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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____to _____
Commission File Number: 1-07149
INTERNET LAW LIBRARY, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 82-0277987
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4301 WINDFERN ROAD, SUITE 2000, HOUSTON, TEXAS, 77041
(Address of principal executive offices including zip code)
(281) 600-6000
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of Class)
Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
Registrant as of October 4, 1999 was $20,976,676 (based on the closing price
of $3.25 per share on October 4, 1999 as reported on the over-the-counter
Bulletin Board).
As of October 4, 1999, 22,751,862 shares of Registrant's Common Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's definitive proxy statement to be filed not later
than 120 days after the end of the Registrant's fiscal year covered by this Form
10-K are incorporated by reference in Part III of this Form 10-K.
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INTERNET LAW LIBRARY, INC.
Form 10-K
For Fiscal Year Ended June 30, 1999
TABLE OF CONTENTS
PART I Page
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1. Business 2
2. Properties 9
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters 11
6. Selected Consolidated Financial Data 14
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 15
7A. Quantitative and Qualitative Disclosures about Market Risk 18
8. Consolidated Financial Statements and Supplementary Data 18
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 18
PART III
10. Directors and Executive Officers of Registrant 19
11. Executive Compensation 19
12. Security Ownership of Certain Beneficial Owners and Management 19
13. Certain Relationships and Related Transactions 19
PART IV
14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K 20
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PART I
This Report contains certain forward-looking statements of the intentions,
hopes, beliefs, expectations, strategies and predictions of Internet Law
Library, Inc. ("Internet Law" or the "Company") or its management with respect
to future activities or other future events or conditions within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements are usually identified by the use of words such as "believes,"
"will," "anticipates," "estimates," "expects," "projects," "plans," "intends,"
"should" or similar expressions. Investors are cautioned that all forward-
looking statements involve risks and uncertainty, including, without limitation,
variations in quarterly results, volatility of Internet Law's stock price,
development by competitors of new or competitive products or services, the entry
into the market by new competitors, the sufficiency of Internet Law's working
capital and the ability of Internet Law to retain management, to implement its
business strategy, to assimilate and integrate any acquisitions, retain
customers or attract customers from other businesses and to successfully defend
itself in ongoing and future litigation. Although Internet Law believes that
the assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and, therefore, there
can be no assurance that the forward-looking statements included in this Report
will prove to be accurate. In light of the significant uncertainties inherent
in the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by Internet Law or any
other person that the objectives and plans of Internet Law will be achieved.
Except for its ongoing obligation to disclose material information as required
by the federal securities laws, Internet Law undertakes no obligation to release
publicly any revisions to any forward-looking statements to reflect events or
circumstances after the date of this report or to reflect the occurrence of
unanticipated events.
ITEM 1. BUSINESS
GENERAL
The Company, formerly known as Planet Resources, Inc., is a Delaware
corporation that now operates an Internet portal that provides subscription
access to databases used for legal research through its wholly owned, operating
subsidiary, National Law Library, Inc. ("National Law"). The content of these
databases consists of federal and state case law, statutory law and regulatory
materials that can be useful to individual lawyers, judges, law firms, corporate
legal departments, government agencies, businesses, and individuals involved in
litigation, legislative efforts, and corporate legal planning. Interfacing with
these databases is a software retrieval engine that is also owned and operated
by National Law. Customers using the Internet portal pay subscription fees to
National Law for monthly or longer-term service.
Internet Law's common stock is traded on the over-the-counter Bulletin
Board under the symbol "ELAW."
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CORPORATE HISTORY
The Company was originally incorporated as Allied Silver-Lead Company in
the State of Idaho in 1967 and, until 1992, operated as an exploratory mining
company. In January 1996, the Company was reincorporated in Delaware as a
result of a merger and, among other shareholder actions taken at that time,
changed its name to Planet Resources, Inc. Between 1992 and its reverse
acquisition by National Law in March of 1999, Internet Law had no operations;
however, the Company maintained certain mining properties which are to be
indirectly distributed to those stockholders who were stockholders of the
Company prior to the reverse acquisition by National Law. To effect this
distribution, New Planet Resources, Inc., a Delaware corporation and a wholly
owned subsidiary of the Company ("New Planet"), will, under the terms of an
Agreement and Plan of Distribution, dated March 25, 1999 (the "Distribution
Agreement"), succeed to the Company's interests in these mining and related
properties and $32,515 in cash at such time as the common stock of New Planet
is registered under the Securities Act. New Planet has filed a registration
statement with the United States Securities and Exchange Commission to register
such stock.
