
are true and correct in all material respects and present an accurate and
complete disclosure of the financial condition of the Purchaser as of
December 31, 1998, and the earnings for the periods covered, in accordance
with generally accepted accounting principles applied on a consistent basis.
3.5 Liabilities. There are no material liabilities of the
Purchaser, whether accrued, absolute, contingent or otherwise, which arose or
relate to any transaction of the Purchaser, its agents or servants which are
not disclosed by or reflected in said financial statements. As of the date
hereof, there are no known circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, which may hereafter give rise to
liabilities, except in the normal course of business of the Purchaser.
3.6 Litigation. There are no legal, administrative or other
proceedings, investigations or inquiries, product liability or other claims,
judgments, injunctions or restrictions, either threatened, pending, or
outstanding against or involving the Purchaser or its subsidiaries, if any,
or their assets, properties, or business, nor does the Purchaser or its
subsidiaries know, or have reasonable grounds to know, of any basis for any
such proceedings, investigations or inquiries, product liability or other
claims, judgments, injunctions or restrictions. In addition, there are no
material proceedings existing, pending or reasonably contemplated to which any
<PAGE>
officer, director, or affiliate of the Purchaser is a party adverse to the
Purchaser or any of its subsidiaries or has a material interest adverse to
the Purchaser or any of its subsidiaries.
3.7 Taxes. All federal, state, foreign, county and local
income, profits, franchise, occupation, property, sales, use, gross receipts
and other taxes (including any interest or penalties relating thereto) and
assessments which are due and payable have been duly reported, fully paid and
discharged as reported by the Purchaser, and there are no unpaid taxes which
are, or could become a lien on the properties and assets of the Purchaser,
except as provided for in the financial statements of the Purchaser, or have
been incurred in the normal course of business of the Purchaser since that
date. All tax returns of any kind required to be filed have been filed and
the taxes paid or accrued. There are no disputes as to taxes of any nature
payable by the Purchaser.
3.8 Hazardous Materials. No hazardous material has been
released, placed, stored, generated, used, manufactured, treated, deposited,
spilled, discharged, released, or disposed of on or under any real property
currently or previously owned or leased by the Purchaser or any of its
subsidiaries.
3.9 Legality of Shares to be Issued. The shares of common
stock of the Purchaser to be issued by the Purchaser pursuant to this
Agreement, when so issued and delivered, will have been duly and validly
authorized and issued by the Purchaser and will be fully paid and
nonassessable.
3.10 Accuracy of All Statements Made by the Purchaser. No
representation or warranty by the Purchaser in this Agreement, nor any
statement, certificate, schedule, or exhibit hereto furnished or to be
furnished by the Purchaser pursuant to this Agreement, nor any document or
certificate delivered to the Private Company pursuant to this Agreement or in
connection with actions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits to state or shall omit to state a
material fact necessary to make the statements contained therein not
misleading.
4. Covenants of the Parties.
4.1 Corporate Records.
a. Simultaneous with the execution of this
Agreement by the Private Company, if not previously furnished, such entity
shall deliver to the Purchaser copies of the articles of incorporation, as
amended, and the current bylaws of the Private Company, and copies of the
resolutions duly adopted by the board of directors of the Private Company
approving this Agreement and the transactions herein contemplated.
b. Simultaneous with the execution of this
Agreement by the Purchaser, if not previously furnished, such entity shall
deliver to the Private Company copies of the Purchaser Articles, and the
current bylaws of the Purchaser, and copies of the resolutions duly
<PAGE>
adopted by the board of directors of the Purchaser approving this Agreement
and the transactions herein contemplated.
4.2 Access to Information.
a. The Purchaser and its authorized
representatives shall have full access during normal business hours to all
properties, books, records, contracts, and documents of the Private Company,
and the Private Company shall furnish or cause to be furnished to the
Purchaser and its authorized representatives all information with respect to
its affairs and business as the Purchaser may reasonably request. The
Purchaser shall hold, and shall cause its representatives to hold
confidential, all such information and documents, other than information that
(i) is in the public domain at the time of its disclosure to the Purchaser;
(ii) becomes part of the public domain after disclosure through no fault of
the Purchaser; (iii) is known to the Purchaser or any of its officers or
directors prior to disclosure; or (iv) is disclosed in accordance with the
written consent of the Private Company. In the event this Agreement is
terminated prior to Closing, the Purchaser shall, upon the written request of
the Private Company, promptly return all copies of all documentation and
information provided by the Private Company hereunder.
b. The Private Company and its authorized
representatives shall have full access during normal business hours to all
properties, books, records, contracts, and documents of the Purchaser, and
the Purchaser shall furnish or cause to be furnished to the Private Company
and its authorized representatives all information with respect to its
affairs and business the Private Company may reasonably request. The Private
Company shall hold, and shall cause its representatives to hold confidential,
all such information and documents, other than information that (i) is in the
public domain at the time of its disclosure to the Private Company; (ii)
becomes part of the public domain after disclosure through no fault of the
Private Company; (iii) is known to the Private Company or any of its officers
or directors prior to disclosure; or (iv) is disclosed in accordance with the
written consent of the Purchaser. In the event this Agreement is terminated
prior to Closing, the Private Company shall, upon the written request of the
Purchaser, promptly return all copies of all documentation and information
provided by the Purchaser hereunder.
4.3 Actions Prior to Closing. From and after the date of
this Agreement and until the Closing Date:
a. The Purchaser and the Private Company shall
each carry on its business diligently and substantially in the same manner as
heretofore, and neither party shall make or institute any unusual or novel
methods of purchase, sale, management, accounting or operation.
b. Neither the Purchaser nor the Private Company
shall enter into any contract or commitment, or engage in any transaction not
in the usual and ordinary course of business and consistent with its business
practices.
<PAGE>
c. Neither the Purchaser nor the Private Company
shall amend its articles of incorporation or bylaws or make any changes in
authorized or issued capital stock, except as provided in this Agreement.
d. The Purchaser and the Private Company shall
each use its best efforts (without making any commitments on behalf of the
company) to preserve its business organization intact.
e. Neither the Purchaser nor the Private Company
shall do any act or omit to do any act, or permit any act or omission to act,
which will cause a material breach of any material contract, commitment, or
obligation of such party.
f. The Purchaser and the Private Company shall
each duly comply with all applicable laws as may be required for the valid
and effective issuance or transfer of stock contemplated by this Agreement.
g. Neither the Purchaser nor the Private Company
shall sell or dispose of any property or assets, except products sold in the
ordinary course of business.
h. The Purchaser and the Private Company shall
each promptly notify the other of any lawsuits, claims, proceedings, or
investigations that may be threatened, brought, asserted, or commenced
against it, its officers or directors involving in any way the business,
properties, or assets of such party.
4.4 Shareholders' Approval. The Purchaser shall promptly
submit this Agreement and the transactions contemplated hereby for the
approval of its stockholders by majority written consent or at a meeting of
stockholders and, subject to the fiduciary duties of the board of directors
of the Purchaser under applicable law, shall use its best efforts to obtain
stockholder approval and adoption of this Agreement and the transactions
contemplated hereby. In connection with such written action by, or meeting
of, stockholders, the Purchaser shall prepare a proxy or information
statement to be furnished to the shareholders of the Purchaser setting forth
information about this Agreement and the transactions contemplated hereby.
The Private Party shall promptly furnish to the Purchaser all information,
and take such other actions, as may reasonably be requested in connection
with any action to be taken by the Purchaser in connection with the
immediately preceding sentence. The Private Company shall have the right to
review and provide comments to the proxy or information statement prior to
mailing to the shareholders of the Purchaser.
4.5 No Covenant as to Tax or Accounting Consequences. It is
expressly understood and agreed that neither the Purchaser nor its officers
or agents has made any warranty or agreement, expressed or implied, as to the
tax or accounting consequences of the transactions contemplated by this
Agreement or the tax or accounting consequences of any action pursuant to or
growing out of this Agreement.
<PAGE>
4.6 Indemnification. The Private Company shall indemnify
Purchaser for any loss, cost, expense, or other damage (including, without
limitation, attorneys' fees and expenses) suffered by Purchaser resulting
from, arising out of, or incurred with respect to the falsity or the breach
of any representation, warranty, or covenant made by the Private Company
herein, and any claims arising from the operations of the Private Company
prior to the Closing Date. Purchaser shall indemnify and hold the Private
Company harmless from and against any loss, cost, expense, or other damage
(including, without limitation, attorneys' fees and expenses) resulting from,
arising out of, or incurred with respect to, or alleged to result from, arise
out of or have been incurred with respect to, the falsity or the breach of
any representation, covenant, warranty, or agreement made by Purchaser
herein, and any claims arising from the operations of Purchaser prior to the
Closing Date. The indemnity agreement contained herein shall remain operative
and in full force and effect, regardless of any investigation made by or on
behalf of any party and shall survive the consummation of the transactions
contemplated by this Agreement.
4.7 Publicity. The parties agree that no publicity,
release, or other public announcement concerning this Agreement or the
transactions contemplated by this Agreement shall be issued by any party
hereto without the advance approval of both the form and substance of the
same by the other parties and their counsel, which approval, in the case of
any publicity, release, or other public announcement required by applicable
law, shall not be unreasonably withheld or delayed.
4.8 Expenses. Except as otherwise expressly provided
herein, each party to this Agreement shall bear its own respective expenses
incurred in connection with the negotiation and preparation of this
Agreement, in the consummation of the transactions contemplated hereby, and
in connection with all duties and obligations required to be performed by
each of them under this Agreement.
4.9 Further Actions. Each of the parties hereto shall take
all such further action, and execute and deliver such further documents, as
may be necessary to carry out the transactions contemplated by this Agreement.
4.10 Name Change. On or before the Closing Date, the
Purchaser shall obtain board and shareholder authorization to amend the
Articles of Incorporation of the Purchaser to change its name to "Ultimate
Sports Entertainment, Inc."
4.11 Cancellation of Class B Stock. On or before the
Closing Date, the Purchaser shall obtain board and shareholder authorization
to amend the Articles of Incorporation of the Purchaser to cancel the entire
class of Class B common stock.
4.12 Increase Number of Authorized Common Shares. On or
before the Closing Date, the Purchaser shall obtain board and shareholder
authorization to amend the Articles of Incorporation of the Purchaser to
increase the total number of common shares to 50,000,000.
<PAGE>
4.13 Cancellation of Outstanding Shares. On or before the
Closing Date the Purchaser shall cancel 2,030,680 outstanding post-split
shares of common stock, such that at Closing the Purchaser shall have
1,950,000 shares of common stock outstanding, excluding the shares to be
issued pursuant to subsections 1.2 and 4.14 hereof.
4.14 Limited Offering. Prior to the Closing the Purchaser
shall conduct a limited offering of 1,200,000 shares of its common stock at
$0.50 per share. Said shares shall be offered for cash or for conversion of
up to $200,000 in convertible notes issued by the Private Company. The net
proceeds from such offering shall be made available at Closing to new
management of the Purchaser for the business of the Private Company.
4.15 Conversion and Collection of Private Company Loans. On
or before Closing the Private Company shall convert all related party
outstanding loans to additional paid in capital. In addition, on or before
Closing the Private Company shall collect all outstanding related party
loans. At Closing the Private Company shall have no outstanding loans
receivable from, or payable to, related parties.
5. Conditions Precedent to the Purchaser's Obligations. Each and
every obligation of the Purchaser to be performed on the Closing Date shall
be subject to the satisfaction prior thereto of the following conditions:
5.1 Truth of Representations and Warranties. The
representations and warranties made by the Private Company in this Agreement
or given on its behalf hereunder shall be substantially accurate in all
material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on and as
of the Closing Date.
5.2 Performance of Obligations and Covenants. The Private
Company shall have performed and complied with all obligations and covenants
required by this Agreement to be performed or complied with by it prior to or
at the Closing.
5.3 Officer's Certificate. The Purchaser shall have been
furnished with a certificate (dated as of the Closing Date and in form and
substance reasonably satisfactory to the Purchaser), executed by an executive
officer of the Private Company, certifying to the fulfillment of the
conditions specified in subsections 5.1 and 5.2 hereof.
5.4 No Litigation or Proceedings. There shall be no
litigation or any proceeding by or before any governmental agency or
instrumentality pending or threatened against any party hereto that seeks to
restrain or enjoin or otherwise questions the legality or validity of the
transactions contemplated by this Agreement or which seeks substantial
damages in respect thereof.
5.5 No Material Adverse Change. As of the Closing Date
there shall not have occurred any material adverse change, financially or
otherwise, which materially impairs the ability
<PAGE>
of the Private Company to conduct its business or the earning power thereof
on the same basis as in the past.
5.6 Shareholders' Approval. The holders of not less than a
majority of the outstanding common stock of the Purchaser shall have voted
for authorization and approval of this Agreement and the transactions
contemplated hereby.
5.7 Shareholders' Execution of Subscription Agreement. Each
of the Shareholders shall have duly executed and delivered a Subscription
Agreement in the form as set forth in Schedule "B" as of the Closing Date.
6. Conditions Precedent to Obligations of the Private Company. Each
and every obligation of the Private Company to be performed on the Closing
Date shall be subject to the satisfaction prior thereto of the following
conditions:
6.1 Truth of Representations and Warranties. The
representations and warranties made by the Purchaser in this Agreement or
given on its behalf hereunder shall be substantially accurate in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the
Closing Date.
6.2 Performance of Obligations and Covenants. The Purchaser
shall have performed and complied with all obligations and covenants required
by this Agreement to be performed or complied with by it prior to or at the
Closing.
6.3 Officer's Certificate. The Private Company shall have
been furnished with a certificate (dated as of the Closing Date and in form
and substance reasonably satisfactory to the Private Company), executed by an
executive officer of the Purchaser, certifying to the fulfillment of the
conditions specified in subsections 6.1 and 6.2 hereof.
6.4 No Litigation or Proceedings. There shall be no
litigation or any proceeding by or before any governmental agency or
instrumentality pending or threatened against any party hereto that seeks to
restrain or enjoin or otherwise questions the legality or validity of the
transactions contemplated by this Agreement or which seeks substantial
damages in respect thereof.
6.5 No Material Adverse Change. As of the Closing Date
there shall not have occurred any material adverse change, financially or
otherwise, which materially impairs the ability of the Purchaser to conduct
its business.
6.6 No Liabilities. As of the Closing Date the Purchaser
shall not have aggregate liabilities in excess of $1,000.
7. Change of Management. Upon and as a condition of Closing this
Agreement:
<PAGE>
7.1 Prior to Closing the Purchaser will present to its
shareholders for approval the election of Frederick R. Licht, Martin Burke,
and Robert M. Deutschman as the sole directors of the Purchaser effective
immediately following the Closing of this Agreement. Prior to Closing the
Private Company will furnish material information of Frederick R. Licht,
Martin Burke, and Robert M. Deutschman as nominees to be elected by the
shareholders of the Purchaser. Purchaser reserves the right to refuse to
cause the nomination of any or all such persons as directors of Purchaser if,
after review of the foregoing information concerning said persons, it is the
opinion of Purchaser that the election of such persons would not be in the
best interests of Purchaser.
7.2 The Private Company reserves the right to terminate
this Agreement if nominees selected by it are not elected or appointed as set
forth above.
8. Closing.
8.1 Time and Place. The Closing of this transaction
("Closing") shall take place at 57 West 200 South, Suite 310, Salt Lake City,
Utah, at 10:00 am, on April 5, 1999, or at such other time and place as the
parties hereto shall agree upon. Such date is referred to in this Agreement
as the "Closing Date."
8.2 Documents To Be Delivered by the Private Company. At
the Closing the Private Company shall deliver to the Purchaser the following
documents:
a. Executed copies of Schedule "B" executed by all
of the shareholders of the Private Company and the certificates for the
number of shares of common stock of the Private Company in the manner and
form required by subsection 1.1 hereof.
b. A stock certificate in the name of the
Purchaser representing all of the outstanding shares of stock of the Private
Company.
c. The certificate required pursuant to subsection
5.3 hereof.
d. Evidence of conversion of the outstanding loans
as required by subsection 4.15.
e. A certificate of good standing from the State
of California dated not more than twenty days prior to Closing.
f. A signed consent and/or minutes of the Private
Company's directors and shareholders approving this Agreement and each matter
to be approved under this Agreement.
g. Such other documents of transfer, certificates
of authority, and other documents as the Purchaser may reasonably request.
<PAGE>
8.3 Documents To Be Delivered by the Purchaser. At
the Closing the Purchaser shall deliver to the Private Company the following
documents:
a. Certificates for the number of shares of common
stock of the Purchaser as determined in subsection 1.2 hereof.
b. The certificate required pursuant to subsection
6.3 hereof.
c. The net proceeds of the limited offering set
forth in subsection 4.14 hereof.
d. A certificate of good standing from the State
of Delaware dated not more than twenty days prior to Closing.
e. A signed consent and/or minutes of the
Purchasers's directors and shareholders approving this Agreement and each
matter to be approved under this Agreement.
f. Such other documents of transfer, certificates
of authority, and other documents as the Private Company may reasonably
request.
9. Termination. This Agreement may be terminated by the Purchaser or
the Private Company by notice to the other if, (i) at any time prior to the
Closing Date any event shall have occurred or any state of facts shall exist
that renders any of the conditions to its or their obligations to consummate
the transactions contemplated by this Agreement incapable of fulfillment, or
(ii) on April 15, 1999, if the Closing shall not have occurred. Following
termination of this Agreement no party shall have liability to another party
relating to such termination, other than any liability resulting from the
breach of this Agreement by a party prior to the date of termination.
10. Miscellaneous.
10.1 Notices. All communications provided for herein shall
be in writing and shall be deemed to be given or made when served personally
or when deposited in the United States mail, certified return receipt
requested, addressed as follows, or at such other address as shall be
designated by any party hereto in written notice to the other party hereto
delivered pursuant to this subsection:
Purchaser: 57 West 200 South
Suite 310
Salt Lake City, UT 84101
Attn: Angela Ross
<PAGE>
With Copy to: Ronald N. Vance
Attorney at Law
57 West 200 South
Suite 310
Salt Lake City, UT 84101
Private Company
and Shareholders: 5410 Wilshire Boulevard
Suite 611
Los Angeles, CA 90036
Attn: Frederick R. Licht
With Copy to:
10.2 Default. Should any party to this Agreement default in
any of the covenants, conditions, or promises contained herein, the
defaulting party shall pay all costs and expenses, including a reasonable
attorney's fee, which may arise or accrue from enforcing this Agreement, or
in pursuing any remedy provided hereunder or by the statutes of the State of
Utah.
10.3 Assignment. This Agreement may not be assigned in
whole or in part by the parties hereto without the prior written consent of
the other party or parties, which consent shall not be unreasonably withheld.
10.4 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their
heirs, executors, administrators, successors and assigns.
10.5 Partial Invalidity. If any term, covenant, condition,
or provision of this Agreement or the application thereof to any person or
circumstance shall to any extent be invalid or unenforceable, the remainder
of this Agreement or application of such term or provision to persons or
circumstances other than those as to which it is held to be invalid or
unenforceable shall not be affected thereby and each term, covenant,
condition, or provision of this Agreement shall be valid and shall be
enforceable to the fullest extent permitted by law.
10.6 Entire Agreement. This Agreement constitutes the
entire understanding between the parties hereto with respect to the subject
matter hereof and supersedes all negotiations, representations, prior
discussions, letters of intent, and preliminary agreements between the
parties hereto relating to the subject matter of this Agreement.
10.7 Interpretation of Agreement. This Agreement shall be
interpreted and construed as if equally drafted by all parties hereto.
10.8 Survival of Covenants, Etc. All covenants,
representations, and warranties made herein to any party, or in any statement
or document delivered to any party hereto, shall
<PAGE>
survive the making of this Agreement and shall remain in full force and
effect until the obligations of such party hereunder have been fully
satisfied.
10.9 Further Action. The parties hereto agree to execute
and deliver such additional documents and to take such other and further
action as may be required to carry out fully the transactions contemplated
herein.
10.10 Amendment. This Agreement or any provision hereof may
not be changed, waived, terminated, or discharged except by means of a
written supplemental instrument signed by the party or parties against whom
enforcement of the change, waiver, termination, or discharge is sought.
10.11 Full Knowledge. By their signatures, the parties
acknowledge that they have carefully read and fully understand the terms and
conditions of this Agreement, that each party has had the benefit of counsel,
or has been advised to obtain counsel, and that each party has freely agreed
to be bound by the terms and conditions of this Agreement.
10.12 Headings. The descriptive headings of the various
sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
10.13 Counterparts. This Agreement may be executed in two
or more partially or fully executed counterparts, each of which shall be
deemed an original and shall bind the signatory, but all of which together
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto executed the foregoing
Agreement and Plan of Reorganization as of the day and year first above
written.
PURCHASER: Neurochemical Research International Corp.
By /s/ Angela M. Ross, President
PRIVATE COMPANY: AllStar Arena Entertainment, Inc.
By /s/ Frederick R. Licht, President
<PAGE>
SCHEDULE "A"
TO THE
AGREEMENT AND PLAN OF REORGANIZATION
<TABLE>
<CAPTION>
NO. OF SHARES OF NO. OF SHARES OF
NAME OF THE PRIVATE COMPANY THE PURCHASER
SHAREHOLDER TO BE TRANSFERRED TO BE ISSUED
<S> <C> <C>
Frederick R. Licht 1,050,000 1,050,000
Martin Burke 710,750 710,750
Paul Fairchild 57,750 57,750
Kevin McCarthy 38,500 38,500
Roger Rose 38,500 38,500
Peter Sussman 38,500 38,500
Herb Dogan 38,500 38,500
Joseph Yukich 385,000 385,000
Michael Walsh 192,500 192,500
Shirley Gibbons 325,000 325,000
Jay Botchman 300,000 300,000
Robert Deutschman 290,000 290,000
Rhonda Vargas 10,000 10,000
Anna Rabinovich 25,000 25,000
Geraldine Reback 300,000 300,000
Patricia E. French 25,000 25,000
Terry Timpone 25,000 25,000
--------- ---------
TOTAL 3,850,000 3,850,000
========= =========
</TABLE>
<PAGE>
AMENDMENT NO. 1
TO THE
AGREEMENT AND PLAN OF REORGANIZATION
This Amendment, entered into this 2nd day of April 1999, is to the
Agreement and Plan of Reorganization (the "Reorganization Agreement") dated
the 30th day of March 1999, by, between, and among Neurochemical Research
International, Corp., a Delaware corporation (hereinafter the "Purchaser"),
AllStar Arena Entertainment, a California corporation (hereinafter the
"Private Company"), and the shareholders of the Private Company listed on
Schedule "A" thereto and who executed Subscription Agreements in the form
attached in Schedule "B" thereto (the "Shareholders"). Pursuant to subsection
10.10 of the Reorganization Agreement, the parties hereby amend the following
provisions to read as follows:
2.6 Liabilities. There are no material liabilities of the
Private Company, whether accrued, absolute, contingent or otherwise, which
arose or relate to any transaction of the Private Company, its agents or
servants occurring prior to October 31, 1998, which are not disclosed by or
reflected in said financial statements. As of the date hereof, there are no
known circumstances, conditions, happenings, events or arrangements,
contractual or otherwise, which may hereafter give rise to liabilities,
except in the normal course of business of the Private Company and except for
a potential dispute with Joseph Yukich, a former officer of the Private
Company.
4.2 Access to Information.
a. The Purchaser and its authorized
representatives shall have full access during normal business hours to all
properties, books, records, contracts, and documents of the Private Company,
and the Private Company shall furnish or cause to be furnished to the
Purchaser and its authorized representatives all information with respect to
its affairs and business as the Purchaser may reasonably request. Unless
required by law, the Purchaser shall hold, and shall cause its
representatives to hold confidential, all such information and documents,
other than information that (i) is in the public domain at the time of its
disclosure to the Purchaser; (ii) becomes part of the public domain after
disclosure through no fault of the Purchaser; (iii) is known to the Purchaser
or any of its officers or directors prior to disclosure; or (iv) is disclosed
in accordance with the written consent of the Private Company. In the event
this Agreement is terminated prior to Closing, the Purchaser shall, upon the
written request of the Private Company, promptly return all copies of all
documentation and information provided by the Private Company hereunder.
b. The Private Company and its authorized
representatives shall have full access during normal business hours to all
properties, books, records, contracts, and documents of the Purchaser, and
the Purchaser shall furnish or cause to be furnished to the Private Company
and its authorized representatives all information with respect to its
affairs and business the Private Company may reasonably request. Unless
required by law, the Private
<PAGE>
Company shall hold, and shall cause its representatives to hold confidential,
all such information and documents, other than information that (i) is in the
public domain at the time of its disclosure to the Private Company; (ii)
becomes part of the public domain after disclosure through no fault of the
Private Company; (iii) is known to the Private Company or any of its officers
or directors prior to disclosure; or (iv) is disclosed in accordance with the
written consent of the Purchaser. In the event this Agreement is terminated
prior to Closing, the Private Company shall, upon the written request of the
Purchaser, promptly return all copies of all documentation and information
provided by the Purchaser hereunder.
4.6 Indemnification. The Private Company shall indemnify
Purchaser for any loss, cost, expense, or other damage (including, without
limitation, attorneys' fees and expenses) suffered by Purchaser resulting
from, arising out of, or incurred with respect to the falsity or the breach
of any representation, warranty, or covenant made by the Private Company
herein, and any claims arising from the operations of the Private Company
prior to the Closing Date and not reflected in the financial statements of
the Private Company furnished pursuant hereto. Purchaser shall indemnify and
hold the Private Company harmless from and against any loss, cost, expense,
or other damage (including, without limitation, attorneys' fees and expenses)
resulting from, arising out of, or incurred with respect to, or alleged to
result from, arise out of or have been incurred with respect to, the falsity
or the breach of any representation, covenant, warranty, or agreement made by
Purchaser herein, and any claims arising from the operations of Purchaser
prior to the Closing Date and not reflected in the financial statements of
the Purchaser furnished pursuant hereto. The indemnity agreement contained
herein shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any party and shall survive the
consummation of the transactions contemplated by this Agreement.
4.12 Increase Number of Authorized Common Shares. On or
before the Closing Date, the Purchaser shall obtain board and shareholder
authorization to amend the Articles of Incorporation of the Purchaser to
increase the total number of authorized common shares to 50,000,000.
10.3 Assignment. This Agreement may not be assigned in
whole or in part by the parties hereto without the prior written consent of
the other party or parties.
SCHEDULE "A"
TO THE
AGREEMENT AND PLAN OF REORGANIZATION
<TABLE>
<CAPTION>
NO. OF SHARES OF NO. OF SHARES OF
NAME OF THE PRIVATE COMPANY THE PURCHASER
SHAREHOLDER TO BE TRANSFERRED TO BE ISSUED
<S> <C> <C>
Frederick R. Licht 272,726 1,050,000
Martin Burke 184,610 710,750
Paul Fairchild 15,000 57,750
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Kevin McCarthy 10,000 38,500
Roger Rose 10,000 38,500
Peter Sussman 10,000 38,500
Herb Dogan 10,000 38,500
Joseph Yukich 100,000 385,000
Michael Walsh 50,000 192,500
Shirley Gibbons 84,416 325,000
Jay Botchman 77,922 300,000
Robert Deutschman 75,325 290,000
Rhonda Vargas 2,597 10,000
Anna Rabinovich 6,494 25,000
Geraldine Reback 77,922 300,000
Patricia E. French 6,494 25,000
Terry Timpone 6,494 25,000
--------- ---------
TOTAL 1,000,000 3,850,000
========= =========
</TABLE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment the
day and year first above written.
PURCHASER: Neurochemical Research International, Corp.
By /s/ Angela M. Ross, President
PRIVATE COMPANY: AllStar Arena Entertainment
By /s/ Frederick R. Licht, President
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN SURGICAL LASER-DEL., INC.
1. Name. The name of the corporation is American Surgical Laser-Del., Inc.
2. Registered Office and Agent. The address of the registered office of the
corporation in the State of Delaware is 229 South State Street, Dover, in the
County of Kent. The registered agent at such address is The Prentice-Hall
Corporation System, Inc.
3. Purpose. The purpose of the corporation is to engage in any lawful act of
activity for which corporations may be organized under the General
Corporation Law of Delaware.
4. Capitalization. The corporation shall be authorized to issue the following
capital stock:
<TABLE>
<CAPTION>
Number
Class Par Value Authorized
- ----- --------- ----------
<S> <C> <C>
Common $ .001 11,000,000
Preferred $ .001 1,000,000
</TABLE>
5. Incorporator. The name and mailing address of the incorporator is:
Jane A. Rudnick
Nutter, McClennen & Fish
Federal Reserve Plaza
600 Atlantic Avenue
Boston, MA 02210
6. Corporate Existence. The corporation is to have perpetual existence.
7. Other Provisions. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware:
A. The board of directors is expressly granted authority to fix by
resolution or resolutions the designations and the powers, preferences
and rights, and the qualifications, limitations or restrictions of any
class or classes of stock or any series of any class of stock.
<PAGE>
B. The books of the corporation may be kept at such place
within or without the State of Delaware as the By-laws of the
corporation may provide or as may be designated from time to time
by the board of directors of the corporation.
8. Compromises or Arrangements. Whenever a compromise or arrangement
is proposed between this corporation and its creditors or any class of them
and/or between this corporation and its stockholders or any class of them,
any court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this corporation under the provisions of section 291 of Title 8
of the Delaware Code or on the application of trustees in dissolution or of
any receiver or receivers appointed for this corporation under the provisions
of section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
9. By-Laws. The Board of Directors may adopt, amend, or repeal the
By-laws of the corporation, except that any By-law adopted by the
stockholders may be altered or repealed only by the stockholders if such
By-law so provides.
10. Elections. The election of Directors by the stockholders need
not be by written ballot unless the By-laws of the corporation provide
otherwise.
IN WITNESS WHEREOF, the undersigned does hereby execute this
instrument on January 18, 1985 and acknowledge, under pain of the penalties
for perjury, that this instrument is her free act and deed and that the facts
stated herein are true.
/s/Jane A. Rudnick
Jane A. Rudnick, Incorporator
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
of
AMERICAN SURGICAL LASER, INC.
(a Utah corporation)
into
AMERICAN SURGICAL LASER-DEL., INC.
(a Delaware corporation)
It is hereby certified that:
1. American Surgical Laser, Inc. (hereinafter called the
"corporation") is a corporation of the State of Utah, the laws of which
permit a merger of a corporation of that jurisdiction with a corporation of
another jurisdiction.
2. The corporation, as the owner of all of the outstanding shares of
stock of American Surgical Laser-Del., Inc. ("ASL-Del."), hereby merges
itself into ASL-Del, a corporation of the State of Delaware.
3. The following is a copy of the resolution adopted on the 10th day
of January, 1985, by the Board of Directors of the corporation to merge the
corporation into ASL-Del.:
VOTED: That the Agreement of Merger between American Surgical Laser ("ASL")
and American Surgical LaserDel., Inc., ("American Surgical Del."), a
Delaware corporation, pursuant to which ASL is to be merged into
American Surgical Del. and American Surgical Del. is to change its name
to American Surgical Laser, Inc., substantially in the form presented
to this meeting and attached hereto as Exhibit 1, be and the same
hereby is approved and adopted subject to the same, being approved and
adopted by the shareholders of ASL entitled to vote thereon at a
meeting duly called and held by them; that Anthony G. Featherston, as
President of ASL, be and hereby is authorized to execute and deliver
said Agreement of Merger on behalf of ASL and to take such steps as he
deems necessary and proper to implement and effectuate the same, his
signature on any document to be conclusive evidence of his authority
hereunder and that the merger of ASL into American Surgical Del. as
contemplated by said Agreement be and the same hereby is authorized and
approved by this Board.
<PAGE>
-2-
4. The proposed merqer herein certified has been approved by at
least a majority of the outstanding stock entitled to vote of the corporation
at a meeting thereof, duly called and held after at least 20 days' notice of
the time, place, and purpose of the meeting mailed to each such stockholder
at his address as it appears on the records of the corporation.
Signed and attested to on March 06, 1985.
/s/Anthony G. Featherston
Anthony G. Featherston, President
of American Surgical Laser, Inc.
Attest:
/s/Jerald J. Billow
Secretary of
American Surgical Laser, Inc.
STATE OF MASSACHUSETTS )
) SS.:
COUNTY OF SUFFOLK )
BE IT REMEMBERED that, on March 6th, 1985, before me, a Notary
Public duly organized by law to take acknowledgement of deeds, personally
came Anthony G. Featherston, President of American Surgical Laser, Inc., who
duly signed the foregoing instrument before me and acknowledged that such
instrument as executed is the act and deed of said corporation, that his
signing is his act and deed, and that the facts stated therein are true.
GIVEN under my hand on March 6th, 1985.
/s/Judith A. Ingalls
Notary Public
NOTARIAL SEAL
<PAGE>
AGREEMENT AND PLAN OF MERGER
of
AMERICAN SURGICAL LASER, INC.
(a Utah corporation)
INTO
AMERICAN SURGICAL LASER-DEL., INC.
(a Delaware corporation)
AGREEMENT AND PLAN OF MERGER made and entered into this day of ,
l985 by and between American Surgical Laser, Inc., hereafter sometimes
referred to as "American Surgical", a Utah corporation, and American Surgical
Laser-Del., Inc., hereinafter sometimes referred to as "American Surgical
Del.", a Delaware corporation, approved by a resolution adopted by the Board
of Directors of each such corporation. American Surgical and American
Surgical Del. are herainafter sometimes referred to as the "Constituent
Corporations."
WHEREAS American Surgical is a business corporation organized under
the laws of the State of Utah; and
WHEREAS the total number of shares of stock which American Surgical
has authority to issue is 50,000,000 all of which are of one class and $.OO1
par value; and
WHEREAS American Surgical Del. is a business corporation organized
under the laws of the state of Delaware; and
WHEREAS the total number of shares of stock which American Surgical
Del. has authority to issue is 11,OOO,OOO shares of Common Stock, $.001 par
value and 1,000.000 shares of Preferred Stock, $.001 par value; and
WHEREAS the Utah Business Corporation Act permits a merger of a
business corporation of the State of Utah with and into a business
corporation organized under the laws of another jurisdiction; and
WHEREAS the Business Corporation Law of Delaware permits the merger
of a business corporation of another jurisdiction with and into a business
corporation organized under the laws of the State of Delaware; and
WHEREAS American Surgical and American Surgical Del. and the
respective Board of Directors thereof deem it advisable and to the advantage,
welfare and best interests of said corporations and their respective
stockholders to merge American Surgical with and into American Surgical Del.
pursuant to the provisions of the Utah Business Corporaticn Act and pursuant
to the provisions of the Business Corporation Law of
<PAGE>
the state of Delaware upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and of the mutual
agreement of the parties hereto, being thereunto duly entered into by
American Surgical and approved by a resolution adopted by its Board of
Directors and by its shareholders, in accordance with the Utah Business
Corporation Act and being thereunto duly entered into by American Surgical
Del. and approved by a resolution adopted by its Board of Directors and its
shareholders, in accordance with the Business Corporation Law of the State of
Delaware, the Agreement and Plan of Merger and the terms and conditions
thereof and the mode of carrying the same into effect, together with any
provisions required or permitted to be set forth therein, are hereby
determined and agreed upon as hereinafter in this Agreement set forth.
1. American Surgical shall, pursuant to the provisions of the Utah
Business Corporation Act and to the provisians of the Business Corporation
Law of the State of Delaware, be liquidated by merging into American Surgical
Del. upon the Effective Date of Merger, as hereinafter defined, and the
separate existence of American Surgical shall thereupon cease. American
Surgical Del. shall be the surviving corporation and shall continue to be
governed by the laws of the State of Delaware under the name American
Surgical Laser, Inc. American Surgical Del. as such surviving corporation is
hereinafter referred to as the "Surviving Corporation".
2. The Merger shall become effective upon the filing and recording
of the Agreement and Plan of Merger by the Secretary of the State of Delaware
or upon the filing and recording of Articles of Merger by the Secretary of
the State of Utah, whichever is later.
3. The Certificate of Incorporation of American Surgical Del. as in
effect on the Effective Date of Merger shall be the Certificate of
Incorporation of the Surviving Corporation and will continue in full force
and effect until altered or amended as therein provided or as provided by law.
4. The By-laws of American Surgical Del. as in effect on the
Effective Date of Merger shall be the By-laws of the Surviving Corporation
and will continue in full force and effect until altered or amended as
therein provided or as provided by law.
5. The directors and officers of American Surgical on the Effective
Date of Merger shall be the directors and officers of the Surviving
Corporation, all of whom shall hold their directorships and offices until the
election and qualification of their respective successors or until their
tenure is
<PAGE>
otherwise terminated by law or in accordance with the By-laws or certificate
of Incorporation of the Surviving Corporation.
6. The manner of converting the shares of each of the Constituent
Corporation into shares of securities of the Surviving Corporatian shall be
as follows. Each share of Common Stock of American Surgical, $.OO1 par value,
which is issued and outstanding immediately prior to the Effective Date of
Merger, shall be converted into one issued and outstanding share of Common
Stock, $.001 par value, of the Surviving Corporation. All treasury shares of
common stock of American Surgical shall be cancelled. Each share of Common
Stock of American Surgical Del., $.O01 par value, which is issued and
outstanding immediately prior to the Effective Date of Merger shall be
cancelled. On the Effective Date of Merger the outstanding shares of Common
Stock of the Constituent Corporations, in each of the foregoing transactions,
shall automatically be converted upon the basis above specified whether or
not certificates representing said shares are then issued and delivered.
7. The Surviving Corporation does hereby agree that it may be served
with process in the State of Utah in any proceeding for enforcement of any
obligation of American Surgical, as well as for enforcement of any obligation
of the Surviving Corporation arising from the merger herein provided for,
including any suit or other proceeding to enforce the right of any
stockholder of American Surgical as and when determined in appraisal
proceedings pursuant to the provisions of Section of the Utah Business
Corporation Act; and does hereby irrevocably appoint the Secretary of State
of Utah as its agent to accept service of process in any such suit or other
proceedings; and does hereby specify the following address to which a copy of
such process shall be mailed by the Secretacy of State of Utah.
8. In the event that this Agreement and Plan of Merger shall have
been fully approved and adopted on behalf of American Surgical in accordance
with the provisions of the Utah Business Corporation Act of the State of Utah
and on behalf of American Surgical Del. in accordance with the provisions of
the General Business Corporation Law of Delaware, the said corporations agree
that they will cause to be executed and filed and recorded any document or
documents prescribed by the laws of the State of Utah and the State of
Delaware and that they will cause to be performed all necessary acts within
the state of Utah and the State of Delaware and elsewhere to effectuate the
merger herein provided for.
9. The Board of Directors and the proper officers of American
Surgical and of American Surgical Del. are hereby authorized, empowered and
directed to do any and all acts and
<PAGE>
things, and to make, execute, deliver, file, and record any and all
instruments, papers and documents which shall be or become necessary, proper
or convenient to carry out or put into effect any of the provisions of this
Agreement and Plan of Merger or of the merger herein provided for.
10. Notwithstanding the full approval or adoption of this agreement and
Plan of Merger, said Agreement and Plan of Merger may be abandoned and
terminated at any time prior to the filing of the Agreement and Plan of
Merger by the Secretary of the State of Delaware or the filing of the
Articles of Merger by the Secretary of the State of Utah, whichever is later,
in the event the Constituent Corporations so agree in writing.
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been hereby
executed as of the date and year first above written on behalf of each of the
Constituent Corporations, parties thereto by a majority of the Board of
Directors of each of them.
AMERICAN SURGICAL LASER, INC.
CORPORATE By:
SEAL Anthony G. Featherston,
President
AMERICAN SURGICAL LASER-DEL., INC.
CORPORATE By:
SEAL Anthony G. Featherston
President
<PAGE>
CERTIFICATE OF SECRETARY
OF
AMERICAN SURGICAL LASER, INC.
The undersigned, being the Secretery of American Surgical Laser, Inc.,
does hereby certify that the foregoing Agreement and Plan of Merger was
consented to by a majority of the stockholders of said corporation entitled to
vote at a meeting either in person or by proxy.
I further certify that the aforesaid vote remains in full force and
effect on the date of this certificate.
Dated: , 1985
CORPORATE
SEAL
Gerald J. Billow,
Secretary
The foregoing Agreement and Plan of Merger having been approved and
certified is hereby executed by the President and by the Secretary of Americen
Surgical Laser, Inc. as the act and deed of such corporation on , 1985, under
the corporate seal of the corporation.
AMERICAN SURGICAL LASER, INC.
CORPORATE By:
SEAL Anthony G. Featherston,
President
By:
Gerald J. Billow, Secretary
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
CITY OF )
Be it remembered that on this day of January, 1985, personally came
before me, a Notary Public in and for the Commonwealth of Massachusetts, the
aforesaid Anthony G. Featherston and Gerald J. Billow, being respectively the
President and Secretary of American Surgical Laser, Inc., a corporation
organized under the laws of the State of Utah, the corporation described in
and which executed the foregoing certificate, known to me personally to be
such, and they, the said Anthony G. Featherston and Gerald J. Billow, as such
President and Secretary, duly executed said certificate before me and
acknowledged the said certiflcate to be their act and deed and the act and
deed of said corporation; that the signatures of the said President and
Secretary of said corporation to the foregoing certificate are in the
handwriting of the said President and Secretary that the seal affixed to said
certificate is the common or corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the date and
year aforesaid.
Notary Public
NOTARIAL SEAL
<PAGE>
CERTIFICATE OF SECRETARY
OF
AMERICAN SURGICAL LASER-DEL., INC.
The undersigned, being the Secretary of American Surgical Laser-Del.,
Inc., does hereby certify that the foregoing Agreement and Plan of Merger was
consented to by all the stockholders of said corporation entitled to vote by
written instrument dated , 1985. By such stockholder action the Agreement and
Plan of Merger was considered by the stockholdecs of the corporation entitled to
vote, and all such outstanding shares of the corporation so entitled to vote
herein consented to the adoption of the Agreement and Plan of Merger.
I further certify that the aforesaid consent remains in full force and
effect on the date of this certificate.
Dated: , 1985
CORPORATE
SEAL
Gerald J. Billow, Secretary
The foregoing agreement and Plan of Merger having been approved and
certified is hereby executed by the President and by the Secretary of American
Surgical Laser-Del., Inc., as the act and deed of such corporation on ,1985
under the corporate seal of the corporation.
AMERICAN SURGICAL LASER-DEL., INC.
CORPORATE By
SEAL Anthony G. Featherston
President
By
Gerald J. Billow, Secretary
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
CITY OF )
Be it remembered that on this day of January, 1985, personally came
before me, a Notary Public in and for the Commonwealth of Massachusetts, the
aforesaid Anthony G. Featherston and Gerald J. Billow, being respectively the
President and Secretary of American Surgical Laser-Del., Inc. a corporation
organized under the laws of the State of Delaware, the corporation described in
and which executed the foregoing certificate, known to me personally to be such,
and they, the said Anthony G. Featherston and Gerald J. Billow, as such
President and Secretary, duly executed said certificate before me and
acknowledged the said cercificate to be their act and deed and the act and deed
of said corporation; that the signatures of the said President and Secretary of
said corporation to the foregoing certificate are in the handwriting of the said
President and Secretary of said corporation, respectively, and that the seal
affixed to said certificate is the common or corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the date and
year aforesaid.
Notary Public
NOTARIAL SEAL
<PAGE>
CERTIFICATE OF DESIGNATION
OF
American Surgical Laser, Inc.
(formerly American Surgical Laser-Del, Inc.)
I, Anthony G. Featherston, President of American Surgical Laser, Inc., a
Delaware corporation, DO HEREBY CERTIFY that the following is a true and
correct copy of a resolution adopted by the Board of Directors of the
corporation on March 7, 1985
RESOLVED: That the Designations, Preferences and Relative,
Participating, Optional or other Rights of the Series
A Convertible Preferred Stock, substantially in
the form attached hereto as Exhibit C, providing
for the relative voting rights of the Series A Con
veritable Preferred Stock of the Corporation be and
hereby is authorized and approved and that the
officers of the Corporation be and hereby are authorized
in the name and on behalf of the Corporation to
cause to be filed with the Secretary of State of
the State of Delaware said Designations with such
changes, additions, deletions and amendments as
the officers and counsel to the Corporation, or
any of them, may approve, in his or their sole dis-
cretion as being necessary, desirable or appropriate,
the making of any such change, addition, deletion
or amendment to be conclusive evidence of such approval
and of the authority therefor hereunder.
I further certify that the foregoing resolutions are still in full force and
effect and have not been modified, amended or rescinded in and respect.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 8th day of
March, 1985.
/s/Anthony G.Featherston, Pres.
Anthony G. Featherston
President
I, Gerald J. Billow, being the duly elected Secretary of American Surgical
Laser-Del., Inc., DO HEREBY CERTIFY that
<PAGE>
Anthony G. Featherston is the duly elected President of the
Corporation and the signature set forth above is his true and
correct signature.
ATTEST: /s/Gerald J. Billow Sec.
Gerald J. Billow
Secretary
<PAGE>
Exhibit C
AMERICAN SURGICAL LASER, INC.
DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS OF THE SERIES A
CONVERTIBLE PREFERRED STOCK
1. DIVIDENDS. The holders of Series A Convertible Preferred Stock shall
be entitled to receive, in preference to the holders of any class of Common
Stock or any other Junior Stock, cumulative cash dividends at the rate of
$.30 per share per annum. Such dividends shall begin to accrue from and after
September 30, 1985 and shall be payable in equal semi-annual installments of
$.15 per share in cash on March 31 and September 30 of each year, commencing
March 31, 1986. The foregoing dividends shall be declared by the Board of
Directors of the Corporation and paid, in its discretion, to the holders of
Series A Convertible Preferred Stock to the extent permitted by law. The
dividends payable to the holders of Series A Convertible Preferred Stock
shall accrue on each dividend payment date to the extent of the installment
due on such date and shall be cumulative semi-annually, so that if on any
dividend payment date full dividends upon the outstanding Series A
Convertible Preferred Stock shall not have been paid in full in accordance
with the provisions of this paragraph 1, then the deficiency shall be
declared and paid, or irrevocably set aside for payment, before (i) any
dividends shall be declared and paid, or set aside for payment, upon the
Common stock or any other Junior Stock or (ii) the Corporation shall make any
other distribution in respect of Common Stock or any Junior Stock, or payment
on account of the redemption, purchase or acquisition of such stock, except
for the repurchase of shares of Common Stock from former officers, directors
or employees of the Corporation. The holders of Series A Convertible
Preferred Stock shall not be entitled to any dividends except as aforesaid,
nor shall they be entitled to any interest on any dividends which may be in
arrears.
2. LIQUIDATION. In the event of a voluntary or involuntary liquidation,
dissolution or winding up of the corporation, the holders of Series A
Convertible Preferred Stock shall be entitled to receive $3.00 per share,
plus accrued and unpaid dividends, before any distribution or payment is made
to the holders of Common Stock or any Junior Stock. If, upon any such
liquidation, dissolution or winding up of the Corporation, the assets
distributable among the holders of the Series A Convertible Preferred Stock
shall be insufficient to permit the payment in full to such holders of the
amount herein above provided, then the entire assets of the corporation shall
be applied ratably to the payment of such amount to the holders of Series A
Convertible Preferred Stock then outstanding.
Neither the merger nor the consolidation of the Corporation, nor the sale,
lease or conveyance of all or a part of its property and business as an
entirety, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this paragraph 2, unless such sale,
lease conveyance shall be in connection with a plan of liquidation,
dissolution or winding up of the Corporation.
3. REDEMPTIONS. (a) To the extent permitted by law, the Corporation
shall redeem on September 30, 1990, and on each September 30, thereafter to
an including September 30,
<PAGE>
1994, a number of shares of Series A Convertible Preferred Stock equal to 20%
of the aggregate number of shares of Series A Convertible Preferred Stock
outstanding on the close of business on September 29, 1990, or if the shares
then issued and outstanding are less than 20% of the aggregate number of
shares outstanding on the close of business on September 29, 1990, then all
such shares. Such redemption shall be at a redemption price equal to the sum
of $3.00 per share, plus accrued and unpaid dividends thereon to the date
fixed for redemption (the "Redemption Price").
(b) The shares of Series A Convertible Preferred Stock at the time
outstanding may be redeemed by the corporation, in whole or in part, at the
option of the corporation expressed by a resolution of its Board of
Directors, at any time and from time to time after March 30, 1986 at the
Redemption Price.
(c) If pursuant to paragraph 3(a) or 3(b) the corporation shall seek to
redeem any shares of Series A Convertible Preferred Stock, the Corporation
shall give written notice of such redemption to each holder of record of
shares of Series A Convertible Preferred Stock to be redeemed not less than
30 nor more than 60 days prior to the date fixed for redemption, by certified
mail enclosed in a postage paid envelope addressed to such holder at such
holder's address as the same shall appear on the books of the Corporation.
Such notice shall (i) state that the Corporation has elected or is required
to redeem such Shares, (ii) state the date fixed for redemption, (iii) state
the amount payable on redemption, (iv) stare that the Shares called for
redemption are convertible, until the close of business on the fifth day
preceding the date fixed for redemption and (v) cal-1 upon such holder to
surrender to the Corporation on or after said date at its principal place of
business designated in such notice, a certificate or certificates
representing the number of shares of Series A , Convertible Preferred Stock
to be redeemed in accordance with such notice. on or after the date fixed in
such notice for redemption, each holder of shares of Series A Convertible
Preferred Stock to be so redeemed shall present and surrender the certificate
or certificates for such shares to the Corporation at the place designated in
said notice and thereupon the Redemption Price of such shares shall be paid
to, or to the order of, whose name appears on such certificate or
certificates as the owner thereof. From and after the date fixed in any such
notice as the date for Redemption, unless default shall be made by the
Corporation in providing for the payment of the Redemption Price pursuant to
such notice, all rights of the holders of the Series A Convertible Preferred
Stock so redeemed, except the right to receive the Redemption Price (but
without interest thereon) shall cease and terminate.
(d) Any shares of Series A Convertible Preferred Stock redeemed by the
Corporation shall be retired and shall not be reissued and the Corporation
may from time to time take such appropriate action as may be necessary to
reduce the authorized Series A Convertible Preferred Stock.
4. Conversion. (a) The holder of any share or shares D.0 Series A
Convertible Preferred Stock shall have the right, at it's option to convert
all or any portion of such shares into fully paid and nonassessable shares of
Common Stock of the Corporation at any time and from time to time after the
date of at the rate of four shares of Common Stock for each one share of
Series A Convertible Preferred Stock, or at the rate which results from the
making of any adjustment specified in subparagraph (f) hereof (the number of
shares of Common Stock issuable at any time, giving effect to the latest
prior adjustment pursuant to subparagraph (f) hereof, if any, in exchange for
one share of Series A Convertible Preferred Stock
<PAGE>
being hereinafter called the "Conversion Rate"). When shares of Series A
Convertible Preferred Stock are converted, all dividends accrued and unpaid
on the stock so converted to the date of conversion (whether or not currently
payable) shall be immediately due and payable and must accompany the shares
of Common Stock issued upon such conversion.
(b) The Series A Convertible Preferred Stock shall be convertible at
the principal office of the Corporation into fully paid and nonassessable
shares of Common Stock at the Conversion Rate. In case of the redemption
pursuant to paragraph 3(a) or 3(b) of any shares of. Series A Convertible
Preferred Stock, such right of conversion shall cease and terminate, as to
the shares to be redeemed. at the close of business on the fifth day
preceding the date fixed for such redemption, unless default shall be made in
the payment of the Redemption Price for the shares to be so redeemed.
(c) In order to convert shares of Series A Convertible Preferred Stock
into shares of Common Stock pursuant to the right of conversion set forth in
subparagraph (a), the holder thereof shall surrender the certificate or
certificates representing Series A Convertible Preferred Stock, endorsed to
the Corporation or in blank, at the principal office of the Corporation and
shall give written notice to the Corporation that such holder elects to
convert the same, stating in such notice the name or names in which such
holder wishes the certificate or certificates representing shares of Common
Stock to be issued. The Corporation shall, within five business days, deliver
at said office or other place to such holder of Series A Convertible
Preferred Stock, or to such holder's nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid, together with cash to which such holder shall
be entitled in lieu of fractional shares. Shares of Series A Convertible
Preferred Stock shall be deemed to have been converted as of the date of the
surrender of such shares for conversion as provided above, and the person or
persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on such date. upon conversion of only a
portion of the number of shares covered by a certificate representing shares
of Series A Convertible Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver to, or upon the written order of the
holder of the certificate so surrendered for conversion, at the expense of
the Corporation, a new certificate covering the number of shares of Series A
Convertible Preferred Stock representing the unconverted portion of the
certificate so surrendered, which new certificate shall entitle the holder
thereof to the rights of the shares of Series A Convertible Preferred Stock
representing thereby to the same extent a if the certificate theretofore
covering such unconverted shares had not been surrendered for conversion.
(d) Notwithstanding the provisions of subparagraph (a) hereof, the
issued and outstanding shares of Series A Convertible Preferred Stock shall
be automatically converted into fully paid and nonassessable shares of Common
Stock at the Conversion Rate immediately upon the consummation of the
Corporation's initial sale of Common Stock in a bona fide firm commitment
underwriting pursuant to a registration statement filed with and declared
effective by the Securities Act of 1933 which results in aggregate net cash
proceeds to the Corporation of at least $5,000,000. When shares of Series A
Convertible Preferred Stock are converted, all dividends accrued and unpaid
on the stock so converted to the date of conversion (whether or not currently
payable) shall be immediately due and payable and must accompany the shares
of Common Stock issued upon such conversion. Such dividends may be paid, at
the option of the Corporation, in whole or in part in shares of Common Stock
of the Corporation. Each such share shall be valued at the Conversion Amount
of a whole share of Common Stock on the business day preceding the date of
conversion.
<PAGE>
(e) The issuance of certificates for shares of Common Stock upon the
conversion of shares of Series A Convertible Preferred Stock shall be made
without charge to the converting stock holder for any original issue or
transfer tax in respect of the issuance of such certificates and any such tax
shall be paid by the Corporation.
(f) The Conversion Rate shall be subject to the following adjustments:
(i) If the Corporation shall subdivide the outstanding
shares of Common Stock into a greater number of shares of Common Stock, or
combine the outstanding shares of Common Stock into a lesser number of
shares, or issue by reclassification of its shares of Common Stock any shares
of the Corporation, the Conversion Rate in effect immediately prior thereto
shall be adjusted so that the holders of Series A Convertible Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number
of shares of Common Stock which such holder would have owned or been entitled
to receive after the happening of any of the events described above if such
shares of Series A Convertible Preferred Stock had been converted immediately
prior to the happening of such event on the day upon which such subdivision,
combination or reclassification, as the case may be, becomes effective.
(ii) In case the Corporation shall seek to effect a
reorganization, shall seek to merge with or consolidate into another
corporation, or shall seek to sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business and, pursuant to the
terms of such proposed reorganization, merger, consolidation or disposition
of assets, shares of stock or other securities, property or assets of the
Corporation, successor or transferee or an affiliate thereof or cash are
proposed to be received by or distributed to the holders of Common Stock,
then each holder of Series A Convertible Preferred Stock shall be given a
written notice from the Corporation informing each holder of the terms of
such proposed reorganization, merger, consolidation, or disposition of assets
and of the record date thereof for any distribution pursuant thereto, at
least ten days in advance of such record date, and each holder of Series A
convertible Preferred Stock, the number of shares of stock or other
securities, property or assets of the Corporation, successor or transferee or
affiliate thereof or cash receivable upon or as a result of such
reorganization, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock equal to the Conversion Rate immediately
prior to such event, multiplied by the number of shares of Series A
Convertible Preferred Stock as may be converted. The provisions of this
subparagraph (ii) shall similarly apply to successive reorganizations,
mergers, consolidations or dispositions of assets.
(iii) If a purchase, tender or exchange offer is made to and
accepted by the holders of more than 50% of the outstanding shares of Common
Stock, the Corporation shall not effect any consolidation, merger or sale
with the person having made such offer or with any affiliate of such person,
unless prior to the consummation thereof each holder of shares of Series A
Convertible Preferred Stock shall have been given a reasonable opportunity
then to elect to receive, upon conversion of the shares of Series A
Convertible Preferred Stock then held by such holder, either the stock,
securities, cash or assets then issuable with respect to the Common Stock or
the stock, securities, cash or assets issued to previous holders of the
Common Stock in accordance with such offer, or the equivalent thereof.
<PAGE>
(iv) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of
the Corporation, for the purposes of this paragraph 4(f).
(v) All calculations under this paragraph (g) shall be made
to the nearest one-thousandth of a share.
(vi) Whenever the Conversion Rate shall be adjusted pursuant
to this paragraph (f), the Corporation shall forthwith obtain, and cause to
be delivered to each holder of Series A Convertible Preferred Stock, a
certificate signed by the principal financial or accounting office of the
Corporation, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and
specifying the new Conversion Rate. In the case referred to in subparagraph
(ii), such a certificate shall be issued describing the amount and kind of
stock, securities, property or assets or cash which shall be receivable upon
conversion of Series A Convertible Preferred Stock after giving effect to the
provisions of such subparagraph (ii).
(g) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of Series A Convertible Preferred Stock , the
full number of shares of Common Stock then deliverable upon the conversion or
exchange of all shares of Series A Convertible Preferred Stock at the time
outstanding. The Corporation shall take at all times such corporate action
as shall necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable share of Common Stock upon the conversion
of Series A Convertible Preferred Stock in accordance with the provisions
hereof.
(h) No fractional shares of Common Stock or scrip representing
fractional shares of Common Stock shall be issued upon any conversion of
Series A Convertible Preferred Stock, but, in lieu thereof, there shall be
paid an amount in cash equal to the Conversion Amount of a whole share of
Common Stock on the business day preceding the day of conversion multiplied
by the fraction of a share which the holder of Series A Convertible Preferred
Stock would have been entitled to receive.
5. Voting Rights.
The holders of each share of Series A Convertible Preferred Stock shall not
have the right to vote.
6. Definitions.
(a) "Common Stock" shall mean the common stock, par value $.001, of the
Corporation.
(b) "Junior Stock" shall mean any class of series of capital stock of
the Corporation which may be issued which, at the time of issuance, is not
declared to be on a parity with or senior to the Series A Preferred Stock as
to all of the following: dividends, rights upon liquidation or redemption or
voting rights.
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CURPORATIONS
FILED 12:30 PM 02/28/1997
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
AMERICAN SURGICAL LASER, INC.
A corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of /s/ AMERICAN SURGICAL
LASER, INC. Resolutions were duly adopted setting forth a proposed amendment
of the Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stock holders of said
corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered 4 so that, as amended, said
Article shall be and read as follows: CAPITALIZATION THE CORPORATION SHALL BE
AUTHORIZED TO ISSUE THE FOLLOWING CAPITAL STOCK: Common 11,000,000 Common
class B 9,000,000 Preferred 1,000,000 All Par $.001
SECOND. That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation
Law of the State of Delaware at which meeting the necessary number of shares
as required by statute were voted in favor of the amendment.
THIRD. That said amendment was duly adopted in accordance with the provisions
of the Section 242 of the General Corporation Law of the State of Delaware.
FOURTH. That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said BOARD OF DIRECTORS OF AMERICAN SURGICAL LASER INC.
has caused this certificate to be signed by
Layne Meriwether, its President,
and Darryl Meriwether, its Secretary,
the 26th day of February 1997
By:/s/ Layne Meriwether
Attest: /s/ Darryl Meriwether
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AMERICAN SURGICAL LASER, INC.
American Surgical Laser Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is American Surgical Laser, Inc.
SECOND: The following amendment was adopted by the Board of Directors
and majority stockholders of the Corporation on February 28, 1997, in the
manner prescribed by Sections 141, 228, and 242 of the General Corporation
Law of the State of Delaware.
RESOLVED, that the Corporation effect a reverse split of the
corporation's $.001 par value common stock and Class B common stock on the
basis of one for 200, retaining the authorized common shares at 11,000,000
shares and the Class B common shares at 9,000,000 shares, with fractional
shares being rounded up to the nearest whole share, and with appropriate
adjustments being made in the additional paid in capital and stated capital
accounts of the Corporation; and
FURTHER, RESOLVED, that such amendment take effect at 8:00 a.m.,
Mountain Daylight Time, May 27, 1997.
THIRD: This amendment does not provide for any exchange,
reclassification or cancellation of issued shares.
FOURTH: This amendment reduces the 10,999,184 common shares
outstanding to 54,996, and reduces the 9,000,000 Class B common shares to
45,000 shares; and decreases the stated capital of the common shares from $
10,999 to $55, and decreases the stated capital of the Class B shares from
$9,000 to $45.
<PAGE>
IN WITNESS WHIEREOF, American Surgical Laser, Inc. has caused this
Certificate to be signed by Layne T. Meriwether, its President, and attested by
Darryl Meriwether, its Secretary, this 23 day of May, 1997.
AMERICAN SURGICAL LASER, INC.
By: /s/Layne T. Meriwether
Layne T. Meriwether, President
Attest:
/s/Darryl Meriwether /s/ Amy Adams
Darryl Meriwether, Secretary
[SEAL]
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CURPORATIONS
FILED 09:00 AM 06/10/1997
971190619 - 2053155
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AMERICAN SURGICAL LASER, INC.
American Surgical Laser, lnc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is "American Surgical Laser, Inc."
SECOND: The following amendment was adopted by the Board of Directors and
majority stockholders of the Corporation on May 28, 1997, in the manner
prescribed by Sections 141, 228 and 242 of the General Corporation Law of the
State of Delaware.
RESOLVED, that the Corporation change its name to "Eclipse Imports, Inc.";
FURTHER, RESOLVED, that such amendment take effect on the date of filing
hereof.
THIRD: This amendment does not provide for any exchange,
reclassification or cancellation of issued shares.
FOURTH: This amendment does not affect the outstanding shares or stated
capital of the Corporation.
IN WITNESS WHEREOF, American Surgical Laser, Inc. has caused this
Certificate to be signed by Collette D. Meriwether, its President, and
attested by Betty L. Meriwether, its Secretary, this 4 day of June, 1997.
AMERICAN SURGICAL LASER, INC.
/s/ Collette D. Meriwether
Collette D. Meriwether President
Attest:
/s/ Betty L. Meriwether
Betty L. Meriwether, Secretary
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ECLIPSE IMPORTS, INC.
Eclipse Imports, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is Eclipse Imports, Inc.
SECOND: The following amendment was adopted by the Board of
Directors and a majority of stockholders of the Corporation on February 12,
1999, in the manner prescribed by the General Corporation Law of the State of
Delaware.
RESOLVED, that the name of the corporation shall be NEUROCHEMICAL
RESEARCH INTERNATIONAL, CORP.
THIRD: The Board of Directors and a majority of stockholders
approved a reverse split of the Corporation's common stock and Class B common
stock on the basis of one for ten, effective 8 a.m., Mountain Standard Time,
February 13, 1999. This reverse does not change article four of the articles
of incorporation; the authorized common shares remain at 11,000,000 shares
and the Class B common shares remain at 9,000,000.
FOURTH: This amendment does not provide for any exchange,
reclassification or cancellation of issued shares.
IN WITHNESS WHEREOF, Eclipse Imports, Inc. has caused this
certificate to be signed by Angela M. Ross, its Presidency, this 12th day of
February, 1999.
ECLIPSE IMPORTS, INC.
/s/ Angela Ross, President
State of Utah )
)
County of Salt Lake )
Subscribed and sworn to before me this 12th day of February, 1999.
/s/ O. Robert Meredith
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
NEUROCHEMICAL RESEARCH INTERNATIONAL, CORP.
Neurochemical Research International, Corp. (the "Company"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
1. That the Board of Directors of said corporation, by unanimous
written consent, adopted the following resolutions:
a. RESOLVED, that, subject to shareholder approval, the name of
the Company be changed to "Ultimate Sports Entertainment,
Inc." and that Article 1 of the Certificate of Incorporation
of the Company be amended to read as follows: "The name of the
corporation shall be Ultimate Sports Entertainment, Inc."
b. RESOLVED, that the Board of Directors hereby declares it
advisable and in the best interest of the corporation to amend
Article 4 of the Certificate of Incorporation to read as
follows:
Section 1. The stock of the corporation is
divided into two classes, namely: common stock in the
amount of fifty million (50,000,000) shares of the
par value of $.001 each and preferred stock in the
amount of one million (1,000,000) shares of the par
value of $.001 each. The board of directors shall
have authority, by resolution or resolutions, to
divide the preferred stock into series, to establish
and fix the distinguishing designation of each such
series and the number of shares thereof (which
number, by like action of the board of directors from
time to time thereafter, may be increased except when
otherwise provided by the board of directors in
creating such series, or may be decreased but not
below the number of shares thereof then outstanding)
and, within the limitations of applicable law of the
State of Delaware or as otherwise set forth in this
article, to fix and determine the relative rights and
preferences of the shares of each series so
established prior to the issuance thereof. There
shall be no cumulative voting by shareholders.
Section 2. The shareholders shall have no
preemptive rights to acquire any shares of this
corporation.
c. RESOLVED, that the Board of Directors hereby declares it
advisable and in the best interest of the corporation to add
Article 11 to the Certificate of Incorporation to read as
follows:
<PAGE>
Section 1. A director of the corporation
shall not be personally liable to the corporation or
its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from
which the director derived any improper personal
benefit.
Section 2. Any repeal or modification of the
foregoing paragraph by the stockholders of the
corporation shall not adversely affect any right or
protection of a director of the corporation existing
at the time of such repeal or modification.
d. RESOLVED, that the Board of Directors hereby declares it
advisable and in the best interest of the corporation to
repeal any and all prior designations relating to the
preferred stock of the Company.
2. That said amendment has been consented to and authorized by the
holders of a majority of the issued and outstanding stock entitled to vote by
written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
3. That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 and 228 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to
be signed by its president this 6th day of April 1999.
/s/ Angela M. Ross, President
<PAGE>
EXHIBIT 3.2
NEUROCHEMICAL RESEARCH INTERNATIONAL, CORP.
BYLAWS
ARTICLE I--OFFICES
Section 1.1 Office
The principal office of the corporation within the State of Delaware
shall be located at such place as shall be designated by the Board of
Directors.
Section 1.2 Other Offices
The corporation may also have such other offices, either within or
without the State of Delaware, as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II--STOCKHOLDERS
Section 2.1 Annual Meeting
An annual meeting of the stockholders, for the selection of
directors to succeed those whose terms expire and for the transaction of such
other business as may properly come before the meeting, shall be held at a
location and at such time each year as designated by the Board of Directors.
Section 2.2 Special Meetings
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Chairman, the
Board of Directors, the President, the chief executive officer, or the
holders of not less than one-tenth of all the shares entitled to vote at the
meeting, and shall be held at such place, on such date, and at such time as
they or he shall fix.
Section 2.3 Notice of Meetings
Written notice of the place, date and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time
by the laws of the State of Delaware or the Articles of Incorporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than
thirty days after the date for which the meeting was originally noticed, or
if a new
<PAGE>
record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted which
might have been transacted at the original meeting.
Section 2.4 Quorum
At any meeting of the stockholders, the holders of a majority of all
of the shares of the stock entitled to vote at the meeting, present in person
or by proxy, shall constitute a quorum for all purposes, unless or except to
the extent that the presence of a larger number may be required by law.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of the stock entitled to
vote who are present, in person or by proxy, may adjourn the meeting to
another place, date or time.
If a notice of any adjourned special meeting of stockholders is sent
to all stockholders entitled to vote thereat, stating that it will be held
with those present constituting a quorum, then except as otherwise required
by law, those present at such adjourned meeting shall constitute a quorum,
and all matters shall be determined by a majority of the votes cast at such
meeting.
Section 2.5 Organization
Such person as the Board of Directors may have designated or, in the
absence of such a person, the highest ranking officer of the corporation who
is present shall call to order any meeting of the stockholders and act as
chairman of the meeting. In the absence of the Secretary of the corporation,
the secretary of the meeting shall be such person as the chairman appoints.
Section 2.6 Conduct of Business
The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including such regulation
of the manner of voting and the conduct of discussion as seem to him in order.
Section 2.7 Proxies and Voting
At any meeting of the stockholders, every stockholder entitled to
vote may vote in person or by proxy authorized by an instrument in writing
filed in accordance with the procedure established for the meeting.
Each stockholder shall have one vote for every share of stock
entitled to vote which is registered in his name on the record date for the
meeting, except as otherwise provided herein or required by law.
All voting, except on the election of directors and where otherwise
required by law, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to
<PAGE>
vote or his proxy, a stock vote shall be taken. Every stock vote shall be
taken by ballots, each of which shall state the name of the stockholder or
proxy voting and such other information as may be required under the
procedure established for the meeting. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the
meeting.
If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders, unless the vote of a greater number or
voting by class is required by law, the Articles of Incorporation, or these
Bylaws.
Section 2.8 Stock List
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his name, shall be open to the examination of any such
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 stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number
of shares held by each of them.
ARTICLE III--BOARD OF DIRECTORS
Section 3.1 Number and Term of Office
The number of directors who shall constitute the whole board shall
be such number not less than one (1) nor more than seven (7) as the Board of
directors shall at the time have designated. Each director shall be selected
for a term of one year and until his successor is elected and qualified,
except as otherwise provided herein or required by law.
Whenever the authorized number of directors is increased between
annual meetings of the stockholders, a majority of the directors then in
office shall have the power to elect such new directors for the balance of a
term and until their successors are elected and qualified. Any decrease in
the authorized number of directors shall not become effective until the
expiration of the term of the directors then in office unless, at the time of
such decrease, there shall be vacancies on the board which are being
eliminated by the decrease.
Section 3.2 Vacancies
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although
<PAGE>
less than a quorum, may elect a successor for the unexpired term and until
his successor is elected and qualified.
Section 3.3 Regular Meetings
Regular meetings of the Board of Directors shall be held at such
place or places, on such date or dates, and at such time or times as shall
have been established by the Board of Directors and publicized among all
directors. A notice of each regular meeting shall not be required.
Section 3.4 Special Meetings
Special meetings of the Board of Directors may be called by
one-third of the directors then in office or by the chief executive officer
and shall be held at such place, on such date and at such time as they or he
shall fix. Notice of the place, date and time of each such special meeting
shall be given by each director by whom it is not waived by mailing written
notice not less than three days before the meeting or by telegraphing the
same not less than eighteen hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
Section 3.5 Quorum
At any meeting of the Board of Directors, a majority of the total
number of the whole board shall constitute a quorum for all purposes. If a
quorum shall fail to attend any meeting, a majority of those present may
adjourn the meeting to another place, date or time, without further notice or
waiver thereof.
Section 3.6 Participation in Meetings by Conference Telephone
Members of the Board of Directors or of any committee thereof, may
participate in a meeting of such board or committee by means of conference
telephone or similar communications equipment that enables all persons
participating in the meting to hear each other. Such participation shall
constitute presence in person at such meeting.
Section 3.7 Conduct of Business
At any meeting of the Board of Directors, business shall be
transacted in such order and manner as the board may from time to time
determine, and all matters shall be determined by the vote of a majority of
the directors present, except as otherwise provided herein or required by
law. Action may be taken by the Board of Directors without a meeting if all
members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors.
<PAGE>
Section 3.8 Powers
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised
or done by the corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(a) To declare dividends from time to time in accordance with law;
(b) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(c) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(d) To remove any officer of the corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon
any other person for the time being;
(e) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers and agents;
(f) To adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers and agents of the
corporation and its subsidiaries as it may determine;
(g) To adopt from time to time such insurance, retirement and other
benefit plans for directors, officers and agents of the corporation and its
subsidiaries as it may determine; and
(h) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the corporation's business and affairs.
Section 3.9 Compensation of Directors
Directors, as such, may receive, pursuant to resolution of the Board
of Directors, fixed fees and other compensation for their services as
directors, including, without limitation, their services as members of
committees of the directors.
Section 3.10 Loans
The corporation shall not lend money to or use its credit to assist
its officers, directors or other control persons without authorization in the
particular case by the stockholders, but may lend money to and use its credit
to assist any employee, excluding such officers, directors or other control
persons of the corporation or of a subsidiary, if such loan or assistance
benefits the corporation.
<PAGE>
ARTICLE IV--COMMITTEES
Section 4.1 Committees of the Board of Directors
The Board of Directors, by a vote of a majority of the whole board,
may from time to time designate committees of the board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure
of the board and shall, for those committees and any other provided for
herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternative members who may
replace any absent or disqualified member at any meeting of the committee.
Any committee so designated may exercise the power and authority of the Board
of Directors to declare a dividend or to authorize the issuance of stock if
the resolution which designates the committee or a supplemental resolution of
the Board of Directors shall so provide. In the absence or disqualification
of any member of any committee and any alternate member in his place, the
member or members of the committee present at the meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
by unanimous vote appoint another member of the Board of Directors to act at
the meeting in the place of the absent or disqualified member.
Section 4.2 Conduct of Business
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be
made for notice to members of all meetings; a majority of the members shall
constitute a quorum unless the committee shall consist of one or two members,
in which event one member shall constitute a quorum; and all matters shall be
determined by a majority vote of the members present. Action may be taken by
any committee without a meeting if all members thereof consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of such committee.
ARTICLE V--OFFICERS
Section 5.1 Generally
The officers of the corporation shall consist of a president, one or
more vice-presidents, a secretary, a treasurer and such other subordinate
officers as may from time to time be appointed by the Board of Directors. The
corporation may also have a chairman of the board who shall be elected by the
Board of Directors and who shall be an officer of the corporation. Officers
shall be elected by the Board of Directors, which shall consider that subject
at its first meeting after every annual meeting of stockholders. Each officer
shall hold his office until his successor is elected and qualified or until
his earlier resignation or removal. Any number of offices may be held by the
same person, except that the offices of president and secretary shall not be
held by the same person.
<PAGE>
Section 5.2 Chairman of the Board
The chairman of the board shall, subject to the direction of the
Board of Directors, perform such executive, supervisory, and management
functions and duties as may be assigned to him from time to time by the Board
of Directors. He shall, if present, preside at all meetings of the
stockholders and of the Board of Directors.
Section 5.3 President
The president shall be the chief executive officer of the
corporation. Subject to the provisions of these Bylaws and to the direction
of the Board of Directors, he shall have the responsibility for the general
management and control of the affairs and business of the corporation and
shall perform all duties and have all powers which are commonly incident to
the office of chief executive or which are delegated to him by the Board of
Directors. He shall have power to sign all stock certificates, contracts and
other instruments of the corporation which are authorized. He shall have
general supervision and direction of all of the other officers and agents of
the corporation. He shall, when present, and in the absence of a chairman of
the board of directors, preside at all meetings of the shareholders and of
the Board of Directors.
Section 5.4 Vice-President
Each vice-president shall perform such duties as the Board of
Directors shall prescribe. In the absence or disability of the President, the
vice-president who has served in such capacity for the longest time shall
perform the duties and exercise the powers of the president.
Section 5.5 Treasurer
The treasurer shall have the custody of the monies and securities of
the corporation and shall keep regular books of account. He shall make such
disbursements of the funds of the corporation as are proper and shall render
from time to time an account of all such transactions and of the financial
condition of the corporation.
Section 5.6 Secretary
The secretary shall issue all authorized notices from, and shall
keep minutes of, all meetings of the stockholders and the Board of Directors.
He shall have charge of the corporate books.
Section 5.7 Delegation of Authority
The Board of Directors may, from time to time, delegate the powers
or duties of any officer to any other officers or agents, notwithstanding any
provision hereof.
<PAGE>
Section 5.8 Removal
Any officer of the corporation may be removed at any time, with or
without cause, by the Board of Directors.
Section 5.9 Action with Respect to Securities of Other Corporation
Unless otherwise directed by the Board of Directors, the president
shall have power to vote and otherwise act on behalf of the corporation, in
person or by proxy, at any meeting of stockholders of or with respect to any
action of stockholders of any other corporation in which this corporation may
hold securities and otherwise to exercise any and all rights and powers which
this corporation may possess by reason of its ownership of securities in such
other corporation.
ARTICLE VI--INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHERS
Section 6.1 Generally
The corporation shall indemnify its officers, directors, and agents
to the fullest extent permitted under Delaware law.
Section 6.2 Not Exclusive of Other Rights
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any bylaw, agreement, vote of shareholders or interested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a person.
Section 6.3 Insurance
The corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article.
Section 6.4 Coverage
For the purposes of this Article, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is or
was a director, officer, employee or agent of such a
<PAGE>
constituent corporation or is or was serving at the request of such a
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article with respect
to the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
ARTICLE VII--STOCK
Section 7.1 Certificates of Stock
Each stockholder shall be entitled to a certificate signed by, or in
the name of the corporation by, the President or a Vice-president, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, certifying the number of shares owned by him. Any of or all the
signatures on the certificate may be facsimile.
Section 7.2 Transfers of Stock
Transfers of stock shall be made only upon the transfer books of the
corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is issued in accordance with Section 7.4 of Article VII of these
Bylaws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 7.3 Record Date
The Board of Directors may fix a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date of any
meeting of stockholders, nor more than sixty (60) days prior to the time for
the other action hereinafter described, as of which there shall be determined
the stockholders who are entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof; to express consent to corporate
action in writing without a meeting; to receive payment of any dividend or
other distribution or allotment of any rights; or to exercise any rights with
respect of any change, conversion or exchange of stock or with respect to any
other lawful action.
Section 7.4 Lost, Stolen or Destroyed Certificates
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 7.5 Regulations
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors
may establish.
<PAGE>
ARTICLE VIII--NOTICES
Section 8.1 Notices
Whenever notice is required to be given to any stockholder,
director, officer, or agent, such requirement shall not be construed to mean
personal notice. Such notice may in every instance be effectively given by
depositing a writing in a post office or letter box, in a postpaid, sealed
wrapper, or by dispatching a prepaid telegram, addressed to such stockholder,
director, officer, or agent at his or her address as the same appears on the
books of the corporation. The time when such notice is dispatched shall be
the time of the giving of the notice.
Section 8.2 Waivers
A written waiver of any notice, signed by a stockholder, director,
officer or agent, whether before or after the time of the event for which
notice is given, shall be deemed equivalent to the notice required to be
given to such stockholder, director, officer or agent. Neither the business
nor the purpose of any meeting need be specified in such a waiver.
ARTICLE IX--MISCELLANEOUS
Section 9.1 Facsimile Signatures
In addition to the provisions for the use of facsimile signatures
elsewhere specifically authorized in these Bylaws, facsimile signatures of
any officer or officers of the corporation may be used whenever and as
authorized by the Board of Directors of a committee thereof.
Section 9.2 Corporate Seal
The Board of Directors may provide a suitable seal, containing the
name of the corporation, which seal shall be in the charge of the secretary.
If and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the treasurer or by the
assistant secretary or assistant treasurer.
Section 9.3 Reliance Upon Books, Reports and Records
Each director, each member of any committee designated by the Board
of Directors, and each officer of the corporation shall, in the performance
of his duties, be fully protected in relying in good faith upon the books of
account or other records of the corporation, including reports made to the
corporation by any of its officers, by an independent certified public
accountant, or by an appraiser selected with reasonable care.
Section 9.4 Fiscal Year
The fiscal year of the corporation shall be as fixed by the Board of
Directors.
<PAGE>
Section 9.5 Time Periods
In applying any of these Bylaws which require that an act be done or
not done a specified number of days prior to an event or that an act be done
during a period of a specified number of days prior to an event, calendar
days shall be used, the day of the doing of the act shall be excluded and the
day of the event shall be included.
ARTICLE X--AMENDMENTS
Section 10.1 Amendments
These Bylaws may be amended or repealed by the Board of Directors at
any meeting or by the stockholders at any meeting.
CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby certify that the undersigned is the
secretary of Neurochemical Research International, Corp., a corporation duly
organized and existing under and by virtue of the laws of the State of
Delaware; that the above and foregoing Bylaws of said corporation were duly
and regularly adopted as such by the Board of Directors by unanimous consent
on the 17th day of March 1999; and that the above and foregoing Bylaws are
now in full force and effect.
Dated this 17th day of March 1999
/s/ Angela M. Ross, Secretary
<PAGE>
EXHIBIT 4.1
[Front of Certificate]
Incorporated Under the Laws of the State of Delaware
CUSIP NO. 90384Q 10 9
ULTIMATE SPORTS
ENTERTAINMENT, INC.
Number Shares
Authorized common stock: 50,000,000 shares
Par Value: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of ULTIMATE SPORTS ENTERTAINMENT, INC. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signature of its duly authorized officers. Dated:
/s/ Paul Fairchild /s/ Frederick R. Licht
Secretary President
Ultimate Sports Entertainment, Inc.
Corporate
Seal
Delaware
Interwest Transfer Co., Inc., P.O. Box 17136/Salt Lake City, Utah 84117
Countersigned & Registered
[Back of Certificate]
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a
saving bank), or a trust company. The following abbreviations,
when used in the inscription on the face of this certificate,
shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM as tenants in common UNI GIFT MIN ACT ....... Custodian .......
TEN ENT as tenants by the entireties (Cust) (Minor)
JT TEN as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as Act ...............
tenants in common (State)
<PAGE>
Additional abbreviations may also be used though not in the above
list.
For Value Received, _____________________ hereby sell, assign and
transfer unto
Please insert social security or other
identifying number of assignee
- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________ Shares of the capital
stock represented by the within certificate, and do hereby irrevocably
constitute and appoint _________________ Attorney to transfer the said stock
on the books of the within named Corporation with full power of substitution
in the premises.
Dated
Notice: The signature of this assignment must correspond with the name as
written upon the face of the certificate in every particular
without alteration or enlargement or any change whatever
<PAGE>
EXHIBIT 5.1
RONALD N. VANCE, P.C.
Attorney at Law
57 West 200 South
Suite 310
Salt Lake City, Utah 84101
February 15, 2000
Frederick R. Licht, President
Ultimate Sports Entertainment, Inc.
2444 Wilshire Boulevard
Suite 414
Santa Monica, CA 90403
Re: Registration Statement on Form SB-2
Dear Mr. Licht:
You have requested my opinion as to whether or not the securities to be
issued by Ultimate Sports Entertainment, Inc. (the "Company") in the
above-referenced registration statement will be legally issued and, when issued,
will be fully paid and non-assessable shares of the Company. In connection with
this engagement I have examined the form of the registration statement to be
filed by the Company; the Articles of Incorporation of the Company; the By-laws
of the Company currently in effect; and the minutes of the Company relating to
the registration statement and the issuance of the shares of common stock by the
Company.
Based upon the above-referenced examination, I am of the opinion that the
shares of common stock to be issued by the Company and to be registered for sale
by the Company pursuant to said registration statement will be legally issued
and, when issued, will be fully paid and non-assessable.
I hereby consent to being named in the registration statement as having
rendered the foregoing opinion and as having represented the Company in
connection with the registration statement.
Sincerely,
/s/ Ronald N. Vance
<PAGE>
EXHIBIT 10.1
LOCK-UP AGREEMENT
THIS AGREEMENT (the "Agreement"), entered into this 14th day of
December 1999, is by, between, and among Frederick R. Licht, Martin J. Burke,
III, and Jay Botchman, shareholders of Ultimate Sports Entertainment, Inc.
(the "Company").
RECITALS:
WHEREAS, each of the undersigned is currently a holder of shares of
the Company;
WHEREAS, the Company is proposing to file a registration statement
for the offer and sale of shares of common stock of the Company to raise
operating capital for the Company;
WHEREAS, to assist the Company in raising such funds, the
undersigned are willing to lock-up a percentage of their shares, subject to
the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual terms and conditions
of this Agreement, the parties hereto agree as follows:
1. For a period of one year from the effective date of the proposed
registration statement to be filed by the Company with the Securities and
Exchange Commission to offer and sell shares of the Company's common stock,
each of the undersigned agrees that he will not sell, assign, pledge,
hypothecate or transfer eighty percent (80%) of any shares held or to be held
by him (whether such shares are owned by him directly or beneficially or in
the name or for the benefit of any member of his family) during such one year
period.
2. This lock-up of shares shall also apply to the future issuance of
any shares to the undersigned during such one year period.
3. Notwithstanding the foregoing, any of the undersigned may make a
transfer of any shares to one or more members of his immediate family,
provided that the transferee shall expressly agree to be bound by the
obligations of the undersigned pursuant to this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement the
day and year first above written.
/s/ Frederick R. Licht
/s/ Martin J. Burke, III
/s/ Jay Botchman
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
CHARACTER COLLABORATION
AND COMIC BOOK PUBLISHING AGREEMENT
AGREEMENT entered into as of March 1997 (the "Effective date") by and among
Lobito Publishing Group, A California Corporation, ("Lobito") having its
principal place of business at 6565 Sunset Boulevard, Suite 418, Los Angeles,
California; and, C. Webb, Inc., A Nevada Corporation, for the services of
Chris Webber, using a mailing address of 220 Bagley, Suite 1010, Detroit,
Michigan; hereinafter referred to as "C Webb."
WlTNESSETH:
Whereas the parties have and will collaborate on the creation and promotion
of a new comic book or series of comic books incorporating the character and
storyline of NBA player Chris Webber, and incorporating Mr. Webber's likeness
and image.
Whereas, Lobito, in conjunction with C. Webb will write, illustrate, produce,
publish, and otherwise exploit the Comic Book subject to the terms and the
conditions of this Agreement, and;
Whereas, Lobito will arrange for the merchandising activities related to the
Chris Webber character subject to the terms and conditions of this Agreement.
For the purpose of this Agreement, "merchandising" shall include, but not be
limited to, the sale of film, television, animation, interactive software and
any other medium currently in use or hereinafter devised, toys, trade
paperbacks, periodicals, clothing, theme park sales and other merchandising
related items encompassing the Character, Mark or logo and all normal forms
of merchandising.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the parties, the parties agree as
follows:
1. COMIC BOOK
Lobito will illustrate pictorial and graphic versions of the Chris Webber
character depicting his exploits and superstar activities as one of the
leading players in the National Basketball Association, accompanied by
dialogue and related literary text based upon the Webber character, in forms
suitable for publication in comic books. Each edition of the Comic Book shall
hereinafter be referred to as an "Issue" of the Comic Book.
