<PAGE> 1
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ___________ to ___________
Commission File Number: 0-11532
VENTURE CATALYST INCORPORATED
(Exact name of small business issuer as specified in its charter)
Utah 33-0618806
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16868 Via Del Campo Court, Suite 200, San Diego, California 92127
(Address of principal executive offices)
Issuer's telephone number: (858) 385-1000
Former Name: Inland Entertainment Corporation
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: as of February 4, 2000,
5,102,286 shares of common stock, $.001 par value per share, were outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
================================================================================
<PAGE> 2
VENTURE CATALYST INCORPORATED
FORM 10-QSB
FOR THE PERIOD ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited):
Consolidated Balance Sheets -
December 31, 1999 and June 30, 1999 .......................... 3
Consolidated Statements of Operations -
Three months ended December 31, 1999 and 1998 ................ 4
Six months ended December 31, 1999 and 1998 .................. 5
Consolidated Statements of Cash Flows -
Six months ended December 31, 1999 and 1998 .................. 6
Notes to Interim Consolidated Financial Statements ........... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION ...................................... 14
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......... 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................. 25
SIGNATURES ................................................................ 26
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VENTURE CATALYST INCORPORATED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND JUNE 30, 1999
<TABLE>
<CAPTION>
December 31, 1999 June 30, 1999
----------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................................. $ 4,592,379 $ 9,285,928
Accounts receivable, net .............................................. 584,270 344,059
Prepaid expenses and other current assets ............................. 791,293 127,935
Due from Barona Casino - expansion project ............................ 6,300,146 3,190,146
----------- -----------
Total current assets .......................................... 12,268,088 12,948,068
NON-CURRENT ASSETS:
Restricted cash and other investments ................................. 2,053,569 2,144,393
Employee and other receivables (net of allowance of $165,279) ......... 255,858 265,134
Property, plant and equipment, net .................................... 979,384 1,073,111
Deferred contract costs, net .......................................... 2,849,659 3,184,915
Available-for-sale securities, net .................................... 1,153,096 --
Deferred taxes, net ................................................... 427,071 171,070
Goodwill and other intangibles, net of amortization ................... 3,303,418 3,424,179
Deposits and other assets ............................................. 161,484 422,984
----------- -----------
Total non-current assets ...................................... 11,183,539 10,685,785
----------- -----------
Total assets................................................... $23,451,627 $23,633,853
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Advances of future consulting fees -- Barona Casino ................... $ 3,576,500 $ 2,603,457
Current portion of long-term debt ..................................... 1,566,667 400,000
Accounts payable and accrued expenses ................................. 984,808 1,440,349
Deferred revenues ..................................................... 164,537 125,072
Income taxes payable .................................................. -- 386,745
----------- -----------
Total current liabilities ..................................... 6,292,512 4,955,623
LONG-TERM DEBT, LESS CURRENT PORTION .................................... 8,733,333 9,900,000
----------- -----------
Total liabilities ............................................. 15,025,845 14,855,623
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 100,000,000 shares authorized
and 4,843,586 shares issued and outstanding ......................... 4,844 4,754
Additional paid in capital ............................................ 1,688,551 1,297,808
Retained earnings ..................................................... 6,578,019 7,475,668
Accumulated unrealized holding gains, net of deferred taxes ........... 246,035 --
Deferred compensation ................................................. (91,667) --
----------- -----------
Total shareholders' equity .................................... 8,425,782 8,778,230
----------- -----------
Total liabilities and shareholders' equity .................... $23,451,627 $23,633,853
=========== ===========
</TABLE>
3
<PAGE> 4
VENTURE CATALYST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
REVENUE:
Indian gaming consulting .................... $ 1,037,000 $3,123,000
Web-site development ........................ 523,627 286,094
Other ....................................... 271,355 102,485
----------- ----------
1,831,982 3,511,579
----------- ----------
OPERATING EXPENSES:
Compensation and benefits ................... 1,555,099 1,400,304
General and administrative expenses ......... 2,156,710 2,646,865
Amortization of intangible assets and
stock-based compensation ................... 283,937 289,952
----------- ----------
3,995,746 4,337,121
----------- ----------
Operating loss ................................... (2,163,764) (825,542)
OTHER INCOME AND (EXPENSE):
Interest income ............................. 125,464 178,744
Interest expense ............................ (237,500) (187,500)
----------- ----------
(112,036) (8,756)
----------- ----------
Loss before income taxes ......................... (2,275,800) (834,298)
Income tax (benefit) provision ................... (858,364) 65,000
----------- ----------
Net loss ......................................... $(1,417,436) $ (899,298)
=========== ==========
Net loss per share - basic ....................... $ (.30) $ (.19)
=========== ==========
Net loss per share - diluted ..................... $ (.30) $ (.19)
=========== ==========
Shares used in the computation of net loss
per share - basic ........................... 4,773,451 4,710,312
=========== ==========
Shares used in the computation of net loss
per share - diluted ......................... 4,773,451 4,710,312
=========== ==========
</TABLE>
4
<PAGE> 5
VENTURE CATALYST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
REVENUE:
Indian gaming consulting ............................. $ 4,221,000 $6,220,099
Web-site development ................................. 1,346,623 449,202
Other ................................................ 412,408 172,039
----------- ----------
5,980,031 6,841,340
----------- ----------
OPERATING EXPENSES:
Compensation and benefits ............................ 3,014,168 2,564,517
General and administrative expenses .................. 3,576,351 4,467,218
Amortization of intangible assets and stock-based
compensation ........................................ 556,541 503,089
----------- ----------
7,147,060 7,534,824
----------- ----------
Operating loss ............................................ (1,167,029) (693,484)
OTHER INCOME AND (EXPENSE):
Interest income ...................................... 269,349 349,155
Interest expense ..................................... (433,333) (333,333)
----------- ----------
(163,984) 15,822
----------- ----------
Income before income taxes ................................ (1,331,013) (677,662)
Income tax (benefit) provision ............................ (433,364) 132,000
----------- ----------
Net loss .................................................. $ (897,649) $ (809,662)
=========== ==========
Net loss per share - basic ................................ $ (.19) $ (.18)
=========== ==========
Net loss per share - diluted .............................. $ (.19) $ (.18)
=========== ==========
Shares used in the computation of net loss
per share - basic .................................... 4,763,619 4,463,678
=========== ==========
Shares used in the computation of net loss
per share - diluted .................................. 4,763,619 4,463,678
=========== ==========
</TABLE>
5
<PAGE> 6
VENTURE CATALYST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net cash (used in) operating activities:
Net loss ......................................................... $ (897,649) $ (809,662)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ................................. 711,979 604,146
Provision for bad debts ....................................... 12,500 110,000
Write-off of asset classified as other asset .................. 80,000 --
Deferred taxes ................................................ (434,164) (13,000)
Compensation for granting of non-employee stock options ....... 23,333 48,000
Due from Barona Casino - expansion project .................... (3,110,000) (966,040)
Equity received for services .................................. (88,898) --
Changes in operating assets and liabilities ................... (447,642) (664,830)
----------- -----------
Net cash used in operating activities .............................. (4,150,541) (1,691,386)
----------- -----------
Cash flows (used in) provided by investing activities:
Purchase of Cyberworks, Inc. .................................. -- (741,937)
Purchase of other intangible assets ........................... (77,191) --
Purchase of available-for-sale securities ..................... (640,000) --
Payment of restricted investment .............................. 100,000 --
Maturity of short-term investments ............................ -- 1,876,667
Purchase of furniture and equipment ........................... (85,044) (162,361)
Payments of loans ............................................. 9,276 7,680
----------- -----------
Net cash (used in) provided by investing activities ................ (692,959) 980,049
----------- -----------
Cash flows provided by financing activities:
Proceeds from exercise of stock options ........................ 149,951 176,275
----------- -----------
Net cash provided by financing activities .......................... 149,951 176,275
----------- -----------
Decrease in cash ................................................... (4,693,549) (535,062)
Cash, beginning of period .......................................... 9,285,928 9,205,502
----------- -----------
Cash, end of period ................................................ $ 4,592,379 $ 8,670,440
=========== ===========
Supplemental disclosures of cash flow information:
Interest expense paid ............................................ $ 712,686 $ 532,655
=========== ===========
Income taxes paid ................................................ $ 1,032,500 $ 606,000
=========== ===========
Non-cash investing and financing activities:
Acquisition of Cyberworks, Inc. ..................................
Fair value of tangible assets ................................. $ 244,226
Goodwill ...................................................... 3,731,501
Liabilities assumed ........................................... (188,790)
Stock issued (750,000 shares) ................................. (3,045,000)
-----------
Cash paid ..................................................... $ 741,937
===========
</TABLE>
6
<PAGE> 7
VENTURE CATALYST INCORPORATED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. DESCRIPTION OF BUSINESS.
Venture Catalyst Incorporated, a Utah corporation formerly known as Inland
Entertainment Corporation and prior to that Inland Casino Corporation (the
"Company") provides consulting and other professional services for gaming
operations with Native American tribes and for emerging and Internet businesses.
A majority of its revenue is earned from a consulting agreement with the Barona
Group of Capitan Grande Band of Mission Indians (the "Barona Tribe") in
connection with the Barona Tribe's operation of a gaming facility located north
of Lakeside, California, in eastern San Diego County.
Since fiscal 1998, in addition to Indian gaming, the Company has pursued, and
continues to pursue, opportunities primarily focused on the Internet.
In March 1998, the Company established a wholly-owned subsidiary, Worldwide
Media Holdings N.V., a Curacao, Netherland Antilles corporation ("WMH"). WMH was
formed to provide comprehensive marketing, advertising, technical and
distribution services for Internet related businesses. WMH currently provides
these services to four Internet casinos. WMH is responsible for all marketing
costs and is paid a fee for its services. The Company wrote-off assets that were
on the books of WMH with a value of approximately $146,000 during the period
ended December 31, 1999, based on the historic and projected performance, and
the commitment of resources to that business. In February 2000 the Board of
Directors of the Company decided to discontinue the Internet Gaming Consulting
business.
On August 27, 1998, the Company acquired all of the outstanding shares of
capital stock of Cyberworks Inc. ("Cyberworks"), a web-site development and
online marketing company. Cyberworks provides its services to clients in the
entertainment, technology, and business-to-business industries, and to various
professional associations and non-profit organizations. Cyberworks operates as a
wholly-owned subsidiary of the Company.
In July 1999, the Company formed an emerging business and Internet consulting
division, which is doing business under the name "Venture Catalyst." Through the
Venture Catalyst division, the Company offers to public and private companies a
wide array of business services, including financial public relations, venture
capital sourcing and business strategy. The Division does, from time to time,
make equity investments in, or take all or a portion of its consulting fees in
equity of, its clients.
2. PRESENTATION OF INTERIM CONSOLIDATED FINANCIAL INFORMATION.
The accompanying interim unaudited consolidated financial statements have been
prepared by Venture Catalyst Incorporated and its subsidiaries Cyberworks, Inc.
and Worldwide Media Holdings, N.V., (unless otherwise noted, collectively the
"Company") in conformity with generally accepted accounting principles for
interim financial information and with the rules and regulations of the U.S.
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
regulations. The interim unaudited consolidated financial statements reflect all
normal,
7
<PAGE> 8
VENTURE CATALYST INCORPORATED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
recurring adjustments and disclosures which are, in the opinion of management,
necessary for a fair presentation. The interim unaudited consolidated financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1999. Current and future
financial statements may not be directly comparable to the Company's historical
financial statements. The results of operations for the interim period are not
necessarily indicative of the results to be expected for the full year.
3. BARONA CONSULTING AGREEMENT.
The Company has provided services to the Barona Tribe since 1991. The Company
provides consulting services in accordance with the terms and conditions of an
Amended and Restated Consulting Agreement (the "Amended and Restated Consulting
Agreement"). During February 1998, the Company and the Barona Tribe executed
Modification #1 to the Amended and Restated Consulting Agreement (the
"Modification") which extended the term for providing consulting services by an
additional 60 months. Unless otherwise stated herein, the Amended and Restated
Consulting Agreement, as amended by the Modification, shall be referred to
herein as the "Barona Consulting Agreement." The Barona Consulting Agreement
expires in March 2004.
In March 1996, the Barona Tribe submitted the Initial Consulting Agreement (a
predecessor agreement to the Amended and Restated Consulting Agreement) to the
National Indian Gaming Commission (the "NIGC"). In May 1996, the NIGC determined
that the Initial Consulting Agreement was not a management agreement and,
therefore, not subject to NIGC approval, and forwarded such agreement to the
Bureau of Indian Affairs (the "BIA"). In July 1997, the BIA reviewed the Initial
Consulting Agreement and determined that no further action by it with respect to
such agreement was required. The NIGC conducted an investigation of the past
relationship between the Barona Tribe and the Company that resulted in a January
1997 settlement agreement.
In January 1997, the Company submitted the Amended and Restated Consulting
Agreement to the NIGC. In April 1997, the Company received a letter from the
NIGC questioning whether the Amended and Restated Consulting Agreement was in
fact a management contract. The letter stated that additional review would be
necessary to make such a determination. In March 1999, the NIGC started a
preliminary review of the relationship between the Barona Tribe and the Company,
which has included a review of the Barona Consulting Agreement. In September
1999, the Company submitted the Modification to the NIGC. This review is
currently pending.
The Company believes that the Amended and Restated Consulting Agreement, as
amended by the Modification, is not a management contract, based on (a) the May
1996 and July 1997 determinations of the NIGC and BIA, respectively, with
respect to the Initial Consulting Agreement, (b) the NIGC's findings in the
January 1997 settlement agreement and (c) the nature of the relationship between
the Barona Casino and the Company. However, there is no assurance that the NIGC
will determine that the Barona Consulting Agreement is not a management
contract. The failure of the NIGC to determine that the Barona Consulting
Agreement is not a management contract could have a material adverse effect on
the business and financial condition of the Company and its subsidiaries. If the
NIGC concludes that the Barona Consulting Agreement is not a management
agreement, the NIGC will forward such Agreement to the BIA for its review. If
the BIA determines that its approval is required, there can be no assurance that
the BIA will approve the Barona Consulting Agreement, and such failure to
approve such Agreement may have a material adverse effect on the business and
financial condition of the Company and its subsidiaries.
8
<PAGE> 9
VENTURE CATALYST INCORPORATED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
4. TRIBAL-STATE COMPACTS.
BARONA COMPACT. In August 1998, a Tribal-State Compact was signed between the
State of California and the Barona Tribe (the "Barona Compact"). The U.S.
Secretary of the Interior approved the Barona Compact, effective October 22,
1998.
The initial term of the Barona Compact will end on January 1, 2009. The Barona
Tribe has been given the option to renew the Barona Compact for two additional
five (5) year terms upon written notice of renewal to the Governor prior to the
termination date. Such options may be denied if the Barona Tribe has been found
to have engaged in unauthorized Class III gaming on two or more occasions or to
have committed violations of the terms of the Barona Compact on five or more
occasions.
Rather than the electronic machines currently in play at the Barona Casino, the
Barona Compact permits the following two varieties of Indian Lottery Games: (a)
Indian Video Lottery Match Game and (b) Indian Video Lottery Scratcher Game. The
Barona Tribe is allowed to operate 1,057 machines, but has been allocated only
199 machines. The balance of machines must be licensed from other Federally
recognized tribes for an annual fee of $5,000 per machine.
Pursuant to an informal agreement with the California Division of Gaming Control
(the "Gaming Control Division"), the Barona Tribe has been permitted to continue
to operate its current 1,057 electronic gaming devices at the Barona Casino for
an indefinite period of time. With the consent of the Gaming Control Division,
of the 1,057 electronic gaming devices being operated at the Barona Casino, 8
are prototypes of the Indian Gaming Machines prescribed by the Barona Compact.
At the present time, there are no such Indian Lottery devices available to any
compacted Indian tribe in California other than for testing purposes.
The Indian Lottery Games are not similar in functional capability to any
existing electronic gaming device or conventional slot machine, have not yet
been commercially produced and are currently being tested in a public
environment. Based upon the limited testing, there is insufficient data to
determine whether these compact-defined devices will produce an income stream
comparable to those machines currently in play at the Barona Casino. In the
event the lottery-based devices do not produce an income stream consistent with
that being earned by the machines currently in play at the Barona Casino, the
resulting decline in revenue from Barona operations may have a materially
adverse impact on the fees paid to the Company under the Consulting Agreement.
In August 1998, the California Legislature passed legislation ("AB489")
specifically authorizing the Governor of the State of California to execute the
various compacts which had been negotiated between the State of California and
Indian tribes, including the Barona Tribe. As a non-urgency measure, AB489 was
scheduled to go into effect on January 1, 1999; however, a referendum petition
to overturn AB489 qualified for the March 2000 Primary election ballot. The
effect of qualifying such referendum provision is that AB489 did not become
effective and will not become effective until the voters of California vote to
uphold AB489. Accordingly, there is a legal question as to whether the
Governor's signature on the Compact between the Barona Tribe and the State of
California is sufficient.
On September 10, 1999, the California legislature approved State Constitution
amendment 11, ("SCA 11"), a proposed amendment to the California Constitution
which would significantly expand the scope of Indian gaming in the State of
California. SCA 11 addresses the deficiencies of Proposition 5. Proposition 5,
the Tribal Government Gaming and Economic Self-Sufficiency Act of 1998, was
approved by the California Voters in the November 1998 General Election. In
August 1999, the California Supreme Court ruled that those provisions of
Proposition 5 which attempted to amend the California constitutional prohibition
against
9
<PAGE> 10
VENTURE CATALYST INCORPORATED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
gaming were unconstitutional. If approved by the people of California on the
March 2000 Primary Election Ballot, SCA 11 would authorize the Governor to
negotiate and conclude tribal-state gaming compacts with Federally recognized
Indian tribes for gaming on Indian lands in California. SCA 11 further provides
that any such compact would be subject to ratification by the California
legislature. SCA 11 permits such Indian tribes to engage in broader forms of
Class III gaming, including slot machines and electronic video games,
house-banked card games, percentage games and any games the California
Constitution authorizes the California lottery to offer.
BARONA COMPACT II. On September 10, 1999, the Governor of the State of
California entered into new Tribal-State Compacts with over 50 Federally
recognized Indian tribes, including the Barona Tribe. The compacts are subject
to ratification by the California legislature, approval by the U.S. Secretary of
the Interior and passage of California State Constitutional Amendment 11. On
September 10, 1999, the California Legislature voted to ratify each of the
above-referenced compacts including the Barona Compact II. There is no assurance
that the remaining conditions will be satisfied. The new Tribal-State Compacts
significantly expand the permissible scope of Indian Gaming beyond that
permitted by the Barona Compact. Until the above-referenced conditions are
satisfied, the Barona Compact shall remain in effect.
5. DUE FROM BARONA CASINO - EXPANSION PROJECT.
The Barona Tribe has commenced an approximately $150 million expansion project.
The Company has assisted and is continuing to assist the Barona Casino in
obtaining outside financing for the project. Prior to the time that the Barona
Casino obtains all such financing, the Company is sharing in funding the
expansion costs with the Barona Tribe. The Company expects to commit
approximately $8,300,000 as an unsecured, non-interest-bearing advance to the
Barona Casino. As of December 31, 1999, the Company has advanced $6,300,146;
these advances have been, and will be, accounted for as a receivable from the
Barona Casino to the Company. In January 2000 the Barona Tribe obtained
approximately $19 million in outside financing, from the issuance of Federally
Tax-Exempt Bonds. Payment of the receivable is expected to occur when the Barona
Tribe obtains all outside financing, which is expected to be sometime in
calendar year 2000.
6. ACQUISITIONS.
On August 27, 1998, the Company acquired all of the outstanding shares of
capital stock of Cyberworks in exchange for 750,000 shares of its common stock
and $500,000 in cash, in a transaction valued, exclusive of acquisition costs,
at $3,560,000. Cyberworks is being operated as a wholly-owned subsidiary of the
Company. The acquisition was accounted for as a purchase and the accounts of
Cyberworks have been included in the accompanying financial statements since
August 27, 1998. The excess of the total acquisition cost over the fair value of
net assets acquired ("goodwill") was approximately $3,732,000 and is being
amortized on a straight-line basis over 10 years.
In July 1999, the Company purchased $100,000 in assets from Typhoon Capital
Consulting, LLC, an investor relations and Internet strategy consulting firm,
consisting of three domain names, computer equipment, office equipment and
furniture. The excess of the acquisition cost over the fair value of net assets
acquired ("other intangible assets") was approximately $77,000 and is being
amortized on a straight-line basis over 3 years.
Goodwill and other intangible assets net of amortization as of December 31, 1999
is $3,303,418 and amortization expense of $197,952 has been recorded for fiscal
2000 through December 31, 1999. On an ongoing basis, the Company will review the
valuation and recoverability of the unamortized goodwill costs
and other intangible assets and will expense all or any portion of the
unamortized amounts determined necessary for fair statement.
10
<PAGE> 11
VENTURE CATALYST INCORPORATED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
7. RESTRICTED CASH AND OTHER INVESTMENTS.
From June 1996 to May 1997, the Company provided consulting services to the
Klamath and Modoc Tribes and the Yahooskin Band of Snake Indians (collectively,
the "Klamath Tribes"). The Klamath Tribes constructed the Kla-Mo-Ya Casino near
Chiloquin, in south central Oregon, a gaming facility funded by revenue bonds
issued by the Klamath Tribes. In connection with such bond financing, the
Company has a net investment of $394,569 in revenue bonds with a principal face
amount of $400,000. In addition, as a condition of the bond financing, the
Company agreed to hold the bonds for a five-year period. Pre-opening costs and
expenses of approximately $1.5 million were financed by loans made pursuant to a
third-party bank credit agreement with the Klamath Tribes. The Company pledged
to such bank a certificate of deposit for $1,518,000 as collateral for such
loans. If the Klamath Tribes are unable to pay its obligations, the Company may
lose all or a portion of its investment in the revenue bonds it purchased and
its certificate of deposit pledged as collateral for bank loans to the Klamath
Tribes. During the quarter ended December 31, 1999, the Klamath Tribes redeemed
bonds held by the Company with a face amount of $100,000. The Klamath Tribes
have made all required interest payments during fiscal 2000 on the bonds held by
the Company.