National Law, a Texas corporation, was formed in November 1998 for the
purpose of developing and marketing an Internet portal to be used for legal
research. Following its formation, National Law's then sole stockholder, and
the current President, Chief Executive Officer and Chairman of Internet Law,
contributed to National Law all of his rights and interests in certain retrieval
and database software and database content valued at $934,000 and $1,096,000,
respectively, in exchange for 15,152,500 shares of common stock of National Law.
Commercial operations began in January 1999, the same month in which National
Law agreed in principle to be acquired by Internet Law.
Pursuant to an Agreement and Plan of Reorganization, dated March 25, 1999,
as amended (the "Merger Agreement"), among the Company, National Law and the
stockholders of National Law, effective as of March 30, 1999, each share of
National Law common stock was exchanged for one share of the Company's
unregistered common stock. In contemplation of this transaction, the Company's
original stockholders agreed to a one-for-two reverse stock split, which
resulted in 2,000,000 shares of the Company's common stock being outstanding
immediately prior to the merger. As a result of these transactions, former
National Law stockholders currently hold 18,000,000 shares of the Company's
unregistered common stock and the Company's original stockholders currently hold
2,000,000 shares of the Company's common stock. Following the transaction, the
stockholders voted to change the name of Planet Resources, Inc. to "Internet Law
Library, Inc." Under the terms of the Merger Agreement, the majority of the
Company's original board of directors resigned and were replaced with directors
elected by the new stockholders of the Company.
RECENT TRANSACTION
In the first quarter of Internet Law's fiscal year ending June 30, 2000,
Internet Law privately issued approximately 1,283,800 shares of unregistered
common stock at an average price per share of $1.11, yielding cash proceeds of
approximately $1,420,700.
PRODUCTS AND SERVICES
National Law provides a "virtual" law library that is designed to be used
to do legal research from offices, homes, or portable laptops. National Law
attempts to attract people who need to conduct legal research, and prefer to do
so quickly, easily and inexpensively over the Internet. Built upon a web-based
architecture, National Law's virtual library enables many users to access a
database designed to provide access to and reduce the costs associated with
online
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legal research. National Law endeavors to maintain and improve its technology
and outpace its competitors by continuing to improve its search engine,
publishing accurate databases, maintaining its low cost, and becoming a one-stop
shopping place for legal research.
National Law's primary product is a text search and retrieval program
available for use via the Internet that currently offers access to the following
databases:
. Texas Case Law;
. New York Case Law (1975 through 1999);
. United States Supreme Court;
. Federal 5th Circuit;
. Federal 11th Circuit;
. Texas Constitution;
. Texas 76th Legislature Session Laws; and
. plain language forms.
National Law's legal information is available through its web site at
www.itislaw.com. In addition, the information from National Law's databases can
be downloaded or printed.
In addition to National Law's existing products and services, the Company
expects to provide a number of additional services in the future, which may
include the following:
. database inquiry, retrieval, and review of all state and federal case
law;
. database inquiry and retrieval of all statutes, codes, constitutions,
rules and regulations, briefs and pending legislation;
. fast and frequent updating of all data;
. maintenance of currency as to hardware developments;
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. maintenance of currency as to Internet developments;
. additional plain language forms;
. plain language writing clinics and editing services; and
. other such related legal research tools as needed by customers.
As the future of data search and retrieval on the Internet expands,
Internet Law may expand its market from primarily Texas into all of the United
States, Canada, other English-speaking countries, Mexico, and all the other
trading partners of the United States who have legal proceedings in the United
States. Internet Law also may provide its services and related products to
international legal offices with correspondent offices in the United States.
Internet Law believes that the proliferation of access to the Internet may open
all these markets at a fraction of the cost historically attributable to such
wide scale marketing strategies, because a geographical presence is obtainable
without the actual expense of physically locating in each of these areas.
Internet Law's ability to provide additional services and expand its market
depends upon a number of factors, many of which are beyond Internet Law's
control. These include the rates of and costs associated with new customer
acquisition, customer retention, capital expenditures and other costs relating
to the expansion of operations; the timing of new product and service
announcements; changes in Internet Law's pricing policies and those of its
competitors; market acceptance of Internet Law's services; changes in operating
expenses, strategy and personnel; increased competition; and general economic
factors. There can be no assurance that Internet Law will be successful in
selling its services or achieving or maintaining profitability or positive cash
flow in the future.