2. APPROVALS/CONSULTATIONS
Except as set forth herein, Lobito and C. Webb shall have joint control over
the content of the Comic Book. Lobito shall submit production budgets on
request. C. Webb shall have approval of the use of his name and likeness
throughout the term of this Agreement, with such approval not to be
unreasonably withheld. C. Webb must approve or reject each submission within
fifteen (15) business days after Lobito submits the same to it.
1
<PAGE>
3. LOBITO'S REPRODUCTION AND DISTRIBUTION RIGHTS
3.1 Grant
(a) Subject to the terms and conditions of this Agreement, during the term of
this Agreement C. Webb hereby grants to Lobito the worldwide, exclusive and
irrevocable right (including the exclusive right to grant others the right)
to reproduce, publish, print, reprint, and distribute the Comic Book and the
Character, with C. Webb's approval, in whole or in part, in any form, in any
language and in any medium now known or hereafter developed and to advertise
and promote the Comic Book, the Character and the Mark in any medium. C. Webb
shall have approval of the use of Mr. Webber's name and likeness, with such
approval not to be unreasonably withheld.
(b) The rights granted in Section 3.1 (a), above, include rights with respect
to film, video or any other audio-visual work in any medium now known or
hereafter developed.
(c) Except as specifically provided in this Agreement, C. Webb shall not
grant to any third party the rights granted in Section 3.1 (a) or (b) with
respect to (i) a comic book, or (ii) film, video, or any other audio-visual
work, or (iii) promotional material or activity using or incorporating the
Character or the Mark.
3.2 Lobito's Responsibilities.
(a) Subject to the provisions of this Agreement and of C. Webb performing in
accordance with its responsibilities hereunder, Lobito shall use its best
efforts consistent with industry norms to advertise, market, promote and sell
copies of each Issue of the Comic Book which C. Webb has approved pursuant to
Section 2 of this Agreement.
(b) Lobito undertakes to maintain the high quality of the Comic Book
consistent with the quality which Lobito maintains for its other comic books.
3.3 C. Webb's Responsibilities.
(a) Throughout the term, C. Webb shall assist Lobito in the promotion of the
Comic Book as specified in this Agreement and as the parties may reasonably
agree from time to time, but in no event less than reasonable efforts. All of
C. Webb's reasonable out-of-pocket expenses directly related to such
assistance shall be promptly paid or reimbursed by Lobito. C. Webb shall
supply Lobito with appropriate documentation of such expenses. Any single
expense in excess of $1,000 must be pre approved by Lobito in writing.
(b) Upon fourteen (14) days written notice by Lobito, Mr. Webber agrees to
make himself available for three (3) personal appearances per calendar
year for promotional events to publicize the Comic Books and Mark. At these
appearances there will be no obligation for Mr. Webber to give autographs.
Any situation involving autographs will be negotiated separately.
(c) C. Webb acknowledges that the Character is based on Mr. Webber's likeness
and that the Comic book (regardless of medium including, print, film, video,
and computer) consuming public will and have come to associate him with the
Character to be developed over time under the terms of this Agreement.
Therefore, C. Webb agrees that during the full term of this Agreement and any
later extensions thereof, it will not portray or represent any other comic
book character and will not make appearances for or on behalf of, and will
not lend any of Mr. Webber's Collaborative data (as defined in section 4.3
of this
2
<PAGE>
Agreement) for use in conjunction with any comic book, comic book character,
or comic book publisher without the prior written consent of Lobito, with
such approval to be granted in Lobito's sole and exclusive discretion, which
approval shall not be unreasonably withheld.
(d) C. Webb warrants that it will not willfully or by gross negligence act to
impair the value of the Comic Book, the Character, or the Mark. In
particular, Mr. Webber shall not comport himself in a way that would
disparage or diminish the value of the developed Character or knowingly bring
negative publicity to the Character, Comic Book, or Mark.
3.4 Credits. Each party hereto shall receive the following credits:
In connection with all issues of the Comic Book and all videos, television
productions, and films, all credits shall be attributed jointly and severally
to: Lobito Publishing Group, Fallasha Erwin, Chris Webber and Rick Licht,
Esq., as "creators".
3.5 Late Shipment of the Comic Book. In the event that an issue of the Comic
Book cannot be shipped on schedule such that it can be shipped only on a
"returnable basis", (i.e., that copies may be returned for refund or credit)
with the prior consultation of C. Webb, Lobito shall have the right whether
to ship same on such returnable basis. The parties hereto agree that
additional time will be allowed for the sale of, and revenue payments for,
any Issues let out on a consignment basis.
3.6 Lobito's Merchandising Rights
Subject to the terms and conditions of this Agreement, C. Webb hereby grants
to Lobito during the term of this Agreement the worldwide, exclusive and
irrevocable right (including the exclusive right to grant others the right)
to exploit and otherwise use the Character and the Mark (defined below) on or
in connection with any and all products or services whatsoever, including but
not limited to, directly and indirectly, (through agents, licensees,
sublicensees, distributors, etc. of Lobito's choosing) merchandising of all
of the foregoing.
4. RIGHTS
4.1 Rights in the Character and the Mark.
(a) The (i) Character, and (ii) the Mark or any variations thereof in
connection with the Character (the "Mark") and all copyright and trademark
rights shall be owned 50% by Lobito and 50% by C. Webb, Inc., a Nevada
Corporation. All decisions affecting the use and exploitation of the
Character and Mark shall be jointly agreed upon by Lobito and C. Webb.
(b) The parties agree that the successful exploitation, merchandising and
licensing of the Character and the Mark will depend on the parties agreeing
upon the appropriate exploitation, merchandising and licensing of the
Character and the Mark. Therefore the parties agree that any use,
exploitation, merchandising or licensing related to the Character or the Mark
not specifically granted herein shall be upon the unanimous written agreement
of the parties. Further, C. Webb agrees that it will not use, exploit or
license or grant to any third party the right to use, exploit or license the
Character or the Mark except as provided in the previous sentence.
4.2 Rights in the Comic Book.
3
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
(a) As among the parties, the Comic Book and all copyright and trademark
rights to all original literary materials and characters therein which first
appear in the Comic Book shall be owned 50% by Lobito and 50% by C. Webb,
Inc., a Nevada Corporation owned by Player. The parties acknowledge that
stock character profiles and standard scenes a faire are excluded from claims
of joint ownership.
(b) The parties agree that Lobito, in its sole discretion, can elect to put
the logo of Lobito Publishing Group (or any such other distributor approved
by C. Webb, not to be unreasonably withheld or delayed) on each Issue of the
Comic Book. Lobito shall have the right to have a copyright notice and/or
trademark in its name. In connection with Lobito's exploitation of its rights
hereunder, C. Webb acknowledges that it will not acquire any rights of any
kind whatsoever in and to (i) the names or marks of Lobito Publishing Group
or any variation thereof, or (ii) any other name or mark or other rights
owned by Lobito, other than as specifically set out in Section 4.1 (a) and
4.2 (a) hereof. However, C. Webb shall retain the right to use in any way it
sees fit any pre-established logos or marks on Mr. Webber which pre-date the
existence of this Agreement.
4.3 Lobito's Exclusive License to Use the Character, Marks, and the
Collaborator Data Solely in Connection With the Distribution of the Comic
Book.
C. Webb hereby grants to Lobito the exclusive right to use (i) the Character,
(ii) the Marks, and (iii) his name, signature, biographic data and photograph
or likeness ("Collaborator Data") in advertising and promotional material in
connection with the Comic Book, including its promotion, sale and
distribution. Lobito shall submit to C. Webb for its prior written approval,
not to be unreasonably withheld or delayed, all proposed materials which
incorporate any Collaborator Data.
4.4 Further Assistance.
Each party agrees that, at the request of another party, and without any
further consideration, it will, during the term of this Agreement and
thereafter, promptly execute and deliver to the other all instruments and
documents (after reasonable review by legal counsel) and do all things which
may be reasonably necessary to carry out the provisions of this Agreement.
4.5 Copyright and Trademark Notices.
The Comic Book, and where possible and appropriate, all other uses of the
Character and the Mark, shall bear a copyright and trademark notice in the
names of Lobito Publishing Group, Fallasha Erwin, C. Webb, Inc., A Nevada
Corporation, and Rick Licht, Esq.
4.6 Survival.
The provisions of this Section 4 shall survive any termination or expiration
of this Agreement.
5. ROYALTIES AND PAYMENT.
5.1 Comic Book (Section 3.1) Publishing Royalties.
(a) Provided that the Comic Book is published and distributed, (I) C. Webb
shall receive * percent (*) of the gross profits, if any, collected by
Lobito in connection with the distribution and sale of the Comic Book as to
the first 15,000 units sold; * percent (*) of the gross profits, if
any, collected by Lobito as to the next 15,000 units sold, or
4
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
Units 15,001 through 30,000, * percent (*) of the gross profits, if
any, on the next 20,000 units sold, or units 30,001 through 50,000, and
* percent (*) of the gross profits, if any, on all units sold in
excess of the first fifty thousand as specified above.
(b) For purposes of this Section 5.1, "gross profits" is defined as the
amount of gross receipts (less all returns) collected by Lobito from the sale
of the Comic Book in all markets. No royalties shall be paid on copies
furnished without charge, and not for resale to the parties, or for review,
advertising or promotional purposes and furnished without charge.
(iv) As an additional accommodation, at C. Webb's request, Lobito agrees to
produce up to five thousand (5,000) promotional quality comic books per
Issue. These promotional books will be delivered to various civic,
charitable, youth, church, benefit or community service organizations chosen
by C. Webb, in connection with any related personal appearances by Mr. Webber.
(c) Other than for transactions on a consignment basis, C. Webb's share of
the net profits to date under this Section 5.1 shall be delivered to it
within forty five (45) days following the date on which each Issue is
released, together with an accurate accounting of the net profits, including
the numbers of copies of the Comic Book sold and returned. Lobito and Player
further agree that for any transaction involving a consignment sale, this
period shall be extended to ninety (90) days. For not less than two (2) years
following the most recent payment made under this Section 5.1 (c) such
statements shall be furnished to the Player not less than once every year,
whether or not any moneys are due to the Player for that year, together with
all sums indicated on said statement as being due and owing. In addition, C.
Webb shall have a five (5) year audit right regarding any monies due and
owing it as noted above in this Section. Lobito grants to C. Webb the right
to audit all statements issued by it for a period of five (5) calendar years.
5.2 Merchandising Royalties.
(a) C. Webb shall receive * percent (*) of the gross profits, if
any, collected by Lobito in connection with the merchandising rights granted
in Section 3(a) hereof during the term of this Agreement.
(b) For the purposes of this Section 5.2, "gross profits" is defined as the
amount of gross receipts (less all returns) collected by Lobito from whatever
source derived from the sale licensing, or use of all forms of merchandising
of the Character and/or Mark.
(c) C. Webb's share of the gross profits to date under this Section 5.2 shall
be delivered to it within fifteen (15) days, together with an accurate
accounting of the gross profits. In addition, Lobito and C. Webb agree that
for any transaction involving a consignment, this period shall be extended to
seventy five (75) days as to the accounting of profits. For two (2) years
following the most recent payment made under this section 5.2 (c) such
statements shall be furnished to C. Webb, whether or not any moneys are due
to C. Webb for the applicable quarter, together with all sums indicated on
said statement as being due and owing. In addition, C. Webb shall have a five
(5) year audit right regarding any monies due and owing it as noted above in
this Section. Lobito grants to C. Webb the right to audit all all statements
issued by it for (5) five calendar years.
5.3 Film, Television, Multimedia, Interactive and Video.
5
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
(a) (I) C. Webb shall receive * percent (*) of the gross
profits, if any, collected by Lobito in connection with the rights described
in Section 3.1 (b) hereof during the term of this Agreement.
(b) For the purpose of this Section 5.3, "gross profits" is defined as the
amount of gross receipts received by Lobito from whatever source derived
through the sale, exploitation or licensing of the Character and/or Mark from
film, television, multimedia (including CD-ROM, internet, videocassette,
laser disc, digital video disc, CD and cable) interactive and video payors.
(i) For the purposes of this Section 5.3, gross receipts exclude reasonable
and customary fees in the industry for like services earned by Lobito for the
individual services provided by employees of Lobito in connection with the
rights described in Section 3.1 (b) hereof.
(c) C. Webb's share of the net profits to date under this Section 5.3 shall
be delivered to it within twenty one (21) days after (i) for each advance
received, the date of receipt of such advance, and (ii) for all other
payments, the end of each calendar year, together with an accurate accounting
of gross profits. For two (2) years following the most recent payment made
under this Section 5.3 (c), such statements shall be furnished to C. Webb,
whether or not any moneys are due C. Webb for the applicable quarter,
together with all sums indicated on said statement as being due and owing. In
addition, C. Webb shall have a five (5) year audit right regarding any monies
due and owing it as noted above in this Section. Lobito grants to C. Webb the
right to audit all statements issued by it for a period of five (5) calendar
years.
5.4 Records.
Lobito shall keep, maintain and preserve at its principal place of business
for two (2) years following its furnishing to C. Webb of a statement to be
submitted by Lobito pursuant to Section 5.3 of this Agreement, true books of
account containing a complete and accurate record covering all transactions
relating to this Agreement and pertaining to the various items required to be
shown on such statement. Each such statement shall be binding on C. Webb and
not subject to any objection unless such objection is made in writing,
stating in specific detail the nature of the objection and delivered to
Lobito within five (5) years after the receipt by C. Webb of the applicable
statement. Such records shall be available for inspection and review (and
copying at C. Webb's expense) during Lobito's normal business hours no
earlier than five (5) days after Lobito receives C. Webb's written notice and
shall be conducted in such a manner as to least interfere with Lobito's
normal business activities. If any such review discloses a deficiency between
the amounts reported as due C. Webb and the amount actually found to be due
to it, then Lobito shall pay C. Webb within thirty (30) days following its
receipt of C. Webb's notification, (i) the omitted amounts, (ii) interest on
the omitted amounts from the date due at the lesser of one and one half
percent (1.5%) per month or the highest rate permitted by law, and (iii) if
any such deficiency exceeds five percent (5%) plus the reasonable costs and
fees of such review.
6. TERM AND TERMINATION
6.1 Term and Renewal. This Agreement shall have an initial term of three (3)
calendar years from the date of execution of same below, with an option on
the part of Lobito to renew for three consecutive additional one (1) year
periods, unless terminated in a writing
6
<PAGE>
signed by all of the parties or as otherwise provided herein. C. Webb will
have a unilateral option to terminate this Agreement if it has not received a
minimum of one hundred fifty thousand dollars ($150,000.00) in payments from
Lobito by the conclusion of the third year of its duration.
In the event of the termination of the Agreement, the rights of ownership
noted above in Sections 4.1 and 4.2 will remain equally split at fifty
percent (50%) for Lobito and fifty percent (50%) for C. Webb.
6.2 Termination. If at any time the Comic Book is not profitable to Lobito,
then Lobito may, at its sole election, elect not to produce, distribute,
publish, release, exploit or make use of the rights granted Lobito in this
Agreement. In such event, this Agreement will terminate.
6.3 Default. In the event any party shall be in material breach in the
performance of any provision of this Agreement, ("Default") and such Default
is not cured within thirty (30) days following written notice thereof from
the other party of such Default, then upon the expiration of said (30) day
period, the party not in Default, at its own election, shall have the right
to terminate this Agreement upon written notice delivered to the other party
within ten (10) days after the end of said thirty (30) day period. Nothing
herein shall limit a party's ability to seek immediate equitable relief
(including injunctive relief) in such circumstances as it reasonably believes
that its interests hereunder or in its property may be compromised.
6.4 Effect of Termination of this Agreement. In the event of termination or
expiration of this Agreement:
(a) Lobito shall continue to enjoy all of the exclusive rights set out in
Section 3.1 of this Agreement with respect to each and every Issue of the
Comic Book, and each and every film, video or any other audio-visual work
which was produced during the term. Lobito's exclusive rights set out in
Section 3.1 of this Agreement with respect to Issues of the Comic Book,
films, videos, and other audio-visual works not already released shall
immediately terminate.
(b) Lobito's payment obligations shall survive until fully discharged, and
Lobito's other rights and obligations under this Agreement shall not be
diminished in any way. However, in the event that Lobito is not up to date or
timely with its prescribed payments to C. Webb, Lobito's rights hereunder
will be deemed suspended until such payments in arrears are made to C. Webb.
(c) The provisions of Section 4.1 hereof requiring the unanimous consent of
the parties shall survive any termination. Further, upon any termination or
expiration of this Agreement, all future uses, exploitation, merchandising,
or licensing related to the Character, the Mark or the Comic Book not
specifically granted herein shall be upon the unanimous written agreement of
the parties and each party agrees that it will not use, exploit or license or
grant to any third party the right to use, exploit or license the Character
or the Mark except as provided in this sentence.
(d) The ownership rights set out in Section 4.1 (a) and 4.2 (a) hereof shall
not be affected by any such termination or expiration.
7. INDEMNIFICATION
7.1 Indemnification.
7
<PAGE>
Lobito will defend, at its own expense, any action, lawsuit or claim brought
against C. Webb in the United States and throughout the World that is based
upon an allegation that the Comic Book infringes any copyright or any
trademark rights cognizable under the laws of the United States or any state
thereof (hereinafter "Infringement"). Further, Lobito will also defend and
indemnify C. Webb, at its own expense, against any action, lawsuit, cause of
action or claim regarding any contract and/or other transaction it negotiates
involving C. Webb. Lobito agrees that it will pay all settlement costs and
all sums which by judgment or decree may be assessed against C. Webb as a
result of such litigation provided that Lobito shall be given (i) prompt
written notice of all claims against any such infringement and of any suits
brought or threatened against C. Webb, (ii) authority to assume the defense
thereof through its own counsel and to compromise or settle any such action,
lawsuit or claim, and (iii) all available information and reasonable
assistance to do so. The foregoing states the entire liability of Lobito with
respect to indemnity. No costs or expenses shall be incurred for the account
of Lobito by the C. Webb or its agents without the prior written consent of
Lobito.
7.2 Changes
C. Webb acknowledges that in the comic book industry, claims of infringement
are often raised in connection with copyrights and or trademarks, whether or
not such claims have any merit. C. Webb acknowledges and agrees that in the
event the Comic Book or any of its contents, including, but not limited to,
any text, artwork, designs, or characters which was contributed by it, or any
of the rights licensed by it to Lobito herein, including the use of the
Character or the Mark is the subject of a claim of infringement, Lobito, with
appropriate consultation from C. Webb, may change any of these so as to
render them non-infringing.
8. CONFIDENTIALITY
Each party agrees not to disclose or use any materials or information of the
other party which is marked confidential, proprietary, or the like, or in the
case of orally conveyed information, which is confirmed as being confidential
in writing within thirty (30) days of conveyance, except as may be necessary
to further the performance of this Agreement.
9. GENERAL
9.1 Assignment.
This agreement and the rights, duties and obligations of the parties hereto
shall not be assignable, transferable or delegable by any party hereto
without the prior written consent of the others, not to be unreasonably
withheld or delayed, and any purported assignment without such consent shall
be void, except that Lobito may assign this Agreement to any affiliate of
Lobito, or to any company which acquires Lobito or with which Lobito is
merged.
9.2 Miscellaneous
All notices specified to sent herein shall be sent by mail or overnight
courier, return receipt requested to the addresses first set out above.
Notices shall be deemed served when received. This Agreement is a binding
agreement and constitutes the complete, fmal and exclusive statements of the
terms of the agreement among the parties with respect to the subject matter
herein and supersedes any and all other agreements, written or oral, prior or
8
<PAGE>
contemporaneous, with respect thereto. This Agreement cannot be modified
except by a written instrument signed by all of the parties. The parties are
independent contractors and this Agreement is not a partnership between
orjoint venture by the parties and no party is the agent for another. If any
one or more of the provisions contained herein or the application thereof in
any circumstance, is held invalid, illegal or unenforceable in any respect
and for any reason, the validity, legality and enfocreability of any such
provision in every other respect and to the remaining provisions hereof shall
not be affected or impaired in any way, it being intended that all the
parties rights and privileges arising hereunder shall be enforceable to the
fullest extent permitted by law. Any party shall be excused from performance
of its obligations hereunder to the extent and for such period of time as
such performance is prevented by an act of God, fire, earthquake, flood,
transportation disruption, war, insurrection, or other cause beyond the
reasonable control of such party.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, their heirs, legal representatives, executors and administrators,
successors and permitted assigns.
9.3 Resolution of Controversy
Any controversy relating to this Agreement or the breach thereof shall be
first discussed at length by all the respective parties hereto. After such
discussion, if there has been no such resolution of the disputed points, the
aggrieved party or parties shall then have the right to pursue litigation in
the judicial forum of its/their choice as against the breaching party or
parties to the Agreement. Nothing contained in this Section 9.3 shall
prohibit a party from seeking equitable relief without first resorting to
litigation under such circumstances as that party's interests hereunder and
in its property will be otherwise compromised. In the eventlitigation is
initiated, each contracting party consents to California or Michigan as the
situs of jurisdiction.
IN THE WITNESS HEREOF, the parties hereto have caused this Agreement to be
signed on the day and year first written above.
/s/Chris Webber
Joseph Yukich, on behalf of Chris Webber, on behalf of C. Webb,
Lobito Publishing Group, A Inc., A Nevada Corporation
California Corporation.
Rick Licht, Esq. Fallasha Erwin, Esq.
9
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
CHARACTER COLLABORATION
AND COMIC BOOK PUBLISHING AGREEMENT
AGREEMENT entered into as of November 1997 (the "Effective date") by and among
AllStar Arena Entertainment Inc, A California Corporation, ("AllStar") having
its principal place of business at 6565 Sunset Boulevard, Suite 418, Los
Angeles, California; Karl Malone, Karl Malone Properties, Inc., ("Player")
c/o CMG Worldwide, 10500 Crosspoint Blvd. lndianapolis,.Indiana, 46256.
DEFINITIONS:
For the purpose of this contract, the term "Player" shall mean both Karl
Malone individually and Karl Malone Properties, Inc. For the purpose of this
contract, the term "AllStar" shall mean AllStar Arena Entertainment a
California Corporation. The terms "character" and "Mark" shall be held to
mean the actual animated superhero cartoon/ comic book character based on
Karl, "The Mailman Malone as jointly developed by AllStar Arena
Entertainment, Karl Malone and Karl Malone Properties, Inc., Karl Malone
Properties, Inc. will retain the right to Player's name, likeness, image,
nickname, trademarks etc. Karl Malone Properties, Inc., grants to AllStar the
right to use Player's name, likeness, image, nickname, for the purpose of
developing the Character and Mark McGwire the term of this Agreement.
WITNESSETH.
Whereas the parties have and will collaborate on the creation and promotion
of a new comic book or series of comic books incorporating the character and
storyline of NBA player Karl Malone, and incorporating Mr. Malone's likeness
and image.
Whereas, AllStar, in conjunction with Player, will write, illustrate,
produce, publish, and otherwise exploit the Comic Book subject to the terms
and the conditions of this Agreement, and;
Whereas, AllStar will arrange for the merchandising activities related to the
Karl Malone character subject to the terms and conditions of this Agreement.
For the purpose of this Agreement, "merchandising" shall include, but not be
limited to the sale of film, television, animation, interactive software and
any other medium currently in use or hereinafter devised, toys, trade
paperbacks, periodicals, clothing, theme park sales and other merchandising
related items encompassing the Character, Mark or logo and all normal forms
of merchandising.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the parties, the parties agree as
follows:
1. COMIC BOOK
AllStar will illustrate pictorial and graphic versions of the Player's
character depicting his exploits and superstar activities as one of the
leading players iii the National Basketball Association, accompanied by
dialogue and related literary text based upon the Malone character, in forms
suitable for publication in comic books. Each edition of the Comic Book shall
hereinafter be referred to as an "Issue" of the Comic Book.
<PAGE>
2. APPROVALS/CONSULTATIONS
Except as set forth herein, AllStar, and Player, shall have joint control
over the content of the Comic Book. AllStar shall submit production budgets
on request. Player shall have approval of the use of his name and likeness
throughout the term of the Agreement, with such approval not to be
unreasonably withheld. Player must approve or reject each submission within
fifteen (15) business days after AllStar submits the same to him.
3. ALLSTAR'S REPRODUCTION AND DISTRIBUTION
3.1 Grant
(a) Subject to the terms and conditions of this Agreement, during the term of
this Agreement Player hereby grants to AllStar the worldwide, exclusive
irrevocable right to reproduce, publish, print, reprint, and distribute the
Comic Book and the Character, with his approval, in whole or in part in any
form, in any language and in any medium now known or hereafter developed and
to advertise and promote the Comic Book, the Character and the Mark in any
medium. Player shall have approval of the use of Mr. Malone's name and
likeness, with such, approval not to be unreasonably withheld.
(b) The rights granted in Section 3.1 (a), above, include rights with respect
to film, video, or any other audio-visual work, relating to the Character or
(iii) promotional material or activity using or incorporating the Character
or the Mark.
(c) Except as specifically provided in this Agreement, Player shall not grant
to any third party the rights granted in Section 3.1 (a) or (b) with respect
to (i), a comic book, or (ii) film, video, or any other audio-visual work,
relating to the Character or (iii) promotional material or activity using or
incorporating the Character or the Mark.
3.2 AllStar's Responsibilities.
(a) Subject to the provisions of this Agreement and of Player with its
responsibilities hereunder, AllStar shall use its best efforts consistent
with industry norms to advertise, market, promote and sell copies of each
Issue of the Comic Book which Player has approved pursuant to Section 2 of
this Agreement.
(b) AllStar undertakes to maintain the high quality of the Comic Book
consistent with the quality which AllStar maintains for its other comic books.
3.3. Player's Responsibilities.
(a) Throughout the term, Player shall assist AllStar in the promotion of the
Comic Book as specified in this Agreement and as the parties may reasonably
agree from time to time, but in no event less than reasonable efforts. All
of Player's reasonable-out-of-pocket expenses directly related to such
assistance shall be promptly paid or reimbursed by Allstar. Player will be
reimbursed of all out-of-pocket expenses within fourteen (14) days after
AllStar receives the appropriate documentation of such expenses. Any single
expense in excess of $1,000 must be pre-approved by AllStar in writing.
<PAGE>
(b) Upon fourteen ( 14) days written notice by Allstar, Player agrees to make
himself available for one (1) personal appearances per calendar year for
promotional events to publicize the Comic Books and Mark, so long as said
appearances do not conflict with any professionalcommitment or previously
scheduled engagements. At these appearances there will be no obligation for
Player to give autographs. Any situation involving autographs will be
negotiated separately.
(c) Player acknowledges that the Character is based on his likeness and that
the Comic book (regardless of medium including, print, film, video, and
computer) consuming public will and have come to associate him with the
Character to be developed over time under the terms of this Agreement.
Therefore, Player agrees that during the full term of this Agreement and
any later extensions thereof, it will not portray or represent any other
comic book character and will not make appearances for or on behalf of, and
will not lend any of his Collaborative data (as defined in section 4.3 of
this Agreement) for use in conjunction with any comic book, comic book
character, or comic book publisher without the prior written consent of
Allstar, with such approval to be granted in Allstar's sole and exclusive
discretion, which approval shall not be unreasonably withheld.
(d) Player warrants that it will not willfully or by gross negligence act to
impair the value of the Comic Book, the Character, or the Mark. In
particular, Player shall not comport himself in a way that would disparage
or diminish the value of the developed Character or knowingly bring
negative publicity to the Character, Comic Book, or Mark.
3.4 Credits. Each party hereto shall receive the following credits:
In connection with all issues of the Comic Book and all videos, television
productions, and films, all credits shall be attributed jointly and severally
to: Allstar Arena Entertainment, Inc., and Karl Malone, as "creators", Mr.
Roesler, and Mr. Enfield will be attributed the title of Executive Producers.
3.5 Late Shipment of the Comic Book. In the event that an issue of the Comic
Book cannot be shipped on schedule such that it can be shipped only on a
"returnable basis", (i.e., that copies may be returned for refund or credit)
with the prior consultation of Player, Allstar shall have the right whether to
ship same on such returnable basis. The parties hereto agree that additional
time will be allowed for the sale of, and revenue payments for, any Issues let
out on a consignment basis.
3.6 Allstar's Merchandising Rights
Subject to the terms and conditions of this Agreement, Player hereby grants
to Allstar during the term of this Agreement the worldwide, irrevocable right
to exploit and otherwise use the Character and the Mark (defined below) on or
in connection with any and all products or services whatsoever, including but
not limited to, directly and indirectly, (through agents, licensees,
sublicensees, distributors, etc. of Allstar's choosing) merchandising of all
of the foregoing. Malone Properties, Inc. c/o CMG, will also have the right
to exploit and otherwise use the Character and Mark on or in connection with
any and all products or services whatsoever, including but not limited to,
directly and indirectly, (through agents, licensees, sublicensees,
distributors, etc. of Its/their choosing) the merchandising of all the
foregoing, with the express proviso that after CMG takes its standard
percentage from merchandising/licensiing the Character and/or Mark, the
balance of any revenue will be split between Player and Allstar in strict
accordance with the terms of this Agreement. Player and Allstar both agree
that no use of Character and/or Mark will be made without the prior consent
of both parties, with such consent not ot be unreasonably withheld.
<PAGE>
4. RIGHTS
4.1 Rights in the Character and the Mark.
(a) The (i) Character, and (ii) the Mark or any variations thereof in connection
with the Character (the "Mark") and all copyright and trademark rights shall be
owned 50% by Allstar and 50% by Player. All decisions affecting the use and
exploitation of the Character and Mark shall be jointly agreed upon by Allstar
and Player.
(b) The parties agree that the successful exploitation, merchandising and
licensing of the Character and the Mark will depend on the parties agreeing
upon the appropriate exploitation, merchandising and licensing of the
Character and the Mark. Therefore the parties agree that any use,
exploitation, merchandising or licensing related to the Character or the
Mark not specifically granted herein shall be upon the unanimous written
agreement of the parties. Further, Player agrees that he will not use,
exploit or license or grant to any third party the right to use, exploit or
license the Character or the Mark except as provided in the previous
sentence. Further, Allstar acknowledges tht Player retains the right to
approve/not approve any merchandising and/or licensing program presented
to him.
4.2 Rights in the Comic Book.
(a) As among the parties, the Comic Book and all copyright and trademark rights
to all original literary materials and characters therein which first
appear in the Comic Book shall be owned 50% by Allstar and 50% by Player.
The parties acknowledge that stock character profiles and standard scenes a
faire are excluded from claims of joint ownership. The term "Stock
Character Profiles" shall be held to mean any and all characters created by
Allstar that appear in the project but are specifically based on actual
persons, living or dead. The term "Standard Scenes A Faire" shall be held
to mean the background, foreground, and settings created by Allstar in
which the action takes place.
(b) The parties agree that Allstar, in its sole discretion, can elect to put
the logo of Allstar Arena Entertainment (or any such other distributor
approved by Player, not to be unreasonably withheld or delayed) on each
Issue of the Comic Book. Allstar shall have the right to have a copyright
notice and/or trademark in its name. In connection with Allstar's
exploitation of its rights hereunder, Player acknowledges that it will not
acquire any rights of any kind whatsoever in and to (i) the names or marks
of Allstar Arena Entertainment Inc. or any variation thereof, or (ii) any
other name or mark or other rights owned by Allstar, other than as
specifically set out in Section 4.1 (a) and 4.2 (a) hereof. However, Player
shall retain the right to use in any way it sees fit any pre-established
logos or marks on him which pre-date the existence of this Agreement.
4.3 Allstar's Exclusive License to Use the Character, Marks, and the
Collaborator Data Solely in Connection With the Distribution of the Comic Book .
Player hereby grants to Allstar the exclusive right to use (i) the Character,
(ii) the Marks, and (iii) his name, signature, biographic data and photograph or
likeness ("Collaborator Data") in advertising and promotional material in
connection with the Comic Book, including its promotion, sale and distribution.
Allstar shall submit to Player for its prior written approval, not to be
unreasonably withheld or delayed, all proposed materials which incorporate any
Collaborator Data.
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
4.4 Further Assistance.
Each party agrees that, at the request of another party, and without any further
consideration, it will, during the term of this Agreement and thereafter,
promptly execute and deliver to the other all instruments and documents (after
reasonable review by legal counsel) and do all things which may be reasonably
necessary to carry out the provisions of this Agreement.
4.5 Copyright and Trademark Notices.
The Comic Book, and where possible and appropriate, all other uses of the
Character and the Mark, shall bear a copyright and trademark notice in the names
of AllStar Arena Entertainment, and Player, i.e. TM/ Karl Malone license
authorized by CMG Worldwide
4.6 Survival.
The provisions of this Section 4 shall survive any termination or expiration of
this Agreement.
5. ROYALTIES AND PAYMENT.
5.1 Comic Book (Section 3.1) Publishing Royalties.
(a) Provided that the Comic Book is published and distributed, (I) Player shall
receive * percent (*) of the gross i.e. the wholesale price of the comic
book, profits, if any, collected by Allstar in connection with the distribution
and sale of the Comic Book as to the first 15,000 units sold; * percent
(*) of the gross profits, if any, collected by Allstar as to the next 15,000
units sold, or units 15,001 through 30,000, * percent (*) of the gross
profits, if any, on the next 20,000 units sold, or units 30,001 through 50,000,
and * percent (*) of the gross profits, if any, on all units sold in
excess of the first fifty thousand as specified above.
(b) For purposes of this Section 5.1, "gross profits" is defined as the amount
of gross receipts (less all returns) collected by Lobito from the sale of the
Comic Book in all markets. No royalties shall be paid on copies furnished
without charge, and not for resale to the parties, or for review, advertising or
promotional purposes and furnished without charge.
(iv) As an additional accommodation, at Player's request, Allstar agrees to
produce up to five thousand (5,000) promotional quality comic books per Issue.
These promotional books will be delivered to various civic, charitable, youth,
church, benefit or community service organizations chosen by him, in connection
with any related personal appearances by Player.
(c) Other than for advances from licensee(s) as noted in Section 5.3 (b) below,
Player will receive his share of any and all monies due to him no later
than thirty (30) days after the close of every calendar quarter during the
term of this Agreement and any extension thereof, and thereafter so long as
any sales are made by Allstar. Player shall have a five (5) year audit
right regarding any monies due and owing it as noted above in this Section.
Allstar grants to Player the right to audit all statements issued by it for
a period of five (5) caledar years. Further, should an audit or an
examination by Player discover deficiency in royalties in excess of $
1,000, then said audit will be paid by Allstar.
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
5.2 Payment.
Allstar shall provide to Player a statement of account on a quarterly basis, in
accordance with the terms enunciated above in Section 5.1 (c).
5.3 Merchandising Royalties
(a) Player shall receive * percent (*) of the gross profits, if
any, collected by Allstar in connection with the merchandising rights
granted in Section 3(a) hereof during the term of this Agreement.
(b) Player will be entitled to receive his percentage of royalties on any and
all advances collected by Allstar from the licensee(s), and will be paid
within thirty (30) days of the receipt of each such advance. Due to
Player's prior contractual relationship with Apex or any other party
with whom player has an apparel deal, any merchandising proposal regarding
shoes and apparel will be submitted to CMG for Player's review, prior to
finalizing any transaction.
(c) For the purposes of this Section 5.3, "gross profits" is defined as the
amount of gross receipts (less all returns) collected by Allstar from
whatever source derived from the sale licensing, or use of all forms of
merchandising of the Character and/or Mark.
(d) Other than for advances from licensee(s) as noted in Section 5.3 (b) above,
Player will receive his share of any and all monies due to him no later
than thirty (30) days after the close of any calendar quarter during the
term of this Agreement and any extension thereof, and thereafter so long as
any sales are made by Allstar. Player shall have a five (5) year audit
right regarding any monies due and owing it as noted above in this Section.
Allstar grants to Player the right to audit all statements issued by it for
a period of five (5) caledar years. Further, should an audit or an
examination by Player discover deficiency in royalties in excess of
$1,000, then said audit will be paid by Allstar.
5.4 Film, Television, Multimedia, Interactive and Video.
(a) (i) Player shall receive * percent (*) of the gross profits, if
any, collected by Allstar in connection with the rights described in Section 3.1
(b) hereof during the term of this Agreement.
(b) For the purpose of this Section 5.4, "gross profits" is defined as the
amount of gross receipts received by Allstar from whatever source derived
through the sale, exploitation or licensing of the Character and/or Mark from
film, television, multimedia (including CD-ROM, internet, videocassette, laser
disc, digital video disc, CD and cable) interactive and video payors.
(i) For the purposes of this Section 5.3, gross receipts exclude reasonable
and customary fees in the industry for like services earned by Allstar for the
individual services provided by employees of Allstar in connection with the
rights described in Section 3.1 (b) hereof.
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
(c) Other than for advances from licensee(s) as noted in Section 5.3 (b) above,
Player will receive his share of any and all monies due to him no later than
thirty (30) days after the close of any calendar quarter during the term of this
Agreement and any extension thereof, and thereafter so long as any sales are
made by Allstar. Player shall have a five (5) year audit right regarding any
monies due and owing it as noted above in this Section. Allstar grants to Player
the right to audit all statements issued by it for a period of five (5) caledar
years. Further, should an audit or an examination by Player discover deficiency
in royalties in excess of $ 1,000, then said audit will be paid for by Allstar.
Player shall have a five (5) year audit right regarding any monies due and owing
it as noted above in this Section. Allstar grants Player the right to audit all
statements issued by it for a period of five (5) calendar years.
5.5 Comic Books Featuring Multiple Players.
(a) Regarding Sections 5.3 and 5.4 above only:
Player also grants to AllStar the sole and exclusive right to his name,
likeness and character in a comic book or books that will feature him as an
action hero figure in conjunction with other AllStar Arena Entertainment
player properties (hereinafter referred to as a "compilation book"). If such
a book or books are issued, his royalty percentage of gross sales will be
adjusted a follows:
If a compilation book is issued featuring two (2) players, each player shall
receive * percent of the gross profits, if any, collected by AllStar in
conjunction with the revenue generation of this book as described in Sections
3(a) and 3.1 (b) of this Agreement.
If a compilation book is issued featuring three (3) players, each player
shall receive * percent of the gross profits, if any collected by AllStar in
conjunction with the revenue generation of this book as described in Sections
3(a) and 3.1 (b) of this Agreement.
If a compilation book is issued featuring four (4) players, each player shall
receive * percent of the gross profits, if any, collected by AllStar in
conjunction with the revenue generation of this book as described in Sections
3(a) and 3.1 (b) of this Agreement.
If a compilation book is issued featuring five (5) players, each player shall
receive * percent of the gross profits, if any, collected by AllStar in
conjunction with the revenue generation of this book-as described in Sections
3(a) and 3.1(b)of this Agreement.
If a compilation book is issued featuring six (6) players, each player shall
receive * percent of the gross profits, if any, collected by AllStar in
conjunction with the revenue generation of this book as described in Sections
3(a) and 3.1(b) of this Agreement.
If a compilation book is issued featuring seven (7) players, each player
shall receive * percent of the gross profits, if any, collected by AllStar in
conjunction with the revenue generation of this book as described in Sections
3(a) and 3.1(b) of this Agreement.
If a compilation book is issued featuring eight (8) players, each player
shall receive * percent of the gross profits, if any, collected by AllStar in
conjunction with the revenue generation of this book as described in Section
3 (a) and 3.1 (b) of this Agreement.
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
If a compilation book is issued featuring nine (9) players, each player shall
receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book as described in Sections
3(a) and 3.1(b) of this Agreement.
If a compilation book is issued featuring ten (10) players, each player shall
receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book as described in Sections
3(a) and 3.1(b) of this Agreement.
(b) Regarding Section 5.1 above only:
Player also grants to Allstar the sole and exclusive right to use his name,
likeness and character in a comic book or books that will feature him as an
action figure in conjunction with other Allstar Arena Entertainment Players,
(hereinafter referred to as a "compilation book"). If such a book or books are
issued, his royalty percentage of gross book unit sales will be as follows:
If a compilation book is issued featuring two (2) players, each player shall
receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book through all unit sales
of same.
If a compilation book is issued featuring three (3) players, each player
shall receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book through all unit sales
of same.
If a compilation book is issued featuring four (4) players, each player shall
receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book through all unit sales
of same.
If a compilation book is issued featuring five (5) players, each player shall
receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book through all unit sales
of same.
If a compilation book is issued featuring six (6) players, each player shall
receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book through all unit sales
of same.
If a compilation book is issued featuring seven (7) players, each player
shall receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book through all unit sales
of same.
If a compilation book is issued featuring eight (8) players, each player
shall receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book through all unit sales
of same.
If a compilation book is issued featuring nine (9) players, each player shall
receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book through all unit sales
of same.
If a compilation book is issued featuring ten (10) players, each player shall
receive * percent of the gross profits, if any, collected by Allstar in
conjunction with the revenue generation of this book through all unit sales
of same.
<PAGE>
5.6 Records.
Allstar shall keep, maintain and preserve at its principal place of business for
two (2) years following its furnishing to Player of a statement to be submitted
by Allstar pursuant to Section 5.3 of this Agreement, true books of account
containing a complete and accurate record covering all transactions relating to
this Agreement and pertaining to the various items required to be shown on such
statement. Each such statement shall be binding on C. Webb and not subject to
any objection unless such objection is made in writing, stating in specific
detail the nature of the objection and delivered to Lobito within five (5) years
after the receipt by C. Webb of the applicable statement. Such records shall be
available for inspection and review (and copying at C. Webb's expense) during
Lobito's normal business hours no earlier than five (5) days after Lobito
receives C. Webb's written notice and shall be conducted in such a manner as to
least interfere with Lobito's normal business activities. If any such review
discloses a deficiency between the amounts reported as due C. Webb and the
amount actually found to be due to it, then Lobito shall pay C. Webb within
thirty (30) days following its receipt of C. Webb's notification, (i) the
omitted amounts, (ii) interest on the omitted amounts from the date due at the
lesser of one and one half percent (1.5%) per month or the highest rate
permitted by law, and (iii) if any such deficiency exceeds five percent (5%)
plus the reasonable costs and fees of such review.
6. TERM AND TERMINATION
6.1 Term and Renewal. This Agreement shall have an initial term of three (3)
calendar years from the date of execution of same below. Allstar reserves the
right to enter into agreements that may exceed the term of this agreement, i.e.
film and television transaction.
In the event of the termination of the Agreement, the rights of ownership noted
above in Sections 4.1 and 4.2 will remain equally split at fifty percent (50%)
for Allstar and fifty percent (50%) for Player.
6.2 Termination. If at any time the Comic Book is not profitable to Allstar,
then Allstar may, at its sole election, elect not to produce, distribute,
publish, release, exploit or make use of the rights granted Allstar in this
Agreement. In such event, this Agreement will terminate.
6.3 Default. In the event any party shall be in material breach in the
performance of any provision of this Agreement, ("Default") and such Default is
not cured within thirty (30) days following written notice thereof from the
other party of such Default, then upon the expiration of said (30) day period,
the party not in Default, at its own election, shall have the right to terminate
this Agreement upon written notice delivered to the other party within ten (1O)
days after the end of said thirty (30) day period. Nothing herein shall limit a
party's ability to seek immediate equitable relief (including injunctive relief)
in such circumstances as it reasonably believes that its interests hereunder or
in its property may be compromised.
<PAGE>
6.4 Effect of Termination of this Agreement. In the event of termination or
expiration of this Agreement:
(a) Allstar shall continue to enjoy all of the exclusive rights set out in
Section 3.1 of this Agreement with respect to each and every Issue of the Comic
Book, and each and every film, video or any other audio-visual work which was
produced during the term. Allstar's exclusive rights set out in Section 3.1 of
this Agreement with respect to Issues of the Comic Book, films, videos, and
other audio-visual works not already released shall immediately terminate.
(b) Allstar's payment obligations shall survive until fully discharged, and
Allstar's other rights and obligations under this Agreement shall not be
diminished in any way. However, in the event that Allstar is not up to date or
timely with its prescribed payments to Player, Allstar's rights hereunder will
be deemed suspended until such payments in arrears are made to him.
(c) The provisions of Section 4.1 hereof requiring the unanimous consent of the
parties shall survive any termination. Further, upon any termination or
expiration of this Agreement, all future uses, exploitation, merchandising, or
licensing related to the Character, the Mark or the Comic Book not specifically
granted herein shall be upon the unanimous written agreement of the parties and
each party agrees that it will not use, exploit or license or grant to any third
party the right to use, exploit or license the Character or the Mark except as
provided in this sentence.
(d)The ownership rights set out in Section 4.1 (a) and 4.2 (a) hereof shall not
be affected by any such termination or expiration.
(e) Upon termination of this Agreement, Player has the right for thirty (30)
days to purchase any existing issues of the comic book not yet distributed at
the standard wholesale distribution price. Following the above noted thirty (30)
day period, Player has the right of first refusal to match any offers to
purchase any undistributed comic books.
7. INDEMNIFICATION
7.1 Indemnification.
7
Allstar will defend, at its own expense, any action, lawsuit or claim brought
against Allstar in the United States and throughout the World that is based upon
an allegation that the Comic Book infringes any copyright or any trademark
rights cognizable under the laws of the United States or any state thereof
(hereinafter "Infringement"). Further, Allstar will also defend and indemnify
Player, at its own expense, against any action, lawsuit, cause of action or
claim regarding any contract and/or other transaction it negotiates involving
him. Allstar agrees that it will pay all settlement costs and all sums which by
judgment or decree may be assessed against Player as a result of such litigation
provided that Allstar shall be given (i) prompt written notice of all claims
against any such infringement and of any suits brought or threatened against
him, (ii) authority to assume the defense thereof through its own counsel and to
compromise or settle any such action, lawsuit or claim, and (iii) all available
information and reasonable assistance to do so. The foregoing states the entire
liability of Allstar with respect to indemnity. No costs or expenses shall be
incurred for the account of Allstar by the Player or its agents without the
prior written consent of Allstar.
<PAGE>
7.2 Changes
Player acknowledges that in the comic book industry, claims of infringement are
often raised in connection with copyrights and or trademarks, whether or not
such claims have any merit. Player acknowledges and agrees that in the event the
Comic Book or any of its contents, including, but not limited to, any text,
artwork, designs, or characters which was contributed by it, or any of the
rights licensed by it to Allstar herein, including the use of the Character or
the Mark is the subject of a claim of infringement, Allstar, with appropriate
consultation from said player, may change any of these so as to render them
non-infringing.
8. CONFIDENTIALITY
Each party agrees not to disclose or use any materials or information of the
other party which is marked confidential, proprietary, or the like, or in the
case of orally conveyed information, which is confirmed as being confidential in
writing within thirty (30) days of conveyance, except as may be necessary to
further the performance of this Agreement.
9. GENERAL
9.1 Assignment.
This agreement and the rights, duties and obligations of the parties hereto
shall not be assignable, transferable or delegable by any party hereto without
the prior written consent of the others, not to be unreasonably withheld or
delayed, and any purported assignment without such consent shall be void, except
that Allstar may assign this Agreement to any affiliate of Allstar, or to any
company which acquires Allstar or with which Allstar is merged. Any such
assignment made must also have the prior written approval of the non-assigning
party.
9.2 Interim Contracts.
Any furhter contracts or agreements negotiated between AllStar and Player and
CMG Worldwide, during the term of this Agreement may extend beyond the stated
term of this Agreement.
9.3 Miscellaneous
All notices specified to sent herein shall be sent by mail or overnight courier,
return receipt requested to the addresses first set out above. Notices shall be
deemed served when received. This Agreement is a binding agreement and
constitutes the complete, final and exclusive statements of the terms of the
agreement among the parties with respect to the subject matter herein and
supersedes any and all other agreements, written or oral, prior or
contemporaneous, with respect thereto. This Agreement cannot be modified except
by a written instrument signed by all of the parties. The parties are
independent contractors and this Agreement is not a partnership between or joint
venture by the parties and no party is the agent for another. If any one or more
of the provisions contained herein or the application thereof in any
circumstance, is held invalid, illegal or unenforceable in any respect and for
any reason, the validity, legality and enfocreability of any such provision in
every other respect and to the remaining provisions hereof shall not be affected
or impaired in any way, it being intended that all the parties rights and
privileges arising hereunder shall be enforceable to the fullest extent
permitted by law. Any party shall be excused from performance of its obligations
hereunder to the extent and for such period of time as such performance is
prevented by an act of God, fire, earthquake, flood, transportation disruption,
war, insurrection, or other cause beyond the reasonable control of such party.
<PAGE>
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, their heirs, legal representatives, executors and administrators,
successors and permitted assigns.
9.4 Resolution of Controversy
Any controversy relating to this Agreement or the breach thereof shall be first
discussed at length by all the respective parties hereto. After such discussion,
if there has been no such resolution of the disputed points, the aggrieved party
or parties shall then have the right to pursue litigation in the judicial forum
of its/their choice as against the breaching party or parties to the Agreement.
Nothing contained in this Section 9.3 shall prohibit a party from seeking
equitable relief without first resorting to litigation under such circumstances
as that party's interests hereunder and in its property will be otherwise
compromised. In the event litigation is initiated, each contracting party
consents to California or Indiana as the situs of jurisdiction. In addition,
each party will have the opportunity to settle any disputes through the American
Arbitration Association.
IN THE WITNESS HEREOF, the parties hereto have caused this Agreement to be
signed on the day and year first written above.
/s/ Rick Licht, Esq. /s/ Karl Malone
On behalf of AllStar On behalf of Karl Malone
Arena Entertainment, Inc., Properties, Inc.
A California corporation
/s/ Joseph J. Yukich
On behalf of AllStar
Arena Entertainment, Inc.,
A California corporation
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
MAJOR LEAGUE BASEBALL
August 30, 1999
Mr. Frederick R. Licht, Esq.
Ultimate Sports Entertainment, Inc.
2444 Wilshire Blvd.
Suite 414
Santa Monica, CA 90403
Dear Rick:
Major League Baseball Properties, Inc. ("MLBP"), on its own behalf and on behalf
of the Major League Clubs has agreed to grant Ultimate Sports Entertainment,
Inc. ("Licensee") a nonexclusive license to publish a series of baseball comics,
subject to approval by the Major League Clubs (the "Clubs"), and the execution
of a licensing agreement agreeable to both parties (the "License Agreement"):
Term: The license period shall run from: August 1, 1999 - November 30,
2000; unless sooner terminated in accordance with the terms
hereof, provided, however, that the license period shall be
extended through December 31, 2001, unless sooner terminated in
accordance with the terms hereof, in the event the agreement
pursuant to which MLBP (or MLBP's successor hereunder) is
authorized by the Clubs to grant the rights and assume the
obligations herein is extended through such date and continues to
authorize MLBP (or MLBP's successor hereunder) to so grant such
rights and assume such obligations.
Prior to the expiration of the license period, MLBP and Licensee
agree to discuss in good faith renewing or extending the license
period for an additional period (if authorized as set forth
above) under mutually agreeable terms and conditions.
Notwithstanding the foregoing, neither party shall have any
obligation to extend or renew this licensing arrangement.
Product Description:
A series of baseball comic books featuring the likenesses of
current Major League Baseball players in Club uniforms (the
"Publication").
Publication Specifications:
Comic book titles: TBD
size: 6-5/8 x 10-1/4
MAJOR LEAGUE BASEBALL Properties paper stock: Cover 10 Point Card Stock
Glossy
245 Park Avenue Text 40#
print order: TBD
New York, New York 10 167 suggested retail price: $3.95
Phone 2 1 2~93 1 ~7900
www-majorleaquebaseball.corn
- -2
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
Territory: Worldwide.
Official Designation: MLBP grants the right for Licensee to designate the
Publication an "Official Publication of Major League
Baseball" and to use the "Major League Baseball
silhouetted batter" logo and/or "Official Publication"
logo on the cover of the Publication. MLBP shall
determine in its sole discretion which logo Licensee
shall use on the-cover of the Publication.
Services: Licensee agrees to develop and produce, at its own cost
and expense, the Publication. Licensee responsibilities
in connection therewith shall include, but not be
limited to, developing and producing the layout,
design, illustrations, photographs, graphics, charts
and any editorial and statistical content. Licensee
shall also be responsible for manufacturing the
Publication, including but not limited to, ink, paper,
printing, binding and shipping to distribution
locations, or may subcontract such manufacturing (i.e.,
producing and printing) responsibilities to a third
party, provided MLBP provides written approval of such
third party.
MLB Marks: MLBP grants the rights to names, characters, symbols,
designs, likenesses, visual representations and such
other similar or related identifications of the
following noted organizations to be used in connection
with the Publication and with the marketing, promotion
and sale of the Publication: (1) Major League Baseball
Properties, Inc. (including the Major League Baseball
silhouetted batter and logos), (2) the American League,
(3) the National League, and (4) All-Star Game,
Division Series, League Championship Series, World
Series, other names given to such games or events and
other names given to other Major League Baseball
playoff games and (5) all current Major League Baseball
Clubs (hereinafter collectively referred to as the "MLB
Marks"). Licensee acknowledges that the authorization
granted hereunder does not include authorization to
utilize the names and/or likenesses of any Major League
Baseball player or other individual.
Minimum Guarantee: As an advance payment against all monies earned under
the terms of this Agreement, Licensee shall pay to MLBP
the following amounts: * due upon execution of this
Agreement; * due August 15, 2000. And if the license
period is extended pursuant to Term above: * due
August 15,2001.
Percentage Compensation: MLBP shall receive a royalty of * on net sales (as
defined below) of the Publication.
<PAGE>
The term "net sales" shall mean gross sales less
quantity discounts and actual returns, but no deduction
shall be made for uncollectible accounts, commissions,
taxes or any other amount. No costs incurred in the
promotion, advertisement, production, distribution or
sale of the Publication shall be deducted from any
Percentage Compensation payable by Licensee.
Advertising Sales: During each year of the license period, MLBP will
receive, free of cost, one full -advertising page in
the Publication. MLBP may sell this page, and shall be
entitled to retain all revenue derived therefrom. All
other advertising pages may be sold by either party, in
Licensee's case, subject to MLBP'S approval of the
identity of the purchaser and content of advertisement.
Licensee acknowledges that MLBP will have a protected
list of accounts consisting of licensees, sponsors and
publishing accounts to whom Licensee is prohibited from
selling advertising pages. Should MLBP sell advertising
pages in addition to the one complimentary advertising
page specified in the previous paragraphs, collected
net revenues from such advertising pages shall be
apportioned between Licensee and MLBP as 75% and 25% of
such net revenues respectively.
Distribution: Licensee shall be responsible for distribution of the
Publication.
The Publication may be sold globally through
traditional newsstand channels as well as to jobbers,
wholesalers, distributors or retailers for sale or
resale and distribution to retail stores and merchants
for their resale and distribution directly to the
public. However, Licensee shall not permit the use of
the Publication as a premium (as defined below), except
with the prior written consent of MLBP and pursuant to
the provisions relating to the premium or special
sales. The term "premium" shall be defined as
including, but not limited to, free or self-liquidating
items offered to the public in conjunction with sale or
promotion of a product or service, including traffic
building or continuity visits by a customer, or any
similar scheme or device, the prime intent of which is
to use the Publication in such a way as to promote,
publicize and/or sell the products, services or
business image of the third party company.
Copyright: MLBP shall be the sole and exclusive owner of the
copyright rights to and in the MLB Marks, statistical
information compiled (including, without limitation,
the format, display and compilation of such statistics)
by MLBP and/or affiliates (the "Statistics") and any
editorial matter contributed by MLBP. Licensee
acknowledges the proprietary nature of the Statistics
and acknowledges that all copyrights in such Statistics
belong to MLBP and/or the Office of the Commissioner of
Baseball, as the case may be. Any use Licensee makes of
the Statistics shall confer no benefit upon it
whatsoever and any such use shall
<PAGE>
inure to the benefit of MLBP and/or the Office of the
Commissioner of Baseball.
Licensee is solely responsible for determining whether
the consent of (i) any individuals depicted or referred
to, in the materials, including Major League Baseball
players, coaches, managers and other personnel, former
and current is required; and (ii) any third party in
connection with any copyright, trademark, or other
property or identified in MLB Marks above, is required.
If Licensee determines that such consents are required,
Licensee is solely responsible for obtaining such
consents directly from such individuals, entity and/or
third party.
Insurance: Licensee shall provide to MLBP evidence of
comprehensive general liability insurance of no less
than one million dollars ($1,000,000).
Indemnity: MLBP hereby agrees to indemnify, defend and hold
Licensee and its owners, shareholders, directors,
officers, employees, agents, representatives,
successors and assigns harmless from any claims, suits,
damages or costs (including reasonable attorneys' fees
and expenses) arising from (i) challenges to MLBP's
authority as agent for and pursuant to authority
granted by the Clubs to license the ML13 Marks (as
defined below) in connection with the manufacture,
distribution, promotion, advertisement and sale of the
Publication or (ii) assertions to any claim of right or
interest in or to the MLB Marks as authorized and used
in the Publication, provided in each case that Licensee
shall give prompt written notice, cooperation and
assistance to MLBP relative to any such claim or suit,
and provided further in each case that MLBP shall have
the option to undertake and conduct the defense of any
suit so brought (including, without limitation,
selecting in its sole discretion, counsel therefore)
and to engage in settlement thereof at its sole
discretion. MLBP shall give Licensee notice of the
making of any claim or the institution of any action
hereunder against MLBP and MLBP shall direct Licensee
as to whether MLBP chooses to defend the action and
select counsel therefor, or whether Licensee is to
handle the defense of the action (subject to MLBP's
approval as to counsel, court filings, discovery,
correspondence, general strategies, costs, and the
settlement or disposition of the action).
Licensee shall assist MLBP, to the extent necessary, in
the procurement of any protection or to protect any of
MLBP's rights to the MLB Marks, and MLBP, if it so
desires and in its sole discretion, may commence or
prosecute any claims or suits in its own name or in the
name of Licensee or join Licensee as a party thereto.
Licensee shall notify MLBP in writing of any
infringements or imitations by others of the MLB marks
of which it is aware. MLBP shall have the sole right to
determine
<PAGE>
whether or not any action shall be taken on account of
such infringements or imitations. Licensee shall not
institute any suit or take any action on account of
any such infringements or imitations without first
obtaining the written consent of MLBP to do so.
Licensee agrees that it is not entitled to share in any
proceeds received by MLBP (by settlement or otherwise)
in connection with any formal or informal action
brought by MLBP hereunder.
Licensee hereby agrees to indemnify, defend and hold
MLBP, MLBE, the Clubs, the Leagues and BOC, Major
League Baseball Properties Canada Inc. ("MLBPC") and
Baseball Television International, Inc. ("BTI") and
their respective owners, shareholders, directors,
officers, employees, agents, representatives,
successors and assigns harmless from any claims, suits,
damages and costs (including reasonable attorneys' fees
and expenses) arising out of (i) any unauthorized use
of or infringement of any trademark, service mark,
copyright, patent, process, method or device by
Licensee in connection with the Publication covered by
this Agreement and the License Agreement, (ii) alleged
defects or deficiencies in said Publication or the use
thereof, or false advertising, fraud, misrepresentation
or other claims related to the Publication not
involving a claim of right to the MLB Marks, (iii) the
unauthorized use of the MLB Marks or any breach by
Licensee of this Agreement and the License Agreement,
(iv) libel or slander against, or invasion of the right
of privacy, publicity or property of, or violation or
misappropriation of any other right of any third party,
(v) agreements or alleged agreements made or entered
into by Licensee to effectuate the terms of this
Agreement and the License Agreement, (vi) Licensee's
distribution methods, practices, or policies relating
to the Publication and/or (vii) Licensee's promotional,
marketing, or advertising activities involving or
related to the Publication, MLBP, or any of its
affiliates. MLBP shall give Licensee notice of the
making of any claim or the institution of any action
hereunder against MLBP and MLBP may at its option
participate in any such action or allow Licensee to
handle MLBP's defense (subject to MLBP's approval as to
counsel, court filings, discovery, correspondence,
general strategies, and the settlement of the action).
The indemnifications hereunder shall survive the
expiration or termination of this Agreement and the
License Agreement.
Licensee agrees to promptly notify MLBP in writing of
any actions commenced against it in any forum relating
to the Publication (irrespective of whether the MLB
Marks are implicated thereby) and shall afford MLBP the
opportunity to (i) take on the defense of such action
on behalf of Licensee or (ii) consult with Licensee in
the defense of such action. In either
<PAGE>
case, subject to the provisions of the preceding
paragraph, MLBP shall bear the costs of such
participation.
Quality Control: Licensee shall submit all materials, including text,
design, images and layout for all components of the
Publication and all promotional and display materials
related to the publication to MLBP for MLBP's approval.
Product Credit: Licensee shall provide MLBP with 150 free copies of
each Publication, for use by MLBP at its sole
discretion.
Miscellaneous: During each year of the license period, Licensee agrees
to purchase one four-color full-page advertisement in
Little League Magazine, not to exceed the net purchase
price of $45,000. Licensee guarantees that MLBP, the
Clubs, official Club and/or MLBP retail stores, and
Club in-stadium concessionaires will obtain the
Publication for retail sale at lowest possible
wholesale prices applicable to the channel of
distribution through which the Publication will be sold
and shall receive prompt shipments and/or deliveries of
the Publication, without regard to the relatively small
volume their orders may represent MLBP and the Clubs
may obtain the Publication for their use, but not
resale, at the manufacturer's lowest possible price,
which shall in no event be greater than its lowest
wholesale price.
Additional specific terms and conditions will be included in the agreement to
follow. Please review and arrange for an authorized representative to sign below
to demonstrate Licensee agreement to these terms and conditions and return to my
attention. Upon execution by MLBP, we will forward to you a copy for your files.
Sincerely,
/s/Donald S. Hintze
Donald S. Hintze
Director of Publishing
AGREED AND ACCEPTED:
Name: /s/ Frederick R. Licht
Signature: /s/Frederick R. Licht
Title: Pres./CEO
Date: 10/01/99
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
LICENSE AGREEMENT
THIS AGREEMENT is made as of the 13th day of May, 1998 in New York, New York,
by and between the Major League Baseball Players Association, an
unincorporated association under the laws of the State of New York, with
offices at 12E. 49th Street, NEW YORK, NEW YORK 10017 (hereinafter "MLBPA"),
and ALLSTAR ARENA ENTERTAINMENT, INC., a California, corporation, with
offices located at6565 Sunset Blvd., Suite 418, Los Angeles, CA 90028
(hereinafter "Licensee")
WHEREAS, MLBPA is acting on behalf of all of the active baseball players
of the National League and the American League who have entered into a
Commercial Authorization Agreement with the MLBPA (hereinafter "players"),
and who, upon being polled by the MLBPA, have not indicated they have granted
a license for products which would conflict with the license granted herein,
and
WHEREAS, MLBPA in such capacity has the right to negotiate this Agreement
and to grant rights in and to the logo, name and symbol of MLBPA identified
in Schedule A hereto (the "Trademarks"), and the names, nicknames,
likenesses, signatures, pictures, playing records, and/or biographical data
of each player described in Schedule A hereto as part of a group (hereinafter
"the Rights"); and
WHEREAS, Licensee desires to use the Rights and/or the Trademarks on or
in association with the manufacture, offering for sale, sale, advertising,
promotion, and distribution of certain products identified in Schedule B (the
"Licensed Products") in the countries identified in Schedule B (the "Licensed
Territory"); and
WHEREAS, MLBPA is willing to grant Licensee such right to use the Rights
and/or the Trademarks on the Licensed Products in the Licensed Territory in
accordance with the terms and conditions recited herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions herein contained, it is hereby agreed as follows:
1. GRANT.
(a) MLBPA hereby grants to Licensee and Licensee hereby accepts the
non-exclusive, non-transferable, nonassignable license, without the right to
grant sublicenses, to use the Rights and Trademarks solely within the
Licensed Territory on the Licensed Products and/or in association with the
manufacture, offering for sale, sale, advertising, promotion, shipment and
distribution of the Licensed Products to jobbers, wholesalers and
distributors for sale, shipment and distribution to retail stores and
merchants and/or to retail stores and merchants for sale, shipment and
distribution direct to the public. Licensee shall not knowingly permit the
Licensed Products to be sold or distributed outside of the Licensed Territory.
(b) MLBPA represents and warrants that it has the authority to grant
the rights licensed herein. IVILBPA makes no representation that it has the
authority to grant, nor does it grant herein, the right to utilize team
symbols, insignias or logos, or the name, symbol, or logo of any other
licensee of MLBPA, or reproductions of any products produced by or for any
other licensee of MLBPA. Accordingly, it is understood by the parties hereto
that if any of the foregoing are to be utilized in connection with the
exercise of the license granted hereunder, including without limitation the
likenesses of players utilizing team logos, symbols or insignias, it will be
the responsibility of Licensee to obtain all necessary permissions for the
use of such material.
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(c) Unless specifically authorized in advance by MLBPA in writing,
Licensee agrees to utilize with equal prominence the names and likenesses of
a minimum of one hundred (100) players or, at MLBPA's direction, a minimum of
five (5) players per Major League team, on Licensed Products during the
initial License Period (as defined herein) and during each additional License
Period, if any, as provided herein. Licensee must provide the MLBPA with
thirty (30) days' written notice of the names of all players Licensee intends
to use on the Licensed Products prior to manufacture of such Licensed
Products, and Licensee may not use the name or likeness of any player on the
Licensed Products without the prior written consent of MLBPA, which shaii not
be unreasonably withheld.
(d) The license granted by MLBPA to Licensee hereunder does not
include the right to, and Licensee shall not in any manner, use (or purport
to grant others the right to use) the Trademarks or the Rights for the
purpose, in whole or in part of promoting any service or product other than
the Licensed Products. Nor does this license convey the right to feature or
highlight any individual player apart from the group. In the event Licensee
is interested in highlighting any player or in securing the personal
endorsement or services of any player, Licensee understands and agrees that
such will require the personal approval of the individual player involved and
a separate payment to such player, through the MLBPA, independent of and in
addition to all payments due to the MLBPA pursuant to this Agreement.
(e) Nothing contained in Section 1 (d) above shall prevent Licensee
from utilizing the names and/or likenesses of the players in a
non-endorsement and/or non-testimonial manner in connection with the
packages, cartons, advertising, point-of sale and/or promotional materials
for the Licensed Products (the "Promotional and Packaging Material") or
require any separate payment in connection therewith; provided, however, that
unless specifically authorized otherwise in advance by MLBPA in writing, the
names and/or likenesses of a minimum of Six (6) such players are utilized
with equal prominence on the Promotional and Packaging Material for all
Licensed Products during the initial License Period and during each
additional License Period, if any, as provided herein, and Licensee agrees to
rotate the players who are utilized in connection with such materials so as
not to highlight any particular player or group of players to the exclusion
of others.
(f) All rights not expressly granted to Licensee in this Agreement
are specifically reserved to MLBPA.
2. TERM AND OPTIONS.
(a) This Agreement shall be effective and shall continue for the
License Period set forth on Schedule B, unless sooner terminated pursuant to
a provision of this Agreement.
(b) MLBPA hereby grants to Licensee two (2) separately exercisable
options (the "Options") to extend the term of this Agreement for additional
one-year periods ("Second and Third License Periods," respectively). In order
to exercise each of the two Options, Licensee must provide MLBPA with written
notice of its intention to exercise each such Option and such written notice
must be received by MLBPA no earlier than one hundred twenty (120) days and
no later than ninety (90) days prior to the expiration of the License Period
then in effect. The attempted exercise of any Option shall be void and of no
effect if Licensee (1) has breached or is then in breach of any of its
obligations under this Agreement, or (ii) fails during any License Period to
make Net Sales sufficient to generate Actual Royalties equal to or greater
than the Guaranteed Minimum Royalties as defined herein, or (iii) fails to
make full and timely royalty payments as provided herein. Licensee's
performance in each License Period shall be pursuant to the same terms and
conditions recited in this Agreement.
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3. ROYALTIES.
(a) Licensee agrees to pay MLBPA a royalty at the percentage set
forth on Schedule B based on Net Sales (as defined in Subsection 3(b) below)
of the Licensed Products employing the Rights and/or the Trademarks by
Licensee (the "Actual Royalty"). Such Actual Royalty shall accrue when the
Licensed Products are sold, shipped, distributed, billed and/or paid for,
whichever occurs earlier, to a third party not affiliated with Licensee. For
purposes of this Agreement, "affiliated" means related in any manner through
direct or indirect ownership or control and includes joint venture
arrangements.
(b) "Net Sales" shall mean gross sales to third parties not
affiliated with Licensee at Licensee's regular wholesale price, less returns
actually credited. No other deductions shall be permitted. For example, there
shall be no deductions made for other discounts, commissions, uncollectible
accounts, taxes, fees, assessments, impositions, payments or expenses of any
kind which may be incurred or paid by Licensee in connection with the royalty
payments due to MLBPA hereunder, or for any costs incurred in the
manufacture, offering for sale, sale, advertising, promotion, shipment,
distribution and/or exploitation of the Licensed Products.
(c) Actual Royalty payments shall be made by Licensee to MLBPA on
all Licensed Products sold, shipped and/or distributed by Licensee, even if
not billed (such as in the case of introductory offers, samples, promotions
and the like and sales, shipments and/or distributions to individuals, and/or
companies which are affiliates or subsidiaries of Licensee), or if billed at
less than Licensee's usual price for such Licensed Products, based upon
Licensee's usual Net Sales price for such Licensed Products sold to third
parties not affiliated with Licensee in the course of Licensee's normal
distribution, shipment and sales activities.
(d) Where the billed price for any Licensed Products is less than the
usual Net Sales price for such Licensed Products sold to third parties not
affiliated with Licensee in the course of Licensee's normal distribution,
shipment and sales activities, the Actual Royalty payment shall be based upon
Licensee's usual Net Sales price.
(e) For each License Period of this Agreement, Licensee agrees to pay
MLBPA a non-refundable guaranteed minimum royalty in the amount(s) and in the
manner set forth on Schedule B (the "Guaranteed Minimum Royalty"). Such
Guaranteed Minimum Royalty shall be paid in equal quarterly installments as
set forth on Schedule B, with the first such payment due immediately upon
execution of this Agreement. If, upon termination or expiration of this
Agreement or any License Period thereof, the total royalties paid and/or
payable by Licensee to MLBPA during each such License Period is less than the
Guaranteed Minimum Royalty, Licensee shall immediately pay the amount of such
difference to MLBPA. Actual Royalty payments based on Net Sales made during
any Term of this Agreement shall be credited against the Guaranteed Minimum
Royalty due for the License Period in which such Net Sales were made.
4. STATEMENTS AND PAYMENT
(a) Licensee shall deliver to MLBPA, at its offices in New York, New
York, or to such other address as MLBPA may direct, on the fifteenth (15th) day
following the end of each calendar quarter during any License Period of this
Agreement, and on the fifteenth (15th) day of the month following termination or
expiration of this Agreement, a complete and accurate statement of its Net Sales
of Licensed Products, differentiated by country and product category, for the
immediately preceding calendar quarter (or portion thereof) (the "Royalty
Period"). Said statement shall be certified as accurate by an officer of
Licensee and shall include
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information as to the stock number, item description, quantity shipped, and
gross selling price of the Licensed Products shipped, distributed and/or sold
by Licensee during the Royalty Period, information as to quantity discounts
given and returns actually credited, computation of Net Sales and royalty
due, and any other information MLBPA may from time to time reasonably
request. Such statements shall be furnished to MLBPA whether or not any
Licensed Products have been shipped, distributed and/or sold, and whether or
not Actual Royalties have been earned during the Royalty Period. Statements
shall be in a form acceptable to MLBPA and consistent with Schedule C hereto.
(b) The amount in United States dollars shown in Licensee's royalty
statements as being due MILBPA shall be paid simultaneously with the
submission of such statements. In the event that the amount credited for
returns during any Royalty Period exceeds Licensee's royalty obligation to
MLBPA for such period, Licensee may use such amount as a credit against
future royalty obligations of Licensee during the Term of this Agreement. In
no event, however, shall the amount credited for returns during any Royalty
Period be used upon termination or expiration of this Agreement as a credit
against past royalty obligations of or royalty payments made by Licensee. In
no circumstances shall MLBPA be obligated to pay any amount to Licensee upon
termination or expiration of this Agreement on account of credits accrued by
Licensee for returns.
(c) Licensee's royalty statements and all amounts payable to MLBPA
by Licensee shall be submitted to:
Major League Baseball Players Association
12 E. 49th Street
New York, NY 10017
or such other address as the MLBPA may direct.
(d) The receipt and/or acceptance by MLBPA of any of the statements
furnished or royalties paid hereunder to MLBPA (or the cashing of any royalty
checks paid hereunder) shall not preclude MLBPA from questioning the
correctness thereof at any time and, in the event that any inconsistencies or
mistakes are discovered in such statements or payments, they shall
immediately be rectified by Licensee and the appropriate payment shall be
made by Licensee.
(e) All payments made hereunder shall be in United States dollars
drawn on a United States bank, unless otherwise specifically agreed upon by
the parties.
(f) Time is of the essence with respect to all payments to be made
hereunder by Licensee. Interest at a rate of the lesser of one and one-half
percent (1.5%) per month or the maximum rate allowed by law, compounded
daily, shall accrue on any amount due MLBPA hereunder from and after the date
upon which the payment is due until the date of receipt of payment.
5. AUDIT.
(a) Licensee agrees to keep accurate books of account and records at
its principal place of business covering all transactions relating to the
license granted herein and pertaining to the items required to be shown in
the Licensee's royalty statements to be submitted pursuant hereto, including
without limitation, invoices, correspondence, banking, financial and other
records. MLBPA and its duly authorized representatives shall have the right,
upon reasonable
<PAGE>
notice, at all reasonable hours of the day, to audit Licensee's books of
account and records, and all other documents and material in the possession
or under the control of Licensee, with respect to the subject matter and the
terms of this Agreement and to make copies and extracts thereof. In the event
that any such audit reveals an underpayment by Licensee, Licensee shall
immediately upon demand remit payment to MLBPA in the amount of such
underpayment plus interest calculated at the rate of the lesser of one and
one-half percent (1.5%) per month or the maximum rate allowed by law,
compounded daily, calculated from the date such payment(s) were actually due
until the date such payment is actually made. In the event that any such
underpayment is greater than Five Thousand Dollars ($5,000), or two percent
(2%) of the royalties due for the period audited, whichever is less, Licensee
shall reimburse MLBPA for the costs and expenses of such audit.
(b) All books of account and records of Licensee covering all
transactions relating to the license granted herein shall be retained by
Licensee for at least two (2) years after the expiration or termination of
this Agreement for possible inspection by MLBPA.
6. QUALITY, NOTICES, APPROVALS, AND SAMPLE
(a) The Licensed Products and the Promotional and Packaging Material
shall be of high quality in design, material and workmanship so as to be
suited to the favorable advantage, protection and enhancement of the
Trademarks and the Rights, in no event shall be of lesser quality than the
best quality of similar products and promotional, advertising, and packaging
material presently shipped, distributed, sold and/or used by Licensee in the
Licensed Territory, shall be safe and suitable for their intended purpose,
and shall be manufactured, sold and/or distributed in full conformance with
all applicable laws and regulations.
(b) Licensee may not manufacture, use, offer for sale, sell,
advertise, promote, ship and/or distribute any Licensed Products, or any
Promotional and Packaging Material relating to the Licensed Products, until
it has received written approval of same in the manner provided herein from
MLBPA. Such approval shall not be unreasonably withheld. Should MLBPA fail to
approve in writing any of the submissions furnished it by Licensee within
fourteen (14) business days from the date of submission thereof, such failure
shall be considered to be a disapproval thereof.
(C) Before commencing or authorizing third parties to commence the
design or development of Licensed Products or Promotional and Packaging
Material which have not been previously approved in writing by MLBPA,
Licensee shall submit at its own cost to MLBPA, for approval, a written
description of the concept of such Licensed Product and/or Promotional and
Packaging Material, including full information on the nature and function of
the proposed item and a general description of how the Rights and/or the
Trademarks and other material will be used thereon. Licensee shall next
submit at its own cost to MLBPA, for approval, complete layouts and
descriptions of the proposed Licensed Products and/or Promotional and
Packaging Material showing exactly how and where the Rights and the
Trademarks and all other artwork and wording will be used. Thereafter,
Licensee shall submit at its own cost to MLBPA, for approval, pre-production
models or prototype samples of the proposed Licensed Products and/or
Promotional and Packaging Material. Finally, Licensee shall submit at its own
cost to MLBPA, for approval, actual proofs or final pre-production samples of
the proposed Licensed Products and/or Promotional and Packaging Material.
Licensee shall not proceed beyond any of the above stages where approval is
required without first securing the express written approval of MLBPA.
<PAGE>
(d) Upon commencement of manufacture, shipment and distribution of
the Licensed Products and/or Promotional and Packaging Material relating to
the Licensed Products after all required approvals have been given by MLBPA,
Licensee shall submit, at its own cost, to MLBPA an additional twelve (12)
sets of the Licensed Products and two (2) sets of the Promotional and
Packaging Material.
(e) MLBPA may periodically during any License Period of this
Agreement require that Licensee submit to MLBPA, at no cost to MLBPA, up to
twelve (12) additional sets of the Licensed Products, and the Promotional and
Packaging Material relating to the Licensed Products, for subsequent review
of the quality of and copyright and trademark usage and notice on same and
for any other purpose that MLBPA deems appropriate.
(f) After the required approval has been secured from MLBPA pursuant
to Section 6(c) above, Licensee shall not depart from the specifications,
quality or appearance thereof in any material respect without first obtaining
the express written approval of MLBPA. Licensee shall make submissions to
MLBPA and obtain approvals in the manner required above each time new or
revised concept, layouts, descriptions, artwork, models, prototype samples
and/or production samples are created, developed and/or adopted by and/or for
Licensee.
(g) Subject to reasonable obligations of confidentiality by MLBPA, to
assure that the provisions of this Agreement are being observed, Licensee
agrees that it will allow MLBPA or its designees to enter Licensee's premises
and/or the premises where the Licensed Products are being manufactured during
regular business hours, and upon reasonable notice, for the purpose of
inspecting the Licensed Products and the Promotional and Packaging Material
relating to the Licensed Products and the facilities in which the Licensed
Products are being packaged.
(h) In order to ensure that the Licensed Products and the Promotional
and Packaging Materials are manufactured, offered for sale, sold, advertised,
promoted, shipped and/or distributed as set forth herein, in the event that
the quality standards and/or trademark and copyright usage and notice
requirements herein referred to are not met, or in the event that said
quality standards and/or trademark and copyright usage and notice
requirements are not maintained throughout the period of manufacture,
offering for sale, sale, advertising, promotion, shipment and/or distribution
of any Licensed Products hereunder, then, in addition to any other rights
available to MLBPA under this Agreement or otherwise, upon receipt of written
notice from MLBPA, Licensee shall immediately discontinue any and all
manufacture, offering for sale, sale, advertising, promotion, shipment and
distribution of such Licensed Products and/or Promotional and Packaging
Material in connection with which the said quality standards and/or trademark
and copyright usage and notice requirements have not been met.
7. ARTWORK.
(a) The form and content of all artwork for use in any media shall be
subject to the express written approval of MLBPA prior to its use by Licensee
in connection with the Licensed Products. If Licensee desires to use artwork
previously approved by MLBPA on a different Licensed Product or on different
Promotional and Packaging Material, Licensee shall first submit samples of
such proposed use to MLBPA for approval thereof.
(b) Except as provided in Section 18(c) of this Agreement,
notwithstanding any rights otherwise granted to Licensee by state or federal
trademark or copyright laws or otherwise, Licensee shall not without express
written permission of MLBPA directly or indirectly use, or authorize others
to use, in any manner whatsoever, any of the artwork or designs or other
material involving the Rights and/or Trademarks, or any reproductions
thereof, following the expiration or termination of this Agreement,
notwithstanding their
<PAGE>
invention or use by Licensee, and Licensee shall not be required to destroy
all such artwork and/or designs and/or other material and furnish to MLBPA
satisfactory evidence of their destruction, but Licensee shall be required to
turn over all such artwork and/or designs and/or other material at MLBPA's
request.
8. OWNERSHIP OF RIGHTS.
(a) It is understood and agreed that MLBPA is the sole and exclusive
holder of all right, title and interest in and to the Rights and/or the
Trademarks for the duration of this Agreement.
(b) Nothing contained in this Agreement shall be construed as an
assignment to Licensee of any right, title and/or interest in or to the
Rights and/or the Trademarks, it being understood that all right, title and
interest relating thereto are expressly reserved by MLBPA except for the
rights being licensed hereunder.
(c) No license is being granted hereunder for any purpose or as to
any products, services or material other than the Licensed Products and only
in the Licensed Territory. MLBPA reserves for such use as it may determine
all rights of any kind other than the rights herein licensed to Licensee.
(d) Licensee shall not use the Rights and/or the Trademarks other
than as permitted herein and, in particular, shall not incorporate the Rights
and/or the Trademarks in Licensee's corporate or business name in any manner
whatsoever. Licensee agrees that in using the Rights and Trademarks, it will
in no way represent that it has any rights, title and/or interest in and/or
to the Rights and/or the Trademarks other than those expressly granted under
the terms of this Agreement. Licensee further agrees that it will not use
and/or authorize the use, either during or after the term of this Agreement,
of any configuration, trademark, trade name or other designation confusingly
similar to the Rights and/or any of the Trademarks.
(e) Notwithstanding any rights otherwise granted to Licensee by state
or federal trademark or copyright laws or otherwise, Licensee shall not
without express written permission of MLBPA directly or indirectly use, or
authorize others to use, in any manner whatsoever, any artwork or designs or
other material involving the Rights and/or Trademarks, or any reproductions
thereof following the expiration or termination of this Agreement,
notwithstanding their invention or use by Licensee, and Licensee shall
destroy all such artwork and/or designs and/or other material and furnish to
MLBPA satisfactory evidence of their destruction.
9. GOODWILL AND PROMOTIONAL VALUE.
(a) Licensee recognizes the value of the goodwill associated with the
Rights and/or the Trademarks and acknowledges that the Rights and/or the
Trademarks, and all rights therein and the goodwill pertaining thereto,
belong exclusively to MLBPA. Licensee further recognizes and acknowledges
that the Rights and/or the Trademarks have acquired secondary meaning in the
mind of the public. Licensee agrees that during any License Period of this
Agreement, or thereafter, it will not dispute or attack the title or any
rights of MLBPA in and to the Rights and/or the Trademarks or the validity of
the license granted herein.
(b) Licensee agrees that its use of the Rights and/or the Trademarks
shall inure to the benefit of MLBPA and that Licensee shall not, at any time,
acquire any rights in the Rights and/or the Trademarks by virtue of any use
it may make of the Rights and/or of the Trademarks. Licensee hereby assigns
to MLBPA any and all trademarks and trademark rights in
<PAGE>
the Trademarks and/or Rights created by such use, together with the goodwill
of the business in connection with which such Trademarks are used.
(c) Licensee acknowledges that MLBPA is entering into this Agreement
not only in consideration of the royalties paid hereunder but also in
recognition of the intrinsic benefit to proper maintenance of the reputation
of MLBPA and the players as a result of the manufacture, offering for sale,
sale, advertising, promotion, shipment and distribution of the Licensed
Products by Licensee in accordance with the provisions of this Agreement.
Licensee therefore acknowledges that its failure to manufacture, offer for
sale, sell, advertise, promote, ship and distribute the Licensed Products in
accordance with the provisions of this Agreement, including without
limitation its obligations to protect and enhance the value of the Trademarks
and the Rights, will result in immediate and irreparable damage to MLBPA in
connection with promotion of the Rights and/or the Trademarks and/or to its
members, and that there will be no adequate remedy at law for the failure by
Licensee to abide by such provisions of this Agreement. Accordingly, Licensee
agrees that in the event of any breach by Licensee, in addition to all other
remedies available to it hereunder, MLBPA may at its sole option commence an
action in any court having jurisdiction or an arbitration proceeding, and
shall be entitled to seek injunctive relief against any such breach as well
as such other relief as any arbitrator(s) or court with jurisdiction may deem
just and proper.
(d) MLBPA recognizes and acknowledges that Licensee has its' own good
will as well as its' own trademarks, which are similarly reserved.
10. TRADEMARK AND COPYRIGHT PROTECTION
(a) The license granted herein is conditioned upon Licensee's full
and complete compliance with the provisions of the trademark and copyright
laws of the United States and any foreign country or countries in the
Licensed Territory.
(b) Licensee agrees to permanently affix to all Licensed Products and
all Promotional and Packaging Material the MLBPA logo and appropriate
legends, markings and/or notices as required by MLBPA, to give appropriate
notice to the consuming public of MLBPA's right, title and interest therein.
Licensee agrees that, unless otherwise specified in writing by MLBPA, each
usage of the Trademarks shall be followed by either the TM or the 0 Trademark
Notice symbol, as appropriate, and the following legends shall appear at
least once on each Licensed Product and on each piece of Promotional and
Packaging Material:
Copyright or -C- MLBPA
Licensee also shall include on the Licensed Products, and on each piece of
Promotional and Packaging Material, the following notice:
Official Licensee -
Major League Baseball Players Association
(c) Licensee agrees that it will not use, distribute or sell any
Licensed Products or distribute any Promotional or Packaging Materials which
do not carry notices meeting the requirements of this Agreement.
(d) Licensee shall use no other markings, legends and/or notices on
or in association with the Licensed Products or on or in association with the
Promotional and
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Packaging Material other than those specified above and such other markings,
legends and/or notices as may be specified by MLBPA, without first obtaining
MLBPA's express written approval with such approval not to be unreasonably
withheld.
(e) MLBPA has the right, but not the obligation, to obtain at its own
cost, appropriate trademark and copyright protection for the Rights and/or
the Trademarks in association with the Licensed Products in any and all
countries of the Licensed Territory, in the name of MLBPA or in the name of
any third party selected by MLBPA.