Additionally, the Company issued an irrevocable letter of credit for $133,000 to
satisfy the terms of its corporate office lease agreement. Such letter of credit
will automatically renew on an annual basis until October 31, 2002 unless
canceled by the lessor.
8. AVAILABLE-FOR-SALE SECURITIES.
At December 31, 1999, available-for-sale securities consist of equity securities
carried at fair value and based on quoted market prices. Additionally, the
Company holds equity securities of companies for which no established trading
market existed at December 31, 1999. These securities are stated at cost that
does not exceed the estimated net realizable value. Available-for-sale
securities with quoted market prices on December 31, 1999 consist of investments
in CraftClick.com Inc, Ultrexx Corporation, Entertainment Boulevard, Inc, and
TheBigHub.com, Inc. Collectively, these securities have a market value of
$803,096 at December 31, 1999. Available-for-sale securities with no established
market prices at December 31, 1999 consist of investments in KINeSYS
Pharmaceutical, Mediacycle, Inc ("spun.com"), companyfinance.com, Inc, and
Bullet Point News Inc. These investments are stated at cost, which is $350,000
at December 31, 1999. A net unrealized holding gain of $246,035, net of deferred
income taxes of $178,164, has been reflected in the equity section of the
consolidated balance sheet based on the change in market value of the
available-for-sale securities from dates of acquisition to December 31, 1999.
See Note 11.
11
<PAGE> 12
VENTURE CATALYST INCORPORATED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
9. SEGMENT REPORTING.
The Company has four reportable business segments: (a) Indian Gaming Consulting
(doing business as the Inland Entertainment Division); (b) Web-Site Development
Services (doing business through its wholly-owned subsidiary, Cyberworks Inc.);
(c) Emerging Business and Internet Consulting, (doing business as the Venture
Catalyst Division); and (d) Internet Gaming Consulting (doing business through
its wholly-owned subsidiary, Worldwide Media Holdings N.V.)
Information on segments and reconciliation to income, before income taxes, for
the three months ending December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
INDIAN INTERNET WEB-SITE VENTURE CONSOLIDATED
GAMING GAMING DEVELOP. CATALYST OTHER ADJUSTMENTS TOTALS
----------- --------- --------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the three months ended
December 31, 1999:
Revenues (external) $ 1,037,000 $ 111,457 $ 523,627 $159,898 $ 1,831,982
Revenues (intersegment) $ 17,995 $ (17,995)
Segment operating profit/(loss) $(1,799,022) $(163,288) $(195,884) $(20,106) $(97,501) $(2,275,800)
For the three months ended
December 31, 1998:
Revenues (external) $ 3,123,000 $ 102,485 $ 286,094 $ 3,511,579
Revenues (intersegment) $ 386,913 $(386,913)
Segment operating profit/(loss) $ (23,237) $(588,861) $(222,200) $ (834,298)
</TABLE>
Information on segments and reconciliation to income, before income taxes, for
the six months ending December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
INDIAN INTERNET WEB-SITE VENTURE CONSOLIDATED
GAMING GAMING DEVELOP. CATALYST OTHER ADJUSTMENTS TOTALS
----------- ----------- ---------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the six months ended
December 31, 1999:
Revenues (external) $ 4,221,000 $ 221,510 $1,346,623 $ 190,898 $ 5,980,031
Revenues (intersegment) $ 31,220 $ (31,220)
Segment operating profit/(loss) $ (744,097) $ (158,123) $ (136,569) $(132,827) $(159,395) $(1,331,012)
For the six months ended
December 31, 1998:
Revenues (external) $ 6,220,099 $ 172,039 $ 449,202 $ 6,841,340
Revenues (intersegment) $ 508,398 $(508,398)
Segment operating profit/(loss) $ 1,131,255 $(1,586,507) $ (222,410) $ (677,662)
</TABLE>
12
<PAGE> 13
VENTURE CATALYST INCORPORATED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
10. NET INCOME PER SHARE.
Below is the reconciliation of the components of the calculation of basic and
diluted net income per share for the time periods indicated:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------------------ ----------------------------
1999 1998 1999 1998
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income available to common shareholders ($1,417,436) ($899,298) ($897,649) ($809,662)
=========== ========= ========= =========
Weighted average shares outstanding -- basic 4,773,451 4,710,312 4,763,619 4,463,678
Effect of stock options -- -- -- --
----------- --------- --------- ---------
Weighted average shares outstanding -- diluted 4,773,451 4,710,312 4,763,619 4,463,678
=========== ========= ========= =========
</TABLE>
At December 31, 1999, options to purchase 7,367,900 shares of the Company's
common stock, at prices ranging from $1.00 to $4.63 per share, were not included
in the computation of diluted EPS because they were anti-dilutive for that
purpose. The options, which expire on various future dates through December
2009, were still outstanding at December 31, 1999.
11. COMPREHENSIVE INCOME.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
----------------------------- ---------------------------
1999 1998 1999 1998
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) ($1,417,436) ($899,298) ($897,649) ($809,662)
Net unrealized holding gains (losses) 246,035 -- 246,035 --
----------- --------- --------- ---------
Comprehensive income (loss) ($1,171,401) ($899,298) ($651,614) ($809,662)
=========== ========= ========= =========
</TABLE>
12. STOCK OPTIONS.
The following table summarizes stock option activity under the 1994 Plan, the
1995 Plan and the 1996 Plan (collectively the "Plans") for the six months ended
December 31, 1999:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------
OPTIONS OPTION PRICE
OUTSTANDING PER SHARE
----------- ------------
<S> <C> <C>
Outstanding at beginning of year ..... 5,501,200 $1.00-$4.13
Granted ............................ 2,408,500 $2.75-$4.63
Exercised .......................... (89,800) $2.56-$4.13
Cancelled .......................... (452,000) $2.50-$4.13
---------
Outstanding at end of year ........... 7,367,900 $1.00-$4.63
---------
</TABLE>
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
Venture Catalyst Incorporated operates in four reportable segments: (a) Indian
Gaming Consulting; (b) Web-site Development services; (c) Emerging and Internet
Business Consulting; and (d) Internet Gaming Consulting. Unless otherwise
specified in this Item 2, "Venture Catalyst Incorporated" or the "Company"
refers to the Company and its subsidiaries.
INDIAN GAMING CONSULTING
The Company has provided services to the Barona Group of Capitan Grande Band of
Mission Indians (the "Barona Tribe") since 1991. The Company is currently
providing consulting services to the Barona Tribe at the Barona Casino under the
terms of the Amended and Restated Consulting Agreement, as amended by
Modification #1 to such agreement (hereinafter referred to as the "Barona
Consulting Agreement" or the "Consulting Agreement") which expires in March
2004. The total consulting fees paid to the Company under the Consulting
Agreement are based upon a net profit formula that includes the Barona Casino's
income and expenses. Accordingly, although gross revenues of the Barona Casino
may increase, the Company's consulting revenue may not correspondingly increase
because expenses at the Barona Casino also may have increased.
From February 1992 through March 1996, the Company provided casino management
services at the Barona Casino pursuant to a management agreement with the Barona
Tribe. During that same period, funds to purchase or construct all fixed assets,
such as buildings, equipment and capital improvements, were contributed to the
Barona Casino by the Company. In the aggregate, the Company contributed
approximately $13,000,000 over the period. Neither the Barona Tribe nor the
Barona Casino paid for any of the fixed assets at the Barona Casino during such
period. Due to the "investment" made by the Company to the Barona Casino, the
value of the Barona Casino has increased, thereby enhancing the potential fees
that may be earned by the Company over the life of its contractual relationship
with the Barona Tribe. These monies contributed to the Barona Casino which have
been used to purchase or construct fixed assets have been viewed by the Company
as intangible assets and referred to as "deferred contract costs" and are being
amortized to expense over the remaining life of the Consulting Agreement through
March 2004. However, given the nature of the asset, if the recoverability is
determined not to be probable, the Company will charge to expense the
unamortized portion.
In 1996, the Barona Casino had become financially self-sufficient and the
Company's relationship with the Barona Tribe had evolved from that of manager of
the Barona Casino to consultant to the Barona Tribe which was now acting as the
manager of the Barona Casino. Since the Company has transitioned from manager to
consultant, there have been only two categories of investments by the Company in
the Barona Casino. The first category related to project commitments made to the
Barona Tribe by the Company when the Company was acting as "manager" pursuant to
a management agreement. Funds attributable to this category have equaled in the
aggregate approximately $550,000. The second category related to a $2,000,000
NIGC settlement. Commencing in November 1996, the Company committed to
contribute $2,000,000 to the Barona Tribe to be used to construct a new road and
entrance to the Barona Casino. As of December 31, 1999, the Company has paid
$1,200,000 of the $2,000,000 commitment.
At this time, the Company has no plans to contribute additional funds to the
Barona Casino or the Barona Tribe in the form of deferred contract costs.
However, the Company will assist the Barona Casino from time to time in
obtaining third party outside financing, if internal funding from the Barona
Casino is not adequate to meet the Barona Casino's project needs. See the
discussion herein under the caption "Liquidity and Capital Resources" relating
to the Company's advance of funds to the Barona Casino in connection with the
Casino's current expansion project.
14
<PAGE> 15
In August 1998, a Tribal-State Compact was entered into between the State of
California and the Barona Tribe (the "Barona Compact"). The Barona Compact was
signed by the Governor of California and the Chairman of the Barona Tribe on
August 12, 1998; thereafter, the Barona Tribal Council voted to submit the
Barona Compact to the U.S. Secretary of the Interior (the "Secretary"). The
Secretary's approval of the Barona Compact was published in the Federal Register
on October 22, 1998.
In August 1998, the California Legislature passed legislation ("AB489")
specifically authorizing the Governor of the State of California to execute the
various compacts which had been negotiated between the State of California and
certain Indian tribes, including the Barona Tribe. AB489 was scheduled to go
into effect on January 1, 1999; however, a referendum petition to overturn AB489
qualified for the March 2000 Primary election ballot. The effect of qualifying
such referendum provision is that AB489 did not become effective and will not
become effective until the voters of California vote to uphold AB489.
Accordingly, there is a legal question as to whether the Governor's signature on
the Barona Compact is sufficient.
On September 10, 1999, the California legislature approved State Constitutional
Amendment 11 ("SCA 11"), a proposed amendment to the California Constitution
which would significantly expand the scope of Indian gaming in the State of
California. If approved by the California voters on the March 2000 Primary
Election Ballot, SCA 11 would authorize the Governor to negotiate and conclude
tribal-state gaming compacts permitting Federally recognized Indian tribes to
engage in broader forms of Class III gaming, including slot machines and
electric video games, house-banked card games, percentage games and any games
the California Constitution authorizes the California lottery to offer. On
September 10, 1999 the Governor of the State of California entered into new
Tribal-State Compacts with over 50 Federally recognized Indian tribes, including
the Barona Tribe (the "Barona Compact II"). The compacts are subject to
ratification by the California Legislature, approval by the U.S. Secretary of
the Interior and passage of SCA 11. On September 10, 1999, the California
legislature voted to ratify these compacts, including the Barona Compact II.
There is no assurance that the remaining conditions will be satisfied. The new
Tribal-State Compacts significantly expand the permissible scope of Indian
gaming beyond that permitted by the Barona Compact. Until the above-referenced
conditions are satisfied, the Barona Compact shall remain in effect. Management
believes the Barona Compact and the Barona Compact II ended a significant amount
of uncertainty and concern about the future of gaming activities at the Barona
Casino.
WEB-SITE DEVELOPMENT BUSINESS
On August 27, 1998, the Company acquired Cyberworks, Inc. ("Cyberworks"), a
web-site development and Internet marketing company. Cyberworks operates as a
wholly-owned subsidiary of the Company. Cyberworks' services include full
service web-site development, strategic consulting for interactive and online
business development and custom Internet application. Cyberworks provides its
services to clients in the entertainment, technology, and business-to-business
industries, and to various professional associations and non-profit
organizations.
INTERNET GAMING CONSULTING
In March 1998, the Company established a wholly-owned subsidiary, Worldwide
Media Holdings, N.V. ("WMH"), a Curacao, Netherland Antilles corporation. WMH
provides consulting services related to Internet casinos, including marketing
and promoting of Internet casinos through web-site development, Internet
advertising and conventional advertising. Currently, WMH is providing consulting
and marketing services to four international Internet casinos; Casino Australia,
the Kenny Rogers Casino, The Good Luck Club and Las Vegas At Home Casino. WMH
does not operate any of these casinos and none of the casinos accept wagers from
the United States or its territories. WMH earns fees to promote and market such
casinos based on a percentage of the net profits of the online casinos. The
Company wrote-off assets that were on the books of WMH with a value of
approximately $146,000 during the period ended December 31, 1999,
15
<PAGE> 16
based on the historic and projected performance, and the commitment of
resources to that business. In February 2000 the Board of Directors of the
Company decided to discontinue the Internet Gaming Consulting business. The
Internet gaming consulting business, historically, has not produced a material
portion of the Company's consolidated revenues, and has never been profitable.
The company believes the resources committed to such business will be more
effectively used in its other operations.
EMERGING AND INTERNET BUSINESS CONSULTING
In July 1999, the Company formed an emerging and Internet business consulting
division, which is operating under the name "Venture Catalyst." Through the
Venture Catalyst division, the Company offers to public and private companies a
wide array of business services, including financial public relations, venture
capital sourcing and online business strategy. The Division's objective is to
serve as a consultant to and/or "incubate" entrepreneurial ventures during every
stage of their financial growth. The Division does, from time to time, make
equity investments in, or take all or a portion of its consulting fees in equity
of, its clients.
The Company has made, and expects to continue to make, investments in personnel
and resources to allow the Venture Catalyst division to grow and to attempt to
better position itself to leverage its financial resources, management
consulting expertise, knowledge of the Internet and existing web-development
platform.
GAMING PORTAL SITE ("VEGAS AT HOME")
In July, 1999, the Company launched the "Vegas At Home" portal web-site, which
is designed to provide both the gaming industry and its patrons with an online
central location containing a variety of gaming related products, merchandise,
information and links to most significant traditional casinos, as well as links
to the four above-referenced Internet-based casino web-sites. The operations of
the business enterprise are currently being reported in the "other" segment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THE THREE MONTHS ENDED
DECEMBER 31, 1998.
REVENUE. Consolidated revenues decreased 47.8% to $1,831,982 for the three
months ended December 31, 1999 from $3,511,579 for the three months ended
December 31, 1998. Revenues from Indian gaming consulting decreased 66.8% to
$1,037,000 from $3,123,000 earned during the same quarter last year. The
significant decrease in Indian Gaming revenues is a result of significantly
higher expenses at the Barona Casino primarily related to the increase in human
resources and operational expenses in connection with the ongoing Barona
expansion project, partially offset by increased revenues earned by the Barona
Casino.
Revenues earned by Cyberworks from web-site development and online marketing in
the three months ended December 31, 1999 were $523,627, an increase of 83.0%
from the $286,094 earned during the same quarter last year. The increase was due
to increased services performed for external clients.
Revenues earned by WMH for marketing and consulting related to Internet gaming
increased 8.8% to $111,457 for the three months ended December 31, 1999 from
$102,485 during the same period in fiscal 1999 as a result of providing
consulting services to an additional casino.
During the three months ended December 31, 1999 the Company had one other source
of revenue not present during the same period last year. During the quarter
$159,898 was earned by the Venture Catalyst division for emerging and Internet
businesses consulting services performed.
16
<PAGE> 17
COMPENSATION AND BENEFITS. Compensation and benefits expenses increased 11.1% to
$1,555,099 for the three months ended December 31, 1999 from $1,400,304 during
the same period last year. The increase was primarily a result of the addition
of 5 employees for the Venture Catalyst division during the current fiscal year
and increased payroll costs for existing employees of the Company, partially
offset by a decrease in the average number of Cyberworks employees during fiscal
2000 compared with fiscal 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased 18.5% to $2,156,710 for the three months ended December 31, 1999 from
$2,646,865 for the three months ended December 31, 1998, resulting primarily
from decreases in: (a) political contributions; (b) advertising, marketing, and
promotion of the online casinos; (c) bad debt allowances established for loans
currently classified as non-current receivables; (d) third-party consulting fees
incurred by the Company in connection with web-site development and consulting
services provided to Internet casinos; and (e) general accounting and legal
services incurred by the Company. These decreases were partially offset by
increases in (a) client relation expenses, which included a contribution for the
design and construction of a Native American museum on the Barona Reservation;
(b) the write-off of an impaired asset on the books of WMH classified as "other
assets", based on a review of the profitability and resource commitment to the
Internet gaming consulting operations; (c) third-party consulting fees incurred
by the Company in connection with its performance of consulting services to the
Barona Casino; (d) the write-off of an investment classified as other assets;
and (e) third-party consulting fees incurred by the Company in connection with
web-site development services and the operation of the "Vegas At Home" portal
site.
AMORTIZATION OF INTANGIBLE ASSETS AND STOCK BASED COMPENSATION. Amortization of
intangible assets and stock based compensation decreased 2.1% to $283,937 for
the three months ended December 31, 1999 from $289,952 for the three months
ended December 31, 1998 as a result of a reduction in stock based compensation
costs related to options granted to third-party consultants, partially offset by
an increase in the amortization of goodwill and other intangible assets in
connection with the acquisition of Cyberworks and the asset purchase related to
the formation of the Venture Catalyst division.
OTHER INCOME AND EXPENSE. For the three months ended December 31, 1999, interest
income was $125,464 compared to $178,744 for the three months ended December 31,
1998. The decrease was due to the decrease in the Company's investments and cash
equivalent balances during the current quarter.
Interest expense increased to $237,500 for the three months ended December 31,
1999 from $187,500 for the three months ended December 31, 1998 as a result of
an increase in notes payable to two shareholders, including a former director of
the Company, in connection with the 1996 repurchase of shares of the Company's
common stock held by them.
INCOME TAX BENEFIT/PROVISION. For the three months ended December 31, 1999, the
Company recorded an income tax benefit of $858,364, a decrease of $923,364 from
the $65,000 income tax provision recorded for the three months ended December
31, 1998. The decrease in the second quarter of fiscal 2000 was due to the
operating loss primarily attributable to tax deductible expenses, while the
operating loss in the comparable quarter of fiscal 1999 was primarily
attributable to expenses that were not tax deductible.
SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THE SIX MONTHS ENDED DECEMBER
31, 1998.
REVENUE. Revenue decreased 12.6% to $5,980,031 for the six months ended December
31, 1999 from $6,841,340 for the six months ended December 31, 1998. Revenues
from Indian gaming consulting decreased 32.1% to $4,221,000 from $6,220,099
earned during the same period last year. The significant decrease in Indian
Gaming revenues is a result of significantly higher expenses at the Barona
Casino primarily related to the increase in human resources and operational
expenses in connection with the ongoing Barona expansion project, partially
offset by increased revenues earned by the Barona Casino.
17
<PAGE> 18
Revenues earned by Cyberworks from web-site development and online marketing in
the six months ended December 31, 1999 were $1,346,623, an increase of 199.8%
from the $449,202 earned during the same period last year. The increase was due
to (a) six months of fees earned during fiscal 2000, as opposed to approximately
four months of fees earned during fiscal 1999 and (b) increased services
performed for external clients.
Revenues earned by WMH for marketing and consulting related to Internet gaming
increased 28.8% to $221,510 for the six months ended December 31, 1999 from
$172,039 during the same period in fiscal 1999 as a result of (a) increased
activity in the casinos marketed by WMH, and (b) providing consulting services
to an additional casino.
During the six month period ended December 31, 1999, the Company had one other
source of revenue not present during the same period last year. During fiscal
2000, $190,898 was earned by the Venture Catalyst division for emerging and
Internet business consulting services performed.
COMPENSATION AND BENEFITS. Compensation and benefits increased 17.5% to
$3,014,168 for the six months ended December 31, 1999, from $2,564,517 during
the same period last year. The increase was primarily a result of: (a) the
addition of Cyberworks employees for the entire period in current fiscal 2000,
as opposed to only approximately four months during the same period in fiscal
1999; (b) the addition of five employees for the Venture Catalyst division
during the current fiscal year; and (c) increased payroll costs for existing
employees of the Company. These increases were partially offset by a decrease in
the average number of Cyberworks employees during fiscal 2000 compared with
fiscal 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased 19.9% to $3,576,351 for the six months ended December 31, 1999 from
$4,467,218 for the six months ended December 31, 1998 resulting primarily from
decreases in: (a) political contributions; (b) start-up costs, advertising,
marketing, and promotion of the online casinos; (c) third-party consulting fees
incurred by the Company in connection with web-site development and consulting
services provided to Internet casinos; (d) bad debt allowances established for
loans currently classified as non-current receivables; and (e) general
accounting services incurred by the Company. These decreases were partially
offset by increases in (a) client relation expenses, which included a
contribution for the design and construction of a Native American museum on the
Barona Reservation; (b) third-party consulting fees incurred by the Company in
connection with its performance of consulting services to the Barona Casino; (c)
third-party consulting fees incurred by the Company in connection with web-site
development services and the operation of the "Vegas At Home" portal site; (d)
the write-off of an impaired asset on the books of WMH classified as "other
assets", based on a review of the profitability and resource commitment to the
Internet gaming consulting operations; (e) the write-off of an investment
classified as other assets; and (f) external shareholder expenses, including the
printing and distribution of annual reports and proxy materials.