AGREEMENTS WITH IT/IS, INC.
The databases provided by Internet Law can be accessed and searched through
a software retrieval engine known as Litidex(R). Litidex(R) was developed by
IT/IS, Inc. ("IT/IS"), a Texas corporation wholly owned by Hunter M.A. Carr,
Internet Law's President, Chief Executive Officer and Chairman. National Law is
a party to certain agreements with IT/IS, the material terms of which are
described below.
Under a Continuing Services Agreement, effective December 1, 1998, between
National Law and IT/IS (the "Services Agreement"), IT/IS agreed to provide
National Law with data files containing case law and statutes as are in the
public domain, together with coding and proprietary editing services covering
these data files. National Law is charged $0.65 per 1,000 characters for those
data files that satisfy certain prescribed quality control requirements.
Pursuant to the Services Agreement, National Law agreed for a three-year period
to provide IT/IS with minimum orders for data files containing an aggregate of
750 million characters per month. National Law has the right, however, to
select another vendor if IT/IS' prices cease to be competitive given market
prices for comparable work.
Under a Management and Financial Services Agreement, effective March 1,
1999, between National Law and IT/IS (the "Management Agreement"), IT/IS
provides accounting, staffing and procurement services and office space to
National Law. National Law pays IT/IS a monthly management fee of $3,600, plus
$85 per hour for accounting services, 125% of the cost of staffing services,
120% of the cost of office supplies, equipment and telephone services and 115%
of the cost of office space rental.
Under an agreement effective March 23, 1999, between National Law and
IT/IS, IT/IS agreed to provide National Law with software development and
consulting services for National Law's databases and retrieval. As of June 30
1999, no services had been provided under this agreement.
Under a personal service contract, effective December 1, 1998, between
National Law and Mr. Carr, effective in November 1998, Mr. Carr provided
executive management and marketing services to National Law. This agreement was
terminated effective July 1, 1999, the date that Mr. Carr became a salaried
officer of Internet Law.
RAW MATERIALS
Case law and statutes are public information that is not protectable by
copyright. Many vendors of these historical records sell these products.
National Law purchases content for its databases from IT/IS who also formats and
uploads the content to National Law's web site. New content, including recently
decided case law and new or pending legislation, is purchased directly from the
respective courts and legislatures.
CUSTOMERS
At October 4, 1999, National Law had a total of approximately 1,388
subscribers to its web-based products. Because Texas legal materials comprised
the first databases National Law made available to customers, most of its
customers are located in Texas. National Law has historically targeted its sales
to small law firms and solo practitioners who may find competitors' products too
expensive. Small firms and solo practitioners typically require legal
information for the states in which they practice. National Law intends to
increase the number of state law databases available through its web-site, and
also intends to continue to aggressively market its products and services to
additional small law firms and solo practitioners, as well large law firms and
legal departments of corporations. There can, however, be no assurance that
National Law will be successful in these efforts.
BUSINESS STRATEGY
Internet Law's objective is to become one of the leading and most
affordable providers of legal resources. Internet Law's strategy to accomplish
this objective is to gain market share by:
. the innovative use of the Internet and other technology;
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. offering its products and prices at extremely competitive prices relative
to its competitors;
. the use of various media to attract and retain customers;
. focusing on a broad and diverse market of potential users of its products
and services; and
. providing excellent customer service and technical support.
INTERNET AND TECHNOLOGY
The Company expects to remain competitive in the market for legal research
through the continued use of the Internet and other forms of technology.
Internet Law believes that National Law is at the forefront in the advanced use
of technology in the legal research industry. This belief stems from the
portability of National Law's products and services, and because of the speed of
National Law's licensed search engine, Litidex(R), that is not available to
competitors. Internet Law believes that Litidex(R) is a superior product to
those used by competitors.
National Law strives to be at the forefront of cutting-edge technology in
both hardware and software as it relates to the needs of the legal profession,
and to document automation, data search and retrieval methods. Specifically,
National Law intends to:
. keep its database current with immediate updates to case law, statutes,
rules and regulations online;
. retain staff who are proficient in all phases of the Internet not just
from a user point of view, but also as an Internet provider and purveyor;
. continue to develop its products;
. strengthen its search engine, Litidex(R), by remaining current in
software and hardware development; and
. offer online sign-up for its products and services.