(f) Licensee shall keep appropriate records (including copies of
pertinent invoices and correspondence), and advise MLBPA, relating to the
dates when each of the Licensed Products is first placed on sale or sold in
each country of the Licensed Territory, and the dates of first use in each
country of each different Trademark and/or of the Rights on the Licensed
Products and Promotional and Packaging Material. If requested to do so by
MLBPA, Licensee also agrees to supply MLBPA with samples, facsimiles or
photographs of the trademark usages in question and other information which
will enable MLBPA to complete and obtain trademark applications or
registrations, or to evaluate or oppose any trademark or design applications,
registrations, or uses of third parties,
(g) Licensee agrees that it shall not at any time within the Licensed
Territory or anywhere else in the world apply for any copyright or trademark
protection which would affect MLBPA's ownership of any rights in the Rights
and/or the Trademarks, nor file any document with any governmental authority
or assert directly or indirectly any right or take any other action which
could affect MLBPA`s ownership of the Rights and/or the Trademarks, or the
publicity rights of the players, or knowingly aid or abet anyone else in
doing so.
(h) Licensee agrees to cooperate in all reasonable respects with
MLBPA in protecting and defending the Rights and/or the Trademarks. In the
event Licensee becomes aware of any claim or problem arising with respect to
the protection of the Rights and/or the Trademarks in the Licensed Territory,
Licensee shall promptly advise MLBPA in writing of the nature and extent of
same. MLBPA has no obligation to take any action whatsoever in the event that
any claim or problem arises with respect to the protection of the Rights
and/or the Trademarks.
11. INFRINGEMENTS.
(a) Licensee agrees to cooperate with MLBPA in the enforcement of
MLBPA's right in the Rights and/or the Trademarks. Licensee agrees to notify
MLBPA in writing of any infringements or imitations by third parties of the
Rights, the Trademarks, the Licensed Products and/or the Promotional and
Packaging Material which may come to Licensee's attention. MLBPA shall have
sole right to determine whether or not any action shall betaken on account of
any such infringement or imitation. MLBPA, if it so desires, may commence or
prosecute any claims or suits in its own name or in the name of Licensee, or
join Licensee as a party thereto; provided, however, that Licensee shall not
be required to incur more than nominal out-of-pocket expense as a consequence
of being joined as a party by MLBPA. Licensee agrees not to contact any
third party, not to make any demands or claims, and not to institute any suit
or take any other action on account of such infringements or imitations
without obtaining the prior express written permission of MLBPA.
(b) With respect to all claims and suits involving the Rights and/or
the Trademarks, including suits in which Licensee is joined as a party, MLBPA
shall have the sole right to employ counsel of its choosing and to direct the
handling of the litigation and any
<PAGE>
settlement thereof. MLBPA shall be entitled to receive and retain all amounts
awarded to MLBPA as damages, profits or otherwise in connection with such
suits.
12. INDEMNIFICATION
Licensee hereby agrees to defend, indemnify and hold harmless MLBPA,
its members, officers, directors, employees and agents, from and against any
and all claims, demands, causes of action and judgments ("Claims") arising
out of or in connection with
(a) Licensee's design, manufacture, distribution, shipment,
advertising, promotion, offering for sale and/or sale of the Licensed
Products and/or the Promotional and Packaging Material, including but not
limited to any allegedly unauthorized use by Licensee of any trademark,
copyright, patent, process, idea, method, device, logo, symbol, insignia,
name, term or material other than those licensed herein, and
(b) Licensee's use of any logos, symbols, insignias, names, terms or
other material claimed to be the property of any Major League Baseball
club(s) or any other entity affiliated directly or indirectly with any Major
League Baseball club(s), and
(c) any alleged defect(s) of the Licensed Products.
With respect to the foregoing indemnity, Licensee agrees to defend and hold
MLBPA and its members harmless at no cost or expense to MLBPA whatsoever,
including, but not limited to, attorneys' fees and court costs. Under no
circumstances shall Licensee have the right to settle or otherwise compromise
any claim without the prior written consent of MLBPA. MLBPA and its members
shall have the right to defend themselves in any such action or proceeding
with attorneys of MLBPA's selection.
13. INSURANCE.
Licensee shall, throughout the License Period(s) of this Agreement,
obtain and maintain at its own cost and expense from a qualified insurance
company acceptable to MLBPA, or self-insurance as authorized by law,
comprehensive general liability insurance, the form of which must be
acceptable to MLBPA, naming MLBPA and its members as an additional insured.
Such policy shall provide protection against any and all claims, demands and
causes of action arising out of any defect or failure to perform, alleged or
otherwise, of the Licensed Products or any material used in connection
therewith or any use thereof. The amount of coverage shall be a minimum of
Two Million Dollars ($2,000,000) combined single limit. The policy shall
provide for twenty (20) days' notice to MLBPA from the insurer by Registered
or Certified Mail, return receipt requested, in the event of any
modification, cancellation or termination. Licensee agrees to furnish MLBPA a
certificate of insurance evidencing same within thirty (30) days after
execution of this Agreement, and in no event shall Licensee manufacture,
offer for sale, sell, advertise, promote, ship and/or distribute the Licensed
Products prior to receipt by MLBPA of such evidence of insurance.
14. EXPLOITATION BY LICENSE.
(a) Licensee agrees to commence distribution, shipment and sale of
all of the Licensed Products in sufficient quantities to meet the reasonably
anticipated demand therefor throughout the Licensed Territory within six (6)
months after the Effective Date of this Agreement. In the event of Licensee's
failure to comply with this requirement, in addition to all other remedies
available to it, MLBPA shall have the option to terminate this Agreement upon
mailing notice of such termination to Licensee.
<PAGE>
(b) Licensee agrees that during all License Periods of this
Agreement, Licensee will continue to diligently and continuously distribute,
ship and sell each of the Licensed Products throughout the Licensed Territory
and that it will use its best efforts to make and maintain adequate
arrangements for the distribution, shipment and sale necessary to meet the
demand for all such Licensed Products throughout the Licensed Territory.
Licensee further agrees to exercise all reasonable efforts to advertise and
promote the Licensed Products at its own expense throughout the term of this
Agreement as widely as practicable within the Licensed Territory, to the best
advantage and enhancement of the Trademarks and the Rights.
(c) Licensee will not discriminate against the Licensed Products by
granting commissions/discounts to salesmen, dealers and/or distributors in
favor of Licensee's other similar products.
15. PREMIUMS, PROMOTIONS AND SECONDS.
(a) Under no circumstances shall Licensee have any right to sell or
otherwise utilize the Licensed Products as premiums or promotional items.
MLBPA shall have and retain the sole and exclusive right to utilize or
license third parties to utilize any of the rights granted herein in
connection with any premium, giveaway, mail order, fund raising, promotional
arrangement or fan club (collectively referred to as "Promotional Products"),
which retained right may be exercised by MLBPA concurrently with the rights
granted to Licensee hereunder.
(b) Licensee agrees not to offer for sale, sell, ship, advertise,
promote, distribute and/or use for any purpose whatsoever, and/or to permit
any third party to offer for sale, sell, ship, advertise, promote, distribute
and/or use for any purpose whatsoever, any Licensed Products and/or
Promotional and Packaging Material relating to the Licensed Products which
are damaged, defective, seconds or otherwise fail to meet the specifications
and/or quality standards and/or trademark and copyright usage and notice
requirements of this Agreement.
16. ASSIGNABILITY AND SUBLICENSING.
The license granted hereunder is and shall be personal to Licensee
and shall not be assigned by any act of Licensee or by operation of law or
otherwise encumbered. Licensee shall not have the Licensed Products or any
portion thereof manufactured for Licensee by a third party unless Licensee
first obtains the express written approval of MLBPA, and such manufacturer
shall have signed an agreement in the form attached hereto as Schedule D.
Licensee shall have no right to grant any sublicenses without MLBPA's prior
express written approval. Any attempt on the part of Licensee to arrange for
manufacture by a third party or to sublicense (except as provided herein),
assign, encumber or alter its rights under this Agreement by operation of law
or otherwise, including without limitation entry by Licensee into any joint
venture arrangement or any material change in the ownership or key management
of Licensee, without reasonable notice to and written approval by MLBPA shall
result in the automatic termination of this Agreement, and all rights granted
hereunder shall immediately revert to MLBPA.
17. TERMINATION.
(a) MLBPA's Right of Termination.
(i) IMMEDIATE RIGHT OF TERMINATION. In addition to the
automatic termination provisions and/or termination rights provided elsewhere
in this Agreement, and notwithstanding any attempts by Licensee to cure
defaults, MLBPA shall have the right
<PAGE>
immediately to terminate this Agreement by giving written notice to Licensee
if Licensee does any of the following:
a. Manufactures, offers for sale, sells, advertises,
promotes, ships, distributes and/or uses in any way any Licensed Product
and/or Promotional and Packaging Material without having the prior written
approval of MLBPA as provided for in this Agreement;
b. Continues to manufacture, offer for sale, sell, advertise,
promote, ship, distribute and/or use in any way any Licensed Product and/or
Promotional and Packaging Material after receipt of notice from MLBPA
disapproving same;
c. Fails to carry on the Licensed Products or Promotional or
Packaging Material the notices specified by MLBPA, as required herein;
d. Becomes subject to any voluntary or involuntary order of
any governmental agency involving the recall of any of the Licensed Products
and/or Promotion and Packaging Material because of safety, health or other
hazards or risks to the public;
e. Directly or indirectly through its controlling
shareholders or any of its officers, directors or employees, takes any action
in connection with the manufacture, offering for sale, sale, advertising,
promotion, shipment and/or distribution of the Licensed Products and/or the
Promotional and Packaging Material which damages or reflects adversely upon
MLBPA, the Rights and/or the Trademarks;
f. Breaches any of the provisions of this Agreement relating
to the unauthorized assertion of rights in the Rights and/or the Trademarks;
g. Two or more times during a twelve-month period fails to
make timely payment of royalties when due or fails to make timely submission
of royalty statements when due;
h. Uses the Trademarks or the Rights for the purpose, in
whole or in part, of promoting any service or product other than the Licensed
Products without the express prior consent of MLBPA in writing; or
i. Fails to obtain or maintain insurance as required by the
provisions of this Agreement.
(ii) Curable Breaches by Licensee. If Licensee
a. commits a material breach of any other terms
of this Agreement, or
b. files a petition in bankruptcy or is
adjudicated a bankrupt or insolvent, or makes an assignment for the benefit
of creditors, or an arrangement pursuant to any bankruptcy law, or
discontinues its business, or if a receiver is appointed for it or its
business and is not discharged within thirty (30) days, and fails to cure
such default and furnish reasonable proof of its cure to MLBPA within fifteen
(15) days after receiving written notice of breach, MLBPA shall have the
right to terminate this Agreement by giving written notice to Licensee.
(b) LICENSEE'S RIGHT OF TERMINATION. If MLBPA commits a material
breach of any of the terms of this Agreement and fails to cure such default
and furnish reasonable proof of its
<PAGE>
cure to Licensee within fifteen (15) days after receiving written notice of
breach, Licensee shall have the right to terminate this Agreement by giving
written notice to MLBPA.
18. POST-TERMINATION AND EXPIRATION RIGHTS AND OBLIGATION.
(a) Except as provided in Section 18(c) below, upon termination of
this Agreement, Licensee and its receivers, representatives, trustees,
agents, administrators, successors and/or permitted assigns shall have no
right to manufacture, offer for sale, sell, ship, advertise, promote and/or
distribute Licensed Products or to use in any way the Rights, the Trademarks,
or any Promotional and Packaging Material relating to the Licensed Products.
(b) Upon expiration of this Agreement or termination by MLBPA,
notwithstanding anything to the contrary herein, all royalties on sales,
shipments and/or distributions theretofore made shall become immediately due
and payable and no Guaranteed Minimum Royalty paid to MLBPA shall be refunded.
(c) Upon expiration of this Agreement, or upon termination of this
Agreement for any reason except those set forth in Section 16 or Section
17(a) above, subject to the requirements of this Agreement with respect to
payment and reporting of royalties, for a period of ninety (90) days,
Licensee may dispose of all finished Licensed Products which are on hand upon
the expiration of the License Period then in effect, provided that the
royalties with respect to that period are paid and the appropriate statements
are furnished for that period. During such ninety (90) day period, MLBPA
itself may use or license the use of the Rights and/or the Trademarks in any
manner at any time anywhere in the world as MLBPA sees fit.
(d) Subject to Section 18(c) above, after the expiration or
termination of this Agreement, Licensee shall refrain from further use of the
Rights and/or the Trademarks or any further reference to them, either
directly or indirectly, in connection with the manufacture, offering for
sale, sale, advertising, promotion, shipment and/or distribution of
Licensee's products. Licensee shall destroy all artwork, films,
transparencies, separations, printing plates, molds and other materials which
reproduce the Licensed Products and/or Promotional and Packaging Material
relating to the Licensed Products, and shall give evidence satisfactory to
MLBPA of their destruction. Licensee shall be responsible to MLBPA for any
damages caused by the unauthorized use by Licensee or by others of all such
materials which are not destroyed pursuant to this Agreement.
(e) Licensee acknowledges that its failure to cease the manufacture,
offering for sale, sale, advertising, promotion, shipment and/or distribution
of the Licensed Products and/or use in any way of the Promotional and
Packaging Material relating to the Licensed Products at the termination or
expiration of this Agreement will result in immediate and irreparable damage
to MLBPA and/or to the players and to the rights of other licensees of MLBPA
Licensee acknowledges and admits that there is no adequate remedy at law for
failure to cease such activities and Licensee agrees that in the event of
such failure, in addition to all other remedies available to it hereunder,
MLBPA at its sole option may commence an action in any court having
jurisdiction or an arbitration proceeding, and shall be entitled to equitable
relief by way of injunctive relief and such other relief as any arbitrators
or court with jurisdiction may deem just and proper.
19. FINAL STATEMENT UPON TERMINATION OR EXPIRATION
Within thirty (30) days after termination or expiration of this
Agreement, as the case may be, Licensee shall deliver to MLBPA a statement
indicating the number and description
<PAGE>
of the finished Licensed Products which it had on hand as of the expiration
or termination date. MLBPA shall have the option upon prior written notice to
Licensee of conducting a physical inventory at the time of expiration or
termination and/or at a later date in order to ascertain or verify such
statement. In the event that Licensee refuses to permit MLBPA to conduct such
physical inventory, Licensee shall forfeit any rights hereunder to dispose of
such inventory. In addition to such forfeiture, MLBPA shall have recourse to
all other remedies available to it.
20. NOTICES.
All notices or other communications required or desired to be sent to
either party shall be in writing and sent by Registered or Certified Mail,
postage prepaid, return receipt requested, or by facsimile or telegram,
charges prepaid. Such notices, including facsimile or telegram, shall be
effective on the date sent, provided that any notice sent by facsimile also
shall be sent by regular mail. The addresses for MLBPA and Licensee shall be
as set forth on Schedule B. Either party may change its address by notice in
writing to the other party.
21. RELATIONSHIP OF THE PARTIE5.
This Agreement does not create a partnership or joint venture between
the parties and neither party shall have any power to obligate or bind the
other in any manner whatsoever.
22. APPLICABLE LAW.
This Agreement is made within the State of New York and shall be
construed in accordance with the laws of the United States and the State of
New York. Licensee hereby expressly waives any right to the benefits of
remedial legislation, if any, of Licensee's home state.
23. REMEDIES.
(a) Except as otherwise provided herein, any dispute or disagreement
between the parties hereto arising out of or relating to this Agreement shall
be settled by final and binding arbitration, in New York City, under the
Commercial Arbitration Rules then obtaining of the American Arbitration
Association. The parties hereto expressly stipulate that the arbitrator(s)
shall have full subpoena power and full powers to fashion appropriate
remedies, including without limitation the power to grant equitable and/or
injunctive and/or declaratory relief. Judgment upon the award may be entered
in any court having jurisdiction.
(b) Licensee recognizes the unique nature of the Rights and the
Trademarks, and the possibility that breaches of this Agreement by Licensee
may require preliminary or extraordinary relief beyond that available in
arbitration, and the possibility that breaches of this Agreement may involve
third parties or witnesses or issues which are beyond the practical
jurisdiction of arbitrators Accordingly, notwithstanding the provisions of
paragraph 23(a), MLBPA ~but not Licensee) may, at its sole and exclusive
option, elect as an alternative to arbitration to commence an action or
proceeding in any court of competent jurisdiction to enforce this Agreement
or protect the Rights and the Trademarks. MLBPA may also require the
termination of a previously-commenced arbitration proceeding so as to permit
a dispute between the parties to be resolved in an action or proceeding in a
court of competent jurisdiction, so long as MLBPA has theretofore not waived
its right to do so by taking substantial steps to prosecute or defend the
arbitration proceeding
24. CAPTIONS.
<PAGE>
The captions used in connection with the paragraphs and subparagraphs
of this Agreement are inserted only for purpose of reference. Such captions
shall not be deemed to govern, limit, modify or in any other manner affect
the scope, meaning or intent of the provisions of this Agreement or any part
thereof, nor shall such captions otherwise be given any legal effect.
25. WAIVER.
(a) No waiver by either party of a breach or a default hereunder
shall be deemed a waiver by such party of a subsequent breach or default of a
like or similar nature.
(b) Resort by either party to any remedies referred to in this
Agreement or arising by reason of a breach of this Agreement by the other
party shall not be construed as a waiver by such party of its right to resort
to any and all other legal and equitable remedies available to it.
26. SURVIVAL OF THE RIGHTS.
Any rights and obligations created by this Agreement and which by
necessary implication continue after its expiration or termination shall
survive such expiration or termination.
27. SEVERABILITY.
In the event that any term or provision of this Agreement 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
term or provision, and this Agreement shall be interpreted and construed as
if such term or provision, to the extent the same shall have been held to be
invalid illegal or unenforceable, had never been contained herein.
28. INTEGRATIQN.
This Agreement represents the entire understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
previous representations, understandings or agreements, oral or written,
between the parties with respect to the subject matter hereof. This Agreement
cannot be modified except by a written instrument signed by the parties hereto
By their execution below, the parties hereto have agreed to all of the terms
and conditions of this Agreement.
MAJOR LEAGUE BASEBALL ALLSTAR ARENA ENTERTAINMENT, INC.
PLAYERS ASSOCIATION
By: /s/ Donald Fey By: /s/ Joseph Yukich
Date: 5-18-98 Date: 5/12/98
SCHEDULE A
TRADEMARKS
MLBPA
<PAGE>
Major League Baseball Players Association
MLB Players Choice Logo
THE RIGHTS
The names, nicknames, likenesses, signatures, pictures, playing records
and/or biographical data of all active baseball players of the National League
and the American League who have entered into a Commercial Agreement with the
MLBPA.
SCHEDULE B
LICENSED PRODUCTS
Comic books featuring animated cartoon super-heroes based on Major League
Baseball Players, such comic books to be not smaller than six inches by ten
inches (6" X 10") and not larger than nine inches by twelve inches (9" X 12").
LICENSE PERIOD
First License Period: January 1, 1998 to December 31, 1998;
Second License Period: (If Renewed): January 1, 1999 to December 31, 1999;
Third License Period (If Renewed): January 1, 2000 to December 31, 2000.
LICENSED TERRITORY:
The United States, its territories and possessions and Canada.
ADDITIONAL CONDITIONS
The International Addendum attached hereto and incorporated herein shall
apply to all sales of Licensee with respect to the Licensed Products outside
the United States.
During the First License Period, Licensee will produce and simultaneously
market at least three (3) different comic books. Each book will feature a
minimum of four (4) different Major League baseball players for a total of at
least twelve (12) different Major League baseball players during the First
License Period. During each subsequent License Period, if any, Licensee will
produce and simultaneously market at least four (4) different comic books
each featuring a minimum of four (4) different Major League baseball players
for a total of al least sixteen (16) different Major League baseball players
during each License Period. Licensee understands and agrees that it must
market the Licensed Products as a group.
MLBPA agrees to consider in good faith any ancillary products Licensee may
propose. Licensee understands and agrees that any ancillary products to be
developed in connection with Licensed Products must be approved in concept in
writing and in advance by the MLBPA and will be Subject to the then-current
terms and policies of MLBPA's licensing program. If MLBPA approves ally such
ancillary products, Licensee agrees to first contact existing MLBPA licensees
in an effort to employ their services in connection with the manufacture and
marketing of such ancillary products before contacting other parties who are
not licensed by MLBPA.
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
Licensee understands and agrees that the content and graphic renderings in
connection with the Licensed Products will only be of a "positive and
wholesome" nature and convey positive messages and ideas for children. The
terms "positive and wholesome" will be determined jointly by MLBPA and
Licensee. In the event of a disagreement, the MLBPA's determination will
prevail.
MLBPA agrees to consider in good faith any television and/or ancillary
projects in connection with the Licensed Products that Licensee may propose.
Licensee Understands and agrees that ML13PA shall have the right to
participate in any discussions or negotiations with any third parties about
any television or film projects in connection With the Licensed Products and
any Such television and film projects in connection with the Licensed
Products are subject to the express written approval of the MLBPA. No right
to include the Rights or the Trademarks in any Such project is granted or
implied by this Agreement.
MLBPA, if it so chooses, will have the opportunity to promote itself, its
players, charities, web sites, and/or events with a full page in each issue
of the comic books at no charge to MLBPA. Although the MLBPA is not obligated
to do so, it is the current intention of MLBPA to develop a national
advertising and/or promotional program featuring the Rights and/or Trademarks
and to Consult with Licensee about the development of such program. Licensee
agrees that MLBPA shall have the right, at its discretion and in a manner and
style of its choice, to print catalogues, brochures, advertisements or other
promotional materials wherein representative merchandise from Licensee and
other Licensees of MLBPA shall be displayed. In this regard, Licensee shall
share in the cost of such materials and without credit against the Guaranteed
Minimum Royalty required herein. Licensee shall share in the cost of such
materials at least once during the initial License Period and each License
Period thereafter (if any), by forwarding payment to MLBPA within ten (10)
days after receiving all invoice therefore in an amount not to exceed Five
Thousand Dollars ($5,000.00).
ACTUAL ROYALTY
** Percent (*)
GUARANTEED MINIMUM ROYALTY
First License Period:
* Dollars (*) to be paid upon execution of this Agreement by Licensee;
Second License Period (If Renewed): * Dollars (*) to be paid as follows:
* due on or before January 15, 1999;
* due on or before April 15, 1999
* due on or before July 15, 1999;
* due on or before October 15, 1999;
Third License Period: (If Renewed) * Dollars (*) to be paid as follows:
* due on or before January 15, 2000;
* due on or before April 15, 2000;
* due on or before July 15, 2000;
* due on or before October 15, 2000.
ADDRESSES FOR NOTICES
Major League Baseball Players Association
12 E. 49th Street
New York, NY 10017
Attention: Judy Heeter
AllStar Arena Entertainment, Inc.
6565 Sunset Blvd. Suite 418
Los Angeles, CA 90028
<PAGE>
Att: F. R. Licht
Acknowledged and Approved:
MAJOR LEAGUE BASEBALL ALLSTAR ARENA
PLAYERS ASSOCIATION ENTERTAINMENT, INC.
By: /s/Donald Fey By: /s/Joseph Yukich
Date: 05/18/98 Date: 05/12/98
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
Performance Licensing Co.
350 FIFTH AVE., SUITE 724 NEW YORK, NY 10118
(212) 971-6666/7 FAX (212) 971-5668 E-MAIL [email protected]
LICENSING AGREEMENT DATED JULY 10, 19
ULTIMATE SPORTS ENTERTAINMENT AND
MLB PLAYERS ALUMNI ASSOCIATION
SCHEDULE B
The Major League Baseball Alumni Association grants to Ultimate Sports
Entertainment, Inc. the rights to explore and pursue any and all opportunities
in an effort to develop ancillary projects with regard to the animated cartoon
superheroes characters created under the license herein. These ancillary
projects may include action figures, video games, film/television/home video,
apparel, etc. The MLB Alumni Association retains all approval rights over any
such ancillary projects.
Upon the completion of any ancillary project contracts, said contracts will be
added to this License Agreement to be governed hereunder.
SIGNED:
MAJOR LEAGUE ALUMNI MARKETING
PERFORMANCE LICENSING COMPANY
ULTIMATE SPORTS ENTERTAINMENT, INC.
<PAGE>
THIS AGREEMENT is made on the Fifteen day of November 1999 by and
BETWEEN
(1) PERFORMANCE LICENSING, a division of The Copyrights Group Limited of
Manor Barn, Milton Nr Banbury, Oxon OX15 4HH, United Kingdom ("the Licensor")
of the one part and
(2) ULTIMATE SPORTS ENTERTAINMENT, INC. a corporation with offices at 2444
Wilshire Blvd., Suite 414 Santa Monica, CA 90403, the United States of America
WHEREAS, Licensor has been granted a license to use certain service
marks and trademarks owned by the Major League Baseball Players Alumni
Association (MLBPAA); and
WHEREAS, Major League Alumni Marketing, Inc. (MLAM) is a wholly owned
subsidiary of MLBPAA, and as such is a duly authorized licensee of MLBPAA; and
WHEREAS, MLBPAA has entered into license agreement with Major League
Baseball Properties, Inc. (MLBP) under which MLBPAA has been granted a
licence to use the trademarks "Major League" and "Major League Baseball" with
restrictions; and
WHEREAS, it has become necessary to pass these restrictions along to
MLBPAA's licensees; and
WHEREAS, MLAM is a licensee of MLBPAA, and as such must comply with
the said restrictions; and
WHEREAS, Licensor, as a duly authorized Licensee of MLAM, warrants
that it has the right to sub-license the aforementioned service marks and
trademarks to Ultimate Sports Entertainment, Inc. for commercial purposes; and
WHEREAS, Ultimate Sports Entertainment, Inc. has agreed to comply
with the agreement between MLBPAA and MLBP, dated July 25, 1997, and
Licensor's agreement with MLAM dated July 10, 1999, according to the
applicable terms of said agreements which are set forth in paragraph numbered
2 of this agreement; and
WHEREAS, Licensee desires to use and Licensor is willing to grant
Licensee the right to use the service marks and trademarks on or in
connection with the sale, offering for sale, distribution and advertising of
animated comic books, posters and postcards featuring cartoon super heroes
based on MLBPAA Alumni in the United States of America its territories and
possessions ("the Licensed Territory");
1
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises, covenants,
and conditions contained herein, it is hereby agreed as follows:
1. Grant of License
(a) Licensor hereby grants to Licensee an exclusive, non-transferable,
nonassignable license, without the right to sublicense, to: (i) use
the Service Mark and Trademark (hereinafter "Marks") in connection
with the sale, offering for sale, distribution and advertising of
animated comic books, posters and postcards featuring cartoon super
heroes based on MLBPAA Alumni within the Licensed Territory and (ii)
to affix the "Marks" to such product itself and to the packaging,
advertising and other promotional material used or distributed in
connection with the sale of such product within the Licensed Territory
(such material to which the Marks has been affixed being the
"Packaging and Promotional Material"). As used herein, the term
"Licensed Product" shall mean all such product on which, or in
connection with the sale, offer to sell, distribution or advertising
of Licensed Product in any area outside of the Licensed Territory and
that it will not knowingly sell or distribute any Licensed Product to
any person or entity who intend(s), or is likely to sell, offer to
sell, distribute or advertise Licensed Product outside of the Licensed
Territory.
(b) Licensee agrees that it will at all times during the term of this
Agreement use its best efforts to actively market Licensed Product so
as to maximize the Royalties payable to Licensor under this Agreement.
(c) Notwithstanding any rights granted hereunder, all rights relating to
the Marks are expressly reserved by Licensor.
(d) Licensee agrees that upon the termination of this Agreement, it shall
immediately cease the manufacture, sale, offering for sale,
distribution and advertising of Licensed Product, and shall no longer
use, in any manner whatsoever, the Marks or any colorable imitation
thereof. This covenant shall survive the termination of this Agreement
subject to paragraph 13.
(e) Licensed Product may not be used as premiums, promotions or loss
leaders, unless approved in writing by the Licensor.
2. The Major League Baseball Properties, Inc. Agreement
MLAM is a wholly-owned subsidiary of the Major League Baseball Players
Alumni Association (MLBPAA). MLBPAA has entered into a License Agreement
with Major League Baseball Properties, Inc., under which MLBPAA has been
granted licenses to use the Marks "Major League" and "Major League
Baseball" with certain restrictions. Accordingly, it is necessary to pass
these
2
<PAGE>
restrictions along to MLBPAA's licensees. MLAM is licensee of MLBPAA and as
such must comply with the aforementioned restrictions.
Consequently, it has become necessary to pass along these restrictions to
MLAM's licensees. Licensor and Licensee agree to comply with the following
additional obligations and restrictions:
(a) The existing license shall include the Marks "Major League Baseball
Players Alumni" and the silhouette batter design, as shown in Exhibit A
hereto.
(b) In the event that Licensee wishes to adopt any new Mark or modifications
which incorporate either the word "Major League" or "Major League
Baseball", Licensee shall submit a written request to Licensor and MLAM for
approval prior to use, which approval shall not be unreasonably withheld,
and upon approval by MLAM, the marks shall be made part of Exhibit A hereto
by written amendment. It is understood that MLAM must request similar
approval from MLBPAA and Major League Baseball Properties, Inc.
(c) It is understood that the license granted herein does not include the
right to use "Major League" or "Major League Baseball" alone as a mark.
(d) All product packaging, hang tags, stationery, written advertising,
promotional materials, brochures, newsletters and other printed materials
covered under license with MLBPAA bearing the designation "Major League" or
"Major League Baseball" will carry a notice that "Major League Baseball"
(or "Major League") is a registered trademark owned by Major League
Baseball Properties, Inc., used under license. Where such notice is
impracticable, the Marks, "Major League" and "Major League Baseball" shall
be followed by a -Registered Trademark- or -TM- symbol, as appropriate, to
indicate the independent trademark rights of Major League Baseball
Properties in the mark.
(e) Licensee shall maintain a general liability insurance policy and/or
product liability insurance policy to cover the licensed product. Licensee
shall cause its policies to be amended to name MLBPAA, MLAM, Major League
Baseball Enterprises, Inc., Major League Baseball Properties, Inc., Major
League Baseball Properties (Canada), Baseball Television, Inc. (BTI) d/b/a
Major League Baseball International, the American League of Professional
Baseball Clubs and its individual member clubs the National League of
Professional Baseball Clubs and its individual member clubs and each of
their respective successors and assigns, as additional named insured
parties.
(f) Any proposed use by Licensee of MLBPAA name and logo, including, without
limitation, in literature,promotional materials, or print advertisement,
shall be submitted at Licensee's expense to Licensor and MLAM for approval
prior to use, and such approval shall not be unreasonably withheld. MLAM
3
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
will approve or disapprove any promotional materials within twenty-one (21)
days of its receipt. In the event that MLAM fails to respond within the
twenty-one (21) day period, Licensee shall have the right to send written
notice of such failure to Licensor and MLAM shall thereafter approve or
disapprove the relevant materials within ten (10) days or such materials
shall be deemed approved.
(g) Qualitv Control The licensed goods and services in connection with which
Licensee uses the licensed Marks shall be at least of a nature and quality
currently used and licensed by Licensor. To this end Licensee will from
time to time, not less than once each year, furnish Licensor with a
representative sample of products manufactured for or licensed by Licensee
and of printed materials bearing marks containing the licensed marks, so
that MLAM may confirm that the quality standards are being maintained.
(h) Indemnification Licensee shall indemnify and hold harmless Major League
Baseball Players Alumni Association, Major League Alumni Marketing, Inc.,
Major League Baseball Properties (Canada), Baseball Television, Inc.
("BTI") d/b/a Major League Baseball International, the American League of
Professional Baseball Clubs and its individual member Clubs, and each of
their respective successors and assigns harmless from any claim, suit,
loss, damage, or expense (including reasonable attorney fees) arising out
of any alleged defect in the product produced, distributed, or sold by
Licensee or such licensees, bearing the Licensed Marks under the
MLBPAA/MLBP, Inc. agreement or out of the manufacturing, rendering,
labelling, selling, distributing, or advertising of product or services by
Licensee, if any, bearing the licensed marks in violation of any law or
regulation, and any breach by Licensee of the agreements, MLAM and Licensor
shall promptly give notice to Licensee of any such claim or suit.
3. Royalties
(a) Licensee agrees to pay to Licensor royalties ("Royalties") equal to *
of Net Sales (as hereinafter defined).
(b) For purposes of this Agreement, "Net Sales" means the dollar amount of
gross sales of Licensed Product made by Licensee in the Licensed Territory,
after deducting bona fide credits for returns actually made. In computing
Net Sales, no other deduction allowances or charges shall be made. Net
Sales resulting from sales to any party direct or indirectly related to or
affiliated with Licensee shall be based on the highest, non-discounted
selling price at which Licensed Product was sold in the Licensed Territory.
For purposes of calculating the Royalties due pursuant to this Section 3, a
sale of a Licensed Product shall be deemed made when such Licensed Product
is shipped or invoiced, whichever is sooner.
4
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
(c) Licensee agrees to pay Licensor, in consideration for the rights granted
herein, a minimum guaranteed royalty of * during the term, payable as
follows: * due upon contract signing, * due non later than July 1, 2000.
4. Term
The term of this Agreement shall commence as of the date of this Agreement
and end on December 31, 2001, unless sooner terminated in accordance with
the provisions of Section 12 hereof or the option is exercised herein.
Licensor and Licensee have the option to renew this Agreement for an
additional one year term upon mutual agreement.
5. Statements and Payments
(a) Licensee shall provide to Licensor, and its representatives, within
thirty (30) days after the end of each calendar quarter during the
term of this Agreement and within thirty (30) days after the
termination of this Agreement (each such calendar quarter and the
remaining partial calendar quarter through the date of termination of
this Agreement, being a "Royalty Period"), with a complete and
accurate statement (a "Royalty Statement") of its Net Sales for such
Royalty Period and the Royalties payable in connection therewith.
Each Royalty Statement shall be certified as complete and accurate by
Licensee. Such statement shall include, without limitation, an
itemization, with respect to such Royalty Period, of (i) the number of
units of Licensed Product sold in the Licensed Territory, the unit
price at which each unit was sold and the total dollar amount of such
gross sales, (ii) the total number of units returned for which credit
was given and the total dollar amount of such credits, and (iii) the
total Net Sales made in a Royalty Period shall be due and payable in
full at the time that the applicable royalty Statement is actually
delivered to Licensor, but in no event later than thirty (30) days
after the expiration of such Royalty Period.
(b) Acceptance by Licensor (or its representative) of a Royalty Statement
or accompanying Royalty payment shall not preclude Licensor from at
any time questioning the correctness of such Royalty Statement, or the
amount of Royalties owed in respect of which such payment was made. In
the event that any shortfalls, inconsistencies or mistakes are
discovered within such period, they shall immediately be rectified by
Licensee at its sole cost and expense.
(c) All payments made hereunder shall be in United States Dollars drawn on
a United States bank. Time is of the essence with respect to all
payments to be made hereunder and interest at a rate of one and
one-half percent (1.5%) per month (but if such rate is not permitted
under the laws of the State of
5
<PAGE>
Virginia, then at the highest rate which is permitted to be paid under the
laws of the State of Virginia) shall accrue on any amount due Licensor,
calculated from the date on which payment was due.
(d) Licensee agrees to keep complete and accurate books and records of all
sales of Licensed Product. Licensor and its representatives (such as
its licensing representatives and outside counsel and accountants)
shall have the right, upon reasonable written notice, during normal
business hours, to examine or audit at their own cost and expense all
applicable books and records of Licensee which relate to sales of
Licensed Product and to make copies or take extracts therefrom. In
the event that a deficiency of 5% or more is shown to exist between
the amount of Royalties due as shown by an examination or audit
covering the Royalty Period addressed by such Royalty Statement,
Licensee shall pay for the cost of such examination and audit and
shall make immediate payment to Licensor of such deficiency, along
with the accrued interest thereon in accordance with paragraph (c)
this Section 5.
(e) Licensee's books and records relating to this Agreement shall be
retained for at least five (5) years after termination of this
Agreement.
6. Quality, Notices and Approvals
(a) Licensee warrants and represents that the quality and style of
Licensed Product and all Promotional and Packaging Material relating
to Licensed Product shall be of first class quality. Licensee may not
use any Packaging and Promotional Material or sell or distribute any
Licensed Product until such Promotional Material and Licensed Product,
respectively, have been approved by Licensor pursuant to paragraph (c)
of this Section 6 which approvals shall not be unreasonably withheld.
(b) All Packaging and Promotional Material and all Licensed Product shall
contain the following legal notices (or such other notices or legends
Licensor may from time to time request):
"Official Licensed Product of the Major League Baseball Players Alumni
Association"
Licensee shall also include the symbol -TM- or -Registered Trademark- as
appropriate, next to the Trademark, whenever the Trademark is used by
Licensee.
(c) Prior to the use of any Promotional Material and/or the sale, offering
for sale, distribution or advertising of Licensed Product, Licensee shall,
at its own cost and expense, submit to Licensor and its designated
representative, for Licensor's approval two (2) samples each of the
Licensed Product intended to be sold and distributed and two (2) samples of
all Promotional Material
6
<PAGE>
intended to be used in connection therewith. Licensor may require that
Licensee submit to Licensor and its designated representative, for
Licensor's approval, an additional sample for each sample reasonably
disapproved by Licensor. Licensee shall not use any such Promotional
Material nor sell or distribute any such Licensed Product until Licensor
shall have approved in writing, such material and product, based upon its
examination of the submitted samples. Licensor shall notify Licensee of
such approval or disapproval within thirty (30) days after Licensor's
receipt of such items. All samples submitted by Licensor shall be the
exclusive property of Licensor, to be used by Licensor as it sees fit.
(d) Licensee shall maintain the quality of all Licensed Product and
Promotional Material at least as high as the quality of the samples of
Licensed Product approved by Licensor pursuant to paragraph (c) of
this Section 6.
7. Goodwill of Trademark
(a) Licensee acknowledges the value of the goodwill associated with the
Marks and that the Marks are distinctive and have acquired secondary
meaning. Licensee agrees, during the term of this Agreement and
thereafter never to challenge the rights of MLBPAA, MLAM or the
Licensor in the Marks or the validity of the license herein granted.
(b) Licensee acknowledges and agrees that the Marks, the goodwill associated
with the Trademark, and all rights pertaining to the Marks and such
goodwill are and shall remain the exclusive property of Licensor. Licensee
further acknowledges and agrees that its use of the Marks pursuant to the
terms of this Agreement insures solely to the benefit of MLBPAA and that
Licensee shall not acquire any rights in the Marks.
(c) Licensee shall promptly comply with all reasonable instructions and
specifications from time to time communicated by Licensor in connection
with the use and display of the Marks at Licensor's cost.
8. Service Marks and Trademark Protection and Infringements
(a) Licensee agrees that it shall not, at any time: (i) apply for any
registration of any Service Marks or Trademark or other designation which
would adversely affect Licensor's rights in the Marks; (ii) file any
document with any governmental authority to take any action which would
adversely affect Licensor's rights in the Marks; (iii) use or authorize the
use of any Marks, trade name or other designation identical with or
confusingly similar to the Marks; (iv) use the Marks, or sell, offer to
sell, distribute or advertise Licensed Product in any manner that does not
comply with the provisions of all applicable federal, state and local laws
and regulations, including, without
7
<PAGE>
limitation, those relating to the use of Marks; (v) use or display the
Marks in a manner which, in the judgment of Licensor, might be confusing or
deceptive or might injure the goodwill and reputation associated with the
Mark; or (vi) otherwise commit any act which would create a potential
liability on the part of Licensor or would adversely affect the goodwill
and reputation of the Marks.
(b) Licensor shall have the exclusive right, but not the obligation, to
prosecute, defend and/or settle at its own cost and expense and in its
sole discretion, all actions, proceeding and claims involving the
Marks, and to take any other action that it deems proper or necessary
for the protection and preservation of its rights in the Marks. In its
sole option, Licensor may take any action described above in its own
name and/or in the name of Licensee, and Licensee will co-operate
fully therewith. All expenses of any action taken by Licensor shall
be borne by Licensor, and all relief granted in connection therewith
shall be solely for the account of Licensor. Licensee will not claim
or reserve any rights against Licensor as the result of any such
action. Licensee shall notify Licensor promptly of any adverse,
pending or threatened action in respect of the Marks, and of any use
by others which would or might tend to be adverse to the rights of the
Licensor.
(c) Without limiting of any of the foregoing provisions of this Section 8,
Licensee agrees to take such other actions as are necessary or
appropriate, in the Licensor's judgment and at Licensor's expense, to
protect MLBPAA's rights in the Marks.
9. Licensor's Right to Purchase Licensed Product
Licensor may, in its discretion, from time to time during the term of this
Agreement, purchase Licensed Product from Licensee in such quantities as
are reasonably requested from time to time by Licensor. The price of such
purchases shall be the lowest actual wholesale price (after deducting the
greatest discount or other allowance offered any wholesale purchaser)
charged by Licensee of Licensed Product, and are not subject to royalties.
10. Representations and Warranties
Licensee represents and warrants to Licensor:
(i) that it is a corporation duly organized, validly, existing and in good
standing under the laws of Delaware;
(ii) that it has the full right, power and authority to enter into, and to
perform the obligations contemplated in this Agreement;
8
<PAGE>
(iii) that this Agreement constitutes a legal, valid and binding obligation
of Licensee, enforceable in accordance with its terms;
(iv) that neither Licensee nor any of its officers, directors, or
shareholders is subject or a party of any agreement, obligation,
claim, action, order or judgment, in effect, pending or threatened,
which could adversely affect or otherwise interfere with the
Licensee's performance under this Agreement.
Licensor represents and warrants to Licensee:
(v) that it has and will have, throughout the term of this agreement, the
right to license the Marks in accordance with the terms and
provisions of this Agreement.
(vi) the entering of this Agreement by Licensor does not violate any
agreements rights or obligations existing between Licensor and any
other person, firm or corporation.
11. Indemnification, Insurance and Injunctive Relief
(a) Licensee hereby agrees to defend, indemnify, and hold Licensor
harmless from and against any damages, losses, liabilities, claims,
demands, causes of action, judgments, costs and expenses (including,
without limitation, reasonable attorneys fees) arising out of or
relating to (i) Licensee's manufacture, sale, offering for sale,
distribution or advertising of Licensed Product or (ii) Licensee's
misrepresentation or breach of warranty or covenant under this
Agreement. MLAM hereby agrees to indemnify, defend and hold Licensee
and its owners, shareholders, directors, officers, employees, agents,
representatives successors and assigns harmless from any claims,
suits, damages or costs (including reasonable attorneys' fees and
expenses) arising from (i) challenges to MLAM's authority as agent
for and pursuant to authority granted by MLAM to license the Alumni
(as defined above) in connection with the manufacture, distribution,
promotion, advertisement and sale of the Products or (ii) assertions
to any claim of right or interest in or to the Alumni as authorised
and used in the Products provided in each case that Licensee shall
give prompt written notice, cooperation and assistance to MLAM
relative to any such claim or suit, and provided further in each case
that MLAM shall have the option to undertake and conduct the defense
of any suit so brought (including without limitation, selecting in
its sole discretion, counsel therefore) and to engage in settlement
thereof at its sole discretion. MLAM shall give Licensee notice of
the making of any claim or the institution of any action hereunder
against MLAM and MLAM shall direct Licensee as to whether MLAM
chooses to defend the action and select counsel therefor, or whether
Licensee is to handle the defense of the action. Licensee shall
retain the right to join in any and all claims.
9
<PAGE>
(b) During the term of this Agreement, the Licensee shall maintain in force
an occurrence based policy of general liability insurance, with a
vendor's broad form endorsement, having policy limits of $2,000,000
publisher's liability coverage. Within thirty days after execution of
this Agreement, Licensee shall provide Licensor with a corresponding
certificate of insurance. Each policy of insurance required to be
maintained by Licensee during the term of this Agreement shall name
Licensor as an additional insured and shall state that such policy
shall not be cancelled or terminated without thirty (30) days prior
written notice to Licensor and shall include a statement indicating
inclusion of the contractual assumption of liability. Each policy
shall further provide that any other insurance maintained by the
Licensor shall constitute excess insurance.
(c) Licensee acknowledges and agrees that Licensor is entering into this
Agreement not only in consideration of the royalties to be paid under
this Agreement but also for the promotional value to be sourced by
Licensor as a result of Licensee's use of the Marks pursuant to this
Agreement, and that Licensee's breach of terms of this Agreement,
including, without limitation, its failure to comply with the
standards and obligations set forth in sections 1 (d), 6, 7 and 8
hereof, may result in immediate and irreparable damage to Licensor.
Accordingly, Licensee acknowledges and agrees that Licensor shall have
no adequate remedy for such breach or failure and that in the event of
such breach or failure, Licensor shall be entitled, in addition to all
other remedies available at law or in equity, to equitable relief by
way of temporary and permanent injunctions and such other further
relief as any court or component jurisdiction may deem just and
proper. The terms of this paragraph (c) shall survive the termination
of this Agreement.
12. Termination
(a) If at any time during the term of this Agreement any of the following
events occurs, Licensor may, in its reasonable discretion and in
addition to any other rights and remedies it may have, terminate this
Agreement immediately upon written notice to the Licensee:
(i) if Licensee shall not have begun the production of Licensed Product in
commercial quantities within ninety (90) days after the date of this
Agreement; or
(ii) if Licensee shall fail to make any payment when due under this
Agreement; or
10
<PAGE>
(iii) if Licensee shall not have paid Royalties in any Contract Year based
upon actual sales within the Licensed Territory of Licensed Product by
Licensee during such Contract Term; or
(iv) if Licensee shall default in the performance of any covenant or
obligation required to be performed by Licensee under the terms
of this Agreement; or
(v) if Licensee shall cease to function as a going concern by suspending
or discontinuing its business or ceases to manufacture or sell
Licensed Product for any reason except for periodic shutdowns in the
ordinary course of business and interruptions caused by strike, labor
dispute or any other events over whicH it has no control; or
(vi) if a voluntary petition or other proceeding shall be filed or
otherwise commenced by or against Licensee under any bankruptcy or
insolvency law or under the reorganization provisions of any law of
like import, or if a receiver of Licensee or of Licensee's property
shall be appointed, or if Licensee shall make an assignment for the
benefit of its creditors or if Licensee is unable to, or does not, pay
its debts as they become due.
(b) Upon the expiration or earlier termination of this Agreement, all
rights granted to Licensee under this Agreement shall automatically
revert to Licensor.
(c) Upon the expiration or earlier termination of this Agreement,
Licensee shall not be relieved of any of its obligations or
liabilities pursuant to this Agreement, including, without limitation,
its obligations to pay Royalties as provided for in this Agreement.
13. Final Statement Upon Termination or Expiration
Licensee shall deliver to Licensor, as soon as practicable, but not later
than sixty (60) days following expiration or termination, a statement
indicating the number and description of Licensed Product(s) on hand
together with a description of all advertising and promotional material
relating thereto. Following expiration or termination, Licensee shall not
continue to manufacture the Licensed Product(s), however, if Licensee has
complied with all the terms of this Agreement including, but not limited
to, complete a timely payment of the consideration set forth above, then
Licensee may continue to distribute and sell its remaining inventory on a
non-exclusive basis for a period not to exceed sixty (60) days following
such termination or expiration, subject to payment of applicable royalties
in relation thereto. In the event this Agreement is terminated by Licensor
for cause, Licensee shall be deemed to have forfeited its sell-off rights
hereunder. If Licensee has any remaining inventory of the Licensed
Product(s) following such sixty (60) day
11
<PAGE>
period, or upon the date this Agreement is terminated for cause, Licensee
shall at Licensor's option deliver up to Licensor for destruction of said
remaining inventory or furnish to Licensor an affidavit attesting to the
destruction of said remaining inventory. Licensor shall have the right to
conduct a physical inventory in order to ascertain or verify such inventory
and/or statement. In the event that Licensee refuses to permit Licensor to
conduct such physical inventory, Licensee shall forfeit its rights
hereunder to dispose of such inventory. In addition to the forfeiture,
Licensor shall have recourse to all legal remedies available to it.
14. General
(a) This Agreement constitutes the entire agreement between Licensor and
Licensee pertaining to the subject matter hereof and supersedes all
previous agreement and understandings, oral or written, relating to
the subject matter hereof. This Agreement may not be amended or
modified, or the performance of any item or provision herein waived,
except in writing executed by all parties to this Agreement.
(b) All notices, approvals and other communication provided for this
Agreement shall be made in writing and delivered personally or by
certified mail, return and receipt requested, postage prepaid, to the
parties at their addresses, or to such address as either party may
specify by written notice to the other, and shall be deemed given
when received.
(c) Licensee expressly acknowledges and agrees that it is acting as an
independent contractor and not an employee or agent of Licensor, and
that nothing herein contained shall constitute a partnership or a
joint venture between Licensee and Licensor. Licensee shall have no
right or authority to bind or obligate Licensor in any manner
whatsoever and shall not expressly or impliedly incur any liability or
obligation on behalf of Licensor.
(d) This Agreement and all rights and duties hereunder are personal to
Licensee and shall not be assigned by Licensee without the express
written approval of Licensor. Nor shall Licensee without such written
approval sublicense, make subject to a security interest or otherwise
encumber or transfer any of the rights granted herein. Licensor shall
have the right to assign this Agreement, with or without the consent
of Licensee, in which event Licensor shall be relieved of any and all
obligations hereunder.
(e) A waiver by either party of any term or condition in this Agreement in
one instance shall not be deemed or construed to be a waiver of such
term or
12
<PAGE>
condition in the future, or of any subsequent breach hereof, whether
of the same or of a different nature.
(f) All questions concerning this Agreement, the rights and obligations of
the parties, the enforcement thereof, and the validity, effect,
interpretation and construction thereof, shall be governed by and
determined under the substantive laws of the State of Virginia
applicable to contracts entered into and to be fully performed
therein. Any claim or controversy arising out of or relating to this
Agreement shall be brought exclusively in any federal or state court
of competent jurisdiction located in the State of Virginia. Each of
the parties, by its execution and delivery of this Agreement,
expressly and irrevocably consents and submits to the exclusive
personal jurisdiction of any of such courts in connection with any
such claim or controversy. Each of the parties further irrevocably
consents to the service of any complaint, summons, notice or other
process relating to any action or proceeding concerning such claim or
controversy by delivery thereof to such party by hand or by certified
or registered mail in the manner prescribed in paragraph (b) of this
section 14.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized office as the date first above written.
MAJOR LEAGUE ALUMNI MARKETING: ULTIMATE SPORTS
ENTERTAINMENT, INC
By: By:
Title: Title:
Date: Date:
PERFORMANCE LICENSING COMPANY:
By: Date:
Title:
--------------------------
13
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
NATIONAL FOOTBALL LEAGUE PROPERTIES, INC.
280 Park Avenue, New York, New York 10017
Area Code (212) 450-2000 FAX (212) 681-7599
PUBLISHING AGREEMENT TERM SHEET
LICENSEE: ULTIMATE SPORTS ENTERTAINMENT, INC DATE: June 16, 1999
ADDRESS: 5410 Wilshire Boulevard, Suite 611 NO(S).: 300-440220-492
Los Angeles, CA 90036
THE FOLLOWING TERMS ARE MADE PART OF AND ARE SUBJECT TO ALL DEFINITIONS, TERMS
AND CONDITIONS SET FORTH IN LICENSE
NO(S). 31064
MARKETING PROGRAM: NFL PUBLISHING
TERM: SEPTEMBER 1, 1999 - AUGUST 31, 2001
TERRITORY. THE UNITED STATES AND SUCH OTHER COUNTRIES THAT NFLP MAY
DESIGNATE IN WRITING.
LICENSED PRODUCTS: COMIC BOOK ADVENTURE STORIES FEATURING NFL QUARTERBACK
CLUB MEMBERS AS HEROES;
SUPER BOWL SPECIALS
FISCAL YEAR LICENSED PRODUCT ROYALTY%
YEAR I 9/1/99-8/31/00 58309 COMIC BOOK ADVENTURE STORIES *
YEAR II 9/1/00-8/31/01 58309 COMIC BOOK ADVENTURE STORIES *
60203 SUPER BOWL SPECIALS *
FISCAL YEAR MINIMUM GUARANTEE ADVANCE
YEAR I 9/1/99-8/31/00 $* $*
(DUE NO LATER THAN (DUE UPON
3/1/00 NOTWITHSTANDING EXECUTION)
ANYTHING TO THE CONTRARY
CONTAINED IN THE LICENSE.)
YEAR II 9/1/00-8/31/00 $* $*
(DUE NO LATER THAN (DUE UPON
3/1/01 NOTWITHSTANDING EXECUTION)
ANYTHING TO THE CONTRARY
CONTAINED IN THE LICENSE.)
AUTHORIZED BRANDS FOR
LICENSED PRODUCT(S): ULTIMATE SPORTS, INC.
LICENSED MARK(S) FOR CLUB MARKS AND THE FOLLOWING LEAGUE MARKS: "NATIONAL
FOOTBALL LEAGUE", "NFL", "NATIONAL FOOTBALL CONFERENCE", "AMERICAN"
LICENSED PRODUCT(S): FOOTBALL CONFERENCE", "NFC", "AFC", "SUPER BOWL" AND
THE NFL SHIELD DESIGN.
DISTRIBUTION CHANNELS FOR INTERNET, STADIUM SHOPS/STADIUM CONCESSIONAIRES,
BOOK STORES, TEAM SALES, HOBBY SHOPS, TOY STORES, DISCOUNT STORES,
LICENSED PRODUCT(S): DIRECT MAIL, SPONSORED PREMIUMS, NEWSSTANDS, SPORTING
GOODS STORES, HOME SHOPPING CHANNELS
RENEWAL REQUEST DATE: SEPTEMBER 1, 2001
PROMOTIONAL PRODUCTS:
FISCAL YEAR LICENSED PRODUCTS NUMBER OF UNITS
<PAGE>
YEAR I EACH LICENSED PRODUCT ONE HUNDRED (100)
YEAR I/ EACH LICENSED PRODUCT ONE HUNDRED (100)
COOPERATIVE FUND: N/A
ADVERTISEMENTS: NIA
SPONSORSHIPS: NIA
ADDITIONAL TERMS:
LICENSEE SHALL HAVE THE RIGHT TO EXTEND THE CONTRACT FOR TWO (2) YEARS WITH
NFLPS CONSENT.
LICENSEE DOES NOT HAVE THE RIGHT TO SELL ANY APPROVED PROMOTIONAL MATERIALS.
31064 ULTIMATE SPORTS ENTERTAINMENT, INC. TERM SHEET
I
National Football League Properties, Inc.
280 Park Avenue, New York, New York 10017
Area Code (212) 450-2000 FAX (212) 681-7599
Publishing Agreement
Licensee: ULTIMATE SPORTS ENTERTAINMENT, INC. DATE: June 16,1999
ADDRESS: 5410 Wilshire Boulevard, Suite 611 No(s).:300-440220-492
Los Angeles, CA 90036
National Football League Properties, Inc. ("NFLP") has the exclusive right
to license for commercial purposes the trademarks of the National Football
League ("NFL") and the thirty-one professional football teams that comprise
the NFL ("Member Clubs"). Licensee, whose name and address are set forth
above, desires to use certain of these trademarks in accordance with the
terms and conditions of this agreement ("License"). In consideration of
the mutual premises, covenants and undertakings contained in this License,
the parties to this License agree as follows:
I . DEFINITIONS
As used in this License, the terms listed on the attached Term Sheet or
Term Sheets and elsewhere in this License have the following meanings:
a. "ADVANCE ROYALTY PAYMENT": The amount to be credited to Royalty payments
due for the corresponding Fiscal Year payable to NFLP upon the execution of
this License for Fiscal Year I and on or before April 15 for each
successive Fiscal Year.
b. "ADVERTISEMENTS": Advertising space in designated NFLP publications to
be purchased by Licensee in accordance with this License.
c. "AFFILIATE": Any person or entity in which Licensee or any owner, majority
shareholder, officer or director of Licensee has any direct or indirect
beneficial or ownership interest or is a joint venture partner.
d. "AUTHORIZED BRANDS": The only brand names Licensee may use in association
with the Licensed Products.
<PAGE>
e. "CLUB MARKS": The To team names, nicknames, helmet designs, uniform
designs, logos, slogans and other identifying symbols and indicia adopted
for commercial purposes by the Member Clubs.
f. "COOPERATIVE FUND": The amount payable to NFLP during each Fiscal Year
for use by NFLP in connection with the designated Cooperative Program.
g. "DISTRIBUTION CHANNELS": The channels of trade in the Territory in which
Licensee may distribute for sale or sell each Licensed Product as defined
in Exhibit I attached to this License or the attached Term Sheet.
h. "FISCAL YEAR": The period beginning on April 1 of any year and ending on
March 31 of the following year except for Fiscal Year 1, which will begin
on the date this License is fully-executed and will end on March 31 of the
following year.
i. "LEAGUE MARKS": "National Football League", "NFL", "National Football
Conference", "American Football Conference", "NFC", "AFC", "Super Bowl",
"Pro Bowl", the NFL Shield design, and other identifying symbols, slogans
and indicia adopted for commercial purposes by the NFL.
j. "LICENSED MARKS": The trademarks for which Licensee is granted certain
limited, non-exclusive rights under this License.
k. "LICENSED PRODUCTS": All products for which Licensee may use the
Licensed Marks in association with the Authorized Brands, if applicable.
This license will refer to each distinct type of product as a "Licensed
Product" since more than one product may be licensed (e.g. T-shirts and
jackets would each be a Licensed Product).
1. "MARKETING PROGRAM": The program established by NFLP in connection with
which Licensee may use the Licensed Marks as authorized under this License.
Licensee shall abide by all rules, guidelines and policies established by
NFLP for such Marketing Program, if applicable, which are deemed part of
this License.
m. "MINIMUM ROYALTY Guarantee": The minimum amount of Royalty payments payable
to NFLP on or before the 15th day following the end of each Fiscal Year.
n. "NET SALES": Gross sales of all Licensed Products sold or distributed for
sale at the greater of Licensee's invoiced selling price or Licensee's
normal domestic wholesale warehouse price or, in the case of Direct
Retailer sales by Licensee only, the retail price less sales derived from
returns received and credited and less reasonable quantity discounts as
actually calculated on the invoice provided that the total returns in any
Fiscal Year in which Licensee desires to deduct quantity discounts from
Net Sales may not exceed ten percent (10%) of Net Sales for the
corresponding Fiscal Year without NFLP's prior written consent only.
Licensee shall not credit any return at a rate greater than the original
invoiced selling price for such Licensed Products. There shall be no other
deductions allowed including, without limitation, deductions for
manufacturing costs, selling costs, distribution costs, advertising and
promotional costs, freight, non-collected or uncollectable accounts,
commissions, taxes, cash discounts, close out sales, distress sales, sales
to employees, or any other costs. For purposes of this Agreement, Net
Sales and all other referenced sales occur when Licensee invoices or ships
any Licensed Product, whichever is earlier. If Net Sales are made to an
Affiliate, the dollar amount of gross sales will be the greater of
Licensee's regular price to unaffiliated accounts or the Affiliate's gross
sales price to an unaffiliated account.
<PAGE>
o. "NFL MARKS": All League Marks and Club Marks, collectively.
p. "PREMIUMS": Any products, including the Licensed Products, bearing the
NFL Marks or other indicia of the NFL or its Member Clubs that Licensee
sells or gives away for the purposes of promoting, publicizing or
increasing the sale of its own products or services other than the
Licensed Products, or that Licensee sells or gives away to any other
party whom Licensee knows or should reasonably know intends to use such
products for the purposes of promoting, publicizing or increasing the sale
of any other party's products or services. Promotions include, without
limitation, combination sales, incentives for sales force, and trade or
consumer promotions.
q. "PROMOTIONAL PRODUCTS": The quantity of each Licensed Product that
Licensee shall provide to NFLP at no cost during each Fiscal Year for use
in connection with NFLP's Promotional Programs, as defined in Paragraph 5
of this License.
r. "RENEWAL REQUEST DATE": The date by which NFLP must receive notification
from Licensee of Licensee's desire to renew the License.
s. "ROYALTY": The amount of Net Sales Licensee shall pay to NFLP for all
sales of the Licensed Products. Licensee shall calculate all Royalty
payments according to Net Sales based on Licensee's normal domestic
wholesale warehouse price. NFLP reserves the right to increase the rate
of the Royalty during the Term, provided that it gives Licensee at least
six (6) months written notice before such increase takes effect.
t. "SPONSORSHIP": The designated events for which Licensee will participate
as a sponsor during each Fiscal Year of the Term subject to the execution
of an NFLP Sponsorship Agreement.
u. "STYLE": A distinct prototype of a Licensed Product that differs from any
other prototype of that same Licensed Product in any form or manner with
respect to design, material, pattern, size, shape, Licensed Marks,
editorial content or any other distinguishing characteristic involving the
specifications for the production of all or any portion of that Licensed
Product (e.g. T-shirts bearing the San Francisco 49ers logo and T-shirts
bearing the San Diego Chargers logo would each be a Style of Licensed
Product).
v. "TERM": The time period for which this License shall be effective.
w. "TERRITORY": The geographic area in which Licensee shall have the right to
sell the Licensed Products. Licensee is prohibited from selling Licensed
Products F.O.B. outside the Territory without the prior written approval of
NFLP.
x. "UNIT": A single Licensed Product (e.g. one T-shirt and one jacket would
each be a Unit).
2. GRANT OF LICENSE
Subject to all of the terms and conditions of this License, NFLP grants
Licensee the non-exclusive right to use the Licensed Marks in connection
with the manufacture, publication, distribution, sale, and advertising of
the Licensed Products under the Authorized Brand in the
<PAGE>
Distribution Channels in the Territory in accordance with all policies,
rules and regulations of the Marketing Program, if applicable, and NFLP,
which are deemed part of this License. Unless otherwise indicated on the
Term Sheet, Licensee shall have no right to distribute the Licensed
Products directly to consumers as a Direct Retailer or otherwise. Licensee
shall have no right to sell or distribute any Premiums unless Licensee
receives a separate Premium License from NFLP and pays NFLP the applicable
Royalty under such Premium License. Licensee shall not use the Licensed
Products as Premiums or permit the use of the Licensed Products as Premiums
by any party whom Licensee knows or should reasonably know intends to use
the Licensed Products as Premiums.
3. TERMS OF PAYMENT
a. Licensee shall pay NFLP the Royalty on all sales of the Licensed Products.
Regardless of whether any sales occur during any Fiscal Year, Licensee
shall also pay NFLP the applicable Advance Royalty Payment and Minimum
Royalty Guarantee for each Fiscal Year during the Term. Advance Royalty
Payments and any payments made to satisfy the Minimum Royalty Guarantee
are not refundable. Licensee may credit the Advance Royalty Payment and
Royalty payments made to NFLP during each Fiscal Year to the Minimum
Royalty Guarantee for the corresponding Fiscal Year only. Licensee may
not credit such amounts to the Advance Royalty Payment, Minimum Royalty
Guarantee or any other payment required under this License for any other
Fiscal Year. If the Term Sheet assigns a per-product Advance Royalty
Payment and Minimum Royalty Guarantee, then Licensee may only credit the
Advance Royalty Payment for such product and Royalty payments from the
sales of such product toward the corresponding Minimum Royalty Guarantee
for such product in the corresponding Fiscal Year. If NFLP terminates this
License, for the Fiscal Year in which termination occurs ("Termination
Fiscal Year") Licensee shall pay NFLP the Royalty on all sales of the
Licensed Products made during the Termination Fiscal Year or a pro rated
portion of the Minimum Royalty Guarantee owed in excess of the Advance
Royalty Payment ("Termination Guarantee"), whichever is greater. For
purposes of this paragraph the pro rated Minimum Royalty Guarantee
will be calculated as follows:
<TABLE>
<CAPTION>
TERMINATION GUARANTEE x NO. OF DAYS COMPLETED IN TERMINATION FISCAL YEAR
- --------------------- -------------------------------------------------
<S> <C>
1 365
</TABLE>
b. On or before the 15th day of each calendar quarter, Licensee shall make all
Royalty payments to NFLP due on sales of the Licensed Products during the
preceding calendar quarter. Simultaneously with the Royalty payment,
Licensee shall furnish full and accurate statements of the Net Sales of
each Licensed Product sold and distributed during such calendar quarter on
forms provided by NFLP. The statements will include the quantity and
description of each Licensed Product itemized by Member Club if applicable,
the gross sales price, itemized deductions from the gross sales price,
any returns made during the preceding quarter, and the resulting Net Sales
on which Licensee calculated the Royalty amount. Licensee shall furnish
such statements for each Licensed Product regardless of whether it sold any
such Licensed Product during the preceding quarter. NFLP's receipt or
acceptance of any statement or Royalty payment or the cashing of a Royalty
check will not preclude NFLP from questioning the correctness of such
statements or payments at any time. Upon discovery of any verifiable
inconsistency or mistake in such statements or payments, Licensee shall
immediately rectify such inconsistency or mistake.
c. Licensee shall pay NFLP all other amounts listed on the Term Sheet attached
to this License, if applicable, in accordance with the dates provided in
such Term Sheet.
<PAGE>
d. Licensee shall pay NFLP an additional charge of one and one-half percent
(1.5%) per month on any payment due under this License that remains unpaid
fifteen (15) days after such payment becomes due.
4. QUALITY CONTROL
a. Prior to making any use of any Style of any Licensed Product, Licensee
shall submit to NFLP for its approval at Licensee's sole cost and expense
at the following applicable stages: (i) finished artwork or final proofs;
(ii) pre-production samples or strike-offs for such proposed Style;
(iii) a preliminary draft of the complete text and (iv) a sample Unit of
the finished version of such Style, including the final complete text,
together with all packaging, cartons, containers, hangtags and wrapping
materials related to such Unit ("Related Materials"). For Styles that
differ solely with respect to the Licensed Marks, Licensee may submit a
sample Unit of one Style along with artwork of the Styles bearing the
other Licensed Marks for approval purposes unless NFLP requests a sample
Unit of each such Style. NFLP shall use its best efforts to promptly
evaluate all such submissions and provide Licensee, if applicable, with
quality standards and specifications for the finished Units of each
Style. Upon approval ofthe finished version of a sample Unit of a Style,
NFLP shall execute a Product Approval Form that will contain any
applicable quality standards and specifications. License shall not
manufacture, publish, sell, distribute or advertise any Style of a
Licensed Product unless NFLP has executed a Product Approval Form for such
Style.
b. All Product Approval Forms are effective for one Fiscal Year only and
Licensee must resubmit to NFLP each Style of each Licensed Product
previously approved by NFLP for quality control approval each Fiscal Year.
From time to time, NFLP may request additional sample Units of any Style of
any Licensed Product to confirm continued compliance with NFLP's quality
control guidelines and any applicable quality standards and specifications.
NFLP shall have the right to withdraw its approval of any Style of any
Licensed Product if, in NFLP's sole judgment, such sample Units cease to
conform to such guidelines, standards or specifications or otherwise
deviate in quality from the previously approved sample Units. Upon notice
by NFLP to Licensee that the Product Approval Form for a Style of a
Licensed Product has been withdrawn, Licensee shall immediately cease to
manufacture, publish, distribute, sell or advertise any further Units of
such Style until such time as a new Product Approval Form has been
executed and delivered by NFLP.
c. Licensee shall not make any modification to any Style for which NFLP has
issued a Product Approval Form or depart from any applicable quality
standards and specifications for any Style unless NFLP has approved such
modification for such Style and issues a new Product Approval Form.
Licensee acknowledges that the manufacture, publication, use, sale,
distribution, or advertising of any Style that deviates from the Style
approved by NFLP will constitute a material breach of this License. Upon
such breach, NFLP may terminate this License immediately.
d. Licensee represents and warrants that it shall not use any design created
in connection with the Licensed Products on any product which is of the
same grade and quality as the Licensed Products but does not bear the
Licensed Marks.
5. ADVERTISING AND PROMOTIONAL MATERIALS
a. Licensee will not use the Licensed Marks or any reproduction of them,
including without limitation, Photographs or Computer Art, as defined in
Paragraph 10a, in any advertising, promotion, publicity or display
materials (collectively "Promotional Materials") without
<PAGE>
receiving NFLP's prior written approval executed on a Promotional Approval
Form supplied to Licensee by NFLP. Licensee may use such approved
Promotional Materials only in conjunction with the Styles of Licensed
Products that NFLP has approved. Licensee shall submit to NFLP all
Promotional Materials at the following applicable stages appropriate to
the medium used: (i) conceptual stage, pre-production art or rough cuts;
(ii) layout,
storyboard and script; (iii) finished materials; and (iv) at any other time
as reasonably requested by NFLP. Licensee shall ensure that it submits all
proposed Promotional Materials and any modifications to previously approved
Promotional Materials to NFLP in a timely fashion that will ensure NFLP has
adequate time to review such materials prior to the date of their proposed
use by Licensee. NFLP shall use best efforts to evaluate all such
Promotional Materials' submissions within ten (10) business days of their
receipt by NFLP. NFLP shall execute a Promotional Approval Form for all
Promotional Materials that it approves. Licensee shall notify its retailers
and/or Third Party Distributors that NFLP must approve all Promotional
Materials involving or using in any form or manner the Licensed Marks.
Licensee shall use best efforts to ensure that its retailers and/or Third
Party Distributors do not publish, display or otherwise distribute such
Promotional Materials without NFLP's prior written approval.
b. NFLP has the exclusive right, in its sole discretion, to approve or
disapprove any Promotional Materials' submissions. Licensee acknowledges
that NFLP may disapprove Promotional Materials that, in NFLP's opinion,
reflect unfavorably upon NFLP, the NFL or its Member Clubs including,
without limitation, materials involving gambling, lotteries or other games
inconsistent with the image of the NFL, the Member Clubs, or the Licensed
Products.
c. NFLP may withdraw its approval of any Promotional Materials if: (i)
the Promotional Materials have been altered without the prior written
approval of NFLP; (ii) the Style and/or the Licensed Product promoted in
the Promotional Materials ceases to be approved under this License; or
(iii) an event occurs that, in NFLP's opinion, causes NFLP's relationship
with Licensee or any Licensed Product to adversely reflect upon the
professional or business reputation of the NFL, its Member Clubs or NFLP.
d. Licensee represents that NFLP has the right to conduct promotions and
special events in its sole discretion and to print catalogs, sales sheets
and brochures involving representative merchandise from NFLP's licensees
("Promotional Programs"). Licensee shall supply within ten (10) business
days of any request by NFLP, at no charge to NFLP, all or any portion of
the quantity of Promotional Products specified on the Term Sheet required
by NFLP for use, in NFLP's sole discretion, in such Promotional Programs.
e. Licensee shall pay NFLP the designated amounts for the Advertisements,
Sponsorship, and Cooperative Fund, if applicable, on or before the
corresponding dates listed on the Term Sheet attached to this License.
NFLP shall use such payments in a manner determined by NFLP in its sole
discretion.
f. During each Fiscal Year of the Term in which NFLP publishes the NFL
Merchandise Catalogue, Licensee shall purchase a full-page advertisement
in such catalogue at the rate established in NFLP's then-existing rate
card. Licensee shall make such payment within fifteen (15) days from
receiving an invoice from NFLP.
<PAGE>
6. DISTRIBUTION REQUIREMENTS
Licensee shall distribute for sale and sell each Licensed Product only in
the authorized Distribution Channels. Prior to distribution of any Licensed
Product, Licensee shall submit to NFLP a list of its retail accounts for
the Licensed Products for the purpose of determining which accounts fall
within the Distribution Channels. NFLP shall determine, in its sole
discretion, whether such retail accounts fall within the Distribution
Channels and shall provide Licensee with a list of the approved retail
accounts. Licensee shall manufacture, publish, distribute, sell and
maintain inventory of sufficient quantities of each Style of each Licensed
Product to meet the reasonable market demand in the Distribution Channels.
Licensee shall not sell Licensed Products to any third party that Licensee
knows or should reasonably know intends to sell the Licensed Products
outside of the authorized Distribution Channels. If Licensee sells or
distributes for sale other merchandise that does not bear the Licensed
Marks but is of the same grade and quality as the Licensed Products,
Licensee shall not discriminate in the granting of commissions and
discounts to salespersons, dealers and distributors for the sale of the
Licensed Products. If the Licensed Marks are Club Marks, Licensee
acknowledges that it shall manufacture, publish, distribute and sell a
commercially significant quantity of Units bearing the trademarks of each
Member Club individually in each Style. Licensee shall have no right to
distribute the Licensed Products via computer on-line services unless
expressly indicated on the Term Sheet.
7. AUTHORIZED BRANDS
Licensee shall only use the Authorized Brands, if applicable, in connection
with the manufacture, publication, distribution, sale, and advertising of
each Licensed Product. NFLP shall have the right, in its sole discretion,
to remove or change any of the Authorized Brands, if applicable, during the
Term. Licensee must receive the prior written approval of NFLP to use any
other trademarks on the Licensed Products.
8. NFLP'S PURCHASE OF LICENSED PRODUCTS
In addition to the Promotional Products provided at no cost by Licensee,
NFLP, the NFL and its Member Clubs shall have the right to purchase any of
the Licensed Products in any quantity at the minimum wholesale price,
excluding Royalty payments, that Licensee charges to its best customer,
that NFLP will not require Licensee to pay a Royalty on such sales.
9. THIRD PARTY RELATIONSHIPS
a. Licensee shall not assign, transfer, grant a security interest in the
Licensed Products, or otherwise encumber any of its rights under this
License to any Affiliate or other third party without NFLP's prior written
consent. If Licensee assigns, transfers, grants a security interest in the
Licensed Products, or encumbers any portion of this License without such
consent, NFLP shall have the right to terminate this License immediately.
Among other things, NFLP will consider the License assigned and subject to
the requirements of this subparagraph if: (i) the beneficial ownership or
control of fifty percent (50%) or more of Licensee's capital stock is
transferred or otherwise conveyed; (ii) Licensee becomes part of any merger
or consolidation; or (iii) the sale or transfer of all or substantially
all of Licensee's assets occurs.
b. Licensee must receive NFLP's prior written consent to use a domestic
or foreign third party manufacturer or publisher of any Licensed Product or
any portion of any Licensed Product, including patches, labels and emblems
made by any party that is not already a licensee of NFLP ("Third Party
Manufacturer"). NFLP shall have the right to approve or disapprove any
Third Party Manufacturer in its sole discretion. NFLP's approval of any
Third Party Manufacturer, if granted, will be contingent on the execution
of an agreement between NFLP
<PAGE>
and the approved Third Party Manufacturer. Notwithstanding such agreement,
Licensee shall at all times remain primarily obligated to NFLP under this
License and shall take all necessary efforts to ensure that such Third
Party Manufacturer uses the Licensed Marks only to manufacture or publish
the designated Licensed Product and for no other purpose including, without
limitation, promoting or selling the Licensed Product. If such Third Party
Manufacturer has made an unauthorized use of the Licensed Marks, Licensee
shall fully cooperate with NFLP to ensure that such unauthorized use ceases
promptly. Licensee shall be primarily obligated to ensure that each
Licensed Product produced by such Third Party Manufacturer complies with
the requirements of Paragraph 4 of this License.
c. Licensee shall not make any payments to any Member Club or to any
shareholder, officer, director, employee, agent or representative of any
Member Club, or to any employee, agent or representative of the NFL or its
affiliates in such person's individual capacity, in connection with the use
of any Licensed Marks under this License or otherwise as a direct result of
sales of any Licensed Product. Licensee shall disclose to NFLP all existing
agreements or agreements being negotiated by Licensee or its agent between
Licensee and any Member Club or any shareholder, officer, director,
employee, agent or representative of any Member Club, or any employee,
agent or representative of the NFL or any of its affiliates in such
person's individual capacity.
d. In the event that NFLP consents to any third party relationship under this
Paragraph 9 or otherwise under this License, Licensee acknowledges that
such approval will be contingent on the execution of an appropriate form
or agreement supplied by NFLP.
10. COMPUTER ARTWORK AND PHOTOGRAPHS
a. Subject to the requirements of Paragraph 4, if Licensee wishes to use
computer artwork incorporating graphic depictions of the Licensed Marks
owned and/or controlled by NFLP ("Computer Art") or photographs
incorporating graphic depictions of the Licensed Marks owned and/or
controlled by NFLP ("Photographs"), Licensee shall request such Computer
Art or Photographs in a Use Application provided to Licensee by NFLP. If
NFLP, in its sole discretion, approves such application, NFLP shall
provide Licensee with Computer Art or Photographs at a rate established by
NFLP in its sole discretion provided that, in the case of Photographs,
Licensee must first sign NFLP's standard Photo Use Agreement. Licensee
shall make any payment for the Computer Art or Photographs within thirty
(30) days of receiving an invoice from NFLP. Licensee shall only use the
Computer Art or Photographs in accordance with the terms and conditions of
this License including, without limitation, Paragraph 11, and, in the case
of Photographs, the Photo Use Agreement. The terms of the executed Photo
Use Agreement will govern in the event of any conflict between the terms
of this License and the terms of the Photo Use Agreement.
b. Licensee shall not make copies of the Computer Art or Photographs without
the express written approval of NFLP and shall not use the Computer Art or
Photographs for any purpose other than the purpose set forth in Licensee's
Use Application. Licensee shall not provide the Computer Art or Photographs
to any other party including a manufacturer or publisher, unless NFLP
approves such party in accordance with Paragraph 9 of this License.
Licensee shall take all steps necessary to prevent the unauthorized copying
or use of the Computer Art or Photographs by third parties.
<PAGE>
c. Upon the expiration or termination of this License, Licensee shall
immediately deliver to NFLP all Computer Art and Photographs provided by
NFLP and all copies and duplications of such Computer Art or Photographs
and all related materials.
d. Licensee acknowledges that it has no right, title or interest in or to any
of the Photographs, including, without limitation, copyrights in the
Photographs. Licensee represents that it will not assert any rights in or
to the Photographs during the Term of thereafter.
11. PROTECTION OF RIGHTS
a. Licensee acknowledges that, as between NFLP and Licensee, NFLP exclusively
owns the NFL Marks and all copyrights, trademarks and other proprietary
rights in and to them. Licensee further acknowledges that NFLP shall own
worldwide in perpetuity: (i) all artwork produced under this License
bearing the NFL Marks ("Artwork") and all copyrights and other proprietary
rights in such Artwork; (ii) all secondary marks and/or promotional
concepts developed for use and used in connection with any Licensed Product
("Secondary Marks") and all copyrights and other proprietary rights in
such Secondary Marks; (iii) all derivative works based on any of the NFL
Marks, Secondary Marks, Computer Art, or Artwork ("Derivative Works") and
all copyrights and other proprietary rights in such Derivative Works; and
(iv) all Computer Art and all copyrights and other proprietary rights in
such Computer Art as well as duplicates and copies of it. Licensee's use of
the Licensed Marks, Computer Art, Artwork, Secondary Marks and Derivative
Works is for NFLP's benefit and Licensee will not acquire any rights in
any of them by such use. Licensee acknowledges that NFLP will have the
right to terminate this License if Licensee asserts any rights in or to
any of the NFL Marks, Computer Art, Artwork, Secondary Marks and Derivative
Works other than those granted under this License. Licensee shall not
attack the trademarks, copyrights or other proprietary rights of NFLP, the
NFL, or its Member Clubs during the Term or thereafter.
b. Licensee hereby irrevocably assigns and transfers to NFLP all right, title
and interest, including all copyrights and extensions and renewals thereof,
in and to the Artwork, the Secondary Marks, the Derivative Works, the
Computer Art, and all related proprietary rights (collectively the
"Proprietary Materials"). At the request of NFLP, Licensee shall execute
all documents confirming NFLP's rights in and to the NFL Marks and
Proprietary Materials including an assignment of copyright in form and
substance satisfactory to NFLP. Licensee shall cause each third party who
makes or contributes to the creation of the Proprietary Materials to agree
that all rights, including the copyrights, in his or her work shall be
owned by NFLP and to execute necessary documents.
c. Licensee shall only display or use the Licensed Marks in the form and
manner that NFLP has specifically approved in writing. Licensee shall cause
to be irremovably and legibly printed or affixed in a clearly visible
location approved by NFLP on every Unit of each Licensed Product, and all
Related Materials, Proprietary Materials, and Promotional Materials the
following:
(i) Trademark Notices as directed and specified by NFLP, including a
legend indicating that the NFL Marks are trademarks of the NFL or the Member
Clubs, and are being used by Licensee under License from NFLP;
(ii) Copyright Notices as directed and specified by NFLP;
(iii) The Marketing Program symbol, if applicable;
(iv) Hangtags, inserts, the officially Licensed Product hologram label or
hangtag, which must be used on all Licensed Products, and other identifying
material required by NFLP;
(v) A permanent label displaying Licensee's name and the Authorized Brand;
(vi) Licensee's name, trade name and address; and
<PAGE>
(vii) All other notices required by NFLP to protect the interests of
NFLP, the NFL, and its Member Clubs.
d. Licensee will not use any Trademark or Copyright Notices on the Licensed
Products, Related Materials, Proprietary Materials, and Promotional
Materials that conflict with, negate or cause confusion with any notices
required under this Paragraph 11. Licensee represents that, except for
the Authorized Brands, if applicable, or as otherwise authorized in writing
by NFLP, it will not associate other licensed properties, names, symbols,
or designs with the Licensed Marks on any of the Licensed Products,
Related Materials, Promotional Materials, and Proprietary Materials.
Licensee will not use the Licensed Marks or NFL Marks on any business
sign, business card, invoice, sales sheet, brochure, catalog, or other
form, or as part of the name of Licensee's business except as authorized
by NFLP in writing prior to such usage.
e. NFLP shall have the right to secure trademark and/or copyright
registrations for the NFL Marks. Upon request by NFLP, in addition to any
other quantity of Licensed Products that Licensee must submit to NFLP under
this License, Licensee shall deliver to N FLP, free of cost, twelve (112)
Units of each Licensed Product with their Related Materials for such
registration purposes provided that Licensee shall not owe any Royalty for
such Units. Licensee shall provide NFLP with the date of first use of each
Licensed Product in interstate and intrastate commerce. NFLP shall have the
right to secure trademark and/or copyright registrations in NFLP's name for
any Proprietary Materials created by Licensee or its agents for use in
connection with any Licensed Product. By execution of this License,
Licensee appoints NFLP as Licensee's attorney-in-fact coupled with an
irrevocable interest to execute, acknowledge, deliver and record all
registrations and all documents referred to in this Paragraph 11.
f. Licensee shall assist NFLP, at NFLP's expense, in the procurement,
protection, and maintenance of NFLP's rights in and to the NFL Marks and
the Proprietary Materials. NFLP may, in its sole discretion, commence or
prosecute and control the disposition of any claims or suits relative to
the imitation, infringement and/or unauthorized use of the NFL Marks or the
Proprietary Materials either in its own name, or in the name of Licensee,
or join Licensee as a party in the prosecution of such claims or suits.
Licensee shall cooperate fully with and provide full assistance to NFLP in
connection with any such claims or suits. Licensee shall promptly notify
NFLP in writing of any infringement, imitations, or unauthorized use of
the NFL Marks or Proprietary Materials by others. NFLP shall, in its sole
discretion, determine whether to take action and the type of action, if
any, to take against such infringement. Licensee shall not institute any
suit or take any action on account of such infringements, imitations or
unauthorized uses unless it receives NFLP's prior written consent. NFLP
will receive the full amount of any settlement made or damages awarded
in connection with any action taken against such infringement.
12. REPRESENTATIONS AND WARRANTIES
a. Licensee warrants and represents that:
(i) All of the illustrations and text in the Licensed Products are original
and have not been published previously in whole or in part;
(ii) Licensee is the sole owner of all rights, including the copyright, in
the illustrations and text in the Licensed Products separate and apart from any
material depicting the NFL Marks;
(iii) Licensee at its own expense has obtained or will obtain and deliver
to NFLP immediately any and all permissions and/or releases from third parties
required for publication of any material provided by Licensee or for the
exercise of any other rights conferred by this License;
<PAGE>
(iv) Licensee will not manufacture or publish any derivative work based on
any Licensed Product during the Term or thereafter without a separate license
executed by NFLP;
(v) The Licensed Products do not contain libelous, defamatory, obscene, or
otherwise unlawful matter, and do not infringe on the privacy, publicity,
proprietary, copyright or other rights of any third party;
(vi) Licensee has the full power, free or any prior contract, lien or other
right, to enter into this License;
b. NFLP shall have no obligation to make an independent investigation to
determine whether the foregoing warranties and representations are true and
any such investigation by or for NFLP shall not constitute a defense to
Licensee in any action based upon a breach or alleged breach of any of the
foregoing warranties and representations. If NFLP determines that a
substantial risk of liability to any third party exists, without relieving
Licensee's of its obligations under this License, NFLP may undertake an
investigation, verification and analysis of the Licensed Products and
implement such revisions to the Licensed Products at Licensee's cost that
NFLP determines may eliminate or lessen such risk. Licensee acknowledges
that NFLP shall have no obligation to publish all or any portion of the
Licensed Products.
13. INDEMNIFICATION AND INSURANCE
a. During the Term and thereafter, Licensee shall be solely responsible for,
defend, indemnify and hold harmless NFLP, the NFL, its Member Clubs, and
each of their respective affiliates, shareholders, officers, directors,
agents and employees for, from and against any claims, demands, Causes of
action, damages, costs and expenses, including reasonable attorneys' fees,
judgments, and settlements arising out of or in connection with: (i)
Licensee's breach or alleged breach of any of its representations,
warranties, covenants or obligations contained in this License; (ii)
Licensee's use of the Licensed Marks except as provided in subparagraph
(c) below; (iii) Licensee's noncompliance with any applicable federal,
state, or local laws or regulations; or (iv) the manufacture, publication,
distribution, sale, advertising or use of any Licensed Product. Licensee
acknowledges that NFLP's approval of any Licensed Product pursuant to
Paragraph 4 of this License or Promotional Materials or promotional
concepts pursuant to Paragraph 5 of this License shall not relieve
Licensee of its indemnification obligations under this Paragraph.
b. Licensee shall obtain and maintain at its own expense from a licensed and
admitted insurance carrier with a rating not less than A from Best, a
publisher's liability insurance policy and an advertising liability
insurance policy that will each provide coverage of two million dollars
($2,000,000) for each occurrence. Licensee shall ensure that such policies:
(i) will list the NFL, its Member Clubs, NFLP, and each of their
respective affiliates, shareholders, officers, directors, agents, and
employees as additional insureds; and (ii) will each provide that they
can not be canceled without at least thirty (30) days written notice to
NFLP. Simultaneously with the execution of this License, Licensee shall
submit to NFLP the fully paid policies or certificates of insurance.