OTHER INCOME AND EXPENSE. For the six months ended December 31, 1999, interest
income was $269,349 compared to $349,155 for the six months ended December 31,
1998. The decrease was due to the decrease in the Company's investments and cash
equivalents.
Interest expense increased to $433,333 for the six months ended December 31,
1999 from $333,333 for the six months ended December 31, 1998 primarily as a
result of an increase in notes payable to two major shareholders, including a
former director of the Company, in connection with the 1996 repurchase of shares
of the Company's common stock.
INCOME TAX BENEFIT/PROVISION. For the six months ended December 31, 1999, the
Company recorded an income tax benefit of approximately $433,364, a decrease of
$565,364 from the $132,000 income tax provision recorded for the six months
ended December 31, 1998. The decrease was due to the operating loss in the
current fiscal year that was primarily attributable to tax deductible expenses,
verse an operating loss in the prior fiscal year that was primarily attributable
to expenses that were not tax deductible.
18
<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity at December 31, 1999 consisted of
unrestricted cash of $4,592,379 and future revenues generated from operations.
The Company believes that these sources of liquidity will be sufficient to meet
the Company's operating and capital requirements for the foreseeable future.
During the six months ended December 31, 1999, the Company's cash position
decreased by $4,693,549 to $4,592,379 from the June 30, 1999 balance of
$9,285,928. The decrease was a result of cash flows used in operating activities
of $4,150,541 and cash flows used in investing activities of approximately
$692,959, partially offset by cash flows provided by financing activities of
$149,951 during the period.
Cash flows used in operating activities include: (a) a net loss of $897,649; (b)
$3,110,000 in short-term advances to the Barona Casino for the Barona Casino
expansion project discussed above; (c) an increase in prepaid assets of
approximately $663,000 primarily due to estimated income tax payments made
during the quarter; (d) decreases in accounts payable and accrued expenses of
approximately $456,000; (e) an increase in net deferred taxes of approximately
$434,000; (f) a decrease in income taxes payable of approximately $387,000; (g)
an increase in accounts receivable of approximately $240,000, primarily due to
Cyberworks' billings for services performed and proceeds due for the exercise of
stock options; and (h) approximately $89,000 in equity received for services in
lieu of cash.
Cash flows provided by operating activities include: (a) an increase in advances
of future consulting fees of approximately $973,000 primarily due to timing
differences between consulting revenues earned and recognized but not yet paid;
(b) amortization of intangible assets of approximately $533,000; (c) a decrease
in deposits and other assets of approximately $181,000, primarily as a result of
a write-off of WMH assets classified as "other assets"; (d) depreciation on
property and equipment of approximately $179,000; and (e) a write-off of other
assets of $80,000.
Cash flows used in investing activities include (a) purchases of $640,000 in
available-for-sale securities and (b) net investments in fixed assets of
approximately $85,000. Additionally, the Company purchased $100,000 of assets
from Typhoon Capital Consulting, LLC, an investor relations and Internet
strategy consulting firm, consisting of three domain names, computer equipment,
office equipment, and furniture. Approximately $23,000 of equipment and
furniture is included in the $85,000 of fixed asset purchases noted above. The
excess of the acquisition cost over the fair value of net assets acquired
("other intangible assets") was approximately $77,000 and is being amortized on
a straight-line basis over 3 years. Cash flows provided by investing activities
include the payment to the Company of $100,000 for a portion of the Klamath
bonds redeemed during the period by the issuer, which were classified as
"restricted cash and other investments".
Cash flows provided by financing activities include approximately $150,000 in
proceeds from the exercise of stock options.
With respect to the current project to expand the Barona Casino discussed above,
the Company and the Barona Tribe will share in funding the expansion costs
incurred prior to obtaining all outside financing. The Company expects to commit
approximately $8,300,000 as an unsecured, non-interest-bearing advance to the
Barona Casino. As of December 31, 1999, the Company had advanced $6,300,146.
These advances have been, and such future advances will be, accounted for as a
receivable from the Barona Casino to the Company. In January 2000, the Barona
Tribe obtained approximately $19 million in outside financing, from the issuance
of Federally Tax-Exempt Bonds (discussed below). Payment of the receivable is
expected to occur when the Barona Tribe obtains all outside financing, which is
expected to be sometime in calendar year 2000.
In January 2000, the Barona Tribe completed a placement of Federally Tax-Exempt
Limited General
19
<PAGE> 20
Obligation Bonds in the principal mount of $18,890,000 (the "Tax-Exempt Bond
Financing"). The principal use of the bond proceeds is to build a public golf
course and related facilities on the Barona Reservation. This project is a part
of the $150 million Barona Casino expansion project. In connection with the
Tax-Exempt Bond Financing, the Company entered into a Consulting Fee
Subordination Agreement pursuant to which no consulting fee earned under the
Barona Consulting Agreement shall be paid to the Company so long as the Company
has received notice from the trustee for the benefit of the bondholders of an
event of default for which there is a payment default under the indenture and
such default shall be continuing or the Company shall have been notified that
any levied Government Service Tax remains unpaid in whole or in part.
In 1992, there was a one-time advance of future fees under the Consulting
Agreement with the Barona Tribe of approximately $2,500,000. At the beginning of
the management relationship in 1992 between the Barona Tribe and the Company,
the Barona Tribe was not in a financial position to make required investments in
the Barona Casino. The Company invested approximately $2,500,000 into the Casino
that was accounted for as revenue to the Barona Casino and expensed by the
Company due to the uncertainty of recovery. The amount was not accounted for as
a deferred contract cost (similar to those investments discussed in the Overview
above). As the Barona Casino became profitable between 1992 and 1994, $2,500,000
of the initial profits of the Barona Casino were distributed to the Company and
were recorded on its books as an obligation called "advances of future
consulting fees." The Barona Casino established a corresponding receivable. When
the consulting relationship ends, the Company and the Barona Tribe will discuss
how to handle this balance. Depending on the outcome, if the obligation is
forgiven by the Barona Tribe, the Company may have an additional source of
liquidity in the sense that a debt may not need to be repaid; however, if the
balance reverts back to the Barona Casino or the Barona Tribe, the Company may
have a debt to repay. There is no indication how this issue will ultimately be
resolved. All other transactions between the two parties are being treated
independently. The remaining difference of the December 31, 1999 balance in
advances of future consulting fees of $3,576,500 and the $2,500,000 is due
primarily to timing differences between consulting revenues earned and
recognized but not yet paid and the actual payment of the consulting revenues.
Consulting fees have typically been paid in the month subsequent to the month in
which services were performed.
In September 1996, the Company entered into a Stock Purchase and Settlement and
Release Agreement (the "Stock Purchase Agreement") with two shareholders,
including a former director. The terms of the Stock Purchase Agreement included
(a) an aggregate cash payment of $200,000 to such shareholders upon closing, (b)
the issuance of two unsecured promissory notes in the aggregate principal amount
of $3,500,000, with interest at the rate of 10% per annum, payments of interest
only for the first three years, followed by three equal annual installments of
principal repayment, with interest on the remaining balance commencing September
30, 1997, (c) a contingent obligation (the "Initial Contingent Obligations") to
issue an aggregate principal amount of $9,856,488 in unsecured promissory notes
to such shareholders including $2,000,000 in principal amount of notes each year
for four years and $1,856,488 in principal amount of notes to be issued in a
fifth year, each note with interest at 10%, payment of interest only for three
years, followed by three equal annual installments of principal plus interest on
the remaining principal balance, and (d) another contingent obligation (the
"Second Contingent Obligation") to issue an additional aggregate principal
amount of $3,000,000 in unsecured promissory notes (or cash, if the Company has
closed a firm commitment underwritten public offering of securities of not less
than $35 million prior to the contingencies being met).
The Initial Contingent Obligations are contingent upon the Company's retained
earnings balance, with certain adjustments, being at least $4,000,000 for the
fiscal year ending immediately prior to the date the notes are to be issued. The
test is to be made each year for eight successive years that commenced with the
fiscal year ended June 30, 1997. The Second Contingent Obligation is subject to
the following conditions: (a) the Barona Tribe enters into a Class III Gaming
Compact (the "Compact") with the State of California which permits the operation
of video gaming machines at the Barona Casino in San Diego County; (b) at the
time that the Barona Tribe enters into the Compact, the Company has a consulting
agreement or similar
20
<PAGE> 21
contractual arrangement with the Barona Tribe; and (c) consulting fees paid to
the Company by the Barona Tribe relating to the Barona Casino for any
consecutive 12-month period within five years after the Barona Tribe has entered
into the Compact, equals or exceeds one and one-half times the consulting fees
for the fiscal year ended June 30, 1996. The Company intends to record as the
additional cost of the repurchase of its common stock, each contingent
obligation as each contingency or condition is met. All payments pursuant to the
Stock Purchase Agreement are further subject to compliance with certain state
law provisions and the Company's Articles of Incorporation concerning repurchase
transactions. The Initial Contingent Obligation has been met for the first three
test periods.
The Company's debt in connection with this stock repurchase is $9,500,000 as of
December 31, 1999. In addition, if all contingent obligations are met, a maximum
of $6,856,488 of aggregate additional consideration may still have to be repaid
under the Stock Purchase Agreement. Management believes that future revenues
generated from operations and unrestricted cash will be sufficient to service
and repay the aggregate amount of this debt.
Restricted cash and other investments of approximately $2,054,000 include; (a)
an irrevocable letter of credit for $133,000 to satisfy the terms of the
corporate lease agreement that will automatically renew on an annual basis until
October 31, 2002, unless canceled by the lessor; (b) an $8,000 certificate of
deposit pledged as collateral in connection with a loan to a Barona Tribal
member; and (c) funds in the amount of $1,912,569 which have been invested or
pledged as security for amounts borrowed by third parties in connection with the
construction of the Kla-Mo-Ya Casino, a gaming facility near Chiloquin, in south
central Oregon. From June 1996 to May 1997, the Company provided consulting
services to the Klamath and Modoc Tribes and the Yahooskin Band of Snake Indians
(collectively, the "Klamath Tribes"). The Klamath Tribes issued revenue bonds to
fund the construction of the Kla-Mo-Ya Casino. In connection with such bond
financing, the Company has a net investment of $394,569 in revenue bonds with a
principal face amount of $400,000. In addition, as a condition of the bond
financing, the Company agreed to hold the bonds for a five-year period.
Pre-opening costs and expenses of approximately $1.5 million were financed by
loans made pursuant to a third-party bank credit agreement with the Klamath
Tribes. The Company pledged a certificate of deposit for $1,518,000 as
collateral for such loans. If the Klamath Tribes are unable to pay its
obligations, the Company may lose all or a portion of its investment in the
revenue bonds it purchased and its certificate of deposit pledged as collateral
for bank loans to the Klamath Tribes. During the quarter ended December 31,
1999, the Klamath Tribes redeemed bonds held by the company with a face amount
of $100,000. The Klamath Tribes have made all required interest payments during
the fiscal year on the bonds held by the company. (See Notes to Interim
Consolidated Financial Statements, Note 7. Restricted cash and other
investments.)
The Company has invested in the equity of several companies, and plans to
continue to invest in the equity of other companies, in connection with the
Venture Catalyst division strategy. The aggregate amount invested will depend on
the Company's available cash and it's ability to identify potential investment
candidates. The Company plans to invest approximately $1,000,000 in the equity
of other companies during fiscal 2000, but has no formal obligation to do so. As
of December 31, 1999, the company has acquired approximately $729,000 in equity
from other companies in exchange for cash and services.
FORWARD-LOOKING STATEMENTS AND CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Included in this Item 2, and in the Notes to the Interim Consolidated Financial
Statements are certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 reflecting the Company's
current expectations. Although the Company believes that its expectations are
based on reasonable assumptions, there can be no assurance that the Company's
financial goals or expectations will be realized. Such forward-looking
statements involve known and unknown risks,
21
<PAGE> 22
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. Numerous factors may affect the Company's actual
results and may cause results to differ materially from those expressed in
forward-looking statements made by or on behalf of the Company. The Company
assumes no obligation to update or revise any such forward-looking statements or
the factors listed below to reflect events or circumstances that may arise after
this Report is filed, and that may have an effect on the Company's overall
performance.
- DEPENDENCY ON REVENUES FROM THE BARONA CASINO/POTENTIAL DECREASE IN
LIQUIDITY
The Company historically has derived substantially all of its revenue, and
currently derives the majority of its revenue, from services provided to the
Barona Tribe. While the Company is taking steps to diversify its business
activities and resulting revenues, those activities are producing revenues
significantly lower than revenues provided from the Company's services to the
Barona Casino. Accordingly, any material reduction in fees payable to the
Company in connection with its consulting relationship with the Barona Tribe
could have a material adverse affect on the business and financial condition of
the Company, if the Company could not either reduce expenses or increase
revenues from other sources. In connection with the Barona Casino's $150 million
expansion project, the Barona Casino has incurred, and expects to continue to
incur, significantly higher expenses then it has incurred in the past. The
result of these expenditures is to likely decrease the consulting revenues paid
to the Company during the expansion project, unless revenues at the Barona
Casino increase at a rate greater than the proportionate increase in expenses,
which is not expected. In addition to the expected decrease in consulting
revenue for the next several months, the Company has made commitments to advance
up to another $2.0 million to the Barona Casino, if needed, until such time all
outside financing is obtained. Although these advances are scheduled to be
repaid at such time the balance of the $150 million bond financing is completed,
which is expected to occur sometime mid calendar year 2000, the Company could be
faced with a decrease in short-term liquidity unless the other business segments
of the Company increase their revenue production. In addition, as noted above,
the consulting fees earned by the Company are now subject to a Subordination
Agreement relating to the Tax-Exempt Bond Financing. If the Company receives
notice (a) of a payment default under the indenture for the Tax-Exempt Bond
Financing, or (b) that the levied Government Service Tax remains unpaid, no
consulting fees will be permitted to be paid. If such an event of default
occurred, it would have a material adverse effect on the business and financial
condition of the Company to the extent that the other business segments of the
Company did not increase their revenues to compensate for such loss and/or that
the Company was unable to raise additional capital or obtain additional
borrowing.
- THE BARONA CONSULTING AGREEMENT
Appropriate regulatory authorities have not yet approved the Consulting
Agreement. If the Consulting Agreement is not approved or is
significantly modified from the standpoint of consulting revenue, such
action would have a material adverse effect on the business and
financial condition of the Company. (See Notes to Consolidated Financial
Statements, Note 3. -- Barona Consulting Agreement.)
- VOLATILITY OF AVAILABLE-FOR-SALE SECURITIES
The Company is exposed to equity price risks on the marketable portion
of its equity securities. The Company's available-for-sale securities at
December 31, 1999 include strategic equity positions in securities that
have experienced significant historical volatility in their stock
prices. The Company does not currently attempt to reduce or eliminate
its market exposure on these securities. An adverse change in equity
prices could result in a material decrease in the fair value of the
Company's available-for-sale securities.
22
<PAGE> 23
- UNCERTAINTIES CONCERNING INTERNET GAMING
Many of the laws and regulations concerning the regulation of the
business of Internet gaming in the United States and in other countries
are currently being developed. The evolution of the laws and statutes
regarding Internet gaming will have a significant impact on the
Company's Internet gaming business. It is not known at what rate or
direction the evolution of such gaming regulations and statutes will
take place. The Company is competing with other entities, some of which
have been in the market longer than the Company. In addition, certain
current competitors and potential future competitors have, or may have
greater resources than the Company to devote further technologies and
new product developments to the development of Internet gaming. There
can be no assurance that existing or future competitors will not develop
or offer technologies that provide significant economic, technological,
creative or strategic advantages over those offered by the Company. The
Company's future success in the Internet Gaming Consulting field is
dependent on the evolving regulatory and competitive environment. There
is no assurance that the Company's present and contemplated services
provided to "Internet gaming casinos" will achieve or maintain
sufficient commercial acceptance, or if they do, that regulatory
developments will not diminish the full economic potential of such
virtual gaming sites.
- VOLATILITY OF STOCK PRICE
The trading price of the Company's Common Stock has been, and will
likely continue to be, subject to wide fluctuations because of Indian
gaming regulatory developments, quarterly variations in the Company's
operating results, announcements of new products or business activities
by the Company or its competitors, general market fluctuations, and
other events and factors. These factors, coupled with the small public
float, have in the past, and could in the future, result in wide
fluctuations in the market trading price.
- YEAR 2000 READINESS DISCLOSURE
As of February 2000, the Company has completed all year 2000 readiness
work. The Company, it's most significant customer, the Barona Casino,
and WMH's online gaming computer software vendor have not experienced
any major incidents related to Year 2000 issues. However, it is possible
that the full impact of the date change has not been fully recognized.
The Company believes that any such problems are likely to be minor and
correctable. The Company will continue to monitor all systems for Year
2000 related concerns. As of December 31, 1999, total costs relating to
the Company's compliance efforts, based upon management's best
estimates, were 55 man-hours of the Company's personnel and $3,400.
Costs for Year 2000 compliance will continue to be expensed as incurred
and are not expected to have a material impact on the Company's
consolidated results of operations
The information set forth above under this caption "Year 2000 Readiness
Disclosure" relates to the Company's efforts to address the Year 2000
concerns regarding the Company's (a) operations; (b) services, products
and technologies sold to third parties; and (c) major suppliers and
customers. Such statements are intended as Year 2000 Statements and Year
2000 Readiness Disclosures and are subject to the Year 2000 Information
Readiness Act.
23
<PAGE> 24
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 10, 1999, the Company held its Annual Meeting of Shareholders. At
such Meeting, the following matters were approved by the shareholders:
(a) Richard T. Harrison, Thomas G. Holmes, Andrew B. Laub, Jana McKeag,
G. Fritz Opel, Charles Reibel, Sanjay Sabnani, Cornelius E. ("Neil") Smyth, and
L. Donald Speer II were each elected to serve as directors of the Company to
hold office for a term of one year and until their respective successors are
elected and qualified. The tabulation of the votes cast for election of
Directors was as follows:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
--------------------------- --------- --------------
<S> <C> <C>
Richard T. Harrison 4,265,082 4,756
Thomas G. Holmes 4,265,208 4,630
Andrew B. Laub 4,265,208 4,630
Jana McKeag 4,265,159 4,680
G. Fritz Opel 4,265,678 4,160
Charles Reibel 4,265,208 4,630
Sanjay Sabnani 4,265,174 4,664
Cornelius E. ("Neil") Smyth 4,265,168 4,670
L. Donald Speer II 4,265,658 4,180
</TABLE>
(b) An amendment to the Company's Articles of Incorporation to change
the name of the Company to "Venture Catalyst Incorporated." The tabulation of
the votes was as follows:
<TABLE>
<S> <C>
Votes For 4,254,813
Votes Against 4,960
Abstentions 10,065
Broker Non-Votes 0
</TABLE>
(c) Approval of a resolution permitting the Company to take action by
written consent of fewer than all of the shareholders of the Company entitled to
vote with respect to the subject matter of the action. The tabulation of the
votes was as follows:
<TABLE>
<S> <C>
Votes For 3,467,704
Votes Against 27,302
Abstentions 9,420
Broker Non-Votes 765,412
</TABLE>
(d) Approval of the Amended and Restated Bylaws of the Company. The
tabulation of the votes was as follows:
<TABLE>
<S> <C>
Votes For 3,482,309
Votes Against 13,895
Abstentions 8,022
Broker Non-Votes 765,612
</TABLE>
24
<PAGE> 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The Exhibits listed below are hereby filed with the U.S.
Securities and Exchange Commission (the "Commission") as part of this Quarterly
Report on Form 10-QSB.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
3.1 Articles of Amendment of Articles of Incorporation of the Company,
filed with the Secretary of State of Utah on December 10, 1999.
3.2 Amended and Restated Articles of Incorporation of the Company
(formerly known as Twin Creek Exploration Co., Inc.), previously
filed as Exhibit 3.1 to the Company's Annual Report on Form 10-KSB
for the Fiscal Year Ended June 30, 1995, filed with the Commission
on October 12, 1995 (File No. 0-11532), is hereby incorporated
herein by reference.
3.3 Amended and Restated Bylaws of the Company, adopted at the
Company's Annual Meeting of Shareholders on December 10, 1999.
10.1 Settlement and Release Agreement dated December 17, 1999, by and
among Richard T. Harrison, the Company and Cyberworks, Inc.
10.2 Amended and Restated Noncompetition Agreement dated as of December
25, 1999, by and among Richard T. Harrison, Cyberworks, Inc. and
the Company.
10.3 Call Agreement dated as of December 25, 1999, by and between
Richard T. Harrison and the Company.
10.4 Stock Pledge Agreement dated as of December 25, 1999, by and
between Richard T. Harrison and the Company.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K. During the Company's second quarter ended
December 31, 1999, the Company filed no Current Reports on Form 8-K with the
commission.
25
<PAGE> 26
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VENTURE CATALYST INCORPORATED,
a Utah Corporation
Date: February 14, 2000 By: /s/ L. DONALD SPEER, II
---------------------------------
L. Donald Speer, II
Chairman of the Board and Chief
Executive Officer, President and
Chief Operating Officer
(Authorized Signatory, Principal
Executive Officer)
Date: February 14, 2000 By: /s/ KEVIN MCINTOSH
---------------------------------
Kevin McIntosh
Vice President, Chief Financial
Officer, Secretary and Treasurer
(Authorized Signatory, Principal
Financial Officer)
26
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
3.1 Articles of Amendment of Articles of Incorporation of the Company,
filed with the Secretary of State of Utah on December 10, 1999.