However, there can be no assurance that Internet Law will be successful in
using new technologies effectively, developing new services or enhancing
existing services on a timely basis or that such new technologies or
enhancements will achieve market acceptance. In addition, there can be no
assurance that services or technologies developed by others will not render
Internet Law's services or technology non-competitive or obsolete.
In addition, the market for Internet services is in an early stage of
growth. Internet Law's services will depend upon the continuing development and
expansion of the market for Internet services. If the demand for Internet
services fails to continue to grow, grows more slowly than anticipated or
becomes saturated with competitors, Internet Law will be materially adversely
affected.
Internet Law is also at risk to fundamental changes in the way Internet
access is delivered. Currently, computers are primarily connected by telephone
lines for access to Internet services. Recently, several companies have
developed cable television modems that they may offer for sale in the near
future. As the Internet becomes accessible through other devices and services,
Internet Law will have to develop new technology or modify its existing
technology to accommodate these developments. There can be no assurance that
Internet Law will succeed in adapting its Internet access business to
alternative devices and conduits.
COMPETITIVE PRICING
The Company expects to achieve its business strategy in part through
competitive pricing. Unlike some competitors, National Law currently does not,
and has no plans to, charge its customers a "per-use" fee or hourly transaction
fees. Rather, National Law charges its customers a monthly fee for its
services. Upon payment of that fee, National Law offers an unlimited search and
retrieval of its services and related products. Presently, aside from
promotional and introductory discounts, National Law's basic monthly fee is
$39.95.
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Internet Law believes the fees charged by National Law are significantly
less than most of its competitors. National Law expects to be able to maintain
this price advantage over its competitors because it believes that it has
relatively low overhead and infrastructure expenses relative to its competition.
It is a goal of National Law to remain substantially less expensive than its
major competitors.
Internet Law's customers have the option of discontinuing their service at
the end of any month for any reason. If a significant number of customers so
elect, and Internet Law is unable to attract new customers, Internet Law will be
materially adversely affected.
SALES AND MARKETING
One of the ways National Law expects to gain market share is to identify
potential customers for its products and services, and employ a marketing
strategy to change potential customers into customers. There are nearly one
million active lawyers practicing in the United States. Moreover, there are more
than 64,000 licensed attorneys in Texas and 110,000 licensed attorneys in New
York. National Law intends to focus on a very broad and expansive market,
including:
. Solo legal practitioners;
. Local, state and national law firms;
. Judges and court personnel;
. Legal assistants and paralegals; and
. Other companies.
In addition, in order to sell its products and services to lawyers and other
market participants, National Law plans to use a marketing strategy that has
several elements:
. telemarketing directly to licensed attorneys;
. mailings, flyers, and electronic mail distributions;
. advertising with displays in target market magazines;
. advertising on the World Wide Web and Internet; and
. writing and publishing a monthly newsletter to current and interested
customers. (As priorities dictate, the publication frequency may be
changed to bimonthly or quarterly.)
National Law does not propose to make use of a traditional direct person-
to-person sales staff. Rather, its strategy is to avoid the high cost and long
lead time associated with a direct, in-the-field sales force, and instead use a
vertical market approach in saturating the potential customer market through the
use of telephone, electronic mail and facsimile contact.
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In addition to the items listed above, National Law plans to make extensive
use of the technology it possesses to obtain customers. National Law maintains
a page on the World Wide Web and has posted its site to the major search
engines. National Law expects that this will allow it to make use of online
sign-up and distribution. Finally, National Law may conduct personal
demonstrations of its services and related products at major national trade
shows.
CUSTOMER SERVICE AND TECHNICAL SUPPORT
National Law strives to retain its customers and obtain new customers
through its dedication to customer service and technical support. National Law
employs four (4) customer service technicians whose primary job is to help
customers when they have questions or problems with its products or services.
In addition, one of National Law's goals is to keep customers informed of coming
enhancements to assure customers that they are staying current with its
products.
INTELLECTUAL PROPERTY RIGHTS
National Law regards its software technologies, databases and database
management software as proprietary. National Law depends on trade secrets for
protection of its software, and it has entered into confidentiality agreements
with its management and key employees covering this software, and limits access
to, and distribution of this software, and other proprietary information. There
can be no assurance that the steps taken by National Law or the Company will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are equivalent or
superior to National Law's service or technology.