Compliance with this subparagraph (b) will not relieve Licensee of its
other obligations under this Paragraph 13. The insurance coverage required
under this License is not cumulative and will not extend to any other
License or Agreement between Licensee and NFLP unless otherwise authorized
by NFLP in writing.
c. During the Term and thereafter, NFLP shall indemnify and hold harmless
Licensee, its officers, directors, agents and employees for, from and
against any claims, demands, causes of action, damages, and reasonable
attorneys' fees for trademark infringement arising out of the use of the
Licensed Marks as strictly authorized under this License, provided that
NFLP is given immediate notice of and shall have the option to undertake
and conduct the defense of
<PAGE>
any such claim, demand or cause of action and further provided that
Licensee shall cooperate in the defense of such claim as reasonably
required by NFLP.
14. FINANCIAL INFORMATION
a. Upon NFLP's request, Licensee shall provide NFLP with a statement from an
independent certified public accountant attesting to Licensee's solvency.
For the purposes of this License, "solvency" shall mean that Licensee is
able to pay its obligations as they become due in the regular course of
business.
c. On or before the 15th day of each month, Licensee shall provide NFLP with
Licensee's Fiscal Year projections for sales and income for its overall
the Licensed Products. Upon request by NFLP, Licensee shall provide NFLP
with a list ranking its Licensed Products sales by retailer and/or Third
Party Distributors for its top twenty-five (25) retail accounts or by
retail accounts comprising seventy-five percent (75%) of its Net Sales,
whichever is greater, and itemizing for each such retailer and/or Third
Party Distributors a description and the number of Units of each Licensed
Product sold.
d. Licensee shall notify NFLP in writing of any adverse material change in
Licensee's financial condition that will likely affect its performance
under this License at the time such material change occurs or when
Licensee learns of the possibility of such a change, whichever is sooner,
including, but not limited to, any possible adverse material change in
Licensee's ability to make timely payments or keep accurate records due to
any inability to process date/time data from, into or between the twentieth
and twenty-first centuries.
15. AUDITS AND INSPECTIONS
a. During the Term and for at least three (3) full Fiscal Years after the
expiration or termination of the License, Licensee shall keep, maintain and
preserve complete and accurate books of account and records covering all
transactions relating to this License, including, without limitation,
invoices, correspondence, inventory accounting, banking and financial
records ("Records"). Licensee shall designate a symbol or number that will
be used exclusively on Records relating to the Licensed Products and with
no other articles that Licensee manufactures, publishes, distributes or
sells. Licensee shall ensure that all invoices for the sale of Licensed
Products to its retailers and/or Third Party Distributors will include the
quantity and description of each Licensed Product itemized by Marketing
Program, if applicable, Style and Member Club, if applicable.
b. During the Term and for at least three (3) full Fiscal Years after the
expiration or termination of the License, NFLP and its duly authorized
representatives will have the right during reasonable business hours to
inspect and audit all Records and conduct a physical examination of
Licensee's premises including its warehouses and manufacturing facilities
and those of Third Party Distributors and Third Party Manufacturers. NFLP
shall provide Licensee with no less than five (5) business days' written
notice prior to such inspection, audit or examination; provided however, if
compelling circumstances exist, as determined by NFLP in the exercise of
its reasonable business judgment, NFLP may conduct an immediate inspection,
audit or examination with no prior notice to Licensee. Licensee represents
that it will fully cooperate with the inspection, audit or examination and
will not cause or permit any interference with NFLP or its representatives
during any inspection, audit or examination. During an inspection, audit
or examination, NFLP shall have the right to make copies or extracts of
Licensee's Records.
<PAGE>
c. Licensee shall pay NFLP for the cost of any audit that discloses a payment
deficiency of more than two percent (2%) between the amount due to NFLP
pursuant to the audit and the amount Licensee actually paid or reported to
NFLP. Licensee shall pay NFLP any deficiency amount together with interest
on the deficiency amount pursuant to the provisions in Paragraph 3d of this
License. Licensee shall pay NFLP the amount of any additional costs beyond
the cost of the audit incurred by NFLP due to a change in an audit date
scheduled by NFLP made at Licensee's request. Licensee shall pay such
amounts within ten (10) days of invoicing by NFLP.
16. TERMINATION
Without prejudice to any other rights it may have in law, equity or
otherwise, NFLP shall have the right to immediately terminate this License
upon written notice to Licensee at any time if:
a. Licensee fails to generate Net Sales during any Fiscal Year satisfying the
corresponding Minimum Royalty Guarantee or fails to generate Net Sales on
any Licensed Product with a separate Minimum Royalty Guarantee satisfying
the corresponding per-product Minimum Royalty Guarantee;
b. Licensee fails to deliver to NFLP or to maintain in full force and effect
the insurance coverage referred to in Paragraph 13b of this License;
c. Licensee fails to make available its premises, Records or other business
information to NFLP or its representatives or fails to provide full and
complete information as required in Paragraphs 14 and 15 of this License;
d. Licensee manufactures, publishes, sells, distributes, advertises or uses
any Style of any Licensed Product, or any Promotional Materials, or
Proprietary Materials without the prior written approval of NFLP as
required in this License, or after such written approval has been
withdrawn by NFLP or has expired;
e. Licensee distributes or sells any Licensed Product outside the Territory or
sells any Licensed Product to a third party that Licensee knows or should
reasonably know intends to sell such Licensed Product outside the
Territory;
f. Licensee distributes any Licensed Product outside the corresponding
Distribution Channels, or sells any Licensed Product to any third party
that Licensee knows or should reasonably know intends to sell such
Licensed Product outside the corresponding Distribution Channels;
g. Licensee fails to obtain NFLP's written approval prior to assigning,
transferring, granting a security interest in the Licensed Products or
otherwise encumbering the License or prior to using a Third Party
Manufacturer, Sublicensee, or any approved Third Party Manufacturer engages
in conduct that would entitle NFLP to terminate the License if Licensee had
engaged in such conduct;
h. Any sales representative of Licensee produces, inventories, warehouses or
distributes any of the Licensed Products;
i. Licensee fails to satisfy the distribution requirements in Paragraph 6 of
this License or otherwise fails to make timely and complete delivery of
orders it has taken for any Licensed Product to seventy percent (70%) or
more of its retail accounts and/or Third Party Distributors that
collectively account for eighty percent (80%) of its Net Sales on one or
more occasion during any Fiscal Year;
<PAGE>
j. Licensee makes a material misrepresentation or omission in its license
application form;
k. Licensee fails to make any payment or deliver any statement required under
this License and fails to correct such default within ten (10) days of
written notice of such default;
1. Licensee breaches any other agreement in effect between Licensee and NFLP;
m. Licensee makes or agrees to make a payment to any Member Club or any
shareholder, officer, director, employee, agent, or representative of a
Member Club, or to any agent, representative or employee of the NFL or its
affiliates in such person's individual capacity, in connection with the use
of any Licensed Marks under this License or otherwise as a direct result of
the sales of any Licensed Product, or Licensee fails to disclose to NFLP
any existing agreement or agreement being negotiated by Licensee or
Licensee's agent between Licensee and a Member Club or any shareholder,
officer, director, employee, agent, or representative of a Member Club, or
any agent, representative or employee of the NFL or its affiliates in such
person's individual capacity;
n. Licensee disparages NFLP, the NFL, any of its Member Clubs, or any of their
respective shareholders, officers, directors and employees as determined by
NFLP in its sole discretion, or otherwise engages in conduct that NFLP
deems detrimental to the NFL or any of its Member Clubs;
o. Licensee fails to comply with any applicable federal, state or local law or
regulation in connection with this License;
p. Licensee breaches any representation or warranty contained in Paragraph 12;
or
q. Licensee fails to comply with any other material term or condition of this
License.
17. GOODWILL AND REPUTATION
Licensee recognizes the great value of the goodwill associated with the NFL
Marks and acknowledges that such goodwill belongs to the Member Clubs and
the NFL, and that such NFL Marks have secondary meaning in the minds of the
public. The nature of the business of NFLP, the NFL, and its Member Clubs,
requires public respect for and trust in the reputation and integrity of
the NFL and its Member Clubs. NFLIP may, at its sole option, terminate
this License or withdraw some or all Product Approval Forms or Promotional
Approval Forms by written notice to Licensee if any unanticipated factor,
development or event causes NFLP's continued association with any one or
more Licensed Product or Licensee to adversely reflect upon NFLP, the NFL
or its Member Clubs as determined by NFLP in its sole discretion. In the
event of such termination, Licensee shall payto NFLP the Royalty on all
sales of the Licensed Products made during the Termination Fiscal Year or
the Termination Guarantee as defined in Paragraph 3a, whichever is greater,
and all other amounts due to NFLP. Upon receipt of such payment, NFLP will
reimburse Licensee for its salvage expenses or, in the case of
unsalvageable Licensed Products, Licensee's manufacturing costs if NFLP
does not permit Licensee to distribute the remaining inventory of Licensed
Products.
18. RENEWAL REQUEST
NFLP must receive a written request from Licensee by no later than the
Renewal Request Date, if applicable, listed on the Term Sheet or Term
Sheets if Licensee desires to renew the License. If Licensee has complied
with all terms and conditions of this License during the Term and NFLP
desires, in its sole discretion, to negotiate a renewal License, NFLP
shall negotiate with Licensee for the terms and conditions of a renewal
License for a period of no
<PAGE>
more than sixty (60) days following NFLP's receipt of Licensee's renewal
request notice. This License automatically expires at the end of the Term
if NFLP does not receive Licensee's written request by the Renewal Request
Date, Licensee has failed to comply with all terms and conditions of this
License, NFLP elects not to negotiate a renewal License, or the parties are
unable to reach an agreement within said thirty day negotiation period.
Licensee acknowledges that NFLP has no express or implied obligation to
renew the License. NFLP will have no liability to Licensee for any expenses
incurred by Licensee in anticipation of any renewal or extension of this
License.
19. EFFECT OF EXPIRATION OR TERMINATION OF THE LICENSE
a. Sixty (60) days before the expiration of this License, Licensee will
furnish to NFLP a statement showing the number of Units and description of
such Units for each Style of each Licensed Product, Promotional Materials,
and Proprietary Materials on hand or in process in Licensee's inventory. If
this License is terminated by NFLP, Licensee shall furnish such statement
within ten (10) days after notice of termination is given by NFLP.
b. After expiration or termination of this License for whatever reason, all
rights granted under this Licensee will revert to NFLP and Licensee shall
refrain from further use of, simulation of or reference to any and all of
the NFL Marks except as provided in this paragraph. Except for termination
of this License by NFLP, Licensee will have ninety (90) days to dispose of
the Licensed Products ("Sell-Off Period") that are on hand or in process at
the time of such expiration, provided all statements and payments then due
to NFLP are first made, Licensee is otherwise in compliance with all terms
and conditions of the License, and such Sell-Off occurs at Licensee's
regular selling price and within the Distribution Channels. During the
Sell-Off Period, Licensee shall submit all payments and statements
required under this License in accordance with the terms and conditions of
the License.
c. If Licensee has remaining inventory of the Licensed Products upon the
termination of this License or after the Sell-Off Period, if applicable,
NFLP may, at its option: (i) purchase such inventory at Licensee's cost;
(ii) require Licensee to deliver such inventory to NFLP for destruction at
Licensee's expense; or (iii) require Licensee to destroy such inventory at
Licensee's expense and furnish NFLIP with an affidavit signed by an officer
of Licensee attesting to such destruction. NFLP will have the right at any
time before expiration or termination of this License and during the
Sell-Off Period to conduct a physical inventory to, among other things,
verify the quantity and Style of the Licensed Products in Licensee's
inventory. If Licensee refuses to permit such physical examination of the
inventory or fails to provide NFLP with the statement required in
subparagraph a above, Licensee will forfeit its right to any Sell-Off
Period.
d. Upon the termination of this License or immediately after the Sell-Off
Period, Licensee shall deliver to NFLP all Proprietary Materials and all
related materials, including software, created or used by Licensee in
connection with this License and shall, at NFLP's option, destroy or sell
to NFLP at Licensee's cost, any molds, plates and other items used to
reproduce the Licensed Marks.
20. PLAYERS AND COACHES
Licensee acknowledges that this License does not grant Licensee any rights
with respect to the name, likeness, signature, or other attributes of any
player, coach, or other employee of the NFL. Licensee shall be responsible
for securing whatever rights may be required for the use of such names,
likeness, signatures, or other attributes. Licensee represents that it will
<PAGE>
not exercise the rights granted in this License in any manner that will
imply that Licensee has obtained any such rights without separate written
authorization from the appropriate player, coach, or employee.
21. NFL FILMS
Licensee understands and acknowledges that this License does not grant
Licensee any rights with respect to film or videotape footage of NFL game
action and that Licensee must obtain such footage directly from NFL Films,
Inc. ("NFL Films") on terms and conditions to be mutually agreed upon by
Licensee and NFL Films. If Licensee desires to use such footage in
connection with this License, NFLIP must approve the proposed usage and
subject matter of such footage in writing prior to its usage.
22. INFORMATION TRANSMISSION
If NFLP obtains the capacity to receive computer transmissions of any or
all information required from Licensee under this License during the Term,
Licensee shall begin to provide such information by such computer
transmission as soon as practicably possible.
23. NOTICES
The parties to this License shall send all notices and statements required
under this License to the respective addresses of the parties set forth
above unless notification of a change of address is given in writing.
Licensee shall direct all notices to NFLP to the Senior Director of
Publishing with a copy to the General Counsel of NFLP. All notices required
under this License must be in writing, must be sent by registered or
certified mail, facsimile, or an overnight delivery service generally
accepted in the industry that provides evidence of delivery, and shall be
deemed to have been given at the time they are sent.
24. RELATIONSHIP OF PARTIES
The parties to this License are not partners, joint venturers, or agents
and nothing in this License shall be construed to place them in any such
relationship. Neither party will have the power to obligate or bind the
other in any manner whatsoever. NFLP, the NFL, and its Member Clubs in no
way endorse, certify or guarantee the quality of the Licensed Products.
25. GOVERNING LAW AND DISPUTES
This License and any dispute arising under it shall be governed by and
construed in accordance with the laws of the State of New York without
regard to conflict of law principles. All disputes pertaining to this
License shall be decided by a state or federal court located in the City
of New York and Licensee consents to personal jurisdiction in such courts.
26. WAIVER
Neither party to this License can waive or modify any provision of this
License unless such waiver or modification is in a writing signed by both
parties. Licensee acknowledges that NFLP's prior forbearance of any
requirement of this License will not prevent NFLP from Subsequently
requiring full and complete compliance with such requirement or from
exercising its rights under this License.
27. CONFIDENTIALITY
The parties to this License acknowledge that the terms of this License are
confidential and each warrant that neither shall disclose such terms to
any third party other than the disclosing party's accountants, agents or
attorneys or as required by law, without the other party's prior written
consent.
28. SEVERABILITY
If any paragraph or clause of this License is illegal or invalid or void
for any reason, the remaining paragraphs and clauses of the License will
remain in full force and effect.
<PAGE>
29. RELEASE
In consideration of the rights granted under this License, Licensee
releases NFLP, the NFL, its Member Clubs and each of their respective
affiliates, shareholders, officers, directors, agents and employees from
any claims, demands, losses, expenses or damages, whether known or unknown,
arising out of or in connection with or in any manner related to the
manufacture, publication, distribution or sale of products bearing the
Licensed Marks. Nothing in this paragraph will relieve NFLP of its
obligations under Paragraph 12 (c) of the License.
30. PUBLIC OR PRIVATE OFFERINGS
Licensee shall not refer to this License or NFLP, the NFL or its Members
Clubs or affiliates in any public or private offering, or other securities
or financing document, without NFLP's prior written consent and then only
on such conditions as NFLP deems appropriate in its discretion.
31. MULTIPLE TERM SHEETS
In the event that this License has multiple Term Sheets attached to it, the
terms and conditions of this License will apply to each individual Term
Sheet.
32. ENTIRE AGREEMENT
This License constitutes the entire agreement and understanding between the
parties to this License with respect to the subject matter of this License
and cancels, terminates, and supersedes any prior or contemporaneous
agreement or understanding, whether oral or written, on this subject
between Licensee and the NFL, its affiliates or Member Clubs, or NFLP. The
headings in this License are for reference purposes only and have no legal
effect.
33. EXECUTION
Licensee will make an offer to enter into this License by having a duly
authorized officer or representative sign below and return the License
with a check payable to NFLP for the Advance Royalty Payment required for
Fiscal Year 1. An acceptance of the offer will occur and a binding
agreement will exist only after an authorized officer or duly authorized
representative of NFLP signs this License and delivers a fully-executed
copy to Licensee. Licensee acknowledges that this Licensee will be deemed
to have been executed in New York City.
Licensee: ULTIMATE SPORTS ENTERTAINMENT, INC.
BY: DATE:
(Signature of officer, partner or individual duly authorized to sign)
TITLE:
NATIONAL FOOTBALL LEAGUE PROPERTIES, INC.
BY: DATE:
(Signature of officer, partner or individual duly authorized to sign)
TITLE:
31064 June 16,1999 ULTIMATE SPORTS ENTERTAINMENT, INC.
<PAGE>
EXHIBIT I
DISTRIBUTION CHANNELS
The following definitions shall apply to this License:
1. AIRPORT/HOTEL SHOP: A separate retail store located in an airport or hotel.
2. AUTOMOTIVE STORE: A retail store that carries as its primary retail items
automotive supplies.
3. BOOK STORE: A retail store that carries as its primary items books and
periodicals. Examples include, without limitation, Walden Books, and Barnes
and Noble.
4. CARD/PARTY SHOP: A retail store that carries as its primary retail items
cards or party products. Examples include, without limitation, Hallmark
Stores.
5. COMPUTER/ELECTRONIC STORE: A retail store that carries as its primary
retail items computers, software, and computer accessories or electronic
equipment and appliances. Examples include, without limitation, CompUSA and
Computer City.
6. COMPUTER ON-LINE: Licensee, and no other organization, making the Licensed
Product available for sale to consumers on the Internet or through a
computer on-line service provided that Licensee may not distribute the
Licensed Product via such media.
7. AMUSEMENT/CONVENIENCE VENUES: Restaurants, convenience stores, gas
stations, car and truck stops, amusement venues, recreation centers and any
other business venue in which the sale of the Licensed Products would
constitute a subsidiary business.
8. CRAFT STORE: A retail store that carries as its primary retail items arts
and crafts supplies.
9. DEPARTMENT STORE: A retail store that operates several departments
carrying higher-priced brands of apparel and non-apparel. Examples include,
without limitation, Macy's, Dillards, Nordstrom, Woodward and Lothrop, JC
Penney, Boscov's, Sears, May Co., Federated Group, Carson Pirie Scott,
Dayton Hudson, Bon Ton, Belks, Strawbridge & Clothier, Jacobson and
Bloomingdales.
10. DIRECT RETAILER: An organization that markets products directly to
consumers without using retail space through the mediums of television or
catalog.
11. DISCOUNT STORE: A retail store that operates several departments carrying
lower-priced brands of apparel and nonapparel with limited service.
Examples include, without limitation, Wal-Mart, Kmart, Bradlees, Roses,
Hills, Caldor, Venture, Target, Shopko, and Ames.
12. DISTRIBUTOR: Defined as Third Party Distributor in Paragraph 9c of the
License.
13. DRUG STORE: A retail store that carries as its primary retail items
pharmaceuticals, health and beauty aids, and convenience items. Examples
include, without limitation, OSCO, Walgreen, and Eckert.
<PAGE>
14. FAN SHOP: A retail store that carries as its primary retail item
licensed products of the NFL, National Basketball Association, National
Hockey League, Major League Baseball, and the National Collegiate Athletic
Association. Examples include, without limitation, Pro Image, Team Spirit
and Stadium Stuff.
15. FOOTWEAR SPECIALTY STORE: A retail store that carries as its primary
retail item athletic footwear and also carries, in limited quantities,
licensed apparel and headwear. Examples include, without limitation, Foot
Locker, FootAction, and Athletes Foot.
16. FUND RAISING: An organization, including Licensee, that markets
products through various channels such as schools for the purpose of
raising money for educational or charitable causes. NFLP must approve each
educational or charitable cause.
17. GALLERY: A retail store that carries as its primary retail item artwork.
18. GIFT/FLOWER SHOP: A retail store that carries as its primary retail items
gifts, novelties or flowers.
19. GROCERY STORE: A retail store that carries as its primary retail items
food and household products. Examples include, without limitation, A & P,
Shop Rite, Vons, Jewel, and Food Town.
20. HARDWARE: A retail store that carries as its primary retail items hardware
products. Examples include, without limitation, True Value, Ace and Cotter.
21. HOBBY STORE: A retail store that carries as its primary retail item
collectible products.
22. HOME SPECIALTY STORE: A retail store that carries as its primary retail
items furniture and home products. Examples include, without limitation,
Home Place, Home Depot, Linens'N Things, and Bed Bath and Beyond.
23. JEWELRY STORE: A retail store that carries as its primary retail item
jewelry. Examples include, without limitation, Adler Jewelers.
24. MEMBERSHIP CLUB/WAREHOUSE STORE: A retail store that markets products
to members only. Examples include, without limitation, BJ's Wholesale Club.
25. MILITARY BASE: The military bases of the United States and its territories
and possessions.
26. OFFICE SUPPLY: A retail store that carries as its primary retail items
office supplies. Examples include, without limitation, Office Max and
Staples.
27. SPORTING GOODS STORE: A retail store that carries as its primary retail
items licensed apparel, athletic footwear and sporting goods equipment.
Examples include, without limitation, Champ's, Herman's, Koenig's, The
Sports Authority, Sportmart, Gart Brothers, and Modells.
<PAGE>
28. STADIUM SHOP/STADIUM CONCESSIONAIRE: A store or vendor that carries as
its primary retail item Licensed Products of the NFL and is located at the
training facilities or stadium of a Member Club.
29. TOY/CHILDREN'S STORE: A retail store that carries as its primary retail
items toys. Examples include, without limitation, Toys'R Us, Kids'R Us,
and Babies'R Us.
31064 June 16,1999 ULTIMATE SPORTS ENTERTAINMENT.ING.
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
NATIONAL FOOTBALL LEAGUE PROPERTIES, INC.
280 Park Avenue, New York, New York 10017
Area Code (212) 450-2000 FAX (212) 681-7599
PUBLISHING AGREEMENT TERM SHEET
LICENSEE: ULTIMATE SPORTS ENTERTAINMENT, INC. DATE: July
19,1999
ADDRESS: 5410 Wilshire Boulevard, Suite 611
440220-568
Los Angeles, CA 90036
THE FOLLOWING TERMS ARE MADE PART OF AND ARE SUBJECT TO ALL DEFINITIONS, TERMS
AND CONDITIONS SET FORTH IN LICENSE
NO(S). 31107
MARKETING PROGRAM: NFL QUARTERBACK CLUB
TERM: SEPTEMBER 1, 1999 - AUGUST 31, 2001
TERRITORY: THE UNITED STATES AND SUCH OTHER COUNTRIES THAT NFLP MAY
DESIGNATE IN WRITING.
LICENSED PRODUCTS: COMIC BOOK ADVENTURE STORIES FEATURING NFL QUARTERBACK
CLUB MEMBERS AS HEROES; SUPER BOWL SPECIALS
<TABLE>
<S> <C> <C>
FISCAL YEAR LICENSED PRODUCT ROYALTY%
YEAR I 9/1/99-8/31/00 58308 COMIC BOOK ADVENTURE STORIES *
YEAR II 9/1/00-8/31/01 58308 COMIC BOOK ADVENTURE STORIES *
60205 SUPER BOWL SPECIALS *
FISCAL YEAR MINIMUM GUARANTEE ADVANCE
YEAR I 9/1/99-8/31/00 $* (DUE NO LATER THAN 3/01/00 $ *
NOTWITHSTANDING ANYTHING (DUE UPON
TO THE CONTRARY CONTAINED EXECUTION)
IN THE LICENSE.)
YEAR II 9/1/00-8/31/01 $* (DUE NO LATER THAN 3/1/01 $* (DUE 9/1/00
NOTWITHSTANDING ANYTHING TO NOTWITHSTANDING ANYTHING TO
THE CONTRARY CONTAINED IN THE CONTRARY CONTAINED IN
THE LICENSE.) THE LICENSE.)
</TABLE>
AUTHORIZED BRANDS FOR
LICENSED PRODUCT(S): ULTIMATE SPORTS, INC.
LICENSED MARK(S) FOR
LICENSED PRODUCT(S): QB CLUB MARKS AND THE QB MEMBER MARKS OF THE QBC MEMBERS
LISTED ON THE ATTACHED EXHIBIT FL.
DISTRIBUTION CHANNELS FOR INTERNET, STADIUM SHOPS/STADIUM CONCESSIONAIRES, BOOK
STORES, TEAM SALES, HOBBY SHOPS, TOY
STORES,
LICENSED PRODUCT(S): DISCOUNT STORES, DIRECT MAIL, SPONSORED PREMIUMS,
NEWSSTANDS, SPORTING GOODS STORES, HOME SHOPPING
CHANNELS
<PAGE>
RENEWAL REQUEST DATE: SEPTEMBER 1, 2001
PROMOTIONAL PRODUCTS: N/A
COOPERATIVE FUND: N/A
ADVERTISEMENTS: N/A
SPONSORSHIPS: N/A
ADDITIONAL TERMS:
NFLP SHALL HAVE THE RIGHT TO CHANGE THE QB MEMBER MARKS IN ITS SOLE
DISCRETION PROVIDED THAT NFLP SHALL NOTIFY LICENSEE OF ANY CHANGE IN THE QB
MEMBER MARKS.
WITHOUT LIMITING THE RIGHTS OF NFLP OR THE QB CLUB IN ANY WAY, NOTHING
CONTAINED IN THIS LICENSE SHALL PREVENT OR IN ANY WAY LIMIT NFLPS AND/OR THE
QB CLUB'S RIGHTS TO ENTER INTO AGREEMENTS INVOLVING THE USE OF CHARACTERS
DEPICTING, BASED ON OR DERIVED FROM ANY OF THE QBC MEMBERS ANDLOR THE QB
MARKS OTHER THAN THE QB CHARACTERS AS SET FORTH IN PARAGRAPH II OF THIS
LICENSE.
LICENSEE DOES NOT HAVE THE RIGHT TO SELL ANY APPROVED PROMOTIONAL MATERIALS.
31107 ULTIMATE SPORTS ENTERTAINMENT, INC. TERM SHEET
National Football League Properties, Inc.
280 Park Avenue,
New York, New York 10017
Area Code (212) 450-2000 FAX (212) 681-7599
PUBLISHING AGREEMENT
LICENSEE: ULTIMATE SPORTS ENTERTAINMENT DATE: July 19,1999
ADDRESS: 5410 Wilshire Boulevard, Suite 611 No(s).: 300-440220-568
Los Angeles, CA 90036
National Football League Properties, Inc. ("NFLP") has the exclusive right to
license for commercial purposes the trademarks of the National Football
League ("NFL") and the thirty-one professional football teams that comprise
the NFL ("Member Clubs") and the NFL Quarterback Club ("QB Club") and its
Members ("QBC Members") when used in groups of three (3) or more. Licensee,
whose name and address are set forth above, desires to use certain of these
trademarks in accordance with the terms and conditions of this agreement
("License"). In consideration of the mutual premises, covenants and
undertakings contained in this License, the parties to this License agree as
follows:
<PAGE>
I. Definitions used in this License, the terms listed on the attached Term
Sheet or Term Sheets and elsewhere in this License have the following
meanings:
a. "ADVANCE ROYALTY PAYMENT": The amount to be credited to Royalty payments
due for the corresponding Fiscal Year payable to NFLP upon the execution
of this License for Fiscal Year I and on or before April 15 for each
successive Fiscal Year.
b. "ADVERTISEMENTS": Advertising space in designated NFLP publications to be
purchased by Licensee in accordance with this License.
c. "AFFILIATE": Any person or entity in which Licensee or any owner, majority
shareholder, officer or director of Licensee has any direct or indirect
beneficial or ownership interest or is a joint venture partner.
d. "AUTHORIZED BRANDS": The only brand names Licensee may use in association
with the Licensed Products.
e. "CLUB MARKS": The full team names, nicknames, helmet designs, uniform
designs, logos, slogans and other identifying symbols and indicia adopted
for commercial purposes by the Member Clubs.
f. "COOPERATIVE FUND": The amount payable to NFLP during each Fiscal Year for
use by NFLP in connection with the designated Cooperative Program.
g. "DISTRIBUTION CHANNELS": The channels of trade in the Territory in which
Licensee may distribute for sale or sell each Licensed Product as defined
in Exhibit I attached to this License or the attached Term Sheet.
h. "FISCAL YEAR": The period beginning on April 1 of any year and ending on
March 31 of the following year except for Fiscal Year 1, which will begin
on the date this License is fully-executed and will end on March 31 of the
following year.
i. "LEAGUE MARKS": "National Football League", "NFL", "National Football
Conference", "American Football Conference", "NFC", "AFC", "Super Bowl",
"Pro Bowl", the NFL Shield design, and other identifying symbols, slogans
and indicia adopted for commercial purposes by the NFL.
j. "LICENSED MARKS": The trademarks for which Licensee is granted certain
limited, non-exclusive rights under this License.
k. "LICENSED PRODUCTS": All products for which Licensee may use the Licensed
Marks in association with the Authorized Brands, if applicable. This
license will refer to each distinct type of product as a "Licensed Product"
since more than one product may be licensed (e.g. T-shirts and jackets
would each be a Licensed Product).
l. "MARKETING PROGRAM": The program established by NFLP in connection with
which Licensee may use the Licensed Marks as authorized under this License.
Licensee shall abide by all rules, guidelines and policies established by
NFLP for such Marketing Program, if applicable, which are deemed part of
this License.
<PAGE>
m. "MINIMUM ROYALTY GUARANTEE": The minimum amount of Royalty payments payable
to NFLP on or before the 15th day following the end of each Fiscal Year.
n. "NET SALES": Gross sales of all Licensed Products sold or distributed for
sale at the greater of Licensee's invoiced selling price or Licensee's
normal domestic wholesale warehouse price or, in the case of Direct
Retailer sales by Licensee only, the retail price less sales derived from
returns received and credited and less reasonable quantity discounts as
actually calculated on the invoice provided that the total returns in any
Fiscal Year in which Licensee desires to deduct quantity discounts from
Net Sales may not exceed ten percent (10%) of Net Sales for the
corresponding Fiscal Year without NFLP's prior written consent only.
Licensee shall not credit any return at a rate greater than the original
invoiced selling price for such Licensed Products. There shall be no other
deductions allowed including, without limitation, deductions for
manufacturing costs, selling costs, distribution costs, advertising and
promotional costs, freight, non-collected or uncollectable accounts,
commissions, taxes, cash discounts, close out sales, distress sales, sales
to employees, or any other costs. For purposes of this Agreement, Net
Sales and all other referenced sales occur when Licensee invoices or ships
any Licensed Product, whichever is earlier. If Net Sales are made to an
Affiliate, the dollar amount of gross sales will be the greater of
Licensee's regular price to unaffiliated accounts or the Affiliate's gross
sales price to an unaffiliated account.
o. "NFL MARKS": All League Marks and Club Marks, collectively.
p. "PREMIUMS": Any products, including the Licensed Products, bearing the NFL
Marks or QB Marks other indicia of the NFL or its Member Clubs, the QB
Club or its Members that Licensee sells or gives away for the purposes of
promoting, publicizing or increasing the sale of its own products or
services other than the Licensed Products, or that Licensee sells or gives
away to any other party whom Licensee knows or should reasonably know
intends to use such products for the purposes of promoting, publicizing or
increasing the sale of any other party's products or services. Promotions
include, without limitation, combination sales, incentives for sales
force, and trade or consumer promotions.
q. "PROMOTIONAL PRODUCTS": The quantity of each Licensed Product that Licensee
shall provide to NFLP at no cost during each Fiscal Year for use in
connection with NFLP's Promotional Programs, as defined in Paragraph 5 of
this License.
r. "QB MARKS": All QB Club Marks and QB Member Marks, collectively.
s. "QB CLUB MARKS": The names, logos, symbols, emblems, and designs of the
NFL Quarterback Club and other indicia, logos, nicknames and identifying
slogans adopted by the QB Club;
t. "QB MEMBER MARKS": The names, likenesses, portraits, pictures, photographs,
voices, signatures, facsimile signatures, and biographical information of
the members of the QB Club.
u. "RENEWAL REQUEST DATE": The date by which NFLP must receive notification
from Licensee of Licensee's desire to renew the License.
v. "ROYALTY": The amount of Net Sales Licensee shall pay to NFLP for all
sales of the Licensed Products. Licensee shall calculate all Royalty
payments according to Net Sales based on Licensee's normal domestic
wholesale warehouse price. NFLP reserves the right to increase the rate
of the Royalty during the Term, provided that it gives Licensee at least
six (6) months written notice before such increase takes effect.
<PAGE>
w. "SPONSORSHIP": The designated events for which Licensee will participate
as a sponsor during each Fiscal Year of the Term subject to the execution
of an NFLP Sponsorship Agreement.
x. "STYLE": A distinct prototype of a Licensed Product that differs from
any other prototype of that same Licensed Product in any form or manner
with respect to design, material, pattern, size, shape, Licensed Marks,
editorial content or any other distinguishing characteristic involving the
specifications for the production of all or any portion of that Licensed
Product (e.g. T-shirts bearing the San Francisco 49ers logo and T-shirts
bearing the San Diego Chargers logo would each be a Style of Licensed
Product).
y. "TERM": The time period for which this License shall be effective.
Z. "TERRITORY": The geographic area in which Licensee shall have the right to
sell the Licensed Products. Licensee is prohibited from selling Licensed
Products F.O.B. outside the Territory without the prior written approval
of NFLP.
aa. "UNIT": A single Licensed Product (e.g. one T-shirt and one jacket would
each be a Unit).
2. GRANT OF LICENSE
Subject to all of the terms and conditions of this License, NFLP grants
Licensee the non-exclusive right to use the Licensed Marks in connection with
the manufacture, publication, distribution, sale, and advertising of the
Licensed Products under the Authorized Brand in the Distribution Channels in
the Territory in accordance with all policies, rules and regulations of the
Marketing Program, if applicable, and NFLP, which are deemed part of this
License. Except as expressly provided on the Term Sheet, Licensee shall have
no right to use any of the QB Marks in connection with the Licensed Products
or otherwise. Unless otherwise indicated on the Term Sheet, Licensee shall
have no right to distribute the Licensed Products directly to consumers as a
Direct Retailer or otherwise. Licensee shall have no right to sell or
distribute any Premiums unless Licensee receives a separate Premium License
from NFLP and pays NFLP the applicable Royalty under such Premium License.
Licensee shall not use the Licensed Products as Premiums or permit the use of
the Licensed Products as Premiums by any party whom Licensee knows or should
reasonably know intends to use the Licensed Products as Premiums.
3. TERMS OF PAYMENT
a. Licensee shall pay NFLP the Royalty on all sales of the Licensed Products.
Regardless of whether any sales occur during any Fiscal Year, Licensee
shall also pay NFLP the applicable Advance Royalty Payment and Minimum
Royalty Guarantee for each Fiscal Year during the Term. Advance Royalty
Payments and any payments made to satisfy the Minimum Royalty Guarantee are
not refundable. Licensee may credit the Advance Royalty Payment and Royalty
payments made to NFLP during each Fiscal Year to the Minimum Royalty
Guarantee for the corresponding Fiscal Year only. Licensee may not credit
such amounts to the Advance Royalty Payment, Minimum Royalty Guarantee or
any other payment required under this License for any other Fiscal Year. If
the Term Sheet assigns a per-product Advance Royalty Payment and Minimum
Royalty Guarantee, then Licensee may only credit the Advance Royalty
Payment for such product and Royalty payments from the sales of such
product toward the corresponding Minimum Royalty Guarantee for such product
in the corresponding Fiscal Year. If NFLP terminates this License, for the
Fiscal Year in which termination occurs
<PAGE>
("Termination Fiscal Year") Licensee shall pay NFLP the Royalty on all
sales of the Licensed Products made during the Termination Fiscal Year or
a pro rated portion of the Minimum Royalty Guarantee owed in excess of the
Advance Royalty Payment ("Termination Guarantee"), whichever is greater.
For purposes of this paragraph the pro rated Minimum Royalty Guarantee
will be calculated as follows:
<TABLE>
<CAPTION>
TERMINATION GUARANTEE X NO. OF DAYS COMPLETED IN TERMINATION FISCAL YEAR
<S> <C>
1 365
</TABLE>
b. On or before the 15th day of each calendar quarter, Licensee shall make all
Royalty payments to NFLP due on sales of the Licensed Products during the
preceding calendar quarter. Simultaneously with the Royalty payment,
Licensee shall furnish full and accurate statements of the Net Sales of
each Licensed Product sold and distributed during such calendar quarter on
forms provided by NFLP. The statements will include the quantity and
description of each Licensed Product itemized by Member Club if applicable,
the gross sales price, itemized deductions from the gross sales price, any
returns made during the preceding quarter, and the resulting Net Sales on
which Licensee calculated the Royalty amount. Licensee shall furnish such
statements for each Licensed Product regardless of whether it sold any such
Licensed Product during the preceding quarter. NFLP's receipt or acceptance
of any statement or Royalty payment or the cashing of a Royalty check will
not preclude NFLP from questioning the correctness of such statements or
payments at any time. Upon discovery of any verifiable inconsistency or
mistake in such statements or payments, Licensee shall immediately rectify
such inconsistency or mistake.
c. Licensee shall pay NFLP all other amounts listed on the Term Sheet
attached to this License, if applicable, in accordance with the dates
provided in such Term Sheet.
d. Licensee shall pay NFLP an additional charge of one and one-half percent
(1.5%) per month on any payment due under this License that remains unpaid
fifteen (15) days after such payment becomes due.
4. QUALITY CONTROL
a. Prior to making any use of any Style of any Licensed Product, Licensee
shall submit to NFLP for its approval at Licensee's sole cost and expense
at the following applicable stages: (i) finished artwork or final proofs;
(ii) pre-production samples or strike-offs for such proposed Style;
(iii) a preliminary draft of the complete text and (iii) a sample Unit of
the finished version of such Style, including the final complete text,
together with all packaging, cartons, containers, hangtags and wrapping
materials related to such Unit ("Related Materials"). For Styles that
differ solely with respect to the Licensed Marks, Licensee may submit a
sample Unit of one Style along with artwork of the Styles bearing the
other Licensed Marks for approval purposes unless NFLP requests a sample
Unit of each such Style. NFLP shall use its best efforts to promptly
evaluate all such submissions and provide Licensee, if applicable, with
quality standards and specifications for the finished Units of each
Style. Upon approval of the finished version of a sample Unit of a Style,
NFLP shall execute a Product Approval Form that will contain any applicable
quality standards and specifications. License shall not manufacture,
publish, sell, distribute or advertise any Style of a Licensed Product
unless NFLP has executed a Product Approval Form for such Style.
b. All Product Approval Forms are effective for one Fiscal Year only and
Licensee must resubmit to NFLP each Style of each Licensed Product
previously approved by NFLP for
<PAGE>
quality control approval each Fiscal Year. From time to time, NFLP may
request additional sample Units of any Style of any Licensed Product to
confirm continued compliance with NFLP's quality control guidelines and
any applicable quality standards and specifications. NFLP shall have the
right to withdraw its approval of any Style of any Licensed Product if, in
NFLP's sole judgment, such sample Units cease to conform to such
guidelines, standards or specifications or otherwise deviate in quality
from the previously approved sample Units. Upon notice by NFLP to Licensee
that the Product Approval Form for a Style of a Licensed Product has been
withdrawn, Licensee shall immediately cease to manufacture, publish,
distribute, sell or advertise any further Units of such Style until such
time as a new Product Approval Form has been executed and delivered by
NFLP.
c. Licensee shall not make any modification to any Style for which NFLP has
issued a Product Approval Form or depart from any applicable quality
standards and specifications for any Style unless NFLP has approved such
modification for such Style and issues a new Product Approval Form.
Licensee acknowledges that the manufacture, publication, use, sale,
distribution, or advertising of any Style that deviates from the Style
approved by NFLP will constitute a material breach of this License. Upon
such breach, NFLP may terminate this License immediately.
d. Licensee represents and warrants that it shall not use any design created
in connection with the Licensed Products on any product which is of the
same grade and quality as the Licensed Products but does not bear the
Licensed Marks.
5. ADVERTISING AND PROMOTIONAL MATERIALS
a. Licensee will not use the Licensed Marks or any reproduction of them,
including without limitation, Photographs or Computer Art, as defined in
Paragraph 10a, in any advertising, promotion, publicity or display
materials (collectively "Promotional Materials") without receiving NFLP's
prior written approval executed on a Promotional Approval Form supplied
to Licensee by NFLP. Licensee may use such approved Promotional Materials
only in conjunction with the Styles of Licensed Products that NFLP has
approved. Licensee shall submit to NFLP all Promotional Materials at the
following applicable stages appropriate to the medium used: (i) conceptual
stage, pre-production art or rough cuts; (ii) layout, storyboard and
script; (iii) finished materials; and (iv) at any other time as reasonably
requested by NFLP. Licensee shall ensure that it submits all proposed
Promotional Materials and any modifications to previously approved
Promotional Materials to NFLP in a timely fashion that will ensure NFLP has
adequate time to review such materials prior to the date of their proposed
use by Licensee. NFLP shall use best efforts to evaluate all such
Promotional Materials' submissions within ten (10) business days of their
receipt by NFLP. NFLP shall execute a Promotional Approval Form for all
Promotional Materials that it approves. Licensee shall notify its
retailers and/or Third Party Distributors that NFLP must approve all
Promotional Materials involving or using in any form or manner the
Licensed Marks. Licensee shall use best efforts to ensure that its
retailers and/or Third Party Distributors do not publish, display or
otherwise distribute such Promotional Materials without NFLP's prior
written approval.
b. NFLP has the exclusive right, in its sole discretion, to approve or
disapprove any Promotional Materials' submissions. Licensee acknowledges
that NFLP may disapprove Promotional Materials that, in NFLP's opinion,
reflect unfavorably upon NFLP, the NFL or its Member Clubs, the QB Club or
the QBC Members including, without limitation, materials
<PAGE>
involving gambling, lotteries or other games inconsistent with the image
of the NFL, the Member Clubs, the QB Club or the QBC Members, or the
Licensed Products.
c. NFLP may withdraw its approval of any Promotional Materials if: (i) the
Promotional Materials have been altered without the prior written approval
of NFLP; (ii) the Style and/or the Licensed Product promoted in the
Promotional Materials ceases to be approved under this License; or (iii)
an event occurs that, in NFLP's opinion, causes NFLP's relationship with
Licensee or any Licensed Product to adversely reflect upon the
professional or business reputation of the NFL, its Member Clubs, the QB
Club, the QBC Members or NFLP.
d. Licensee represents that NFLP has the right to conduct promotions and
special events in its sole discretion and to print catalogs, sales sheets
and brochures involving representative merchandise from NFLP's licensees
("Promotional Programs"). Licensee shall supply within ten (10) business
days of any request by NFLP, at no charge to NFLP, all or any portion of
the quantity of Promotional Products specified on the Term Sheet required
by NFLP for use, in NFLP's sole discretion, in such Promotional Programs.
e. Licensee shall pay NFLP the designated amounts for the Advertisements,
Sponsorship, and Cooperative Fund, if applicable, on or before the
corresponding dates listed on the Term Sheet attached to this License.
NFLP shall use such payments in a manner determined by NFLP in its sole
discretion.
f. During each Fiscal Year of the Term in which NFLP publishes the NFL
Merchandise Catalogue, Licensee shall purchase a full-page advertisement
in such catalogue at the rate established in NFLP's then-existing rate
card. Licensee shall make such payment within fifteen (15) days from
receiving an invoice from NFLP.
6. DISTRIBUTION REQUIREMENTS
Licensee shall distribute for sale and sell each Licensed Product only
in the authorized Distribution Channels. Prior to distribution of any
Licensed Product, Licensee shall submit to NFLP a list of its retail accounts
for the Licensed Products for the purpose of determining which accounts fall
within the Distribution Channels. NFLP shall determine, in its sole
discretion, whether such retail accounts fall within the Distribution
Channels and shall provide Licensee with a list of the approved retail
accounts. Licensee shall manufacture, publish, distribute, sell and maintain
inventory of sufficient quantities of each Style of each Licensed Product to
meet the reasonable market demand in the Distribution Channels. Licensee
shall not sell Licensed Products to any third party that Licensee knows or
should reasonably know intends to sell the Licensed Products outside of the
authorized Distribution Channels. If Licensee sells or distributes for sale
other merchandise that does not bear the Licensed Marks but is of the same
grade and quality as the Licensed Products, Licensee shall not discriminate
in the granting of commissions and discounts to salespersons, dealers and
distributors for the sale of the Licensed Products. If the Licensed Marks are
Club Marks, Licensee acknowledges that it shall manufacture, publish,
distribute and sell a commercially significant quantity of Units bearing the
trademarks of each Member Club individually in each Style. Licensee shall
have no right to distribute the Licensed Products via computer on-line
services unless expressly indicated on the Term Sheet.
7. AUTHORIZED BRANDS
Licensee shall only use the Authorized Brands, if applicable, in
connection with the manufacture, publication, distribution, sale, and
advertising of each Licensed Product. NFLP shall have the right, in its sole
discretion, to remove or change any of the Authorized Brands, if
<PAGE>
applicable, during the Term. Licensee must receive the prior written approval
of NFLP to use any other trademarks on the Licensed Products.
8. NFLP'S PURCHASE OF LICENSED PRODUCTS
In addition to the Promotional Products provided at no cost by Licensee,
NFLP, the NFL and its Member Clubs, the QB Club and the QB Members shall have
the right to purchase any of the Licensed Products in any quantity at the
minimum wholesale price, excluding Royalty payments, that Licensee charges to
its best customer, provided that NFLP will not require Licensee to pay a
Royalty on such sales.
9. THIRD PARTY RELATIONSHIPS
a. Licensee shall not assign, transfer, grant a security interest in the
Licensed Products, or otherwise encumber any of its rights under this
License to any Affiliate or other third party without NFLP's prior
written consent. If Licensee assigns, transfers, grants a security
interest in the Licensed Products, or encumbers any portion of this
License without such consent, NFLP shall have the right to terminate
this License immediately. Among other things, NFLP will consider the
License assigned and subject to the requirements of this subparagraph
if: (i) the beneficial ownership or control of fifty percent (50%) or
more of Licensee's capital stock is transferred or otherwise conveyed;
(ii) Licensee becomes part of any merger or consolidation; or (iii) the
sale or transfer of all or substantially all of Licensee's assets occurs.
b. Licensee must receive NFLP's prior written consent to use a domestic or
foreign third party manufacturer or publisher of any Licensed Product or
any portion of any Licensed Product, including patches, labels and emblems
made by any party that is not already a licensee of NFLP ("Third Party
Manufacturer"). NFLP shall have the right to approve or disapprove any
Third Party Manufacturer in its sole discretion. NFLP's approval of any
Third Party Manufacturer, if granted, will be contingent on the execution
of an agreement between NFLP and the approved Third Party Manufacturer.
Notwithstanding such agreement, Licensee shall at all times remain
primarily obligated to NFLP under this License and shall take all necessary
efforts to ensure that such Third Party Manufacturer uses the Licensed
Marks only to manufacture or publish the designated Licensed Product and
for no other purpose including, without limitation, promoting or selling
the Licensed Product. If such Third Party Manufacturer has made an
unauthorized use of the Licensed Marks, Licensee shall fully cooperate
with NFLP to ensure that such unauthorized use ceases promptly. Licensee
shall be primarily obligated to ensure that each Licensed Product produced
by such Third Party Manufacturer complies with the requirements of
Paragraph 4 of this License.
c. Licensee shall not make any payments to any Member Club or to any
shareholder, officer, director, employee, agent or representative of any
Member Club, or to any employee, agent or representative of the NFL or its
affiliates in such person's individual capacity, in connection with the
use of any Licensed Marks under this License or otherwise as a direct
result of sales of any Licensed Product. Licensee shall disclose to NFLP
all existing agreements or agreements being negotiated by Licensee or its
agent between Licensee and any Member Club or any shareholder, officer,
director, employee, agent or representative of any Member Club, or any
employee, agent or representative of the NFL or any of its affiliates in
such person's individual capacity.
<PAGE>
d. In the event that NFLP consents to any third party relationship under this
Paragraph 9 or otherwise under this License, Licensee acknowledges that
such approval will be contingent on the execution of an appropriate form
or agreement supplied by NFLP.
10. COMPUTER ARTWORK AND PHOTOGRAPHS
a. Subject to the requirements of Paragraph 4, if Licensee wishes to use
computer artwork incorporating graphic depictions of the Licensed Marks
owned and/or controlled by NFLP ("Computer Art") or photographs
incorporating graphic depictions of the Licensed Marks owned and/or
controlled by NFLP ("Photographs"), Licensee shall request such Computer
Art or Photographs in a Use Application provided to Licensee by NFLP. If
NFLP, in its sole discretion, approves such application, NFLP shall
provide Licensee with Computer Art or Photographs at a rate established
by NFLP in its sole discretion provided that, in the case of Photographs,
Licensee must first sign NFLP's standard Photo Use Agreement. Licensee
shall make any payment for the Computer Art or Photographs within thirty
(30) days of receiving an invoice from NFLP. Licensee shall only use the
Computer Art or Photographs in accordance with the terms and conditions
of this License including, without limitation, Paragraph 11, and, in the
case of Photographs, the Photo Use Agreement. The terms of the executed
Photo Use Agreement will govern in the event of any conflict between the
terms of this License and the terms of the Photo Use Agreement.
b. Licensee shall not make copies of the Computer Art or Photographs without
the express written approval of NFLP and shall not use the Computer Art or
Photographs for any purpose other than the purpose set forth in Licensee's
Use Application. Licensee shall not provide the Computer Art or
Photographs to any other party including a manufacturer or publisher,
unless NFLP approves such party in accordance with Paragraph 9 of this
License. Licensee shall take all steps necessary to prevent the
unauthorized copying or use of the Computer Art or Photographs by third
parties.
c. Upon the expiration or termination of this License, Licensee shall
immediately deliver to NFLP all Computer Art and Photographs provided by
NFLP and all copies and duplications of such Computer Art or Photographs
and all related materials.
d. Licensee acknowledges that it has no right, title or interest in or to any
of the Photographs, including, without limitation, copyrights in the
Photographs. Licensee represents that it will not assert any rights in or
to the Photographs during the Term of thereafter.
11. PROTECTION OF RIGHTS
a. Licensee acknowledges that, as between NFLP and Licensee, NFLP exclusively
owns the NFL Marks and QB Marks and all copyrights, trademarks and other
proprietary rights in and to them. Licensee further acknowledges that NFLP
shall own worldwide in perpetuity: (i) all artwork produced under this
License bearing the NFL Marks and QB Marks ("Artwork") and all copyrights
and other proprietary rights in such Artwork; (ii) all secondary marks
and/or promotional concepts developed for use and used in connection with
any Licensed Product ("Secondary Marks") and all copyrights and other
proprietary rights in such Secondary Marks; (iii) all derivative works
based on any of the NFL Marks, QIB Marks, Secondary Marks, Computer Art,
or Artwork ("Derivative Works") and all copyrights and other proprietary
rights in such Derivative Works; and (iv) all Computer Art and all
copyrights and other proprietary rights in such Computer Art as well as
duplicates and copies of it. Licensee's use of the Licensed Marks,
Computer Art, Artwork, Secondary Marks and Derivative Works is for NFLP's
benefit and Licensee will not acquire any rights in any of them by such
use. Licensee acknowledges that NFLP will have the right to terminate this
<PAGE>
License if Licensee asserts any rights in or to any of the NFL Marks, QB
Marks, Computer Art, Artwork, Secondary Marks and Derivative Works other
than those granted under this License. Licensee shall not attack the
trademarks, copyrights or other proprietary rights of NFLP, the NFL, its
Member Clubs, the QB Club, or its Members during the Term or thereafter.
Licensee and NFLP shall jointly own any and all characters in the Licensed
Products created by Licensee depicting and/or based on or derived from
any of the QBC Members and/or the QB Marks ("QB Characters"). Upon the
expiration or termination of this License, neither party shall use any of
the QB Characters without the other party's prior written approval.
b. Licensee hereby irrevocably assigns and transfers to NFLP all right, title
and interest, including all copyrights and extensions and renewals thereof,
in and to the Artwork, the Secondary Marks, the Derivative Works, the
Computer Art, and all related proprietary rights (collectively the
"Proprietary Materials"). At the request of NFLP, Licensee shall execute
all documents confirming NFLP's rights in and to the NFL Marks, QB Marks
and Proprietary Materials including an assignment of copyright in form
and substance satisfactory to NFLP. Licensee shall cause each third party
who makes or contributes to the creation of the Proprietary Materials to
agree that all rights, including the copyrights, in his or her work shall
be owned by NFLP and to execute necessary documents.
c. Licensee shall only display or use the Licensed Marks in the form and
manner that NFLP has specifically approved in writing. Licensee shall
cause to be irremovably and legibly printed or affixed in a clearly
visible location approved by NFLP on every Unit of each Licensed Product,
and all Related Materials, Proprietary Materials, and Promotional
Materials the following:
(i) Trademark Notices as directed and specified by NFLP, including a
legend indicating that the NFL Marks are trademarks of the NFL or the
Member Clubs, and are being used by Licensee under License from NFLP;
(ii) Copyright Notices as directed and specified by NFLP;
(iii) The Marketing Program symbol, if applicable;
(iv) Hangtags, inserts, the officially Licensed Product hologram label or
hangtag, which must be used on all Licensed Products, and other
identifying material required by NFLP;
(v) A permanent label displaying Licensee's name and the Authorized
Brand;
(vi) Licensee's name, trade name and address; and
(vii) All other notices required by NFLP to protect the interests of NFLP,
the NFL, its Member Clubs, the QB Club and its Members.
d. Licensee will not use any Trademark or Copyright Notices on the Licensed
Products, Related Materials, Proprietary Materials, and Promotional
Materials that conflict with, negate or cause confusion with any notices
required under this Paragraph 11. Licensee represents that, except for
the Authorized Brands, if applicable, or as otherwise authorized in
writing by NFLP, it will not associate other licensed properties, names,
symbols, or designs with the Licensed Marks on any of the Licensed
Products, Related Materials, Promotional Materials, and Proprietary
Materials. Licensee will not use the Licensed Marks, QB Marks or NFL Marks
on any business sign, business card, invoice, sales sheet, brochure,
catalog, or other form, or as part of the name of Licensee's business
except as authorized by NFLP in writing prior to such usage.
e. NFLP shall have the right to secure trademark and/or copyright
registrations for the NFL Marks and QIB Marks. Upon request by NFLP, in
addition to any other quantity of Licensed Products that Licensee must
submit to NFLP under this License, Licensee shall deliver to NFLP, free
of cost, twelve (12) Units of each Licensed Product with their Related
Materials for such registration purposes provided that Licensee shall not
owe any Royalty for such
<PAGE>
Units. Licensee shall provide NFLP with the date of first use of each
Licensed Product in interstate and intrastate commerce. NFLP shall have
the right to secure trademark and/or copyright registrations in NFLP's
name for any Proprietary Materials created by Licensee or its agents for
use in connection with any Licensed Product. By execution of this License,
Licensee appoints NFLP as Licensee's attorney-in-fact coupled with an
irrevocable interest to execute, acknowledge, deliver and record all
registrations and all documents referred to in this Paragraph 11.
f. Licensee shall assist NFLP, at NFLP's expense, in the procurement,
protection, and maintenance of NFLP's rights in and to the NFL Marks, QB
Marks and the Proprietary Materials. NFLP may, in its sole discretion,
commence or prosecute and control the disposition of any claims or suits
relative to the imitation, infringement and/or unauthorized use of the
NFL Marks, QB Marks or the Proprietary Materials either in its own name,
or in the name of Licensee, or join Licensee as a party in the prosecution
of such claims or suits. Licensee shall cooperate fully with and provide
full assistance to NFLP in connection with any such claims or suits.
Licensee shall promptly notify NFLP in writing of any infringement,
imitations, or unauthorized use of the NFL Marks, QB Marks or Proprietary
Materials by others. NFLP shall, in its sole discretion, determine whether
to take action and the type of action, if any, to take against such
infringement. Licensee shall not institute any suit or take any action on
account of such infringements, imitations or unauthorized uses unless it
receives NFLP's prior written consent. NFLP will receive the full amount of
any settlement made or damages awarded in connection with any action taken
against such infringement.
12. REPRESENTATIONS AND WARRANTIES
a. Licensee warrants and represents that:
(i) All of the illustrations and text in the Licensed Products are
original and have not been published previously in whole or in
part;
(ii) Licensee is the sole owner of all rights, including the copyright, in
the illustrations and text in the Licensed Products separate and apart from any
material depicting the NFL Marks and QB Marks;
(iii) Licensee at its own expense has obtained or will obtain and
deliver to NFLP immediately any and all permissions and/or releases from third
parties required for publication of any material provided by Licensee or for the
exercise of any other rights conferred by this
License;
(iv) Licensee will not manufacture or publish any derivative work based on
any Licensed Product during the Term or thereafter without a separate license
executed by NFLP;
(v) The Licensed Products do not contain libelous, defamatory, obscene, or
otherwise unlawful matter, and do not infringe on the
privacy, publicity, proprietary, copyright or other rights of any third party;
(vi) Licensee has the full power, free or any prior contract, lien or
other right, to enter into this License;
b. NFLP shall have no obligation to make an independent investigation to
determine whether the foregoing warranties and representations are true
and any such investigation by or for NFLP shall not constitute a defense
to Licensee in any action based upon a breach or alleged breach of any of
the foregoing warranties and representations. If NFLP determines that a
substantial risk of liability to any third party exists, without relieving
Licensee's of its obligations under this License, NFLP may undertake an
investigation, verification and analysis of the
<PAGE>
Licensed Products and implement such revisions to the Licensed Products at
Licensee's cost that NFLP determines may eliminate or lessen such risk.
Licensee acknowledges that NFLP shall have no obligation to publish all or
any portion of the Licensed Products.
13. INDEMNIFICATION AND INSURANCE
a. During the Term and thereafter, Licensee shall be solely responsible for,
defend, indemnify and hold harmless NFLP, the NFL, its Member Clubs, the QB
Club, its Members and each of their respective affiliates, shareholders,
officers, directors, agents and employees for, from and against any claims,
demands, causes of action, damages, costs and expenses, including
reasonable attorneys' fees, judgments, and settlements arising out of or
in connection with: (i) Licensee's breach or alleged breach of any of its
representations, warranties, covenants or obligations contained in this
License; (ii) Licensee's use of the Licensed Marks except as provided in
subparagraph (c) below; (iii) Licensee's noncompliance with any applicable
federal, state, or local laws or regulations; or (iv) the manufacture,
publication, distribution, sale, advertising or use of any Licensed
Product. Licensee acknowledges that NFLP's approval of any Licensed
Product pursuant to Paragraph 4 of this License or Promotional Materials
or promotional concepts pursuant to Paragraph 5 of this License shall not
relieve Licensee of its indemnification obligations under this Paragraph.
b. Licensee shall obtain and maintain at its own expense from a licensed
and admitted insurance carrier with a rating not less than A from Best, a
publisher's liability insurance policy and an advertising liability
insurance policy that will each provide coverage of three million dollars
($3,000,000) for each occurrence. Licensee shall ensure that such policies:
(i) will list the NFL, its Member Clubs, NFLP, the QB Club, the QBC
Members, and each of their respective affiliates, shareholders, officers,
directors, agents, and employees as additional insureds; and (ii) will
each provide that they can not be canceled without at least thirty (30)
days written notice to NFLP. Simultaneously with the execution of this
License, Licensee shall submit to NFLP the fully paid policies or
certificates of insurance. Compliance with this subparagraph (b) will not
relieve Licensee of its other obligations under this Paragraph 13. The
insurance coverage required under this License is not cumulative and will
not extend to any other License or Agreement between Licensee and NFLP
unless otherwise authorized by NFLP in writing.
c. During the Term and thereafter, NFLP shall indemnify and hold harmless
Licensee, its officers, directors, agents and employees for, from and
against any claims, demands, causes of action, damages, and reasonable
attorneys' fees for trademark infringement arising out of the use of the
Licensed Marks as strictly authorized under this License, provided that
NFLP is given immediate notice of and shall have the option to undertake
and conduct the defense of any such claim, demand or cause of action and
further provided that Licensee shall cooperate in the defense of such
claim as reasonably required by NFLP.
14. FINANCIAL INFORMATION
a. Upon NFLP's request, Licensee shall provide NFLP with a statement from an
independent certified public accountant attesting to Licensee's solvency.
For the purposes of this License, "solvency" shall mean that Licensee is
able to pay its obligations as they become due in the regular course of
business.
b. On or before the 15th day of each month, Licensee shall provide NFLP with
Licensee's Fiscal Year projections for sales and income for its overall the
Licensed Products. Upon request by NFLP, Licensee shall provide NFLP with
a list ranking its Licensed Products sales by
<PAGE>
retailer and/or Third Party Distributors for its top twenty-five (25)
retail accounts or by retail accounts comprising seventy-five percent
(75%) of its Net Sales, whichever is greater, and itemizing for each such
retailer and/or Third Party Distributors a description and the number of
Units of each Licensed Product sold.
c. Licensee shall notify NFLP in writing of any adverse material change in
Licensee's financial condition that will likely affect its performance
under this License at the time such material change occurs or when
Licensee learns of the possibility of such a change, whichever is sooner,
including, but not limited to, any possible adverse material change in
Licensee's ability to make timely payments or keep accurate records due to
any inability to process date/time data from, into or between the
twentieth and twenty-first centuries.
15. AUDITS AND INSPECTIONS
a. During the Term and for at least three (3) full Fiscal Years after the
expiration or termination of the License, Licensee shall keep, maintain and
preserve complete and accurate books of account and records covering all
transactions relating to this License, including, without limitation,
invoices, correspondence, inventory accounting, banking and financial
records ("Records"). Licensee shall designate a symbol or number that will
be used exclusively on Records relating to the Licensed Products and with
no other articles that Licensee manufactures, publishes, distributes or
sells. Licensee shall ensure that all invoices for the sale of Licensed
Products to its retailers and/or Third Party Distributors will include the
quantity and description of each Licensed Product itemized by Marketing
Program, if applicable, Style and Member Club, if applicable.
b. During the Term and for at least three (3) full Fiscal Years after the
expiration or termination of the License, NFLP and its duly authorized
representatives will have the right during reasonable business hours to
inspect and audit all Records and conduct a physical examination of
Licensee's premises including its warehouses and manufacturing facilities
and those of Third Party Distributors and Third Party Manufacturers. NFLP
shall provide Licensee with no less than five (5) business days' written
notice prior to such inspection, audit or examination; provided however,
if compelling circumstances exist, as determined by NFLP in the exercise
of its reasonable business judgment, NFLP may conduct an immediate
inspection, audit or examination with no prior notice to Licensee. Licensee
represents that it will fully cooperate with the inspection, audit or
examination and will not cause or permit any interference with NFLP or its
representatives during any inspection, audit or examination. During an
inspection, audit or examination, NFLP shall have the right to make copies
or extracts of Licensee's Records.
c. Licensee shall pay NFLP for the cost of any audit that discloses a payment
deficiency of more than two percent (2%) between the amount due to NFLP
pursuant to the audit and the amount Licensee actually paid or reported to
NFLP. Licensee shall pay NFLP any deficiency amount together with interest
on the deficiency amount pursuant to the provisions in Paragraph 3d of
this License. Licensee shall pay NFLP the amount of any additional costs
beyond the cost of the audit incurred by NFLP due to a change in an audit
date scheduled by NFLP made at Licensee's request. Licensee shall pay such
amounts within ten (10) days of invoicing by NFLP.
16. TERMINATION
Without prejudice to any other rights it may have in law, equity or
otherwise, NFLP shall have the right to immediately terminate this License
upon written notice to Licensee at any time if:
<PAGE>
a. Licensee fails to generate Net Sales during any Fiscal Year satisfying the
corresponding Minimum Royalty Guarantee or fails to generate Net Sales on
any Licensed Product with a separate Minimum Royalty Guarantee satisfying
the corresponding per-product Minimum Royalty Guarantee;
b. Licensee fails to deliver to NFLP or to maintain in full force and effect
the insurance coverage referred to in Paragraph 13b of this License;
c. Licensee fails to make available its premises, Records or other business
information to NFLP or its representatives or fails to provide full and
complete information as required in Paragraphs 14 and 15 of this License;
d. Licensee manufactures, publishes, sells, distributes, advertises or uses
any Style of any Licensed Product, or any Promotional Materials, or
Proprietary Materials without the prior written approval of NFLP as
required in this License, or after such written approval has been
withdrawn by NFLP or has expired;
e. Licensee distributes or sells any Licensed Product outside the Territory
or sells any Licensed Product to a third party that Licensee knows or
should reasonably know intends to sell such Licensed Product outside the
Territory;
f. Licensee distributes any Licensed Product outside the corresponding
Distribution Channels, or sells any Licensed Product to any third party
that Licensee knows or should reasonably know intends to sell such
Licensed Product outside the corresponding Distribution Channels;
g. Licensee fails to obtain NFLP's written approval prior to assigning,
transferring, granting a security interest in the Licensed Products or
otherwise encumbering the License or prior to using a Third Party
Manufacturer, Sublicensee, or any approved Third Party Manufacturer
engages in conduct that would entitle NFLP to terminate the License if
Licensee had engaged in such conduct;
h. Any sales representative of Licensee produces, inventories, warehouses or
distributes any of the Licensed Products;
i. Licensee fails to satisfy the distribution requirements in Paragraph 6 of
this License or otherwise fails to make timely and complete delivery of
orders it has taken for any Licensed Product to seventy percent (70%) or
more of its retail accounts and/or Third Party Distributors that
collectively account for eighty percent (80%) of its Net Sales on one or
more occasion during any Fiscal Year;
j. Licensee makes a material misrepresentation or omission in its license
application form;
k. Licensee fails to make any payment or deliver any statement required under
this License and fails to correct such default within ten (10) days of
written notice of such default;
l. Licensee breaches any other agreement in effect between Licensee and NFLP;
m. Licensee makes or agrees to make a payment to any Member Club or any
shareholder, officer, director, employee, agent, or representative of a
Member Club, or to any agent, representative or employee of the NFL or
its affiliates in such person's individual capacity, in connection with
the use of any Licensed Marks under this License or otherwise as a direct
result of the sales of any Licensed Product, or Licensee fails to disclose
to NFLP any existing
<PAGE>
agreement or agreement being negotiated by Licensee or Licensee's agent
between Licensee and a Member Club or any shareholder, officer, director,
employee, agent, or representative of a Member Club, or any agent,
representative or employee of the NFL or its affiliates in such person's
individual capacity;
n. Licensee disparages NFLP, the NFL, any of its Member Clubs, the QB Club,
any of the QB Members or any of their respective shareholders, officers,
directors and employees as determined by NFLP in its sole discretion, or
otherwise engages in conduct that NFLP deems detrimental to the NFL or
any of its Member Clubs the QB Club, any of the QB Members;
o. Licensee fails to comply with any applicable federal, state or local law or
regulation in connection with this License;
p. Licensee breaches any representation or warranty contained in Paragraph 12;
or
q. Licensee fails to comply with any other material term or condition of this
License.
17. GOODWILL AND REPUTATION
Licensee recognizes the great value of the goodwill associated with the NFL
Marks and QB Marks and acknowledges that such goodwill belongs to the
Member Clubs and the NFL, the QB Club or the QBC Members as the case may be
and that such NFL Marks and QB Marks have
Secondary meaning in the minds of the public. The nature of the business of
NFLP, the NFL, and its Member Clubs, and the QB Club requires public
respect for and trust in the reputation and integrity of the NFL and its
Member Clubs, the QB Club and the QBC Members. NFLP may, at its sole
option, terminate this License or withdraw some or all Product Approval
Forms or Promotional Approval Forms by written notice to Licensee if any
unanticipated factor, development or event causes NFLP's continued
association with any one or more Licensed Product or Licensee to adversely
reflect upon NFLP, the NFL or its Member Clubs, the QB Club and the QBC
Members as determined by NFLP in its sole discretion, the QB Club or the
QBC Members. In the event of such termination, Licensee shall pay to NFLP
the Royalty on all sales of the Licensed Products made during the
Termination Fiscal Year or the Termination Guarantee as defined in
Paragraph 3a, whichever is greater, and all other amounts due to NFLP.
Upon receipt of such payment, NFLP will reimburse Licensee for its salvage
expenses or, in the case of unsalvageable Licensed Products,
Licensee's manufacturing costs if NFLP does not permit Licensee to
distribute the remaining inventory of Licensed Products.
18. RENEWAL REQUEST
NFLP must receive a written request from Licensee by no later than the
Renewal Request Date, if applicable, listed on the Term Sheet or Term
Sheets if Licensee desires to renew the License. If Licensee has complied
with all terms and conditions of this License during the
Term and NFLP desires, in its sole discretion, to negotiate a renewal
License, NFLP shall negotiate with Licensee for the terms and conditions of
a renewal License for a period of no more than sixty (60) days following
NFLP's receipt of Licensee's renewal request notice. This License
automatically expires at the end of the Term if NFLP does not receive
Licensee's written request by the Renewal Request Date, Licensee has failed
to comply with all terms and conditions of this License, NFLP elects not
to negotiate a renewal License, or the parties are unable to reach an
agreement within said sixty day negotiation period. Licensee acknowledges
that NFLP has no express or implied obligation to renew the License. NFLP
will have no liability to Licensee for any expenses incurred by Licensee in
anticipation of any renewal or extension of this License.
19. EFFECT OF EXPIRATION OR TERMINATION OF THE LICENSE
<PAGE>
a. Sixty (60) days before the expiration of this License, Licensee will
furnish to NFLP a statement showing the number of Units and description
of such Units for each Style of each Licensed Product, Promotional
Materials, and Proprietary Materials on hand or in process in Licensee's
inventory. If this License is terminated by NFLP, Licensee shall furnish
such statement within ten (10) days after notice of termination is given
by NFLP.
b. After expiration or termination of this License for whatever reason, all
rights granted under this Licensee will revert to NFLP and Licensee
shall refrain from further use of, simulation of or reference to any and
all of the NFL Marks and QIB Marks except as provided in this paragraph.
Except for termination of this License by NFLP, Licensee will have
ninety (90) days to dispose of the Licensed Products ("Sell-Off Period")
that are on hand or in process at the time of such expiration, provided
all statements and payments then due to NFLP are first made, Licensee is
otherwise in compliance with all terms and conditions of the License,
and such Sell-Off occurs at Licensee's regular selling price and within
the Distribution Channels. During the Sell-Off Period, Licensee shall
submit all payments and statements required under this License in
accordance with the terms and conditions of the License.
c. If Licensee has remaining inventory of the Licensed Products upon the
termination of this License or after the Sell-Off Period, if applicable,
NFLP may, at its option: (i) purchase such inventory at Licensee's cost;
(ii) require Licensee to deliver such inventory to NFLP for destruction
at Licensee's expense; or (iii) require Licensee to destroy such
inventory at Licensee's expense and furnish NFLP with an affidavit
signed by an officer of Licensee attesting to such destruction. NFLP
will have the right at any time before expiration or termination of this
License and during the Sell-Off Period to conduct a physical inventory
to, among other things, verify the quantity and Style of the Licensed
Products in Licensee's inventory. If Licensee refuses to permit such
physical examination of the inventory or fails to provide NFLP with the
statement required in subparagraph a above, Licensee will forfeit its
right to any Sell-Off Period.
d. Upon the termination of this License or immediately after the Sell-Off
Period, Licensee shall deliver to NFLP all Proprietary Materials and all
related materials, including software, created or used by Licensee in
connection with this License and shall, at NFLP's option, destroy or
sell to NFLP at Licensee's cost, any molds, plates and other items used
to reproduce the Licensed Marks.
20. PLAYERS AND COACHES
Licensee acknowledges that this License does not grant Licensee any rights
with respect to the name, likeness, signature, or other attributes of any
player, coach, or other employee of the NFL except with respect to the QBC
Members if such rights are expressly granted on the Term Sheet.
Licensee shall be responsible for securing whatever rights may be
required for the use of such names, likeness, signatures, or other
attributes. Licensee represents that it will not exercise the rights
granted in this License in any manner that will imply that Licensee has
obtained any such rights without separate written authorization from the
appropriate player, coach, or employee.
21. NFL FILMS
Licensee understands and acknowledges that this License does not grant
Licensee any rights with respect to film or videotape footage of NFL
game action and that Licensee must obtain such footage directly from NFL
Films, Inc. ("NFL Films") on terms and conditions to be mutually agreed
upon by Licensee and NFL Films. If Licensee desires to use such footage
in
<PAGE>
connection with this License, NFLP must approve the proposed usage and
subject matter of such footage in writing prior to its usage.
22. INFORMATION TRANSMISSION
If NFLP obtains the capacity to receive computer transmissions of any or
all information required from Licensee under this License during the
Term, Licensee shall begin to provide such information by such computer
transmission as soon as practicably possible.
23. NOTICES
The parties to this License shall send all notices and statements required
under this License to the respective addresses of the parties set forth
above unless notification of a change of address is given in writing.
Licensee shall direct all notices to NFLP to the Senior Director of
Publishing with a copy to the General Counsel of NFLP. All notices
required under this License must be in writing, must be sent by
registered or certified mail, facsimile, or an overnight delivery
service generally accepted in the industry that provides evidence of
delivery, and shall be deemed to have been given at the time they are
sent.
24. RELATIONSHIP OF PARTIES
The parties to this License are not partners, joint venturers, or agents
and nothing in this License shall be construed to place them in any
such relationship. Neither party will have the power to obligate or bind
the other in any manner whatsoever. NFLP, the NFL, and its Member Clubs,
the QB Club and the QBC Members in no way endorse, certify or guarantee
the quality of the Licensed Products.
25. GOVERNING LAW AND DISPUTES
This License and any dispute arising under it shall be governed by and
construed in accordance with the laws of the State of New York without
regard to conflict of law principles. All disputes pertaining to this
License shall be decided by a state or federal court located in the
City of New York and Licensee consents to personal jurisdiction in such
courts.
26. WAIVER
Neither party to this License can waive or modify any provision of this
License unless such waiver or modification is in a writing signed by both
parties. Licensee acknowledges that NFLP's prior forbearance of any
requirement of this License will not prevent NFLP from subsequently
requiring full and complete compliance with such requirement or from
exercising its rights under this License.
27. CONFIDENTIALITY
The parties to this License acknowledge that the terms of this License are
confidential and each warrant that neither shall disclose such terms to any
third party other than the disclosing party's accountants, agents or
attorneys or as required by law, without the other party's prior written
consent.
28. SEVERABILITY
If any paragraph or clause of this License is illegal or invalid or void
for any reason, the remaining paragraphs and clauses of the License will
remain in full force and effect.
29. RELEASE
In Consideration of the rights granted under this License, Licensee
releases NFLP, the NFL, its Member Clubs, the QB Club, the QBC Members, and
each of their respective affiliates, shareholders, officers, directors,
agents and employees from any claims, demands, losses, expenses or damages,
whether known or unknown, arising out of or in connection with or in
<PAGE>
any manner related to the manufacture, publication, distribution or sale of
products bearing the Licensed Marks. Nothing in this paragraph will relieve
NFLP of its obligations under Paragraph 12 (c) of the License.
30. PUBLIC OR PRIVATE OFFERINGS
Licensee shall not refer to this License or NFLP, the NFL or its Members
Clubs or affiliates in any public or private offering, or other securities
or financing document, without NFLP's prior written consent and then only
on such conditions as NFLP deems appropriate in its discretion.
31. MULTIPLE TERM SHEETS
In the event that this License has multiple Term Sheets attached to it, the
terms and conditions of this License will apply to each individual Term
Sheet.
32. ENTIRE AGREEMENT
This License constitutes the entire agreement and understanding between the
parties to this License with respect to the subject matter of this License
and cancels, terminates, and supersedes any prior or contemporaneous
agreement or understanding, whether oral or written, on this subject
between Licensee and the NFL, its affiliates or Member Clubs, the QB Club,
the QBC Members or NFLP. The headings in this License are for reference
purposes only and have no legal effect.
33. EXECUTION
Licensee will make an offer to enter into this License by having a duly
authorized officer or representative sign below and return the License
with a check payable to NFLP for the Advance Royalty Payment required for
Fiscal Year 1. An acceptance of the offer will occur and a binding
agreement will exist only after an authorized officer or duly authorized
representative of NFLP signs this License and delivers a fully-executed
copy to Licensee. Licensee acknowledges that this Licensee will be deemed
to have been executed in New York City.
LICENSEE: ULTIMATE SPORTS ENTERTAINMENT, INC.
BY: DATE:
(Signature of officer, partner or individual duly authorized to sign)
TITLE:
NATIONAL FOOTBALL LEAGUE PROPERTIES, INC.
BY: DATE:
(Signature of officer, partner or individual duly authorized to sign)
TITLE:
NFL QUARTERBACK CLUB
BY: DATE:
<PAGE>
(Signature of officer, partner or individual duly authorized to sign)
TITLE:
31107 ULTIMATE SPORTS ENTERTAINMENT
EXHIBIT I
DISTRIBUTION CHANNELS
The following definitions shall apply to this License:
1 . AIRPORT/HOTEL SHOP: A separate retail store located in an airport or
hotel.
2. AUTOMOTIVE STORE: A retail store that carries as its primary retail items
automotive supplies.
3. BOOK STORE: A retail store that carries as its primary items books and
periodicals. Examples include, without limitation, Walden Books, and Barnes
and Noble.
4. CARD/PARTY SHOP: A retail store that carries as its primary retail
items cards or party products. Examples include, without limitation,
Hallmark Stores.
5. COMPUTER/ELECTRONIC Store: A retail store that carries as its primary
retail items computers, software, and computer accessories or electronic
equipment and appliances. Examples include, without limitation, CompUSA
and Computer City.
6. COMPUTER ON-LINE: Licensee, and no other organization, making the
Licensed Product available for sale to consumers on the Internet or through
a computer on-line service provided that Licensee may not distribute the
Licensed Product via such media.
7. AMUSEMENT/CONVENIENCE Venues: Restaurants, convenience stores, gas
stations, car and truck stops, amusement venues, recreation centers and
any other business venue in which the sale of the Licensed Products would
constitute a subsidiary business.
8. CRAFT STORE: A retail store that carries as its primary retail items arts
and crafts supplies.
9. DEPARTMENT STORE: A retail store that operates several departments
carrying higher-priced brands of apparel and non-apparel. Examples include,
without limitation, Macy's, Dillards, Nordstrom, Woodward and Lothrop, JC
Penney, Boscov's, Sears, May Co., Federated Group, Carson Pirie Scott,
Dayton Hudson, Bon Ton, Belks, Strawbridge & Clothier, Jacobson and
Bloomingdales.
10. DIRECT RETAILER: An organization that markets products directly to
consumers without using retail space through the mediums of television or
catalog.
11. DISCOUNT STORE: A retail store that operates several departments
carrying lower-priced brands of apparel and nonapparel with limited
service. Examples include, without limitation, Wal-Mart, Kmart, Bradlees,
Roses, Hills, Caldor, Venture, Target, Shopko, and Ames.
12. DISTRIBUTOR: Defined as Third Party Distributor in Paragraph 9c of the
License.
<PAGE>
13. DRUG STORE: A retail store that carries as its primary retail items
pharmaceuticals, health and beauty aids, and convenience items. Examples
include, without limitation, OSCO, Walgreen, and Eckert.
14. FAN SHOP: A retail store that carries as its primary retail item
licensed products of the NFL, National Basketball Association, National
Hockey League, Major League Baseball, and the National Collegiate Athletic
Association. Examples include, without limitation, Pro Image, Team Spirit
and Stadium Stuff.
15. FOOTWEAR SPECIALTY STORE: A retail store that carries as its primary
retail item athletic footwear and also carries, in limited quantities,
licensed apparel and headwear. Examples include, without limitation, Foot
Locker, FootAction, and Athletes Foot.
16. FUND RAISING: An organization, including Licensee, that markets
products through various channels such as schools for the purpose of
raising money for educational or charitable causes. NFLP must approve each
educational or charitable cause.
17. GALLERY: A retail store that carries as its primary retail item artwork.
18. GIFT/FLOWER SHOP: A retail store that carries as its primary retail items
gifts, novelties or flowers.
19. GROCERY STORE: A retail store that carries as its primary retail items
food and household products. Examples include, without limitation, A & P,
Shop Rite, Vons, Jewel, and Food Town.
20. HARDWARE: A retail store that carries as its primary retail items hardware
products. Examples include, without limitation, True Value, Ace and Cotter.
21. HOBBY STORE: A retail store that carries as its primary retail item
collectible products.
22. HOME SPECIALTY STORE: A retail store that carries as its primary retail
items furniture and home products. Examples include, without limitation,
Home Place, Home Depot, Linens'N Things, and Bed Bath and Beyond.
23. JEWELRY STORE: A retail store that carries as its primary retail item
jewelry. Examples include, without limitation, Adler Jewelers.
24. MEMBERSHIP CLUB WAREHOUSE STORE: A retail store that markets products
to members only. Examples include, without limitation, BJ's Wholesale Club.
25. MILITARY BASE: The military bases of the United States and its territories
and possessions.
26. OFFICE SUPPLY: A retail store that carries as its primary retail items
office supplies. Examples include, without limitation, Office Max and
Staples.
27. SPORTING GOODS Store: A retail store that carries as its primary retail
items licensed apparel, athletic footwear and sporting goods equipment.
Examples include, without
<PAGE>
limitation, Champ's, Herman's, Koenig's, The Sports Authority, Sportmart,
Gart Brothers, and Modells.
28. STADIUM SHOP/STADIUM CONCESSIONAIRE: A store or vendor that carries as
its primary retail item Licensed Products of the NFL and is located at the
training facilities or stadium of a Member Club.
29. TOY/CHILDREN'S STORE: A retail store that carries as its primary retail
items toys. Examples include, without limitation, Toys'R Us, Kids'R Us,
and Babies'R Us.
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
R-247
LICENSE AGREEMENT
THIS LICENSE AGREEMENT made as of the 1st day of July, 1999 BETWEEN:
ULTIMATE SPORTS ENTERTAINMENT INC., a corporation
incorporated under the laws of California with offices
at 2444 Wilshire Blvd., Suite 414, Santa Monica, CA,
90403 (the "Licensee")
OF THE FIRST PART
- and -
THE NATIONAL HOCKEY LEAGUE PLAYERS' ASSOCIATION, an
unincorporated association with offices at 777 Bay
Street, Suite 2400, Toronto, Ontario, M5G 2C8, (the
"Licensor")
OF THE SECOND PART
WITNESSETH:
WHEREAS, the Licensor is the owner of certain proprietary rights in and
to the property described in Schedule "A" attached hereto (the "Property");
WHEREAS, the Licensor has a group licensing program under which it
licenses the use of the Property in furtherance of its efforts to promote its
members and the game of hockey;
WHEREAS, the Licensee desires to use the Property on or in association
with the manufacture, packaging, offering for sale, sale, advertising,
promotion, shipment and distribution (the "Exploitation") of certain products
identified in Schedule "C" attached hereto (the "Licensed Products") in the
territory identified in Schedule "D" attached hereto (the "Licensed
Territory");
AND WHEREAS, the Licensor is willing to grant the Licensee such right to
use the Property on or in association with the Exploitation of the Licensed
Products in the Licensed Territory in accordance with the terms and
conditions recited herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions herein contained, it is hereby agreed as follows:
<PAGE>
2
1. INTERPRETATION
This Agreement shall be interpreted in accordance with the following:
(a) words denoting the singular shall include the plural and vice versa
and words denoting any gender shall include all genders;
(b) references to dollars, unless otherwise specifically indicated, shall
be references to U.S. Dollars;
(c) the word "including" shall mean, "including without limitation" and
the word "includes" shall mean "includes without limitation";
(d) the expression "arm's length" shall have the meaning ascribed thereto
in the Income Tax Act (Canada);
(e) the expression "business day" shall mean any day other than Saturday
and Sunday on which the Canadian chartered banks are open for business in
Toronto, Ontario; and
(f) the term "Agreement" shall mean this agreement and all schedules
attached hereto.
2. REPRESENTATIONS OF LICENSOR
(a) The Licensor represents that it has been duly appointed and is acting
on behalf of all active hockey players (the "Players") of the National
Hockey League ("NHL") who have entered into a Group Licensing Authorization
Agreement with the Licensor, and that in such capacity it has the right to
negotiate this Agreement and the right to grant the rights described
herein.
(b) The Licensor further represents that the Licensor has not entered
into, granted or become subject to, and will not enter into, grant or
become subject to, any agreement, right or obligation which will prevent
the Licensee from exercising the rights granted to the Licensee herein.
(c) The Licensor makes no warranties or representations other than those
expressly made herein.
3. REPRESENTATIONS OF LICENSEE
(a) The Licensee represents that it is a corporation duly incorporated and
organized and validly subsisting under the laws of its jurisdiction of
incorporation, that it has full corporate power and authority to carry on
its business as now conducted and that it has obtained all material
authorizations required in respect of its operations.
<PAGE>
3
(b) The Licensee further represents that it has full corporate power and
authority and full right to enter into and perform its obligations under
this Agreement.
(c) The Licensee further represents that the consummation of the
transactions herein contemplated and the compliance with the terms,
conditions and provisions of this Agreement will not conflict with, or
result in a breach of, or constitute a default under any of the terms,
conditions or provisions of the certificates of incorporation, constating
documents or by-laws of the Licensee or any material agreement or
instrument to which the Licensee is party or by which it is bound.
(d) The Licensee further represents that all software, embedded microchips
and other processing capabilities utilized by or in connection with the
business or financial operations of the Licensee are able to correctly
recognize, interpret, store, transmit, receive and manipulate data on and
involving all calendar dates and otherwise handle the transition from the
year 1999 to the year 2000, and without causing any abnormal results or
scenarios in relation to dates during and after the year 2000.