3.2 Amended and Restated Articles of Incorporation of the Company
(formerly known as Twin Creek Exploration Co., Inc.), previously
filed as Exhibit 3.1 to the Company's Annual Report on Form 10-KSB
for the Fiscal Year Ended June 30, 1995, filed with the Commission
on October 12, 1995 (File No. 0-11532), is hereby incorporated
herein by reference.
3.3 Amended and Restated Bylaws of the Company, adopted at the
Company's Annual Meeting of Shareholders on December 10, 1999.
10.1 Settlement and Release Agreement dated December 17, 1999, by and
among Richard T. Harrison, the Company and Cyberworks, Inc.
10.2 Amended and Restated Noncompetition Agreement dated as of December
25, 1999, by and among Richard T. Harrison, Cyberworks, Inc. and
the Company.
10.3 Call Agreement dated as of December 25, 1999, by and between
Richard T. Harrison and the Company.
10.4 Stock Pledge Agreement dated as of December 25, 1999, by and
between Richard T. Harrison and the Company.
27 Financial Data Schedule.
</TABLE>
27
<PAGE> 1
EXHIBIT 3.1
State of Utah
Department of Corporations
Division of Corporations and Commercial Code
I hereby certify that the foregoing has been filed and approved on the 10th day
December, 1999 in the office of this Division and hereby issue this Certificate
thereof.
Examiner /s/ BS Date 12/13/99
[SEAL] /s/ LORENA R. RIFFO
-------------------
Division Director
ARTICLES OF AMENDMENT
OF
INLAND ENTERTAINMENT CORPORATION
To the Division of Corporations and Commercial Code
State of Utah
Pursuant to the provisions of Section 16-10a-1006 of the Utah Revised
Business Corporation Act, the corporation hereinafter named (the "Corporation")
does hereby adopt the following Articles of Amendment:
1. The name of the Corporation is Inland Entertainment Corporation.
2. Article I of the Articles of Incorporation of the Corporation is
hereby amended so as henceforth to read as follows:
"The name of the corporation is Venture Catalyst Incorporated."
3. The date of adoption of the aforesaid amendment was December 10,
1999.
4. The designation, the number of outstanding shares, the number of
shares entitled to be cast by the voting group entitled to vote on the said
amendment, and the number of votes of the voting group indisputably represented
at the meeting at which the said amendment was approved are as follows:
a. Designation of voting group: Common Stock, par value $.001
per share
b. Number of outstanding shares of voting group: 4,760,786
c. Number of shares of voting group entitled to vote on the
amendment: 4,760,786
d. Number of shares of voting group indisputably represented at
the meeting: 4,269,838
<PAGE> 2
5. The total number of votes cast for and against the said amendment by
the voting group entitled to vote on the said amendment is as follows:
a. Designation of voting group: Common Stock, par value $.001
per share
b. Number of votes of voting group cast for the amendment:
4,254,813
c. Number of votes of voting group cast against the amendment:
4,960
d. Number of votes of voting group abstaining from voting: 1,065
6. The said number of votes cast for the said amendment was sufficient
for the approval thereof by the said voting group.
Executed on December 10, 1999
Inland Entertainment Corporation
By: /s/ L. DONALD SPEER, II
---------------------------------
L. Donald Speer II,
Chief Executive Officer and
President
-2-
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
BYLAWS OF
VENTURE CATALYST INCORPORATED
ARTICLE I - PURPOSES
SECTION 1.01 PURPOSE. This corporation is organized for any and all
lawful purposes for which corporations may be organized under the Utah Revised
Business Corporation Act, as amended, as set forth in the corporation's Articles
of Incorporation.
ARTICLE II - OFFICES
SECTION 2.01 OFFICES. The principal office of the corporation may be
located at any place, either in or outside the State of Utah, as designated in
the corporation's most current Annual Report filed with the Utah Division of
Corporations and Commercial Code. The corporation may have such other offices,
either in or outside the State of Utah, as the board of directors may designate
or as the business of the corporation may require from time to time. The
corporation shall maintain at its principal office a copy of certain records, as
specified in Section 16-10a-1601 of the Utah Revised Business Corporation Act.
SECTION 2.02 REGISTERED OFFICE. The registered office of the
corporation, required by Section 16-10a-501 of the Utah Revised Business
Corporation Act, shall be located in the State of Utah and may be, but need not
be, identical with the corporation's principal office (if located in the State
of Utah). The address of the registered office may be changed from time to time.
ARTICLE III - SHAREHOLDERS
SECTION 3.01 ANNUAL MEETING. The corporation shall hold an annual
meeting of shareholders at such time, date and place as the board of directors
shall determine, for the purpose of electing directors and for the transaction
of such other business as may come before the meeting.
-1-
<PAGE> 2
SECTION 3.02 SPECIAL MEETING. The corporation shall hold a special
meeting of the shareholders:
(i) on call of its board of directors, the chairman of the board
of directors; or
(ii) if the holders of shares representing at least ten percent
(10%) of all the votes entitled to be cast on any issue that is proposed
to be considered at a special meeting sign, date and deliver to the
corporation's secretary one or more written demands for the meeting,
stating the purpose or purposes for which it is to be held.
SECTION 3.03 PLACE OF MEETINGS. The board of directors may designate any
place, either in or outside the State of Utah, as the place at which any annual
or special meeting is to be held. If no designation is made, the meeting shall
be held at the corporation's principal office.
SECTION 3.04 ACTION WITHOUT A MEETING.
(a) ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken at a meeting of the shareholders may be taken without a meeting and
without prior notice if one or more consents in writing, setting forth the
action so taken, are signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
the action at a meeting at which all shares entitled to vote thereon were
present and voted.
(b) NOTICE OF ACTION. Unless the written consents of all
shareholders entitled to vote have been obtained, notice of any shareholder
approval without a meeting shall be given at least ten (10) days before the
consummation of the action authorized by the approval to:
(i) those shareholders entitled to vote who have not consented
in writing; and
(ii) those shareholders not entitled to vote and to whom the
Utah Revised Business Corporation Act requires that notice of the
proposed action be given.
The notice must contain or be accompanied by the same material that, under the
Utah Revised Business Corporation Act and these Bylaws, would have been required
to be sent in a notice of meeting at which the proposed action would have been
submitted to the shareholders for action.
-2-
<PAGE> 3
(c) WITHDRAWAL OF CONSENT. Any shareholder giving a written
consent or the shareholder's proxyholder, or a transferee of the shares or a
personal representative of the shareholder or their respective proxyholder, may
revoke the consent by a signed writing describing the action and stating that
the shareholder's prior consent is revoked, if the writing is received by the
corporation prior to the effectiveness of the action.
(d) EFFECTIVE DATE OF ACTION. An action taken pursuant to this
Section 3.04 is not effective unless all written consents on which the
corporation relies for the taking of an action pursuant to subsection (a) are
received by the corporation within a sixty (60) day period and not revoked
pursuant to subsection (c). Action taken pursuant to this Section 3.04 is
effective as of the date the last written consent necessary to effect the action
is received by the corporation, unless all of the written consents necessary to
effect the action specify a later date as the effective date of the action, in
which case the later date shall be the effective date of the action. If the
corporation has received written consents as contemplated by subsection (a)
signed by all shareholders entitled to vote with respect to the action, the
effective date of the action may be any date that is specified in all the
written consents as the effective date of the action
(e) ELECTION OF DIRECTORS. Notwithstanding subsection (a),
directors may not be elected by written consent except by unanimous written
consent of all shares entitled to vote for the election of directors.
(f) RECORD DATE. If not otherwise determined under Section 3.06
of these Bylaws, the record date for determining shareholders entitled to take
action without a meeting or entitled to be given notice under subsection (b) of
action so taken is the date the first shareholder delivers to the corporation a
writing upon which the action is taken pursuant to subsection (a).
SECTION 3.05 NOTICE OF MEETING.
(a) NOTICE REQUIRED. The corporation shall give notice to
shareholders of the date, time and place of each annual and special
shareholders' meeting no fewer than ten (10) nor more than sixty (60) days
before the meeting date. Notice shall be deemed effective at the earlier of (i)
when deposited in the United States mail, addressed to the shareholder at his or
her address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid; (ii) on the date shown on the return receipt if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee; (iii) when received; or (iv) five (5)
days after deposit in the United States mail mailed postpaid and correctly
addressed to an address other than that shown in the corporation's current
record of shareholders.
-3-
<PAGE> 4
(b) EXCEPTION TO NOTICE REQUIREMENT. Notwithstanding any
requirement in these Bylaws or elsewhere that notice be given, the corporation
shall not be required to give notice to any shareholder to whom:
(i) a notice of two (2) consecutive annual meetings, and all
notices of meetings during the period between the two (2) consecutive
annual meetings, have been mailed, addressed to the shareholder at the
shareholder's address as shown on the corporation's records, and have
been returned undeliverable; or
(ii) at least two (2) payments, if sent by first class mail, of
dividends or interest on securities during a twelve (12) month period,
have been mailed, addressed to the shareholder at the shareholder's
address as shown on the records of the corporation, and have been
returned undeliverable.
(c) CONTENTS OF NOTICE.
(i) The notice of every shareholders' meeting must state the
place, day and time of the meeting.
(ii) Notice of an annual meeting need not include a description
of the purpose or purposes for which the meeting is called, except for
those matters specified by law or these Bylaws for which specific notice
must be given.
(iii) Notice of a special meeting must include a description of
the purpose or purposes for which the meeting is called.
(iv) If a purpose of any shareholder meeting is to consider
either (1) a proposed amendment of the Articles of Incorporation
(including any restated Articles requiring shareholder approval); (2) a
plan of merger or share exchange; (3) the sale, lease, exchange or other
disposition of all, or substantially all of the corporation's property;
(4) the dissolution of the corporation; or (5) the removal of a
director, the notice must so state and be accompanied by respectively a
copy or summary of the (1) amendment; (2) plan of merger or share
exchange; and (3) a description of the transaction involving the
disposition of all or substantially all the corporation's property. If
the proposed corporate action creates dissenters' rights under Part 13
of the Utah Revised Business Corporation Act, the notice must state that
shareholders are, or may be, entitled to assert dissenters' rights, and
must be accompanied by a copy of such Part 13.
(d) WAIVER OF NOTICE. A shareholder may waive any notice
required by these Bylaws, before or after the date and time stated in the notice
as the date or time
-4-
<PAGE> 5
when any action will occur or has occurred. The waiver must be in writing, be
signed by the shareholder entitled to the notice, and be delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
(e) WAIVER BY ATTENDANCE. A shareholder's attendance at a
meeting:
(i) waives objection to lack of notice or defective notice of
the meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting
because of lack of notice or defective notice; and
(ii) in the case of a special meeting, waives objection to
consideration of a particular matter at the meeting that is not within
the purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
SECTION 3.06 RECORD DATE FOR MEETINGS AND OTHER ACTIONS.
(a) FIXING OF RECORD DATE. The board of directors by resolution
may fix a record date in order to determine the shareholders entitled to receive
notice of a shareholders' meeting, and to determine the shareholders who are
entitled to take action without a meeting, to demand a special meeting, to vote,
or to take any other action. Such record date may not be more than seventy (70)
days before the meeting or action requiring the determination of shareholders.
(b) DEFAULT RECORD DATE. If the board of directors does not fix
a record date, the record date for determining shareholders entitled to notice
of and to vote at an annual or special shareholders' meeting is the close of
business on the date before the first notice is delivered to shareholders.
(c) ADJOURNMENT. A determination of shareholders entitled to
notice of or to vote at a shareholders' meeting is effective for any adjournment
of the meeting unless the board of directors fixes a new record date, which it
must do if the meeting is adjourned to a date more than one hundred twenty (120)
days after the date fixed for the original meeting,
SECTION 3.07 RECORD DATE OF DIVIDENDS AND OTHER DISTRIBUTIONS. The board
of directors may fix a future date as the record date for determining
shareholders entitled to dividends and other distributions, other than one
involving a purchase, redemption, or other acquisition of the corporation's
shares. If the board of directors does not fix a record date, the record date is
the date the board of directors authorizes the distribution.
-5-
<PAGE> 6
SECTION 3.08 MEETINGS BY TELECOMMUNICATION. Shareholders may participate
in a meeting by, or the meeting may be conducted through the use of, conference
telephone or similar means of communication by which all persons participating
in the meeting can hear one another during the meeting. A shareholder
participating in a meeting by this means is considered to be present at the
meeting.
SECTION 3.09 VOTING LISTS.
(a) REQUIREMENTS FOR VOTING LIST. After fixing a record date for
a shareholders' meeting, the corporation shall prepare a list of the names of
all its shareholders who are entitled to be given notice of the meeting. The
list must be arranged by voting group, and within each voting group by class or
series of shares. The list must be alphabetical within each class or series and
must show the address of, and the number of shares held by, each shareholder.
(b) INSPECTION OF VOTING LIST PRIOR TO A MEETING. The
shareholders' list must be available for inspection by any shareholder,
beginning on the earlier of ten (10) days before the meeting for which the list
was prepared or two (2) business days after notice of the meeting is given and
continuing through the meeting and any meeting adjournments, at the
corporation's principal office of at a place identified in the meeting notice in
the city in which the meeting will be held.
(c) INSPECTION OF VOTING LIST AT THE MEETING. The corporation
shall make the shareholders' list available at the meeting, and any shareholder,
or any shareholder's agent or attorney is entitled to inspect the list at any
time during the meeting or any adjournment, for any purpose germane to the
meeting.
(d) EFFECT ON MEETING. The corporation's refusal or failure to
prepare or make available the shareholders' list does not affect the validity of
action taken at the meeting.
SECTION 3.10 PROXIES.
(a) MANNER OF VOTING. At all meetings of shareholders, a
shareholder may vote his or her shares in person or by proxy.
(b) APPOINTMENT OF PROXY. A shareholder may appoint a proxy by
signing an appointment form, either personally or by the shareholder's attorney
in fact.
(c) EFFECTIVE DATE. A proxy is effective when received by the
corporation.
-6-
<PAGE> 7
(d) TERM. A proxy is valid for eleven (11) months unless a
longer period is expressly provided in the appointment form.
(e) REVOCATION. An appointment of a proxy is revocable by the
shareholder, and is revoked upon the death or incapacity of the shareholder
(upon receipt of notice of either event by the secretary or other officer or
agent authorized to tabulate votes before the proxy exercises the authority
under the appointment), unless the 6 appointment form conspicuously states that
it is irrevocable and the appointment is coupled with an interest.
SECTION 3.11 VOTING ENTITLEMENT OF SHARES. Each outstanding share is
entitled to vote is entitled to one (1) vote upon each matter submitted to a
vote at a meeting of shareholders.
SECTION 3.12 QUORUM. Shares entitled to vote at a meeting may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. A majority of the votes entitled to be cast on a matter
constitutes a quorum for action on that matter. Once a quorum is present, it
shall be deemed to continue for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set for that
adjourned meeting.
SECTION 3.13 VOTE REQUIRED TO TAKE ACTION FOR OTHER THAN ELECTION OF
DIRECTORS. If a quorum exists, action on a matter, other than the election of
directors, is approved if the votes cast favoring the action exceed the votes
cast opposing the action, except where a greater number of affirmative votes is
otherwise required by law.
SECTION 3.14 VOTING FOR DIRECTORS.
(a) MANNER OF VOTING. At each election of directors, every
shareholder entitled to vote at the election has the right to cast, in person,
or by proxy, all of the votes to which the shareholders shares are entitled for
as many persons as there are directors to be elected and for whose election the
shareholder has the right to vote. Shareholders shall not have a right to
cumulate their votes for the election of directors.
(b) VOTE REQUIRED. Directors are elected by a plurality of the
votes cast by the shares entitled to vote in the election, at a meeting of
shareholders at which a quorum is present.
SECTION 3.15 CONDUCT OF MEETINGS. The board of directors may adopt by
resolution such rules and regulations for the conduct of meetings of
shareholders as it shall deem appropriate. Except to the extent inconsistent
with such rules and regulations adopted by the board of directors, the chair of
any meeting of shareholders shall have the
-7-
<PAGE> 8
right and authority to prescribe such rules, regulations and procedures and to
all such acts as, in the judgment of the chair, are appropriate for the conduct
of the meeting. Such rules, regulations and procedures, whether adopted by the
board of directors or prescribed by the chair, may include, without limitation,
the following: (a) the establishment of an agenda or order of business for the
meeting, (b) rules and procedures for maintaining order at the meeting and the
safety of those present, (c) limitations on attendance at or participation in
the meeting to shareholders of record, their duly authorized and constituted
proxies or such other persons as the chair of the meeting shall determine, (d)
restrictions on entry to the meeting after the time fixed for commencement
thereof, and (e) limitations on the time allotted to questions or comments by
participants. Unless and to the extent determined by the board of directors or
the chair of the meeting, meetings of shareholders shall not be required to be
held in accordance with the rules of parliamentary procedure.
ARTICLE IV- BOARD OF DIRECTORS
SECTION 4.01 GENERAL POWERS. The business and affairs of the corporation
shall be managed under the direction of its board of directors.
SECTION 4.02 NUMBER. The number of directors of the corporation shall be
not less than three (3) nor more than ten (10), with the exact number of
directors within such parameters to be set by resolution of the board of
directors from time to time; provided that no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director.
SECTION 4.03 CHAIR. One (1) director may be designated by a majority of
the full board of directors as chair of the board. The chair of the board shall
preside at all meetings of the board of directors.
SECTION 4.04 ELECTION. The directors shall be elected at each annual
meeting of the shareholders. If the directors are not elected at an annual
meeting, or if an annual meeting is not held, then the directors may be elected
at any special meeting of the shareholders held for that purpose.
SECTION 4.05 TERM. The terms of the initial directors of the corporation
expire at the first shareholders' meeting at which directors are elected. The
terms of all other directors expire at the next annual shareholders' meeting
following their election. Despite the expiration of a director's term, the
director shall continue to serve until the election and qualification of a
successor or until there is a decrease in the number of directors, or until such
director's earlier death, resignation or removal from office.
-8-
<PAGE> 9
SECTION 4.06 QUALIFICATIONS. Directors need not be residents of the
State of Utah or shareholders of the corporation.
SECTION 4.07 RESIGNATION. Any director of the corporation may resign at
any time by giving written notice to the corporation. A resignation is effective
when the notice is received by the corporation unless the notice specifies a
later effective date.
SECTION 4.08 REMOVAL.
(a) SHAREHOLDERS' RIGHT TO REMOVE DIRECTORS. The shareholders
may remove one or more directors with or without cause. A director may be
removed only at a meeting called for that purpose.
(b) NOTICE REQUIREMENT. The notice of the meeting at which a
director is to be removed must state that the purpose, or one of the purposes,
of the meeting is to remove the director.
(c) VOTE REQUIRED. A director may be removed only if the number
of votes cast to remove the director exceeds the number of votes cast against
removal.
SECTION 4.09 VACANCIES. Any vacancy occurring among the directors,
including a vacancy resulting from an increase in the number of directors, may
be filled by the affirmative vote of a majority of the remaining directors,
although less than a quorum, or by the shareholders. A director elected to fill
a vacancy shall be elected for the unexpired term of his or her predecessor in
office.
SECTION 4.10 COMPENSATION. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors, and may be paid a fixed sum for attendance at each
meeting of the board of directors or stated salaries as directors. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
SECTION 4.11 REGULAR MEETINGS. By resolution, the board of directors may
determine the time and place, either within or without the State of Utah, for
the holding of regular meetings without other notice than such resolution.
SECTION 4.12 SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the chairman of the board or
fifty percent (50%) or more of the directors. The person or persons authorized
to call special meetings of the board of
-9-
<PAGE> 10
directors may fix any place, either within or without the State of Utah as the
place for holding any special meeting of the board of directors called by them.
SECTION 4.13 ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at a meeting of the board of directors may be taken without a
meeting if a consent in writing, setting forth the action so taken, is signed by
all of the directors. Such consent has the same force and effect as a unanimous
vote of the directors. Action taken under this provision is effective at the
time the last director signs a writing describing the action taken unless, prior
to that time, any director has revoked a consent by a writing signed by the
director and received by the secretary or any other person authorized by the
Bylaws or the board of directors to receive the revocation, or unless the
consent specifies a different effective time.
SECTION 4.14 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting
shall be given at least one (1) day prior to the date of the meeting. Notice
must be in writing unless oral notice is reasonable under the circumstances.
Notice may be communicated in person, by any form of electronic communication or
by mail or private carrier. The notice need not describe the purpose of the
special meeting, unless otherwise required by law or these Bylaws. Notice will
conclusively be deemed to have been given and shall be effective when personally
delivered (by courier or otherwise); or if given by mail, on the fifth day after
being sent by first class, registered or certified mail; or if given by
telecopy, facsimile or other electronic means, when confirmation of transmission
is indicated by the sender's machines or device.
SECTION 4.15 WAIVER OF NOTICE.
(a) WRITTEN WAIVER. Any director may waive notice of any meeting
before or after the date and time of the meeting stated in the notice. Except as
provided in subsection (b) below, the waiver must be in writing and signed by
the director entitled to notice. The waiver shall be delivered to the
corporation for filing with the corporate records, but delivery and filing are
not conditions to its effectiveness.
(b) WAIVER BY ATTENDANCE. The attendance of a director at or
participation in a meeting waives any required notice to the director of the
meeting unless the director at the beginning of the meeting, or promptly upon
the director's arrival, objects to the holding of the meeting or the transacting
of business at the meeting because of lack of notice or defective notice, and
does not thereafter vote for or assent to action taken at the meeting.
SECTION 4.16 QUORUM. A majority of the number of directors fixed by
Section 4.02 of these Bylaws constitutes a quorum for the transaction of
business at any meeting of the board of directors.