MARKET/INDUSTRY
Industry sources estimate the market for on-line legal information was $1.7
billion in 1998, and is projected to grow to $2.7 billion by 2002. With the
growth in litigation (28% increase in civil lawsuits and 55% in criminal cases
from 1984-97) and the increase in the number of lawyers (980,000 in the United
States as of December 31, 1998 and 1.06 million projected by 2002), Internet Law
believes the projected increase in the market for on-line legal information is
reasonable. In addition, the increased popularity of the Internet, both
domestically and internationally, and the movement towards conservation of
natural resources by using less paper, further strengthens this belief. Although
there can be no assurance of its success, the Company anticipates that in the
immediate future in Texas alone, National Law may be able to significantly
increase its subscribers, potentially generating substantial monthly gross
revenues.
COMPETITION
The competition in Internet Law's industry is intense; its principal
competitors have significantly greater resources than it does, and this
competition may adversely affect Internet Law's consolidated results of
operations. The market for electronic legal information is currently dominated
by LEXIS/NEXIS(R), which is owned by Reed-Elsevier, and West Group, a division
of The Thomson Corporation. These competitors are both large, well-established
companies. They offer databases that are similar to or in some cases larger
than the databases that National Law offers. Internet Law's competitors have
longer operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than Internet
Law. This may enable them to undertake more extensive
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marketing campaigns, to respond more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products than Internet Law can.
LEXIS/NEXIS(R) and West Publishing Company have significant penetration in the
large law firm market, a market in which Internet Law intends to compete.
In addition, Internet Law competes with other companies that offer fee-
based access to selected legal databases over the Internet. These companies may
be more successful than Internet Law may be in capturing market share.
EMPLOYEES
Internet Law and its subsidiary, National Law, had 23 full-time employees
at October 4, 1999. In addition, Internet Law relies on the services of
employees at IT/IS provided under the Management and Financial Services
Agreement. Internet Law's employees are not represented by any collective
bargaining organization. Internet Law has never experienced a work stoppage and
believes that its relationships with its employees are good.
ITEM 2. PROPERTIES
FACILITIES
Internet Law's primary executive offices are at 4301 Windfern Road,
Houston, TX 77041. Pursuant to the Management and Financial Services Agreement,
the Company pays IT/IS allocated monthly charges of approximately $3,800, which
amount may increase as the Company requires more office space. Management
believes that its current facilities are adequate to meet its needs through the
next 12 months and that, if required, suitable additional space will be
available on commercially reasonable terms to accommodate expansion of Internet
Law's operations.
OTHER PROPERTY
The Company, from its operations before the reverse acquisition by National
Law, is the owner of subsurface mineral rights on approximately 190 acres
located in the City of Mullan, Idaho. Title was acquired by issuance to the
real property owners of one share of the Company's common stock for each 25
square feet of surface owned. In acquiring such mineral rights, the Company,
through its predecessor, issued 361,739 shares of common stock, as adjusted for
subsequent stock splits and the merger of Allied Silver-Lead Company ("Allied")
with the Company. Conveyance of title included all subsurface rights lying
beneath adjacent streets and alleys where ownership rested with the grantor.
The acquisition of such mineral rights was completed in November of 1985.
The Company, through one of its predecessors, entered into an agreement,
dated May 1, 1981, with the City of Mullan whereby the Company, as Lessee, has
the right to mine subsurface minerals on approximately 200 acres owned by the
City north of Osburn Fault for a period of 25 years (subject to a renewal option
for an additional 25 years). The City of Mullan, as lessor, received 20% of all
royalty payments or other consideration received by Allied from Hecla Mining
Company. In the event Allied enters in to a lease agreement for the exploration
and
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development of "City Property" south of the Osburn Fault, the City will receive
15% of the royalties received. No royalties have been paid on "City Property"
south of the fault.
The Company has no competitive economic position in the mining industry
as no mineral production has ever been realized. Further, the Company has
not received revenue from its mineral rights for the last several years.
ITEM 3. LEGAL PROCEEDINGS
On September 9, 1999, Loislaw.com, Inc. ("Lois") commenced legal
proceedings in the District Court of Harris County, Texas, 11th Judicial
District (Case No. 1999-45563), against Internet Law, National Law and IT/IS.