(e) The Licensee further represents that the Licensee has not entered
into, granted or become subject to, and will not enter into, grant or
become subject to, any agreement, right or obligation which will prevent
the Licensee from performing its obligations herein.
4. GRANT
(a) Subject to the terms and conditions hereof, the Licensor hereby grants
to the Licensee a non-exclusive, non-transferable, non-assignable license,
without the right to grant sub-licenses, to use the Property solely on or
in association with the Exploitation of the Licensed Products and solely
within the Licensed Territory (the "License").
(b) The rights, licenses and privileges granted by the Licensor hereunder
shall not constitute or be used by the Licensee as a personal endorsement
by all or any of the Players or by the Licensor, of any Licensed Product or
any other product or service. In the event that the Licensee is interested
in securing a Player's personal endorsement, using a Player in a manner
that will focus on or highlight the Player or securing a Player for a photo
shoot or other appearance, it is understood and acknowledged that such
endorsement, highlighting or appearance will require the personal approval
of the Player involved and a separate payment directly to him, independent
of, and in addition to, all payments due to the Licensor under the terms of
this Agreement.
(c) With respect to any current Player or former NHL player with whom the
Licensee wishes to enter into an endorsement, spokesperson,
<PAGE>
4
highlighting, appearance or promotional agreement, the Licensee agrees as
follows:
(i) The Licensee shall first contact the Licensor with its request
to engage the endorsement, spokesperson, highlighting,
appearance or promotional services of any particular active
Player (or a Player who has been under contract, but has not
yet announced his retirement). The Licensee will allow the
Licensor sufficient time to contact the Player to see if he is
available to provide the requested services. The Licensee
agrees not to contact the Player without the consent of the
Licensor.
If the Player agrees to make his services available, the
Licensee will be permitted to enter into an endorsement,
spokesperson, highlighting, appearance or promotional agreement
with him, provided that any such agreement which purports to be
exclusive (in whole or in part) shall be deemed to include the
following terms and conditions:
"Exclusive shall mean that the Player shall refrain from
granting to any other manufacturer or distributor of similar
products the endorsement, as a spokesman, of the Player for use
in advertising and/or promotion of such similar products. The
parties acknowledge and agree that the Player's name and
likeness may appear on the products of NHLPA licensees, that
they will continue to do so, and that no such grant of rights
with respect to any other product shall constitute a breach of
this Agreement."
The Licensee agrees that any agreements which it has entered
into with Players prior to the date of this Agreement shall be
deemed to include the above-noted language so that any Players
who have agreements with the Licensee are free to participate
in all group licenses of the Licensor.
Notwithstanding anything herein to the contrary, the Licensee
agrees that it will not use any current NHL player as a
spokesman or for the endorsement or promotion of the Licensed
Products unless such player forms part of the group included in
this Agreement.
The Licensee shall notify the Licensor prior to concluding any
such agreement with any Player and shall provide a copy of the
agreement to the Licensor within five days of its execution.
(ii) The Licensor acknowledges and agrees that the Licensee may
enter into agreements with former NHL players on an exclusive
<PAGE>
5
basis as to endorsement, spokesperson, highlighting or
promotion rights. The Licensee acknowledges and agrees that if
any such former NHL player re-enters the NHL to again become an
active Player, the Licensee shall be bound, with respect to
such Player, to the provisions of sub-paragraph (i) above.
The Licensee shall provide a copy of any such agreement with
any former NHL player to the Licensor within five (5) days of
its execution.
(d) Nothing contained in sub-paragraph (b) above shall prevent the
Licensee from utilizing the names and/or likenesses of the Players in a
non-endorsement and/or non-testimonial manner in connection with the
packages, cartons, advertising, point of sale and/or promotional materials
for the Licensed Products (the "Promotional and Packaging Materials") or
require any separate payment in connection therewith, provided that, unless
specifically authorized in advance by the Licensor in writing, the names
and/or likenesses of a minimum of six (6) such Players are utilized with
equal prominence on the Promotional and Packaging Materials for all
Licensed Products during the entire Term of this Agreement; and the
Licensee agrees to rotate the Players who are so utilized in connection
with such materials so as not to highlight any particular Player or group
of Players to the exclusion of others. Notwithstanding the foregoing, the
Licensee agrees that, at the request of the Licensor, it will refrain from
utilizing the names and/or likenesses of any particular Player(s) on any
Promotional and Packaging Materials.
(e) The Licensee agrees and acknowledges that any Player may elect to be
excluded from all or any part of this Agreement.
(f) The Licensee agrees that it will not enter into any agreement relating
to any Licensed Products with any NHL player who does not form part of the
group included in this Agreement.
(g) The Licensee agrees that it will not enter into any agreement with any
third party with respect to any markings, designs or other indicia
generally associated in the minds of the public with any particular Player
which would preclude the Player from being depicted in or on any NHLPA
licensed products or promotional materials in the manner in which the
public has become accustomed to seeing him.
(h) The Licensor makes no representation that it has the authority to
grant nor does it grant herein, the right to utilize league symbols,
insignias or logos or the NHL team emblem or uniform which a Player wears
as a hockey player for his NHL team. Accordingly, it is understood by the
parties hereto that if likenesses of Players depicting any such team or
league material are to be utilized in the exercise of this License, it will
be the
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
6
responsibility of the Licensee to obtain permission for the use of such
material.
(i) All rights not expressly granted to the Licensee in this Agreement are
specifically reserved to the Licensor.
5. TERM
(a) The term of this Agreement (the "Term") shall extend from the date
first written above to June 30, 2001 unless earlier terminated in
accordance with the provisions hereof. All references herein to the words
"annual", "year" or any other similar term shall be references to the
twelve (12) month period from July 1 to the following June 30 unless the
context in which any such terms are used otherwise requires.
(b) The Licensee acknowledges that except as expressly provided herein,
there is no right to renew this Agreement, and no options to extend this
Agreement have been granted or are implied hereunder.
6. ROYALTY PAYMENT
(a) The Licensee agrees to pay the Licensor a royalty ("Royalty") of *
percent (*) based on Net Sales (as defined herein) of Licensed Products by
the Licensee. Such Royalties shall accrue when the Licensed Products are
sold, shipped, distributed, billed or paid for, whichever occurs earliest.
(b) Royalty payments shall be made by the Licensee to the Licensor on all
Licensed Products sold, shipped or distributed by the Licensee, even if not
billed or if billed at a discount. Royalty payments to be made in respect
of Licensed Products sold, shipped or distributed but not billed or if
billed at a discount (such as in the case of introductory offers, samples,
promotions and the like, or in the case of sales, shipments or
distributions to individuals or companies which are affiliated or
associated with or subsidiaries of the Licensee), shall be based upon the
Licensee's then usual wholesale price (the "Usual Wholesale Price") for
such Licensed Products sold to arm's length third parties in the course of
the Licensee's normal sales, shipment and distribution activities.
(c) Where the billed price for any Licensed Products is less than the
Usual Wholesale Price for such Licensed Products, the Royalty payments
shall be based upon the Usual Wholesale Price.
(d) The Licensee further agrees to pay the Licensor a non-refundable,
minimum guaranteed annual royalty of * Dollars (* U.S.) for its use of
the rights licensed hereunder during the Term (the "Guaranteed Minimum
Royalty"). The Guaranteed Minimum Royalty shall be paid as follows:
<PAGE>
[Material marked with an asterisk has been
omitted from this document pursuant to a
request for confidential treatment and has
been filed separately with the Securities and
Exchange Commission.]
7
(i) * Dollars (* U.S.) upon execution of this Agreement; an
additional * Dollars (* U.S.) by September 15, 1999; an
additional * Dollars (* U.S.) by December 15, 1999; and an
additional * Dollars (* U.S.) by April 15, 2000; and
(ii) An additional * Dollars (* U.S.) by July 15, 2000; an
additional * Dollars (* U.S.) by September 15, 2000; an
additional * Dollars (* U.S.) by December 15, 2000; and an
additional * Dollars (* U.S.) by April 15, 2001
(e) The Guaranteed Minimum Royalty payments shall be paid by the Licensee
as specified above, whether or not the Licensee uses the rights licensed
hereunder, and no part of such guaranteed payments shall be repayable to
the Licensee except as specifically recited herein.
(f) Royalty payments based on Net Sales (as adjusted in accordance
herewith) made during any year of this Agreement shall be credited against
the Guaranteed Minimum Royalty due for the year in which such sales were
made. In no event shall any Royalties received in excess of the Guaranteed
Minimum Royalty for the year in which such Net Sales were made be used as a
credit against past or future Royalty obligations of the Licensee nor shall
any such excess be applied against the Guaranteed Minimum Royalty for any
other year of this Agreement.
(g) "Net Sales" shall mean gross sales of all Licensed Products, adjusted
in accordance with sub-paragraphs 6(b) and 6(c) hereof, less only returns
actually credited. No deductions shall be made for cash or other
discounts, for commissions, for uncollectible accounts, for taxes, fees,
assessments, impositions, payments or expenses of any kind which may be
incurred or paid by the Licensee in connection with the Royalty payments
due to the Licensor hereunder or in connection with a transfer of funds or
Royalties or with the conversion of any currency into any other currency,
or for any costs incurred in the use of the Property or the Exploitation of
the Licensed Products. If any tax is imposed on the Licensor by any country
with respect to Royalties payable to the Licensor, the Licensee shall
compute and pay the Royalties due to the Licensor hereunder on the basis of
the gross amount involved before the deduction of any such taxes. If the
Licensee is required to withhold from any Royalty payment due to the
Licensor an amount representing taxes or other levies imposed pursuant to
the laws of any country, the Licensee shall nevertheless have the
obligation to pay the entire gross amount of the Royalty without regard to
the amount of such tax or other levy. All taxes and other levies of any
kind whatsoever resulting from this Agreement shall be
<PAGE>
8
the responsibility of the Licensee and shall be paid by the Licensee at
the time and in the manner required by the relevant legislation.
(i) The Licensee represents to the Licensor that it is not a resident of
Canada and has not registered in Canada for purposes of the Federal Goods
and Services Tax.
7. MARKETING COMMITMENT/PRODUCT CREDIT
(a) The Licensee also agrees to provide and deliver free of charge to the
Licensor Licensed Products valued at a minimum of Five Thousand Dollars
($5,000.00 U.S.) wholesale during each year of the Term. Delivery of the
Licensed Products shall be made within thirty (30) days after a written
request for delivery has been made by the Licensor to the Licensee.
8. FORECASTS, STATEMENTS AND PAYMENTS
(a) Upon execution of this Agreement, and by each January 1 and July 1
thereafter, the Licensee shall provide to the Licensor a business plan
covering the remainder of the contract year broken down by quarter,
outlining the following:
(i) the gross and net sales projections for each Licensed Product,
broken down by country in the Licensed Territory;
(ii) a schedule of planned promotional and marketing campaigns
together with the media to be used; and
(iii) a list of the Licensed Products and, if applicable, the
particular designs proposed to be offered.
(b) The Licensee shall deliver to the Licensor, by the 15th day after the
end of each calendar quarter during the entire Term of this Agreement, and
thereafter in accordance with paragraph 21 hereof, a complete and accurate
statement (the "Royalty Statement") in the form attached hereto as Schedule
"F", certified to be accurate by an officer of the Licensee, showing the
number, description and gross sales (as adjusted in accordance herewith) of
the Licensed Products distributed, shipped or sold by the Licensee during
the preceding calendar month ("Royalty Period") together with any returns
actually credited and made during such Royalty Period. Such Royalty
Statements shall be furnished to the Licensor whether or not any of the
Licensed Products have been distributed, shipped or sold during the Royalty
Period for which such Royalty Statement is due. The Licensee shall pay to
the Licensor on or before the 15th day of each calendar quarter during the
entire Term of this Agreement, all Royalties earned under the terms hereof
for the most recent Royalty Period. If so instructed by the Licensor, all
payments of Royalties and/or other amounts to be made hereunder shall be
<PAGE>
9
made by wire transfer in accordance with the written instructions given by
the Licensor from time to time. The receipt or acceptance by the Licensor
of any Royalty Statement or of any Royalty paid hereunder (or the
depositing of any Royalty or other amount paid hereunder) shall not
preclude the Licensor from questioning the correctness thereof at any time,
and in the event that any inconsistencies or mistakes are discovered in
connection therewith, they shall immediately be rectified and the
appropriate payment made by the Licensee to the Licensor.
(c) Time is of the essence with respect to all payments to be made
hereunder by the Licensee. Any amounts payable hereunder not paid in full
on their due date shall accrue interest daily from the relevant due date
until the date payment is received at the rate of 1 1/2% per month (18% per
annum).
(d) All payments made hereunder with respect to Licensed Products sold,
shipped or distributed to or within the United States shall be in United
States currency. All payments made hereunder with respect to Licensed
Products sold, shipped or distributed to or within any country other than
the United States shall be calculated in accordance with sub-paragraph (e)
and shall be paid in United States currency.
(e) If the Licensed Territory includes countries other than the United
States, the Royalty Statement shall be broken down by country and all Net
Sales amounts shall be stated in the currency of the country where such
sales were made, followed by the equivalent amount of such Net Sales in
United States currency, followed by the exchange rate applied. The Licensor
reserves the right to dispute the appropriateness of the exchange rate
applied. Any dispute that cannot be resolved by agreement between the
parties shall be settled by reference to the exchange rate that would have
been applied by the Chase Manhattan Bank in New York, N.Y., to exchange
such foreign currency into United States dollars.
(f) All transactions under this Agreement, including without limitation,
all payments of Royalties and all notices, reports, royalty statements,
approvals and other communications, shall be with or made payable in the
name of the Licensor, or its designated assigns, if applicable.
<PAGE>
10
9. BOOKS AND RECORDS/AUDIT
(a) The Licensee agrees to keep accurate books of account and records at
its principal place of business covering all transactions relating to the
license being granted herein. The Licensor or any duly authorized
representative shall have the right, at all reasonable hours of any
business day, to audit the Licensee's books of account and records and all
other documents and material in the possession or under the control of the
Licensee with respect to the subject matter and the terms of this Agreement
and to make copies and extracts thereof. In the event that any such audit
reveals an underpayment by the Licensee, the Licensee shall immediately
remit payment to the Licensor in the amount of such underpayment together
with interest thereon calculated at the same rate and in the same manner as
this Agreement provides for interest to be calculated on overdue royalties.
Further, in the event that any such underpayment is greater than the lesser
of Five Thousand Dollars ($5,000.00) or two percent (2%) of the Royalties
due for any Royalty Period, the Licensee shall reimburse the Licensor for
the costs and expenses related to or associated with its audit.
(b) Upon demand by the Licensor, but not more than once each year, the
Licensee shall, at its own cost, furnish the Licensor with a statement,
prepared by an independent certified public or chartered accountant of the
Licensee's choice and approved by the Licensor, which approval shall not be
unreasonably withheld, setting forth the number of Licensed Products
manufactured during the time period extending from the date of any previous
statement (or in the case of the first statement, the date of the
commencement of this Agreement) up to and including the date of the
statement and also setting forth the pricing information for all Licensed
Products (including the number and description of the Licensed Products)
shipped, distributed and sold by the Licensee during the aforementioned
time period.
(c) All books of account and records of the Licensee covering all
transactions relating to the Licensee shall be retained by the Licensee for
at least six (6) years after the expiration or termination of this
Agreement, as the case may be, for possible inspection by the Licensor.
10. QUALITY, NOTICES, APPROVALS, AND SAMPLES
(a) A list of Players whose names, likenesses, pictures, photographs,
facsimiles, signatures, descriptions, playing records and/or biographical
sketches (the "Personality Rights") are to be included in the Property for
purposes of this Agreement shall be established and may be modified in the
following manner:
(i) The Licensee and the Licensor shall agree upon a list of
Players' names immediately after the execution of this
Agreement.
<PAGE>
11
Subject to subparagraph (ii), the Licensee shall be entitled
to use the Personality Rights of each Player included on the
list for the length of the Term as long as he is an active
Player.
(ii) The Licensor may notify the Licensee from time to time of any
Players whose Personality Rights are to be added to or excluded
from the Property for purposes of this Agreement.
(b) The quality of the Licensed Products as well as the quality of all
Promotional and Packaging Material shall be at least as high as the best
quality of similar products and promotional, advertising and packaging
material presently shipped, distributed, sold or used by the Licensee in
the Licensed Territory and shall be in full conformance with all applicable
laws and regulations.
(c) Before commencing or authorizing third parties to commence the design
or development of any Licensed Products or any Promotional and Packaging
Material which have not been previously approved in writing by the
Licensor, the Licensee shall submit at its own cost to the Licensor, for
approval, a description of the concept of the same, including full
information on the nature and function of the proposed item and a general
description of how the Property and other material will be used thereon.
The Licensee shall next submit at its own cost to the Licensor, for
approval, complete layouts and descriptions of the proposed Licensed
Products and Promotional and Packaging Material showing exactly how and
where the Property and all other artwork and wording will be used.
Thereafter, the Licensee shall submit at its own cost to the Licensor, for
approval, pre-production proofs or prototype samples of the proposed
Licensed Products and Promotional and Packaging Material. Finally, the
Licensee shall submit at its own cost to the Licensor, for approval, actual
production samples of the proposed Licensed Products and Promotional and
Packaging Material (the "Production Samples"). The Licensee shall not
proceed beyond any of the above stages where approval is required without
first securing the prior express written approval of the Licensor. The
Licensee may not Exploit any Licensed Product nor use any Promotional and
Packaging Material until it has received final written approval of same in
the manner provided herein from the Licensor. All approvals required
hereunder may be granted or withheld as the Licensor, in its sole
discretion, may determine. Should the Licensor fail to approve in writing
any of the submissions furnished to it by the Licensee within seven (7)
days from the date of submission thereof, such failure shall be deemed to
be a notice of disapproval thereof.
(d) The Licensee agrees that all Licensed Products and all Promotional and
Packaging Material shall contain appropriate legends, markings and notices
as required from time to time by the Licensor, in order to give appropriate
notice to the consuming public of the Licensor's right, title and interest
therein and thereto. The Licensee agrees that, unless otherwise
<PAGE>
12
expressly approved in writing by the Licensor, each usage of the trademarks
set forth in Schedule "B" (the "Trademarks") shall be followed by either
the TM or the R Trademark Notice symbol, as directed by the Licensor.
Additionally, the Licensee shall place or cause to be placed the following
legend at least once on each Licensed Product and on each piece of
Promotional and Packaging Material:
"National Hockey League Players' Association, NHLPA and NHLPA Logo are
Trademarks of the NHLPA and are used, under license, by Ultimate
Sports Entertainment Inc."
(e) The Licensee shall further imprint or cause to be imprinted on every
Licensed Product and on each piece of Promotional and Packaging Material
the logo of the Licensor, as illustrated in Schedule "E" of this Agreement
followed by "-C- NHLPA", and also the following:
"Officially Licensed Product of the National Hockey League Players'
Association".
(f) Where patent protection is either pending or has been granted for any
portion of the Property, the Licensed Products or the Promotional and
Packaging Material, the Licensee shall further include the appropriate
patent notice on all Licensed Products and on all pieces of Promotional and
Packaging Material.
(g) The Licensee shall use no markings, legends or notices on or in
association with the Licensed Products or on or in association with the
Promotional and Packaging Material other than those specified above or such
other markings, legends or notices as may from time to time be specified by
the Licensor, without first obtaining the Licensor's prior express written
approval in the manner provided herein.
(h) Upon commencement of manufacture, shipment and distribution of the
Licensed Products and Promotional and Packaging Material after all required
approvals have been given by the Licensor, the Licensee shall submit, at
its own cost, thirty (30) final versions of each of the Licensed Products
and of the Promotional and Packaging Material to the Licensor.
(i) The Licensor may, from time to time during the Term of this Agreement,
require that the Licensee submit to the Licensor, at no cost to the
Licensor, up to ten (10) additional final versions of each of the Licensed
Products and Promotional and Packaging Material for subsequent review of
the quality thereof and the appropriateness of the copyright, patent and
trademark usage and notice thereon, and for any other purpose that the
Licensor, in its sole discretion, deems appropriate.
<PAGE>
13
(j) After the required approval of the Production Samples has been
secured, the Licensee shall not depart therefrom in any respect without
first obtaining the express prior written approval of the Licensor. The
Licensee shall make submissions to the Licensor and obtain approvals in the
manner required above each time new or revised concepts, layouts,
descriptions, artwork, models, prototype samples or Production Samples are
created, developed or adopted by or for the Licensee. It is acknowledged
that the Licensor is approving of the use of the Property, the Licensed
Products and the Promotional and Packaging Material as part of its overall
licensing program and may in its discretion refuse to consent to any change
or modification to a Licensed Product or to the Promotional and Packaging
Material even if such change or modification improves the quality or
standard of the Licensed Product or the Promotional and Packaging Material.
(k) In submitting any Licensed Products, artwork, models, prototype
samples, Production Samples or other items to the Licensor for approval or
otherwise (collectively, the "Submitted Products"), the Licensee shall
engage directly and for its own account, all packagers, shippers,
expeditors, customs brokers and others so that no amounts are charged to
the Licensor in connection with any such submissions. If any amounts are
charged to the Licensor, the Licensor, if it so chooses, may pay the
amounts charged and render an account to the Licensee who shall forthwith
pay all such amounts together with interest thereon calculated at the same
rate and in the same manner as this Agreement provides for interest to be
calculated on overdue royalties.
(l) The Licensor may use and/or distribute any or all of the Submitted
Products for any purpose that the Licensor, in its sole discretion, deems
appropriate and the Licensor may advertise and promote such use or
distribution of the Submitted Products in any manner the Licensor, in its
sole discretion, so chooses.
(m) To assure that the provisions of this Agreement are being observed,
the Licensee agrees that it will allow the Licensor or its designates to
enter the Licensee's premises or the premises where the Licensed Products
or the Promotional and Packaging Materials are being manufactured and in
which Licensed Products are being packaged during regular business hours
and upon not less than two (2) business days notice, for the purpose of
inspecting the Licensed Products and the Promotional and Packaging Material
and the facilities in which the Licensed Products and Promotional and
Packaging Material are being manufactured and in which the Licensed
Products are being packaged.
(n) In the event that the quality standards or trademark, patent and
copyright usage and notice requirements hereinabove referred to are not met
or maintained in respect of the use of the Property or the Promotional and
Packaging Material, or throughout the various stages of Exploitation of any
<PAGE>
14
Licensed Products hereunder, then, upon receipt of written notice from the
Licensor, the Licensee shall immediately discontinue the use of the
Property and the Promotional and Packaging Material, and any and all of
those stages of Exploitation of the Licensed Products in connection with
which the said quality standards or trademark, patent and copyright usage
and notice requirements have not been met.
11. OWNERSHIP OF RIGHTS
(a) It is understood and agreed that the Licensor is the sole and
exclusive owner of all right, title and interest in and to the Property.
(b) Nothing contained in this Agreement shall be construed as an
assignment to the Licensee of any right, title or interest in and to the
Property or any part thereof, it being understood that all right, title and
interest relating thereto are expressly reserved by the Licensor except for
the rights that are expressly licensed hereunder.
(c) No license as to the use of any property or as to any products other
than with respect to the use of the Property, the Exploitation of the
Licensed Products and the use of the Promotional and Packaging Material,
and only in the Licensed Territory, is being granted hereunder and the
Licensor reserves for its own use, all rights of any kind whether now known
or subsequently discovered other than the rights herein licensed to the
Licensee. The Licensee recognizes that the Licensor may already have
entered into, and may in the future enter into, license agreements with
respect to the Property for products which fall into the same general
product category as one or more of the Licensed Products and which may be
similar to one or more of the Licensed Products in terms of use, function,
or otherwise, and the Licensee hereby expressly concedes that the existence
of said licenses does not and shall not constitute a breach of this
Agreement by the Licensor.
(d) The Licensee shall not use the Licensor's name or the Property other
than as permitted hereunder and, in particular, shall not incorporate the
Licensor's name or the Property in the Licensee's corporate or business
name in any manner whatsoever. The Licensee agrees that in using the
Property, it will in no way represent that it has any rights, title or
interest in or to the Property other than those expressly granted herein.
The Licensee further agrees that it will not use or authorize the use of,
either during or after the Term of this Agreement, any configuration,
trademark, trade name or other designation confusingly similar to the
Licensor's name or the Property.
12. GOODWILL AND PROMOTIONAL VALUE
(a) The Licensee recognizes the value of the goodwill associated with the
Property and acknowledges that the Property and all rights therein and the
goodwill pertaining thereto, belong exclusively to the Licensor. The
Licensee
<PAGE>
15
further recognizes and acknowledges that the Property has acquired
secondary meaning in the mind of the public. The Licensee agrees that
during the Term of this Agreement and thereafter, it will not attack the
title of any rights of the Licensor in and to the Property or the validity
of the license being granted herein nor will it express publicly any views,
opinions or statements with respect to the Property or the Licensor that
would run contrary to the preservation of such goodwill and promotional
value.
(b) The Licensee agrees that its use of the Property shall enure to the
benefit of the Licensor and that the Licensee shall not, at any time,
acquire any rights in or to the Property by virtue of any use it may make
of the Property.
(c) The Licensee acknowledges that the Licensor is entering into this
Agreement not only in consideration of the Royalties to be paid hereunder
but also for the promotional value to be secured by the Licensor as a
result of the use of the Property and the Exploitation of the Licensed
Products by the Licensee. Accordingly, the Licensee acknowledges that its
failure to use the Property or to Exploit the Licensed Products in
accordance with the provisions of this Agreement or to fulfill the
Licensee's obligations under the provisions hereof will result in immediate
and irreparable damage to the Licensor in connection with the promotion of
the Property and that the Licensor will have no adequate remedy at law for
the failure by the Licensee to abide by such provisions of this Agreement.
Accordingly, the Licensee agrees that in the event of any such breach by
the Licensee, the Licensor, in addition to all other remedies available to
it hereunder, shall be entitled to injunctive relief against any such
breach as well as such other relief as any court with jurisdiction may deem
just and proper.
<PAGE>
16
13. TRADEMARK, PATENT, AND COPYRIGHT PROTECTION
(a) The License granted hereunder is conditioned upon the Licensee's full
and complete compliance with the applicable provisions of the trademark,
patent, copyright and other intellectual property laws of Canada, the
United States and the foreign country or countries in the Licensed
Territory. The Licensee agrees to keep records of and advise the Licensor
in writing when each of the Licensed Products is first sold in each country
in the Licensed Territory.
(b) The Licensor has the right, but not the obligation, to obtain at its
own cost, appropriate trademark, patent, copyright and other intellectual
property protection for the Property.
(c) The Licensee shall cooperate with the Licensor in protecting and
defending the Property. In the event that any claim or problem arises with
respect to the protection of the Property, the Licensee shall promptly
advise the Licensor in writing of the nature and extent of same. The
Licensor has no obligation to take any action whatsoever in the event that
any claim or problem arises with respect to the protection of the Property.
The Licensor shall have the election, however, to proceed with counsel of
its own choice. Alternatively, the Licensor may, at the Licensor's own
expense, have the Licensee proceed on its behalf with respect to any such
claim or problem, provided, however, that the Licensor's prior express
written permission shall be obtained by the Licensee prior to incurring any
costs chargeable to the Licensor in connection therewith.
(d) The Licensee agrees that it shall not at any time apply for any
copyright, trademark, patent or other intellectual property protection
which would affect the Licensor's ownership of the Property or any rights
therein or thereto nor file any document with any governmental authority or
take any other action which could potentially affect the Licensor's
ownership of the Property, or its rights therein, or aid or abet anyone
else in doing so.
14. INFRINGMENTS
(a) The Licensee agrees to assist the Licensor in the enforcement of any
rights of the Licensor in and to the Property. The Licensor, if it so
desires, may commence or prosecute any claims or suits in its own name or
in the name of the Licensee or join the Licensee as a party thereto. In all
cases, the Licensor shall have the sole right to employ counsel of its
choosing and to direct the handling of the litigation and any settlement
thereof. The Licensee agrees to notify the Licensor in writing of any
infringements or imitations by third parties of the Property, the Licensed
Products or the Promotional and Packaging Material which may come to the
Licensee's attention. The Licensor shall have the sole right to determine
whether or not any action shall be taken on account of any such
infringement or imitation. The Licensee
<PAGE>
17
agrees not to contact the third party, not to make any demands or claims,
not to institute any suit nor take any other action on account of any such
infringements or imitations without first obtaining the prior express
written permission of the Licensor, which permission shall not be
unreasonably withheld. All costs and expenses, including attorneys' fees
and disbursements, incurred in connection with any suit instituted by the
Licensee without the consent of the Licensor shall be borne solely by the
Licensee.
(b) The Licensor shall be entitled to receive and retain all amounts
awarded as damages, profits or otherwise in connection with any suit or
claim under this paragraph.
15. INDEMNIFICATION
(a) The Licensee hereby agrees to be solely responsible for, defend, hold
harmless, exonerate and indemnify the Licensor and its directors, officers,
employees, agents and other representatives from and against any claims,
demands, cause of action, suits, losses, damages and expenses in connection
therewith (including reasonable attorney's fees and disbursements) directly
or indirectly arising out of, or resulting from:
(i) any acts or omissions of the Licensee in connection with either
the exercise of its rights hereunder or the Exploitation of the
Licensed Products;
(ii) breach of any provision in this Agreement by the Licensee;
(iii) the use of any team symbol, name, insignia, logo or mark;
(iv) allegations of unauthorized use of any patent, process, idea,
method, material or device by the Licensee relating to the
Licensee's use of the Property, design or Exploitation of the
Licensed Products or use of the Promotional and Packaging
Material; or
(v) any alleged defect in the Licensed Products or Promotional and
Packaging Material or of any other product or service of the
Licensee.
(b) The Licensee shall be given prompt written notice of and shall have
the right to undertake and conduct the defence of any such claim, demand,
suit or cause of action. The Licensee shall have the right to defend any
such claim, demand, suit or cause of action with attorneys of its own
selection, such attorneys not to be selected without the prior written
approval of the Licensor, which approval shall not be unreasonably
withheld. Should the Licensee decide not to defend such claim, demand,
suit or cause of action, the
<PAGE>
18
Licensor shall have the right to defend the claim, demand, suit or cause
of action with attorneys of its own selection. In any instance to which
the foregoing indemnities pertain, the Licensee shall keep the Licensor
fully advised of all developments and shall not enter into a settlement of
any such claim or action without the Licensor's prior written approval,
which shall not be unreasonably withheld.
(c) The Licensor hereby agrees to be solely responsible for, defend, hold
harmless, exonerate and indemnify the Licensee, its directors, officers,
employees, agents and other representatives from and against any losses,
damages and expenses (including reasonable attorney's fees and
disbursements) arising out of, or resulting from:
(i) a judgment resulting from a claim that the use of the Property
as authorized in this Agreement violates or infringes upon the
trademark, copyright or other rights of a third party in or to
the Property; or
(ii) a breach of this Agreement by the Licensor.
(d) The Licensor shall be given prompt written notice of and shall have
the right to undertake and conduct the defence of any such claim, demand,
suit or cause of action. The Licensor shall have the right to defend any
such claim, demand, suit or cause of action with attorneys of its own
selection, such attorneys not to be selected without the prior written
approval of the Licensee, which approval shall not be unreasonably
withheld. Should the Licensor decide not to defend such claim, demand,
suit or cause of action, the Licensee shall have the right to defend the
claim, demand, suit or cause of action with attorneys of it own selection.
In any instance to which the foregoing indemnities pertain, the Licensor
shall keep the Licensee fully advised of all developments and shall not
enter into a settlement of any such claim or action without the Licensee's
prior written approval, which shall not be unreasonably withheld.
16. INSURANCE
(a) The Licensee shall, throughout the Term of this Agreement, obtain and
maintain at its own cost and expense from a qualified insurance company
acceptable to the Licensor acting reasonably, standard Product Liability
Insurance, the form of which must be acceptable to the Licensor, naming the
Licensor as an additional named insured. Such policy shall provide
protection against any and all claims, demands and causes of action arising
out of any defects or failure to perform, alleged or otherwise, of the
Licensed Products, the Promotional and Packaging Materials or any material
used in connection therewith or any use thereof. The amount of coverage
shall be a minimum of Two Million Dollars ($2,000,000) combined single
limit, with no deductible amount, for each single occurrence for bodily
injury and for property damage.
<PAGE>
19
The policy shall provide for a minimum of ten (10) days prior written
notice to the Licensor from the insurer by registered or certified mail,
return receipt requested, in the event of any proposed modification,
cancellation or termination. The Licensee agrees to furnish the Licensor
with a certified copy of a certificate of insurance (the "Product
Liability Certificate") evidencing same within thirty (30) days after
execution of this Agreement and in no event shall the Licensee Exploit
the Licensed Products prior to receipt by the Licensor of the Product
Liability Certificate.
(b) The Licensee shall, throughout the Term of this Agreement, obtain and
maintain at its own cost and expense from a qualified insurance company
acceptable to the Licensor acting reasonably, standard Advertiser's
Liability Insurance, the form of which must be acceptable to the Licensor,
naming Licensor as an additional named insured. The amount and coverage
shall be a minimum of Two Million Dollars ($2,000,000) with no deductible
amount. The policy shall provide for a minimum of ten (10) days prior
written notice to the Licensor from the insurer by registered or certified
mail, return receipt requested, in the event of any proposed modification,
cancellation or termination. The Licensee agrees to furnish the Licensor
with a certified copy of a certificate of insurance (the "Advertiser's
Liability Certificate") evidencing same within thirty (30) days after the
date of execution of this Agreement and in no event shall the Licensee
Exploit the Licensed Products prior to the receipt by the Licensor of the
Advertiser's Liability Certificate.
17. EXPLOITATION BY THE LICENSEE
(a) The Licensee agrees to commence distribution, shipment and retail sale
of all of the Licensed Products in commercially reasonable quantities in
each of the countries within the Licensed Territory by December 1, 1999.
The Exploitation of all Licensed Products shall at all times be conducted
in accordance with all applicable laws.
(b) The Licensee further agrees that during the entire Term of this
Agreement, the Licensee will continue to diligently and continuously
distribute, ship and sell all of the Licensed Products throughout the
Licensed Territory and that it will use its best efforts to make and
maintain adequate arrangements for the distribution, shipment and sale
necessary to meet the demand for all such Licensed Products throughout the
Licensed Territory. The Licensee further agrees to exercise all reasonable
efforts to advertise and promote the Licensed Products at its own expense
throughout the Term as widely as practicable within the Licensed Territory
to the best advantage and enhancement of the Property.
(c) The Licensee agrees that the Licensed Products will be sold, shipped
and distributed outright, at a competitive price that does not exceed the
price generally and customarily charged in the particular trade, and not on
an approval, consignment, or sale or return basis. The Licensee will not
<PAGE>
20
discriminate against the Licensed Products by granting commissions or
discounts to salesmen, dealers or distributors in favour of the Licensee's
other products. The Licensee agrees that the Licensed Products will only be
sold to retail stores and merchants for sale, shipment and distribution
direct to the public, or to jobbers, wholesalers and distributors for sale,
shipment and distribution to retail stores and merchants. If any Licensed
Products are sold for the Licensee by an agent, distributor or other third
party, the agreement between the third party and the Licensee must require,
and the Licensee must ensure, that the third party complies with all of the
provisions of this Agreement as though the third party were the Licensee.
(d) Unless specifically authorized in advance by the Licensor in writing,
the Licensee shall make available for purchase Licensed Products featuring
the names and likenesses of a minimum of twenty (20) different Players on
the Licensed Products during each year of this Agreement with no less than
four (4) different Players being featured in each Licensed Product.
18. PREMIUMS, PROMOTIONS AND SECONDS
(a) The Licensee shall not utilize or license third parties to utilize any
of the Licensed Products in connection with any premium, giveaway, mail
order, sales at arenas, promotional arrangement or fan club without the
prior written approval of the Licensor.
(b) The Licensee agrees not to offer for sale, sell, ship, advertise,
promote, distribute or use for any purpose whatsoever or to permit any
third party to offer for sale, sell, ship, advertise, promote, distribute
or use for any purpose whatsoever any Licensed Product or Promotional and
Packaging Material relating to the Licensed Products which is (i) damaged,
defective, seconds or otherwise fails to meet the specifications and
quality standards or trademark, patent, copyright and other intellectual
property usage and notice requirements of this Agreement (collectively, the
"Damaged Products"), or (ii) to be sold as a package with, tied to or in
conjunction with any other products or services. Disposition of Damaged
Products shall be conducted in a manner to be agreed upon by the Licensor
and the Licensee, both acting in good faith.
19. ASSIGNABILITY AND SUBLICENSING
(a) The License granted hereunder is and shall be personal to the Licensee
and shall not be assigned in whole or in part by any act of the Licensee or
by operation of law or otherwise encumbered. This License shall be subject
to immediate termination by the Licensor upon the occurrence of a change of
control of the Licensee without the prior written approval of the Licensor
having been first obtained. The Licensee shall not have the Licensed
Products manufactured for the Licensee by a third party nor grant any
sublicense unless the Licensee first obtains the Licensor's prior written
approval and such manufacturer shall have signed an agreement in the form
<PAGE>
21
attached hereto as Schedule "G". Any attempt on the part of Licensee to
arrange for manufacture by a third party or to sublicense or assign to
third parties its rights in whole or in part under this Agreement without
the prior written approval of the Licensor shall constitute a material
breach of this Agreement and shall result in the right of the Licensor to
immediately terminate this Agreement at its option.
(b) The Licensor shall have the right to assign its rights and obligations
under this Agreement without the approval of the Licensee.
20. TERMINATION
The following termination rights are in addition to the termination
rights provided elsewhere in this Agreement:
(a) IMMEDIATE RIGHT OF TERMINATION - The Licensor shall have the right to
immediately terminate this Agreement by giving written notice to the
Licensee if the Licensee does any of the following:
(i) Uses any Property, Exploits in any way any Licensed Product or
uses Promotional and Packaging Material without having the
prior written approval of the Licensor as provided for by the
provisions of this Agreement or continues to use any Property,
Exploit in any way any Licensed Product or use Promotional and
Packaging Material after receipt of notice or deemed notice
from the Licensor disapproving or withdrawing approval of same;
(ii) Becomes subject to any voluntary or involuntary order of any
governmental agency involving the recall of any of the Licensed
Products or Promotional and Packaging Material because of
safety, health, environmental or other hazards or risks to the
public;
(iii) It or its controlling shareholders or any of their officers,
directors or employees take any actions in connection with the
use of the Property, the Exploitation of the Licensed Products
or the use of the Promotional and Packaging Material which in
the reasonable opinion of the Licensor, damages or reflects
adversely upon the Licensor or the Property;
(iv) Breaches any of the provisions of this Agreement relating to
the unauthorized assertion of rights in and to the Property;
(v) Two or more times during a twelve month period fails to make
timely payment of Royalties or Guaranteed Minimum Royalties
when due or fails to make timely submissions of Royalty
Statements when due;
<PAGE>
22
(vi) Breaches any of the provisions of this Agreement prohibiting
the Licensee from directly or indirectly arranging for the
manufacture by third parties, permitting a change of control of
the Licensee, or assigning, transferring, sublicensing or
otherwise encumbering this Agreement or any of its rights or
obligations hereunder;
(vii) Fails to obtain or maintain product liability or advertising
insurance as required by the provisions of this Agreement; or
(viii) Files a petition in bankruptcy or is adjudicated a bankrupt, or
if a petition in bankruptcy is filed against the Licensee or if
the Licensee becomes insolvent, or makes an assignment for the
benefit of its creditors or an arrangement pursuant to any
bankruptcy laws, or if Licensee discontinues its business, or
if a receiver is appointed for it or its business. In the event
of such termination, neither Licensee nor its receivers,
representatives, trustees, agents, administrators, successors
or assigns shall have any right to sell, exploit or in any way
deal with the Property, the rights granted hereunder or with
any Licensed Product or Promotional and Packaging Material.
(b) IMMEDIATE RIGHT TO TERMINATE A PORTION OF THE AGREEMENT - The Licensor
shall have the right to immediately terminate the portion(s) of this
Agreement relating to any Licensed Product(s) and any country or countries
in the Licensed Territory in connection with which the Licensee, for any
reason, fails to commence sale, shipment and distribution of any such
Licensed Product(s) in any such country or countries in accordance with the
terms of this Agreement.
(c) RIGHT TO TERMINATE ON NOTICE - Without limiting the applicability of
paragraphs 20(a) or 20(b), on occurrence of one of the following events,
this Agreement may be terminated upon thirty (30) days written notice,
provided that during the thirty (30) day period the defaulting party fails
to cure the breach:
(i) The Licensor shall have the right to terminate the portion(s)
of this Agreement relating to any Licensed Product(s) and any
country or countries in the Licensed Territory if the Licensee,
for any reason, after the commencement of Exploitation of such
Licensed Product(s) in such country or countries, fails to
continue to Exploit such Licensed Product(s) in commercially
acceptable quantities in such country or countries for two
consecutive Royalty Periods.
<PAGE>
23
(ii) The Licensor shall have the right to terminate this Agreement
if the Licensee violates any of its obligations under this
Agreement including, without limitation, its payment
obligations.
(iii) Either party shall have the right to terminate this Agreement
in the event that the other party commits a material breach of
any other provision of this Agreement.
21. POST-TERMINATION AND EXPIRATION RIGHTS AND OBLIGATIONS
(a) If this Agreement is terminated under paragraph 20(a), (c)(ii) or
(c)(iii), the Licensee and its creditors, receivers, representatives,
trustees, agents, administrators, successors and permitted assigns of the
Licensee shall have no right to use the Property, Exploit the Licensed
Products or use in any way any Promotional and Packaging Material relating
to the Licensed Products. Upon any such termination, the Licensee shall
forthwith deliver all Licensed Products remaining on hand to the Licensor.
The Licensor may dispose of such Licensed Products at its discretion.
(b) Upon termination or expiration of this Agreement, as the case may be,
notwithstanding anything to the contrary herein, all Royalties on sales,
shipments and/or distributions theretofore made shall become immediately
due and payable and no Guaranteed Minimum Royalty paid to the Licensor
shall be refunded. The obligation to pay outstanding Guaranteed Minimum
Royalties shall not be extinguished by any termination or expiration of
this Agreement. In the event of the termination of this Agreement by the
Licensor under paragraph 20(a), (c)(ii) or (c)(iii), the Licensee shall
immediately pay to the Licensor as liquidated damages all Guaranteed
Minimum Royalties agreed to be paid hereunder to the end of the Term.
(c) After termination or expiration of this Agreement, as the case may be,
under any provision other than paragraph 20(a), (b) or (c), the Licensee
shall immediately cease to manufacture the Licensed Products, provided that
the Licensee may dispose of or liquidate the Licensed Products which are on
hand at the time notice of termination is received or upon the expiration
of the Term for a period of ninety (90) days after notice of termination or
such expiration, as the case may be, and further provided that the
Royalties with respect to that period are paid, and the appropriate
statements with respect to that period are furnished, in accordance with
the provisions hereof. Amounts paid as Guaranteed Minimum Royalties during
the Term of this Agreement shall not be used to reduce any Royalties that
may become payable on sales of Licensed Products during this 90-day period.
During such ninety (90) day period, the Licensor may itself use or license
the use of the Property in any manner and at any time anywhere in the
world, as the Licensor sees fit. Any Licensed Products remaining on hand
at the end of the
<PAGE>
24
90-day sell-off period shall be sent forthwith to the Licensor. The
Licensor may dispose of such Licensed Products at its discretion.
(d) After the expiration or termination of this Agreement, all rights
granted to the Licensee shall forthwith revert to the Licensor who shall be
free to license others to use the Property in connection with the
Exploitation of the Licensed Products and the use of the Promotional and
Packaging Material, and the Licensee shall refrain from further use of the
Property or any further reference to it, either directly or indirectly, in
connection with any use of any of the Licensed Products. The Licensee shall
further turn over to the Licensor all artwork, films, transparencies,
separations, printing plates, screens, molds and other materials and
devices (collectively the "Reproduction Materials and Devices") which
reproduce the Licensed Products and the Promotional and Packaging Material,
or shall give the Licensor satisfactory evidence or assurance that such
materials and devices will no longer be used to reproduce the Licensed
Products or Promotional and Packaging Material. The Licensee shall be
responsible to the Licensor for any damages caused by the unauthorized use
by the Licensee or by others of the Reproduction Materials and Devices.
(e) The Licensee acknowledges that its failure to cease the use of the
Property, the Exploitation of the Licensed Products and the use in any way
of the Promotional and Packaging Material relating to the Licensed Products
at the termination or expiration of this Agreement will result in immediate
and irreparable damage to the Licensor and to the rights of any subsequent
licensee of the Licensor. The Licensee acknowledges and admits that there
is not an adequate remedy at law for failure to cease such activities and
the Licensee agrees that in the event of such failure, the Licensor shall
be entitled to equitable relief by way of injunctive relief and such other
relief as any court with jurisdiction may deem just and proper.
22. FINAL STATEMENT UPON TERMINATION OR EXPIRATION
Within fifteen (15) days after termination or expiration of this
Agreement, as the case may be, the Licensee shall deliver to the Licensor a
statement (the "Inventory Statement") indicating the number and description
of the Licensed Products which it had on hand or in the process of
manufacturing as of the expiration or termination date. The Licensor shall
have the option of conducting a physical inventory during normal business
hours at the time of expiration or termination or at a later date in order
to ascertain or verify the Inventory Statement. In the event that the
Licensee refuses to permit the Licensor to conduct such physical inventory,
the Licensee shall forfeit its rights hereunder to dispose of such
inventory. In addition to such forfeiture, the Licensor shall have recourse
to all other remedies available to it.
<PAGE>
25
23. RECITALS
The parties hereto acknowledge and agree that the recitals contained
in this Agreement are true and correct as of the date first above written.
24. NOTICES
All notices or other communications or deliveries required or desired
to be sent to either party shall be in writing and sent by registered or
certified mail, postage prepaid, return receipt requested, by prepaid
courier, or by facsimile charges prepaid to the following addresses:
If to the Licensor: NHLPA
777 Bay Street
Suite 2400
Toronto, ON M5G 2C8
Attention: Ted Saskin
Telecopier No. (416) 408-3685
If to the Licensee: Ultimate Sports Entertainment Inc.
2444 Wilshire Blvd.
Suite 414
Santa Monica, CA 90403
Attention: Rick Licht
Telecopier No. (310) 829-9596
Either party may change such address by notice in writing to the other
party.
25. RELATIONSHIP OF THE PARTIES
This Agreement does not create a partnership or joint venture between
the parties and the Licensee shall have no power to obligate or bind the
Licensor in any manner whatsoever.
26. APPLICABLE LAW AND DISPUTES
(a) Choice of Law. This Agreement shall be governed by the laws of
Ontario, Canada. It is further agreed that all disputes, controversies or
differences whatsoever arising under, in connection with, or incidental to
the business relationship of which this Agreement is a part shall be
governed exclusively by the laws of the Province of Ontario and the laws of
Canada applicable therein except to the extent forbidden by the public
policy of the Licensee's home province or state; Licensee hereby expressly
waives any other benefit, use or right to which it might otherwise be
entitled under the laws of any province, state or nation other than the
Province of Ontario and Canada.
(b) Choice of Forum.
<PAGE>
26
(i) It is hereby agreed by and between the parties to this
Agreement that, subject to the exception set forth in
subparagraph (ii) hereof, all disputes, controversies or
differences whatsoever arising under, in connection with, or
incident to this Agreement or the business relationship of
which this Agreement is a part shall be litigated, if at all,
exclusively in and before a court located in the Province of
Ontario, Canada, and in no other court of any other province,
state or nation. Further, Licensee hereby attorns to the
jurisdiction and judgment of the courts of the Province of
Ontario, Canada, and agrees that any judgment or other ruling
issued by an Ontario court shall be enforceable in any other
jurisdiction in which the Licensee may be found or may have
assets.
(ii) The Licensor may bring suit against the Licensee in a forum
other than Ontario, Canada provided that: (A) such suit is
solely for an injunction to enforce the terms and conditions of
this Agreement and is not for damages; (B) such suit is brought
against the Licensee in a Canadian province or territory, or in
an American state or district, in which the Licensee is doing
business; and (C) the Licensee is not a resident of Ontario
and/or would not otherwise be directly subject to an injunction
issued by an Ontario court.
27. CAPTIONS
The captions used in connection with the paragraphs and subparagraphs
of this Agreement are inserted only for purpose of reference. Such captions
shall not be deemed to govern, limit, modify or in any other manner affect
the scope, meaning or intent of the provisions of this Agreement or any
part hereof nor shall such captions otherwise be given any legal effect.
28. WAIVER
(a) No waiver by either party of a breach or a default hereunder shall be
deemed a waiver by such party of a subsequent breach or default of a like
or similar nature.
(b) Resort by either party hereto to any remedies referred to in this
Agreement or arising by reason of a breach of this Agreement by the other
party shall not be construed as a waiver by the non-breaching party of its
right to resort to any and all other legal and equitable remedies available
to such party. Further, failure on the part of either party to resort to
any remedies referred to herein shall not be construed as a waiver of any
other rights and remedies to which such party is entitled, whether under
the terms of this Agreement or otherwise.
<PAGE>
27
29. SURVIVAL OF THE RIGHTS
Notwithstanding anything to the contrary contained herein, such
obligations which remain executory after the termination hereof by
expiration of the Term of this Agreement, or otherwise, shall remain in
full force and effect until discharged by performance and such rights as
pertain thereto shall remain in force until their expiration.
30. SEVERABILITY
In the event that any term or provision of this Agreement 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
term or provision and this Agreement shall be interpreted and construed as
if such term or provision, to the extent that same shall have been held to
be invalid, illegal or unenforceable, had never been contained herein.
31. TIME OF THE ESSENCE
Time is of the essence with respect to all aspects of this Agreement.
Extension, waiver or variation of any provision of this Agreement shall not
be deemed to affect this provision and there shall be no implied waiver of
this provision.
32. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which, taken together, shall
constitute one and the same instrument.
33. ENTIRE AGREEMENT
This Agreement represents the entire understanding between the parties
hereto with respect to the subject matter hereof and this Agreement
supersedes all previous representations, understanding or agreements, oral
or written, between the parties with respect to the subject matter hereof
and cannot be modified except by a written instrument signed by the parties
hereto.
<PAGE>
28
By their execution below, the parties hereto have agreed to all of the
terms and conditions of this Agreement.
ULTIMATE SPORTS ENTERTAINMENT INC.
per: /s/ Frederick R. Licht
------------------------------
Rick Licht
NATIONAL HOCKEY LEAGUE PLAYERS'
ASSOCIATION
per: /s/Ted Saskin
------------------------------
Ted Saskin
Senior Director
Business Affairs and Licensing
<PAGE>
SCHEDULE A
DESCRIPTION OF THE PROPERTY
The trademarks of the Licensor as set forth in Schedule "B" and the names,
nicknames, likenesses, pictures, photographs, facsimiles, signatures,
descriptions, playing records, voices, biographical sketches and other
indicia and identifying characteristics and marks of all Players who have
executed a Group Licensing Authorization Agreement.
<PAGE>
SCHEDULE B
LIST OF TRADEMARKS
1. National Hockey League Players' Association
2. NHLPA
3. Logo of NHLPA
<PAGE>
SCHEDULE C
LIST OF LICENSED PRODUCTS
Hockey only comic book type publication featuring at least four (4) different
Players in each publication.
<PAGE>
SCHEDULE D
LICENSED TERRITORY
Worldwide
<PAGE>
SCHEDULE E
LOGO OF LICENSOR
<PAGE>
SCHEDULE F - PAGE 1
ROYALTY REPORT FOR THE NATIONAL HOCKEY LEAGUE PLAYERS' ASSOCIATION
<TABLE>
<S> <C> <C>
Licensee: Date Prepared: Prepared By:
------------------------- ----------------- ------------------
Address: Period Covered: Signature:
------------------------- ----------------- ------------------
Contract Term: Print Name:
------------------------- ----------------- ------------------
</TABLE>
<TABLE>
<CAPTION>
MONTH ROYALTY DUE ROYALTY DUE ROYALTY DUE TOTAL ROYALTY MINIMUM TOTAL PAID ROYALTY DUE
98/99 PRODUCT 99/00 PRODUCT 00/01 PRODUCT DUE GUARANTEE
- ----------- ------------- ------------- ------------- ------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
July
August
September
October
November
December
January
February
March
April
May
June
TOTALS:
</TABLE>
<PAGE>
SCHEDULE F - PAGE 2
ROYALTY REPORT FOR THE NATIONAL HOCKEY LEAGUE PLAYERS' ASSOCIATION
TOTALS
<TABLE>
<S> <C> <C>
Licensee: Date Prepared: Prepared By:
------------------------- ----------------- ------------------
Address: Period Covered: Signature:
------------------------- ----------------- ------------------
Contract Term: Print Name:
------------------------- ----------------- ------------------
</TABLE>
<TABLE>
<CAPTION>
MONTH GROSS SALES DISCOUNTS RETURNS NET SALES
- ---------- ----------- --------- ------- ---------
<S> <C> <C> <C> <C>
July
August
September
October
November
December
January
February
March
April
May
June
TOTALS:
</TABLE>
<PAGE>
SCHEDULE F - PAGE 3
ROYALTY REPORT FOR THE NATIONAL HOCKEY LEAGUE PLAYERS' ASSOCIATION
<TABLE>
<S> <C> <C>
Licensee: Date Prepared: Prepared By:
------------------------- ----------------- ------------------
Address: Period Covered: Signature:
------------------------- ----------------- ------------------
Contract Term: Print Name:
------------------------- ----------------- ------------------
</TABLE>
<TABLE>
<CAPTION>
ITEM DESCRIPTION STOCK WHOLESALE QUANTITY GROSS LESS LESS NET SALES ROYALTY ROYALTY DATE
98/99 PRODUCT NUMBER PRICE PER SHIPPED SALES RETURNS PERMITTED RATE
UNIT DISCOUNTS
- ---------------- ------ --------- -------- ----- ------- --------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTALS:
</TABLE>
<PAGE>
SCHEDULE G
MANUFACTURER'S AGREEMENT
Licensee: Ultimate Sports Entertainment Inc.
Licensed Territory: Worldwide
Licensed Products: Hockey only comic book type publication featuring at least
four (4) different Players in each publication
The undersigned understands that the National Hockey League Players'
Association ("NHLPA") has authorized the above-named Licensee to manufacture
the above named Licensed Products utilizing certain names, logos, symbols,
likenesses, signatures, pictures, descriptions, playing records and
biographical sketches which are the property of NHLPA ("the Rights"). In
order to induce NHLPA to consent to the manufacture of the Licensed Products
by the undersigned, the undersigned agrees that, without the prior written
consent of NHLPA in each instance, it will not manufacture the Licensed
Products for anyone but the Licensee; that it will not sell the Licensed
Products to anyone but the Licensee; that it will not knowingly manufacture
the Licensed Products for distribution in any territory other than the
above-named Licensed Territory; that it will not (unless NHLPA otherwise
consents in advance in writing) manufacture any other merchandise utilizing
any aspect of the Rights; that it will permit such representatives as NHLPA
may from time to time designate to inspect the activities of the undersigned
in relation to its manufacture of the Licensed Products; and that whenever
the Licensee ceases to require the undersigned to manufacture the Licensed
Products, the undersigned will return to the Licensee any molds, plates,
engravings, screens, or other devices used to reproduce any of the Rights, or
at the direction of the Licensee will give satisfactory evidence or assurance
to the Licensor that such devices will no longer be used to reproduce the
Licensed Products. NHLPA shall be entitled to invoke any remedy permitted by
law for violation of this agreement by the undersigned.
[NAME OF MANUFACTURER]:
By:
----------------------------
Title:
-------------------------
<PAGE>
DIAMOND SUPPLIER INFORMATION SHEET
COMIC DISTRIBUTOR, INC.
Dear Vendor,
The below is our understanding of the terms of sales between Diamond Comic
Distributors Inc., and your company. If you are in agreement with these
terms, we ask that you sign below, and return this form to us at your
earliest convenience.
If for any reason you disagree with any part of the supplier information
terms sheet, please contact your Branch Manager at (410) 560-7100 for
clarification, or draft what you believe your terms to be, and either return
with this form to the address below, or fax it to (410) 560-7148.
/s/Paul Fairchild Publisher 08/27/99
- ------------------ --------- --------
Supplier Signature Title Date
Company Name: Ultimate Sports Entertainment, Inc.
Check should be made payable to: Ultimate Sports Entertainment, Inc.
Remittance Address: 2444 Wilshire Blvd. Suite 414
Santa Monica, CA 90403
Contact: Paul Fairchild Title: Paul Fairchild
Phone: 310-829-9590 Fax: 310-829-9590 E-mail Address: [email protected]
Contact for shipping problem (if different from above): Title:
Phone: Fax: E-mail Address:
Advertising Contact: Same Fax: Same E-mail Address: Same
DISCOUNT/TERMS:
BASE DISCOUNT: 60% NET COST:
BILLING TERMS: Net 30
EARLY PAYMENT DISCOUNT/TERMS:
SUPPLIER DOES NOT OFFER ANY EARLY PAYMENT DICOUNT AT THIS TIME:
COMMENTS:
SHIPPING TERMS:
Plus Freight: Freight Paid: Freight Rebate: 2% Freight Allowance:
Freight on Board:
Manufactured at: Quebecor
Phone: Fax: E-mail Address:
Shipped from (if different from manufactured at)
Phone: Fax: E-mail Address:
Contact for transportation/Pick-up options
Phone: Fax: E-mail Address:
ORDERING INFORMATION:
Do we have to order in increments/case qty's? If so, what amount? N/A
How many shipping points do you allow? Reorders to all locations
Dropship requirements/minimums: None
Reorder increments/minimums: None
<PAGE>
Diamond
Comic Distributors, Inc. SUPPLIER INFORMATION SHEET
Company Name: Lobito Publishing Co./DBA Allstar Arena
Check Payable to: Lobito Publishing Co.
Address: 6565 Sunset Blvd. Suite 418
Los Angeles, CA 90028
Contact: Joe Yukich
Phone: 213-467-4441 Fax #: 213-467-0464
Contact for shipping problems:
Phone: Fax #:
DISCOUNT/TERMS:
DISCOUNT: 60% NET COST:
TERMS: 30 DAYS
INCENTIVE DISC/TERMS:
COMMENTS:
PUBLISHER DATABASE:
SHIPPING TERMS:
Plus frt. Frt. paid Frt. Rebate Frt. Allow 2%
Manufactured at: Quebecor
or Shipped from:
ORDERING INFORMATION
Do we have to order in increments/case qty.'s? If so, what amount? None
How many shipping points will the publisher allow? All on reorders
Dropship requirements/minimums: none
Dear Vendor:
The above is our understanding of the terms and sale between Diamond Comic
Distributors Inc., and your company. If you are in agreement with these
terms we ask that you sign below, and return this form to us at your earliest
possible convenience.
If for any reason you disagree with any part of the supplier information
terms form, please contact Tom Stormonth at (410) 560-7100 for clarification,
or draft what you believe your terms to be, and either return with this form
to the above address, or fax it to (410) 560-7148.
Signature /s/Joseph Yukich Title Vice President Date 12/1/97
-------------------- ------------------ -----------
<PAGE>
DIAMOND COMIC DISTRIBUTORS NEW COMIC PUBLISHERS INFORMATION
(UPDATED JULY 13, 1999)
<TABLE>
<S> <C>
OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
PREVIEWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
PREVIEWS ADULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Order Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
DIAMOND DATELINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
DIAMOND DIALOGUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
DIAMOND'S PHILOSOPHIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
CONTACT INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
CREATING A SUBMISSIONS PACKAGE . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Samples. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Proposed Terms of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Product Information Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Cover Graphics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
CONTINUING SOLICITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
PREVIEWS 1999 PUBLISHING SCHEDULE-EXPLANATION OF TERMS . . . . . . . . . . . . . . .8
PROMOTIONAL OPPORTUNITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Advertisements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Catalog Flyer Pack Inserts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Targeted Distribution of Promotional Materials . . . . . . . . . . . . . . . . . . 10
Targeted Mailings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Discount Group Average Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Mass E-mails . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Order Form Incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Other Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Promoting Outside of Diamond . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DIAMOND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Order Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Returnability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
BRIEF LIST OF COMIC BOOK PRINTERS. . . . . . . . . . . . . . . . . . . . . . . . . 14
LIST OF OTHER INDUSTRY PUBLICATION . . . . . . . . . . . . . . . . . . . . . . . . 14
SAMPLE SOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
BLANK PRODUCT INFORMATION SHEET. . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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OVERVIEW
Thank you for choosing Diamond Comic Distributors as part of your
distribution network. Diamond Comic Distributors is the largest distributor
of English-language comics in the world and the exclusive distributor to
comic book retailers for comic book retailers for Dark Horse Comics, DC
Comics, Image Comics, and Marvel Comics. With five Distribution Centers and
13 dropship points in the continental United States and a facility in the
United Kingdom, Diamond services over 4500 retail accounts worldwide. By
offering you numerous editorial and promotional opportunities to reach those
retailers, we are confident that you will be satisfied with both Diamond's
distribution and marketing capabilities.
Please take some time to thoroughly read these materials. This package
includes several useful tools for comic publishers. This pamphlet contains
guidelines for creating a submissions package, insights into the comic
industry, promotional ideas, and an introduction to some of Diamond's
services and policies. In addition to this pamphlet, you will find a DIAMOND
ADVERTISING & MARKETING SERVICES RATE CARD, an AD SPECIFICATIONS CARD, and a
PREVIEWS PUBLISHING SCHEDULE.
PREVIEWS
Diamond rarely makes purchases in advance. Rather, we solicit our customers
for orders, compile the numbers, and base our Purchase Orders on the feedback
that we receive. Our Purchase Orders may also request extra inventory for
Diamond in anticipation of subsequent retailer orders. Our main vehicle for
soliciting products to our customers is PREVIEWS. Published monthly, PREVIEWS
is a 400+ page catalog containing information on new comic books, graphic
novels, trading cards, videos, toys, and other comic book-related
merchandise. In addition to providing comic book retailers with the a copy of
the catalog to order from, Diamond also makes available bulk copies of
PREVIEWS to sell to consumers.
Being available to consumers as well as retailers, PREVIEWS has a print run
of roughly 90,000 copies. Because PREVIEWS is the main vehicle for
solicitations, it contains many advertising opportunities for suppliers.
PREVIEWS ads are some of the most cost-effective advertisements in the
industry.
PREVIEWS solicits for products two months in advance. Our January cover date
PREVIEWS has listings for products scheduled to ship in March. Many of the
products solicited in PREVIEWS, comic books and graphic novels included, have
not been produced at that time. Based on retailer orders through PREVIEWS,
Diamond will issue your Purchase Orders roughly two weeks before the
beginning of the month that your products are solicited to ship in. Diamond
buys and sells products on a non-returnable basis, hence our suppliers know
that our sales are final. Knowing what we will order in advance can help you
to determine your print quantities and allocate your production resources in
the most effective way possible.
PREVIEWS ADULT
For products that are intended for more mature audiences, we publish a
monthly supplement to PREVIEWS called PREVIEWS ADULT. Like PREVIEWS, it is
available to both retailers and consumers of legal age. This supplement,
provides more extensive descriptions and graphics of products we carry that
are adult-oriented.
ORDER FORMS
Our customers order products through PREVIEWS using an order form provided by
Diamond. PREVIEWS is directed at consumers, yet it contains much information
that our retailers need that consumers do not. Some information, such as our
pricing and retailer buying incentives, is better left out of consumer
targeted publications. The PREVIEWS RETAILER ORDER FORM is our primary means
to convey our pricing, terms of sale, and other retailer-oriented
information. It is also a tool that we use to solicit retailer-specific
items, such as retailer incentives and Retailer Resources (our selection of
products devoted to comic book racks, books on succeeding in small business,
and other items that help retailers run their businesses).
PREVIEWS is a sales tool for our retailers. Consumers often want to order
specific items in PREVIEWS that their comic book retailer may not have
intended on ordering. For this purpose, we publish a PREVIEWS CONSUMER ORDER
FORM, which retailers pass out to consumers who buy PREVIEWS for special
orders.
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Advertising opportunities are available to publishers in both PREVIEWS ORDER
FORMS.
DIAMOND DATELINE
Diamond's weekly retailer newsletter, DIAMOND DATELINE, contains
up-to-the-minute product changes and news stories. It updates
customers--before they place their orders--on content, price, shipping, and
creative or format changes. Additionally, it is a vehicle with which to
update retailers on late-breaking news stories which affect the industry or
products solicited in the most recent issue of PREVIEWS. Publishers may opt
to advertise in DIAMOND DATELINE or have a poster or flyer inserted into its
pages.
DATELINE also contains a solicitation opportunity, the PREVIEWS UPDATE, which
solicits for products outside of the normal PREVIEWS cycle. Being a weekly
publication, the turnaround time for orders on products solicited through
DIAMOND DATELINE is much quicker.
DIAMOND DIALOGUE
DIAMOND DIALOGUE is our full-color, monthly news magazine that we use to
promote exciting new products and convey industry happenings to our
customers. As with our other publications, advertising is available in
DIAMOND DIALOGUE, which is aimed at and distributed to retailers. DIAMOND
DIALOGUE is also distributed to all of the leading press organizations and
many of Diamond's largest suppliers.
DIAMOND'S PHILOSOPHIES
Founded in 1982, Diamond Comic Distributors has always been a service
oriented-company. We go to great lengths to provide the best service possible
to our comic book retailers. One way that we are able to service our
customers is by offering a diverse product mix. We supply our customers with
trading cards, toys, videos, role-playing and collectible card games,
international merchandise, and, of course, comics. We pride ourselves on the
product selection that we are able to offer. Each month, we offer hundreds of
new comics publications through PREVIEWS, allowing our customers, in turn, to
offer a diverse or specialized product mix to their customers.
Diamond's direct and indirect costs include editing and printing PREVIEWS,
issuing Purchase Orders, physically distributing products, issuing payments
to our suppliers, paying rent at our Distribution Centers and Home Office,
etc. If we do not feel that a specific product will reach our benchmark, we
may choose not to list it. If our goal for a product line is not being met,
we may choose to discontinue carrying it. The benchmark that we set for
comics being solicited through PREVIEWS is $2500 retail.
When we agree to distribute a comic or comic line, we make a commitment to
that series. We understand that it can take time for new products to catch
on, and we want to give promising new products time to find their audience.
Generally, we give comic series three to five issues to reach our benchmark
before we choose to discontinue it. If the series is below our benchmark but
exhibits a trend towards growth, we may choose to continue carrying it.
CONTACT INFORMATION
Below are the names, numbers, and e-mail addresses of the people you will
most likely be dealing with. If you have any questions on these materials,
feel free to the contact members of our Comic Purchasing staff. If you have
any questions about advertising space or specifications, please contact Steve
Bond.
<TABLE>
<CAPTION>
Name Position Phone E-mail address
- ---- -------- ----- --------------
<S> <C> <C> <C>
Mark Herr Purchasing Manager/Comics Team Leader (410) 560-7112 x220 [email protected]
Jim Kuhoric Assistant Manager (410) 560-7112 x173 [email protected]
Glen Folland Senior Brand Manager (410) 560-7112 x353 [email protected]
Steve Leaf Brand Manager (410) 560-7112 x331 [email protected]
Chris Schaff Brand Manager (410) 560-7112 x312 [email protected]
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Steve Bond Advertising Services Manager (530) 274-1805 [email protected]
</TABLE>
CREATING A SUBMISSIONS PACKAGE
To familiarize Diamond with your product and company, you should send us a
submissions package. This should include your proposed terms of sale, a
sample copy of the product that you would like Diamond to solicit, some basic
information about that product, cover art, and a press release. Remember that
one of your jobs as a publisher is sales. It is entirely possible that
Diamond will be one of your larger customers. As a businessperson dealing
with one of your larger customers, you will want to make your submissions
package as complete and professional as possible. First impressions can truly
be lasting impressions. A complete, professional submissions package could
mean the difference between a standard listing, a Spotlight in PREVIEWS, or
editorial coverage in DIAMOND DIALOGUE. An incomplete or unprofessional
submissions package may not provide Diamond with enough information to carry
your product.
Your submissions are reviewed by the five members of Diamond's Comics
Purchasing team and PREVIEWS Editor, Marty Grosser. From March of 1997 to
July of 1999, Diamond accepted 40% of the comics submitted. Many of the
submissions that were rejected by Diamond were sent to our Retailer
Submissions Board for a second opinion. Collectively, this board of retailers
has much experience in selling all types of comics from all sizes of
publishers. It assists Diamond in making recommendations on which items may
have been overlooked.
PLEASE BE SURE TO INCLUDE CONTACT INFORMATION WITH YOUR SUBMISSIONS PACKAGE,
SO THAT WE WILL BE ABLE TO INFORM YOU OF OUR DECISION. Please list the
contact person's name, their address and phone number. If that person has a
fax number or web or e-mail address, please include it as well.
SAMPLES
In order for Diamond to agree to carry any new comic from a new publisher, we
require that we see the product. YOUR SUBMISSIONS PACKAGE SHOULD CONTAIN A
COMPLETE COPY OF YOUR FIRST COMIC. A photocopied version is acceptable, but,
with the exception of advertisements and editorial pages, the comic must be
complete - LETTERED AND INKED. If you are producing a comic in color, it must
be completely colored before submitting it to Diamond. Sample copies of the
second and third comic books should be sent when they are ready to be
solicited through PREVIEWS. Sample copies sent to Diamond become property of
Diamond Comic Distributors, Inc. and will not be returned.
Beyond the first three issues, you should consider sending samples or sample
pages for new products that you would like Diamond's help promoting. Seeing
quality new offerings up front often assists us with our promotional and
editorial decisions.
PROPOSED TERMS OF SALE
Diamond distributes on a buy/sell basis. We purchase your products for one
price and sell them to our customers for another. Because we price our
products to our customers up front, we need to know, at the time of
solicitation, what our cost is. For comics, we generally work on a percentage
off of the cover price. Other aspects of trade terms-such as payment terms,
minimums and increments, and shipping responsibility-will be negotiated when
your comic is accepted and before it is solicited.
DISCOUNT-Diamond generally receives a discount in the range of 60%-70% off of
the US retail (cover) price. (We pay $0.30-$0.40 for a comic with a $1.00
cover price.) Please indicate your proposed discount with your terms of sale.
PAYMENT TERMS-Diamond's standard payment terms are 30 days, meaning we will
pay for your products 30 days after we receive them. We are capable of paying
sooner, but need an incentive to do so. Diamond is willing to consider early
payment incentives offered in the form of additional discount points. The
soonest we can pay for an item is 10 days after we receive it. PLEASE
REMEMBER THAT IN ORDER TO PAY FOR
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ANY PRODUCT, WE MUST HAVE AN INVOICE TO PAY FROM. Please send invoices to the
attention of Accounts Payable at our Home Office in Timonium. Credit
references are available upon request.
MINIMUMS AND INCREMENTS-If you or your printer is only willing to ship a
minimum quantity at any one time to any one place, please let us know what
that minimum is with your proposed terms of sale. If there is an increment
(multiple) that we will need to adhere to, please let us know that as well.
We can structure our Purchase Orders to meet those minimums, but we need to
know this information before we solicit your product.
If we do not believe that we can meet your minimum, we will inform you during
the solicitation cycle. We recommend that new publishers do not enforce any
minimums or increments, as they limit the accessibility of their products to
retailers and consumers.
SHIPPING RESPONSIBILITY-Shipping charges to our Distribution Centers
traditionally are paid by the publisher. All shipments should include a
packing list referencing your company name, address, and phone number.
Packing lists should include the quantities and the names of the products
included with the shipment and should reference our purchase order numbers
from our orders to you.
Please keep in mind that our market is still primarily a collectors' market.
Special attention is required when choosing mailing cartons and packing your
shipments. Diamond will request replacements for damaged product. Damages can
slow down the distribution of and payment for your product.
Diamond has weekly pick-ups scheduled at Brenner Printing in San Antonio,
Texas and Impremeries Quebecor in Montreal, Quebec. In exchange for picking
up and distributing your product to our Distribution Centers, Diamond will
negotiate with you a freight rebate. The standard freight rebate is an
additional 2% off of the retail price.
PRODUCT INFORMATION SHEET
SOME BASIC INFORMATION SHOULD BE SENT TO DIAMOND FOR EVERY PRODUCT THAT YOU
WOULD LIKE DIAMOND TO SOLICIT. The information that we request will help us
to write a noteworthy description of your products, price them correctly to
our customers, export them into foreign countries, and prepare internally for
distribution. Although it may appear in other parts of your submissions
package, we ask that you summarize the information on one sheet for us. A
sample Product Information Sheet and a blank template are included at the end
of this pamphlet.
Your Product Information Sheet should include each of the following items:
- - TITLE
- - ISSUE NUMBER AND NUMBER OF ISSUES IN SERIES (IF APPLICABLE)
- - WRITERS' AND ARTISTS' NAMES
- - SYNOPSIS
- - INTENDED AUDIENCE
- - FORMAT (COLOR OR BLACK & WHITE, SIZE, AND PAGE COUNT)
- - RETAIL PRICE
- - PRINTER OR SHIPPING ORIGINATION
- - COUNTRY OF ORIGIN
- - SHIP DATE
- - UPC CODE (OPTIONAL)
- - LICENSING RESTRICTIONS (IF ANY)
- - SPECIAL DISCOUNT INFORMATION (IF ANY)
TITLE-This is the name of your comic book or graphic novel. Please keep your
titles consistent from month to month for limited and continuing series.
(i.e., If your comic is titled STONE MOUNTAIN GLADIATOR: RETURN OF DELILAH,
your title should be written as such on all solicitations. Subsequent issues
should not be abbreviated to STONE MOUNTAIN GLADIATOR.) Titles of story arcs
told within a series should be included in the synopsis, not the title.
(NOTE: Please keep the titles of your products to 45 characters or less. Our
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computer system can only accept a fixed number of characters in each title,
after which the issue number and possibly title, are truncated. Truncated
information does not appear on Diamond internal reports or on our customers'
invoices. Diamond will abbreviate any titles that are too long for our
computer systems.)
ISSUE NUMBER-If it is a continuing or ongoing series of comic books, be sure
to include the issue number. If it is a limited series, please remind us with
each solicitation how many comics will be in the series [I.E., #3 (of 4)].
CREATORS' NAMES-We can give credits to the creative team that worked on the
comic being solicited. Often, the creators involved in the book are a selling
point. This is the type of useful information that Diamond wants to pass
along to its retailers who order from, and the consumers who read, PREVIEWS.
SYNOPSIS-Write a brief, objective description of your comic book. Diamond
will use your write-up as the foundation for what is written in PREVIEWS. In
many cases, we use the copy that you provide verbatim. This synopsis should
be two to three sentences. It should be an overview of the product that will
excite PREVIEWS readers and entice retailers to support the title. It is not
necessary to provide quotes in your synopsis, as they will not be included in
the PREVIEWS write-up. Quotes are better suited for advertisements and
promotional materials. Diamond Comic Distributors reserves the right to edit
any copy submitted for PREVIEWS.
INTENDED AUDIENCE-There are three general classifications that we use for
intended audience: ALL AGES, MATURE READERS, and ADULT MATERIAL. Each of
these have varying degrees and are always subjective. Our customers have the
right to know the nature of the content in the comic books they are
purchasing. The sale of adult materials to minors is prohibited by law in the
United States and many other countries. Some countries restrict the
importation of materials with sexual content. Please be specific and use your
best judgment when soliciting your products as to which of these general
classifications your product falls into.
ALL AGES-All Ages products are considered "G-Rated." These comics do
not include any nudity, foul language, adult situations, or excess
violence.
MATURE READERS-Mature Readers products are considered "PG-Rated" or
"PG-13 Rated." These comics may contain some violence, brief nudity,
adult situations, or profanity.
ADULT MATERIAL-This material should not be sold to minors. Adult comic
books may contain gratuitous nudity or sex. Due to the nature of the
material, we do not actively promote Adult Material in PREVIEWS. We do
not allow advertising or picture graphics, no matter how tame, in
PREVIEWS for Adult Material. Rather, we use PREVIEWS ADULT to solicit
these materials to those retailers who choose to add Adult merchandise
to their product mix.
FORMAT-Please note the page count of your comic or graphic novel. If it is
sized differently than a current, standard size comic book, please note the
physical dimensions. If it is digest- or magazine-sized, you may note this
instead. Please also note if the interior pages will be printed in black and
white or full-color, and make the same distinction for the cover.
RETAIL PRICE-Please include the US retail (cover) price of your publication.
If possible, please also include the Canadian dollar and British pounds
equivalents if they will be printed on the cover. If you require assistance
with conversion rates, please contact your Brand Manger or a member of the
Comics Purchasing Team.
PRINTER OR SHIPPING ORIGINATION-Please let us know from where you will be
shipping your product. This helps us to prepare our internal systems its
arrival. Often, product is shipped directly from the printer or manufacturer.
(A brief list of printers is included on page 14 of this pamphlet.)
COUNTRY OF ORIGIN-In order to export your comics, for Customs purposes, we
need to know in which country it will be manufactured. THE COUNTRY OF ORIGIN
IS THE COUNTRY IN WHICH YOUR COMICS WILL BE PRINTED, NOT THE COUNTRY THAT
WHERE IT IS DRAWN.
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SHIP DATE-If you can provide us with an exact ship date, please do so. This
information is valuable to our customers and tells Diamond which issue of
PREVIEWS your product should be solicited in. If you do not have a ship date,
then let us know what month you plan to ship your product.
UPC CODE-Many of our accounts are automated, with computerized inventories
and point of purchase scanners. If you have a UPC code or ISBN number for
your comic book or graphic novel, please provide it so that we can pass it
along to our customers. These are useful tools for our retailers, but are
currently not a requirement for Diamond to distribute your products. You may
contact the Uniform Code Council at (937) 435-3870 for more information about
obtaining a UPC code.
LICENSING RESTRICTIONS-If your comic book is based on a license you have
purchased (I.E. STAR WARS, UNCLE SCROOGE), you may have certain restrictions
on where your comic can be distributed. Please inform Diamond on your Product
Information Sheet of any international restrictions to which you may be
contractually bound.
SPECIAL DISCOUNT INFORMATION-Some products that you solicit to us, such as
T-shirts or other related merchandise, may carry different pricing than your
comics. IF YOUR PRICING TO DIAMOND IS DIFFERENT FROM THE PRICING THAT IS
NEGOTIATED FOR YOUR COMICS, PLEASE LET US KNOW IN ADVANCE BY INCLUDING IT ON
YOUR PRODUCT INFORMATION SHEET. This will allow us to accurately price the
products to our customers. If there are no special discounts stated on your
solicitations for T-shirts or related merchandise, we will assume that we are
receiving our standard negotiated discount on these items and price them
accordingly to our customers. Diamond will list the related merchandise that
we choose to carry in the Comics section of PREVIEWS with your comic and
graphic novel listings.
COVER GRAPHIC
At the time of solicitation, please provide a color cover graphic for your
comic book. Our industry is visually driven. The written copy and the cover
graphic are often all that retailers will have to influence their buying
decisions. If you cannot supply the cover graphic but are able to supply
another piece of artwork, please indicate that the artwork to be shown in
PREVIEWS is not the actual cover.
PREVIEWS is a PG-Rated catalog. Diamond will not run any artwork that depicts
or suggests nudity or excessive violence and reserves the right to refuse any
artwork or advertisement on the basis of its content. If you have any doubts
about your graphic, fax it to your Brand Manager or any member of the Comics
Purchasing Team for approval before you mail it to us.
Diamond produces all of its catalogs on a Macintosh computer system. We
encourage you to send electronic files via e-mail or provide them to us on
floppy disks, zip disks, or CD-ROM. Zip disks and CD-ROM's only will be
returned after PREVIEWS has been sent to the printer. Please remember when
sending an electronic file that it will not be printed at full size. Please
scale down the size of the file that you send accordingly. FILE NAMES FOR
ARTWORK SHOULD BE LABELED SO THAT WE CAN EASILY IDENTIFY IT. PLEASE AVOID
CONFUSING OR OVERSIMPLIFIED ABBREVIATIONS. For more information on electronic
files, please see the AD SPECIFICATIONS sheet provided.
If you cannot supply the graphic electronically, please send a full-sized
reproduction for us to scan.
PRESS RELEASE
One of the jobs of a publisher is marketing. With your debut issue and with
any other special issue or event, you should send a press release. If we feel
that extra exposure is warranted, Diamond may devote some editorial to your
comic in one or more of our publications. If we do not have a press release,
then it becomes much more difficult to give your comic book or graphic novel
any editorial coverage. It is also recommended that you include a press
release with your submissions package. Future press releases can be sent to
your Brand Manager. Keep in mind that these same press releases should also
be sent to as many other media organizations as possible. (A brief list of
other comic related media organizations can be found on page 14 of this
pamphlet.)
CONTINUING SOLICITATIONS
7
<PAGE>
As you continue to solicit products to Diamond, please remember to include a
complete Product Information Sheet with each solicitation. Artwork should be
submitted at the time of solicitation. If you have a special issue, include a
press release so that we have the option of including an editorial push in
our publications. Remember that mock-ups are due at the time of solicitation
for the second and third comic books that you solicit through Diamond. It is
not necessary to solicit monthly to continue to be carried by Diamond. We and
our customers would rather have you wait an extra month to solicit than have
you ship your products late. If you will not have a solicitation for an
upcoming issue of PREVIEWS, please inform your Brand Manager before that
catalog's deadline.
PREVIEWS 1999 PUBLISHING SCHEDULE EXPLANATION OF TERMS
In order to publish a 400-page catalog, we need all of our suppliers to
supply timely information, artwork, and advertisements. Missing one of these
deadlines could force us to pull your advertisement and/or product
solicitation from PREVIEWS. The PREVIEWS 1999 PUBLISHING SCHEDULE should be
incorporated into your production calendar. A copy of this Schedule has been
included with this package. Here is an explanation of the columns you will
see:
COVER DATE-This column represents the month that each issue of PREVIEWS will
go on sale, and when our customers will be placing initial orders for your
products.
ITEMS SHIPPING-This is the month in which your product is scheduled to ship.
DEADLINE FOR CATALOG INFO & ARTWORK-This is the deadline for PREVIEWS
solicitation material. All solicitation materials, including Product
Information Sheets, artwork, and mock-ups (samples) are due at this time.
ADS/INSERT RESERVATIONS DUE-This is the date by which you must book your
advertisements by calling our Publisher Services Manager, Steve Bond, at
(530) 274-1805. "Booking an ad" is simply stating your intention of running
an advertisement. By having ads booked, we will know what to expect and
prepare us to save room for them. For preferred advertisements, the sooner an
ad is booked, the closer we may be able to place the ad next to the
solicitation. See the enclosed Diamond Advertising & Marketing Services Rate
Card for more details and guidelines.
PREVIEWS COVER ART DUE-This is the date that artwork for the cover of
PREVIEWS is due. Because we add the PREVIEWS logo and other text to the cover
graphic, we require it sooner than we would a regular advertisement. Artwork
for PREVIEWS covers should be sent to the Home Office in Timonium, MD.
AD MATERIALS DUE-Advertisements are due to Diamond's Home Office at this
time. UNLESS PAYMENT TERMS FOR ADVERTISEMENTS HAVE BEEN GRANTED, PAYMENT IS
DUE ON THIS DATE AS WELL. Credit applications are available upon request.
Checks should be made payable to Diamond Comic Distributors, Inc. To avoid
confusion, please remember to book your advertisements by the reservation due
date.
PREVIEWS INSERT MATERIALS DUE-If you are having a promotional item, such as a
trading card or poster, bound or blown into PREVIEWS, the materials must
arrive at our printer by this date. Contact your Brand Manager for more
details.
CATALOG PACK PROMO ITEMS DUE-Catalog Flyer Pack inserts should arrive at our
Star/TRU location by this date. Two samples of the insert should be sent to
the Home Office in Timonium, MD by this date as well. If payment terms have
not been arranged, a check for $325 should be included with the samples sent
to the Home Office. (Full details appear on page 10 of this pamphlet.)
PREVIEWS ON SALE-This is the date that our customers will receive PREVIEWS to
sell to consumers and to begin making their ordering decisions.
PURCHASE ORDERS MAILED-This is the date that our Order Processing Department
BEGINS to mail and fax Purchase Orders. Because we handle so many items, not
all of the Purchase Orders will be ready on this date. This is not
necessarily the date that you will receive your Purchase Order.
8
<PAGE>
PROMOTIONAL OPPORTUNITIES
SPECIAL NOTES ON PROMOTIONAL OPPORTUNITIES: Promotional and advertising
opportunities offered by Diamond are intended to promote sales through
Diamond. UNDER NO CIRCUMSTANCE SHOULD YOUR ADDRESS, PHONE NUMBER, OR E-MAIL
ADDRESS BE INCLUDED ON ANY PROMOTIONAL MATERIALS OR ADVERTISEMENTS. Web
addresses should not be included if the web site sells directly to retailers
or consumers. It is our intention to keep PREVIEWS an acceptable publication
to be purchased by younger readers. DIAMOND RESERVES THE RIGHT TO REJECT ANY
ADVERTISEMENT ON THE BASES OF GRATUITOUS VIOLENCE AND/OR
REVEALING/PROVOCATIVE POSES. If you have any questions about the
acceptability of your advertisement, it is best to fax a copy to your Brand
Manager before you send it to film.
Once Diamond accepts your product, you will want to begin promoting it. In
addition to advertisements in its various publications, Diamond has numerous
promotional opportunities that you can take advantage of. By submitting your
project to Diamond, you are entering an extremely competitive market. Comics
that are not promoted aggressively often fall by the wayside and are soon
forgotten. With 4-8 new publishers in PREVIEWS every month, our customers are
faced with a difficult decision of choosing whose comics to carry.
Remembering from month to month which comics they have chosen can be even
more difficult. Aggressively promoting your first issue is a necessity, as is
the continual promotion of subsequent issues.
Beyond the numerous advertising opportunities in various publications,
Diamond has several promotional opportunities that can be used in conjunction
with ads or as stand alone-efforts. These opportunities include the Previews
Catalog Pack, targeted distribution or mailings of promotional materials,
telemarketing, mass faxes and e-mails, and representation at trade shows.