-10-
<PAGE> 11
SECTION 4.17 MANNER OF ACTING. The act of a majority of the directors
present at a meeting at which a quorum is present is the act of the board of
directors. Voting by proxy is not permitted.
SECTION 4.18 MEETINGS BY TELECOMMUNICATION. The board of directors may
permit any or all directors to participate in a regular or special meeting by,
or conduct the meeting through the use of, any means of communication by which
all directors participating may hear each other during the meeting. A director
participating in a meeting by this means is considered present in person at the
meeting.
SECTION 4.19 PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken is presumed to have assented to the action taken unless:
(i) the director objects at the beginning of the meeting, or
promptly upon arrival, to holding the meeting or transacting business at
the meeting and does not thereafter vote for or assent to any action
taken at the meeting;
(ii) the director contemporaneously requests that his dissent or
abstention as to any specific action be entered into the minutes of the
meeting; or
(iii) the director causes written notice of a dissent or
abstention as to any specific action to be received by the presiding
officer of the meeting before adjournment of the meeting or by the
corporation promptly after adjournment of the meeting.
The right of dissent under this Section as to a specific action shall not be
available to a director who votes in favor of the action taken.
ARTICLE V - COMMITTEES
SECTION 5.01 CREATION OF COMMITTEES. The board of directors by
resolution adopted by a majority of the number of directors fixed by Section
4.02 of these Bylaws may appoint such committees from time to time, either
standing or ad hoc, as it deems necessary or appropriate, including but not
limited to an executive committee as described in Section 5.05 below.
SECTION 5.02 MEMBERSHIP. Each committee shall consist of not less than
two (2) directors, who shall serve at the pleasure of the board of directors.
-11-
<PAGE> 12
SECTION 5.03 NOTICE, ETC. Sections 4.08 through 4.16 of these Bylaws,
which govern meetings, actions without meetings, notice, waiver of notice, and
quorum and voting requirements of the board of directors, shall apply to
committees and their members, as well.
SECTION 5.04 AUTHORITY. Each committee shall have and may exercise all
the authority specified in the resolution by which it is created, except that no
committee shall have any authority to adopt a plan of merger or consolidation,
to recommend to the shareholders the sale, lease or other disposition of all or
substantially all of the property or as of the corporation other than in the
usual and regular course of its business, to recommend to the shareholders a
voluntary dissolution of the corporation, or to amend the Bylaws of the
corporation.
SECTION 5.05 EXECUTIVE COMMITTEE. The executive committee of the board
of directors, if created pursuant to Section 5.01 of these Bylaws, shall consist
of two (2) or more directors. When the board of directors is not in session, the
executive committee shall have and may exercise all of the authority of the
board of directors except to the extent, if any, that such authority shall be
limited by the resolution appointing the executive committee, and except as
limited by Section 5.04 of these Bylaws.
ARTICLE VI - OFFICERS
SECTION 6.01 NUMBER. The corporation shall have such officers as may be
determined by the board of directors, and may include a president, a vice
president, a secretary, and a treasurer, each of whom shall be appointed by the
board of directors. One or more additional vice presidents (the number to be
determined by the board of directors) and such other officers and assistant
officers and agents as may be deemed necessary may also be appointed by the
board of directors. The board of directors may delegate to any officer of the
corporation or any committee of the board of directors the power to appoint
remove and prescribe the duties of such other officers, assistant officers,
agents and employees. Any two (2) or more offices may be held by the same
person.
SECTION 6.02 APPOINTMENT AND TERM OF OFFICE. The officers of the
corporation shall be appointed by the board of directors or by any officer to
whom or committee of the board of directors to which the power of appointment
has been delegated. Each officer shall hold office until such officer's
successor has been appointed or until such officer's death or until such officer
shall resign or shall have been removed in the manner provided below. The
appointment of an officer shall not itself create any contract rights with the
corporation.
-12-
<PAGE> 13
SECTION 6.03 REMOVAL. Any officer, assistant, agent or employee may be
removed, with or without cause, at any time by the board of directors, or by any
officer to whom or committee of the board of directors to which such power of
removal has been delegated but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
SECTION 6.04 RESIGNATION. An officer may resign at any time by giving
written notice of resignation to the corporation. A resignation of an officer is
effective when it is received by the corporation, unless the notice specifies a
later effective date. An officer's resignation does not affect the corporation's
contract rights, if any, with the officer.
SECTION 6.05 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors or by any officer to whom or committee of the board of directors to
which such power has been delegated.
SECTION 6.06 THE CHAIRMAN OF THE BOARD. The chairman of the board,
unless otherwise specified by the board of directors, shall be the chief
executive officer of the corporation and, under the direction of the board of
directors, shall in general supervise and control all the business and affairs
of the corporation. The chairman of the board shall, when present, preside at
all meetings of the shareholders and at meetings of the board of directors. The
chairman of the board may hire, prescribe the duties of, and fire employees, and
may delegate such authority in whole or in part to any other officer or
employee. The chairman of the board may sign, with the secretary or any other
proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, and any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
Bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and, in general, shall perform all
duties incident to the office of chief executive officer and such other duties
as may be prescribed by the board of directors from time to time.
SECTION 6.07 THE PRESIDENT. The president is the chief operating officer
of the corporation and has, subject to the direction of the chairman of the
board, if any, general supervision, direction and control of the day-to-day
operations of the business and officers of the corporation. The president has
the general powers and duties as may be prescribed by the board of directors.
The president may sign, with the secretary or any other proper officer of the
corporation thereunto authorized by the board of directors, certificates for
shares of the corporation, and any deeds, mortgages, bonds, contracts, or other
instruments which the board of directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the board of
-13-
<PAGE> 14
directors or by these Bylaws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed. In the absence
of a chairman of the board, or if there is no chairman of the board, the
president shall, in addition, be the chief executive officer of the corporation
and shall have the powers and duties described in Section 6.06 herein.
SECTION 6.08 THE VICE PRESIDENT. In the absence of the president, or in
the event of the president's death, inability or refusal to act, the vice
president (or in the event there is more than one vice president, the vice
presidents in the order designated by the board of directors, or in the absence
of any designation, then in the order of their election) shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. Any vice president may sign,
with the secretary or an assistant secretary, certificates for shares of the
corporation; and shall perform such other duties as from time to time may be
assigned to him or her by the president or by the board of directors.
SECTION 6.09 THE SECRETARY. The secretary shall (a) keep the minutes of
the shareholders' and of the board of directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and affix such seal to
documents when authorized; (d) keep a register of the address of each
shareholder which shall be furnished to the secretary by such shareholder; (e)
sign with the chairman of the board, president, or a vice president,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the board of directors; (f) have general charge
of the stock transfer books of the corporation; (g) maintain the records
required under Section 16-10a-1601 of the Utah Revised Business Corporation Act;
and (h) in general, perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to him or her by the
president or by the board of directors. In the absence of a secretary and any
assistant secretaries, the president shall perform these duties.
SECTION 6.10 THE TREASURER. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his or her duties in
such sum and with such surety or sureties as the board of directors shall
determine. He or she shall: (a) have charge and custody of and be responsible
for all funds and securities of the corporation; (b) receive and give receipts
for moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies or other depositories as shall be selected in accordance with the
provisions of Section 8.04 of these Bylaws; and (c) in general, perform all of
the duties incident to the office of treasurer and such other duties as from
time to time may be assigned to him or her by the president or by the board of
directors. In the absence of a treasurer, the secretary shall perform such
duties.
-14-
<PAGE> 15
SECTION 6.11 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries, when authorized by the board of directors, may sign with
the chairman of the board, president or a vice president certificates for shares
of the corporation, the issuance of which shall have been authorized by a
resolution of the board of directors. The assistant treasurers shall
respectively, if required by the board of directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the board of
directors shall determine. The assistant secretaries and assistant treasurer, in
general, shall perform such duties as shall be assigned to them by the secretary
or the treasurer, respectively, or by the president or the board of directors.
SECTION 6.12 COMPENSATION. The compensation of the officers shall be
fixed from time to time by the board of directors and no officer shall be
prevented from receiving such compensation by reason of the fact that he or she
is also a director of the corporation.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 7.01 CERTIFICATES FOR SHARES.
(a) SHAREHOLDER'S RIGHT TO A CERTIFICATE; CONTENTS. Shares may
but need not be represented by certificates. Unless required by law, the rights
and obligations of shareholders are not affected by whether or not their shares
are represented by certificates. Notwithstanding anything herein to the
contrary, every owner of shares of stock of the corporation may request to have
a certificate or certificate, in a form approved by the board of directors,
certifying the number and class and series of shares of the stock of the
corporation owned by such shareholder. Such certificates shall be consecutively
numbered in the order in which they are issued.
(b) SIGNATURES. Each certificate shall be signed by chairman of
the board or the president or a vice president and by the secretary or an
assistant secretary, or by such other officers as may be designated from time to
time by the board of directors. Any or all of the signatures on the certificates
may be a facsimile. In case any officer, transfer agent or registrar who has
signed, or whose facsimile signature has been placed upon, any such certificate,
shall cease to hold such office or position before the certificate is issued,
the certificate may nevertheless be issued by the corporation with the same
effect as if the person who signed the certificate, or whose facsimile signature
has been placed on the certificate, still held such office or position at the
date of issue.
(c) SHAREHOLDER REGISTER. A record shall be kept of the names
and addresses of the persons and entities owning the capital stock of the
corporation, the number and class and series of shares represented by each stock
certificate, and the date
-15-
<PAGE> 16
thereof, and when canceled, the date of cancellation. Every certificate
surrendered to the corporation for exchange or transfer must be canceled, and no
new certificate or certificates may be issued in exchange for any existing
certificate until the existing certificate has been canceled, except in cases
provided for in Section 7.05.
SECTION 7.02 TRANSFERS OF STOCK. Transfers of shares of stock of the
corporation shall be made only on the books of the corporation by the registered
holder of such shares, or by such holder's attorney as authorized by a power of
attorney duly executed and filed with the secretary, or with a transfer clerk or
a transfer agent appointed as provided in Section 7.04, and upon surrender of
the certificate or certificates representing such shares properly endorsed for
transfer, or when proper instructions with respect to the transfer of
uncertificated shares are received by the transfer agent appointed as provided
in Section 7.04. The person in whose name shares of stock stand on the books of
the corporation shall be deemed the owner of such shares for all purposes as
regards the corporation. Whenever any transfer of shares is made for collateral
security, and not absolutely, such fact shall be indicated in the entry of
transfer if, when the certificate or certificates are presented to the
corporation for transfer, both the transferor and the transferee request the
corporation to do so.
SECTION 7.03 REGULATIONS. The board of directors may make such rules and
regulations as it deems expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates representing
shares of the corporation's capital stock.
SECTION 7.04 TRANSFER AGENT. The board of directors may appoint, or
authorize any officer or officers to appoint, one or more transfer agents and
one or more registrars, and may require all certificates for stock to bear the
signature or signatures of any of them.
SECTION 7.05 LOST, STOLEN, DESTROYED, AND MUTILATED CERTIFICATES. If any
stock certificate is lost, stolen, destroyed, or mutilated, the corporation may
issue another certificate in its place upon proof of such loss, theft,
destruction, or mutilation and upon receipt by the corporation of a bond of
indemnity in such form and for such amount as the board of directors may direct;
provided, however, that a new certificate may be issued without requiring any
bond when the board of directors determines that it is proper.
SECTION 7.06 LEGENDS. Each stock certificate shall contain such legend
or other statements as may be required by the Utah Revised Business Corporation
Act, the Utah Uniform Securities Act, the federal securities laws, and any
agreement between the corporation and the applicable shareholder. Failure to
comply with the requirements of this Section 7.06 shall not affect the validity
of any certificate of stock which is otherwise issued in accordance with the
provisions of this Article VII.
-16-
<PAGE> 17
ARTICLE VIII - CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 8.01 CONTRACTS. The board of directors may authorize any officer
or officers, or agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 8.02 LOANS. No loans may be contracted on behalf of the
corporation and no promissory notes or other evidences of indebtedness may be
issued in its name unless authorized by a resolution of the board of directors.
Such authority may be general or confined to specific instances. No loan may be
made by the corporation secured by its unissued shares.
SECTION 8.03 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, or agent
or agents, of the corporation as may from time to time be determined by
resolution of the board of directors.
SECTION 8.04 DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the board of directors
may select.
ARTICLE IX DIVIDENDS
SECTION 9.01 DIVIDENDS. The board of directors may from time to time
declare, and the corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and the corporation's
Articles of Incorporation.
ARTICLE X - INDEMNIFICATION
SECTION 10.01 DEFINITIONS. As used in this Article X:
(a) "Corporation" includes any domestic or foreign entity that
is a predecessor of the corporation by reason of a merger or other transaction
in which the predecessor's existence ceased upon consummation of the
transaction.
(b) "Director" means an individual who is or was a director of
the corporation or an individual who, while a director of the corporation, is or
was serving at the corporation's request as a director, officer, partner,
trustee, employee fiduciary, or
-17-
<PAGE> 18
agent of another corporation or other person or of an employee benefit plan. A
director is considered to be serving an employee benefit plan at the
corporation's request if his or her duties to the corporation also impose duties
on, or otherwise involve services by, him or her to the plan or to participants
in or beneficiaries of the of the plan. "Director" includes, unless the context
requires otherwise, the estate or personal representative of a director.
(c) "Expenses" include counsel fees.
(d) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine (including an excise tax
assessed with respect to an employee benefit plan), or reasonable expenses.
(e) "Officer," "employee," fiduciary," and "agent" include any
person who, while serving the indicated relationship to the corporation, is or
was serving at the corporation's request as a director, officer, partner,
trustee, employee, fiduciary, or agent of another corporation or other person or
of an employee benefit plan. An officer, employee, fiduciary, or agent is
considered to be serving an employee benefit plan at the corporation's request
if the person's duties to the corporation also impose duties on, or otherwise
involve services by, that person to the plan or participants in, or
beneficiaries of the plan. Unless the context requires otherwise, such terms
include the estates or personal representatives of such persons.
(f) "Official capacity" means:
(i) when used with respect to a director, the office of
director in the corporation; and
(ii) when used with respect to a person other than a
director, as contemplated in Section 10.07, the office in the
corporation held by the officer of the employment, fiduciary, or agency
relationship undertaken by him or her on behalf of the corporation,
"Official capacity" does not include service for any other
corporation, other person, or employee benefit plan.
(g) "Party" includes an individual who was, is, or is threatened
to be made a named defendant or respondent in a proceeding.
(h) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
-18-
<PAGE> 19
SECTION 10.02 AUTHORITY TO INDEMNIFY DIRECTORS.
(a) Except as provided in Subsection 10.02(d), the corporation
shall indemnify an individual made a party to a proceeding because he or she is
or was a director, against liability incurred in the proceeding if:
(i) his or her conduct was in good faith; and
(ii) he or she reasonably believed that his or her
conduct was in, or not opposed to, the corporation's best
interests; and
(iii) in the case of any criminal proceeding, he or she
had no reasonable cause to believe his conduct was unlawful.
(b) A director's conduct with respect to any employee benefit
plan for a purpose he or she reasonably believed to be in or not opposed to the
interests of the participants in and beneficiaries of the plan is conduct that
satisfies the requirement of Subsection 10.02(a)(ii).
(c) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director did not meet the standard of
conduct described in this section.
(d) The corporation may not indemnify a director under this
section:
(i) in connection with a proceeding by or in the right
of the corporation in which the director was adjudged liable to
the corporation; or
(ii) in connection with any other proceeding charging
that the director derived an improper personal benefit, whether
or not involving action in his or her official capacity, in
which proceeding he or she was adjudged liable on the basis that
he or she derived an improper personal benefit.
(e) Indemnification permitted under this Section 10.02 in
connection with a proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding.
SECTION 10.03 MANDATORY INDEMNIFICATION OF DIRECTORS. The corporation
shall indemnify a director who was successful, on the merits or otherwise, in
the defense of any proceeding, or in the defense of any proceeding, or in the
defense of any claim, issue, or matter in the proceeding, to which he or she was
a party because he or she is or was a
-19-
<PAGE> 20
director of the corporation, against reasonable expenses incurred by him or her
in connection with the proceeding or claim with respect to which he or she has
been successful.
SECTION 10.04 ADVANCE OF EXPENSES FOR DIRECTORS.
(a) The corporation shall pay for or reimburse the reasonable
expenses incurred by a director who is a party to a proceeding in advance of
final disposition of the proceeding if:
(i) the director furnishes the corporation a written affirmation
of his or her good faith belief that he or she has met the applicable
standard of conduct described in Section 10.02;
(ii) the director furnishes to the corporation a written
undertaking, executed personally or on his or her behalf, to repay the
advance if it is ultimately determined that he or she did not meet the
standard of conduct; and
(iii) a determination is made that the facts then known to those
making the determination would not preclude indemnification under this
part.
(b) The undertaking required by Subsection 10.04(a)(ii) must be
an unlimited general obligation of the director but need not be secured and
shall be accepted without reference to financial ability to make repayment.
(c) Determination of payments under this section shall be made
in the manner specified in Section 10.06.
SECTION 10.05 COURT-ORDERED INDEMNIFICATION OF DIRECTOR. A director of
the corporation who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court, after giving
any notice the court considers necessary, may order indemnification in the
following manner:
(a) if the court determines that the director is entitled to
mandatory indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to obtain
court-ordered indemnification; and
(b) if the court determines that the director is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not the director met the applicable standard of
conduct set forth in Section 10.02 or was adjudged liable as described in
Subsection 10.02(d), the court may order indemnification as the
-20-
<PAGE> 21
court determines to be proper, except that the indemnification with respect to
any proceeding in which liability has been adjudged in the circumstances
described in Subsection 10.02(d) is limited to reasonable expenses incurred.
SECTION 10.06 DETERMINATION OF INDEMNIFICATION OF DIRECTORS.
(a) A corporation may not advance expenses to a director under
Section 10.04 until after the written affirmation and undertaking required by
Subsection 10.04(a)(ii) are received and the determination required by
Subsection 10.04(a)(iii) has been made.
(b) The determinations required by Subsection 10.06(a) shall be
made:
(i) by the board of directors by a majority vote of those
present at a meeting at which a quorum is present, and only those
directors not parties to the proceeding shall be counted in
satisfying the quorum; or
(ii) If a quorum cannot be obtained as contemplated in
Subsection 10.06(b)(i), by a majority vote of a committee of the
board of directors designated by the board of directors, which
committee shall consist of two or more directors not parties to the
proceeding, except that directors who are parties to the proceeding
may participate in the designation of directors for the committee;
or
(iii) by special legal counsel:
(1) selected by the board of directors or its committee
in the manner prescribed in Subsections 10.06(b)(i) and (ii); or
(2) if a quorum of the board of directors cannot be
obtained under Subsection 10.06(b)(i) and a committee cannot be
designated under Subsection 10.06(b)(ii), selected by a majority
vote of the full board of directors, in which selection
directors who are parties to the proceeding may participate; or
(iv) by the shareholders, by a majority of the votes
entitled to be cast by holders of qualified shares (as defined in
the Utah Revised Business Corporation Act) present in person or by
proxy at a meeting.
(c) A majority of the votes entitled to be cast by the holders
of all qualified shares constitutes a quorum for purposes of action that
complies with this section. Shareholders' action that otherwise complies with
this section is not affected by the presence of holders, or the voting, of
shares that are not qualified shares.
-21-
<PAGE> 22
SECTION 10.07 INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND
AGENTS.
(a) an officer of the corporation is entitled to mandatory
indemnification under Section 10.03, and is entitled to apply for court-ordered
indemnification under Section 10.05, in each case to the same extent as a
director;
(b) the corporation shall indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the corporation to the same extent as
to a director; and
(c) the corporation may also indemnify and advance expenses to
an officer, employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy and if provided for by specific
action of the board of directors, or contract.
SECTION 10.08 INSURANCE. The corporation may purchase and maintain
liability insurance on behalf of a person who is or was a director, officer,
employee, fiduciary, or agent of the corporation, or who, while serving as a
director, officer, employee, fiduciary, or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, fiduciary, or agent of another foreign or domestic
corporation or other person, or of an employee benefit plan, against liability
asserted against or incurred by him or her in that capacity or arising from his
or her status as a director, officer, employee, fiduciary, or agent, whether or
not the corporation would have power to indemnify him or her against the same
liability under Sections 10.02, 10.03 or 10.07. Insurance may be procured from
any insurance company designated by the board of directors, whether the
insurance company is formed under the laws of this state or any other
jurisdiction of the United States or elsewhere, including any insurance company
in which the corporation has an equity or any other interest through stock
ownership or otherwise.
SECTION 10.09 LIMITS ON DIRECTORS' LIABILITY. Pursuant to the
corporation's Articles of Incorporation, and to the fullest extent permitted by
the Utah Revised Business Corporation Act, as the same exists or may hereafter
be amended, no director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for any action taken or any
failure to take any action, as a director.
SECTION 10.10 SAVINGS CLAUSE. If this Article or any portion thereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each officer and director as to
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether internal or external,
including without limitation a grand jury proceeding and an action or suit
-22-
<PAGE> 23
brought by or in the right of the corporation, to the full extent permitted by
any applicable portion of this Article that shall not have been invalidated, or
by any other applicable law.
ARTICLE XI - MISCELLANEOUS
SECTION 11.01 SEAL. The board of directors may provide a corporate seal,
which shall be in the form of a circle and shall bear the name of the
corporation and words and figures showing that the corporation was incorporated
in the State of Utah and the year of incorporation.
SECTION 11.02 AMENDMENTS. These Bylaws, or any of them may be altered,
amended or repealed, and new Bylaws may be made, (i) by the board of directors,
by vote of a majority of the directors then in office, acting at any meeting of
the board of directors, or (ii) by the shareholders, by vote of a majority of a
quorum of the shareholders, at any annual meeting of shareholders, without
previous notice, or at any special meeting of shareholders, provided that notice
of such proposed amendment, modification, repeal or adoption is given in the
notice of special meeting. Except as otherwise provided in the corporation's
Articles of Incorporation, any Bylaws made or altered by the shareholders may be
altered or repealed by either the board of directors or the shareholders.
SECTION 11.03 FISCAL YEAR. Unless otherwise specified by the board of
directors, the fiscal year of the corporation shall end on the 30th day of June
in each year.
SECTION 11.04 VOTING OF STOCK IN OTHER CORPORATIONS. Unless otherwise
ordered by the board of directors, chairman of the board, the president and each
vice president shall have full power and authority on behalf of the corporation
to attend any meeting of shareholders of any corporation in which the
corporation may hold stock, to vote the stock held by the corporation, to
exercise on behalf of the corporation at any such meeting any and all of the
rights and powers incident to the ownership of such stock, and to execute and
deliver on behalf of the corporation proxies and consents in connection with the
exercise by the corporation of the rights and powers incident to the ownership
of such stock. The board of directors may, from time to time, confer like powers
upon any other person or persons.
-23-
<PAGE> 1
EXHIBIT 10.1
SETTLEMENT AND RELEASE AGREEMENT
This Settlement and Release Agreement (this "Agreement") is hereby
entered into by and among Richard T. Harrison, an individual (the "Executive"),
Venture Catalyst Incorporated, formerly known as Inland Entertainment
Corporation, a Utah corporation (the "Company"), and Cyberworks, Inc., a
California corporation and a wholly-owned subsidiary of the Company
("Cyberworks").
RECITALS
WHEREAS, the Executive has been employed by the Company pursuant to an
Employment Agreement by and among the Company, Cyberworks and the Executive
dated as of August 27, 1998 (the "Employment Agreement"), serving as President
and Chief Operating Officer of Cyberworks, a Director of the Company and of
Cyberworks, and a member of the Executive Committee of the Company's Board of
Directors (the "Executive Committee");
WHEREAS, the Executive, the Company and Cyberworks have determined that
it is in their mutual best interests that the Executive resign from his
positions as President and Chief Operating Officer of Cyberworks, a Director of
the Company and of Cyberworks, a member of the Executive Committee, and all
other positions that he holds with the Company and any other subsidiary or
related entity of the Company, without having to give the 60 day notice required
under the Employment Agreement; and
WHEREAS, the Executive is the beneficial owner of 750,000 shares of
common stock of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereby agree as follows:
1. Unconditional Resignation. The Executive hereby voluntarily,
unconditionally and irrevocably resigns, pursuant to Sections 4.4 and 6 of the
Employment Agreement, as an employee, an officer, a director (including a member
of any committees of the Board of Directors) of the Company, Cyberworks, and any
other subsidiary or related entity of the Company, effective as of the date the
Executive signs this Agreement (the "Resignation Date"). The Company and
Cyberworks each accept
<PAGE> 2
such resignation and the Executive is relieved of all duties effective
immediately. Concurrently with the execution of this Agreement, the Executive
shall execute a separate letter of resignation in a form acceptable to the
Company. In connection with such resignation, the Company and Cyberworks each
hereby waives the Executive's compliance with the notice provision of Section
4.4 of the Employment Agreement.
2. Compensation, Expenses, Vacation Pay and Other Benefits Through the
Resignation Date. The Company and/or Cyberworks shall pay to the Executive
within 72 hours of notice of the Resignation Date (a) the current portion of his
salary earned by him, (b) documented expense reimbursement of $11,333.16 owed to
him and (c) any accrued and unused vacation pay earned by him ($8,769.23,
representing 10 days), in each case, through the Resignation Date. The Executive
acknowledges and agrees that the payment of the foregoing salary, expenses and
vacation pay through the Resignation Date constitutes full payment of any and
all monies that he earned or that is owed to him during his employment by the
Company and/or Cyberworks through the Resignation Date.
3. Company Property. With the exception of the computer equipment
referenced in Section 6(b) herein, on the Resignation Date, the Executive shall
return to the Company and/or Cyberworks all property of the Company and/or
Cyberworks in the Executive's possession, including, but not limited to, that
certain 1999 Mercedes S420 Sedan automobile. In addition, within one business
day after the Resignation Date, the Executive shall relinquish his membership in
the Del Mar Country Club. In addition, the parties have agreed on a list of
personal property owned by the Executive that he shall be entitled to remove
from the Company's premises; that list shall be initialed by the parties and
become a part of this Agreement.
4. COBRA Benefits. The Executive (or any of his eligible dependents) may
elect to continue to participate in any of the Company's or Cyberworks' group
health insurance plans pursuant to COBRA, 29 U.S.C. Section 1161, et seq.
Nothing in this Agreement is intended to alter the terms of COBRA in any way and
those terms shall remain applicable in all respects.
5. Continuation of Benefits After the Resignation Date. Except as
expressly provided in this Agreement or in the plan documents governing the
Company's or Cyberworks' employee benefit plans, as of the Resignation Date, the
Executive will no longer be eligible for, receive, accrue, or participate in any
other benefits or benefit plans provided by the Company and/or Cyberworks,
including, without limitation, medical, dental and life insurance benefits, a
car allowance and the Company's or Cyberworks' 401(k) retirement plan; provided,
however, that health care coverage for the Executive and the Executive's
dependents may be continued under COBRA for as long as the
-2-
<PAGE> 3
Executive is eligible for such coverage and so long as the Executive pays the
required premiums.
6. Severance Benefits After the Resignation Date. Notwithstanding his
voluntary resignation, the Company and/or Cyberworks shall provide, as severance
benefits, the following benefits to the Executive after the expiration of the
date that the period of revocation under Section 11(c) of this Agreement has
lapsed without exercise and after the Executive's spouse executes the Spousal
Consent in the form presented to the Executive by the Company (the "Settlement
Date").
(a) Automobile Related Payment. The Company and/or Cyberworks
shall pay to the Executive twenty-seven thousand two hundred forty-one dollars
and ninety-eight cents ($27,241.98) in cash related to nonaccountable automobile
benefits.
(b) Computer Equipment. The Company and/or Cyberworks, as the
case may be, shall transfer to the Executive title to the computer equipment
described in Schedule 1 hereto.
(c) Call Agreement; Cash Payment. The Company and the Executive
shall enter into a Call Agreement on the Settlement Date, pursuant to which the
Executive shall grant to the Company the right and option (the "Call Option") to
require the Executive to sell to the Company all or part of the shares of the
Company's common stock subject to the Call Agreement at an exercise price of
$2.50 per share. The Call Option shall be exercisable in accordance with the
provisions of the Call Agreement at any time on or after the Settlement Date
until two years from the Settlement Date. As additional consideration for the
Executive's entering into the Call Agreement, the Company and/or Cyberworks
shall pay the Executive twenty thousand dollars ($20,000) in cash on the
Settlement Date.
(d) Noncompetition Agreement. The Company, Cyberworks and the
Executive shall amend and restate that certain Noncompetition Agreement dated
August 27, 1998 by and among the Company, Cyberworks and the Executive (the
"Noncompetition Agreement") as set forth in Exhibit A attached hereto.
(e) Future Employment for the Executive. Subject to the terms of
the Noncompetition Agreement, as amended and restated, the Company and
Cyberworks will consent to the Executive's employment by Working Woman Network,
Inc. and Working Woman Internet, Inc. (collectively, "Working Woman"). In
addition, notwithstanding Section 2 of the Noncompetition Agreement, as amended
and restated, on or after the Settlement Date, the Company and Cyberworks shall
permit the Executive to solicit and/or hire Charles Gillespie as an employee of
Working Woman.
-3-
<PAGE> 4
The payments and benefits set forth in this Section 6 are, from and
after the Settlement Date, the Executive's only right to compensation from the
Company and any of its parents, direct or indirect subsidiaries, divisions or
related entities (collectively referred to herein as the "Company and its
Related Entities").
7. Status of Related Agreements and Future Employment.
(a) Noncompetition Agreement. The Company, Cyberworks and the
Executive hereby acknowledge and agree that the Noncompetition Agreement, as
amended and restated, shall remain in full force and effect.
(b) Employment Agreement and Confidentiality Agreement. Although
the Employment Agreement was terminated by the Executive on the Resignation
Date, the Executive acknowledges that the duties and obligations set forth in
Sections 8, 9 and 10 of the Employment Agreement, together with the related
Confidentiality Agreement, extend beyond the Resignation Date.
8. General Release by the Executive. The Executive, for himself and his
heirs, executors, administrators, assigns, affiliates, successors and agents
(collectively, the "Executive's Affiliates") hereby fully and without limitation
releases and forever discharges the Company and its Related Entities and its and
their agents, representatives, shareholders, owners, officers, directors,
employees, consultants, attorneys, auditors, accountants, investigators,
affiliates, successors and assigns (collectively with the Company, the
"Releasees"), both individually and collectively, from any and all rights,
claims, demands, liabilities, actions, causes of action, damages, losses, costs,
expenses and compensation, of whatever nature whatsoever, known or unknown,
fixed or contingent ("Claims"), which the Executive or any of the Executive's
Affiliates has or may have or may claim to have against the Releasees by reason
of any matter, cause, or thing whatsoever, from the beginning of time to the
date hereof, including, without limiting the generality of the foregoing, any
Claims arising out of, based upon, or relating to the recruitment, hire,
employment, relocation, remuneration, investigation, or termination of the
Executive by any of the Releasees, the Executive's tenure as a Director of any
of the Releasees, any agreement or compensation arrangement between the
Executive and any of the Releasees (including, but not limited to, the
Employment Agreement), or any act or occurrence in connection with any actual,
existing, proposed, prospective or claimed ownership interest of any nature of
the Executive or the Executive's Affiliates in equity capital or rights in
equity capital or other securities of any of the Releasees to the maximum extent
permitted by law.
The Executive specifically and expressly releases any Claims arising out
of or based on the California Fair Employment and Housing Act, as amended; Title
VII of the Civil Rights Act of 1964, as amended; the Americans With Disabilities
Act; the
-4-
<PAGE> 5
National Labor Relations Act, as amended; the Equal Pay Act; ERISA; any
provision of the California Labor Code; California common law of fraud,
misrepresentation, negligence, defamation, infliction of emotional distress, any
breach of contract or covenant claim, any tort claim, any violation of public
policy or wrongful termination; state or Federal wage and hour laws; or any
other state or Federal law, rule, or regulation dealing with the employment
relationship.
The Executive is aware of California Civil Code Section 1542, which
provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
With full awareness and understanding of the above provision, the Executive
hereby waives any rights he may have under California Civil Code Section 1542.
9. Release of Federal Age Discrimination Claims by the Executive. The
Executive hereby knowingly and voluntarily waives and releases all rights and
claims, known or unknown, arising under the Age Discrimination In Employment Act
of 1967, as amended, which he might otherwise have had against the Company or
any of the Releasees regarding any actions which occurred prior to the effective
date of this Agreement.
10. Breach of Release. The Executive agrees that if he hereafter
commences, joins in, or in any manner seeks relief through any suit arising out
of, based upon, or relating to any of the Claims released by the Executive
hereunder, or in any manner asserts against any of the Releasees any of the
Claims released by the Executive hereunder, the Executive shall pay to such
Releasee(s), as the case may be, in addition to any other damages caused to such
Releasee, as the case may be, all attorneys' fees incurred in defending or
otherwise responding to said suit or claim.
11. Rights Under the Older Workers Benefit Protection Act. In accordance
with the Older Workers Benefit Protection Act of 1990, the Executive is aware of
the following:
(a) The Executive has the right to consult with an attorney
before signing this Agreement and is hereby advised by the Company and/or
Cyberworks to do so;
-5-
<PAGE> 6
(b) The Executive has twenty-one (21) days from December 17,
1999, to consider this Agreement; and
(c) The Executive has seven (7) days after signing this
Agreement to revoke Sections 6 and 9 of this Agreement (which must be revoked in
their entirety and as a group), and such Sections of this Agreement (as a group)
will not be effective until that revocation period has expired without exercise.
The Executive agrees that in order to exercise his right to revoke this
Agreement within such seven (7) day period, he must do so in a signed writing
delivered to the Company's Chief Executive Officer before the close of business
on the seventh calendar day after the Resignation Date. If the Executive does
not revoke the above-referenced Sections of this Agreement, the General Releases
set forth in Section 8 herein shall have as their new effective date the date
that the period of revocation under Section 11(c) of this Agreement has lapsed.
12. Confidentiality of Agreement. The Executive acknowledges that this
Agreement and certain related agreements may have to be disclosed in the
Company's reports filed with the U.S. Securities and Exchange Commission. Except
as may be required by law, neither the Executive, his attorney, nor any person
acting by, through, under or in concert with them, shall disclose any of the
terms of or facts relating to this Agreement (other than to state that the
Company has filed this Agreement and/or agreements related thereto as public
documents) or the negotiation thereof to any individual or entity, except for
disclosures made among the Executive, his attorney, spouse, children or tax
advisors. The Executive further agrees that under no circumstances will he
induce, encourage, solicit or assist any other person or entity to file or
pursue any proceeding of any kind against the Releasees.
13. Proprietary Information. The Executive acknowledges that certain
information, observations, and data obtained by him during the course of or
related to his employment with the Company and its Related Entities (including,
without limitation, certain financial information, shareholder information,
product design information, business plans, marketing plans or proposals,
personnel information, customer lists and other customer information) are the
sole property of the Company and its Related Entities and constitute trade
secrets of the Company and its Related Entities. The Executive agrees to
promptly return all files, customer lists, financial information and other
property of the Company and its Related Entities that are in the Executive's
possession or control without making copies thereof. The Executive further
agrees that he will not disclose to any person or use any such information,
observations or data without the written consent of the Company's Board of
Directors. Further, the Executive acknowledges that any unauthorized use of
trade secrets will cause irreparable harm to the Company and its Related
Entities and will give rise to an immediate action by the Company and/or its
Related Entities for injunctive relief. If Executive is served with a deposition
subpoena or other legal process calling for the disclosure of such information,
or if he is contacted by
-6-
<PAGE> 7
any third person requesting such information, he will immediately notify the
Company's Chief Financial Officer and will fully cooperate with the Company in
minimizing the disclosure thereof.
14. Unfair Competition. In addition to the provisions under the
Noncompetition Agreement in its form on this December 17, 1999 or as amended and
restated:
(a) The Executive agrees not to (whether as an employee,
director, owner, stockholder, consultant, limited or general partner, or
otherwise), for himself or for any other person or entity, engage in any unfair
competition with the Company and its Related Entities.
(b) The Executive also covenants and agrees not to intentionally
interfere with, disrupt, or attempt to disrupt, the relationship, contractual or
otherwise, between the Company, any of its Related Entities and any of its/their
customers, employees or suppliers as of the Resignation Date. Notwithstanding
anything to the contrary, with respect to this subparagraph (b) of this Section
14, during the term of the Noncompetition Agreement, as amended and restated,
nothing herein shall be construed or interpreted to be less inclusive than
Sections 2 and 3 of the Noncompetition Agreement, as amended and restated.
(c) The Executive acknowledges that any unfair competition or
misuse of trade secret or proprietary information belonging to the Company and
its Related Entities, or any violation of Sections 12 through 14 of this
Agreement, will result in irreparable harm to the Company and/or its Related
Entities and will give rise to an immediate action by the Company and its
Related Entities for injunctive relief.
15. Cooperation Clause.
(a) The Executive agrees to cooperate with the Company and its
Related Entities and its or their counsel (i) in any investigations (including
internal investigations) and audits of the Company's or any of its Related
Entities' management's current and past conduct and business and accounting
practices and (ii) in the Company's defense of, or other participation in, any
administrative, judicial, or other proceeding arising from any charge, complaint
or other action which has been or may be filed relating to the period during
which the Executive was engaged in employment with the Company and/or its
Related Entities. Except as required by law or authorized in advance by the
Company's Board of Directors, the Executive will not communicate, directly or
indirectly, with any third party concerning the management or governance of the
Company and/or its Related Entities, the operations of the Company and/or its
Related Entities, the legal positions taken by the Company and/or its Related
Entities, or the financial status of the
-7-
<PAGE> 8
Company and/or its Related Entities. The Executive shall direct inquiries from
third parties on these issues to the Company. The Executive acknowledges that
any violation of this Section 15 will result in irreparable harm to the Company
and its Related Entities and will give rise to an immediate action by the
Company and/or its Related Entities for injunctive relief.
(b) The Executive will not seek or accept employment by the
Company or its Related Entities at any time and if he does so, his application
need not be considered.
16. Non-disparagement; Employment Reference. The Executive agrees not to
disparage or otherwise publish or communicate derogatory statements or opinions
about the Company and/or its Related Entities, its/their respective management,
products and services to any third party for a period of three (3) years after
the Resignation Date. It shall not be a breach of this Section 16 for the
Executive to testify truthfully in any judicial or administrative proceeding, or
to make factually accurate statements in legal or public filings. If any
prospective employers contact the Human Resources Director of the Company
concerning the Executive, they will be told that the Executive was employed by
Cyberworks and held other positions with the Company from August 27, 1998 until
he voluntarily resigned as of the Resignation Date.
17. Remedies for Breach. Notwithstanding anything to the contrary
herein, if the Executive breaches his obligations under this Agreement, in
addition to whatever other rights the Company and/or its Related Entities may
have, the Executive shall forfeit his right to receive any further payments or
benefits under this Agreement.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
principles of conflict of laws. The Company, Cyberworks and the Executive each
hereby agrees that all actions or proceedings arising directly or indirectly
hereunder, whether instituted by the Executive, the Company or Cyberworks, shall
be litigated in courts having situs within the State of California, County of
San Diego and the Executive, the Company and Cyberworks each hereby expressly
consents to the jurisdiction of any local, state or Federal court located within
said state and county, and consent that any service of process in such action or
proceeding may be made by personal service upon the Executive, the Company or
Cyberworks wherever the Executive, the Company or Cyberworks may be located,
respectively, or by certified or registered mail directed to the Executive at
his/its last known address. The Executive, the Company and Cyberworks each
hereby waives trial by jury, any objection based on forum non conveniens, and
any objection to venue of any action instituted hereunder.
-8-
<PAGE> 9
19. Attorneys' Fees. In any action, litigation or proceeding between the
parties arising out of or in relation to this Agreement, each party shall bear
its own costs and expenses, including reasonable attorneys' fees.
20. Non-Admission of Liability. The Executive, the Company and
Cyberworks each understands and agrees that neither the payment of any sum of
money nor the execution of this Agreement by the parties will constitute or be
construed as an admission of any liability whatsoever by any party.
21. Withholding Taxes; Tax Reporting. The Company and/or Cyberworks may,
if required in its reasonable judgment, withhold from any amounts payable under
this Agreement all such Federal, state, city and other taxes, and may file with
appropriate governmental authorities all such information returns or other
reports with respect to the tax consequences attendant to any amounts payable
under this Agreement, as may, in its reasonable judgment, be required by law.
22. Severability. If any one or more of the provisions contained herein
(or parts thereof), or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity
and enforceability of any such provision in every other respect and of the
remaining provisions hereof will not be in any way impaired or affected, it
being intended that all of the rights and privileges shall be enforceable to the
fullest extent permitted by law.
23. Entire Agreement. This Agreement represents the sole and entire
agreement among the parties and, except as expressly stated herein, supersedes
all prior agreements, negotiations and discussions among the Executive, the
Company and Cyberworks with respect to the subject matters contained herein.
24. Waiver. No waiver by any party hereto at any time of any breach of,
or compliance with, any condition or provision of this Agreement to be performed
by any other party hereto may be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or at any prior or subsequent time.
-9-
<PAGE> 10
25. Amendment. This Agreement may be modified or amended only if such
modification or amendment is agreed to in writing and signed by duly authorized
representatives of the parties hereto, which writing expressly states the intent
of the parties to modify this Agreement.
26. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original as against any
party that has signed it, but all of which together will constitute one and the
same instrument.
27. Assignment. This Agreement inures to the benefit of and is binding
upon the Company and its successors and assigns, but the Executive's rights
under this Agreement are not assignable.
28. Notice. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) if personally delivered; (b) if sent by telecopy, facsimile or
other electronic means; or (c) if mailed by overnight or by first class,
certified or registered mail, postage prepaid, return receipt requested, and
properly addressed as follows:
If to the Executive, to:
Richard T. Harrison
747 Golden Park Avenue
San Diego, California 92106
Fax: (619) 239-5601, c/o Richard E. Sparber, Esq.
e-mail: [email protected]
with a copy to:
Sparber, Ferguson, Ponder & Ryan
701 B Street, 10th Floor
San Diego, California 92101-8103
Attn: Richard E. Sparber, Esq.
Fax: (619) 239-5601
e-mail: [email protected]
-10-
<PAGE> 11
If to the Company or Cyberworks, to:
Venture Catalyst Incorporated
16868 Via Del Campo Court, Suite 200
San Diego, California 92127
Attn: Chief Financial Officer
Fax: (858) 716-2101
e-mail: [email protected]
with a copy to:
Paul, Hastings, Janofsky and Walker, LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626
Attn: John F. Della Grotta, Esq.
Fax: (714) 979-1921
e-mail: [email protected]
Such addresses may be changed, from time to time, by means of a notice given in
the manner provided above. Notice will conclusively be deemed to have been given
when personally delivered (including, but not limited to, by messenger or
courier); or if given by mail, on the date of delivery, if given by Federal
Express or other similar overnight service or on the third day after being sent
by first class, certified or registered mail; or if given by telecopy or
facsimile machine or other electronic media, when confirmation of transmission
is indicated by the sender's machine. Notices, requests, demands and other
communications delivered to legal counsel of any party hereto, whether or not
such counsel shall consist of in-house or outside counsel, shall not constitute
duly given notice to any party hereto.