Advertisements and PREVIEWS Catalog Pack inserts should be booked through our
Publisher Services Manager, Steve Bond. Please note that we only accept
advertising for titles solicited in the corresponding month's PREVIEWS, not
for upcoming projects. You must obtain confirmation of acceptance before
booking the ad.
ADVERTISEMENTS
Advertisements are available in all of Diamond's publications. Please check
with your Brand Manager or any member of the Comics Purchasing Team for
availability of premium advertising spots. See the enclosed DIAMOND
ADVERTISING & MARKETING SERVICES RATE CARD for guidelines and more details.
Advertisements must adhere to the same guidelines given under Cover Graphic.
(See also SPECIAL NOTES ON PROMOTIONAL OPPORTUNITIES at the beginning of this
section.) DIAMOND RESERVES THE RIGHT TO REJECT ANY ADVERTISEMENT BASED ON
CONTENT. IF YOU ARE UNSURE ABOUT YOUR AD, PLEASE FAX IT TO YOUR BRAND MANAGER
FOR APPROVAL BEFORE SENDING US THE FILM.
CATALOG FLYER PACK INSERTS
Every month, with the complimentary issue of PREVIEWS and the PREVIEWS ORDER
FORM that is sent to each of our customers, we package promotional materials
from our suppliers. These materials can be an ashcan, a poster folded to
81/2" x 11", a full-color flyer, etc. A quantity of 6,000 flyers are
required. The cost to participate in this program is $325. This fee is
usually waived for posters and other POP items that are designed to help
retailers sell through. Flyers should be sent to our Star/TRU Distribution
Center in Sparta, Illinois:
Diamond Comic Distributors, Inc.
803 Bradbury Lane
Sparta, IL 62286
Attn: PREVIEWS Catalog Pack Promotional Materials
The check for $325 should be sent to the Home Office in Timonium, MD along
with two sample flyers. Please do not send flyers without confirmation of
acceptance.
9
<PAGE>
TARGETED DISTRIBUTION OF PROMOTIONAL MATERIALS
Promotional materials can play a big role in your marketing strategy. A
preview comic or letter introducing your company and marketing strategy can
help retailers make educated buying decisions. Posters and other
point-of-purchase items help retailers to sell through the quantities that
they have ordered. A signed copy or other premium used to thank retailers for
ordering your product can make a lasting impression and affect future buying
habits.
Diamond will distribute to our customers your promotional material for a cost
of $0.15 per unit (trade paperback size or smaller; the price is negotiable
for larger items). Customers receive these promotional materials with their
weekly product shipments. We will require you to ship these to the locations
indicated on the Purchase Order in the quantities indicated. Please Note:
Unless packaged together, two separate items (e.g., a comic and a cover
letter) count as two units.
Diamond's Marketing Research Department is capable of identifying the best
prospects for your promotional materials. If we have the data, there are
countless ways for us to manipulate and study it. Because of our position in
the market, we know who the largest comic retailers are, their store
locations, and their ordering habits. Almost every retailer who carries comic
books buys them through us, hence our data is extremely comprehensive. Our
charge for Marketing Research is $35 per hour.
Here are some examples of what Marketing Research can do:
SAMPLE COPIES-PROVE TO RETAILERS THAT THEY SHOULD BE ORDERING YOUR COMIC.
Often, the descriptions in PREVIEWS and the artwork shown is not enough
information for retailers. Advertisements cannot always show the consistency
and the quality of the interior art work. Giving retailers an ashcan or a
copy of the book in advance can help educate retailers. One hour of Marketing
Research can target the top 500, 1000, or 1500 retailers. Include a letter or
flyer with the ashcan to speak directly to the top retailers.
PROMOTIONAL POSTERS-HELP RETAILERS TO BE PROFITABLE WITH YOUR COMIC. If you
want to support the retailers who ordered your comic, consider sending them a
promotional poster. A poster displayed on the wall of a store can build
excitement and help a title sell. One hour of Marketing Research can easily
accomplish this. (Note: To qualify for the $0.15 per unit price, posters must
be folded down to 8 1/2" x 11".)
THANK-YOU PACKS-THANK CUSTOMERS WHO PURCHASED YOUR COMIC. Show your gratitude
by sending customers who order your comic a free signed copy. This simple
gesture can help to build repeat customers. Use the opportunity to include
artwork from your next issue. One hour of Marketing Research can accomplish
this too.
RECOVER LOST CUSTOMERS-REMIND FORMER CUSTOMERS THAT THEIR ORDERS ARE
IMPORTANT TO YOU. Have you seen a decline in your comics' sales from the last
issue? Two hours of Marketing Research to compare your last two issues'
orders can help you reach any customers who may have abandoned you.
To implement any of these programs or one of your own design, contact your
Brand Manager three weeks before you intend for the promotional item to reach
our retailers.
TARGETED MAILINGS
The same promotional opportunities listed above can also be accomplished
through the mail. A letter or package is a lot more personal and, because it
does not come with the weekly shipment, retailers are liable to give it a
little more attention. While we will not sell the database of our customers'
names and addresses, we can mail to them the materials that you provide. Our
charge for this service is exact postage +20%, labor ($15 per hour), and
marketing research costs.
DISCOUNT GROUP AVERAGE REPORTS
Diamond's Marketing Research Department is also capable of manipulating data
and putting them in succinct, informative sales reports. One the report that
Diamond frequently runs for our suppliers is the
10
<PAGE>
Discount Group Average Report (DGA), which breaks down the customers by size,
shows the number of customers buying, the total number of customers, and the
average quantity bought per customer.
MASS E-MAILS
Diamond currently has an e-mail database containing over 1800 customer
addresses. You can take advantage of this resource to send out your company's
updates and press releases to all of these. The cost of this service is $250
per e-mail.
ORDER FORM INCENTIVES
Offering a premium item to retailers is often a good incentive to entice them
to purchase more copies. Copies of your comic with a variant cover or
creators' signatures are common premium items that influence orders.
To list an Order Form incentive, submit a separate Product Information Sheet
with your solicitation. State what your requirements are for the customer to
receive your incentive. (EXAMPLE: FOR EVERY 5 COPIES OF STONE MOUNTAIN
GLADIATOR #4 ORDERED, RETAILERS WILL RECEIVE ONE FREE COPY OF STONE MOUNTAIN
GLADIATOR #4 SIGNED BY THE INKER, JOHNNY INKER.) Remember to keep the goals
within reason and the premium worthwhile. Retailers are not apt to raise
their order to 50 copies to qualify for a free bumper sticker. At this time,
there is no charge for simple Order Form incentives like the example listed
above. With Marketing Research, we are capable of developing more complex
incentives. In the event that Marketing Research is needed, you will be
charged $35 per hour. An Order Form incentive must ship within 14 days of the
product that it supports.
OTHER SERVICES
As your business grows, you may want to inquire about some of Diamond's other
services.
We have a group of six Inside Sales Representatives whose sole purpose is to
call our customers to offer your products or solicit feedback.
Our Customers Service Department can make suggested sales on your behalf.
Our Outside Sales Force visits our top domestic retailers four times a year.
You can put them to work for you promoting your comic, graphic novel, or
comic line.
Our targeted faxes give our customers an easy opportunity to order more of
your books.
If you can't attend a trade show, we can help you to maintain a presence
there.
Consult the enclosed Diamond Advertising & Marketing Services Rate Card for
pricing or call your Brand Manager for details.
PROMOTING OUTSIDE OF DIAMOND
Beyond the many services and advertising opportunities that Diamond offers,
there are many other promotional avenues that you should explore. Remember to
send your press releases not just to Diamond, but to other industry
publications that may want to run articles on or review your comics. These
same publications may present advertising opportunities that you can use in
conjunction with Diamond advertisements to augment your exposure. (A brief
list of industry publications can be found on page 14 of this pamphlet.)
Your presence in comic shops can be a powerful influence on their owners. Be
sure to know all of the owners of your local comic shops. Persuade them to
order your products through PREVIEWS, then follow up to see how well they are
selling. Arrange signings for your creators and set up local conventions too.
11
<PAGE>
DIAMOND POLICIES
ORDER ADJUSTMENTS
We work in a system where our customers buy sight unseen, without the
possibility of returns. For this reason, we need to provide as much accurate
information as we can in PREVIEWS and in the other vehicles that we use for
solicitations. Information that is incorrect or that changes can affect the
salability of the product.
Timeliness can also affect salability. Late books have plagued the comics
industry for years. In response to our customers' pleas, we have implemented
policies for late-shipping products. Our current grace period for comics and
most other products is 30 days. This allows for an additional 30 days beyond
the scheduled ship date or the end of the scheduled ship month for you to
ship your product.
If there are any changes to the solicitation, or the manufacturing of the
product is falling more than 30 days behind schedule, we will want to allow
our customers the opportunity to reevaluate the demand for the product. When
we allow customers this opportunity, we will cancel the existing Purchase
Order and issue a new Purchase Order based on the revised orders that we
receive. (NOTE: The new Purchase Order takes about 30 days to process. If you
will need a new Purchase Order for any reason, such as lateness or a change
in information, please give us as much notice as possible. If a product did
not meet Diamond's benchmark for sales, we will not Order Adjust it for
lateness.)
RETURNABILITY
Currently, Diamond does not accept returns from its customers, nor is Diamond
set-up to deal with returns the way that many other industries are. In the
future, we will be exploring this option as a service to our both customers
and suppliers.
For now, there are a few scenarios where we do require suppliers to accept
returns. However, this is not the way that we or our customers prefer to do
business. If a product is returnable, Diamond will not pay for the unsold
product. Diamond will withhold up to 50% of the payment in anticipation of
any unsold product, and the supplier will be responsible for the costs
associated with the return of unsold product. Late-shipping seasonal
products, periodicals shipped out of solicited order, items that are poorly
manufactured, and items with unannounced changes will all be made returnable.
LATE-SHIPPING SEASONAL PRODUCTS-Products scheduled for a specific event or
holiday must be received by Diamond at least three weeks before that event.
Three weeks will allow us enough time to distribute the books to our
customers, and allow our customers enough time to sell the product before the
event. Diamond reserves the right to cancel orders for seasonal products not
received three weeks prior to the event or holiday.
PERIODICALS SHIPPING OUT OF SOLICITED ORDER-When issues of a comic books ship
out of order, sales can be difficult for our retailers, who risk losing
customers who miss that issue.
ITEMS THAT ARE POORLY MANUFACTURED-Occasionally, we receive enough complaints
about a product's quality that we request that the vendor accept returns.
ITEMS WITH UNANNOUNCED CHANGES-When a product ships with an unannounced
format, creative, or price change, we will request returns on our customers'
behalf. These changes should be announced to Diamond well in advance,
allowing enough time for an Order Adjustment.
12
<PAGE>
PRINTERS
AMERICAN COLOR GRAPHIC
1215 Fayetteville Quary Rd.
Sylacauga, AL 35151
(205) 249-3871
New Accounts Contact: Jeff Rosenthal
DIAMOND PICK-UP AVAILABLE.
BRENNER PRINTING
106 Braniff St.
San Antonio, TX 78216
(210) 349-4024
New Accounts Contact: Monica Arocha
DIAMOND PICK-UP AVAILABLE.
MORGAN PUBLISHING
PO Box 471
Grafton, ND 58237
(701) 352-0640
New Accounts Contact: Toni Thordarson
PORT PUBLISHING
PO Box 249
Port Washington, WI 53074
(414) 284-3494
New Accounts Contact: Bruce Gray
PRENEY PRINT & LITHO
2714 Dougall Ave.
Windsor, Ontario N9E 1R9
Canada
(519) 966-3412
New Accounts Contact: Kim Preney
QUEBECOR/RONALDS
8000 Blaise Pascal
Montreal, Quebec H1E 2S7
Canada
(514) 494-5401
New Accounts Contact: Angelo Messina
DIAMOND PICK-UP AVAILABLE.
SMALL PRESS CO-OP
2579 Clematis St.
Sarasota, FL
(941) 922-0844
[email protected]
TRANSCONTINENTAL
1201 Marie-Victorin St.
St. Bruno, Montarville, Quebec J3V 6C3
Canada
(800) 337-8560 x4285
New Accounts Contact: George Bruno
DIAMOND PICK-UP AVAILABLE.
RIPON COMMUNITY PRINTERS
656 S. Douglas St.
Ripon, WI 54971
(920) 748-3136
New Accounts Contact: Tom Welk
(THE ABOVE IS A BRIEF LIST OF PRINTERS WITH EXPERIENCE IN PRINTING COMIC
BOOKS. IT IS NOT A COMPLETE LIST. YOU MAY FIND OTHER PRINTERS THAT WILL WORK
WELL FOR YOU. BY NO MEANS ARE YOU RESTRICTED TO WORKING WITH ONE OR ANY OF
THE ABOVE PRINTERS.)
INDUSTRY PUBLICATIONS
COMIC SHOP NEWS
published by Comic Shop News
Cliff Biggers
2770 Carillon Crossing
Marietta, GA 30066
[email protected]
(770) 422-4642
THE COMICS JOURNAL
published by Fantagraphics Books
7563 Lake City Way Northeast
Seattle, WA 98115
Tom Spurgeon
[email protected]
(206) 524-1967
COMIC BUYER'S GUIDE
published by Krause Publishing
John Jacksom Miller
700 East State Street
Iola, WI 54990-0001
[email protected]
(715) 445-2214
WIZARD: THE GUIDE TO COMICS
publihsed by Wizard Press
151 Wells Avenue
Congers, NY 10920
Jim McLaughlin
(914) 268-2000
[email protected]
COMICS BUYER'S GUIDE
published by Krause Publishing
Maggie Thompson
700 East State Street
Iola, WI 54990-0001
[email protected]
(715) 445-2214
13
<PAGE>
SAMPLE SOLICITATION
MOCK-UP PRESS
123 E. Oak Avenue, Suite 111
Stone Mountain, GA 30088
Contact: R.T. Writer
(770) 44.3-0388
TITLE: STONE MOUNTAIN GLADIATOR: THE RETURN OF DELILAH
ISSUE NUMBER: #3 (OF 5)
WRITERS' AND ARTISTS' NAMES: WRITTEN BY R.T. WRITER, PENCILED BY JAKE SKETCHER,
& INKED BY JOHNNY INKER
INTENDED AUDIENCE: ALL AGES
FORMAT: FULL COLOR COVER, BLACK & WHITE INTERIORS; COMIC BOOK SIZED; 32 PGS
RETAIL PRICE: $2.50 US, $3.75 CANADIAN
PRINTER: SHIPPING FROM QUEBECOR
COUNTRY OF ORIGIN: CANADA
SHIP DATE: SHIPS AUGUST 1999
UPC CODE: NONE
SYNOPSIS:
AMID THE RETURN OF HIS FORMER LOVER DELILAH, THE STONE MOUNTAIN GLADIATOR
MUST ONCE AGAIN DEFEND GEORGIA FROM HIS ARCH-NEMESIS, THE SOUTHERN SKULL.
TORN BETWEEN HIS SENSE OF JUSTICE AND HIS LONGING TO RENEW HIS LOVE, SAMSON
IS FACED WITH THE MOST DIFFICULT DECISION OF HIS CAREER.
Included with this solicitation, you should find a zip disk containing a the
cover of STONE MOUNTAIN GLADIATOR: DELILAH RETURNS #3. Please call if there
are any problems.
14
<PAGE>
PRODUCT INFORMATION SHEET
COMPANY NAME:
---------------------
ADDRESS:
- ----------------------------------
- ----------------------------------
- ----------------------------------
PHONE:
----------------------------
TITLE:
--------------------------------------------------------------------
ISSUE NUMBER:
---------------------
WRITERS' AND ARTISTS' NAMES:
----------------------------------------------
INTENDED AUDIENCE:
----------------
FORMAT:
---------------------------
RETAIL PRICE:
---------------------
PRINTER:
--------------------------
COUNTRY OF ORIGIN:
----------------
SHIP DATE:
------------------------
UPC CODE:
-------------------------
SYNOPSIS:
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
SPECIAL NOTES:
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
15
<PAGE>
2444 Wilshire Blvd.
Suite 414
Santa Monica, CA 90403
Ph. 310.829.9590
ULTIMATE SPORTS ENTERTAINMENT, INC.
January 20, 2000
MICHAEL JOHNSON
MJ SPORTS
2936 WEST CANYON AVE.
SAN DIEGO, CA 92123
Dear Michael:
The following will constitute the Agreement, by and between MJ Sports and
Ultimate Sports Entertainment, Inc.:
The term will cover the 2000 Major League Baseball Season, beginning
January 1, 2000 and ending with the 2000 World Series. MJ Sports will
have exclusive in-stadium concession rights to distribute for sale
Ultimate Sports non-premium comic books featuring Major League
Baseball Players as animated cartoon superheroes. MJ Sports will have
the right to pursue specific team "custom comics" for in-stadium
non-premium concession sales as well. Ultimate Sports will pay MJ Sports
a comission of $.10 (ten cents) per comic book sold, with said
comission payable within 10 days of Ultimate Sports receipt of payment
from the in-stadium concessionaire. MJ Sports agrees that the teams
will pay all freight/shipping costs.
If the terms of the Agreement above are acceptable, please indicate so by
signing in the space provided below.
/s/ Michael Johnson
- --------------------
Michael Johnson
MJ Sports Sincerely,
/s/ Frederick R. Licht
Frederick R. Licht, Esq.
<PAGE>
Ultimate Sports Entertainment, Inc.
ULTIMATE SPORTS DISTRIBUTION AGREEMENT
This agreement (the "Agreement") is made and entered into as of November 30,
1999 between Ultimate Sports Entertainment, Inc. ("Ultimate Sports") and
Comic Cavalcade ("Cavalcade").
1. ORDER PROCESSING AND RELATED CHARGES.
(a) There is a monthly guatantee of $2,000 that is the floor minimum
charge. This is for Cavalcade having the staff on hand to handle the
orders and our warehousing of your merchandise (in quantities of 2000
units at a time). This charge also covers all customer service costs
for the month (order complaints and re-ships, phone call questions,
address corrections) and there will not be any additional customer
service costs for each month.
(b) For each incoming order, Ultimate Sports will be charged a minimum of
$2.25 per order. That charge will cover up to three (3) products
in that order and costs associated with taking the call, processing
the order, and shipping the order. Cavalcade will bill the consumer
$3.95 per order for shipping and handling, all of which is kept by
Cavalcade, that will be used to pay for the actual cost of postage,
packaging, and bagging and boarding each product. Cavalcade will
charge the consumer more for International shipping, but the full
costs of that have not yet been determined. For each additional book
in any given single order, above the first three, Ultimate Sports will
be charged an additional $0.50. The consumer will be charged an
additional $3.00 for shipping and handling if their order exceeds ten
(10) products.
(c) For any given "premium" book sold, Ultimate Sports will be charged
$5.00 additional for special processing, tracking and handling. A
"premium" book is defined as one that has a retail price of greater
than $50.00 or is of significant replacement value cost or limited
nature (such as 1 of 100 copies signed by a famous athlete). These
"premium" books will be fully tracked via UPS or Federal Express and
given special packaging to prevent damage. The consumer will also be
charged an additional $3.95 for shipping and handling on these orders.
(d) Orders will be fulfilled via USPS unless they contain a "premium"
book. These orders will not be insured and certainly some will be
lost or damaged in transit. It is understood that in the case of a
lost or damaged order, Cavalcade will simply send a new one out with
a minimum of questions asked. Ultimate Sports will be responsible for
the cost of the merchandise in these cases, but will not be charged
any additional processing charges from Cavalcade. These customer
service charges are built into the monthly minimum. Orders of
"premium" product will be sent fully tracked and insured. In the
event of a loss, an insurance/damage claim will be submitted to the
carrier that will cover the cost of the merchandise and processing
the order again.
(e) All orders and business by Cavalcade relating to this deal will be
processed under the Ultimate Sports name. Phone calls will be answered
with "Ultimate Sports" and all address labels will be marked with
Ultimate Sports. The end consumer will have the complete illusion of
dealing only with Ultimate Sports. Phones will be manned from 10 AM
until 6 PM and the fax machine will be on all the time. Hours may be
adjusted as traffic warrants.
(f) Cavalcade reserves the right to adjust the shipping and handling
charges as needed or in the event of price increases by the delivery
agents.
2. FINANCIAL TRACKING. Cavalcade will set up an entirely separate bank
account for all Ultimate Sports business through Cavalcade. All bank deposits
as well as electronic credit card deposits will go into this account, and
will be held in trust for Ultimate Sports. All charges related to financial
transactions (bank charges, credit card processing charges, bounced checks,
charge backs on credit cards) will be paid by, and
Initials: Ultimate Sports Cavalcade
<PAGE>
ULTIMATE SPORTS ENT. DISTRIBUTION AGREEMENT
deducted from, Ultimate Sports' funds in the account. Cavalcade will work
on monthly cycles for reconciliation of charges and payments. Cavalcade
will send Ultimate Sports an accounting of all expenses and charges along
with a check to Ultimate Sports for its sales minus Cavalcade's expenses
and charges. For the first few months, Ultimate Sports may actually be
cuffing Cavalcade checks if sales are not sufficient to cover the floor
minimum.
3. SHIPPING TO STADIUMS. Cavalcade will handle shipping to stadiums from the
commencement of this Agreement or Ultimate Sports can have Cavalcade handle
that after it has full warehouse capabilities. Cavalcade will ship ground
UPS to stadiums unless otherwise requested. Cavalcade will charge exact
shipping cost (as billed to its UPS account) plus 20% to cover labor and
new packaging required. All of these shipments will be fully insured and
trackable.
4. TIME TABLE. An 888 phone line and fax line are being installed at this
time and will be operational on September 1, 1999. As of now, Cavalcade has
an Internet connection and address ([email protected]) operational and
will have a system in place to begin fulfillment by September 1, 1999.
5. START UP COSTS. Cavalcade will need $1,000 in on-refundable start up costs
upon acceptance of this deal. This will handle bringing in new phone
lines, setting up bank accounts, credit card terminals, fax machines, of
fice space, etc. Cavalcade will also ask for the last month of service
guarantee paid in advance ($2,000) as well as September's guarantee of
$2,000 on September 1, 1999.
6. LENGTH OF DEAL. The Agreement is for a two-year deal, commencing September
1, 1999. Early termination can be done by Ultimate Sports with 30 days
notice. Upon early termination by Ultimate Sports, Ultimate Sports shall
pay Cavalcade a kill fee equal to $250 times the number of months remaining
in the two-year term. Obviously, Cavalcade expects any problems or
concerns to be worked through easily, but colossal issues should be
resolved through binding arbitration conducted under the rules of the
American Arbitration Association.
ULTIMATE SPORTS ENTERTAINMENT, INC. COMIC CAVALCADE
By: /s/Paul Fairchild By: /s/William Christensen
-------------------------- ---------------------------
Paul Fairchild, Publisher William Christensen, President
2444 Wilshire Blvd. #414 9 Triumph Dr.
Santa Monica, CA 90403 Urbana, IL 61802
Phone: (310) 829-9590 Phone: (217) 384-2211
Fax: (323) 939-7327 Fax: (217) 384-2216
Initials: Ultimate Sports Cavalcade
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THIS LEASE, dated MAY 5, 1999 (which date is to be used for reference
purposes only) is made and entered into by and between DGL ASSOCIATES a
partnership, having an office at 2444 Wilshire Blvd., Suite 600, Santa
Monica, CA 90403 ("Landlord") and ULTIMATE SPORTS, INC ("TENANT").
ARTICLE 1
SUMMARY OF BASIC TERMS
1.01 Purpose. This Article defines certain terms used in this Lease,
subject, however, to qualifications and exceptions set forth elsewhere herein.
1.02 Land. The term "Land" means that certain real property in the City
of Santa Monica, County of Los Angeles, State of California, owned by
Landlord.
1.03 Building. The term "Building" means that certain office building
complex constructed on the Land which has the street address of 2444 Wilshire
Boulevard, Santa Monica, CA, including all parking garages, outside plazas,
atria, lobbies, office and commercial spaces, landscaping, water elements,
fine art and the Land.
1.04 Premises. The term "Premises" means the space on floor three of the
Building, known as SUITE 414 and located substantially as shown on the floor
plan attached hereto as Exhibit A, subject to relocation to other floor(s)
pursuant to Article 22 (if applicable).
1.05 Lease Term. The phrase "Lease Term" means the term of this Lease,
which shall be (i) a period of Three (3) years and one-half (1/2) months
commencing as set forth in Subsection 2.02(a), plus a stub period of a
partial month as necessary in order for the Lease Term to end on the last day
of a month (the "Initial Term"), plus 00 the period(s) of any renewal
option(s) which Tenant duly exercises, unless the Lease Term is earlier
terminated pursuant to any of the provisions of this Lease or law.
1.06 Initial Basic Rent. The phrase "Initial Basic Rent" means the sum
of $2,255.00 per month, as described more fully in Article 3.
1.07 Tenant's Share. The phrase "Tenant's Share" shall mean 1.87%
percent.
1.08 Security Deposit. The phrase "Security Deposit" means a security
deposit in the amount of $6,765.00, to be held and used by Landlord as
provided in Article 5. SEE RIDER #30
1.09 Tenant's Parking. The phrase "Tenant's Parking" signifies
nonexclusive parking for THREE (3) automobiles in the parking garage of the
Building as provided in Section 25.01.
1.10 Tenant's Broker. The phrase "Tenant's Broker" means COLDWELL
BANKER, whose address and telephone number are:
Address: MR. TODD MASSER
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COLDWELL BANKER
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11900 WEST QLYMOIC BLVD., SUITE 100
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LOS ANGELES, CA 90064
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Telephone: 310-447-8500
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1.11 Tenant's Identity. Tenant is
a natural person.
XXX a corporation incorporated in the State of
California
a general/limited partnership whose general partners are
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1.12 PERMITTED USE. The phrase "Permitted Use" means
GENERAL OFFICE USE, and related business purposes of the original
Tenant named herein in keeping with the class and character of the Building
as a first class office building.
1.13 RENTABLE AREA OF THE PREMISES. The phrase "Rentable Area of the
Premises" means the square footage amount determined by multiplying Usable
Area (hereinafter defined) by the Building's "R/U Ratio," which is determined
by calculating the usable area of the entire Building (using the same
methodology as is described hereinafter to calculate Usable Area), and
calculating the rentable area of the entire Building, and then dividing such
rentable area of the entire Building by such usable area of the entire
Building; the rentable area of the entire Building is calculated by (a)
measuring the area within the bounds of the inside finished surfaces of each
outer Building wall, on each floor of the Building, without deduction for
common areas or for columns, projections, major vertical penetrations, or any
other items or elements, and then (b) adding the areas of each floor of the
Building. As so determined the Rentable Area is 1,156 square feet, subject
only to those adjustments made pursuant to Subsection 2.01 (b).
1.14 USABLE AREA. The phrase "Usable Area" means the square footage of
the Premises as determined by Landlord by measuring the area within the
bounds of the center line of the glass in the exterior wall of the Building,
the center line of any partition between the Premises and a Building standard
public corridor connecting the fire stairs on each floor (whether or not such
corridor is actually constructed), the surface facing the Premises of any
partition separating the Premises from the Building core and the center line
of any partition that separates the Premises from adjoining premises and
common areas. No deduction shall be made for space occupied by structural or
functional columns and projections.
1.15 RENT ADJUSTMENT DATE. "Rent Adjustment Date" shall mean: SEE RIDER
#29
1.16 RENT COMMENCEMENT DATE. The phrase "Rent Commencement Date" means
the date determined by Subsection 2.02(a).
1.17 LEASE DATE. The phrase "Lease Date" means that date upon which this
Lease is fully executed by Landlord and Tenant.
ARTICLE 2
DEMISE, TERM AND OCCUPANCY
2.01 DEMISE.
(a) Demise and Reservation. Landlord hereby leases the Premises to
Tenant, and Tenant hereby hires the Premises from Landlord, reserving however
to landlord all of the rights, interests and estates in the Premises,
Building, and Land not granted to Tenant by this Lease.
(b) Determination of Rentable Area of the Premises. The number of square
feet set forth in Section 1.14 for the Rentable Area of the Premises shall be
conformed to that determined by Landlord's space planner as soon as
practicable alter receipt from Landlord of the final floor plan for the
Premises. If the Rentable Area of the Premises is so determined to be other
than as set forth in Section 1.14, or if there occurs a change in the size of
the Premises, then all amounts, sums and/or percentages based upon the
Rentable Area of the Premises shall be equitably prorated in accordance
therewith. After the Rentable Area of the Premises has been determined as
provided herein, and if the same differs from that set forth in Section 1.14,
then the parties shall execute an amendment to this Lease setting forth the
Rentable Area of the Premises, and the amounts, sums and/or percentages based
thereon and adjusted as set forth above. The failure of either party to
execute such amendment shall not affect the validity or enforceability of
this Lease nor excuse the payment of Rents by Tenant. The number of square
feet of Rentable Area of the Premises as determined by Landlord's space
planner shall for all purposes of this Lease conclusively be deemed to be the
Rentable Area of the Premises, and Tenant shall be responsible for payment of
all Rents and performance of all obligations based upon or calculated from
the Rentable Area of the Premises as so determined.
2.02 COMMENCEMENT.
(a) Lease Term. The Lease Term 0) shall commence on the date (the "Rent
Commencement Date") that is the earlier to occur of (A) the Rent Adjustment
Date (if Subsection 2.03(b) applies to this Lease) or the Occupancy Date (if
Subsection 2.03(c) applies to this Lease), and (B) the date Tenant first
occupies any part of the Premises, with Landlord's consent, for the purpose,
of commencing business, and (ii) shall end at noon on the earlier of the last
day of the Lease Term (the "Expiration Date") or such earlier termination of
this lease. After the Rent Commencement Date, upon Landlord's request, Tenant
shall promptly complete and execute a copy of the form attached hereto as
Exhibit B.
(b) Obligations and Duties. Tenant shall be bound, as of the Lease,
except as otherwise specifically provided herein. Failure of Tenant to
fulfill any such obligation and/or duty before any other such obligation and
duty becomes binding shall not preclude Landlord from obtaining any remedy
available hereunder at law, or in equity.
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2.03 Preparation of Promises.
(a) Preparation Work. The Premises shall be prepared for Tenant's
occupancy in accordance with the Work Letter for Tenant improvements attached
hereto as Exhibit C (the "Work Letter").
(b) Tenant Constructs Improvements. This Subsection 2.03(b) shall form a
part of this Lease only if Tenant is to construct the tenant improvements
under the Work Letter. If so, the Occupancy DATE shall be the date that is
the earlier to occur of (i) the Rent Adjustment Date, or (ii) the date
Tenant, or anyone claiming under or through Tenant, first occupies any part
of the Premises, with Landlord's consent, for the purpose of constructing the
tenant improvements under the Work Letter, notwithstanding that minor
incorrect or incomplete details of construction or mechanical adjustments,
pertaining only to the Base Building Work (as defined in the Work Letter),
which do not materially interfere with Tenant's performance of Tenant's Work
(as defined in the Work Letter) remain to be performed (such details and
adjustments are referred to as "Punch-List Items"). Tenant shall be deemed to
have accepted the Premises and to have found them to be in satisfactory
condition, except for any Punch-List Items, on the Occupancy Date. On or
before the Occupancy Date, Tenant shall submit a punch list to Landlord,
describing the Punch-List Items with reasonable specificity and detail, and
Landlord shall provide Tenant with reasonable and timely access to the
Premises to allow Tenant to so perform. Landlord shall correct all Punch-List
Items on the punch list of which it is reasonable to require correction by
Landlord and shall do so with reasonable diligence in a manner consistent
with Tenant's construction of the tenant improvements under the Work Letter.
(c) Landlord Constructs Improvements. This Subsection 2.03(c) shall form
a part of this Lease only if Landlord is to construct the tenant improvements
under the Work Letter. If so, the Occupancy Date shall be the date on which M
Landlord has substantially completed the work it is obligated to perform
pursuant to the Work Letter; and the same shall be deemed substantially
completed notwithstanding the fact that certain items, such as minor details
of construction, mechanical adjustment or decoration, which do not materially
interfere with Tenant's use of the Premises (i.e., the "Punch-List Items"),
remain to be performed, and (ii) access to the Premises is available to
Tenant. However, if completion of either of the above requirements for
establishing the Occupancy Date is delayed due to (iii) any act or omission
of Tenant or any of its employees, agents or contractors, including, but not
limited to, delays due to changes in or additions to Landlord's Work (as
defined in the Work Letter) requested by Tenant or delays by Tenant in the
submission of plans, drawings, specifications or other information, the
approval of working drawings or estimates, or the giving of necessary
authorizations or approvals regarding tenant improvements, or (iv) the
inclusion in Landlord's Work of any Tenant's Work (as defined in the Work
Letter), or a shortage or unavailability of materials required for Tenant's
Work, then the Occupancy Date shall be deemed to have been the date that said
two requirements would have been completed but for such delay. Landlord shall
give Tenant at least 15 days' notice in advance of Landlord's estimate of the
Occupancy Date. Any variance between the date so estimated and the actual
Occupancy Date shall be of no consequence, and Landlord shall not incur any
liability on account of such variance. Tenant shall be deemed to have
accepted the Premises and to have found them to be in satisfactory condition,
except for any Punch-List Items, on the Occupancy Date. Within 10 days after
the Occupancy Date, Tenant hall submit a punch list to Landlord, describing
the Punch-List Items with reasonable specificity and detail. Landlord shall
correct all Punch-List Items on the punch list of which it is reasonable to
require correction by Landlord.
ARTICLE 3
RENT
3.01 RENTS. Commencing on the Rent Commencement Date and thereafter during the
Lease Term, Tenant shall pay to Landlord the following rents for the Premises
(the "Rents"): (a) a basic rent per annurn (the "Basic Rent") in the amount of
the Initial Basic Rent, adjusted periodically as set forth in Section 3.04,
which shall be due and payable in equal monthly installments in advance on the
first day of each and every calendar month during the Lease Term, and M
additional charges ("Additional Charges") consisting of all other sums of money
payable by Tenant under the provisions of this Lease. The first installment of
Basic Rent shall be due and payable upon execution of this Lease.
3.02 Payment. Tenant shall pay the Rents when due, without notice or demand, and
without any abatement, deduction or setoff. Tenant shall pay the Rents in lawful
money of the United States, to Landlord at its office in the Building or to such
other person or place as Landlord may designate from time to time.
3.03 Proration. Any Rents, the amount of which is determined in part by the
length of a period of time, shall be prorated as and when appropriate on the
basis of a 30day month or a 360-day year.
3.04 Adjustments of Basic Rent. SEE RIDER #29
3.05 Partial Payment. No payment by Tenant or receipt or acceptance by
Landlord of a lesser amount than the correct Basic Rent or Additional Charges
due shall be deemed to be other than a payment on account, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment be deemed an accord and satisfaction, and Landlord may accept such
check or payment, irrespective of any such endorsement or statement, without
prejudice to Landlord's right to recover the balance, treat such partial
payment as a default or pursue any other remedy provided in this Lease or at
law.
3.06 Late Charge. Tenant hereby acknowledges that the late payment of Rents
will cause Landlord to incur damages, including administrative costs, loss of
use of the overdue funds and other costs, the exact amount of which would be
impractical and extremely difficult to ascertain.
Landlord and Tenant therefore agree that if Landlord does not receive a
payment of Rents within five (5) days after the date that such payment is
due, Tenant shall pay to Landlord, as Additional Charges, a late charge of
ten cents for each dollar so overdue. Acceptance of the late charge by
Landlord shall not cure or waive Tenant's default, nor prevent Landlord from
exercising, before or after such
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acceptance, any of the rights and remedies for a default provided by this
Lease or at law. Payment of the late charge is not an alternative means of
performance of Tenant's obligation to pay Rents at the times specified in
this Lease.
ARTICLE 4
OPERATING EXPENSE ADJUSTMENTS
4.01 OPERATING EXPENSE DEFINITIONS. For the purpose of this Article, the
following terms shall have the meanings herein ascribed to them:
(a) Costs of Operation. "Costs of Operation" shall mean, in any Lease
Year, and subject to the adjustment set forth in Subsection 4.01(c), all
expenses, costs and disbursements of every kind and nature paid or incurred
by or on behalf of Landlord with respect to or for the operation, maintenance
and management of the Building. Without in anyway limiting the generality of
the foregoing, Costs of Operation shall include the following:
(i) Wages, including all fringe benefits of every nature and kind,
Workers' Compensation, and payroll taxes of employees of Landlord at the
level of building manager and below engaged in the operation, maintenance and
management of the Building.
(ii) Costs of goods, tools, supplies and services supplied or used
in or with respect to the operation, maintenance and management of the
Building, including without limitation the cost of insurance premiums;
cleaning, painting, janitorial, trash removal, security and other services;
legal, accounting and other consultants' fees; operation of elevators and
security systems; heating, cooling, air conditioning and ventilating; hot and
cold water, gas, electricity, sewer and other utilities; maintenance and
repairs to the Building, and to any equipment, machinery or apparatus,
therein; window cleaning; service agreements on equipment; licenses, permits
and inspections; depreciation on personal property, tools and movable
equipment used in the repair, maintenance or operation of the Building;
contesting the validity or applicability of any law if a successful contest
would reduce Costs of Operation; maintenance and repairs of the structural
components, building systems, and finish work relating to the parking garage;
and of the landscaping, signs, plazas, furnishings, water elements,
sidewalks, streets and walkways in or adjacent to the Building;
(iii) Management fees and other costs and expenses paid to Landlord's
managing agent; or, if Landlord acts as the managing agent, a sum in lieu
thereof which does not exceed the then-prevailing rates for management fees
for other first-class office buildings in Santa Monica, CA;
(iv) Costs of capital improvements and replacements which are
intended to reduce Costs of Operations or which are required by law, and
which are made after completion of the Building shell and amortized (with
interest at prevailing rates) over the useful life of such improvements;
(v) Rentals paid by Landlord with respect to machinery, equipment,
tools, materials, facilities or systems for the normal management,
maintenance or operation of the Building;
(vi) All expenses and costs incurred by Landlord as a result of or in
order to comply with laws, including without limitation laws pertaining to
energy or natural resource conservation or environmental protection, and all
charges, taxes, surcharges, assessments or penalties imposed by any
government agency or public utility as a means of conserving or controlling
the consumption of water, gas, electricity, energy, natural resources, or
other products or services; and
(vii) All of the following: (A) all taxes, general and special
assessments, duties, charges, and levies of every kind, character and
description whatsoever, levied, imposed or charged upon or against the
Building or any part hereof or the various estates in the Building or any
part thereof or upon Landlord with respect thereto, except as set forth in
Section 9.05; (B) all taxes levied, imposed or charged on real and personal
property used in the operation, maintenance or management of the Building;
(C) all taxes levied, imposed or charged against or measured by or based upon
the rent payable by lessees and occupants of the Building or the value of the
Building or any part thereof; (D) all taxes imposed or charged in the future
in lieu thereof or for which Landlord is liable with respect to the Building;
(E) all sales, use, and utility taxes and other similar amounts which are
expensed by Landlord in connection with the Building; and (F) costs and
expenses incurred by Landlord in contesting the amount, validity or
applicability of any of the foregoing; but not including Landlord's income,
franchise, gift, estate, inheritance, transfer, excise or excess-profits
taxes to the extent that any such income, franchise, gift, estate,
inheritance, transfer, excise or excess-profits taxes are not levied in whole
or partial substitution for any other taxes; recoveries through protest,
appeals or other actions taken by Landlord, after deduction of all costs and
expenses, including legal and other professional fees and costs, shall be
deducted for the year of receipt.
(b) Costs of Operation -- Exclusions. Costs of Operation shall exclude
the following:
(i) Costs incurred by Landlord with respect to goods and services
supplied to lessees and occupants of the Building to the extent that such
lessees and occupants directly reimburse Landlord for such costs other than
as provided in this Article 4;
(ii) Costs incurred by landlord for the repair of damage to the
Building to the extent that Landlord is reimbursed by insurance proceeds;
(iii) Costs incurred by Landlord with respect to the installation of
tenant improvements made for tenants in the Building;
(iv) Depreciation (other than on personal property, tools and movable
equipment as described in Clause 00 of Subsection 4.01 (a) above), interest
and principal on mortgages encumbering the Building or the Land;
(v) Landlord's direct out-of-pocket costs for labor and materials for
the operation of the parking garage;
(vi) Costs incurred in connection with the leasing of space in the
Building and the renewal or enforcement of existing leases, including leasing
commissions and brokerage fees, legal fees, tenant improvements costs and
allowances and advertising expenses, except advertising expenses related to
public relations or community activities;
(vii) Costs of purchasing fine art works (except that graphics, signs
and conventional decoration shall not be excluded); and
(viii) Costs and expenses otherwise includable in Costs of Operation,
to the extent that the Landlord is reimbursed or paid from other sources for
such costs and expense.
(c) Costs of Operation - Adjustments. If less than 100% of the Rentable
Area of the Building is occupied and fully serviced during any period in a
Lease Year, then the Costs of Operation for such Lease Year shall be adjusted
to what the Costs of Operation would have been as if 100% of the Rentable
Area of the Building had been occupied and fully serviced throughout such
Lease Year.
(d) Lease Year. "Lease Year" shall mean any calendar year that overlaps
the Lease Term as to any period.
4.02 Adjustment of Rents.
(a) Costs of Operation. Tenant shall pay, as Additional Charges, an
amount equal to (1) the amount, if any, by which the Costs of Operation for
any lease year after 1999 exceed the Costs of Operation for 1999, multiplied
by (2) Tenant's Share. Tenant shall pay
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such Additional Charges in the following manner: commencing as of January 1
of the Lease Year after 1999, on or before the first day of each calendar
month, Tenant shall pay Landlord one-twelfth (1/12) of the amount of the
Additional Charges, as reasonably estimated by Landlord, due from Tenant for
the ensuing Lease Year pursuant to the first sentence of this Subsection
4.02(a), as shown by a statement provided by Landlord to Tenant ("Landlord's
statement"). There shall be a final adjustment at the end of each Lease Year,
to reflect actual Costs of Operation for said Lease Year. Notwithstanding the
foregoing, at Landlord's sole option (which Landlord may exercise from time
to time during the Lease Term), Landlord may bill Tenant annually, quarterly
or at any other interval based on the actual Costs of Operation, rather then
estimating and collecting in advance.
(b) Revised Estimates. Quarterly during the Lease Year, if Landlord has
received evidence indicating an increase in Costs of Operation over that set
forth in Landlord's statement, Landlord may revise its estimates of COSTS OF
OPERATION FOR THE LEASE YEAR. The amounts of Additional Charges on account of
Costs of Operation, and the installment payments with respect thereto, shall
then be adjusted as necessary to assure that, as nearly as possible, Tenant
shall have paid Tenant's Share of Additional Charges on account of Costs of
Operation, based on the revised estimates, by the end of the Lease Year.
(c) Final Statement. As soon as practicable after the end of each Lease
Year, Landlord shall present Tenant with a final statement ("Landlord's final
statement") of actual Costs of Operation for such Lease Year. Within five
days of presentation of Landlord's final statement, Tenant shall pay
Landlord, as Additional Charges, any amount due for Tenant's Share of Costs
of Operation. Any credit due Tenant for overpayment of Tenant's Share of
Costs of Operation shall be credited against the monthly installments of
Basic Rent next coming due (except that Landlord shall refund to Tenant the
amount of any such credit for the final Lease Year in the Lease Term). Tenant
shall have 30 days after presentation of Landlord's final statement within
which to object in writing to the accuracy of Landlord's final statement;
after expiration of said 30-day period, Landlord's final statement shall be
conclusive and binding on Tenant. Until resolution thereof, objection by
Tenant shall not excuse or abate Tenant's obligation to make the payments
required by this Section 4.02.
ARTICLE 5
SECURITY DEPOSIT SEE RIDER #30
5.01 Security Deposit. Concurrently with Tenant's execution of this Lease,
Tenant shall deposit the Security Deposit with Landlord. Said sum shall be
held by Landlord as security for the faithful performance by Tenant of all
the terms, covenants, and conditions of this Lease to be kept and performed
by Tenant hereunder. If Tenant defaults with respect to any provision of this
Lease, including, but not limited to the provisions relating to the payment
of Rents, Landlord may (but shall not be required to) use, apply, or retain
all or any part of this security deposit for the payment of any Rents in
default, or for the payment of any amount which Landlord may spend or become
obligated to spend by reason of Tenant's default, or to compensate Landlord
for any other loss or damage, direct or indirect, which Landlord may suffer
by reason of Tenant's default. If any portion of said deposit is so used or
applied, then Tenant shall, within five (5) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
security deposit to its original amount, and Tenant's failure to do so shall
be a default under this Lease. Landlord shall not be required to keep this
security deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the security
deposit or any balance thereof shall be returned to Tenant (or, at Landlord's
option, to the last assignee of Tenant's interest hereunder) within thirty
(30) days following expiration of the Lease Term. If a termination of
Landlord's interest in this Lease occurs, then Landlord shall transfer said
deposit to Landlord's successor in interest.
ARTICLE 6
USE AND COMPLIANCE WITH LAW
6.01 Use. Tenant shall use and occupy the Premises for the Permitted Use and
for no other purpose whatsoever, and shall obtain and maintain all licenses
and permits required therefor by law.
6.02 Prohibited Uses. Tenant shall not at any time use or occupy or allow any
person to use or occupy the Premises, or do or permit anything to be done or
kept in the Premises, in any manner which (a) violates any certificate of
occupancy in force of the Premises or for the Building; (b) causes or is
likely to cause damage to the Building, the Premises or any equipment,
facilities or other systems therein; (c) constitutes a violation of any law,
license, or permit, or is considered a hazardous or toxic substance,
material, or waste under California or federal law; (d) violates a
requirement or condition of the standard fire insurance policy issued for
office buildings in the City of Santa Monica; (e) impairs the character,
reputation, image or appearance of the Building as a first-class office
building; (f) impairs the proper and economic maintenance, operation and
repair of the Building or its equipment, facilities or systems; (g)
constitutes a nuisance, annoyance or inconvenience to other lessees or
occupants of the Building, or interferes with or disrupts the use of
occupancy of any area of the Building (other than the Premises) by other
lessees or occupants; (h) interferes with the transmission or reception of
microwave, television, radio or other communications signals by antennae
located on the roof of the Building or elsewhere in the Building; (i)
constitutes an unlawful, immoral or objectionable occurrence or condition; or
(j) results in repeated demonstrations, bomb threats or other events which
require evacuation of the Building or otherwise disrupt the use, occupancy or
quiet enjoyment of the Building by other lessees and occupants. Tenant shall
not use or allow another person to use any part of the Premises for a
restaurant or bar; the storage, manufacture or sale of food, beverages,
liquor, tobacco in any form or drugs (except that Tenant may maintain vending
machines for the use of its officers and employees may bring food, beverages,
tobacco and medicine onto the Premises for their personal and lawful
consumption); the business of photocopying or offset printing (but Tenant may
use part of the Premises for photocopying or offset printing in connection
with its own business); medical or dental offices or laboratories; a typing
or stenograph business; a barber, beauty or manicure shop; a school or
classroom; the manufacture, retail sale or auction of merchandise, goods, or
property of any kind; cooking (except that Tenant may maintain one or more
coffee or lunch rooms and/or kitchens for the exclusive use of Tenant's
officers, employees and invitees); lodging or sleeping; or for immoral
purposes. No noise, vibration, smoke, gasses or odor shall be permitted to
escape from the Premises.
6.03 Compliance by Tenant. Tenant shall, at Tenant's expense, comply with all
laws that impose any obligation, order or duty on Landlord or Tenant, arising
from or related to (a) Tenant's use of the Promises, (b) the manner of
conduct of Tenant's business or operation of its installations, equipment or
other property therein, (c) any cause or condition created by or at the
instance of Tenant; or (d) breach of any Tenant's obligations hereunder; and
Tenant shall pay all the costs, expenses, fines, penalties and damages,
including attorneys' fees and costs, which may be imposed upon Landlord by
reason of or arising out of Tenant's failure to fully and promptly comply
with and observe the provisions of this Section. Where Tenant's compliance as
required by this Section necessitates actions by Tenant for which another
provision of this Lease requires Landlord's consent. Tenant shall obtain
Landlord's consent pursuant to such other provision before taking such action.
ARTICLE 7
INSURANCE
7.01 USE OF PROMISES. Tenant shall not violate, or permit the violation of,
any condition, standard for use in California, imposed by any insurance
policy covering or relating to the Building, and shall not do, or permit
anything to be done, or keep or permit anything to be kept in the Premises
(a) which might subject Landlord to any liability or responsibility for
personal injury or death or property damage, or (b) which might increase any
insurance rate with respect to the Building over the rate which would
otherwise then be in effect, or (c) which might result in insurance companies
of good standing refusing to insure the Building in amounts satisfactory to
Landlord, or (d) which
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might result in the cancellation of any policy covering or relating to the
Building or the assertion of any defense by the insurer in whole or in part
to claims under any such policy.
7.02 Casualty Insurance. During the Lease Term, Landlord shall maintain All
Risk Coverage insurance, amount of its full replacement value, with loss of
rents coverage, and the amount of any deductible shall be determined by
Landlord but shall not exceed that which is commercially reasonable for a
first-class office building. During the Lease Term, Tenant shall maintain, at
Tenant's expense, All Risk Coverage insurance covering Tenant's Property, and
insuring Tenant's Property in the amount of its full replacement value.
7.03 Liability Insurance. During the Lease Term, Landlord shall maintain
public liability insurance covering the Building and insuring against all
hazards and risks customarily insured against by persons operating
first-class office buildings. Tenant, at its expense, shall maintain at all
times during the Lease Term public liability insurance with respect to the
Premises, their use and occupancy by Tenant and the conduct or operation of
business therein, with combined single-limit coverage of not less than
$2,000,000. Landlord may from time to time increase the policy amount to be
maintained by Tenant under this Section as Landlord deems necessary in order
to maintain adequate liability coverage.
7.04 Waiver of Subrogation. Landlord and Tenant shall each secure an
appropriate clause in, or an endorsement upon, each insurance policy required
by this Article, pursuant to which the insurance company waives subrogation
or permits the insured, prior to any loss, to agree with a third party to
waive any claim it might have against said third party without invalidating
the coverage under the insurance policy. On Tenant's policies, the waiver of
subrogation or permission for waiver of any claim shall extend to Landlord,
Landlord's Affiliates and its and their agents and employees. On Landlord's
policies, the waiver of subrogation or permission for waiver of any claim
shall extend to Tenant and its agents and employees. Each party hereby
releases the above-named persons with respect to any claim (including a claim
for negligence) which it might otherwise have against them for injury, loss,
damage or destruction occurring during the Lease Term and covered by the
policies required of Tenant or Landlord under this Article.
7.05 Policy Requirements. Landlord, Landlord's Affiliates and its and their
agents and employees, and any lessor or mortgagee whose name and address
shall have been furnished to Tenant shall be designated as additional insured
parties on any insurance policy required by this Article. Tenant shall
deliver to Landlord fully paid-for policies or certificates of insurance for
the insurance coverage required by this Article, in form satisfactory to
Landlord, issued by the insurance company or its authorized agent, at least
20 days before the Rent Commencement Date. All policies shall provide that
they cannot be canceled or modified unless Landlord, and any other additional
insured party, are given at least 30 days' prior written notice of such
cancellation or modification.
7.06 Premium Increase. If, by reason of any action or omission by Tenant in
default of any of its obligations under this Lease, or by reason of any
Tenant Work installed in the Premises, the premiums on Landlord's insurance
on the Building are higher than they otherwise would be. Tenant shall
reimburse Landlord, on demand, as Additional Charges, for that part of the
premiums attributable to the default by Tenant or the Tenant Work.
ARTICLE 8
ALTERATIONS
8.01 Conditions. With Landlord's prior written approval , which shall not be
unreasonably withheld, Tenant may from time to time, at its expense, make
such alterations ("Alterations") in and to the Premises as Tenant may
reasonably consider necessary or as may be required by law, license, or
permit for the conduct of its business in the Premises, provided and upon the
conditions that: (a) the Alterations do not affect the outside appearance of
the Building or the appearance of the common areas of the Building and are
not visible from the outside of the Building or from the common areas of the
Building; (b) the Alterations are non-structural and do not impair the
strength of the Building; (c) the Alterations are to the interior of the
Premises and do not affect any part of the Building outside of the Premises;
(d) the Alterations do not affect the proper functioning of the mechanical,
electrical, sanitary and other service systems of the Building, or increase
the usage of such systems by Tenant; (e) before proceeding with any
Alteration, Tenant shall submit to Landlord, for Landlord's approval, plans
and specifications for the work to be done, and Tenant shall not proceed with
such work until it obtains Landlord's approval, which shall not be
unreasonably withheld; (f) Tenant shall pay to Landlord upon demand the
reasonable direct, out-of-pocket costs and expenses actually incurred by
Landlord in reviewing Tenant's plans and specifications and inspecting the
Alterations to determine whether they are being performed in accordance with
the approved plans and specifications and in compliance with law, including,
without limitation, the fees of any architect, engineer or attorney employed
by Landlord for such purpose; (g) before proceeding with any Alteration which
is reasonably estimated to cost more than $10,000 (exclusive of the costs of
items constituting Tenant's Property, as defined in Section 9.02), Tenant
shall comply with the requirements of Section 8.04; N not less than 15 days,
nor more than 20 days prior to commencement of the Alterations, Tenant shall
notify Landlord of the work commencement date, in order that Landlord may
post notices of nonresponsibility about the Premises; (i) Tenant shall obtain
and maintain suchinsurance therefor as is acceptable to Landlord; and (j)
Tenant shall fully and promptly comply with and observe the rules and
regulations of Landlord then in force with respect to the making of
Alterations.
8.02 PERFORMANCE. Tenant shall obtain all necessary governmental permits and
certificates, at Tenant's sole cost and expense, for the commencement and
prosecution of Alterations and for final approval of the Alterations upon
completion. If Landlord does not perform the Alterations as contractor,
Tenant shall retain at its sole expense a reputable contractor, selected from
Landlord's list of acceptable contractors and then independently approved by
Landlord for the specific Alterations, to perform the Alterations in
compliance with the permits and certificates and applicable law. Alterations
shall be diligently performed in a good and workmanlike manner, using new
materials and equipment at least equal in quality and class to the better of
M the original installations of the Building, or (ii) the prevailing Building
standards established by Landlord. Any Alterations in the mechanical,
electrical, sanitary, heating, ventilating, air-conditioning or other systems
of the Building shall be performed only by contractors designated by
Landlord. Alterations shall be performed in a manner that does not interfere
with, delay, or impose additional expense on Landlord in the construction,
maintenance, repair or operation of the Building; and if any additional
expense is incurred by Landlord as a result of Alterations, Tenant shall
reimburse Landlord for the additional expense upon demand, as Additional
Charges.
8.03 Liens. Tenant shall keep the Premises and the Building free from any
liens arising out of any work performed, materials furnished, or obligations
incurred by or on behalf of Tenant. Landlord may require, at Landlord's sole
option, that Tenant shall provide to Landlord, at sole option, that Tenant
shall provide to Landlord, at Tenant's sole cost and expense, a lion and
completion bond in an amount equal to one and one-half (11%) times the
estimated cost of any improvement, additions, or alterations in the Premises
which Tenant desires to make to insure Landlord against any liability for
mechanics' and materialmen's liens and to insure completion of the work.
8.04 Security for Performance. When required by Section 8.01 and/or Section
10.02, Tenant shall obtain and deliver to Landlord a performance bond and a
labor and materials payment bond for the benefit of Landlord, issued by a
corporate surety licensed to do business in California, each in an amount
equal to 125 percent of the estimated cost of the Alterations and in form
satisfactory to Landlord.
8.05 Miscellaneous. Landlord reserves the right to perform the Alterations as
contractor. In that event, Tenant need not comply with Subsection 8.01 (g)
and Landlord shall perform the Alterations for the price plus contractor's
overhead and profit set forth in the contractor's bid which Tenant would have
accepted, and Tenant shall pay to Landlord the amount of the Bid Price as and
when the Bid Price is required to be paid under the bid. Any bid obtained by
Tenant and the contractor making the bid shall satisfy the criteria specified
in Section 8.02. Tenant agrees that the review and approval by Landlord of
Tenant's plans and specifications for Alterations are solely for Landlord's
benefit. Landlord shall have no duty toward Tenant, nor shall Landlord be
deemed to have made any representation or warranty
<PAGE>
to Tenant with respect to the safety, adequacy, correctness, efficiency or
compliance with law of the plans and specifications, the Alterations or their
design, or any other matter regarding the Alterations.
ARTICLE 9
LANDLORD'S AND TENANT'S PROPERTY
9.01 Fixtures. All fixtures, equipment (other than communications and office
equipment referred to in Section 9.02), improvements and appurtenances
("Fixtures") attached to or built into the Premises on or before the Rent
Commencement Date or during the Lease Term, including Alterations, shall
become and remain a part of the Premises and the property of Landlord,
regardless of whether the Fixtures were installed by Tenant or at Tenant's
expense, and shall not be removed by Tenant.
9.02 Tenant's Property. All communications and office equipment, whether or
not attached to or built into the Premises, which are installed in the
Premises by or for the account of Tenant, without expense to Landlord, and
which can be removed without substantial damage to the Premises or the
Building, and all furniture, furnishings and other articles of movable
personal property owned by Tenant (or leased from any person except Landlord)
and located in the Promises shall remain the property of Tenant ("Tenant's
Property") and may be removed by Tenant at any time during the Lease Term if
Tenant is not in default under this Lease at the time of removal. If any of
Tenant's Property is installed, relocated, or removed, Tenant shall repair,
at its sole expense, any damage to the Premises or to the Building resulting
from the installation, relocation, or removal of Tenant's Property.
9.03 Removal at Termination. Prior to the expiration of the Lease Term, or
immediately upon any earlier termination of the Lease, Tenant, at its
expense, shall remove from the Premises all of Tenant's Property (except such
items thereof which are the property of Landlord or as Landlord has expressly
permitted to remain, which shall become the property of Landlord), and Tenant
shall repair any damage to the Premises or the Building resulting from the
installation, relocation, or removal of Tenant's Property.
9.04 Abandonment. Any personal property remaining on the Premises after Lease
termination, shall be disposed of by Landlord in the manner prescribed in
California Civil Code, Sections 1980-1991.
9.05 Taxes on Tenant's Property and Non-Standard Tenant Improvements.
(a) Tenant's Property. At least 10 days prior to delinquency, Tenant
shall pay all taxes levied or assessed upon Tenant's Property. If the
assessed value of the Building, the Premises, or property of Landlord is
increased by the inclusion of a value placed upon Tenant's Property, Tenant
shall pay to Landlord, upon demand as Additional Charges, the taxes levied
against Landlord on account of the included value of Tenant's Property.
(b) Tenant's Work. Tenant shall pay to Landlord, upon demand, as
Additional Charges, such portion of all real estate taxes levied or assessed
against Landlord which are attributable to that portion of the value of
tenant improvements installed in the Premises in excess of an amount equal to
that of Building standard improvements.
For the purposes of calculating the amount payable by Tenant pursuant to this
Subsection 9.05(b), the value of tenant improvements installed in the
Premises shall be deemed to be equal to the cost of such tenant improvements,
including any fees paid to Landlord in connection therewith, and including
any Alterations whether or not performed pursuant to Section 8.01.
ARTICLE 10
REPAIRS AND MAINTENANCE
10.01 Landlord's Obligations. Landlord shall keep and maintain the Building's
exterior walls, glass, roof and foundation and the public portions of the
Building and the Building systems and facilities serving the Premises and the
Base Building Work (as defined in the Work Letter) located in the Premises
and, if Tenant constructed the tenant improvements under the Work Letter, the
improvements and fixtures described in Paragraphs 3.3, 3.4 and 3.5 of the
Work Letter, in proper working order, condition and repair, unless provided
otherwise herein. Landlord shall have no obligation, however, to perform any
repairs unless Landlord has knowledge of the need for such repairs,
describing the needed repairs in reasonable detail.
10.02 Tenant's Obligations. Tenant shall, at its sole cost and expense
throughout the Lease Term, take good care of the Promises, the Fixtures and
Tenant's Property except as provided otherwise in Sections 10.01 and 13.01.
Tenant shall be responsible for all repairs, maintenance and replacement of
doors, interior glass, and wall and floor coverings in the Premises and
improvements in the Premises described as Tenant's Work in the Work Letter
(excluding, if Tenant constructed the tenant improvements, the HVAC life
safety system described in Paragraph 3.3, 3.4 and 3.5 of the Work Letter, and
excluding the extent to which such responsibility is covered by insurance
proceeds received by Landlord under policies held by Landlord in accordance
with Section 7.02) and for the repair and maintenance of all water fountains,
sinks and sanitary and electrical fixtures and equipment in the Premises.
Tenant shall be responsible for all maintenance and repairs, interior and
exterior, structural and nonstructural, ordinary and extraordinary, of the
Premises, the Building and the Building's facilities and systems, made
necessary, in whole or in part, by (a) the performance or existence of
Tenant's Work (as defined in the Work Letter) or Alterations; (b) the
installation, use or operation of Tenant's Property in the Premises, (c) the
moving of Tenant's Property in or out of the Building, or (d) any act,
omission, misuse or neglect by Tenant or its officers, partners, employees,
agents, contractors or invitees. All Tenant repair work shall be subject to
all of the provisions of Article 8 regarding Alterations. Landlord shall
perform or cause to be performed, at Tenant's expense, any other repairs of
the Building and its facilities and systems for which Tenant is responsible.
Tenant shall reimburse Landlord on demand, as Additional Charges, for the
costs of such repairs.
10.03 Exculpation of Landlord for Repairs. Except as otherwise expressly
provided in this Lease, Landlord shall have no liability to Tenant, and
Tenant's covenants and obligations under this Lease shall not be reduced or
abated in any manner whatsoever by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord making any
maintenance, repairs, alterations, additions or improvements in or to any
portion of the Building or the Premises or in or to the fixtures, equipment
or appurtenances of the Building or the Premises, which Landlord is required
or permitted to make by this Lease, or which are required by law, or which
Landlord deems appropriate, excepting any direct (but not consequential)
damages to the extent caused by the negligence or willful misconduct of
Landlord or its employees. Landlord shall have the right to erect scaffolding
and barricades in the Premises and the Building for the purposes of such
repairs, provided that such structures do not unreasonably impair access to
the Premises. Tenant waives any rights it may have under California Civil
Code Sections 1941 and 1942, and any other provisions of law now or hereafter
in force, regarding the duties of a lessor to repair leased premises or the
rights of lessees to make repairs if the lessor fails to do
10.04 Notices. Tenant shall give prompt notice to Landlord of (a) any
occurrence in or about the Premises for which Landlord might be liable, (b)
any fire or other casualty in the Premises; (c) any damage to or defect in
the Premises, including the Fixtures, for the repair of which Landlord might
be responsible; and (d) any damage to or defect in any part or appurtenance
of the Building's sanitary, electrical, heating, ventilating,
air-conditioning, elevator or other systems located in or passing through the
Premises.
<PAGE>
ARTICLE 11
UTILITIES AND SERVICES
11.01 Basic Utilities and SERVICES. Landlord shall furnish to the Premises
during "Business Hours," which are the periods from 8 a.m. to 7 p.m. Monday
through Friday and 8 a.m. to 2 p.m. Saturday, except for New Year's Day,
President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day, and such other holidays as are generally observed in the City
of Santa Monica by the closing of businesses, and subject to the rules and
regulations from time to time established by Landlord, (a) heating, air
conditioning and ventilation in amounts reasonably required for the use and
occupancy of the Premises; (b) freight and passenger elevator service; (c)
electricity in amounts required for normal lighting by the Building's
standard overhead fluorescent fixtures, and for an ordinary number of normal
office machines; and (d) hot and cold water in amounts required for normal
lavatory, coffee room and drinking purposes. Subject to the provisions of
Section 11.02 regarding charges for additional use, passenger elevator
service, electricity and water will be available 24 hours a day, every day of
the year. Landlord shall provide heating, air conditioning, ventilation, and
freight elevator service at other than Business Hours by arrangement with
Tenant, provided that Tenant is not then in default of this Lease and
provided that Tenant pays Landlord's usual charges for such overtime use.
Landlord shall provide janitorial service Monday through Friday, except for
the holidays listed above, generally consistent with that furnished in other
first-class office buildings in Santa Monica and window washing at intervals
determined by Landlord. Tenant shall neither contract for nor employ any
labor in connection with the maintenance, cleaning or other servicing of the
Premises without the prior written consent of Landlord.
11.02 Additional Tenant Use. On the Rent Commencement Date, and from time to
time thereafter, Landlord may impose a reasonable charge, as Additional
Charges, and establish reasonable rules and regulations for (a) the use by
Tenant of heating, air conditioning, ventilation, or freight elevators at any
time other than during Business Hours; (b) the use by Tenant of heating, air
conditioning, ventilation, water or electricity in amounts exceeding that to
be provided under Section 11.01, and (c) the use of any additional or unusual
janitorial or cleaning services required because of any non-building standard
improvements in the Premises (including glass or fragile surfaces), the
carelessness of Tenant, the nature of Tenant's business (including the
operation of Tenant's business other than during Business Hours), or for the
removal of any refuse and rubbish unusual in kind or amount. Tenant shall not
install or operate machinery, appliances or equipment (including computers,
electronic data and word processors, photocopiers, laser printers, and
machines that require more than 110 volts) which would exceed the capacity of
any mechanical electrical, sanitary, life safety, or other service system of
the Building as determined by Landlord. Without the prior written consent of
Landlord, which Landlord may refuse in its sole discretion, Tenant shall not
install or operate any machinery, appliance, or equipment in the Premises
which will in any way increase the demand for electricity beyond that usually
supplied for use of the Premises as general office space, and shall not
connect any apparatus, device, machinery, appliance, or equipment for the
purpose of using electric current except through existing electrical outlets
in the Premises. If Tenant consumes electricity in amounts exceeding that to
be provided under Section 11.01, Landlord, or its electrical consultant, may
install, at Tenant's expense, a meter to measure the electricity consumed on
the Promises. Whether or not separately metered, Tenant shall pay Landlord (a
Additional Charges) the cost of such excess electricity consumption, if any.
11.03 Temperature Maintenance. Landlord makes no representation with respect
to the adequacy or fitness of the air-conditioning or ventilation equipment
in the Building to maintain temperatures which may be required for, or
because of, any condition other than normal office equipment, normal
electrical loads, or normal occupancy of the Premises, and Landlord shall
have no liability for loss or damage in connection therewith.
11.04 Exculpation of Landlord for Utilities. Landlord shall not be liable for
any failure to furnish any services or utilities when such failure is caused
by acts of God, war, civil disobedience, vandalism, accidents, breakage,
repairs, strikes, lockouts, other labor disputes, alterations or improvements
to the Premises or the Building, the inability to obtain an adequate supply
of fuel, water, electricity, labor or other supplies, or for any other
condition beyond Landlord's reasonable control, including, without
limitation, any governmental energy conservation program, and Tenant shall
not be entitled to any damages nor shall such failure abate or suspend
Tenant's obligation to pay the Rents or constitute or be construed as a
constructive or other eviction of Tenant. Neither Landlord's actions nor its
failure to act shall entitle Tenant to any damages, abate or suspend Tenant's
obligation to pay the Rents, or constitute or be construed as a constructive
or other eviction of Tenant.
11.05 Security. Landlord shall institute reasonable security measures for the
Building, but Landlord makes no warranty, representation, or guaranty that
such measures will adequately protect persons or property from loss or injury.
11.06 Access. Landlord, the cleaning contractor and their employees shall
have access to the Premises after 5:00 pm. and before 7:00 a.m. and shall
have the right to use, without charge therefor, all light, power and water in
the Premises reasonably required to clean the Premises.
11.07 Directory Listing. Landlord, at Tenant's request, shall maintain
listings of the name of Tenant (and the names of any of Tenant's officers and
employees) on the Building directory located in the ground floor lobby,
provided that the names so listed shall not use more than two lines of such
directory for every 1,000 square feet of Rentable Area of the Premises
(rounded to the nearest full line). The reasonable charge of Landlord for any
changes in such listings shall be paid by Tenant to Landlord as Additional
Charges.
ARTICLE 12
RIGHTS OF LANDLORD
12.01 Reservation from Promises. Except for the space within the inside
surfaces of all walls, hung ceilings, floors, windows and doors bounding the
Promises, Landlord reserves from the Premises all of the Building, including,
without limitation, the roof, exterior Buildings walls, core corridor walls
and doors, any terraces or roofs adjacent to the Premises, the space between
hung ceilings and the slab above and any space in or adjacent to the Premises
used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric,
telephonic or other utilities, sinks or other Building facilities, and the
use thereof, as well as access thereto through the Premises for the purposes
of operation, maintenance, decoration and repair of the Premises or the
Building. Landlord reserves the right, and Tenant shall permit Landlord, to
install, erect, use and maintain pipes, ducts and conduits in and through the
Premises; provided, that Landlord shall disguise, conceal or camouflage the
pipes, ducts and conduits.
12.02 Entry By Landlord. Landlord and its agents shall have the right to
enter or pass through the Premises at reasonable times (a) to examine the
Premises and to show them to actual and prospective lenders, mortgagees,
purchasers, and lessees of the Building and (b) to make repairs, alterations,
additions and improvements in the Premises, the Building or Building
facilities and equipment.
Any entry by Landlord shall be made on reasonable advance oral notice, except
in emergency situations. In exercising its rights under this Section,
Landlord shall take reasonable measures to avoid unnecessary interference
with Tenant's use and occupancy of the Premises.
Landlord shall have a pass key to the Promises and shall be allowed to bring
materials and equipment into the Premises as required in connection with
repairs, alterations, additions and improvements, without any liability to
Tenant and without any reduction of Tenant's covenants and obligations, and
may do so (but shall not be obligated to do so) on an overtime basis.
<PAGE>
12.03 Temporary Obstructions of Light or View; Closures. If at any time any
windows of the Premises are temporarily darkened or the light or view
therefrom obstructed by reason of any repairs, improvements, maintenance or
cleaning in or about the Building, or if any part of the Building, other than
the Premises, is temporarily or permanently closed or inoperable, the same
shall be without liability to Landlord and without any reduction or
diminution of Tenant's obligation under this Lease.
12.04 Exhibiting the Promises. During a period of 18 months prior to the
expiration of the lease Term, Landlord and its agents may exhibit the
Premises to prospective tenants during normal business hours, on reasonable
advance written or oral notice to Tenant.
12.05 Entry Prior to End of Term. If, during the last month of the Lease
Term, Tenant has removed all or substantially all of Tenant's Property from
the Premises, Landlord may, without notice to Tenant, immediately enter the
Premises and alter, renovate and decorate the same, without liability to
Tenant and without reducing or otherwise affecting Tenant's covenants and
obligations hereunder.
12.06 Building Name and Address. Landlord reserves the right at any time,
without notice or liability to Tenant, to change the Building's name or
address.
12.07 Alterations of Building. Landlord reserves the right, at any time,
without incurring any liability to Tenant therefor and without affecting or
reducing any of Tenant's covenants and obligations hereunder, to make such
changes, alterations, additions and improvements in or to the Building and
its systems and equipment, as well as in or to street entrances, doors,
halls, passages, elevators, escalators and stairways, and other public parts
of the Building, as Landlord shall deem necessary or desirable. Landlord,
however, shall not materially interfere with Tenant's use of the Premises.
12.08 Other Rights. The enumeration of rights of Landlord in this Article is
not all-inclusive and shall not be construed to preclude or limit other
rights reserved to Landlord by this Lease or by law.
ARTICLE 13
DAMAGE OR DESTRUCTION
13.01 ABATEMENT. Except to the extent of Landlord's rights under Section
13.02, if the Premises are damaged by fire or other perils covered by
extended coverage insurance, Landlord agrees to forthwith repair same to the
extent of insurance proceeds actually received by Landlord, and this Lease
shall remain in full force and effect, except that Tenant shall be entitled
to a proportionate reduction of the Basic Rent from the date of damage and
while such repairs are being made, such proportionate reduction to be based
upon the extent to which the damage and making of such repairs shall
materially interfere with the conduct of Tenant's business within the
Premises. If the damage is due to the fault or neglect of Tenant or any
officer, agent, employee, invitee, or principal of Tenant, there shall be no
such abatement. Tenant, for all purposes under this Lease, hereby waives the
provisions of California Civil Code Section Section 1932 and 1933 and those
of any law of similar import now or hereafter enacted.
13.02 Reconstruction. If the Premises are damaged by fire or other perils
covered by fire and extended coverage insurance and such is not the result of
the act or omission of Tenant or any officer, agent, employee, guest,
invitee, or principal of Tenant, then Landlord shall forthwith repair the
same, provided the extent of the destruction be less than ten percent (10%)
of the then full replacement cost of the Premises. If such destruction of the
Premises is to an extent of ten percent (10%) or more of the full replacement
cost, then Landlord shall have the option: (a) to repair or restore such
damage, in which case this Lease shall continue in full force and effect, but
the Basic Rent shall be proportionately reduced as set forth in Section
13.01; or (b) to give notice to Tenant at any time within sixty (60) days
after such damage, in which case this Lease shall terminate as of the date
specified in such notice, which date shall be no more than thirty (30) days
after the giving of such notice, and all interest of Tenant in the Premises
shall terminate on said date, and all Rents shall be paid up to the date of
said such termination.
ARTICLE 14
EMINENT DOMAIN
14.01 Taking. If more than twenty-five percent (25%) of the Premises is taken
or appropriated by any public or quasi-public authority under the power of
eminent domain, either party hereto shall have the right, at its option,
within sixty (60) days after said taking, to terminate this Lease upon thirty
(30) days written notice. If any portion of the Premises is taken and neither
party elects to terminate as herein provided, then the Basic Rent thereafter
to be paid shall be equitably reduced. If any material part of the Building
other than the Premises is taken or appropriated, then within sixty (60) days
of said taking, Landlord may terminate this Lease upon written notice to
Tenant. If any taking or appropriation whatsoever occurs, then Landlord shall
be entitled to any and all awards and/or settlements which may be given, and
Tenant shall have no claim against Landlord for the value of any unexpired
term of this Lease or any portion of Tenant's leasehold estate.
ARTICLE 15
SURRENDER OF PREMISES
15.01 Surrender. On the last day of the Lease Term, or upon any earlier
termination of this Lease, or upon any reentry by Landlord upon the Premises,
Tenant shall quit and surrender the Premises to Landlord "broom-clean" and in
good order, condition and repair, ordinary wear and tear excepted and also
excepting any damage or destruction caused by fire or other casualty which
Tenant is not obligated by this Lease to repair. Upon expiration of the Lease
Term or earlier termination of this Lease, all of Tenant's right, title and
interest in the Premises or the Building, including any possessory interest,
shall cease.
15.02. Acceptance of Surrender. Prior to expiration of the Lease Term or
earlier termination of this Lease, no act or thing done by Landlord or its
agents shall be deemed an acceptance of surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing and
signed by Landlord.
15.03 No Merger. The surrender of this Lease by Tenant or the termination of
this Lease prior to expiration of the Lease Term shall not constitute a
merger, and, at the option of Landlord, shall operate as an assignment to
Landlord of any subleases of the Premises.
15.04 No Holding Over. There shall be no holding over by Tenant after
expiration of the Lease Term, and the failure by Tenant to deliver possession
of the Premises to Landlord shall be an unlawful detainer.
ARTICLE 16
DEFAULT BY TENANT
16.01 Default. The occurrence of any of the following shall constitute a
material default and breach of this lease by Tenant:
(a) Tenant's failure to pay Basic Rent or Additional Charges when due;
<PAGE>
(b) Tenant's failure to take possession of the Premises within 15 days
after tendered by Landlord, or Tenant's abandonment or vacation of the Premises;
(c) Tenant's failure to observe and perform any other provisions of this
Lease to be observed or performed by Tenant, where such failure continues for
15 days after written notice thereof by Landlord to Tenant; provided,
however, that if the nature of such failure is such that it cannot reasonably
be cured within such 15-day period, Tenant shall not be deemed to be in
default under this Subsection 16.01(c) if Tenant commences to cure such
failure within that period and thereafter diligently proceeds to completion;
(d) Tenant's making any general assignment for the benefit of creditors;
the filing by or against Tenant of a petition to have Tenant adjudged a
bankrupt or of a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within 60 days); the appointment of a trustee
or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where
possession is not restored to Tenant within 30 days; or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within 30 days.
(e) Tenant's failure to observe or perform according to the provisions
of Article 8 or Section 6.03 where such failure continues for more than 24
hours after notice from Landlord.;
(f) The committing of waste on the Premises; or
(g) The hypothecation or assignment of this Lease or subletting of the
Premises, or attempts at such actions, in violation of Article 19.
(h) Tenant's failure to supply any estoppel certificate required of
Tenant under this Lease.
16.02 Termination of Lease. If any such default by Tenant occurs, then in
addition to any other remedies available to Landlord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all
rights of Tenant hereunder by giving Tenant a notice of termination. If
Landlord so terminates this Lease, then Landlord may recover from Tenant:
(a) The worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus
(b) The worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the time of award
exceeds the amount of such rental loss Tenant proves could have been
reasonably avoided; plus
(c) The worth at the time of award of the amount by which the unpaid
rent for the balance of the terms after the time of award exceeds the amount
of such rental loss that Tenant proves could be reasonably avoided; plus
(d) Any other amount necessary to compensate Landlord for the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; plus
(e) Such other amounts in addition to or in lieu of the foregoing as may
be permitted from time to time by applicable California law.
As used in subparagraphs (a) and (b) above, the "worth at the time of award"
is computed by allowing interest from the date of termination until the time
of award at the maximum rate allowable under state or federal law, or, if no
such maximum rate applies, at the rate of 18 percent per annum. As used in
subparagraph (c) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent 0 %).
16.03 Reentry by Landlord. If any such default by Tenant occurs, Landlord
shall also have the right, with or without terminating this Lease, to reenter
the Premises and remove all persons and property; the removed property may be
stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant.
16.04 Election to Terminate. No reentry or taking possession of the Premises
by Landlord pursuant to Section 16.03 shall be construed as an election to
terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction.
16.05 Redemption Rights. Tenant, on behalf of itself and any and all persons
claiming through or under Tenant, hereby waives and surrenders all right and
privilege which it might have, under any law, to redeem the Premises or to
have a continuance of this Lease after being dispossessed or ejected from the
Premises by process of law or under the terms of this Lease or after the
termination of this Lease.
16.06 Application of Rent Payments. Tenant waives all rights that it may have
under present or future law to designate the items to which any payments made
by Tenant are to be credited. Tenant agrees that Landlord may apply any
payments made by Tenant to such items as Landlord sees fit, irrespective of
any designation or request by Tenant as to the items to which such payments
should be credited.
16.07 Counterclaims. Tenant shall not interpose any counterclaim of any kind
in any action or proceeding commenced by Landlord to recover possession of
the Premises except those that would be waived by law due to Tenant's failure
so to interpose. Tenant may assert any counterclaim in a separate action or
proceeding.
16.08 Performance by Landlord. If Tenant shall default in the performance of
any of Tenant's obligations under this Lease, and the default continues for
15 days after Landlord gives Tenant notice of the default, and Tenant has not
commenced diligently to cure such default, Landlord, without thereby waiving
or curing such default, may (but shall not be obligated to) perform the
defaulted obligation for the account and at the expense of Tenant. Landlord
may perform Tenant's defaulted obligation without notice in a case of
emergency, also at Tenant's sole cost and expense.
16.09 Attorneys Fees. If Landlord commences action against Tenant to enforce
any of the terms hereof, or because of the breach by Tenant of any of the
terms hereof, or for the recoverey of any rent due hereunder, or for the
unlawful cletainer of said Premises, Tenant shall pay to Landlord reasonable
attorneys fees and expenses, and the right to such attorneys fees and
expenses shall be enforceable whether or not such action is prosecuted to
judgment. If Tenant breaches any term of this Lease, Landlord may employ an
attorney, or attorneys, to protect Landlords rights hereunder, and in the
event of such employment following any breach by Tenant, Tenant shall pay
Landlord's reasonable attorneys fees and expenses incurred by Landlord,
whether or not an action is actually
<PAGE>
commenced against Tenant by reason of said breach.
16.10 Post-Judgment Interest. The amount of any judgment obtained by Landlord
against Tenant in any legal proceeding arising out of a default by Tenant
under this Lease shall bear interest until paid at the maximum rate allowed
by law, or, if no such maximum rate prevails, at the rate of 18 percent per
annum. Notwithstanding California Civil Code S 3287 to the contrary, if any
damages were certain or ascertainable by calculation, then such interest
shall accrue from the day that the right to such damages vested in Landlord,
and if any claim is unliquiclated, such interest shall accrue from the day
such claim arose.
16.11 No Waivers. The failure of Landlord to insist in any one or more
instances, upon the strict performance by Tenant of any of Tenant's
obligations under this Lease, or to exercise any right or remedy given
Landlord upon a default by Tenant, shall not be construed as a waiver or
relinquishment for the future, and the obligations of Tenant and Landlord's
rights and remedies upon a default shall continue and remain in full force
and effect with respect to any subsequent breach, act or omission. The
receipt by Landlord of Rents with knowledge of a breach by Tenant of any
obligation of this Lease shall not be deemed a waiver of such breach.
16.12 Remedies Not Exclusive. The rights and remedies provided to Landlord in
this Article are not exclusive, and Landlord may exercise any other right or
remedy it may have pursuant to this Lease, at law or in equity.
16.13 Quarterly Payments. Landlord reserves the right to collect, quarterly
in advance, any and all amounts owed by Tenant under this Lease after Tenant
has defaulted hereunder, as defined in this Article and notwithstanding the
subsequent cure of any or all of such defaults, three or more times in any
consecutive twelve month period.
Tenant shall begin such payments on the first day of the calendar month
immediately following notice from Landlord of the exercise of such right.
Tenant shall pay all intraquarterly upward adjustments within ten days of
notice of same from Landlord, and Landlord shall credit Tenant's next
quarterly payment with all intra-quarterly downward adjustments. Such right
may be exercised by Landlord in Landlord's absolute discretion, and shall not
be construed as an obligation of Landlord.
ARTICLE 17
SUBORDINATION AND ATTORNMENT
17.01 OPERATION. Upon request of Landlord, Tenant shall subordinate, in
writing, its rights hereunder to the lien of any mortgage or deed of trust,
given to any person, now or hereafter in force against the Building or the
Premises, and to all advances made or hereafter to be made upon the security
thereof. If any proceedings are brought for foreclosure, or if the power of
sale under any mortgage or deed of trust made by Landlord covering the
Building or the Premises is exercised, then Tenant shall attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as
Landlord under this Lease. So long as Tenant is not in default hereunder,
however, this Lease shall remain in full force and effect for the full term
hereof.
ARTICLE 18
QUIET ENJOYMENT, NO SMOKING & FIRE RULES
18.01 Quiet Enjoyment. So long as Tenant timely pays all the Rents and
performs all of Tenant's other obligations hereunder within the time periods
permitted under this Lease, Tenant shall peaceably and quietly have, hold and
enjoy the Premises during the Lease Term without hindrance, ejection or
molestation by Landlord or any person lawfully claiming through or under
Landlord, subject, nevertheless, to the provisions of this Lease and to any
mortgages. This covenant is a covenant running with the land, and is not a
personal covenant of Landlord.
18.02 No Smoking. Tenant acknowledges, agrees and covenants that the
Premises, the total building in which the Premises is a part, all common
areas, parking areas, and areas of ingress and egress, are non smoking. The
failure by Tenant, Tenant employees, agents and guests, to observe this
non-smoking prohibition shall be deemed in material breach of this Lease.
18.03 Fire Regulations. Tenant, Tenant's employees, agents and guests, must
cooperate and conform with all fire regulations promulgated by pertinent
government agencies and Landlord. Any failure to observe fire rules and
regulations, including, but not limited to, fire drills, suite coordinators,
and appointment of fire monitors appointed by Tenant, shall be deemed to be a
material breach of this lease.
ARTICLE 19
ASSIGNMENTS AND SUBLEASES
19.01 Consent. Tenant shall not assign or sublease the Premises without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, except that Landlord shall have the unlettered right to withhold
such approval of any proposed assignee or sublessee (the "Proposed
Assignee"), (a) on the basis of the Proposed Assignee's character and/or
reputation, (b) if the Proposed Assignee has negotiated with Landlord or
Landlord's agent for a tenancy in the Building within the previous six
months, (c) if the Proposed Assignee (or an affiliate thereof) is then a
tenant of the Building, or (d) if the Proposed Assignee's proposed use of the
Premises is not consistent with the Permitted Use. Landlord reserves the
right to collect rent directly from the Proposed Assignee, and such
collection shall not waive any obligation of Tenant under this Lease. No
assignment or sublease of this Lease shall serve to release Tenant from any
obligation under this Lease.
19.02 Offer to Landlord. Notwithstanding Section 19.01 to the contrary, if
Tenant desires to assign or sublease the Premises, Tenant shall first offer
the Premises to Landlord under terms and conditions at least as favorable to
Landlord as those that would be offered to the Proposed Assignee. Landlord
shall have not less than 60 days in which to accept said offer. If Landlord
accepts said offer, Landlord and Tenant shall promptly execute documentation,
acceptable to Landlord, to effect an assi gnment/subl ease of the Premises to
Landlord under said terms and conditions.
If Landlord does not accept said offer, then Tenant shall have the rights
described in Section 19.01. Any proposal made to a Proposed Assignee that is
(a) materially more favorable to the Proposed Assignee than that offered
Landlord, or (b) that is accepted by the Proposed Assignee more than 60 days
after the earlier of (i) Landlord's rejection of the offer to Landlord, and
(ii) Landlord's 60-day acceptance period described above, (c) shall be null
and void and shall require a new offer to Landlord under the terms set forth
in this Section 19.02.
19.03 Constructive Assignment. Any dissolution of Tenant, and any transaction
or group of transactions that causes one or more persons, not previously
controlling Tenant, to control Tenant (either alone or with other controlling
persons), is hereby deemed to be an assignment of this Lease and shall be
subject to the terms of this Article 19. In the case of a partnership,
controlling persons are deemed
<PAGE>
to be each general partner thereof, and in the case of a corporation,
controlling persons are deemed to be each SHAREHOLDER OF the corporation
owning shares sufficient in number to impose said shareholder's will over
that of one or more other shareholders of the corporation.