29. Miscellaneous Provisions.
(a) The parties represent that they have read this Agreement and
fully understand all of its terms; that they have conferred with their
attorneys, or have knowingly and voluntarily chosen not to confer with their
attorneys about this Agreement; that they have executed this Agreement without
coercion or duress of any kind; and that they understand any rights that they
have or may have and sign this Agreement with full knowledge of any such rights.
(b) The language in all parts of this Agreement must be in all
cases construed simply according to its fair meaning and not strictly for or
against any party. Whenever the context requires, all words used in the singular
must be construed to have been used in the plural, and vice versa, and each
gender must include any other
-11-
<PAGE> 12
gender. The captions of the Sections of this Agreement are for convenience only
and must not affect the construction or interpretation of any of the provision
herein.
(c) Each provision of this Agreement to be performed by a party
hereto is both a covenant and condition, and is a material consideration for the
other party's performance hereunder, and any breach thereof by the party will be
a material default hereunder. All rights, remedies, undertakings, obligations,
options, covenants, conditions and agreements contained in this Agreement are
cumulative and no one of them is exclusive of any other. Time is of the essence
in the performance of this Agreement.
(d) Each party acknowledges that no representation, statement or
promise made by any other party, or by the agent or attorney of any other party,
has been relied on by him or it in entering into this Agreement.
(e) Each party understands that the facts with respect to which
this Agreement is entered into may be materially different from those the
parties now believe to be true. Each party accepts and assumes this risk and
agrees that this Agreement and the release in it shall remain in full force and
effect, and legally binding, notwithstanding the discovery or existence of any
additional or different facts, or of any claims with respect to those facts.
(f) Unless expressly set forth otherwise, all references herein
to a "day" are deemed to be a reference to a calendar day. All references to
"business day" mean any day of the year other than a Saturday, Sunday or a
public or bank holiday in San Diego, California. Unless expressly stated
otherwise, cross-references herein refer to provisions within this Agreement and
are not references to the overall transaction or to any other document.
(g) Each party to this Agreement will cooperate fully in the
execution of any and all other documents and in the completion of any additional
actions that may be necessary or appropriate to give full force and effect to
the terms and intent of this Agreement.
30. Approval of Board of Directors. This Agreement was approved by the
Company's Board of Directors at a special meeting held on October 25, 1999 and
by the Cyberwork's Board of Directors at a special meeting held on October 27,
1999.
-12-
<PAGE> 13
THE EXECUTIVE, THE COMPANY AND CYBERWORKS EACH ACKNOWLEDGE THAT HE/IT
HAS READ THIS AGREEMENT, UNDERSTANDS IT AND IS VOLUNTARILY ENTERING INTO IT. THE
EXECUTIVE ACKNOWLEDGES AND UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF
ALL KNOWN AND UNKNOWN CLAIMS.
-13-
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the dates indicated below.
VENTURE CATALYST INCORPORATED,
a Utah corporation
Dated: December 17, 1999 By: /s/ L. DONALD SPEER, II
---------------------------------
L. Donald Speer, II
Chairman of the Board and Chief
Executive Officer
CYBERWORKS, INC.,
a California corporation
Dated: December 17, 1999 By: /s/ L. DONALD SPEER, II
---------------------------------
L. Donald Speer, II
Chairman of the Board and Chief
Executive Officer
EXECUTIVE
Dated: December 17, 1999 By: /s/ RICHARD T. HARRISON
---------------------------------
Richard T. Harrison
-14-
<PAGE> 15
SCHEDULE 1
COMPUTER EQUIPMENT
1. Sony Superslim Notebook Laptop Computer
Serial No. 3204030
2. Two 17" ViewSonic Monitors GL773's
-15-
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED NONCOMPETITION AGREEMENT
THIS AMENDED AND RESTATED NONCOMPETITION AGREEMENT ("Agreement") is made
and entered into as of this 25th day of December, 1999, by and among Richard T.
Harrison (the "Executive"), Cyberworks, Inc., a California corporation
("Cyberworks"), and Venture Catalyst Incorporated, formerly known as Inland
Entertainment Corporation, a Utah corporation (the "Company").
RECITALS
WHEREAS, prior to August 27, 1998, the Executive was President, Chief
Executive Officer and a director of Cyberworks, and from August 27, 1998 to
December 17, 1999, was President and Chief Operating Officer of Cyberworks, a
Director of the Company and of Cyberworks, and a member of the Executive
Committee of the Company's Board of Directors;
WHEREAS, the Executive is the sole record and beneficial holder of the
issued and outstanding share capital of Cyberworks;
WHEREAS, the Company entered into an Agreement and Plan of
Reorganization with, among others, the Executive, dated August 25, 1998 (the
"Acquisition Agreement"), which resulted in the Company acquiring 100% of the
issued and outstanding shares of capital stock of Cyberworks (the "Cyberworks
Shares");
WHEREAS, as a condition to the closing of the Acquisition Agreement, the
Executive entered into an Employment Agreement with the Company and Cyberworks,
dated as of August 27, 1999 (the "Employment Agreement");
WHEREAS, the Company, Cyberworks and the Executive entered into the
Settlement and Release Agreement, dated December 17, 1999 (the "Settlement and
Release Agreement"), pursuant to which, among other things, the Executive
resigned as an employee, an officer and director of the Company and Cyberworks,
effective as of the date of the Settlement and Release Agreement; and
WHEREAS, the parties hereto agree that it would be detrimental to the
Company if the Executive, directly or indirectly, were to engage in the business
of the Company or Cyberworks once the Executive ceases to be employed by the
Company or Cyberworks, particularly while the Executive is in possession of
confidential, secret or proprietary information about the business of Cyberworks
and the Company.
AGREEMENT
In consideration of the above-referenced recitals and of the terms,
conditions and covenants set forth below, the parties agree as follows:
<PAGE> 2
1. Noncompetition.
(a) Except as otherwise explicitly permitted by this Agreement,
from the date hereof until 18 months after the Settlement Date, as defined in
the Settlement and Release Agreement (the "Noncompete Term"), so long as the
Company carries on a like business of Cyberworks within the Territory (as herein
defined), the Executive will not within the Territory, either directly or
indirectly, and will not permit any Covered Entity to, either directly or
indirectly, engage or participate in any business or enterprise which has
physical presence in the Territory (by means of an office, personnel or
otherwise) and which is in the business of web-site development or in the
business of providing "incubation" or entrepreneurial services for start-up and
emerging companies (including, but not limited to, business startup services and
advice, business plan builder, business plan review, investment banking access,
angel access, online IPO references, government programs assistance (SBA,
Department of Trade, Department of Commerce, etc.), legal services, marketing
services, purchasing, shipping, mail, and leasing). By way of example and not by
way of limitation, during the Noncompete Term, "Working Woman" (as defined in
the Settlement and Release Agreement) may conduct the business of website
development and provide "incubation services" outside the Territory. Working
Woman also may have a physical presence in the Territory through the employment
of the Executive, Charles Gillespie and/or other employees working within the
Territory, provided that neither Working Woman nor its employees, officers or
agents, Affiliates or related entities, including the Executive and Charles
Gillespie, conduct the business of web-site development or provide "incubation
services" within the Territory during the Noncompete Term."
(b) A "Covered Entity" means every Affiliate of the Executive
and every business, association, trust, entity, corporation, partnership or
proprietorship in which the Executive or any Affiliate of the Executive has an
ownership interest or profit sharing percentage of five percent (5%) or more, or
a firm from which the Executive or any Affiliate of the Executive receives or is
entitled to receive income or compensation, or in which the Executive or any
Affiliate of the Executive has an interest as a lender. The agreements of the
Executive contained herein also apply to each entity which is presently a
Covered Entity or which becomes a Covered Entity subsequent to the date of this
Agreement.
(c) The Executive and any Covered Entity will be deemed to be
engaging or participating in competition prohibited by this Agreement if the
Executive or a Covered Entity contracts with, consults with, advises or assists
(financially or otherwise) any other party to engage in activities which may
not, consistent with this Agreement, be undertaken directly by the Executive or
a Covered Entity, whether or not such contract, consultation, advice or
assistance is for explicitly stated compensation.
(d) "Affiliate" means, with respect to any party, any
corporation, company, partnership, joint venture and/or firm which controls, is
controlled by or is under common control with such party; provided, however,
that the Company shall not be deemed to be an Affiliate of Cyberworks. "Control"
means (i) in the case of corporate entities, direct or indirect ownership of at
least twenty five percent (25%) of the stock or participating shares entitled to
vote for the election of directors; and (ii) in the case of
-2-
<PAGE> 3
non-corporate entities (such as limited liability companies, partnerships or
limited partnerships), either (A) direct or indirect ownership of at least
twenty five percent (25%) of the equity interest, or (B) the power to direct the
management and policies of the noncorporate entity.
(e) A "Managed Entity" means any corporation, company,
partnership, joint venture and/or firm in which the Company, Cyberworks or any
Affiliate of the Company or Cyberworks has a direct or indirect equity interest
or interest as a lender and in which the Executive has at any time held a
management position.
(f) "Territory" means the San Diego County, California, and the
area within 75 miles of its border.
2. Non-Solicitation of Employees.
During the Noncompete Term, the Executive will not, either
directly or indirectly, and will not permit any Covered Entity to, either
directly or indirectly, hire, solicit, take away, or attempt to hire, solicit or
take away (either on behalf of the Executive or on behalf of any other person or
entity) any person (a) who is then an employee of the Company, Cyberworks, any
Affiliate of Cyberworks or any Managed Entity, or (b) who has terminated his or
her employment by the Company, Cyberworks, any Affiliate of Cyberworks or any
Managed Entity without the consent of such employer, within 180 days of such
termination.
3. Non-Solicitation of Customers and Suppliers.
During the Noncompete Term, the Executive will not, directly or
indirectly, and will not permit any Covered Entity to, either directly or
indirectly, with respect to each and every individual, corporation, partnership,
company or other association that during the Executive's term of employment by
the Company, Cyberworks or any of its Affiliates (a) has obtained or contracted
to obtain intellectual property, technology, goods or services from the Company,
Cyberworks, any Affiliate of Cyberworks or any Managed Entity (a "Customer") and
with which the Executive had contact during his term of employment by the
Company, Cyberworks or any of its Affiliates, or (b) became known to the
Executive as a Customer or potential Customer of the Company or Cyberworks, any
Affiliate of Cyberworks or any Managed Entity in any manner and whose name
and/or address would constitute proprietary or confidential information, or (c)
has a contractual relationship with the Company, Cyberworks, any Affiliate of
Cyberworks or any Managed Entity to provide intellectual property, technology,
goods or services to be utilized in the business of the Company, Cyberworks, any
Affiliate of Cyberworks or any Managed Entity (a "Supplier"), solicit, call
upon, divert or take away such Customer or potential Customer or Supplier as a
client, customer or supplier on his behalf or on behalf of any other individual,
corporation, company, partnership or other association conducting a business
substantially similar to the business of the Company or Cyberworks, any
Affiliate of Cyberworks or any Managed Entity or cause or attempt to cause such
Customer or potential Customer or Supplier to redirect, terminate, limit, modify
or fail to enter into any actual or potential relationship with the Company or
Cyberworks, any Affiliate of Cyberworks or any Managed Entity involving
-3-
<PAGE> 4
the business of the Company, Cyberworks, any Affiliate of Cyberworks or any
Managed Entity, notwithstanding that any such Customer, potential Customer or
Supplier may have been induced to give his or its patronage to the Company,
Cyberworks, any Affiliate of Cyberworks or any Managed Entity by the
solicitation by the Executive or by someone on the Executive's behalf.
4. Enforcement.
The Executive acknowledges that a breach of this Agreement by
the Executive or any Covered Entity will cause serious and potentially
irreparable harm to Cyberworks, the Company, each of their Affiliates and each
Managed Entity. The Executive therefore acknowledges that a breach of this
Agreement by him or any Covered Entity cannot be adequately compensated in an
action for damages at law, and equitable relief would be necessary to protect
Cyberworks, the Company, each of their Affiliates and each Managed Entity from a
violation of this Agreement and from the harm which this Agreement is intended
to prevent. By reason thereof, the Executive acknowledges on behalf of himself
and each Covered Entity that Cyberworks, the Company, each of their Affiliates
and each Managed Entity are entitled, in addition to any other remedies they may
have under this Agreement or otherwise, to preliminary and permanent injunctive
and other equitable relief to prevent or curtail any breach of this Agreement.
The Executive acknowledges, however, that no specification in this Agreement of
a specific legal or equitable remedy may be construed as a waiver of or
prohibition against pursuing other legal or equitable remedies in the event of a
breach of this Agreement by the Executive or any Covered Entity.
5. Survival.
All recitals, covenants, commitments and agreements of any of
the parties made in this Agreement shall survive the execution and delivery of
this Agreement and the closing of the transactions contemplated by the
Acquisition Agreement.
6. Binding Effect; Successors and Assigns.
This Agreement may be assigned by the Company or Cyberworks if
such assignment is accompanied by the sale of the stock of the Company or
Cyberworks, as applicable, or of substantially all of the assets of the Company
or Cyberworks, as applicable. The terms and provisions set forth in this
Agreement inure to the benefit of and are enforceable by the Company and its
successors, assigns, and successors-in-interest, including without limitation
any corporation with which the Company may be merged or by which it may be
acquired, or which may be the acquiring corporation in an asset sale transaction
or other form of corporate reorganization. This Agreement may not be assigned by
the Executive.
7. Severability.
In the event that any provision or term of this Agreement, or
any word, phrase, clause, sentence or other portion thereof (including, without
limitation, the geographic and temporal restrictions and provisions contained in
this Agreement) is held
-4-
<PAGE> 5
to be unenforceable or invalid for any reason, such provision or portion thereof
will be modified or deleted in such a manner as to make this Agreement, as
modified, legal and enforceable to the fullest extent permitted under applicable
laws.
8. Governing Law.
This Agreement will be governed by and construed in accordance
with the laws of the State of California without regard to the conflicts of law
principles thereof.
9. Venue.
The parties hereby irrevocably and unconditionally consent to
submit to the exclusive jurisdiction of the courts of the State of California,
County of San Diego, and/or the United States District Court for the Southern
District of California for any actions, suits, controversies or proceedings
arising out of or relating to this Agreement and the transactions contemplated
hereby (and the parties agree not to commence any action, suit or proceeding
relating thereto except in such courts), and further agree that service of any
process, summons, notice or document by U.S. registered mail to the respective
addresses set forth above shall be effective service of process for any action,
suit or proceeding brought against the parties in any such court. The parties
hereby irrevocably and unconditionally waive any objection to the laying of
venue of any action, suit, controversies or proceeding arising out of this
agreement or the transactions contemplated hereby, in the courts of the State of
California, County of San Diego and/or the United States District Court for the
Southern District of California, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient or improper forum.
10. Notices.
All notices, claims, requests, demands, and other communications
hereunder ("notices") shall be in writing and shall be deemed to have been given
if personally delivered or if sent by telecopy or facsimile or mailed by
overnight, commercial air courier service or by first class, registered or
certified mail, postage prepaid, and properly addressed as follows:
To Executive: Mr. Richard T. Harrison
747 Golden Park Avenue
San Diego, California 92106
(619) 222-1475
e-mail: [email protected]
-5-
<PAGE> 6
with a copy to: Sparber, Ferguson, Ponder & Ryan
701 B Street, 10th Floor
San Diego, California 92101-8103
Attn: Richard E. Sparber, Esq.
Fax: (619) 239-5601
e-mail: [email protected]
To Company Venture Catalyst Incorporated
or Cyberworks: 16868 Via Del Campo Court, #200
San Diego, California 92127
Attention: Kevin McIntosh, Vice President,
Chief Financial Officer, Secretary and
Treasurer
Fax: (619) 716-2101
e-mail: [email protected]
with a copy to: Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626
Attention: John F. Della Grotta, Esq.
Fax: (714) 979-1921
e-mail: [email protected]
Any party may change its address for the purpose of this Article by giving the
other parties written notice of the new address in the manner set forth above.
Notice will conclusively be deemed to have been given when personally delivered,
or if given by mail, on the second day after being sent by an overnight,
commercial air courier service or on the fifth day after being sent by first
class, registered or certified mail, or if given by telecopy or facsimile
machine, when confirmation of transmission is indicated by the sender's telecopy
or facsimile machine.
11. Miscellaneous Terms.
(a) The headings contained in this Agreement are for reference
purposes only, are not necessarily descriptive of the paragraphs to which they
relate and shall not affect the meaning or interpretation of this Agreement.
(b) No change, modification, addition or amendment to this
Agreement will be valid unless in writing and signed by the party against which
enforcement of such change, modification, addition or amendment is sought.
(c) The parties agree to cooperate in good faith to accomplish
the objectives of this Agreement and, to that end, agree to execute and/or
deliver from time to time such other and further instructions and documents and
to take such other actions as may be necessary or convenient to fulfillment of
these purposes.
(d) No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, will
be deemed to be, or
-6-
<PAGE> 7
may be construed as, a further or continuing waiver of any such term, provision
or condition.
(e) In the event of any dispute concerning the interpretation of
this Agreement or its enforcement, or any proceeding arising out of or in
connection with an alleged or actual breach of this Agreement, the prevailing
party will be entitled to recover, in addition to any other relief obtained or
awarded, any reasonable attorneys' fees and expenses incurred in relation to
such dispute, enforcement or proceeding.
(signature page follows)
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date first above written.
VENTURE CATALYST INCORPORATED, a Utah
corporation
By: /s/ L. DONALD SPEER, II
-------------------------------------------
L. Donald Speer, II
Chairman of the Board, Chief Executive
Officer and President
CYBERWORKS, INC., a California corporation
By: /s/ L. DONALD SPEER, II
-------------------------------------------
L. Donald Speer, II
Chairman of the Board, Chief Executive
Officer and President
RICHARD T. HARRISON, an individual
/s/ RICHARD T. HARRISON
----------------------------------------------
Richard T. Harrison
-8-
<PAGE> 1
EXHIBIT 10.3
CALL AGREEMENT
THIS CALL AGREEMENT (this "Agreement") dated as of December 25, 1999, is
entered into by and between Richard T. Harrison, an individual ("Harrison"), and
Venture Catalyst Incorporated, formerly known as Inland Entertainment
Corporation, a Utah corporation (the "Company").
RECITALS:
A. Harrison is the owner of 750,000 shares of the Company's common
stock, par value $.001 per share, represented by Certificate No. SD3572 (which,
together with any other shares of the Company's common stock subsequently
acquired by Harrison, are referred to herein as the "Shares").
B. Harrison and the Company have entered into that certain Settlement
and Release Agreement dated as of the date hereof (as the same may be amended,
modified or restated from time to time, the "Settlement Agreement").
C. Harrison and the Company have entered into that certain Stock Pledge
Agreement, dated as of the date hereof, between Harrison and the Company (as the
same may be amended, modified or restated from time to time, the "Stock Pledge
Agreement")
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The Company's Call Option. In consideration for the Company's
entering into the Settlement and Release Agreement and the Company's payment of
$20,000 on the date hereof, Harrison hereby grants to the Company the right and
option (the "Call Option") to require Harrison to sell to the Company all or a
part of the Shares at an exercise price of $2.50 per Share. The Call Option
shall be exercisable in accordance with the provisions hereof at any time for a
period of two years, from December 25, 1999 to December 25, 2001 after the date
hereof.
2. Manner of Exercise. The Call Option may be exercised by the Company
from time to time during the exercise period for all or a part of the Shares by
means of a written notice of exercise signed by an authorized officer of the
Company and given to Harrison.
<PAGE> 2
3. Payment and Delivery. Within five (5) days after the receipt of
notice delivered to Harrison by the Company pursuant to Section 2, Harrison
shall deliver to the Company the Shares free and clear of any liens, claims,
encumbrances, security interests, options, charges and restrictions of any kind,
and the Company shall pay to Harrison the purchase price therefor; provided,
however, that if there is a lien on any of the Shares pursuant to the Stock
Pledge Agreement, the Company or any other person exercising the Call Option
shall be entitled to deduct from the purchase price the amount necessary to
satisfy such lien in order to satisfy such lien and pay such amount to the
lienholder.
4. Representations, Warranties and Covenants of Harrison. Harrison
represents and warrants to the Company that:
(a) This Agreement constitutes the valid, binding and
enforceable obligation of Harrison.
(b) Harrison shall defend Harrison's title to the Shares and
sole beneficial ownership thereof against all persons claiming an interest
therein except the Company or any person claiming through the Company.
(c) Except for the restrictions imposed by the Stock Pledge
Agreement and restrictions on offerings and sales of securities imposed by
applicable securities laws of the United States of America or any state or
commonwealth thereof, there are not and will not be during the terms of this
Agreement any restrictions upon the sale or other disposition of any of the
Shares.
(d) Except as contemplated by Section 4(c), Harrison has good
and valid title to the Shares, free and clear of any liens, claims,
encumbrances, security interests, options, charges and restrictions of any kind,
and Harrison now has and will have during the term of this Agreement, without
obtaining the consent of any governmental authority, stock exchange or any other
person except the Company, the right to pledge, to grant a security interest in,
and otherwise to transfer and dispose of the Shares free of any liens, security
interests and encumbrances, and free of any rights or equities in favor of any
other persons, except those created by this Agreement.
(e) During the term of this Agreement, (i) Harrison shall not
sell, transfer, assign or otherwise dispose of, grant any option with respect
to, or mortgage, pledge (other than pursuant to the Stock Pledge Agreement or
this Agreement) or otherwise encumber the Shares or any interest therein, and
(ii) if the Shares are foreclosed upon or become undeliverable, Harrison shall
provide to the Company replacement shares of the Company's common stock.