ARTICLE 20
NOTICES
20.01 NOTICES. ALL notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands shall be sufficient if sent by United States
Mail, postage prepaid, addressed to the party to be notified at its address
at the Building (except that prior to the Rent Commencement Date, Tenant's
address for such purposes shall be as set forth in Section 1.11), or to such
other person or place as such party may from time to time designate by notice
to the other.
ARTICLE 21
ESTOPPEL CERTIFICATES
21.01 Estoppel Certificates. Within 10 days after a request by Landlord or
Tenant, the other party shall execute an estoppel certificate, in form
satisfactory to the requesting party, and shall deliver such certificate to
whom the requesting party or any mortgagee shall direct, which (a) certifies
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified,
and stating the modifications); (b) states the Expiration Date and that there
are no agreements to extend or renew the Lease Term or to permit any holding
over (or if there are any such agreements, describes them and specifies the
periods of extension or renewal); (c) certifies the dates through which Rents
have been paid; (d) states whether or not, to the knowledge and belief of the
certifying party, the requesting party is in default in performance of any of
its obligations under this Lease, and specifies each default of which it has
knowledge; (a) states whether or not, to the knowledge and belief of Tenant,
any event has occurred which, with the giving of notice or passage of time,
or both, would constitute a default by Landlord and, if such an event has
occurred, specifies each such event; (f) states whether Tenant is entitled to
any credits, offsets, defenses or deductions against payment of Rents, and,
if so, describes them; and (g) states such other information as Landlord
and/or a mortgagee shall reasonably request.
ARTICLE 22
RELOCATION OF PREMISES
22.01 Building Planning. If Landlord requires the Premises for use in
conjunction with another suite or for any other reasons connected with the
Building planning program, Landlord, upon notifying Tenant in writing, shall
have the right to move Tenant to another space in the Building, at Landlord's
sole cost and expense, and the terms and conditions of this Lease shall
remain in full force and effect, except that the Premises shall be in a new
location. If the new space does not meet with Tenant's reasonable approval,
however, Tenant may cancel this Lease upon giving Landlord thirty (30) days'
notice within ten (10) days after receipt of Landlord's notification. If
Tenant refuses to permit Landlord to so move Tenant to such new location,
then Landlord shall have the right to cancel and terminate this Lease
effective immediately.
ARTICLE 23
BROKER
23.01 Broker. Tenant covenants, warrants and represents that no broker except
Tenant's broker was instrumental in bringing about or consummating this Lease
and that Tenant had no conversations or negotiations with any broker except
Tenant's Broker concerning the leasing of the Premises. Tenant agrees to
indemnify, defend and hold Landlord harmless against and from any claims for
any brokerage commissions or finder's fees by persons other than Tenant's
Broker, and all costs, expenses and liabilities incurred in connection with
such claims, including attorneys' fees.
ARTICLE 24
EXCULPATION AND INDEMNIFICATION
24.01 Exculpation. Neither Landlord, nor Landlord's Affiliates, nor any
partner, director, officer, agent or employee of Landlord or Landlord's
Affiliates, nor mortgagee or any director, officer, other agent or employee
of such mortgagee, shall be liable to Tenant or its partners, directors,
officers, contractors, agents, employees, invitees, sublessees or licensees
(collectively, "Tenant's Agents"), for any loss, injury or damage to Tenant
or to any other person, or to its or their property, irrespective of the
cause of such injury, damage or loss, except to the extent caused by or
resulting from the negligence or willful misconduct of Landlord or its
employees in the operation or maintenance of the Premises or the Building.
Further, neither Landlord, nor Landlord's Affiliates, nor any partner,
director, officer, agent or employee of Landlord or Landlord's Affiliates,
nor mortgagee or any director, officer, other agent or employee of such
mortgagee, shall be liable (a) for any such damage caused by other lessees or
persons in or about the Building, or caused by operations in construction of
any private, public or quasi-public work, or (b) for consequential damages
arising out of any loss of the use of the Premises or any equipment or
facilities therein by Tenant or any person claiming through or under Tenant.
24.02 Indemnity. Tenant shall defend, indemnify and hold harmless Landlord,
Landlord's Affiliates, all mortgagees, and its and their respective partners,
directors, officers, agents and employees from and against any and all direct
and/or consequential claims, demands, liability, loss, damage, costs and
expenses arising from or in connection with: (a) the conduct or management of
the Promises or of Tenant's business therein, or any work or act whatsoever
done, or any condition created by Tenant or Tenant's Agents in or about the
Premises or the Building during the Lease Term or during the period of time,
if any, prior to the Rent Commencement Date that Tenant may have been given
access to the Premises; (b) any act, omission or negligence of Tenant or
Tenant's Agents; (c) any accident, injury or damage whatsoever (except to the
extent caused by Landlord's negligence or willful misconduct) occurring in or
about the Premises; and (d) any breach or default by Tenant in the full and
prompt payment and performance of Tenant's obligations under this Lease;
together with all costs, expenses and liabilities incurred in connection with
each claim, action or proceeding brought thereon, including, without
limitation, all reasonable attorneys' fees and expenses. Upon Landlord's
demand before or after the expiration or earlier termination of the Lease
term, Tenant shall perform such acts, and shall execute such agreements, as
are reasonably necessary to assure Landlord (and such other persons as
Landlord deems necessary) of Tenant's obligation to abide by the provisions
of this Section 24.02 and Article 15. If an action or proceeding is brought
against any of the persons indemnified under this Section for a matter
covered by this indemnity, Tenant, upon notice from the indemnified person,
shall defend such action or proceeding by counsel reasonably satisfactory to
Landlord and the indemnified person.
24.03 Satisfaction of Remedies. Neither Landlord, nor Landlord's Affiliates,
nor any successor to Landlord's interest, including any Successor Landlord,
shall be personally liable for the performance of Landlord's obligations
under this Lease, Tenant shall look only to Landlord's estate and property in
the Land and the Building (or the proceeds thereof), and to no other property
or assets of Landlord or Landlord's Affiliates, for the satisfaction of
Tenant's remedies under this Lease, or for the collection of a judgment (or
other judicial process) requiring the payment of money by Landlord or
Landlord's Affiliates. The covenants and agreements contained in this Section
<PAGE>
24.03 shall be enforceable by Landlord, Landlord's Affiliates, and its and
their respective successors and assigns.
24.04 Transfers of Landlord's Interest. The covenants and agreements of
Landlord under this Lease shall not be binding on any person at any time
holding the interest of Landlord (including the original named Landlord)
subsequent to the transfer of that person's interest in the Building. In the
event of such a transfer, the covenants and agreements of Landlord shall
thereafter be binding upon the transferee of Landlord's interest. If
Landlord's interest in the Building or the Land shall be sold, assigned or
otherwise transferred to any person, including any transfer upon the exercise
of any remedy provided in a mortgage or at law or equity, that person, and
each person thereafter succeeding to its interest in the Building or the
Land, shall not be (a) liable for any act or omission of Landlord under this
Lease occurring prior to such sale, assignment or other transfer; (b) subject
to any offset, defense or counterclaim accruing prior to such sale,
assignment or other transfer; (c) bound by any payment prior to such sale,
assignment or other transfer of Basic Rent or Additional Security Charges for
more than one month in advance; and (d) liable for the return of the Security
Deposit except to the extent that the Security Deposit has been paid over to
such person.
ARTICLE 25
PARKING
25.01 Tenant's Parking. Tenant shall have the right to use Tenant's Parking
for the unreserved and unassigned parking of standard size or smaller
automobiles used by Tenant, its officers and employees. Such right is subject
to (a) Tenant's notice to Landlord on or before the first anniversary of the
Rent Adjustment Date, of Tenant's election to so use a number of parking
spaces up to that amount allotted to Tenant in Section 1.09, and (b) Tenant's
timely payment to Landlord or the operator of the Building parking garage of
the prevailing fee for parking charged to lessees and occupants of the
Building. To the extent that Tenant fails to so elect or to so pay, Landlord
shall not be obligated to allot parking spaces to Tenant as Tenant's Parking.
Landlord may designate the location of Tenant's Parking, and may from time to
time relocate all or any portion of Tenant's Parking. The use of Tenant's
Parking shall be governed by the rules and regulations adopted from time to
time by Landlord or the operator of the parking garage. Tenant's business
visitors shall have the right to park in the parking garage only to the
extent that parking space is available and subject to the payment of the
prevailing fee for parking charged to visitors to the Building.
ARTICLE 26
MISCELLANEOUS
26.01 Memorandum of Lease. Tenant shall not record this Lease. At the request
of Landlord, however, Tenant shall promptly execute, acknowledge and deliver
to Landlord a memorandum of lease with respect to this Lease sufficient for
recording.
26.02 Entire Agreement. This Lease contains all of the agreements and
understandings related to the leasing of the Premises and the respective
obligations of Landlord and Tenant in connection therewith. Landlord has not
made and is not making, and Tenant, in executing and delivering this Lease,
is not relying upon, any warranties, representations, promises or statements,
except those that are expressly set forth in this Lease, including any riders
and all exhibits hereto. All prior agreements and understandings between the
parties have merged into this Lease, which alone fully and completely
expresses the agreement of the parties.
26.03 Amendments. No agreement shall be effective to amend, change, modify,
waive, release, discharge, terminate or effect an abandonment of this Lease,
in whole or in part, unless such agreement is in writing, refers expressly to
this lease and is signed by Landlord and Tenant. Material modifications to
this Lease must also be approved by any mortgagee who has such right under
its mortgage.
26.04 Successors. Except as otherwise expressly provided herein, the
obligations of this Lease shall bind and benefit the successors and assigns
of the parties hereto; provided, however, that no assignment, sublease or
other transfer in violation of the provisions of Article 19 shall operate to
vest any rights in any putative assignee, sublessee or transferee of Tenant.
26.05 Force Majeure. Neither Landlord nor Tenant shall have any liability
whatsoever to the other on account of (a) the inability to fulfill, or delay
in fulfilling, any of its obligations under this Lease by reason of war,
civil disobedience, strike, other labor trouble, governmental preemption of
priorities or other controls in connection with a national or other public
emergency, or shortages of fuel, supplies or labor resulting therefrom, or
any other cause, whether similar or dissimilar to the above, beyond its
reasonable control; or (b) any failure or defect in the supply, quantity or
character of electricity or water furnished to the Premises, by reason of any
requirement, act or omission of the public utility or others furnishing the
Building with electricity or water, or for any other reason, whether similar
or dissimilar to the above, beyond Landlord's reasonable control. If this
Lease specifies a time period for performance of an obligation, that time
period shall be extended by the period of any delay in such performance
caused by any of the events of force majeure described above.
26.06 Holding Over. If Tenant remains in possession of the Premises after the
expiration of the original lease term or any extensions thereof, such
continued possession shall create a tenancy from month-to-month, at a monthly
rental of 150 percent times the last month's rent paid during the lease term
or any extension of the lease term, and upon the same terms and conditions
contained herein insofar as applicable.
26.07. Excavations. If an excavation is made upon land adjacent to or under
the Building, or is authorized to be made, then, at the request of Landlord,
Tenant shall afford persons performing the excavation and shoring license to
enter the Premises for the purpose of doing such work as those persons may
deem necessary or desirable to preserve and protect the Building from injury
or damage and to support the Building. Tenant shall have no claim for damages
or liability against Landlord or such persons, and Tenant's obligations under
this Lease shall not be reduced or otherwise affected.
26.08. Definitions. For the purposes of this Lease, the following terms shall
have the following meanings.
(a) Including. "Including" and "include" shall be interpreted in the
merely descriptive and non-exclusive sense unless the contrary is explicitly
set forth thereat.
(b) Landlord. "Landlord" shall mean the Landlord herein named or any
successor in interest, but only for the time that any such person owns the
Building or a lease of the Building in accordance with and subject to the
provisions of Section 24.04.
(c) Landlord's Affiliates. "Landlord's Affiliates" shall mean NONE.
(d) Laws. "Laws", "provisions of law," and words of similar import shall
mean laws, statutes, ordinances, building and fire codes, rules, regulations,
judgments, rulings, decrees, orders and directive of any or all of the
federal, state, county and city governments and all departments,
subdivisions, bureaus, courts, agencies or offices thereof, and of any other
governmental, public or quasi-public authorities having jurisdiction over the
Building or the Premises, and the direction of any public officer pursuant to
law, whether now or hereafter in force.
References to specific statutes include successor statutes of similar purpose
and import.
<PAGE>
(e) Mortgage. "Mortgage" shall include a mortgage, a dead to secure
debt, or a deed of trust, and "holder of a mortgage" or "Mortgagee" or words
of similar import shall include a mortgagee of a mortgage, a grantee of a
deed to secure debt, or a beneficiary of a deed of trust.
(f) Person. "Person" shall mean any natural person or persons, a
partnership, a corporation, and any other form of business or legal
association or entity.
(g) Tenant. "Tenant" shall mean the Tenant herein named or any assignee
or other successor in interest (immediate or remote) of the Tenant herein
named, who at the time in question is the owner of the Tenant's estate and
interest granted by this Lease; but the foregoing shall not be construed to
permit any sublease or assignment of this Lease in violation of Article 19,
or to relieve the Tenant herein named or any assignee or other successor in
interest (whether immediate or remote) of the Tenant herein named from the
full and prompt payment, performance and observance of the covenants,
obligations and conditions to be paid, performed and observed by Tenant under
this Lease. The Tenant herein named and all assignees and other successors in
interest shall remain liable for all such covenants, obligations and
conditions as principals and not as guarantors.
26.09 Light and Air. No diminution or shutting off of light, air or view by
any structure that may be erected on lands in the vicinity of the Building
shall in any manner affect this Lease or the obligation of Tenant hereunder,
or impose any liability on Landlord.
26.10 Governing Law. This Lease shall be governed by and construed in
accordance with the laws of the State of California.
26.11 Invalidity. If any provision of this Lease or the application thereof
to any person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, the remainder of this Lease shall not be affected,
and said provision and the application of said provision to other persons or
circumstances shall be enforced to the greatest extent permitted by law.
26.12 Captions. The captions, headings and title of this Lease, along with
tables of contents or indexes of defined terms, if any, are solely for
convenience of reference and shall not affect the interpretation of this
Lease.
26.13 Presumptions. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party drafting a
document. It shall be construed neither for nor against Landlord or Tenant,
but shall be given a reasonable interpretation in accordance with the plan
meaning of its terms and the intent of the parties.
26.14 Independent Covenants. Each covenant, agreement, obligation or other
provision of this Lease on Tenant's part to be performed shall be deemed and
construed as a separate and independent covenant of Tenant, not dependent on
any other provision of this Lease.
26.15 Number and Gender. All terms and words used in this Lease, regardless
of the number or gender in which they are used, shall be deemed to include
any other number and any other gender as the context may require.
26.16 Time is of the Essence. Time is of the essence of this Lease and of
each provision hereof in which a time of performance is established.
26.17 Joint and Several Liability. If, at any time during the Lease Term,
Tenant comprises more than one person, all such persons shall be jointly and
severally liable for payment of Rents and for performance of every obligation
of Tenant under this Lease.
26.18 Exhibits. All exhibits and any riders appended to this Lease are
incorporated herein and by this reference made a part hereof.
26.19 Submission of Lease. The submission of this Lease to Tenant or its
broker, agent or attorney for review or signature does not constitute an
offer to Tenant to lease the Premises or the granting of an option to do so.
This instrument shall have no binding force or effect until its execution and
delivery by both Landlord and Tenant.
26.20 Labor Harmony. Tenant shall not use (and upon notice from Landlord
shall cease using) contractors, services, workmen, labor, materials or
equipment that, in Landlord's reasonable judgment, would disturb labor
harmony with the workforce or trades engaged in performing other work, labor
or services in or about the Building.
26.21 Rules and Regulations. Tenant shall observe and comply with the Rules
and Regulations for the Building set forth in Exhibit D hereto, and any
reasonable amendments and additions thereto as Landlord may adopt from time
to time for the management, safety, security, care, cleanliness and good
order of the Building (the "Rules and Regulations"). Landlord shall not be
responsible or liable to Tenant for violations of the Rules and Regulations
by other lessees and occupants of the Building.
26.22 Insolvency. At any time during the Lease Term that (a) Landlord
reasonably believes that Tenant is insolvent, is not generally discharging
its liabilities as they become due, or is (or will be) otherwise unable to
pay the full amount of Rents as said Rents become due hereunder, and (b)
Tenant (i) is not obligated to pay the full amount of Basic Rent as set forth
in Section 3.01, which lack of obligation is permitted by an abatement clause
of this Lease or other agreement between Landlord and Tenant, and/or (ii) is
entitled to the benefit of an allowance from Landlord for the purpose of
constructing tenant improvements in the Premises, then Landlord may, but is
not obligated to, (c) terminate this Lease upon thirty days' notice thereof
to Tenant, (d) demand, by notice thereof to Tenant, that Tenant pay the full
amount of Basic Rent as provided in this Lease irrespective of any abatement
clause hereof or other agreement between Landlord and Tenant, (a) terminate,
by notice thereof to Tenant, the continued and future benefit to Tenant of
any allowance for the construction of tenant improvements in the Premises,
thereby obligating Tenant to complete said improvements at its sole cost and
expense, or (f) exercise any combination of the rights permitted to Landlord
in this SECTION 26.22 as may be appropriate under the circumstances.
Notwithstanding the foregoing (except if Landlord terminates this Lease
pursuant thereto), if Landlord exercises any of the rights permitted to it in
this Section 26.22 and Tenant thereafter fully performs all of its
obligations under this Lease (as modified by the exercise of such rights)
throughout the twelve months following Landlord's exercise of such rights,
then Landlord shall refund to Tenant the benefit that would have inured to
Tenant but for this SECTION 26.22. Such refund shall be made over a period of
time equivalent in length to that over which Tenant would have received such
benefit but for this SECTION 26.22, and shall be equal to the dollar amount
of such benefit without regard for interest or the time-value of money.
<PAGE>
26.24 All Monetary Obligations are Rent. All monetary obligations of Tenant
to Landlord under the terms of Lease are deemed to be rent.
ARTICLE 27
RIDER
27.01 RIDER TO LEASE. This lease is modified and amended by the terms of the
Rider attached hereto. If the printed terms of the Rider conflict with the
printed terms of this Lease, the printed terms of the Rider shall prevail.
Typewritten and handwritten modifications and amendments to the Rider and to
this Lease, shall prevail in any conflict with printed terms, whether in the
Rider or in this Lease.
By :
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of the
date first above written.
TENANT:
ULTIMATE SPORTS, INC.
By:
By:
DATED:
LANDLORD:
DGL ASSOCIATES
By:
DATED:
,
RIDER TO STANDARD FORM OFFICE LEASE
Between
DGL ASSOCIATES,
as Landlord
and
ULTIMATE SPORTS, INCORPORATED
AS TENANT
ARTICLE 28
OPTIONS
28.1 Option to Extend. Landlord hereby grants to Tenant ONE (1) option
(the Renewal Option(s)") to extend the Lease Term for a period of THREE (3)
years (the "option term") commencing upon the expiration of the Initial Term,
upon each and all of the following terms and conditions:
(a) Tenant must give to Landlord and Landlord must have received
written notice of the exercise of the Renewal Option no earlier than 15
months and no later than 1 2 months prior to the end of the Initial Term,
time being of the essence. If timely notification of the exercise of the
Renewal Option is not so given and received, the Renewal Option shall
automatically expire.
(b) All of the terms and conditions of this Lease, except as
specifically modified herein and not including the Renewal Option or Exhibit
C, shall apply during the option term.
(c) The provisions of Section 28.2 are conditions of the Renewal
Option.
(d) Basic Rent during the option term shall equal the then-prevailing
effective rental rate in the Building, calculated on a rentable square-foot
basis and then applied to the Rentable Area of the Premises.
(e) As a further condition to Tenant's exercise of the Renewal
Option, on the 120th day
<PAGE>
prior to the commencement of the option term Tenant shall provide Landlord
with a copy of Tenant's financial statements for Tenant's most recently ended
fiscal quarter and two most recently-ended fiscal years.
28.2 Conditions to Option(s).
(a) The Renewal Option is not assignable separate and apart from this
Lease, nor may it be separated from this Lease in any manner, either by
reservation or otherwise. In the event this Lease has been assigned and the
Renewal Option is exercised (whether exercise occurs before or after such
assignment and regardless of any subsequent assignment or assignments), the
originally herein-named Tenant, in addition to its assignee and any
subsequent assignee(s), shall be liable hereon throughout the option term.
(b) Tenant shall have no right to exercise the Renewal Option W
during the time commencing from the date Landlord gives to Tenant a notice of
default pursuant to Article 16 and continuing until the non-compliance
alleged in said notice of default is cured (but only if such default is
susceptible to being cured and such cure is accomplished prior to the
expiration of the applicable grace period, if any), or (ii) during the period
of time commencing on the day after a monetary obligation to Landlord is due
from Tenant and remains unpaid (without any necessity for notice thereof to
Tenant) and continuing until the obligation is paid, or (iii) if Tenant has
committed any non-curable breach of this Lease or is otherwise in default of
this Lease, or Ov) if this Lease has been terminated.
(c) The period of time within which the Renewal Option may be
exercised shall not be extended or enlarged by reason of Tenant's inability
to exercise such right because of the provisions of the foregoing subsection
28.2(b).
(d) At Landlord's sole election, the Renewal Option shall terminate
and be of no further force or effect, notwithstanding Tenant's due and timely
exercise thereof, if, after such exercise but prior to the commencement of
the option term (i) Tenant is in default of any of the terms, covenants or
conditions of this Lease beyond the applicable grace period, if any, to cure
such default, or (ii) this Lease has been terminated.
28.3 EFFECTIVE RENTAL RATE. As used above, the phrase "then-prevailing
effective rental rate of the Buildings means the rental amount determined as
follows:
Landlord shall notify Tenant, at least ninety days prior to commencement of
the option term if Tenant has timely exercised the Renewal Option, of the
amount Landlord believes to be the fair market rental rate for Basic Rent for
new leases of similar duration and of similar premises in the Building. If
Tenant does not dispute Landlord's determination within ten days after
Landlord's notice, the amount set forth in Landlord's notice shall constitute
the then-prevailing effective rental rate of the Building. If Tenant disputes
such determination, and Landlord and Tenant are unable to agree upon the fair
market rental within ten days after Tenant notifies Landlord that Tenant
disputes Landlord's determination of fair market rental, then within an
additional ten days Landlord and Tenant shall each select an MAI appraiser w
ith at least ten years experience appraising office buildings in the West Los
Angeles-Santa Monica area, and within ten business days after both appraisers
have been so selected, each shall submit to the other his or her estimate of
the Premises' fair market monthly rental, on the basis of the foregoing and
the following criteria; if either appraiser fails to timely submit his or her
estimate, such estimate shall be disregarded and the one timely estimate
shall alone constitute the then-prevailing effective rental rate of the
Building. If each appraiser provides a timely estimate and the higher of the
two is within 5% of the lower, the two shall be averaged, and such average
shall be the then-prevailing effective rental rate of the Building. If the
two estimates are not so within 5%, the two appraisers shall within an
additional ten business days select a third qualified appraiser, who shall
submit his or her estimate to the other two appraisers within ten business
days after he or she is selected, and the two closest estimates shall be
averaged, and such average shall be the then-prevailing effective rental rate
of the Building. If either party fails timely to select its appraiser as
provided above the other party's appraiser alone shall determine the
then-prevailing effective rental rate of the Building. If the two appraisers
selected by Landlord and Tenant are unable to timely agree upon a third
appraiser, or if the third appraiser fails to timely submit his or her
estimate, the third appraiser (or a replacement therefor in the event the
third appraiser selected by the first two has failed to timely submit his or
her estimate) shall be selected by the American Arbitration Association. Each
party shall pay the fees and costs of its appraiser and 50% of the fees and
costs of the third appraiser (if one is required) and the costs of the
American Arbitration Association. In determining the then-prevailing
effective rental rate, Landlord and Tenant, and all appraisers, if any are
needed, shall look to the net effective rent and parking charges payable on
leases in buildings of comparable size, quality and location, with due regard
to customary periodic rent and parking charge INCREASES, AND RENT
concessions, and to the then-prevailing base year or other method of
calculating and charging for Costs of Operation, but valuing the existing
improvements, if any, in the subject space on the basis of renting to a
tenant for whom said improvements are acceptable as adequate; no deduction
shall be made for customary or other broker's fees or similar expense which
may be saved, or for tenant improvement allowances and/or tenant improvement
construction time which may be saved.
29.0 Monthly Rent
May 15, 1999 May 31, 1999 $1,237.00
June 1, 1999 May 31, 2000 $2,255-00
June 1, 2000 May 31, 2001 $2,323.00
June 1, 2001 May 31, 2002 $2,393.00
30.0 Security Deposit
<PAGE>
If Tenant has not been in default, Landlord will refund one months
security deposit the thirteenth (13) month and one months security deposit
the twenty-fifth (25) month of the term.
31.0 Condition of Acceptance
Tenant accepts the premises in its current "As-is / Where is" condition.
<PAGE>
EXHIBIT B
MEMORANDUM OF LEASE COMMENCEMENT
This Memorandum of Lease Commencement is made as of MAY 5, 1999 BY DGL
ASSOCIATES ("Landlord"), having an office at 2444 Wilshire Blvd., Ste. 600,
Santa Monica, CA 90403 and ULTIMATE SPORTS, INC. ("Tenant"), having an office
at 2444 WILSHIRE BOULEVARD, SUITE 414, SANTA MONICA, CALIFORNIA 90403
Landlord and Tenant agree to and acknowledge the following matters:
1. Landlord and Tenant have entered into a lease dated as of MAY 5, 1999
(the "Lease"), covering office space KNOWN AS SUITE 414, located at 2444
WILSHIRE BOULEVARD, SANTA MONICA, CA 90403, as more particularly described in
the lease.
2. All terms defined in the lease shall have the same meaning when
used in this Memorandum of Lease Commencement.
3. The Rent Commencement Date of the Lease is MAY 15, 1999 and the
Expiration Date of the Lease is MAY 31, 2002.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum of
Lease Commencement as of the day and year first above written.
TENANT:
ULTIMATE SPORTS, INC.
By: /s/Paul Fairchild
Its:
By: CFO
Its:
LANDLORD:
DGL ASSOCIATES
By: /s/
Its: General Manager
EXHIBIT C
Tenant accepts the Premises in its current "As is / Where is" condition.
Any and all improvements will be at Tenants sole cost and expense.
EXHIBIT D
RULES AND REGULATIONS
These Rules and Regulations are attached to and form a part of the Lease
dated MAY 5, 1999 between DGL ASSOCIATES as Landlord and ULTIMATE SPORTS,
INC. as Tenant.
1. The rights of each tenant in entrances, corridors, parking ramps and
areas, elevators and other public areas servicing the Building are limited to
ingress to and egress from such tenant's premises for the tenant and its
employees, licensees and invitees, and no tenant shall use, or permit the use
of, the entrances, corridors or elevators for any other purpose. No tenant
shall invite to the
<PAGE>
tenant's premises, or permit the visit of, persons in such numbers or under
such conditions as to interfere with the use and enjoyment of any of the
entrances, corridors, elevators and other facilities of the Building by any
other tenants. Fire exits and stairways are for emergency use only, and they
shall not be used for any other purpose by the tenants, their employees,
licensees or invitees. No tenant shall encumber or obstruct, or permit the
encumbrance or obstruction of any of the sidewalks, entrances, corridors,
doorways, elevators, fire exits or obstruction of any of the sidewalks,
entrances corridors, doorways, elevators, fire exits or stairways of the
Building.
Landlord reserves the right to control and operate the public portions of the
Building and the public facilities, as well as facilities furnished for the
common use of the tenants, in such manner as it in its reasonable judgment
deems best for the benefit of the tenants generally. No tenant and no
invitees or employees of tenant shall be allowed on the roof of the Building.
2. Landlord may refuse admission to the Building during the days and
hours specified in Rule 30 to any person not known to the watchman in charge
or not having a pass issued by Landlord or the tenant whose premises are to
be entered or not otherwise properly identified, and Landlord may require all
persons admitted to or leaving the Building outside of Business Hours on
Business Days to provide appropriate identification and to register. Tenant
shall be responsible for all persons for whom it issues any such pass and
- -shall be liable to Landlord for all acts or omissions of such persons. Any
person whose presence in the Building at any time shall, in the judgment of
Landlord, or its representatives, be prejudicial to the safety, character or
reputation of the Building or its tenants may be denied access to the
Building or may be ejected therefrom. during any invasion, riot, public
excitement or other commotion, Landlord may prevent all access to the
Building by closing the doors or otherwise for the safety of the tenants and
protection of property in the Building.
3. Tenants shall obtain ice, drinking water, food, beverage, linen,
barbering, shoe-polishing, floor-polishing, cleaning, janitorial, plant-care
or other similar services only from vendors who have registered with the
Building office and who have been reasonably approved by Landlord for
provision of such services in the Building.
4. No awnings or other projections shall be attached to the outside
walls of the Building.
No curtains, blinds, shades or screens which are different from the standards
adopted by Landlord for the Building shall be attached to or hung in, or used
in connection with, any exterior window or door of the premises of any tenant
without the prior written consent of Landlord. Such curtains, blinds, shades
or screens must be of a quality, type, design and color, and attached in the
manner approved by Landlord.
5. No lettering, sign, advertisement, notice or object shall be
displayed in or on the exterior windows or doors, or on the outside of any
tenant's premises, or at any point inside any tenant's premises where the
same might be visible outside of such premises, without the prior written
consent of Landlord, which consent may be withheld in the sole and absolute
discretion of Landlord.
Interior signs, elevator cab designations and lettering on doors or the
Building directory shall, if and when approved by Landlord, be inscribed,
painted or affixed for each tenant by Landlord at the expense of such tenant,
and shall be of size, color and style acceptable to Landlord.
6. The skylights, windows and doors that reflect or admit light and air
into the halls, passageways or other public places in the Building shall not
be covered or obstructed by any tenant.
7. No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules except by a newsstand licensed by Landlord.
8. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the premises of any tenant of the Building.
9. Tenants and their contractors, employees, agents, visitors and
licensees shall not at any time bring into or keep upon the premises of the
Building any foul or noxious gas or substance or any inflammable,
combustible, explosive or otherwise hazardous fluid, chemical or substance.
10. No locks or bolts of any kind which are not operable by the grand
master key for the Building shall be placed upon any of the doors by any
tenant, nor shall any changes be made in locks or the mechanism thereof which
would make such locks inoperable by the grand master key.
Additional keys for a tenant's premises and toilet rooms shall be procured
only from Landlord, who may make a reasonable charge therefor. Each tenant
shall, upon the termination of its tenancy, turn over to Landlord all keys of
stores, offices and toilet rooms either furnished to or otherwise procured by
such Tenant, and in the event of the loss of any keys furnished by Landlord,
such tenant shall pay to Landlord the cost thereof.
11 . All removals, or the carrying in or out of any safes, freight,
furniture, packages, boxes, crates or any other object or matter of any
description, must take place during such hours, in such elevators and in such
manner as Landlord or its agent may determine from time to time. Persons
<PAGE>
employed to move safes and other heavy objects shall be acceptable to
Landlord. Before moving large quantities of furniture and equipment into or
out of the Building, tenants shall notify Landlord and shall comply with
Landlord's requirements concerning the time and manner in which the work
shall be performed. All labor and engineering costs incurred by Landlord in
connection with any moving, including a reasonable charge for overhead and
profit, shall be paid by the tenant to Landlord, on demand.
12. Landlord reserves the right to inspect all objects and matter to be
brought into the Building and to exclude from the Building any objects or
matter which violate any of these Rules and Regulations or the lease of which
this Exhibit is a part. Landlord may require any person leaving the Building
with any package or other object or matter to submit a pass issued by the
tenant from whose premises the item is being removed, listing the item. This
rule shall not be deemed to impose any responsibility or liability on
Landlord for the protection of any tenant against the removal of property
from the premises of such tenant.
13. No tenant shall occupy or permit any portion of its premises to be
occupied as an office for a public stenographer or public typist, or for the
storage, manufacture, or sale of food, liquor, drugs or tobacco in any form,
or as a barber, beauty or manicure shop, or as a school or classroom, unless
such use has been specifically approved by Landlord. No tenant shall use or
permit its premises or any part thereof to be used for manufacturing or the
sale at retail or auction of merchandise, goods or property of any kind.
These prohibitions supplement the prohibited uses specified in the lease of
which this Exhibit is a part.
14. Landlord shall have the right to prohibit any advertising or
identifying sign by any tenant which, in Landlord's sole and absolute
judgment, tends to impair the reputation of the Building or its desirability
as a building for others, and upon written notice from Landlord, such tenant
shall refrain from and discontinue such advertising or identifying sign.
Landlord shall also have the right in its sole and absolute discretion to
approve any advertising or identifying sign.
15. Landlord shall have the right to prescribe the weight, size and
position of safes and other objects of excessive weight, and no safe or other
object whose weight exceeds the lawful load for the area upon which it would
stand shall be brought into or kept upon any tenant's premises. If, in the
judgment of Landlord, it is necessary to distribute the concentrated weight
of any object, the work involved in such distribution shall be done at the
expense of the tenant and in such manner as Landlord shall determine.
16. No machinery or mechanical equipment other than ordinary portable
business machines may be installed or operated in any tenant's premises
without Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed, and in no event shall any machines or
mechanical equipment be so placed or operated as to disturb other tenants.
Machines and mechanical equipment that Landlord permits a tenant to install
and use shall be so equipped, installed and maintained by the tenant as to
prevent any noise, vibration or electrical or other interference from being
transmitted from the tenant's premises to any other area of the Building.
17. Landlord, its contractors, and their respective employees shall have
the right to use, without charge therefore, all light, power and water in the
premises of any tenant while cleaning or making permitted repairs or
alterations in the premises of such tenant.
18. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties, unless under
special instructions from Landlord.
19. Canvassing, soliciting and peddling in the Building are prohibited
and each tenant shall cooperate to prevent the same.
20. Nothing shall be done or permitted in any tenant's premises, and
nothing shall be brought into or kept in any tenant's premises, which would
impair or interfere with any of the Building's services or the proper and
economic heating, ventilating, air conditioning, cleaning or other servicing
of the Building or the premises, or the use or enjoyment by any other tenant
of any other premises, nor shall there be installed by any tenant any
ventilating, air conditioning, electrical or other equipment of any kind
which, in the reasonable judgment of Landlord, might cause any such
impairment or interference.
21. No acids, vapors or other materials which may cause damage shall be
discharged or permitted to be discharged into the waste lines, vents or flues
of the Building. The sinks and toilets and other plumbing fixtures in or
serving any tenant's premises shall not be used for any purpose other than
the purposes for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited therein.
All garbage receptacles used in the premises of any tenant shall be emptied,
cared for and cleaned by and at the expense of the tenant.
22. All entrance doors in a tenant's premises shall be left locked by
the tenant when the tenant's premises are not in use. Entrance doors shall
not be left open at any time. Each tenant, before closing and leaving its
premises at any time, shall turn out all lights and entirely shut off all
water faucets.
23. Hand trucks shall not be used in the Building unless they are
equipped with rubber tires and
<PAGE>
side guards.
24. Tenants shall cooperate with Landlord in obtaining maximum
efficiency of the Building air-conditioning system by lowering and partially
closing window blinds when the sun's rays fall directly on windows of the
premises. Tenant shall not obstruct, alter or in any way impair the efficient
operation of the Building heating, ventilating and air-conditioning systems
and shall not place furniture equipment or other objects where they would
interfere with air flow. Tenant shall not tamper with or change the setting
of any thermostats or temperature control valves.
25. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting or wires or
stringing of wires will be allowed without the prior written consent of
Landlord. The location of telephones, call boxes and other office equipment
affixed to the premises shall be subject to the approval of Landlord.
26. Linoleum, tile, carpet and other floor coverings shall be affixed to
the floor of the premises only in a manner previously approved in writing by
Landlord. 27. No person shall be allowed to transport or carry
beverages, food, food containers, etc., on any passenger elevators. The
transportation of such items shall be via freight elevator in such manner as
prescribed by Landlord.
28. The bulletin board or directory of the Building shall be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to exclude any other names therefrom and
otherwise limit the number of listings thereon.
29. Tenant shall not overload the floor of the premises or mark, drive
nails, screw or drill into the partitions, woodwork or plaster or in any way
deface the premises or any part thereof.
30. Landlord reserves the right to close and keep locked all entrance
and exit doors and otherwise regulate access of all persons to the halls,
corridors, elevators and stairways in the Building on Sundays and legal
holidays and on other days between the hours of 7:00 p.m. and 7:00 a.m., and
at such times as Landlord may deem advisable for the adequate protection and
safety of the Building, its tenants and property in the Building. Access to
the premises may be refused unless the person seeking access is known by the
employee of the Building in charge to be authorized to enter, has a pass or
is otherwise properly identified.
31. Landlord reserves the right to rescind, alter or waive any rule or
regulation at any time prescribed for the Building when, in its reasonable
judgment, it deems it necessary, desirable or proper for its best interest
and for the best interests of the tenants generally, and no alteration or
waiver of any rule or regulation in favor of one tenant shall operate as an
alteration or waiver in favor of any other tenant.
<PAGE>
MADISON LESSOR
LEASING MADISON LEASING CO., INC. LEASE NO . ALL-001
CO., INC. 32 CENTRAL AVENUE, MIDLAND PARK, NJ 07432
(201) 447-0222 - FAX (201) 447-1521
NAME AND ADDRESS OF LESSEE: ALLSTAR ARENA ENTERTAINMENT, INC.,
5410 WILSHIRE BLVD
LOS ANGELES, CA 90036
FEDERAL TAX ID NO. 95-4602985 CONTACT: PAUL FAIRCHILD PHONE NO.: 3239391100
DESCRIPTION OF EQUIPMENT:
<TABLE>
<CAPTION>
QTY PO MLC MFG MODEL DESCRIPTION SERIAL
<S> <C> <C> <C> <C> <C> <C>
2 03265-001 015011 Apple PowerBook G# 266 Mhz, 64MB RAM,
$6,999.94 4GB HD, 14 TF display
1 03265-002 015012 Apple Desktop Bus Mouse 11
$84.99
2 03265-003 015013 Mead Apple Notebook Backpack
$99.98
2 03265-004 015014 Microsoft Office 98 Gold-CD
$1,199.98
1 03265-005 015015 Apple Floppy Drive for
$130.99 Powerbook G3
2 1 03265-006 015016 VST ZIP Drive for Powerbook G3
$499.98
Leased Equipment Cost: $9,015.86
</TABLE>
EFFECTIVE COMMENCEMENT DATE: ON THE FIRST OF THE,MONTH FOLLOWING THE DATE OF
EXECUTION OF THE DELIVERY, ACCEPTANCE AND INSTALLATION CERTIFICATE.
SCHEDULE OF BASE RENT PAYMENTS DURING INITIAL TERM OF LEASE: THE APPROPRIATE
SALES, USE AND/OR RENTAL TAX(ES) WILL BE THIRTY-SIX (36) MONTHS @ $312.60 PER
MONTH. ADDED TO YOUR MONTHLY. BASE RENT OR PAID WHEN LEASE IS APPROVED BY
MADISON LEASING CO.. Inc.
LEASE PAYMENTS MUST BE MADE BY ELECTRONIC TRANSFER
SPECIAL TERMS & CONDITIONS (IF ANY):
UPON EXPIRATION OF THE LEASE TERM AND PAYMENT BY LESSEE OF ALL RENTALS AND
PROVIDED THAT NO EVENT OF DEFAULT SHALL HAVE OCCURRED, LESSEE, AT IT'S
OPTION, MAY PURCHASE ALL OF LESSOR'S RIGHT, TITLE, AND INTEREST IN AND TO
ALL, BUT NOT LESS THAN ALL OF THE EQUIPMENT DESCRIBED IN THE SCHEDULE FOR A
PURCHASE PRICE EQUAL TO THE GREATER OF (a) THE THEN FAIR MARKET VALUE OF THE
EQUIPMENT OR (b) FIFTEEN (16) PERCENT OF THE ORIGINAL COST OF THE EQUIPMENT.
THE "FAIR MARKET VALUE" OF THE EQUIPMENT SHALL BE DETERMINED BY AN
INDEPENDENT THIRD-PARTY APPRAISER SELECTED BY LESSEE, PROVIDED, HOWEVER, IF
LESSEE ELECTS TO EXERCISE ITS OPTION, BUT FAILS TO OBTAIN SUCH AN APPRAISAL,
THE FAIR MARKET VALUE OF THE EQUIPMENT SHALL BE ONE THOUSAND THREE HUNDRED
FIFTYTWO AND 37/100 DOLLARS ($1,352.38).
IF THE LESSEE, FOR ANY REASON, DOES NOT PURCHASE THE EQUIPMENT, THE LEASE
TERM SET FORTH IN THE SCHEDULE SHALL AUTOMATICALLY AND WITHOUT FURTHER ACTION
ON THE PART OF THE LESSOR OR LESSEE, BE EXTENDED FOR AN ADDITIONAL TERM OF
(12) TWELVE MONTHS. UPON TERMINATION OF THE EXTENDED LEASE TERM, THE LESSEE
SHALL BE OBLIGATED TO RETURN THE EQUIPMENT TO LESSOR.
THE RENTAL PAYMENT IS BASED ON THE RATE OF INTEREST PREVAILING AT THE TIME
LESSOR NEGOTIATED THE FINANCING OF FUNDS TO SUPPORT THE PURCHASE OF THE
EQUIPMENT DESCRIBED IN THIS LEASE AT THE LESSOR'S LENDING INSTITUTION. IF THE
PRIME RATE INCREASES AFTER THE DATE OF COMMENCEMENT OF THIS LEASE, ONLY THE
ACTUAL PERCENT OF SUCH INCREASE WILL BE ADDED TO THE MONTHLY RENTAL PAYMENT.
IF THE PRIME RATE SUBSEQUENTLY DECREASES DURING THE PERIOD OF THIS LEASE,
PAGE 1 OF 7
initial he SHRTISE.DOE/7-10-98 @MADISON LEASING CO., INC.
<PAGE>
Lease No. ALL-001
the rental payment will be reduced to reflect the decrease. However, in no
event will the rental payment be less than the amount in effect on the
original Rent Commencement date.
1. Interim Rent of Ten and 45/100 dollars ($10.46) per day commencing on
the delivery date for each day Lessee has possession of the Equipment prior
to the Effective Commencement Date, shall be due on the first day of the
month following delivery of equipment.
2. A Security Deposit in the amount of Nine Hundred One and 58/100
dollars ($901.59) is due and payable upon Lessor's acceptance of the Lease.
The Security Deposit received will be applied to the purchase offer price, if
any, at the end of the lease term. If the Lessee is required to make an
"offer to purchase" according to the special terms and conditions of this
lease, the offer to purchase must be made at least ninety (90) days prior to
the expiration date of the lease herein. If the offer to purchase is not
received ninety (90) days prior to expiration of the term of this lease, the
lease will automatically be extended for a period of twelve (12) months. If
there is a default in any of the terms of this agreement, the security
deposit will be applied as liquidated damages to offset the Lessor's legal
costs and any other costs incurred as a result of such default.
EQUIPMENT LOCATION: (IF OTHER THAN ABOVE) 5410 Wilshire Blvd, Los Angeles, CA
90036
THIS LEASE CONSISTS OF THE FOLLOWING DOCUMENTS:
Lease Document W/PERSONAL GUARANTY
PROPERTY TAGS CERTIFICATE
Annex A - DESCRIPTION OF EQUIPMENT
DELIVERY AND ACCEPTANCE
Insurance Letter
Landlord's Waiver
Debit AUTHORIZATION
Purchase ORDER AUTHORIZATION
UCC-I Form State
UCC- I FORM COUNTY
TERMS AND CONDITIONS OF LEASE
1. LEASE. LESSOR leases to LESSEE and LESSEE leases and hires from LESSOR
the personal property described above and/or in Annex A attached hereto, with
all replacement parts, additions and accessories now or later incorporated
into and/or affixed onto the Equipment.
<PAGE>
1.a. The LESSEE must notify LESSOR, at least ninety (90) days prior to
the expiration of the Lease, of the intent, in writing, not to renew the
Lease. In the event the LESSEE does not notify LESSOR of its intention not to
continue the Lease, the Lease will continue for an additional twelve (12)
months.
THE OBLIGATION OF THE LESSEE TO GIVE THIS NOTICE APPLIES WHERE THERE IS A
NEGOTIATED BUY
AGREEMENT AS WELL.
1.b. If there is a negotiated Buy Agreement, the Lease will continue
until such moneys stated in the Buy Agreement have been received by LESSOR.
2. WARRANTIES. LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER REGARDING THE EQUIPMENT, INCLUDING
WITHOUT LIMITATION, THE CONDITION OF THE EQUIPMENT, THE MERCHANTABILITY OF
THE EQUIPMENT, OR THE FITNESS OF THE EQUIPMENT FOR A PARTICULAR PURPOSE. No
defect or unfitness of the equipment shall relieve LESSEE of the obligation
to pay rent or of any other obligation under this Lease. Lessor leases the
Equipment to LESSEE "AS IS." LESSEE'S only remedy, if any, shall be against
the supplier or manufacturer of the equipment and not against LESSOR. LESSEE
understands and agrees that neither the manufacturer nor the supplier, nor
any salesman or other agent of manufacturer or supplier is an agent of
LESSOR. No salesman or other agent of the supplier or manufacturer is an
agent of LESSOR. No representation as to the Equipment or any other matter by
the manufacturer or supplier shall in any way affect LESSEE'S obligations to
perform hereunder, including the obligation to make rental payments as set
forth in this Lease. The LESSEE acknowledges that it has fully inspected the
equipment that it has requested the LESSOR to acquire and lease to LESSEE,
and the equipment is in good condition and to the LESSEE's complete
satisfaction. To the extent permitted by the manufacturer or supplier, and
provided LESSEE is not in default under this Lease, LESSOR shall permit
LESSEE to enforce all manufacturer and/or supplier warranties with respect to
the Equipment directly against the manufacturer and/or supplier. The parties
have specifically negotiated and agreed to the foregoing paragraph.
Madison Leasing Co., Inc.
<PAGE>
Lease No. ALL-001
3. TERM. The term of this lease shall commence upon the
effective/commencement date above and shall terminate upon the expiration of
the number of units of time set forth above. This Lease is not cancelable or
terminable by LESSEE prior the stated term.
4. RENT. LESSEE shall pay LESSOR as rent, the payments specified above in
advance for the calendar period indicated at the office of LESSOR shown
above, or as otherwise directed by LESSOR in writing. The first such payment
shall be due upon execution of this Lease with subsequent payments due on the
first day of the month following the day on which the Equipment is delivered
to LESSEE. All rental payments and other sums payable by LESSEE hereunder are
unconditional and shall be made without abatement, reduction or setoff of any
nature, including anything arising out of any present or future claim LESSEE
may have against LESSOR or the manufacturer or supplier of the Equipment. If
any payment due to LESSOR hereunder is not received by LESSOR on or before
the first of each month, in advance, the LESSEE will pay a late charge of
five (5%) percent of the late payment.
5. TAXES. LESSEE shall pay all taxes and assessments which may be levied,
directly or indirectly against the Equipment or any interest therein or with
respect to the ownership, possession or use thereof, whether such taxes are
levied against the LESSOR or the LESSEE. Such taxes to be paid by the LESSEE
shall include without limitation, property, sales, rent, lease and use taxes
and any other tax measured by the gross rent payable hereunder. If such taxes
are levied against the LESSOR, it shall notify the LESSEE of such fact. The
LESSOR shall have the right, but not the obligation, to pay any such taxes,
whether levied against the LESSOR or the LESSEE. In such event the LESSEE
shall reimburse the LESSOR therefor within five days after receipt of invoice
and for the failure to make such reimbursement when due the LESSOR shall have
all remedies provided herein with respect to the nonpayment of the rental
hereunder.
6. DEFAULT. If LESSEE fails to pay any rent, late charge or other amount
herein provided within five (5) days after the same is due and payable, or if
LESSEE fails to observe, keep or perform any other provision of this Lease
required to be observed, kept or performed by LESSEE, or if LESSEE dies,
becomes disabled or legally incompetent, ceases doing business as a going
concern, or if a petition is filed by or against LESSEE under the Bankruptcy
Act or any amendment thereto (including a petition for reorganization or an
arrangement), or if a receiver is appointed for LESSEE or its property, or if
LESSEE commits an act of bankruptcy, becomes insolvent, makes an assignment
for the benefit of creditors, or if LESSEE, without LESSOR's prior consent,
attempts to remove or sell or transfer or encumber or sublet or part with the
possession of said Equipment, or if any guarantor of LESSEE's obligations
hereunder shall default under his, her or its guaranty, die or become
<PAGE>
disabled or legally incompetent or file or suffer to be filed a petition
under the Bankruptcy Act or any amendment thereto (including a petition for
reorganization or an arrangement) or if a receiver is appointed for such
guarantor or its property or if it commits an act of bankruptcy, becomes
insolvent or makes an assignment for the benefit of its creditors, or if
LESSOR deems itself insecure, then LESSOR or its agents shall have the right
to exercise any one or more of the following remedies: (a) To declare the
entire amount of rent hereunder immediately due and payable without notice or
demand to LESSEE; (b) To sue for and recover from the LESSEE an amount equal
to the unpaid balance of the rent due and to become due during the term of
this Lease, as well as all attorneys' fees and other expenses incurred by
LESSOR in an attempt to enforce the provisions of this Lease; (c) To sue for
and recover damages for the LESSEE'S default; or (d) to take possession of
any or all items of Equipment without demand or notice wherever same may be
located without any Court Order or other process of law. Upon retaking
possession of any or ll items of Equipment, the LESSOR at its option may (i)
lease repossessed Equipment or any part thereof to any third party on such
terms and conditions as the LESSOR may determine or (ii) sell the Equipment
or any part thereof to the highest bidder at public auction or at private
sale and may credit the amount so realized less all expenses, including
attorneys' fees, incurred in connection with such disposition to the LESSOR
upon default by LESSEE hereunder. LESSEE hereby waives any and all damages
occasioned by such taking of possession. Any said taking of possession shall
not constitute a termination of this Lease and shall not relieve LESSEE of
its original obligation hereunder unless LESSOR expressly so notifies LESSEE
in writing. In addition, the LESSOR shall have upon default such other and
further remedies and rights as may be available at law or in equity by reason
of LESSEE'S default.
7. NON-WAIVER. LESSOR'S failure at any time to require strict performance
by LESSEE of any of the provisions hereof shall not waive or diminish
LESSOR'S right thereafter to demand strict compliance therewith or with any
other provision. Waiver of any default shall not waive any other default.
LESSOR'S rights hereunder are cumulative and not alternative.
8. INDEMNITY. LESSEE shall indemnify and hold LESSOR harmless from any
and all claims, actions, proceedings, expenses, damages and liabilities
including attorneys' fees arising in connection with the Equipment including,
without limitation, its manufacture, selection, purchase, delivery,
possession, use, operation, maintenance, leasing, return and any acts of the
LESSEE in failing to accept and acknowledge acceptance of the Equipment and
to maintain the Equipment in good repair.
9. TITLE. All Equipment shall remain personal property , no matter how
attached to realty, and title to the Equipment shall remain exclusively with
the LESSOR. If the Equipment becomes attached to realty, LESSEE shall be
responsible to LESSOR for its removal and any damage to the Equipment. LESSOR
may display notice of its ownership of the Equipment by affixing to the
Equipment an identifying plate or any other indicia of ownership and LESSEE
will not disturb any such notice. LESSEE shall keep the Equipment free from
any and all liens and encumbrances, LESSEE shall give
<PAGE>
LESSOR immediate notice of any attachment or other judicial process, liens or
encumbrances affecting the Equipment and shall indemnify and hold LESSOR
harmless from any loss or damage caused thereby. LESSEE shall from time to
time take such action and execute such instruments as may be necessary or
advisable, and shall otherwise cooperate so as to defend the title of LESSOR
thereto, whether by filing of Commercial Code, as adopted in the state where
the Equipment is to be or in fact is located, or otherwise. LESSEE agrees
that LESSOR may at its option and where not prohibited by law, file financing
statements or amendments thereto without the signature of the LESSEE with
respect to any or all equipment and, if signature Is required, then LESSEE
appoints LESSOR as LESSEE'S attorney-in-fact to execute any such financing
statements.
10. ACCEPTANCE AND INSTALLATION. LESSEE shall inspect the Equipment upon
the receipt thereof and shall thereafter deliver immediately to LESSOR the
DELIVERY ACCEPTANCE & INSTALLATION CERTIFICATE attached to this Lease, fully
executed by LESSEE'S authorized representative. LESSEE shall be responsible
for all costs of installation. Upon such written acceptance, LESSEE agrees
that it shall be conclusively presumed, as between LESSOR and LESSEE, that
the LESSEE has fully inspected and acknowledged that the Equipment is in good
condition and repair.
11. USE AND RETURN OF EQUIPMENT. LESSOR, at the request of LESSEE, has
ordered or shall order the Equipment described above from a supplier selected
by LESSEE. LESSOR shall not be liable for specific performance of this Lease
or for damages, if, for any reason, supplier fails to accept such order or
delays or fails to fill the order. LESSEE agrees to accept such Equipment and
authorizes LESSOR to add the serial number of the Equipment to this Lease.
LESSEE shall keep the Equipment at its place of business as specified above.
LESSEE shall give LESSOR immediate notice of any attachment or other judicial
process, liens or encumbrances affecting, or attempting to or which may
affect the Equipment, and LESSEE shall indemnify and save LESSOR harmless
from any loss or damage caused by thereby. LESSEE shall exercise due and
proper care in the use, repair and servicing of the Equipment. At LESSOR'S
request, LESSEE will permit LESSOR to have access to the Equipment at all
reasonable times for the purpose of inspection and examination. Upon the
expiration or termination of this Lease, LESSEE at its sole expense shall
forthwith pack and return the Equipment to LESSOR at such place as designated
by LESSOR, in the same condition as when received by LESSEE, reasonable wear
and tear excepted. LESSEE represents and warrants that this is a commercial
and business lease agreement and is not a consumer transaction, and the
Equipment will be used solely for business purposes. LESSEE shall make no
alteration to the Equipment without the prior written consent of LESSOR.
12. RISK OF LOSS. LESSEE hereby assumes the entire risk of loss from any
cause whatsoever, including theft, damage or destruction, and no such event
shall relieve LESSEE from any obligation under this Lease and this Lease
shall remain in full force and effect. LESSEE, with LESSOR'S consent, may
promptly replace or repair the Equipment. Otherwise, LESSEE shall immediately
pay to LESSOR any amount equal to
<PAGE>
the aggregate unpaid total rent for the balance of the term of the Lease plus
the amount calculated by LESSOR as the fair market reversionary value of the
Equipment. Upon such payment, this Lease shall terminate and LESSEE shall
become entitled to the Equipment in its then condition and location, "AS IS",
without warranty, express or implied, with respect to any matter whatsoever.
13. INSURANCE. LESSEE shall at its own expense keep the Equipment insured
against such risks, in such amounts, including replacement value, and with
such companies as Lessor shall approve. Said insurance shall provide for loss
payable to the LESSOR and shall identify LESSOR as a named insured, with the
right to 30 days written notice to LESSOR before cancellation or material
change in insurance. Upon LESSOR'S request, LESSEE shall deliver copies of
the policies or certificates of insurance to LESSOR. Subject to the
provisions of this Lease with regard to risk of loss, and without limiting
such provisions in the case of any loss or damage covered by insurance, and
only to the extent that such loss or damage is covered by such insurance, the
proceeds of such insurance shall be applied, at the option of LESSOR, (a)
toward the replacement, restoration or repair of Equipment which may be lost,
stolen, destroyed or damaged or (b) toward the obligations of Lessee for rent
hereunder. In the event the Lessor elects to apply insurance proceeds to the
repair or to the replacement of the damaged Equipment, this Lease shall
continue in full force and effect. In the event the LESSOR elects to apply
insurance proceeds to the payment of LESSEE'S obligations for or the rent
hereunder shall be reduced by the amount of such insurance proceeds, but the
LESSEE shall be liable for any additional rents due plus the amount
calculated by LESSOR as the fair market reversionary value of the Equipment.
Such reduction of rents shall be allocated solely to the item or items lost,
stolen, damaged or destroyed. In the event LESSEE fails to provide proof of
insurance as provided above, LESSOR shall have the right, but not the
obligation, to procure insurance on behalf of LESSEE and to add to the rental
payments due hereunder an amount equal to the cost of such insurance, plus
the reasonable expenses of LESSOR in procuring such insurance.
14. ASSIGNMENT. LESSEE and its successors and assigns shall not,
voluntarily or by operation of law, assign or encumber any rights under this
Lease without LESSOR'S written consent. LESSOR may assign this Lease and/or
mortgage the Equipment, and said assignee or mortgagee may assign or mortgage
the same. All rights of LESSOR hereunder may be assigned, pledged, mortgaged,
transferred or otherwise disposed of, either in whole or in part, without
notice to LESSEE, and the LESSEE acknowledges, consents and agrees that all
rights in and to the Equipment described herein, including LESSEE'S right to
possession to said Equipment, are subordinate junior and subject to the
rights and claims of any assignee in and to said Equipment under any
mortgage, title, retention, or other security instrument, either now existing
or hereafter created, including but not limited to the right of the assignee
to repossess or recapture possession of said Equipment. LESSEE consents and
agrees to the assignment to the assignee of all moneys due or to become due
to LESSOR under this Lease, and in such event promises and agrees to settle
all claims against LESSOR directly with it and hereby waives, relinquishes
and disclaims any right
<PAGE>
or privilege to withhold payment of, or refrain from paying directly to any
such assignee, any moneys now or hereafter owing under the terms of this
Lease, and the right of the assignee to receive the rentals, as well as any
other right of the assignee, shall not be subject to any defense, setoff,
counterclaim or recoupment which may arise out of any breach or obligation of
LESSOR or by reason of any other assignee by LESSOR whether or not this Lease
is terminated by operation of law or otherwise, including, without
limitation, termination arising out of bankruptcy, reorganization or similar
proceedings involving LESSOR. LESSEE shall abide by any such assignment and
make payment as may therein be directed. Following such assignments, the term
LESSOR shall be deemed to include or refer to LESSOR'S assignee provided no
such assignee shall be deemed to assume any obligation or duty imposed upon
LESSOR hereunder and LESSEE shall only look to LESSOR for performance thereof.
15. NOTICES. All notices relating hereto shall be mailed to LESSOR or
LESSEE, as the case may be, at the respective addresses shown or at any later
address of which the sender may have been theretofore notified in writing.
All such notices shall be deemed served when such notice shall have been
mailed to the party to be notified by certified or registered mail with
postage prepaid.
16. GOVERNING LAW. This Lease, and the rights and liabilities of LESSOR
and LESSEE, shall be determined and adjudicated pursuant to and in accordance
with the laws of the State of New Jersey, and this Lease shall be deemed to
have been made and entered into in the county of the principal office of
LESSOR in New Jersey. LESSEE agrees that all litigations, actions or
proceedings in any court of record which involve matters directly or
indirectly arising from, related to or in any way connected with this Lease
and the matters set forth herein shall only be filed in courts of record in
the State of New Jersey or in a Federal Court for the State of New Jersey and
LESSEE consents to the jurisdiction and venue of any such court and waives
personal service upon LESSEE of any and all process issuing from any such
court, and consents that any such process may be personally served or served
by certified or registered mail directed to LESSEE at the address hereinabove
stated and that such services shall be deemed completed within five (5) days
after such mailing.
17. FURTHER ASSURANCES. From time to time throughout the term of this
Lease with respect to any of the Equipment, Lessee agrees to execute,
acknowledge and deliver such further counterparts hereof, financing
statements, corporate resolutions, opinions of counsel, financial statements,
estoppel certificates in favor of any assignee of LESSOR or such other
documents which in the opinion of LESSOR or counsel for LESSOR may be
necessary or desirable.
18. CONSOLIDATION, MERGER OR SALE. In the event of any consolidation or
merger of LESSOR into or with another corporation, or the sale of all or
substantially all of the assets of LESSOR to another corporation, partnership
or proprietorship, LESSOR shall be permitted to transfer all the rights and
obligations hereunder releasing LESSOR from all obligations and liabilities
to LESSEE hereunder.
<PAGE>
19. GENERAL. If more than one LESSEE is named in this Lease the liability
of each shall be joint and several. LESSEE shall use the Equipment in a
careful and proper manner and shall comply with and conform to all national,
state, municipal and other laws, ordinances and regulations, all applicable
requirements of the manufacturer of the Equipment or the terms of any
insurance policies in any way relating to the possession, use or maintenance
of the Equipment. The obligations of LESSOR hereunder shall be suspended to
the extent that it is hindered or prevented from complying therewith because
of labor disturbances, including strikes and lockouts, acts of God, fires,
storms, accidents, governmental regulations or interference of any cause
whatsoever beyond the control of LESSOR. The terms and conditions of this
Lease supersede those of all previous agreements between the parties with
respect to that Equipment, and this Lease together with the Guarantee, the
Delivery Acceptance and Installation Certificate and the Purchase Order
constitute the entire agreement between the parties. Any provisions hereof
prohibited by, or unenforceable under, any applicable law of any jurisdiction
shall, as to such jurisdiction, be ineffective without invalidating the
remaining provisions of this Lease, provided, however, that to the extent
that any provisions of any such applicable law may be waived, they are hereby
waived by LESSEE to the full extent permitted by law to the end that this
Lease shall be deemed to be valid and binding and enforceable in accordance
with its terms. The titles to the paragraphs of this Lease are solely for the
convenience of this Lease and are not an aid to the interpretation of the
instrument. Any person who signed this Lease as guarantor has done so with
the intention of thereby personally guaranteeing the same, and such person
agrees that he guarantees the performance of LESSEE of this Lease and all
conditions, covenants and undertakings of LESSEE hereunder, and he guarantees
the payment by LESSEE of all rental an other payments to be made by LESSEE to
LESSOR hereunder.
20. STATUTORY FINANCE LEASE. LESSEE AGREES AND ACKNOWLEDGES THAT IT IS
THE INTENT OF BOTH PARTIES TO THIS LEASE THAT IT QUALIFY AS A STATUTORY
"FINANCE LEASE," WHICH IS NOT A "CONSUMER LEASE" UNDER ARTICLE 2A OF THE
UNIFORM COMMERCIAL CODE. LESSEE ACKNOWLEDGES AND AGREES THAT LESSEE HAS
SELECTED BOTH: (1) THE EQUIPMENT; AND (2) THE SUPPLIER FROM WHOM LESSOR IS TO
PURCHASE THE EQUIPMENT LESSEE ACKNOWLEDGES THAT LESSOR HAS NOT PARTICIPATED
IN ANY WAY IN LESSEE'S SELECTION OF THE EQUIPMENT OR OF THE SUPPLIER AND
LESSOR HAS NOT SELECTED, MANUFACTURED, OR SUPPLIED THE EQUIPMENT LESSEE
REPRESENTS AND WARRANTS THAT NONE OF THE EQUIPMENT WILL BE USED FOR PERSONAL,
FAMILY OR HOUSEHOLD PURPOSES OR IN ANY MATTER WHICH WOULD RENDER THIS LEASE A
CONSUMER LEASE FOR ANY LEGAL PURPOSE.
LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT EVIDENCING
THE LESSOR'S PURCHASE OF THE EQUIPMENT FROM THE SUPPLIER CHOSEN BY LESSEE AND
THAT LESSEE SHOULD CONTACT THE SUPPLIER OF THE EQUIPMENT FOR A DESCRIPTION OF
ANY SUCH RIGHTS.
<PAGE>
ASSIGNMENT BY LESSEE PROHIBITED. WITHOUT LESSOR's PRIOR WRITTEN CONSENT,
LESSEE SHALL NOT ASSIGN THIS LEASE OR SUBLEASE THE EQUIPMENT OR ANY INTEREST
THEREIN, OR PLEDGE OR TRANSFER THIS LEASE, OR OTHERWISE DISPOSE OF THE
EQUIPMENT COVERED HEREBY.
Dated: 12/17 1998
LESSEE:ALLSTAR ARENA ENTERTAINMENT,INC
Witnessed By: /s/Herb Dogan By: /s/ Joseph Yukich
Print Name:
Witnessed By:
Signature:
Print Name Date
LESSOR:
MADISON LEASING CO., IN
BY: /s/John J.Gerard,CEO
John J. Gerard, CEO
This Lease shall be adjudicated pursuant to the Laws of the State of New
Jersey.
NOTICE: THIS IS A NON-CANCELABLE, BINDING CONTRACT CONSISTING OF ALL TERMS
CONTAINED THEREIN. IT CONTAINS IMPORTANT TERMS AND CONDITIONS AND HAS LEGAL
AND FINANCIAL CONSEQUENCES TO YOU. PLEASE READ IT CAREFULLY; FEEL FREE TO ASK
QUESTIONS BEFORE SIGNING BY CALLING THE LEASING COMPANY AT (201) 447-0222.
@ Madison Leasing Co., Inc.
<PAGE>
01/12/1999 12:15 MADISON LEASING CO
Lease No. ALL-001
INDIVIDUAL PERS0NAL GUARANTEE
FOR VALUE RECEIVED and in consideration of the execution of the ABOVE
described equipment lease agreement and/or the purchase of equipment to be
leased thereunder by MADISON LEASING CO., INC., we hereby jointly and
severally guarantee to you the full and prompt payment of any and all sums
which may presently or in the future be or become due and owing to you from
the above named Lessee and we agree to be, without deduction by reason of
setoff, defense or counterclaim of Lessee, jointly and severally liable to
you for the due performance of all Lessee's agreements with you and all
renewals, extensions, continuations, modifications, supplements and
amendments thereof. This guarantee is an unconditional guarantee of the
performance of all conditions, obligations and undertakings of Lessee and
shall continue so long as the aforementioned equipment lease agreement or any
renewals, modifications and amendments thereof shall remain in force.
We hereby jointly and severally waive notice of the acceptance hereof and of
all notices and demands of any kind to which we may be entitled, We further
waive notice of and consent to any agreement with Lessee or anyone else,
including without limitation agreements and arrangements for payment
extension, subordination, composition. arrangement, discharge or release of
the ,whole or any part of Lessee's obligations, and the same shall in no way
impair out liability hereunder.
We shall be liable to you for attorney's fees equal to fifteen percent of
Lessee's unpaid obligations. Nothing shall discharge or satisfy our liability
hereunder except the full performance and payment of Lessee's obligations. We
agree that if we or Lessee should become insolvent, or make a general
assignment, or if a proceeding in bankruptcy or reorganization proceeding
shall be commenced by, against or in respect of Lessee or of us, any and all
of our obligations shall, at your option, become due and payable without
notice.
Any amounts received by you from whatever source on account of Lessee's
obligations may be applied in such order as you elect in your sole judgment
and, notwithstanding any payments made by us, we irrevocably waive any rights
we may have as creditor of Lessee and any right to enforce any remedy which
you now or hereafter have against Lessee.
This instrument shall continue in full force and effect and any termination
hereof by us shall have no applicability to rights and obligations arising
out of transactions having their inception prior to such termination. The
death of any one or more of us shall not effect a termination oft his
guarantee as to such deceased or any of the survivors of us, nor shall
termination by any one or more of us affect the continuing liability
<PAGE>
hereunder of such of us as do not give notice of termination. The obligations
under this guarantee shall constitute primary and not secondary obligations.
This instrument cannot be changed or terminated orally and SHALL be binding
upon out heirs, assigns, and successors and shall inure to the benefit of
your successors and assigns. PLEASE DO NOT USE ANY CORPORATE TITLES IN THE
FOLOWING SECTION.
Joseph Yukich: /s/Joseph Yukich SS#554157587 Date: 12/2/98
Martin Burke: /s/Martin Burke SS#559479192 Date: 12/22/98
Paul Fairchild: /s/Paul Fairchild SS#572813491 Date: 01/04/99
Notary Public
MADISON LEASING CO., INC
<PAGE>
NOBLE HOUSE OF BOSTON, INC.
ADVERTISING AND PROMOTIONAL SERVICES AGREEMENT
This Agreement (the "Agreement") is made on this 5th day of April 1999,
between NOBLE HOUSE OF BOSTON, INC., a Florida corporation ("NHOB") and
Ultimate Sports Entertainment, Inc. a Nevada corporation ("Client").
Whereas, NHOB is in the business of planning, developing and
implementing advertising, marketing and promotional campaigns for
corporations and other business entities ("Advertising and Promotional
Services"); and
Whereas, Client wants to engage NHOB to prepare and implement an
advertising and promotional campaign for Client.
Now, therefore, in consideration of the mutual promises contained herein
and other GOOD and valuable consideration, the receipt and sufficiency of which
are acknowledged, the parties, intending to be legally bound, agree as follows:
1) Advertising and Promotional Services; Term Subject to Client's compliance
with each of the representations, warranties and covenants and agreements
made by Client in the Agreement, NHOB agrees to provide to Client the
Advertising and Promotional Services identified on Exhibit A to this
Agreement and incorporated herein by reference., for the period commencing
on the later of the date that this Agreement is executed and delivered by
Client or the date that NHOB receives payment of its fees as provided
below (the "Effective Date") and expiring on the 180'h day following the
effective date of this Agreement (the "Term").
2) Obligations and Responsibilities of Client As of the date hereof and
during the Term of this Agreement, Client agrees as follows.
a) Representation and Warranties.
Client represents and warrants to NHOB that:
i) Organization. Client is a corporation duly organized, validly
existing and in good standing under the laws of the State of its
incorporation and is duly qualified to do business as a foreign
corporation in each jurisdiction in which it owns or leases
property or engages in business.
ii) Formal Action. Client has the corporate power and authority to
execute and deliver this Agreement and to perform each of its
obligations hereunder. The Client has taken all necessary action
to approve the execution and delivery of this Agreement and
performance of all obligations of Client in this Agreement.
<PAGE>
iii) Valid and Binding Agreement. Client has duly executed and delivered
this Agreement, which is the valid and binding obligation of
Client, enforceable AGAINST it in accordance with its terms.
iv) No Violation. The execution, delivery and performance of this
Agreement by Client does not and will not violate any provisions
of the certificate of incorporation or bylaws of Client or any
agreement to which Client is a party or any applicable law or
regulation or order or decree of any court, arbitrator or
government. Client is not required to request action of, or filing
with, any governmental or public body or authority in connection
with the execution, delivery or performance of this Agreement.
v) Litigation. No action, suit or proceeding is pending against,
threatened or otherwise affecting the Client or any of its
properties before any court, arbitrator or governmental body or
administrative agency and none of the persons owning beneficially
or of record more than 10% of the outstanding capital stock of the
Client, or any of the directors or officers of Client, is a party
to any action, suit or proceeding before any federal or state
court, arbitrator or governmental body or administrative agency
(other than routine traffic violations) and no such person has been
a party to any such proceedings for more than the past five years.
vi) Accuracy of Information. The Client has furnished information to
NHOB regarding the business, operations, financial condition
(including financial statements), business plans and biographical
information regarding the Client's directors and officers
(collectively referred to as the "Information Package"). Client
represents and warrants that the Information Package is true,
complete and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3) Covenants and Agreements.
Client covenants and agrees to the following-
a) Client Certification. Client acknowledges that it is responsible
for the accuracy and completeness of the Information Package and
for all other information furnished to NHOB and for the accuracy
and completeness of the contents of all materials prepared by NTHOB
for and on behalf of Client. The Client hereby designates the
individuals listed on Exhibit B to this Agreement as the duly
authorized representatives of Client for purposes of certifying
to NEOB the accuracy of all documents, advertisements or other
materials prepared by NHOB for and on behalf of Client. The Client
agrees to promptly advise NEOB in WRITING of any condition, event,
circumstance or act that would constitute a material adverse change
in the business, properties, financial condition or business
prospects of the Client or which would make any of the information
contained in the Information Package or in any
<PAGE>
document prepared by NHOB for and on behalf of Client misleading
in any material respect.
b) Client hereby agrees that NHOB and its directors, officers, agents
and employees may rely on the Information Package and on all other
information furnished by Client, and on each and every
certification provided by an authorized representative of Client,
until NHOB is advised in writing by an authorized representative of
Client that the information previously furnished to NHOB is
inaccurate or incomplete in any material respect. Client
acknowledges that NHOB shall have no obligation to provide services
hereunder until it has received a written certificate from an
authorized representative of Client as follows- NTHOB shall prepare
proofs and/or tapes of the agreed upon materials and information,
as set for dissemination, for the Client's review and approval and
Client shall sign and return such materials marking all corrections
and changes that the Client believes appropriate. Client
acknowledges that NHOB will make oral representations based on the
information furnished hereunder and the Client authorizes such
representations.
i) Books and Records. Client shall maintain true and complete
books, records and accounts in which true and correct entries
shall be made of its transactions in accordance with generally
accepted accounting principals consistently applied ("GAAP").
ii) Financial and Other Information. Client agrees to furnish to
NHOB the following information:
(1) Annual Financial Statements. As soon as practicable, and
in any event within 90 days after the close of the
Client's fiscal year, annual financial statements
including a balance sheet, an income statement, a
statement of cash flows, and a statement of stockholder's
equity, and all notes thereto prepared in accordance with
GAAP and audited by an independent certified public
accountant.
(2) Quarterly Financial Statements. As soon as practicable,
and in any event within 45 days after the end of each
fiscal quarter, quarterly financial statements, including
a balance sheet, a quarterly and year-to-date income
statement, a statement of cash flows, and a statement of
stockholder's equity, prepared by Client in accordance
with GAAP and certified by the chief financial officer
and chief executive officer of Client as fairly
presenting, subject to normal year-end audit adjustments,
the Client's financial position as of and for the periods
indicated.
(3) Noble House of Boston, Inc. Reliance on Client's Full
Disclosure. Client will provide, or cause to be provided,
to NHOB all financial and other information requested by
NHOB for rendering its services pursuant to this
Agreement. Client recognizes and confirms that NHOB will
use such information in performing the services
contemplated by this Agreement
<PAGE>
without independently verifying such information and that
NHOB does not assume any responsibility for the accuracy
or completeness of such information. The persons executing
this Agreement on behalf of Client certify that there is
no fact known to them which materially adversely affects
or may (so far as the Client's senior management can now
reasonably foresee) materially adversely affect the
business, properties, condition (financial or other) or
operations (present or prospective) of the Client which
has not been set forth in written form delivered by Client
to NHOB.
(4) The persons executing this Agreement on behalf of Client
agree to keep NHOB promptly informed of any facts
hereafter know to Client which materially adversely
affects or may (so far as the Client's senior management
can now reasonably foresee) materially adversely affect
the business, properties, condition (financial or other)
or operations (present or prospective) of Client.
(5) Legal Representation. Client acknowledges and agrees that
it has been and will continue to be, represented by legal
counsel experienced in corporate and securities laws and
Client acknowledges that it has been advised as to the
obligations imposed on it pursuant to such laws and
understands that it will have the obligation and
responsibility to see that all such laws are complied with
at all times during the Term of this Agreement.
4) Compensation. In consideration of the Advertising and Promotional Services
to be performed by NHOB hereunder, Client hereby agrees to compensate NHOB
in the manner in the amount specified in Exhibit C which is attached
hereto and incorporated herein by reference thereto. In addition to the
compensation to be paid to NHOB as provided in Exhibit C, Client shall
reimburse NHOB promptly after a written request therefor accompanied by
appropriate documentation, for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of NHOB's counsel, if any)
incurred in connection with providing services hereunder or to the extent
provided in Exhibit C.
5) Indemnity. Client acknowledges that it is responsible for the accuracy
of the Information Package and all other information provided to NHOB and
for the contents of all materials, advertorials and other information
prepared by NHOB for an on behalf of Client as provided herein and Client
agrees to indemnity NHOB in accordance with the Indemnification Agreement
set forth in Exhibit D, which is attached hereto and incorporated herein
by reference.
6) Relationship of the Parties. This Agreement provides for the providing
of marketing, promotional and advertising services by NTHOB to Client and
the provisions herein for compliance with financial covenants, delivery
of financial statements, and similar provisions are intended solely for
the benefit of NHOB to provide it with information on which it may rely
in providing services hereunder and nothing contained in the Agreement
shall be construed as permitting or obligating NBOB to act as a financial
or
<PAGE>
business advisor or consultant to Client, as permitting or obligating
NHOB to participate in the management of client's business, as creating
or imposing any fiduciary obligation on the part of NHOB with respect to
provisions of services hereunder and NHOB shall have no such duty or
obligation to client, as providing or counseling Client as to the
compliance by Client with any federal or state securities or other laws
effecting the services to be provided hereunder, or as creating any joint
venture, agency, or other relationship between the parties other than
explicitly and specifically stated in the Agreement. The Client
acknowledges that it has had the opportunity to obtain the advice of
experienced counsel of its own CHOOSING in connection with the negotiation
and execution of the Agreement, the provision of services hereunder and
with respect to all matters contained herein, including, without
limitation, the provisions of Section 4 hereof
7) Survival of Certain Provisions. The Client's obligations to pay the fees
and expenses of NHOB pursuant to Section 3 of this Agreement and to comply
with the indemnification provisions pursuant to Section 4 shall remain
operative and in full force and effect regardless of any termination of
this Agreement and shall be binding upon, and shall inure to the benefit
of, NHOB and in the case of the indemnity agreement, the persons, agents,
employees, officers, directors and controlling persons referred to in
the Indemnification Agreement, and their respective successors and
assigns and heirs, and no other person shall acquire or have any right
under or by virtue of this Agreement. All amounts paid or required to be
paid under Sections 3 and 4 of this Agreement shall be full earned on the
Effective Date of this Agreement notwithstanding prior termination of
this Agreement.
8) Terminatiom NHOB shall have the right in its sole and absolute discretion
to terminate its obligations hereunder and to immediately cease providing
Advertising and Promotional Services pursuant to this Agreement if NHOB,
in the exercise of its reasonable judgement, believes that the
representations and warranties made by Client hereunder are inaccurate in
any material respect or if Client breaches any of its covenants and
agreements continued herein or if any federal or state governmental
agency or instrumentally institutes an investigation or suite against
Client or pertaining to the services hereunder.
9) Non-Solicitation Covenant. Client agrees that it will not directly or
indirectly during the term of this Agreement or for three years following
the termination or expiration of this Agreement, either voluntarily or
involuntarily, for any reason whatsoever, recruit or hire or attempt to
recruit or hire any employee of NEOB or of any of its affiliates or
subsidiaries, or otherwise induce any such employees to leave the
employment of NHOB or of any of its affiliates or subsidiaries or to
become an employee of or otherwise be associated with Client or any
affiliate or subsidiary of Client. Client acknowledges that NHOB and
its affiliates and subsidiaries have invested a significant amount of
time, energy and expertise in the training of their employees to be
able to provide Advertising and Promotional Services and Client
therefore agrees that this covenant is reasonable and agrees that the
breach of such covenant is very likely to result in irreparable injury
to NHOB which is unlikely to be adequately compensated by damages.
Accordingly, in the
<PAGE>
event of a breach or threatened breach by Client of this Section 8, NHOB
shall be entitled to an injunction restraining Client and any affiliate,
subsidiary or director or officer thereof from recruiting, or hiring or
attempting to recruit or hire any employee of NHOB or of any affiliate or
subsidiary of NHOB. Nothing herein shall be construed as prohibiting NHOB
from pursuing any other remedies available to NHOB for such breach or
threatened breach, including recovery of damages from Client. The
undertaking herein shall survive the termination or cancellation of the
Agreement for three years.
10) Miscellaneous.
a) Governing Lam This Agreement shall be governed by the laws of the
State of Florida applicable to contracts executed and performed in
the Circuit Court, Seminole County, in the State of Florida (without
regard to the principles of conflicts of laws)
b) Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
c) Cumulation of Rights and Remedies. No right or remedy of NHOB under
this Agreement is intended to preclude any other right or remedy and
every right and remedy shall coexist with every other fight and remedy
now or hereafter existing, whether by contract, at law, or in equity.
d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties and their successors and assigns.
Client shall not have any right to assign any of its rights or
delegate any of its obligations or responsibilities under this
Agreement except as expressly stated herein.
e) Payment of Fees and Expenses on Enforcing Agreement In the event of
any dispute between the parties arising out of or related to this
Agreement or the interpretation thereof, at the trial level or
appellate level, the prevailing party shall be entitled to recover
from the non-prevailing party all costs and expenses, including
reasonable fees and disbursements of counsel which may be incurred
in connection with such proceeding, without limitation, including
any costs and expenses of experts, witnesses, depositions and other
costs.
f) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing, and shall be delivered to the
parties at the addresses set forth below (or to such other addresses
as the parties may specify by due notice to the others). Notices or
other communications shall be effective when received at the
recipient's location (or when delivered to that location if receipt is
refused). Notices or other communications given by facsimile
transmission shall be presumed received at the time indicated in the
recipient's automatic acknowledgement. Notices or other communications
given by Federal Express or other recognized overnight courier service
shall be presumed received on the following business day. Notices or
other
<PAGE>
communications given by certified mail, return receipt requested,
postage prepaid, shall be presumed received three business days after
the date of mailing.
ULTMATE SPORTS ENTERTAINNIENT, INC.
Attn: Frederick R. Licht
Fax: (310)
NOBLE HOUSE OF BOSTON, D4C.
Attn: Douglas Carley, President
Fax: (407) 339-7462
g) Headings. The headings in this Agreement are intended solely for
convenience of reference. They shall be given no effect in the
construction or interpretation of this Agreement.
h) Severability. The invalidity or unenforceability of any provision of
this Agreement shall not impair the validity or enforceability of any
other provision.
In Witness "Whereof, the parties have executed this Agreement as of the
date first above written.
Attest:
By: By: /s/ Fredeirck R. Licht
Secretary Frederick R. Licht, President
[Corporate Seal)
Attest: NOBLE HOUSE OF BOSTON, INC.
By: /s/ Rob Karbowsky By: /s/ Douglas Carley
Secretary Douglas Carley, President
[Corporate Seal]
<PAGE>
EXHIBIT A
Advertising and Promotional Services
The services to provided are as follows:
1. NHOB will contact market makers, money managers, fund managers, hedge
fund managers and/or a minimum of eighteen hundred (1,800) retail
brokers who will review Client's company. This process will begin
immediately upon NHOB receiving the compensation and expense
advancement as set forth Exhibit "C", and the Client's current
shareholder list and printed materials. Follow-up with shareholders,
brokers, funds and institutions will be done as well.
2. NHOB will distribute the Information Package to all inquiring brokers.
The Client shall supply the necessary materials for the Information
Package and update it on a continual basis at Client's cost. If
Client requests assistance from NHOB in assembling and/or creating
a typical Information Package, then NHOB will charge Client for its
assistance. NHOB's charges for assisting Client in assembling
and/or creating the Information Package shall be an expense item
and invoiced under term net 30 days. The cost of mailing the
Information Package to all inquiring brokers shall be an expense
item and shall be invoiced under term net 30 days.
3. Preparation of a customized Client "Bullet Sheet," a one-page investor
fact sheet, is to be sent to every broker who shows interest in the
Client's stock.
4. NHOB shall research prepare and publish the "The Buy-Line Report" an
(8) to (10) page special report, providing an in-depth overview of
Client. This marketing piece is specifically targeted to investors
and brokers interested in the emerging growth sector of the
financial market.
5. NHOB will provide assistance in review of documentation to be sent to
brokers. If travel is required, the Client will pay transportation and
hotel expenses for NHOB's employees. The transportation and hotel
expenses shall be an expense item and invoiced under term net 30 days
or paid in advance by Client.
6. NHOB will arrange a Due Diligence Dinner meeting. This meeting will
include a corporate overview presentation by the Client's top
management. The Client shall pay all of the costs of the Due
Diligence Dinner meeting, including, but not limited to, the
invitations, the meeting room, meals, beverages, and the
facilitator employed to coordinate the dinner and the meeting. The
cost of the Due Diligence Dinner meeting is an expense advancement
item.
<PAGE>
7. Wall Street Watchdog, NHOB's media arm, will provide Client with a
number of channels to market:
A) An interview or advertorial on "The Wall Street Watchdog Radio
Show," a weekly one hour investment program reaching two million
people.
B) Sixty-second commercials on the Watchdog radio show promoting
your company. Leads generated off the show would go through
NHOB broker network for follow-up.
C) "The Wall Street Watchdog Alert," a condensed corporate profile
transmitted by fax to over 3,000 brokers. This newsletter will be
sent out a second time with an update.
D) We will market Client through The Watchdog Wire Service, a
comprehensive database of financial media along with buy and sell
side institutions. It contains over 300,000 contacts such as
analysts, portfolio managers, brokers, institutional investors
and many more.
E) Consultation with Client on their web site in order to make it
more investor-friendly or if a web site doesn't exist,
consultation on developing and maintaining a company web site.
F) "The Wall Street Watchdog Report," a two page snapshot of your
company that includes interviews with top management personnel,
updated news on Client and reasons why to invest in Client.
H) WSW will provide public relations exposure on Client press
releases to newsletter writers, trade publications and financial
GURUS. WSW will also provide story ideas on Client for feature
articles to generate investor awareness of Client.
8. Performance by Client.
A) Client is required to do a Standard & Poor's listing at the
Client's expense.
B) Client is required to provide NHOB with all S& P listings on
their attorney's letterhead.
C) Client will provide its shareholders with audited financials on a
yearly basis and unaudited financials on quarterly basis.
D) Client will use its reasonable best efforts to register or
qualify any shares of common stock of Client under the securities
or blue sky laws
<PAGE>
of such jurisdictions as any broker or market maker may
reasonably request and do any and all other acts and things
which may be reasonably necessary or advisable to enable such
broker or market maker to consummate the disposition in such
jurisdictions of shares of common stock of Client, provided that
the Client will not be required to (1) qualify generally to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this Section (2) subject itself to
taxation in any such jurisdiction or (3) consent to general
service of process in any such jurisdiction.