-2-
<PAGE> 3
5. Authorization and Request. Harrison hereby (i) authorizes the
Company's Transfer Agent to deliver the Shares to the Company upon the exercise
of the Call Option to the extent that the Shares are held by the Company's
Transfer Agent; and (ii) requests the Company's Transfer Agent that all
certificates for the Shares be legended to the effect that such Shares are
subject to the terms of this Agreement and the Stock Pledge Agreement.
6. Transferability of the Call Option; Restrictive Legend. The Call
Option shall be freely transferable by the Company. Each certificate for the
Shares shall be stamped or otherwise imprinted with a legend substantially in
the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CALL AGREEMENT AND A STOCK PLEDGE AGREEMENT, EACH BY AND BETWEEN
VENTURE CATALYST INCORPORATED, FORMERLY KNOWN AS INLAND ENTERTAINMENT
CORPORATION, AND RICHARD T. HARRISON, AND EACH DATED AS OF DECEMBER 25, 1999,
COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY, AND ARE HELD AND
MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF ONLY IN
ACCORDANCE THEREWITH."
7. Termination. The Call Option shall terminate on December 25, 2001.
8. Miscellaneous.
(a) Waivers. No failure to exercise and no delay in exercising
on the part of the Company, any right, power or remedy under this Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or remedy hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
failure of the Company to insist upon the strict observance or enforcement of
any provision of this Agreement shall not be construed as a waiver or
relinquishment of such provision. Any waiver of any right, power, remedy, term
or condition contained herein shall only be effective if it is in writing and
signed by the Company.
(b) Survival of Agreements, etc. All representations,
warranties, covenants and agreements made by Harrison in this Agreement or in
any instrument, document or certificate furnished hereunder or in connection
herewith shall be deemed to have been relied upon by the Company,
notwithstanding any investigation heretofore or hereafter made by the Company,
and shall survive the delivery of this Agreement and the incurrence of any
obligations.
-3-
<PAGE> 4
(c) Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) if personally delivered; (ii) if sent by telecopy, facsimile or
other electronic means; or (iii) if mailed by overnight or by first class,
certified or registered mail, postage prepaid, return receipt requested and
properly addressed as follows:
If to Harrison, to:
Richard T. Harrison
747 Golden Park Avenue
San Diego, California 92106
Fax: (619) 239-5601, c/o Richard E. Sparber, Esq.
e-mail : [email protected]
with a copy to:
Sparber, Ferguson, Ponder & Ryan
701 B Street, 10th Floor
San Diego, California 92101-8103
Attn: Richard E. Sparber, Esq.
Fax: (619) 239-5601
e-mail: [email protected]
If to the Company, to:
Venture Catalyst Incorporated
16868 Via Del Campo Court, Suite 200
San Diego, California 92127
Attn: Kevin McIntosh
Vice President, Chief Financial Officer,
Secretary and Treasurer
Fax: (858) 716-2101
e-mail: [email protected]
with a copy to:
Paul, Hastings, Janofsky and Walker, LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626
Attn: John F. Della Grotta, Esq.
Fax: (714) 979-1921
e-mail: [email protected]
-4-
<PAGE> 5
Such addresses may be changed from time to time, by means of a notice given in
the manner provided above. Notice will conclusively be deemed to have been given
when personally delivered (including, but not limited to, by messenger or
courier); or if given by mail, on the date of delivery, if given by Federal
Express or other similar overnight service or on the third day after being sent
by first class, certified or registered mail; or if given by telecopy or
facsimile machine or other electronic media, when confirmation of transmission
is indicated by the sender's machine. Notices, requests, demands and other
communications delivered to legal counsel of any party hereto, whether or not
such counsel shall consist of in-house or outside counsel, shall not constitute
duly given notice to any party hereto.
(d) Amendments. This Agreement may only be amended by a writing
executed by Harrison and the Company.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without giving
effect to the principles of conflict of laws. Harrison and the Company hereby
agree that all actions or proceedings arising directly or indirectly hereunder,
whether instituted by Harrison or the Company, shall be litigated in courts
having situs within the State of California, County of San Diego and Harrison
and the Company hereby expressly consent to the jurisdiction of any local, state
or Federal court located within said state and counties, and consent that any
service of process in such action or proceeding may be made by personal service
upon Harrison or the Company wherever Harrison or the Company may be located,
respectively, or by certified or registered mail directed to Harrison or the
Company at his/its last known address. Harrison and the Company waive trial by
jury, any objection based on forum non conveniens, and any objection to venue of
any action instituted hereunder.
(f) Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
(g) Section Headings. The headings set forth in this Agreement
are for convenience of reference only and shall not be deemed to define or limit
the provisions hereof or to affect in any way their construction and
application.
(Signature Page Follows)
-5-
<PAGE> 6
(SIGNATURE PAGE - CALL AGREEMENT)
IN WITNESS WHEREOF, Harrison and the Company have executed and delivered
this Agreement on the date first above written.
HARRISON:
/s/ RICHARD T. HARRISON
------------------------------------
Richard T. Harrison
THE COMPANY:
VENTURE CATALYST INCORPORATED,
a Utah corporation
By: /s/ L. DONALD SPEER, II
---------------------------------
L. Donald Speer, II
Chairman of the Board and
Chief Executive Officer
-6-
<PAGE> 1
EXHIBIT 10.4
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge") dated as of December 25,
1999, is entered into by and between Richard T. Harrison, an individual (the
"Pledgor"), and Venture Catalyst Incorporated, formerly known as Inland
Entertainment Corporation, a Utah corporation (the "Pledgee").
RECITALS:
A. The Pledgor is the owner of 750,000 shares of the Pledgee's common
stock, $.001 par value per share, represented by Certificate No. SD3572 (which,
together with any other shares of the Pledgee's common stock subsequently
acquired by the Pledgor are referred to herein as the "Pledged Shares").
B. The Pledgor and the Pledgee have entered into that certain Settlement
and Release Agreement of even date herewith (as the same may be amended,
modified or restated from time to time, the "Settlement Agreement").
C. Pursuant to the Settlement Agreement, the Pledgee and the Pledgor
have agreed, among other things, to enter into a Call Agreement of even date
herewith relating to, and secured by, the Pledged Shares (as the same may be
amended, modified or restated from time to time, the "Call Agreement").
NOW, THEREFORE, in order to induce the Pledgee to enter into the
Settlement Agreement and the Call Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Pledge.
(a) The Pledgor hereby pledges, hypothecates, assigns,
transfers, sets over and delivers to the Pledgee, and grants to the Pledgee a
security interest in:
(i) the Pledged Shares;
(ii) each certificate or other instrument representing
any of the foregoing;
(iii) distributions or dividends or other monies of
every kind and nature payable in respect of any or all of the foregoing; and
<PAGE> 2
(iv) the proceeds of the foregoing; (collectively, the
"Collateral"), in order to secure all obligations of the Pledgor hereunder and
the obligations of the Pledgor under the Call Agreement.
(b) In order to perfect a security interest in the Collateral,
the Pledgor hereby delivers to the Pledgee appropriate undated stock transfer
powers duly executed in blank for the Pledged Shares beneficially owned by the
Pledgor on the date hereof and from time to time will deliver appropriate
undated stock transfer powers duly executed in blank for any Pledged Shares
acquired after the date hereof to be pledged hereunder.
(c) During the term of this Pledge, the Pledgor shall not sell,
transfer, assign or otherwise dispose of, grant any option with respect to, or
mortgage, pledge (other than pursuant to this Pledge) or otherwise encumber the
Pledged Shares or any interest therein.
2. Power of Attorney, Income.
(a) The Pledgor hereby irrevocably appoints the Pledgee the
Pledgor's attorney, coupled with an interest, with full power of substitution:
(i) Upon a Default (as hereinafter defined) or pursuant
to the exercise of a call under the Call Agreement, to arrange for the transfer
of the Pledged Shares or any part thereof into the name of the Pledgee or into
the name of the Pledgee's nominee, if, at any time, the Pledgee shall, in its
sole discretion reasonably exercised, deem such a transfer to be desirable; and
(ii) For the purposes of taking any action and executing
any instrument, in the name of the Pledgor or otherwise, which the Pledgee may
at any time deem necessary or appropriate in order to (i) perfect its security
interest in the Collateral or any part thereof, (ii) upon a Default hereunder,
foreclose said security interest or otherwise exercise its rights under this
Pledge and in and to the Collateral, or (iii) deliver the Pledged Shares to the
Pledgee or any other person exercising rights pursuant to the Call Agreement.
(b) As long as no Default hereunder shall have occurred and be
continuing, the Pledgor shall, unless otherwise prohibited, be entitled to
receive and retain any and all dividends and interests on the Pledged Shares,
but any such dividends in stock or other securities of the Pledgee shall be and
become part of the Pledged Shares.
-2-
<PAGE> 3
(c) Upon the occurrence and during the continuance of a Default
hereunder, the right of the Pledgor to receive the dividends and interest which
the Pledgor is authorized to receive and retain pursuant to Paragraph 2(b) shall
cease, and all such rights shall thereupon become vested in the Pledgee;
provided, however, that the Pledgee, as the sole further condition to the
vesting pursuant to this Paragraph 2(c) of such rights and powers of the
Pledgee, shall notify the Pledgor in writing that the Pledgee elects to exercise
such rights and power, and the Pledgee shall have the sole and exclusive right
and authority to receive and retain the dividends and interest which the Pledgor
would otherwise be authorized to retain pursuant to Paragraph 2(b) hereof.
(d) Upon the occurrence and during the continuation of a Default
hereunder, the Pledgee shall have an irrevocable proxy to vote all the Pledged
Shares, with full power of substitution, at all meetings and actions, without
meeting and any action for which shareholders consent is required or given. This
proxy coupled with an interest may not be revoked while the Call Agreement is in
force.
3. Representations and Warranties. The Pledgor represents and warrants
that:
(a) This Pledge constitutes the valid, binding and enforceable
obligation of the Pledgor.
(b) The Pledgor shall defend the Pledgor's title to the Pledged
Shares and sole beneficial ownership thereof against all persons claiming any
interest therein except the Pledgee or any person claiming through the Pledgee.
(c) Except for the restrictions imposed by the Call Agreement,
this Pledge and restrictions on offerings and sales of securities imposed by
applicable securities laws of the United States of America or any state or
commonwealth thereof, there are not and will not be during the term of this
Pledge any restrictions upon the sale or other disposition of any of the
Collateral.
(d) Except as contemplated by Paragraph 3(c), the Pledgor has
good and valid title to the Pledged Shares, free and clear of any liens, claims,
encumbrances, security interests, options, charges and restrictions of any kind,
and the Pledgor now has and will have during the term of this Pledge, without
obtaining the consent of any governmental authority, stock exchange or any other
persons except the Pledgee, the right to pledge, to grant a security interest
in, and otherwise to transfer and to dispose of the Collateral free of any
liens, security interests or other encumbrances, and free of any rights or
equities in favor of any other persons, except those created by this Pledge.
-3-
<PAGE> 4
4. Defaults and Remedies. Any of the following shall constitute a
"Default" under this Pledge:
(a) if any representation or warranty made by the Pledgor in
this Pledge or in any instrument, document or certificate furnished hereunder or
in connection herewith shall prove to have been incorrect in any material
respect at the time it was made;
(b) if the Pledgor fails to observe or perform any of the
Pledgor's covenants, agreements, obligations and undertakings contained in this
Pledge after ten (10) days' written notice by the Pledgee; or
(c) the Pledgor breaches the Call Agreement in any material
respect or fails to deliver the Pledged Shares upon the exercise of the Call
Option (as defined in the Call Agreement).
In the event of any such Default, the Pledgee shall be cumulatively or
alternatively entitled, without further notice to the Pledgor, and without
necessity for legal proceedings (i) if the Default is a failure to deliver
certificates representing the Pledged Shares subject to the Call Agreement, to
deliver such certificates and to hold the proceeds received from the person
exercising rights under the Call Agreement as additional Collateral, (ii) to
sell any or all of the securities serving as Collateral; and (iii) to transfer
to the name of, or register in the name of, the Pledgee or its nominee, as owner
rather than a secured party, any or all Collateral. In addition, and not by way
of limitation of the foregoing, the Pledgee shall have any or all remedies
provided by law, including, but not limited to, all rights and powers of a
secured party after default pursuant to the California Commercial Code.
5. Application of Proceeds of Sale, etc. The proceeds of any sale or
other disposition of, or any collection of or realization on, any of the
Collateral, and any cash held by the Pledgee as part of the Collateral
hereunder, shall be applied by the Pledgee from time to time to pay:
(a) First, all costs, fees and expenses paid or incurred by the
Pledgee (including all amounts paid by the Pledgee for the account of the
Pledgor or to the Pledgee's agents, brokers, counsel and consultants) in
connection with the exercise, protection or enforcement of the Pledgee's rights
and remedies under this Pledge and in and to the Collateral, including any and
all taxes, assessments, charges and encumbrances of every kind prior to the
security interest created by this Pledge which the Pledgee may consider
necessary or desirable to pay;
(b) Second, the excess, if any, shall be held as Collateral to
the extent any remaining obligations under the Call Agreement remain
unsatisfied; and
-4-
<PAGE> 5
(c) Third, the excess, if any, after all remaining obligations
under the Call Agreement have been satisfied, shall be paid to the Pledgor or to
whomever is then legally entitled to receive the same
6. Duty of the Pledgee; Exercise of Rights and Remedies. The Pledgee
shall have no duty as to the protection of any of the Collateral or any income
with respect thereto, nor as to the preservation of rights against prior
parties, nor as to the preservation of any rights pertaining to any of the
Collateral beyond reasonable care in its custody. Upon Default hereunder, the
Pledgee may exercise its rights and remedies with respect to any of the
Collateral without resort or regard to other security or sources of payment for
the Pledgor's obligations.
7. No Release; Waivers, Etc.
(a) No Release. The Pledgor shall continue to be liable under
this Pledge and the provisions hereof shall remain in full force and effect
notwithstanding (i) the Pledgee's waiver of or failure to enforce any of the
terms, covenants or conditions contained in the Settlement Agreement or any
modification thereof; or (ii) any release of any real or personal property or
other security then held by the Pledgee for the performance of the Pledgor's
obligations hereunder.
(b) Waiver of Demand. The Pledgor hereby waives: (i) diligence
and demand of payment; (ii) all notices to the Pledgor or to any other person,
including, but not limited to, notices of the acceptance of this Pledge or
notice of any other matters relating thereto; (iii) all demands whatsoever; (iv)
any statute of limitations affecting the Pledgor's liability hereunder or the
enforcement thereof; and (v) all principles or provisions of law, which conflict
with the terms of this Pledge. Moreover, the Pledgor agrees that his obligations
shall not be affected by any circumstances which constitute a legal or equitable
discharge of a guarantor or surety.
(c) No Prior Remedy Received. The Pledgor agrees that the
Pledgee or its assigns and endorsees may enforce this Pledge without the
necessity of resorting to or exhausting any security or collateral; and the
Pledgor hereby waives the right to require the Pledgee or its assigns or
endorsees to foreclose any lien on any real or personal property, to pursue any
other remedy or to enforce any other right.
(d) No Limitation of Rights. The Pledgor further agrees that
nothing contained herein shall prevent the Pledgee from suing on the Call
Agreement or from exercising any rights available to it thereunder and that the
exercise of any of the aforesaid rights shall not constitute a legal or
equitable discharge of the Pledgor. The Pledgor hereby authorizes and empowers
the Pledgee to exercise, in its sole discretion, any rights and remedies, or any
combination thereof, which may then be available.
-5-
<PAGE> 6
8. Cumulative Remedies. The remedies provided in this Pledge in favor of
the Pledgee shall not be deemed exclusive but shall be cumulative and shall be
in addition to all of the remedies in favor of the Pledgee existing at law or in
equity.
9. Terms Subject to Applicable Law. All rights, powers and remedies
provided herein may be exercised only to the extent that the exercise thereof
does not violate any applicable laws, and are intended to be limited to the
extent necessary so that they will not render this Pledge invalid, unenforceable
or entitled to be recorded, registered or filed under any applicable law. If any
term of this Pledge or any application thereof shall be held to be invalid,
illegal or unenforceable, the validity of any other terms of this Pledge or any
other applications of such term shall in no way be affected thereby.
10. Miscellaneous.
(a) Waivers. No failure to exercise and no delay in exercising
on the part of the Pledgee, any right, power or remedy under this Pledge or the
Call Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or remedy hereunder or thereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy. The failure of the Pledgee to insist upon the strict observance or
enforcement of any provision of this Pledge shall not be construed as a waiver
or relinquishment of such provision. Any waiver of any right, power, remedy,
term or condition contained herein shall only be effective if it is in writing
and signed by the Pledgee.
(b) Survival of Agreements, etc. All representations,
warranties, covenants and agreements made by the Pledgor in this Pledge or in
any instrument, document or certificate furnished hereunder or in connection
herewith shall be deemed to have been relied upon by the Pledgee,
notwithstanding any investigation heretofore or hereafter made by the Pledgee,
and shall survive the delivery of this Pledge, the Collateral and the incurrence
of any obligations.
(c) Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) if personally delivered; (ii) if sent by telecopy, facsimile or
other electronic means; or (iii) if mailed by overnight or by first class,
certified or registered mail, postage prepaid, return receipt requested, and
properly addressed as follows:
If to the Pledgor, to:
Richard T. Harrison
747 Golden Park Avenue
San Diego, California 92106
Fax: (619) 239-5601, c/o Richard E. Sparber, Esq
-6-
<PAGE> 7
e-mail: [email protected]
with a copy to:
Sparber, Ferguson, Ponder & Ryan
701 B Street, 10th Floor
San Diego, California 92101-8103
Attn: Richard E. Sparber, Esq.
Fax: (619) 239-5601
e-mail: [email protected]
If to the Pledgee, to:
Venture Catalyst Incorporated
16868 Via Del Campo Court, Suite 200
San Diego, California 92127
Attn: Kevin McIntosh
Vice President, Chief Financial Officer,
Secretary and Treasurer
Fax: (858) 716-2101
e-mail: [email protected]
-7-
<PAGE> 8
with a copy to:
Paul, Hastings, Janofsky and Walker, LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626
Attn: John F. Della Grotta, Esq.
Fax: (714) 979-1921
e-mail: [email protected]
Such addresses may be changed, from time to time, by means of a notice given in
the manner provided above. Notice will conclusively be deemed to have been given
when personally delivered (including, but not limited to, by messenger or
courier); or if given by mail, on the date of delivery, if given by Federal
Express or other similar overnight service or on the third day after being sent
by first class, certified or registered mail; or if given by telecopy or
facsimile machine or other electronic media, when confirmation of transmission
is indicated by the sender's machine. Notices, requests, demands and other
communications delivered to legal counsel of any party hereto, whether or not
such counsel shall consist of in-house or outside counsel, shall not constitute
duly given notice to any party hereto.
(d) Amendments. This Pledge may only be amended by a writing
executed by the Pledgor and the Pledgee.
(e) Governing Law. This Pledge shall be governed by and
construed in accordance with the laws of the State of California without giving
effect to principles of conflict of laws. The Pledgor and the Pledgee hereby
agree that all actions or proceedings arising directly or indirectly hereunder,
whether instituted by the Pledgee or the Pledgor, shall be litigated in courts
having situs within the State of California, County of San Diego and the Pledgor
and the Pledgee hereby expressly consent to the jurisdiction of any local, state
or Federal court located within said state and county, and consent that any
service of process in such action or proceeding may be made by personal service
upon the Pledgor or the Pledgee wherever the Pledgor or the Pledgee may be
located, respectively, or by certified or registered mail directed to the
Pledgor or the Pledgee at his/its last known address. The Pledgor and the
Pledgee waive trial by jury, any objection based on forum non conveniens, and
any objection to venue of any action instituted hereunder.
(f) Successors and Assigns. This Pledge shall be binding upon
and shall inure to the benefit of the Pledgor and the Pledgee and their
respective successors and assigns.
-8-
<PAGE> 9
(g) Section Headings. The headings set forth in this Pledge are
for convenience of reference only and shall not be deemed to define or limit the
provisions hereof or to affect in any way their construction and application.
(h) Termination. This Pledge shall terminate and the Collateral
returned to the Pledgor after the Call Agreement has terminated.
(Signature Page Follows)
-9-
<PAGE> 10
(SIGNATURE PAGE - STOCK PLEDGE AGREEMENT)
IN WITNESS WHEREOF, the Pledgor and the Pledgee have executed and
delivered this Pledge on the date first above written.
PLEDGOR:
RICHARD T. HARRISON
/s/ RICHARD T. HARRISON
------------------------------------
PLEDGEE:
VENTURE CATALYST INCORPORATED,
a Utah corporation
By: /s/ L. DONALD SPEER, II
---------------------------------
L. Donald Speer, II
Chairman of the Board and
Chief Executive Officer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,592,379
<SECURITIES> 0
<RECEIVABLES> 584,270
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,268,088
<PP&E> 1,693,287
<DEPRECIATION> 713,903
<TOTAL-ASSETS> 23,451,627
<CURRENT-LIABILITIES> 6,292,512
<BONDS> 8,733,333
0
0
<COMMON> 4,844
<OTHER-SE> 8,420,938
<TOTAL-LIABILITY-AND-EQUITY> 23,451,627
<SALES> 0
<TOTAL-REVENUES> 1,831,982
<CGS> 0
<TOTAL-COSTS> 3,995,746
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 237,500
<INCOME-PRETAX> 2,275,800
<INCOME-TAX> 858,364
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,417,436
<EPS-BASIC> .30
<EPS-DILUTED> .30
</TABLE>