The parties hereto by signing this Exhibit in the space provide below
signify their agreement regarding the service to be provided by NHOB under
the Agreement.
ULTIMATE SPORTS ENTERTAINMENT, INC.
By: /s/ Frederick R. Licht,President
Frederick R. Licht, President
NOBLE HOUSE OF BOSTON, INC.
By: /s/ Douglas Carley,President
Douglas Carley, President
<PAGE>
EXHIBIT B
Client hereby designates the following person or persons to act on its
behalf for the purpose set forth in Section 2.B. (1) of the Agreement.
/S/ Frederick R. Licht /s/ FR LICHT
DIRECTOR (PLEASE SIGN) DIRECTOR (PLEASE PRINT)
PRESIDENT (PLEASE SIGN) PRESIDENT (PLEASE PRINT)
/s/Paul Fairchild
VICE PRESIDENT (PLEASE SIGN) VICE PRESIDENT (PLEASE PRINT)
<PAGE>
EXHIBIT C
COMPENSATION
1. Upon the execution and delivery of the Agreement, Client agrees to
remit to NEOB in cash or, at the option of Client, to issue NHOB two hundred
thousand (200,000) shares of unrestricted Common Stock of the Client (the
"Shares"), which Shares shall be duly and validly issued, fully paid and
nonassessable and shall not be issued in violation of any preemptive right of
any stockholders of Client. The Shares will be issued in compliance with the
requirements of the Securities Act of 1933 (the "Act) and the General Rules
and Regulation promulgated under the Act and shall be unrestricted,
unencumbered and freely tradable on the stock exchange or other electronic
trading system on which the Shares are listed for trade.
2. Client shall pay to NHOB one hundred fifty thousand restricted
Shares, concurrently with the issuance of the Shares, Client will execute and
deliver the Registration Rights Agreement attached hereto as Exhibit E under
which the Client agrees to register the Shares for sale in compliance with
the Act and to comply with all conditions necessary or required to enable the
Shares to be sold pursuant to the General Rules and Regulation under the Act.
3. The Shares, if any, to be issued to NHOB shall be approved for
issuance in accordance with the rules and regulations of any stock exchange
or other electronic trading system on which the Shares are listed for trading
and shall be issued in compliance with all appropriate federal or state
governmental rules and regulations.
4. Client acknowledges that the consideration to be paid to NHOB shall
be fully earned on the date that NHOB commences providing services under the
Agreement.
5. Client agrees to pay or reimburse NHOB for all expenses arising out
of or related to the provision of services by NHOB under the Agreement to the
extent provided in the Agreement and/or in Exhibit A thereto.
The parties hereto by signing this Exhibit in the space provided below
signify their agreement to the compensation provisions contained herein.
Ultimate Sports Entertainment, Inc.
By: /s/Frederick R. Licht, Pres.
Frederick R. Licht, President
NOBLE HOUSE OF BOSTON, INC.
By: /s/Douglas Carley Pres.
Douglas Carley, President
<PAGE>
EXHIBIT D
INDEMNIFICATION
Client acknowledges and agrees that if, in connection with the services
or matters that are the subject of or arise out of such Agreement, NHOB
becomes involved (whether or not as a named party) in any action, claim or
LEGAL proceeding (including any governmental inquiry or investigation),
Client agrees to reimburse NHOB for its reasonable legal fees, disbursements
of counsel and other expenses (including the cost of investigation and
preparation) as they are incurred by NHOB. Client also agrees to indemnify
and hold NHOB harmless against any losses, claims, damages or liabilities,
joint or several, as incurred, to which NHOB may become subject in connection
with the services or matters which are the subject of or arise out of the
Agreement; provided, however, that Client shall not be liable under the
foregoing indemnity in respect of any loss, claim, damage or liability to the
extent that a court having jurisdiction shall have determined by a final
judgment that such loss, claim, damage or liability is a consequence of
intentional fraudulent acts committed by NHOB without the knowledge and/or
consent of Client. In the event that the foregoing indemnity is unavailable
by operation of law, the Client shall contribute to amounts paid or payable
by NHOB in respect of such losses, claims, damages and liabilities in the
proportion that Client's interest bears to NHOB 's interest in ihe matters
contemplated by the Agreement. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, or
otherwise, the Client shall contribute to such amount paid or payable by NHOB
in such proportion as is appropriate to reflect not only such relative
interests but also the relative fault of Client on the one hand and NHOB on
the other hand in connection with the matters as to which such losses,
claims, damages or liabilities relate and other equitable considerations.
Promptly after NHOB 's receipt of notice of the commencement of any
action or of any claim, NHOB will, if a claim in respect thereof is to be
made against Client under this Indemnity Agreement, notify Client of the
commencement thereof In case any such action or claim is brought against
NHOB, Client will be entitled to participate therein and, to the extent that
Client may wish, to assume the defense thereof, with counsel satisfactory to
NHOB. After notice form Client to NHOB of Client's election to so assume the
defense thereof, Client will not be liable to NHOB for indemnification as
provided in the preceding paragraph for any legal fees, disbursements of
counsel or other expenses subsequently incurred by NHOB, in connection with
the defense thereof other than reasonable costs of investigation; provided
that NHOB shall have the right to employ separate counsel if, in the
reasonable judgment of NHOB 's counsel, it is advisable for NHOB to be
represented by separate counsel or if in the reasonable judgement of NHOB 's
counsel, Client is not vigorously and actively defending against any such
claim of claims, and in either such event the reasonable legal fees and
disbursements of such separate counsel shall be paid by Client.
The foregoing agreements shall apply to any modification of the
Agreement, shall remain in full force and effect following the completion or
termination of NHOB 's
<PAGE>
engagement under the Agreement and shall be in addition to any rights that
NHOB may have at common law or otherwise. The agreements in this
Indemnification Agreement shall extend to and inure to the benefit of each
person, if any, who may be deemed to control NHOB, be controlled by NHOB or
be under common control with NHOB and to NHOB 's, and to each such other
person's respective affiliates, directors, officers, employees and agents.
This Indemnification Agreement shall be binding on any successor Client.
Client represents that the Indemnification Agreement contained herein
is the legal, valid, binding and enforceable obligation of Client,
enforceable against Client according to its terms.
This Indemnification Agreement shall be governed by, and construed in
accordance with, the laws of the State of Florida without regard to
principles of conflicts of law, and the forum for resolution of legal and
interpretative issues shall be the Federal District courts in the State of
Florida.
The parties hereto by signing this Exhibit in the space provided below
signify their agreement to the indemnification provisions contained herein.
Ultimate Sports Entertainment, Inc.
By: /s/Frederick R. Licht
Frederick R. Licht, President
NOBLE HOUSE OF BOSTON, INC.
By: /s/Douglas Carley -
Douglas Carley, President
<PAGE>
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights
Agreement") is made and entered into as of April 5, 1999 by and between Noble
House of Boston, Inc., a Florida corporation (NHOB), and Ultimate Sports
Entertainment, Inc., a Nevada corporation (the Client).
WHEREAS, NHOB concurrently with the execution of this Registration
Rights Agreement is acquiring shares of the Client's common stock, par value
$001 per share ("Common Stock") and/or options to purchase shares of Common
Stock; and
WHEREAS, as a condition to such acquisition, the parties are willing to
enter into the agreements contained herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. DEFINITIONS
"Affiliate" means, with respect to any Person, any other Person
which, directly or indirectly, controls, is controlled by or is under common
control with such Person.
"Agreement" means the Public Relations and Advertising Agreement
dated as of the date of this Registration Rights Agreement between NHOB and
Client.
"Client" is defined in the Preamble to this Registration Rights
Agreement.
"Common Stock" is defined in the Recitals to this Registration
Rights Agreement.
"NHOB" is defined in the Preamble to this Registration Rights
Agreement.
"Holder" is defined in Section 2.1 hereof
"Lock-Up Period" is defined in Section 2.1 hereof
"Options" mean the Options issuable, in certain circumstances,
pursuant to the Agreement, which are exercisable for Common Stock.
"Other Holders" is defined in Section 4.3 hereof
<PAGE>
"Permitted Transfer" is defined in Section 2.2 hereof
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and government or any
department or agency thereof
"Piggyback Notice" is defined in section 4.1 hereof
"Piggyback Registration" is defined in Section 4.1 hereof
"Registerable Securities" means (i) the Common Stock issued to
NHOB pursuant to the Agreement, (ii) any Common Stock issued to NHOB pursuant
to the exercise of Options, and (iii) any securities issued or issuable with
respect to the Common Stock referred to in clauses (i) or (ii) by way of
replacement, share dividend, share split or in connection with a combination
of shares, recapitalization, merger, consolidation or other reorganization.
"Registration Rights Agreement" is defined in the Preamble to the
Registration Rights Agreement.
"Registration Expenses" is defined in Section 6.1 hereof
"Restricted Securities" is defined in Section 2.1 hereof
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Transfer" is defined in Section 2.1 hereof
Section 2. RESTRICTIONS ON TRANSFER
2.1 LOCK-UP PERIOD. Without the express prior written consent of
the Client, NHOB agrees that, except as set forth in Section 2.2 below, it
will not, directly or indirectly, offer, sell, contract to sell or otherwise
dispose of (or announce any offer, sale, contract of sale or other
disposition of) ("Transfer") any Registerable Securities of Options
(collectively, "Restricted Securities") prior to the first anniversary
following the date of this Registration Rights Agreement.
2.2 PERMITTED TRANSFERS. The restrictions contained in this
Section 2 will not apply with respect to any of the following transactions
(each, a "Permitted Transfer"):
2.2.1 a natural person may Transfer Restricted Securities to
his or her spouse, siblings, parents or any natural or adopted children or
other descendants or to any personal trust in which such family members or
such transferee retains the entire beneficial interest;
<PAGE>
2.2.2 NHOB may (A) Transfer Restricted Securities to one or
more other entities that are wholly owned and controlled, legally and
beneficially, by NHOB or an Affiliate, or (B) Transfer Restricted Secunities
by distributing such Restricted Securities in a liquidation, winding up or
otherwise without consideration to the equity owners of such corporation,
partnership or business entity or to any other corporation, partnership or
business entity that is wholly owned by such equity owners; or (C) Transfer
Restricted Securities to a director, officer or key employee of NHOB or
Affiliate;
2.2.3 a transferee acquiring Restricted securities in a
Permitted Transfer may Transfer Restricted Securities on his or her death or
mental incapacity to such Person's estate, executor, administrator or
personal representative or to such Person's beneficiaries pursuant to a
devise or bequest or by the laws of descent and distribution; or
2.2.4 NHOB or any transferee acquiring Restricted Securities
in a Permitted Transfer may Transfer Restricted Securities pursuant to an
effective Registration Statement as provided herein or pursuant to an
exemption from the registration requirements of the Securities Act.
If any Person Transfers Restricted Securities as described in this Section
2.2, such Restricted Securities shall remain subject to the Registration
Rights Agreement and, as condition of the validity of such Transfer, the
transferee shall be required to execute and deliver a counterpart of this
Registration Rights Agreement. Thereafter, such transferee shall be deemed a
Holder for purposes of this Registration Rights Agreement.
2.3 RIGHTS OF SUBSEQUENT HOLDER. Subject to the forgoing
restrictions, the Client and NHOB hereby agree that any subsequent holder of
Registerable Securities shall be entitled to all benefits hereunder as a
holder of such securities.
Section 3. DEMANDS FOR REGISTRATION.
1.1 DEMAND PERIOD From the date hereof, until the date which is
four years from the date hereof (the "Demand Period"), subject to the terms
and conditions of this Registration Rights Agreement, NHOB and the Permitted
Transferees will have in the aggregate three opportunities, in addition to
other rights enumerated in this Registration Pights Agreement, to request
registration under the Securities Act of all or part of itsRegisterable
Securities (a "Demand Registration"). The Holders of 50% or more of the
Registerable Securities shall have the right to exercise the registration
rights under this Section 3.
3.2 DEMAND PROCEDURE.
3.2.1. Subject to Sections 3.2.2 and 3.2.4 below, during the
Demand Period any Holder or combination of Holders (the "Demanding
Shareholders") owning 50%
<PAGE>
or more of the Registerable Securities may deliver to the Client a written
request (a "Demand Registration Request") that the Client register any or all
such Demanding Shareholders' Registerable Shares.
3.2.2 Holders, taken together, may only make one Demand
Registration Request in each six-month period during the Demand Period (the
"Interim Demand Periods"). The Client shall only be required to file one
registration statement (as distinguished from supplements or pre-effective or
post-effective amendments thereto) in response to each Demand Registration
Request.
3.2.3 A Demand Registration Request from Demanding
Shareholders shall (i) set forth the number of Registerable Securities
intended to be sold pursuant to the Demand Registration Request (ii) disclose
whether all or any portion of a distribution pursuant to such registration
will be sought by means of an underwriting, and (iii) identify any managing
underwriter or managing underwriters proposed for the underwritten portion,
if any, of such registration.
3.2.4 If during any Interim Demand Period, the Client
receives a Demand Registration Request from Demanding Shareholders for the
registration of 9 Registerable Securities having an aggregate market value of
$100,000 or greater, as determined according to the closing price of the
Common Stock on the NASDAQ National Market, on the Bulletin Board or in the
Pink Sheets on the date of such Demand Registration Request, then the Client
shall, subject to the limitations in Sections 3.2.5 and 3.2.6 hereof, (i) use
its reasonable best efforts to prepare and file within 330 days of receipt of
the Demand registration request with the SEC a registration statement under
the Securities Act with respect to all Registerable Securities that the
Demanding Shareholders requested to be registered in the Demand Registration
Request, (ii) use its reasonable best efforts to cause such registration
statement to become effective within 75 days of receipt of the Demand
Registration Request, and (iii) if such registration can be accomplished by
means of a registration statement on Form S-3, keep such registration
statement effective until such time as the Demanding Shareholders shall have
sold or otherwise disposed of all of their Reaisterable Securities included
in the registration. If such registration cannot be accomplished by means of
a registration statement on Form S-3, the Client shall use its reasonable
best efforts to keep such registration statement effective for at least 180
days.
3.2.5 The parties anticipate that the registration
contemplated under this Section 3) will be accomplished by means of the
filing of a Form S-3, and that registration on such form will allow for
different means of distribution, including sales by means of an underwriting
as well as sales into the open market. If the Demanding Shareholders desire
to distribute all or part of the Registerable Securities covered by their
request by means of an underwriting, they shall so advise the Client in
writing in their initial Demand Registration Request as described in Section
3.2.3 above. A determination of whether all or part of the distribution will
be by means of an underwriting shall be made by Demanding Shareholders
holding a majority of the Registerable Securities to be included in the
registration. If all or part of the distribution is to be by means of an
underwriting, all subsequent decisions concerning the underwriting which are
to be made by the Demanding
<PAGE>
Shareholders pursuant to the terms of this Registration Rights Agreement,
which shall include the selection of the underwriter or underwriters to be
engaged and the representative, if any, of the underwriters so engaged, shall
be made by the Demanding Shareholders who hold a majority of the Registerable
Securities to be included in the underwriting, subject to approval by the
Board of Directors of the Client.
3.2.6 Upon the receipt by the Client of a Demand Registration
Request in accordance with Section 3.2.4 hereof, the Client shall, within ten
days following receipt of such Demand Registration Request, give written
notice of such request to Holders. The Client shall include in such notice
information concerning whether all, part or none of the distribution is
expected to be made by means of an underwriting, and, if more than one means
of distribution is contemplated, may require Holders to notify the Client of
the means of distribution of their Registerable Securities to be included in
the registration. If any Holder who is not a Demanding Shareholder desires to
sell any Registerable Securities owned by such Holder, such Holder may elect
to have all or any portion of its Registerable Securities included in the
registration statement by notifying the Client in writing (a "Supplemental
Demand Registration Request") within 20 days of receiving notice of the
Demand Registration Request from the Client. The right of any Holder to
include all or any portion of its Registerable Securities in an underwriting
shall be conditioned upon the Client's having received a timely written
request for such inclusion by way of a Demand Registration Request or
Supplemental Demand Registration Request (which right shall be further
conditioned to the extent provided in this Registration Rights Agreement). AN
Holders proposing to distribute their Registerable Securities through an
underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting.
3.2.7 Notwithstanding any other provision of this Section 3,
if an under-writer advises the Client in writing that marketing factors
require a limitation on the number of shares to be underwritten, then the
number of shares of Registerable Securities that may be included in the
underwriting shall be allocated among the Holders in proportion (as nearly as
practicable) to the respective amounts of Registerable Securities each Holder
owns (or in such other proportion as they shall mutually agree). Registerable
Securities excluded or withdrawn from the underwriting in accordance with
this Section 3.2.7 shall be withdrawn from the registration.
3.3 PRIORITY ON REQUEST REGISTRATION. The Client will not include
in any Demand Registration any securities which are not Registerable
Securities without the prior written consent of the Holders of a majority of
the shares of Registerable Securities included in such registration. If a
Demand Registration is an underwritten offering and the managing underwriters
advise the Client in writing that in their opinion the number or Registerable
Securities and, if permitted hereunder, other securities requested to be
included in such offering exceeds the number of securities that can be sold
in an orderly manner in such offering within a price range acceptable to the
Holders of a majority of the shares of Registerable Securities initially
requesting registration, the Client will include in such registration prior
to the inclusion of any securities which are not Registerable Securities the
number of shares of Registerable Securities requested to be included that in
the opinion of
<PAGE>
such underwriters can be sold in an orderly manner within such acceptable
price range, pro rata among the respective Holders thereof on the basis of
the number of shares of Registerable Securities owned by each such Holder.
Section 4. PIGGYBACK REGISTRATIONS
4.1 RIGHT TO PIGGYBACK. If the Client proposes to undertake an
offering of shares of Common Stock for its account or for the account of
other stockholders and the registration form to be used for such offering may
be used for the registration of Registerable Securities (a "Piggyback
Registration"), each such time the Client will give prompt written notice to
all Holders of Registerable Securities of its intention to effect such a
registration (each, a "Piggyback Notice") and, subject to Sections 4.3 and
4.4 hereof, the Client will use its best efforts to cause to be included in
such registration all Registerable Securities with respect to which the
Client has received written requests for inclusion therein within 20 days
after the date of sending the Piggyback Notice.
4.2 PRIORITV ON PRIMARV REGISTRATIONS. If a Piggyback Registration
is an under-written primary registration on behalf of the Client, and the
managing underwriters advise the Client in writing that in their opinion the
number of securities requested to be included in such registration exceeds
the number that can be sold in an orderly manner within a price range
acceptable to the Client, the Client will include in such registration (a)
first, the securities the Client proposes to sell and (b) second, the
Registerable Securities requested to be included in such registration and any
other securities requested to be included in such registration that are held
by Persons other than the Holders of Registerable Securities pursuant to
registration rights, pro rata among the holders of Registerable Securities
and the holders of such other securities requesting such registration on the
basis of the number of shares of such securities owned by each such holder.
4.3 PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders
of the Client's securities other than the Holders of Registerable Securities
(the "Other Holders"), and the managing underwriters advise the Client in
writing that in their opinion the number of securities requested to be
included in such registration exceeds the number that can be sold in a
orderly manner in such offering within a price range acceptable to the Other
Holders requesting such registration, the Client will include in such
registration (a) first, the securities requested to be included therein by
the Other Holders requesting such registration and (b) second, the
Registerable Securities requested be include in such resignation hereunder,
pro rata amount the Holders of Registerable Securities requesting such
registration on the basis of the number of shares of such securities
owned by each such Holder.
4.4 SELECTION OF UNDERWRITERS. In the case of an underwritten
Piggyback Re2istration, the Client will have the right to select the
investment banker(s) and managers(s) to administer the offering.
Section 5. REGISTRATION PROCEDURES.
<PAGE>
5.1 REGISTRATION. Whenever the Holders of Registerable Securities
have requested that any Registerable Securities be sold pursuant to this
Registration Rights Agreement, the Client will use its reasonable best
efforts to effect the registration and the sale of such Registerable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Client will as expeditiously as possible:
5.1.1 REGISTRATION STATEMENT. Prepare and file with the SEC a
registration statement with respect to such Registerable Securities and use
its reasonable best efforts to cause such registration statement to become
effective.
5.1.2 AMENDMENTS AND SUPPLEMENTS. -Promptly prepare and file
with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the period required by the intended
method of disposition and the terms of this Registration Rights Agreement and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement.
5.1.3 PROVISIONS OF COPIES. Promptly furnished to each seller
of Registerable Securities the number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as such seller may reasonably request in order to facilitate
the disposition of the Registerable Securities owned by such seller.
5.1.4 BLUE SKY LAWS. Use its reasonable best efforts to
register or qualify such Registerable Securities under the securities or blue
sky laws of such jurisdictions as any seller reasonably requests and do any
and all other acts and things which may be reasonably necessary or advisable
to enable such seller to consummate the disposition in such jurisdictions of
the Registerable Securities owned by such seller, PROVIDED, that the Client
will not be required to (a) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 5.1.4, (b) subject itself to taxation in any such jurisdiction or (c)
consent to general service of process in any such jurisdiction.
5.1.5 ANTI-FRAUD RULES. Promptly notify each seller of such
Registerable Securities when a prospectus relating thereto is required to be
delivered under Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any material fact necessary to
make the statements therein not misleading, and in such event, at the request
of any such seller, the Client will promptly prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registerable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading, PROVIDED,
<PAGE>
that the Client will not take any action which causes the prospectus included
in such registration statement to contain an untrue statement of material
fact or omit any material fact necessary to make the statements therein not
misleading, except as permitted by Section 5.5.
5.1.6 SECURITIES EXCHANGE LISTING. Use its reasonable best
efforts to cause all such Registerable Securities to be listed on each
securities exchange on which securities of the same class issued by the
Client are then listed and use its reasonable best efforts to qualify such
Registerable Securities for trading on each system on which securities of the
same class issued by the Client are then qualified.
5.1.7 UNDERWRITING AGREEMENT. Enter into such customary
agreements (including underwriting agreements in customary form) and take all
such other actions as the holders of a majority of the shares of
Registerable Securities being sold or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such
Registrable Securities.
5.1.8 DUE DILIGENCE. Make available for inspection by any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
underwriter, all financial and other records, pertinent corporate documents
and properties of the Client, and cause the Client's officers, directors,
employees and independent accountants to supply all information reasonably
requested by any such underwriter, attorney, accountant or agent in
connection with such registration statement.
5.1.9 EARNING STATEMENT. Otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning
with the first day of the Client's first full calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section I I (a) of the Securities Act and Rule 158
thereunder.
5.1.10 DEEMED UNDERWRITERS OR CONTROLLING PERSONS. Permit any
Holder of Registerable Securities which Holder, in such Holder's reasonable
judgment, might be deemed to be an underwriter or a controlling person of the
Client, to participate in the preparation of such registration or comparable
statement and to require the insertion therein of material in form and
substance satisfactory to such Holder and to the Client and furnished to the
Client in writing, which in the reasonable judgment of such Holder and its
counsel should be included.
5.1.11 MANAGEMENT AVAILABILITY. In connection with
under-written offerings, make available appropriate management personnel for
participation in the preparation and drafting of such registration comparable
statement, for due diligence meetings and for "road show" meetings.
5.1.12 STOP ORDERS. Promptly notify Holders of the
Registerable Securities of the threat of issuance by the SEC of any stop
order suspending the effectiveness
<PAGE>
of the registration statement or the initiation of any proceeding for that
purpose, and make every reasonable effort to prevent the entry of any order
suspending the effectiveness of the registration statement. In the event of
the issuance of any stop order suspending the effectiveness of a registration
statement, or of any order suspending or preventing the use of any related
prospectus or suspending the qualification of any Registerable Securities
included in such registration statement for sale in any jurisdiction, the
Client will use its reasonable best efforts promptly to obtain the withdrawal
of such order.
5.1.13 OPINIONS. At each closing of an under-written
offering, request opinions of counsel to the Client and updates thereof
(which opinions and updates shall be reasonably satisfactory to the
underwriters of the Registerable Securities being sold) addressed to the
underwriters covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by such Holders or their counsel.
5.1.14 COMFORT LETTER. Obtain a cold comfort letter and
related bring down letters from the Client's independent public accountants
addressed to the selling Holders of Registerable Securities in customary form
and covering such matters of the type customarily covered by cold comfort
letters as the Holders of a majority of the Registerable Securities being
sold reasonably request.
5.2 FURTHER INFORMATION. The Client may require each Holder of
Registerable Securities to furnish to the Client in writing such information
regarding the proposed distribution by such Holder of such Registerable
Securities as the Client may from time to time reasonably request.
5.3 NOTICE TO SUSPEND OFFERS AND SALES. Each Investor severally agrees
that, upon receipt of any notice from the Client of the happening of any
event of the kind described in Sections 5.1.5 or 5.1.12 hereof, such Investor
will forthwith discontinue disposition of shares of Common Stock pursuant to
a registration hereunder until receipt of the copies of an appropriate
supplement or amendment to the prospectus under Section 5.1.5 or until the
withdrawal of such order under Section 5.1.12.
5.4 REFERENCE TO HOLDERS. If any such registration or comparable
statement refers to any Holder by name or otherwise as the holder of any
securities of the Client and if, in the Holder's reasonable judgement, such
Holder is or might be deemed to be a controlling person of the Client, such
Holder shall have the right to require (a) the insertion therein of language
in form and substance satisfactory to such Holder and the Client and
presented to the Client in writing, to the effect that the holding by such
Holder of such securities is not to be construed as a recommendation by such
Holder of the investment quality of the Client's securities covered thereby
and that such holdings does not imply that such Holder will assist in meeting
any future financial requirements of the Client, or (b) in the event that
such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar Federal statute then in force, the deletion of
the reference to such Holder, PROVIDE that with respect to this clause (b)
such Holder shall furnish to the Client an opinion of
<PAGE>
counsel to such effect, which opinion and counsel shall be reasonably
satisfactory to the Client.
5.5 CLIENT'S ABILITY TO POSTPONE. Notwithstanding anything to the
contrary contained herein, the Client shall have the right twice in any
twelve month period to postpone the filing of any registration statement
under Sections 3 or 4 hereof or any amendment or supplement thereto for a
reasonable period of time (all such postponements not exceeding 90 days in
the aggregate in any twelve month period) if the Client furnishes the Holders
of Registerable Securities a certificate signed by the Chairman of the Board
of Directors or the President of the Client stating that, in its good faith
judgment, the Client's Board of Directors (or the executive committee thereoO
has determined that effecting the registration at such time would materially
and adversely affect a material financing, acquisition, disposition of assets
or stock, merger or other comparable transaction, or would require the Client
to make public disclosure of information the public disclosure of which would
have a material adverse effect upon the Client.
Section 6. REGISTRATION EXPENSES.
6.1 EXPENSE BORNE BY CLIENT. Except as specifically otherwise
provided in Section 6.2 hereof, the Client will be responsible for payment of
all expenses incident to any registration hereunder, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger and delivery
expenses, road show expenses, advertising expenses and fees and disbursements
of counsel for the Client and all independent certified public accountants
and other Persons retained by the Client in connection with such registration
(all such expenses borne by the Client being herein called the "Registration
Expenses").
6.2 EXPENSE BORNE BY SELLING SECURITYHOLDERS. The selling
securityholders will be responsible for payment of their own legal fees (if
they retain legal counsel separate from that of the Client), underwriting
fees and brokerage discounts, commissions and other sales expenses incident
to any registration hereunder, with any such expenses which are common to the
selling securityholders divided among such securityholders (including the
Client and holders of the Client's securities other than Registerable
Securities, to the extent that securities are being registered on behalf of
such Persons) pro rata on the basis of the number of shares being registered
on behalf of each such securityholder, or as such securityholders may
otherwise agree.
Section 7. INDEMNIFICATION SECTION.
7.1 INDEMNIFICATION BY CLIENT. The Client agrees to indemnify, to
the fullest extent permitted by law, each Holder of Registerable Securities
and each Person who controls (within the meaning of the Securities Act) such
Holder against all loses, claims, damages, liabilities and expenses in
connection with defending against any such losses, claims, damages and
liabilities or in connection with any investigation or inquiry, in each case
caused by or based on any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus
or any amendment thereof
<PAGE>
counsel to such effect, which opinion and counsel shall be reasonably
satisfactory to the Client.
5.5 CLIENT'S ABILITY TO POSTPONE. Notwithstanding anything to the
contrary contained herein, the Client shall have the right twice in any
twelve month period to postpone the filing of any registration statement
under Sections 3 or 4 hereof or any amendment or supplement thereto for a
reasonable period of time (all such postponements not exceeding 90 days in
the aggregate in any twelve month period) if the Client furnishes the Holders
of Registerable Securities a certificate signed by the Chairman of the Board
of Directors or the President of the Client stating that, in its good faith
Judgment, the Client's Board of Directors (or the executive committee
thereof) has determined that effecting the registration at such time would
materially and adversely affect a material financing, acquisition,
disposition of assets or stock, merger or other comparable transaction, or
would require the Client to make public disclosure of information the public
disclosure of which would have a material adverse effect upon the Client.
Section 6. REGISTRATION EXPENSES.
6.1 EXPENSE BORNE BY CLIENT. Except as specifically otherwise
provided in Section 6.2 hereof, the Client will be responsible for payment of
all expenses incident to any registration hereunder, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger and delivery
expenses, road show expenses, advertising expenses and fees and disbursements
of counsel for the Client and all independent certified public accountants
and other Persons retained by the Client in connection with such registration
(all such expenses borne by the Client being herein called the "Registration
Expenses").
6.2 EXPENSE BORNE BY SELLING SECURITYHOLDERS. The selling
securityholders will be responsible for payment of their own legal fees (if
they retain legal counsel separate from that of the Client), underwriting
fees and brokerage discounts, commissions and other sales expenses incident
to any registration hereunder, with any such expenses which are common to the
selling securityholders divided among such securityholders (including the
Client and holders of the Client's securities other than Registerable
Securities, to the extent that securities are being registered on behalf of
such Persons) pro rata on the basis of the number of shares being registered
on behalf of each such securityholder, or as such securityholders may
otherwise agree.
Section 7. INDEMNIFICATION -SECTION.
7.1 INDEMNIFICATION BY CLIENT. The Client agrees to indemnify, to
the fullest extent permitted by law, each Holder of Registerable Securities
and each Person who controls (within the meaning of the Securities Act) such
Holder against all loses, claims, damages, liabilities and expenses in
connection with defending against any such losses, claims, DAMAGES and
liabilities or in connection with any investigation or inquiry, in each case
caused by or based on any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus
or any amendment thereof
<PAGE>
or supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or arise out of any violation by the Client of any rules or
regulation promulgated under the Securities Act applicable to the Client and
relating to action or inaction required of the Client in connection with such
registration, except insofar as the same are (1) contained in any information
furnished in writing to the Client by such Holder expressly for use therein,
(ii) caused by such Holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto, or (iii)
caused by such Holder's failure to discontinue disposition of shares after
receiving notice from the Client pursuant to Section 5.3 hereof In connection
with an underwritten offering, the Client will indemnify such underwriters,
their officers and directors and each Person who controls (within the meaning
of the Securities Act) such underwriters at least to the same extent as
provided above with respect to the indemnification of the Holders of
Registerable Securities.
7.2 INDEMNIFICATION BY HOLDER. In connection with any registration
statement in which a Holder of Registerable Securities is participating, each
such Holder will furnish to the Client in writing such information as the
Client reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify
the Client, its directors and officers and each Person who controls (within
the meaning of the Securities Act) the Client against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
but only to the extent that such untrue statement or omission is contained in
any information so furnished in writing by such Holder expressly for use in
connection with such registration; provided that the obligation to indemnify
will be individual to each Holder and will be limited to the net amount of
proceeds received by such Holder from the sale of Registerable Securities
pursuant to such registration statement. In connection with an underwritten
offering, each such Holder will indemnify such underwriters, their officers
and directors and each Person who controls (within the meaning of the
Securities Act) such underwriters at least to the same extent as provided
above with respect to the indemnification of the Client.
7.3 ASSUMPTION OF DEFENSE BY INDEMNIFYING PARTY. Any Person
entitled to indemnification hereunder will (a) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks
indemnification and (b) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably satisfactory to
the indemnified party. If such defense is assumed, the indemnifying party
will not be subject to any liability for anv settlement made by the
indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim. unless in the reasonable
judgment of any indemnified party a conflict of interest may
<PAGE>
exist between such indemnified party and any other of such indemnified
parties with respect to such claim.
7.4 BINDING EFFECT. The indemnification provided for under this
Registration Rights Agreement will remain in full force and effect regardless
of any investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and will
survive the transfer of securities. The Client also agrees to make such
provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event the Client's indemnification is
unavailable for any reason. Each Holder or Registerable Securities also
agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event such Holder's
indemnification is unavailable for any reason.
Section 8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person-s securities on the basis provided in
any underwriting arrangements approved by the Person or Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
Section 9. MISCELLANEOUS.
9.1 NO INCONSISTENT AGREEMENTS. The Client will not hereafter enter
into any agreement with respect to its securities, which violates the rights
granted to the Holders of Registerable Securities in this Registration Rights
Agreement.
9.2 REMEDIES. Any Person having rights under any provision of this
Registration Rights Agreement will be entitled to enforce such rights
specifically to recover damages caused by reason of any breach of any
provision of this Registration Rights Agreement and to exercise all other
rights granted by law. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provision of this
Registration Rights Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without
posting any bond or other security) for specific performance and for other
injunctive relief in order to enforce or prevent violation of the provisions
of this Registration Rights Agreement.
9.3 TERM. Except for the provisions of Section 7 or as specifically
otherwise provided herein, the provisions of this Registration Rights
Agreement shall apply until such time as all Registerable Securities have
ceased to be Registerable Securities hereunder but in
<PAGE>
no event later than three years from the date of this Registration Rights
Agreement.
9.4 AMENDMENTS AND WAIVERS. Except as otherwise specifically
provided herein, this Registration Rights Agreement may be amended or waived
only upon the prior written consent of the Client and of the Holders of a
majority of the then outstanding shares of Registerable Securities
9.5 SUCCESSORS AND ASSIGNS. Subject to Section 2 hereof, all
covenants and agreements in this Registration Rights Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of (i)
the respective successors and assigns of the parties hereto whether so
expressed or not and (ii) the persons referred to in clause (iv) of the
definition of Registerable Securities. In addition, whether or not any
express assignment has been made but subject in any case to Section 2 hereof,
the provisions of this Registration Rights Agreement which are for the
benefit of NHOB or Holders of Registerable Securities are also for the
benefit of, and enforceable by, any subsequent holder of such securities so
long as such securities continue to be restricted securities, as that term is
defined in Securities Act Rule 144.
9.6 SEVERABILITY. Whenever possible, each provision of this
Registration Rights Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Registration Rights Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this
Registration Rights Agreement.
9.7 COUNTERPARTS. This Registration Rights Agreement may be
executed simultaneously in multiple counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts
taken together will constitute one and the same Registration Rights Agreement.
9.8 DESCRIPTIVE HEADINGS. The descriptive headings of this
Registration Rights Agreement are inserted for convenience only and do not
constitute a part of this Registration Rights Agreement.
9.9 GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Registration Rights Agreement will be
governed by and construed in accordance with the domestic laws of the State
of Florida, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Florida or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than
the State of Florida.
9.10 ENTIRE AGREEMENT. This Registration Rights Agreement is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding
of the parties hereto with respect of the subject matter contained herein.
This Registration Rights Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
<PAGE>
9.11 NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Registration
Rights Agreement shall be in writing and shall be deemed to have been given
when delivered personally to the recipient, sent to the recipient by
facsimile transmission, sent to the recipient by reputable express courier
service (charges prepaid) or three business days after being mailed to the
recipient by certified or registered mail, return receipt requested and
postage prepaid. Such notices, demands and other communications will be sent
to each Holder at the address indicated on the records of the Client and to
the Client at the address set forth in the Agreement or to such other address
or to the attention of such other person as the recipient party has specified
by prior written notice to the sending party.
9.12 CONFIDENTIALITY. The Client shall hold in strict confidence
and shall not disclose information with respect to sales of Common Stock by
any Holder, including the fact of such sales, the amount of such sales and
the timing of such sales, except as such information shall become public
without violation of this Section 9.12, as may be required by applicable law,
rules or regulations or with the express written consent of such Investor.
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written,
Ultimate Sports Entertainment Inc.
By: /s/ Frederick R. Licht
Frederick R. Licht, President
NOBLE HOUSE OF BOSTON, INC.
By: /s/ Douglas Carley
Douglas Carley, President
<PAGE>
Ultimate Sports Entertainment, Inc.
2444 Wilshire Blvd, Suite 414
Santa Monica, CA 90404
Telephone: (310) 829-9590
October 20, 1999
Mr. Michael Lauer
Lancer Partners LP
375 Park Avenue
NewYork, N.Y. 10152
Dear Mr. Lauer:
This letter set forth the terms of the loan transaction discussed with
you by Martin J. Burke, III.
Lender: Lancer Partners LP or its designee.
Borrower: Ultimate Sports Entertainment, Inc (the "Company").
Amount of loan: $600,000
Maturity date: 4 months from date of advance.
Interest: 10% per annum, payable at maturity.
Addition compensation
for making loan: The Company will issue to you without any cost to the
Lender 250,000 shares of common stock of the Company.
The Company will agree to use its best efforts to
include these shares in the next registration statement
filed by the Company with the Securities Exchange
Commission.
Special default right: In the event the Company fails to repay the loan,
together with interest accrued thereon, by its maturity
date and such failure continues for a period of 15
days, then Lender shall receive without any cost to the
Lender 250,000 additional shares for each 80 day period
that such, loan remains unpaid following maturity date.
Convertibility: The Lender has the right at any time prior to receiving
repayment of the loan to convert the loan into shares
of common stock of the Company at $1.00 per share.
<PAGE>
Mr. Michael Lauer
October 2O, 1999
Page 2.
Special options: To the extent that the loan (or additional loans made
by the Lender up to an aggregate of $1,500,000) is
converted into stock pursuant to the foregoing
conversion right, Lender shall have the option to
purchase aggregately from Jay Botchman, Martin J.
Burke, III and Frederick R. Licht at 10 cents per
share, such number of shares as equals one share for
each $3 of loan principal being so converted, but in no
event shall this option relate to more than 500,000
shares. This option, if exercised, shall be exercised
in such a manner so that Messrs. Botchman, Burke and
Licht each deliver one-third of the amount of shares
subject to the exercise of the option. Jay Botchman,
Martin J. Burke, III and Frederick R. Licht affix their
signatures below for the purpose of confirming the
grant of this special option.
If the above accurately reflects the terms of the loan transaction
agreed to between you and Martin J. Burke, III please sign below to indicate
your agreement thereto.
Very truly yours,
Ultimate Sports Entertainment, Inc.
By: /s/Frederick R. Licht
----------------------------
Frederick R. Licht,
President
The above is confirmed and agreed to:
Lancer Partners LP
By:
Michael Lauer
Agreed to with respect to the special option referred to above.
Jay Botchman
Martin Burke
/s/ Frederick R. Licht
- ----------------------
Frederick R. Licht
<PAGE>
EXHIBIT 10.17
ULTIMATE SPORTS ENTERTAINMENT, INC.
STOCK OPTION PLAN
ARTICLE 1.
GENERAL PROVISIONS
1.1. PURPOSE OF THE PLAN
This Stock Option Plan (the "Plan") is intended to promote the
interests of Ultimate Sports Entertainment, Inc., a Delaware corporation,
(the "Corporation") by providing eligible persons with the opportunity to
acquire or increase their proprietary interest in the Corporation as an
incentive for them to remain in the Service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
1.2. ADMINISTRATION OF THE PLAN
a. Prior to the Section 12(g) Registration Date, the Plan
shall be administered by the Board or a committee of the Board.
b. Beginning with the Section 12(g) Registration Date, the
Primary Committee shall have sole and exclusive authority to administer the
Plan with respect to Section 16 Insiders. Administration of the Plan with
respect to all other persons eligible under the Plan may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee, or
the Board may retain the power to administer the Plan with respect to all
such persons.
c. Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and
may be removed by the Board at any time. The Board may also terminate the
functions of any Secondary Committee at any time and reassume all powers and
authority previously delegated to such committee.
d. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Plan and to make such determinations under, and issue
such interpretations of, the provisions of the Plan and any outstanding
options thereunder as it may deem necessary or advisable. Decisions of the
Plan Administrator within the scope of its administrative functions under the
Plan shall be final and binding on all parties who have an interest in the
Plan under its jurisdiction or any option thereunder.
e. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each
such committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such
<PAGE>
committee. No member of the Primary Committee or the Secondary Committee
shall be liable for any act or omission made in good faith with respect to
the Plan or any option grants under the Plan.
f. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to
the provisions of the Plan) to determine which eligible persons are to
receive option grants, the time or times when such option grants are to be
made, the number of shares to be covered by each such grant, the status of
the granted option as either an Incentive Option or a Non-Statutory Option,
the time or times at which each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares, the acceleration of such
vesting schedule, the maximum term for which the option is to remain
outstanding, whether the option shares shall be subject to rights of
repurchase and/or rights of first refusal, and all other terms and conditions
of the option grants.
1.3. ELIGIBILITY
The following persons shall be eligible to participate in the Plan:
a. Employees, as to both Incentive and/or Non-Statutory
Options,
b. non-employee members of the Board or the board of
directors of any Parent or Subsidiary as to Non-Statutory Options, and
c. consultants and other independent advisors who provide
Services to the Corporation or any Parent or Subsidiary, as to Non-Statutory
Options.
1.4. STOCK SUBJECT TO THE PLAN
a. The stock issuable under the Plan shall be shares of
authorized but unissued Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed one million
(1,000,000) shares, which number of shares may be changed from time to time
in accordance with Section 3.4 below.
b. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent the
options expire or terminate for any reason prior to exercise in full.
However, should the Exercise Price be paid with shares of Common Stock or
should shares of Common Stock otherwise issuable under the Plan be withheld
by the Corporation in satisfaction of the withholding taxes incurred in
connection with the exercise of an option under the Plan, then the number of
shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised, and not by
the net number of shares of Common Stock issued to the holder of such option.
<PAGE>
c. Should any change be made to the Common Stock by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as
a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of
securities for which any one person may be granted options per calendar year,
and (iii) the number and/or class of securities and the Exercise Price in
effect under each outstanding option in order to prevent the dilution or
enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding, and conclusive.
ARTICLE 2.
OPTION GRANT PROGRAM
2.l. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document
evidencing an Incentive Option shall, in addition, be subject to the
provisions of Section 2.2 of the Plan, below.
a. Exercise Price
(1) The Exercise Price shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the Grant Date.
(2) The Exercise Price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Article
3. 1, and the documents evidencing the option, be payable in one or more of
the forms specified below:
(a) cash or check made payable to the Corporation,
(b) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date, or
(c) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation designated brokerage firm to effect the
immediate sale of the Purchased Shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the Purchased Shares plus all
applicable federal, state and local income and employment taxes required to
be withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the Purchased Shares directly to
such brokerage firm in order to complete the sale.
<PAGE>
Except to the extent the sale and remittance procedure
is utilized, payment of the Exercise Price for the Purchased Shares must be
made on the Exercise Date.
b. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in
excess of ten (10) years measured from the Grant Date.
c. Effect of Termination of Service
(1) The following provisions shall govern the exercise
of any options held by the Optionee at the time of cessation of Service:
(a) Any option outstanding at the time of the
Optionee's cessation of Service for any reason except death,
Permanent Disability or Misconduct shall remain exercisable for a
three (3) month period thereafter, provided no option shall be
exercisable after the Expiration Date.
(b) Any option outstanding at the time of the
Optionee's cessation of Service due to death or Permanent Disability
shall remain exercisable for a twelve (12) month period thereafter,
provided no option shall be exercisable after the Expiration Date.
Subject to the foregoing, any option exercisable in whole or in part
by the Optionee at the time of death may be exercised subsequently by
the personal representative of the Optionee's estate or by the person
or persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
(c) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(d) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more
than the number of shares for which the option is exercisable on the
date of the Optionee's cessation of Service; the option shall,
immediately upon the Optionee's cessation of Service, terminate and
cease to be outstanding to the extent the option is not otherwise at
that time exercisable. Upon the expiration of the applicable exercise
period or (if earlier) upon the Expiration Date, the option shall
terminate and cease to be outstanding for any shares for which the
option has not been exercised.
(2) The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(a) extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of
Service from the period otherwise in
<PAGE>
effect for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the
Expiration Date, and/or
(b) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to
the number of shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but
also with respect to one or more additional shares that would have
vested under the option had the Optionee continued in Service.
d. Stockholder Rights. The holder of an option shall have
no stockholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the Exercise Price, and
become a holder of record of the Purchased Shares.
e. Limited Transferability of Options. During the lifetime
of the Optionee, Incentive Options may be exercised only by the Optionee, and
shall not be assignable or transferable except by will or the laws of descent
and distribution following the Optionee's death. Non-Statutory Options may be
assigned or transferred in whole or in part only (i) during the Optionee's
lifetime if in connection with the Optionee's estate plan to one or more
members of the Optionee's immediate family (spouse and children) or to a
trust established exclusively for the benefit of one or more such immediate
family members, or (ii) by will or the laws of descent and distribution
following the Optionee's death. The assigned portion may only be exercised by
the person or persons who acquire a proprietary interest in the option
pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
2.2. INCENTIVE OPTIONS
The terms specified below shall apply to all Incentive Options.
Except as modified by the provisions of this Section 2.2, all the provisions
of this Plan shall apply to Incentive Options. Options specifically
designated as Non-Statutory Options when issued under the Plan shall NOT be
subject to the terms of this Section 2.2.
a. Eligibility. Incentive Options may only be granted to
Employees.
b. Exercise Price. The Exercise Price shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the Grant Date.
c. Dollar Limitation. The aggregate Fair Market Value of
the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or Subsidiary) may
for the first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the
<PAGE>
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied in the
order in which such options are granted.
d. 10% Stockholder. If an Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the Exercise Price shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share
of Common Stock on the Grant Date, and the option term shall not exceed five
(5) years measured from the Grant Date.
e. Holding Period. Shares purchased pursuant to an option
shall cease to qualify for favorable tax treatment as Incentive Option Shares
if and to the extent Optionee disposes of such shares within two (2) years of
the Grant Date or within one (1) year of Optionee's purchase of said shares.
2.3. CORPORATE TRANSACTION/CHANGE IN CONTROL
a. In the event of any Corporate Transaction, the Board of
Directors shall have the sole discretion to elect that each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. The Board may exercise its discretion to
accelerate the vesting of options whether or not (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation or Parent thereof or to be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation
or Parent thereof, (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing on
the unvested option shares at the time of the Corporate Transaction and
provides for subsequent payout in accordance with the same vesting schedule
applicable to such option, except to the extent that the acceleration of such
option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, whose determination
shall be final, binding and conclusive.
b. In the event of any Corporate Transaction, the Board of
Directors shall have sole discretion to elect that all outstanding repurchase
rights may also be terminated automatically whether or not those repurchase
rights are to be assigned to the successor corporation (or Parent thereof) in
connection with such Corporate Transaction.
c. The Plan Administrator's discretion under Sections
2.3.a. and b. above shall be exercisable either at the time the option is
granted or at any time while the option remains outstanding, whether or not
those options are to be assumed or replaced (or those repurchase rights are
to be assigned) in the Corporate Transaction. The Plan Administrator shall
also have the discretion to grant options which do not accelerate whether or
not such options are assumed (and to provide for repurchase rights that do
not terminate whether or not such rights are assigned) in connection with a
Corporate Transaction.
<PAGE>
d. If the Board of Directors elects the automatic
acceleration of some or all of the outstanding options upon the occurrence of
a Corporate Transaction, all such outstanding options shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof) immediately following the consummation of the
Corporate Transaction.
e. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities that
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan following the
consummation of such Corporate Transaction, (ii) the exercise price payable
per share under each outstanding option, provided the aggregate exercise
price payable for such securities shall remain the same and (iii) the maximum
number of securities and/or class of securities for which any one person may
be granted stock options.
f. The Plan Administrator shall have the discretion,
exercisable at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration of any options
assumed or replaced in a Corporate Transaction that do not otherwise
accelerate at that time (and the termination of any of the Corporation's
outstanding repurchase rights that do not otherwise terminate at the time of
the Corporate Transaction) in the event the Optionee's Service should
subsequently terminate by reason of an Involuntary Termination within
eighteen (18) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (l)-year period measured from the effective date of the
Involuntary Termination.
g. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of
one or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights) upon the occurrence of a Change in Control or
(ii) condition any such option acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent Involuntary Termination of
the Optionee's Service within a specified period (not to exceed eighteen (18)
months) following the effective date of such Change in Control. Any options
accelerated in connection with a Change in Control shall remain fully
exercisable until the expiration or sooner termination of the option term.
h. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent
such dollar limitation is exceeded, the accelerated portion of such option
shall be exercisable as a Non-Statutory Option under the federal tax laws.
i. The grant of options under the Plan shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure
<PAGE>
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
ARTICLE 3.
MISCELLANEOUS
3.1. FINANCING
a. The Plan Administrator may permit any Optionee to pay
the option Exercise Price by delivering a promissory note payable in one or
more installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Promissory notes may be authorized with
or without security or collateral. In all events, the maximum credit
available to the Optionee may not exceed the sum of (i) the aggregate option
Exercise Price payable for the Purchased Shares plus (ii) the amount of any
federal, state and local income and employment tax liability incurred by the
Optionee in connection with the option exercise.
b. The Plan Administrator may, in its discretion, determine
that one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
3.2. TAX WITHHOLDING
a. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements.
b. The Plan Administrator may, in its discretion, provide
any or all holders of Non-Statutory Options under the Plan with the right to
use shares of Common Stock in satisfaction of all or part of the Taxes
incurred by such holders in connection with the exercise of their options.
Such right may be provided to any such holder in either or both of the
following formats:
(1) Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such Non- Statutory Option, a portion of
those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
(2) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised, one or
more shares of Common Stock previously acquired by such holder (other
than in connection with the option exercise triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
<PAGE>
3.3. EFFECTIVE DATE AND TERM OF THE PLAN
a. The Plan shall become effective on the Plan Effective
Date. However, no shares shall be issued under the Plan pursuant to Incentive
Options until the Plan is approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the Plan
Effective Date, then all Incentive Options previously granted under this Plan
shall automatically convert into Non-Statutory Options.
b. The Plan shall terminate upon the earliest of (i)
December 31, 2009, (ii) the date on which all shares available for issuance
under the Plan shall have been issued, or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all outstanding options shall continue to have force and
effect in accordance with the provisions of the documents evidencing such
options.
3.4. AMENDMENT OF THE PLAN
a. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no
such amendment or modification shall adversely affect any rights and
obligations with respect to options at the time outstanding under the Plan
unless each affected Optionee consents to such amendment or modification. In
addition, amendments to the Plan shall be subject to approval of the
Corporation's stockholders to the extent required by applicable laws or
regulations.
b. Options to purchase shares of Common Stock may be
granted under the Plan that are in each instance in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued are held in escrow until there is obtained Board approval
(and shareholder approval if required by applicable laws or regulations) of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan.
3.5. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
3.6. REGULATORY APPROVALS
a. The implementation of the Plan, the granting of any
option under the Plan, and the issuance of any shares of Common Stock upon
the exercise of any option shall be subject to the Corporation's obtaining
all approvals and permits required by regulatory authorities having
jurisdiction over the Plan and the options granted under it, and the shares
of Common Stock issued pursuant to the Plan.
b. No shares of Common Stock shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of federal and
<PAGE>
state securities laws and all applicable listing requirements of any stock
exchange (or the Nasdaq market, if applicable) on which Common Stock is then
listed for trading.
3.7. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which
rights are hereby expressly reserved by each, to terminate such person's
Service at any time for any reason, with or without cause.
IN WITNESS WHEREOF the Corporation has executed this Plan effective
as of the Effective Date.
Ultimate Sports Entertainment, Inc.
By: /s/ Frederick R. Licht, President
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan and the
Plan Documents:
1. Board shall mean the Corporation's Board of Directors.
2. Change in Control shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:
a. the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation), of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders, which the Board does not recommend such
stockholders to accept, or
b. a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (i) have been Board
members continuously since the beginning of such period or (ii) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (i) who were still
in office at the time the Board approved such election or nomination.
3. Code shall mean the Internal Revenue Code of 1986, as amended.
4. Common Stock shall mean the Corporation's common stock.
5. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
a. a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction; or
b. the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
6. Eligible Director shall mean a non-employee Board member eligible
to participate in the Plan.
<PAGE>
7. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
8. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
9. Exercise Price shall mean the exercise price per share as
specified in the Stock Option Grant.
10. Expiration Date shall mean the date on which the option expires
as specified in the Stock Option Grant.
11. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
a. If the Common Stock is traded at the time on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists.
b. If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.
c. If the Common Stock is not listed on any Stock Exchange nor
traded on the Nasdaq National Market, then the Fair Market Value shall be
determined by the Plan Administrator after taking into account such factors
as the Plan Administrator shall deem appropriate.
d. In all instances the determination of Fair Market Value
shall be made in accordance with Regulation Sections 1.421-7(e)(2) and
20.2031-2(f)(2) as promulgated under Sections 421 and 2031 of the Code, as
then in effect.
12. Grant Date shall mean the date on which the option is granted to
Optionee as specified in the Stock Option Grant.
13. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
<PAGE>
14. Involuntary Termination shall mean the termination of the
Service of any individual which occurs by reason of:
a. such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
b. such individual's voluntary resignation following (i) a
change in his or her position with the Corporation which materially reduces
his or her level of responsibility, (ii) a reduction in his or her level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than fifteen
percent (15 %) or (iii) a relocation of such individual's place of employment
by more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's consent.
15. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds
for the dismissal or discharge of any Optionee or other person in the Service
of the Corporation (or any Parent or Subsidiary).
16. 1933 Act shall mean the Securities Act of 1933, as amended.
17. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
18. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
19. Optionee shall mean any person to whom an option is granted
under Plan.
20. Option Shares shall mean the number of shares of Common Stock
subject to the option as specified in the Stock Option Grant.
21. Owner shall mean Optionee and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Optionee.
22. Parent shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided
each corporation in the unbroken chain (other than the Corporation) owns, at
the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one or the
other corporations in such chain.
<PAGE>
23. Permanent Disability or Permanently Disabled shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
24. Permitted Transfer shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Optionee's will or the laws of
intestate succession following Optionee's death, or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness
incurred by Optionee in connection with the acquisition of the Purchased
Shares.
25. Plan Administrator shall mean the particular entity, whether the
Board or a committee of the Board, which is authorized to administer the Plan
with respect to one or more classes of eligible persons, to the extent such
entity is carrying out its administrative functions under the Plan with
respect to the persons under its jurisdiction.
26. Plan Documents shall mean the Plan, the Stock Option Grant, and
Stock Option Exercise Notice and Purchase Agreement, collectively.
27. Plan Effective Date shall mean January 11, 2000, the date as of
which the Plan was adopted by the Board.
28. Primary Committee shall mean the committee of two (2) or more
non-employee Board members (as defined in the regulations to Section 16 of
the 1934 Act) appointed by the Board to administer the Plan with respect to
Section 16 Insiders.
29. Purchased Shares shall mean the shares purchased upon exercise
of the Option.
30. Recapitalization shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other charge
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
31. Reorganization shall mean any of the following transactions:
a. a merger or consolidation in which the Corporation is not
the surviving entity;
b. a sale, transfer, or other disposition of all or
substantially all of the Corporation's assets;
c. a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger; or
<PAGE>
d. any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
32. SEC shall mean the Securities Exchange Commission.
33. Secondary Committee shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Plan with respect to
eligible persons other than Section 16 Insiders.
34. Section 12(g) Registration Date shall mean the date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.
35. Section 16 Insider shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of
the 1934 Act.
36. Service shall mean the performance of services to the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the option grant.
37. Stock Exchange shall mean either the American Stock Exchange,
the New York Stock Exchange, or another regional stock exchange.
38. Stock Option Exercise Notice and Purchase Agreement shall mean
the agreement of said title in substantially the form of Exhibit A to the
Stock Option Grant, pursuant to which Optionee gives notice of his intent to
exercise the option and purchase Shares.
39. Stock Option Grant shall mean the Stock Option Grant document,
pursuant to which Optionee has been informed of the basic terms of the option
granted under the Plan.
40. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
41. Taxes shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options in
connection with the exercise of those options.
42. 10% Stockholder shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).
<PAGE>
EXHIBIT 10.18
Grant No. _________
ULTIMATE SPORTS ENTERTAINMENT, INC.
STOCK OPTION GRANT
Optionee: __________________________________________________________
Address: ___________________________________________________________
Grant Date: ________________________________________________________
Exercise Price: $__________ per share
Number of Option Shares: __________ shares
Expiration Date: _____________________________________________________
Type of Option: _____ Incentive Option _____ Non-Statutory Option
This Stock Option Grant is made, as of the Grant Date set forth above, by
and between Ultimate Sports Entertainment, Inc., a Delaware corporation (the
"Corporation") and the Optionee named above. This Stock Option Grant includes
the terms of the Stock Option Exercise Notice and Purchase Agreement attached
hereto as Exhibit A, and is subject to the terms of the Corporation's Stock
Option Plan (the "Plan"), a copy of which is attached hereto as Exhibit B. All
capitalized terms not defined herein shall have the meaning set forth in the
Appendix to the Plan.
1. Grant of Option. The Corporation hereby grants to Optionee named above,
as of the Grant Date, an option to purchase up to the total number of Option
Shares specified above. The Option Shares shall be purchasable from time to time
during the option term specified in paragraph 2 below at the Exercise Price.
2. Option Term. The option term shall be measured from the Grant Date and
shall accordingly expire at the close of business on the Expiration Date
specified above, unless sooner terminated in accordance with paragraph 5 below.
3. Limited Transferability. This option shall be neither transferable nor
assignable, in whole or in part, by Optionee other than by will or by the laws
of descent and distribution following Optionee's death and may be exercised,
during Optionee's lifetime, only by Optionee. However, if this option is
designated a Non-Statutory Option above, then this option may also, in
connection with Optionee's estate plan, be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's immediate family
(spouse or children) or to a trust established exclusively for the benefit of
one or more such immediate family members. Optionee
<PAGE>
shall give written notice of any such assignment during Optionee's lifetime to
the Corporation within 20 days of assignment. The assigned portion may only be
exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for this option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
4. Exercisability. This option shall become vested or exercisable for the
Option Shares in installments as provided in the Exercise Schedule below:
[EXERCISE SCHEDULE]
For purposes of calculating the number of months since grant only full
complete calendar months from the first of said month until the end of said
month will be counted. For example, if the grant was issued on June 18th, the
remaining days in the month of June would be disregarded and a full calendar
month would not accrue until July 31st. If the grant was issued on June 1st a
full calendar month would accrue on June 30th.
If the Optionee is terminated by the actions of the Corporation, except for
Misconduct, at any time before he has obtained an accumulated exercisable
percentage of 100% then, upon such termination, he shall be deemed to have
obtained the next exercisable percentage upon such termination. For example, if
the Optionee has worked twenty-two months after the grant of option and the
Optionee is then terminated by the Corporation without cause, the Optionee, upon
such termination, will obtain an additional fifteen percent (15 %) of
exercisable percent as if he had worked twenty-seven (27) months after the grant
of the Option.
As the option becomes exercisable or vested for such installments, those
installments shall accumulate and the option shall remain exercisable for the
accumulated installments until the Expiration Date or sooner termination of the
option term under paragraph 5 below. The exercisable installments may be
exercised in whole or in part, but only as to whole shares.
5. Cessation of Service. The option term specified in paragraph 2 above
shall terminate, and this option shall cease to be outstanding prior to the
Expiration Date, upon Optionee's ceasing to be in the Service of the
Corporation. In such event, the following provisions shall apply:
a. Should Optionee cease to remain in Service for any reason (other
than death, Permanent Disability or Misconduct) while this option is
outstanding, then Optionee shall have a period of three (3) months (commencing
with the date of such cessation of Service) during which to exercise this option
as to vested Option Shares.
b. Should Optionee die while this option is outstanding, then personal
representative of Optionee's estate (or the person or persons to whom the option
is transferred pursuant to Optionee's will or in accordance with the laws of
descent and distribution) shall have a
<PAGE>
period of twelve (12) months (commencing with the date of such cessation of
service) during which to exercise this option as to vested Option Shares.
c. Should Optionee cease Service by reason of Permanent Disability
while this option is outstanding, then Optionee shall have a period of twelve
(12) months (commencing with the date of such cessation of Service) during which
to exercise this option as to vested Option Shares.
d. Should Optionee's Service be terminated for Misconduct, then this
option shall terminate immediately and cease to remain outstanding.
e. During the limited post-Service exercise period, this option may
not be exercised in the aggregate for more than the number of vested Option
Shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of such limited post-Service exercise
period or upon the Expiration Date (if earlier), this option shall terminate and
cease to be outstanding for any vested Option Shares for which the option has
not been exercised. In no event shall this option be exercisable at any time
after the Expiration Date. To the extent this option is not otherwise
exercisable for vested Option Shares at the time of Optionee's cessation of
Service, this option shall immediately terminate and cease to be outstanding
with respect to those shares.
6. Adjustment in Option Shares. Should any change be made to the Common
Stock by reason of any split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the total number and/or class of securities
subject to this option, and (ii) the Exercise Price, in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.
7. Stockholder Rights. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price, and become a holder of
record of the Purchased Shares.
8. Manner of Exercising Options
a. In order to exercise this option with respect to all or any part of
the Option Shares for which this option is at the time exercisable, Optionee (or
any other person or persons exercising this option) must take the following
actions:
(1) Execute and deliver to the Corporation a Stock Option
Exercise Notice and Purchase Agreement (Exhibit A) for the Option Shares for
which the option is exercised.
(2) Pay the aggregate Exercise Price for the Purchased Shares in
one or more of the following forms:
<PAGE>
(a) Cash or check made payable to the Corporation; or
(b) A promissory note payable to the Corporation, but only
to the extent authorized by the Plan Administrator in accordance
with paragraph 13.
Upon prior written approval of the Plan Administrator, the
Exercise Price may also be paid as follows:
(c) In shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on
the Exercise Date; or
(d) Through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising the
option) shall concurrently provide irrevocable written
instructions (1) to a Corporation- designated brokerage firm to
effect the immediate sale of the Purchased Shares and remit to
the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Exercise
Price payable for the Purchased Shares plus all applicable
federal, state and local income and employment taxes required to
be withheld by the Corporation by reason of such exercise and (2)
to the Corporation to deliver the certificates for the Purchased
Shares directly to such brokerage firm in order to complete the
sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Stock Option. Exercise Notice and Purchase Agreement
delivered to the Corporation in connection with the option exercise.
(3) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.
(4) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to comply
with the applicable requirements of federal and state securities laws.
(5) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction of
all federal, state and local income and employment tax withholding requirements
applicable to the option exercise.
b. As soon as practical after the Exercise Date, the Corporation shall
issue to, or, on behalf of Optionee (or any other person or persons exercising
this option), a share certificate for the Purchased Shares, with the appropriate
legends affixed thereto.
<PAGE>
c. In no event may this option be exercised for any fractional shares.
9. Compliance with Laws and Regulations
a. The exercise of this option and the issuance of the Option Shares
upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or Nasdaq, if applicable) on which
the Common Stock may be listed for trading at the time of such exercise and
issuance.
b. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
10. Successors and Assigns. Except to the extent otherwise provided in
paragraph 3 above, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's permitted assigns and the legal representatives, heirs and
legatees of Optionee's estate.
11. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated on the Stock Option Grant. All notices shall be deemed
effective upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.
12. Financing. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, permit Optionee to pay the Exercise Price for
the purchase Option Shares by delivering a full-recourse promissory note payable
to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.
13. Construction. This Agreement and the option evidenced hereby are made
and granted pursuant to the Plan and are in all respects limited by and subject
to the terms of the Plan and the Stock Option Exercise Notice and Purchase
Agreement. All decisions of the Plan Administrator with respect to any question
or issue arising under the Plan or this Agreement shall be conclusive and
binding on all persons having an interest in this option.
14. Additional Terms Applicable to an Incentive Option. In the event this
option is designated an Incentive Option above, the following terms and
conditions shall also apply to the grant:
<PAGE>
a. This option shall cease to qualify for favorable tax treatment as
an Incentive Option if (and to the extent) this option is exercised for one or
more Option Shares: (1) more than three (3) months after the date Optionee
ceases to be an Employee or in the Service of the Corporation for any reason
other than death or Permanent Disability or (2) more than twelve (12) months
after the date Optionee ceases to be an Employee by reason of death or Permanent
Disability.
b. No installment under this option shall qualify for favorable tax
treatment as an Incentive Option if (and to the extent) the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which such
installment first becomes exercisable hereunder would, when added to the
aggregate value (determined as of the respective date or dates of grant) of any
earlier installments of the Common Stock and any other securities for which this
option or any other Incentive Options granted to Optionee prior to the Grant
Date (whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such One
Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year,
this option shall nevertheless become exercisable for the excess shares in such
calendar year as a Non-Statutory Option.
c. Should the Board elect to accelerate the exercisability of this
option upon a Corporate Transaction, then this option shall qualify as an
Incentive Option only to the extent the aggregate Fair Market Value (determined
at the Grant Date) of the Common Stock for which this option first becomes
exercisable in the calendar year in which the Corporate Transaction occurs does
not, when added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this option or
one or more other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the
calendar year of such Corporate Transaction, the option may nevertheless be
exercised for the excess shares in such calendar year as a Non-Statutory Option.
d. Should Optionee hold, in addition to this option, one or more other
options to purchase Common Stock which become exercisable for the first time in
the same calendar year as this option, then the foregoing limitations on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
e. The grant of this option is subject to approval of the Plan by
Corporation's stockholders within twelve (12) months after the adoption of the
Plan by the Board. In the event that such stockholder approval is not obtained,
then this option shall not qualify as an Incentive Option.
f. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without stockholder
approval be issued under the Plan, then this option shall cease to qualify as an
Incentive Option unless stockholder
<PAGE>
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
g. If Optionee is a 10% Stockholder, then the Exercise Price shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the Grant Date, and the option term shall not exceed
five (5) years measured from the Grant Date.
h. Shares purchased pursuant to this option shall cease to qualify for
favorable tax treatment as Incentive Option shares if and to the extent Optionee
disposes of such shares within two (2) years from the Grant Date or within one
(1) year of Optionee's purchase of said shares.
i. Optionee acknowledges that the rules regarding Incentive Options as
contained in the Internal Revenue Code are subject to amendment in the future.
Optionee should consult his or her tax advisor prior to taking any action with
respect to this option or the shares purchased hereunder.
IN WITNESS WHEREOF, this Agreement is executed as of the Grant Date first
noted above.
Ultimate Sports Entertainment, Inc.
By:
-----------------------------------
Frederick R. Licht, President
<PAGE>
ACKNOWLEDGMENT
Optionee understands and agrees that the option is granted subject to and
in accordance with the terms of the Corporation's Stock Option Plan (the
"Plan"). Optionee further agrees to be bound by the terms of the Plan and the
terms of the option as set forth in this Agreement. Optionee understands that
any Option Shares purchased under the option shall be subject to the terms set
forth in the Stock Option Exercise Notice and Purchase Agreement attached hereto
as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit B, and represents that Optionee has read and
understands the Plan, and accepts this option subject to all terms and
provisions of the Plan and the Plan documents. Optionee hereby agrees to accept
as binding, conclusive and final, all decisions and interpretations of the Board
of Directors upon any questions arising under the Plan. Optionee acknowledges
that there may be adverse tax consequences upon exercise of this option and/or
upon disposition of the Purchased Shares, and that Optionee should consult a tax
advisor prior to such exercise or disposition.
OPTIONEE
------------------------------
Signature
------------------------------
Please Print Name
------------------------------
Date
<PAGE>
EXHIBIT A
FORM OF STOCK OPTION EXERCISE NOTICE AND PURCHASE AGREEMENT
(To be signed only upon exercise of Option)
To: Ultimate Sports Entertainment, Inc.
The undersigned, the owner of the attached Stock Option Grant, hereby
irrevocable elects to exercise the purchase rights represented by the Stock
Option Grant for, and to purchase thereunder, _____________ shares of Common
Stock of Ultimate Sports Entertainment, Inc. Enclosed is payment in the amount
of $_______________ as the exercise price of the Common Stock to be acquired.
Please have the certificate(s) registered in the name of and delivered to the
following address:
Registered Name(s)
---------------------------------
---------------------------------
---------------------------------
Mailing Address
---------------------------------
---------------------------------
---------------------------------
If this exercise does not include all of the Common Stock covered by the
attached Stock Option Grant, please deliver a new Stock Option Grant of like
tenor for the balance of the Common Stock to the undersigned at the foregoing
address.
DATED this ______ day of __________ 200___.
---------------------------------
Signature of Optionee
<PAGE>
SCHEDULE OF NON-QUALIFIED OPTION HOLDERS
<TABLE>
<CAPTION>
Number of Exercise Expiration
Grant No. Name & Address Option Shares Price Date
- --------- -------------- ------------- ----- ----
<S> <C> <C> <C> <C>
1 Michael Lott 10,000 $0.50 1/11/03
7367 Hollywood Blvd. #216
Los Angeles, CA 90046
2 Drew Gitlin 250,000 $0.50 1/11/03
150 N. Anita
Los Angeles, CA 90049
3 Jeff Smith 10,000 $0.50 1/11/03
1520-A Miramar Bch.
Montecito, CA 93108
4 Todd Orlich 10,000 $0.50 1/11/03
411 West End Ave.
Apt. 5-D
New York, NY 10024
5 Dave Schwarz 7,500 $0.50 1/11/03
3 Jagger
Melville, NY 11747
6 Karen Reed 5,000 $0.50 1/11/03
2120 Colorado
4th Floor
Santa Monica, CA 90404
7 Patti Felker 50,000 $1.00 1/11/03
10880 Wilshire Blvd.
Suite 2070
Los Angeles, CA 90024
</TABLE>
<PAGE>
EXHIBIT 10.19
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY
NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SO REGISTERED
OR UNLESS IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY, AN EXEMPTION FROM REGISTRATION UNDER ALL SUCH LAWS IS
AVAILABLE.
Warrant for the Purchase of Shares of Common Stock
No. W1 250,000 Shares
THIS CERTIFIES THAT, for value received, Deborah Fensterheim,
("Holder"), is entitled to subscribe for and purchase from Ultimate Sports
Entertainment, Inc. a Delaware corporation (the "Company"), at any time on
and prior to the Expiration Date, as defined below, two hundred and fifty
thousand fully paid and nonassessable shares (the "Shares") of the Company's
Common Stock, $.001 par value per share (the "Common Stock"), at a price of
two dollars - 00/100 ($2.00) per Share (the "Exercise Price"), subject to the
terms and conditions set forth herein. The term "Holder", as used herein,
shall include the original Holder and any person to whom this Warrant is
transferred in conformity with the terms hereof, and the term "Warrant" shall
mean and include this Warrant and any Warrant or Warrants hereafter issued in
consequence of the exercise or transfer of this Warrant, in whole or in part.
1. The Expiration Date of this Warrant shall be October 31, 2004,
subject to extension as provided in Section 8(c) below.
2. This Warrant may be exercised at any time prior to or on the
Expiration Date (the "Exercise Period") as to the whole or any lesser number
of whole Shares by the surrender of this Warrant (with the Form of Election
at the end hereof duly executed) to the Company at its offices located at
2444 Wilshire Boulevard, Santa Monica, California 90403, or such other place
designated by the Company in writing delivered to the Holder, accompanied by
a certified or bank cashier's check payable to the order of the Company in an
amount equal to the Exercise Price multiplied by the number of Shares covered
by such exercise (the "Shares Purchase Price"). Upon any exercise of this
Warrant, in whole or in part, the holder hereof may pay the Shares Purchase
Price with respect to the shares of Common Stock for which this Warrant is
then being exercised (collectively, the "Exercise Shares") by surrendering
its rights to a number of Exercise Shares having a fair market value equal to
or greater than the required aggregate Exercise Price, in which case the
holder hereof would receive the number of Exercise Shares to which it would
otherwise be entitled upon such exercise, less the surrendered shares.
3. Exercise of this Warrant shall be effective as of the close of
the business day on which the Company has received the last of (a) this
Warrant, (b) a duly executed Election to Purchase, and (c) the Shares
Purchase Price. Upon each exercise of this Warrant, the Holder shall be
deemed to be the holder of record of the Shares issuable upon such exercise.
As soon as
<PAGE>
practicable after each such exercise, the Company shall issue and deliver to
the Holder a certificate or certificates for the Shares issuable upon such
exercise as set forth in Election to Purchase and, if this Warrant should be
exercised in part only, the Company shall execute and deliver a new Warrant
evidencing the right of the Holder to purchase the balance of the Shares
subject to purchase hereunder. The issue of any stock or other certificate
upon the exercise of this Warrant shall be made without charge to the Holder
for any tax in respect of the issue of such certificate.
4. The Company shall be entitled to treat the Holder as the owner in
fact of this Warrant for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrant on the part of any
other person. Subject to the provisions of Section 8 below, this Warrant
shall be transferable on the books of the Company upon delivery hereof with
the form of Assignment at the end hereof duly completed by the Holder or by
his duly authorized attorney or representative.
5. The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of providing
for the exercise of this Warrant, such number of Shares as shall, from time
to time, be sufficient therefor.
6. The Exercise Price shall be subject to adjustment from time to
time as follows:
a. If the Company shall (i) declare a dividend or make a
distribution on outstanding shares of its Common Stock in shares of Common
Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify the
outstanding shares of Common Stock into a lesser number of shares, the
Exercise Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price then in effect by a fraction,
the denominator of which shall be the number of shares of Common Stock
outstanding immediately after giving effect to such action, and of which the
numerator shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be made successively
whenever any event specified above shall occur.
b. If during the Exercise Period the Company issues or sells any
shares of Common Stock, or grants any options or rights to subscribe for or
to purchase shares of Common Stock, or issues or sells any securities
convertible into or exchangeable for shares of Common Stock, for a
consideration per share of Common Stock less than the Exercise Price in
effect immediately prior to the time of such issuance, sale or grant, the
Exercise Price shall be reduced to a price determined by multiplying the
Exercise Price in effect immediately prior to such issuance by a fraction,
the numerator of which is A + (B / C) and the denominator of which is A + D,
wherein: "A" shall be the number of Outstanding Shares (as defined below)
immediately prior to the subject issuance; "B" shall be the consideration for
the shares, options, warrants, rights or convertible or exchangeable
securities then being issued or other securities then being issued; "C" shall
be the Exercise Price in effect immediately prior to the subject issuance;
and "D" shall be the number of shares then being issued or issuable upon the
exercise of such options,
<PAGE>
warrants, rights or convertible or exchangeable securities. The term
"Outstanding Shares" shall mean the number of shares of Common Stock
outstanding immediately prior to the issuance of securities in respect of
which the adjustment is to be made, plus the number of shares of Common Stock
issuable upon the exercise of any outstanding rights to subscribe for or to
purchase, or the exercise of any other options or warrants for the purchase
of, any shares of Common Stock, or the conversion or exchange of any
securities, convertible into or exchangeable for shares of Common Stock.
c. If the Company grants any rights to subscribe for or to
purchase or any options or warrants for the purchase of shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock, the adjustment provided for in this Section shall be made at the time
of the issuance of such securities, and the consideration received by the
Company for the shares of Common Stock issuable upon the exercise, conversion
or exchange thereof, for purposes of determining the consideration received
by the Company, shall include (i) any consideration received by the Company
upon the issuance of such securities, and (ii) any consideration to be
received at the time of issuance of shares of Common Stock, without deduction
of any expenses incurred, paid or allowed by the Company in connection
therewith. If any such rights, options, warrants or convertible or
exchangeable securities shall be issued for consideration other than cash,
the amount of the consideration other than cash received by the Company shall
be the fair value thereof.
d. Upon any change or adjustment in the aggregate consideration
to be received per share of Common Stock upon the exercise or conversion of
any outstanding rights, options, warrants or other securities, or upon the
expiration of the Company's obligation to issue Common Stock upon the
exercise, conversion or exchange of any such securities, the Exercise Price
shall be recomputed by: (i) first, multiplying the Exercise Price in effect
at the time of such event by the reciprocal of the fraction, if any, used to
adjust the Exercise Price at the time of the most recent prior adjustment of
the Exercise Price in respect of such securities, and (ii) second (in the
case of a change or adjustment only) by the figure thus obtained in the
manner provided in paragraph (b) of this Section 6, treating such change or
adjustment as a new issuance of such securities.
e. Whenever the Exercise Price is adjusted pursuant to this
Section 6, the number of Shares purchasable upon exercise of this Warrant
shall simultaneously be adjusted by multiplying the number of Shares
initially issuable upon exercise of this Warrant by the initial Exercise
Price in effect on the date hereof and dividing the product so obtained by
the Exercise Price, as adjusted.
f. All calculations under this Section 6 shall be made to the
nearest one-hundredth of a cent and to the nearest whole Share.
7. a. In case of any consolidation with or merger of the Company
with or into another corporation (other than a merger of consolidation in
which the Company is the continuing or surviving corporation), or in case of
any sale, lease or conveyance to other corporation of the property of the
Company as an entirety or substantially as an entirety, appropriate
provisions shall
<PAGE>
be made so that the Holder shall have the right thereafter to receive upon
exercise of this Warrant solely the kind and amount of shares of stock and
other securities, property, cash or any combination thereof receivable upon
such consolidation, merger, sale, lease or conveyance by a holder of the
number of Shares of Common Stock for which this Warrant might have been
exercised immediately prior to such consolidation, merger, consolidation,
sale, lease or conveyance subject to subsequent adjustments which shall be as
nearly equivalent as practicable to the adjustments in Section 6 hereof.
b. In case of any reclassification or change in the Shares of
Common Stock issuable upon exercise of this Warrant, the Holder shall have
the right thereafter to receive upon exercise of this Warrant solely the kind
and amount of shares of stock and other securities, property, cash or any
combination thereof receivable by the holder of the number of Shares for
which this Warrant might have been exercised immediately prior to such
reclassification or change subject to subsequent adjustments which shall be
as nearly equivalent as practicable to the adjustments in Section 6.
c. The above provisions of this Section 7 shall similarly apply
to successive reclassification and changes in Shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
8. a. Unless registered under the Securities Act of 1933, this
Warrant and Shares or other securities issued upon exercise of this Warrant
shall not be transferred by the Holder unless, in the opinion or counsel
reasonably satisfactory to the Company, an exemption from registration under
applicable securities laws is applicable to such transfer. This Warrant and
Shares and other securities issued upon the exercise of this Warrant shall be
subject to a stop-transfer order and the certificate or certificates
evidencing any such securities shall bear such legend as the Company may deem
necessary or advisable to evidence this restriction.
b. If the Company shall seek to register any securities of the
Company under the Securities Act of 1933 (except in connection with any stock
option plan, stock purchase plan, savings or similar plan or an acquisition,
merger or exchange of stock, to be registered on Forms S-4, S-8 or any
successor forms under the Securities Act) and if the form of registration
statement proposed may be used for the registration of Shares or other
securities then issuable upon the exercise of this Warrant (hereinafter
referred to, collectively, as "Registrable Securities"), the Company shall
furnish the Holder with at least 30 days prior written notice thereof. At the
written request of a Holder given within 20 days after the receipt of such
notice, the Company will use its best efforts to cause all of the Registrable
Securities for which registration shall have been requested to be included in
such registration statement. If the proposed registration is, in whole or in
part, an underwritten public offering of securities of the Company, and the
managing underwriter of that Offering determines and advises in writing that
the inclusion of Registrable Securities proposed to be included in the
underwritten public offering would interfere with the successful marketing
(including pricing) of the Offering, then the amount of Registrable
Securities to be included in such Registration underwritten public offering
shall be reduced pro rata among all persons requesting registration of
Registrable Securities to a level acceptable to such underwriter, which may
be zero.
<PAGE>
c. If, prior to December 31, 2000, the Company has not processed
to effectiveness a registration statement under the Securities Act of 1933
covering all Registrable Securities issuable to the Holder upon exercise of
this Warrant and kept such registration current and effective for a period of
at least 120 consecutive days, then the Holder shall have the right, upon
written notice to the Company, and on one occasion only, to have the Company
prepare, file and process to effectiveness a registration statement under the
Securities Act covering the Registrable Securities, and keep that
registration statement current and effective for at least 120 consecutive
days so as to permit the continuous sale of Registrable Securities by the
Holder pursuant thereto. If, for any reason, the Company is unable to or
fails to file and process to effectiveness a registration statement and to
maintain the effectiveness of a registration statement as contemplated
herein, the Expiration Date and Expiration Period shall be extended until a
date which is thirty (30) days after the Company has maintained a
registration statement in effect with respect to Registrable Securities in
conformity with this paragraph.
d. All expenses of the registration of Registrable Securities
pursuant to this Section 8 shall be borne by the Company, except that Holder
shall bear the cost of any legal or other expenses contracted for by the
Holder, as well as any sales commissions or discounts earned by the
underwriter in respect of the sale of Registrable Securities in any
underwritten offering.
9. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Warrant and upon surrender and
cancellation of any Warrant if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and
deliver to the Holder thereof a new Warrant of like date, tenor and
denomination.
10. The Holder of any Warrant shall not have, solely on account of
such status, any rights of a shareholder of the Company, either at law or in
equity, or to any notice of meetings of shareholders or of any other
proceedings of the Company.
11. This Warrant shall be governed by and construed in accordance
with the laws of the State of incorporation of the Company.
12. The Company warrants the due authorization, execution and
delivery of this Warrant this 9th day of November, 1999.
(SEAL) Ultimate Sports Entertainment, Inc.
By: /s/ Frederick R. Licht
President
ATTEST:
By: /s/ Frederick R. Licht
Secretary
<PAGE>
ELECTION TO PURCHASE
The undersigned Holder hereby irrevocable elects to exercise the within
Warrant to purchase ( )* Shares of Common Stock issuable upon the exercise
thereof and requests that certificates for such Shares be issued in
his/her/its name and delivered to him/her/it at the following address:
- ------------------------------------------------------------------------------;
Date:
------------------
- -------------------------------------------------------------------------------
Signature(s)**
- -------------------------------------------------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers the within Warrant to the extent of (_________)* Shares purchasable
upon exercise thereof to ______________________________, whose address is
_____________________________________And hereby irrevocable constitute and
appoint ______________________________ his/her/its Attorney to transfer said
Warrant on the book of the Company, with full power of substitution.
Date:
------------------
- -------------------------------------------------------------------------------
Signature(s)**
- -------------------------------------------------------------------------------
* If the Warrant is to be exercised or transferred in its entirety,
insert the word "All" before "Shares"; otherwise insert the number of
shares then purchasable on the exercise thereof as to which transferred
or exercised. If such Warrants shall not be transferred or exercised to
purchase all shares purchasable upon exercise thereof, that a new
Warrant to purchase the balance of such shares be issued in the name
of, and delivered to, the Holder at the address stated below.
** Signature(s) must confirm exactly to the name(s) of the Holder as set
forth on the first page of this Warrant.
<PAGE>
Date: August 13, 1999
Amount: $50,000.00
Ultimate Sports Entertainment, Inc.
(A Delaware Corporation)
Promissory Note
Ultimate Sports Entertainment, Inc., a corporation duly organized and
existing under the laws of the State of Delaware, for value received, hereby
promises to pay the following registered holder hereof at the address stated,
Roger Tichenor
1749 Bridgewater Drive
Heathrow, FL 32746
the principal sum of fifty thousand dollars ($50,000.00) in such lawful money
of the United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, on the terms and at the
time hereinafter provided.
This Note is subject to the following terms and provisions:
1. Pavment and Interest. The principal amount of this Note together with all
interest then accrued shall be due and payable in six months from the date
hereof (the "Due Date"). Interest on the outstanding principal shall accrue
at the rate of twelve percent ( 12%) per annum from the date hereof. All
interest shall be calculated on the basis of a 365-day year, counting the
actual number of days elapsed from the date of this Note to the Due Date.
Interest on any overdue payments of principal and interest due hereunder
shall accrue and be payable at the rate of twelve percent (12%) per annum,
based on the actual number of days elapsed from the date such principal or
interest payment was due to the date of actual payment.
2. Negotiability and Transferability. This Note is negotiable and
transferable.
Ultimate Sports Entertainment, Inc.
By /s/ Frederick R. Licht
-----------------------------
Frederick R. Licht, President
<PAGE>
Date: August 13,1999
Amount: $50,000.00
Ultimate Sports Entertainment, Inc.
(A Delaware Corporation)
Promissory Note
Ultimate Sports Entertainment, Inc., a corporation duly organized and
existing under the laws of the State of Delaware, for value received, hereby
promises to pay the following registered holder hereof at the address stated,
James Skalko
136 Vista Oak Dr.
Longwood, FL 32779
the principal sum of fifty thousand dollars ($50,000.00) in such lawful money
of the United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, on the terms and at the
time hereinafter provided.
This Note is subject to the following terms and provisions:
1. Payment and Interest. The principal amount of this Note together with
all interest then accrued shall be due and payable in six months from the
date hereof (the "Due Date"). Interest on the outstanding principal shall
accrue at the rate of twelve percent (12%) per annum from the date hereof.
All interest shall be calculated on the basis of a 36$day year, counting the
actual number of days elapsed from the date of this Note to the Due Date.
Interest on any overdue payments of principal and interest due hereunder
shall accrue and be payable at the rate of twelve percent (12%) per annum,
based on the actual number of days elapsed from the date such principal or
interest payment was due to the date of actual payment.
2. Negotiability and Transferability. This Note is negotiable and
transferable.
Ultimate Sports Entertainment, Inc.
By /s/ Frederick R. Licht
-----------------------------
Frederick R. Licht, President
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
AllStar Arena Entertainment, Inc., a California corporation, a wholly owned
subsidiary
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 for Ultimate Sports Entertainment, Inc.,
of our report dated August 18, 1999, relating to the January 31, 1999
financial statements of Allstar Arena Entertainment, which appears in such
Prospectus. We also consent to the reference to us under the heading
"Experts".
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
February 14, 2000