Lois, a competitor of Internet Law, alleged that IT/IS breached an agreement
between Lois and IT/IS by allegedly providing certain materials to National Law
for use on National Law's web site. The suit seeks, among other things, to
enjoin National Law from utilizing such material, actual damages equal to the
value of its market position prior to defendants' alleged tortious interference
with the contract, and actual damages for alleged lost profits. Management and
counsel for the Company consider the suit without merit, and management intends
to vigorously defend the case.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to Internet Law's security holders during
Internet Law's fourth quarter.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Internet Law's common stock trades on the over-the-counter Bulletin Board
under the symbol "ELAW." The following table shows the high and low of closing
bid prices for the common stock as reported by the over-the-counter Bulletin
Board. The closing bid price quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission and may not necessarily represent actual
transactions.
1998 Fiscal Year High Low
- ---------------- ---- ---
First Quarter $0.50 $0.25
Second Quarter $0.75 $0.25
Third Quarter $0.75 $0.50
Fourth Quarter $0.50 $0.25
1999 Fiscal Year High Low
- ---------------- ---- ---
First Quarter $0.125 $0.125
Second Quarter $0.25 $0.063
Third Quarter $0.875 $0.063
Fourth $7.00 $0.469
SALES OF UNREGISTERED SECURITIES
During the past three years ended June 30, 1999, the Company issued
unregistered shares of its common stock to a limited number of persons as
described below.
1. Pursuant to the Merger Agreement among the Company, National Law and the
stockholders of National Law, effective as of March 30, 1999, each share of
National Law common stock was exchanged for one share of the Company's
unregistered common stock.
2. In March 1999, Internet Law issued and sold 2,394,184 shares of common
stock, par value $.001 per share to A. W. Dugan, the Company's former
Chairman of the Board of Directors and President, and, currently, a
significant stockholder of the Company, for $59,855.
3. In April 1999, Internet Law issued and sold 15,000 shares of common stock,
par value $.001 per share to Chuck Dunbar, for $150.
4. In April 1999, Internet Law issued and sold 25,000 shares of common stock,
par value $.001 per share to Joanna Hoover for $10,000.
5. In April 1999, Internet Law issued and sold 15,000 shares of common stock,
par value $.001 per share to D.H. Westmoreland, for $150.
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6. In May 1999, Internet Law issued and sold 15,000 shares of common stock,
par value $.001 per share to Joanna Hoover, for $150.
7. In May 1999, Internet Law issued and sold 15,000 shares of common stock,
par value $.001 per share to Bryan Gentle for $15,000.
8. In May 1999, Internet Law issued and sold 15,000 shares of common stock,
par value $.001 per share to Rich Nommensen for $150.
9. In May 1999, Internet Law issued and sold 15,000 shares of common stock,
par value $.001 per share to Tina Williams for $150.
10. In June 1999, Internet Law issued and sold 15,000 shares of common stock,
par value $.001 per share to Joe H. Reynolds for $15.
11. In June 1999, Internet Law issued and sold 50 shares of common stock, par
value $.001 per share to Ekat Tcherkassova for $.05.
12. In June 1999, Internet Law issued and sold 1,500 shares of common stock,
par value $.001 per share to Rhea Laws as consideration for a conference
table that Internet law valued at $4,500.
13. In June 1999, Internet Law issued and sold 10,000 shares of common stock,
par value $.001 per share to Robert Bolton as consideration for consulting
services valued at $12,500.
None of the foregoing transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, and Internet Law believes that
each transaction was exempt from the registration requirements of the Securities
Act by virtue of Section 4(2) thereof. The recipients in such transactions
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof, and
appropriate legends were affixed to the share certificates and instruments
issued in such transactions. All recipients had adequate access, through their
relationships with Internet Law, to information about Internet Law.
HOLDERS
At October 4, 1999, there were 1,482 holders of record of Internet Law's
common stock and 22,751,862 shares outstanding.
DIVIDENDS
Internet Law has never declared any cash dividends on its common stock.
Internet Law does not anticipate paying any cash dividends on its common stock
in the foreseeable future and intends to retain its earnings, if any, to finance
the expansion of its business and for general corporate purposes. Any payment
of future dividends will be at the discretion of the Board of Directors and will
depend upon, among other things, Internet Law's earnings, financial
12
<PAGE>
condition, capital requirements, level of indebtedness, contractual restrictions
and other factors that Internet Law's Board of Directors deems relevant.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Under the terms of the Merger Agreement, the stockholders of National Law
became beneficial owners of 90% of the Company's outstanding common stock, a
majority slate of new directors were elected by the new stockholders, and the
name of the company was changed from Planet Resources to Internet Law. In
return, the original stockholders of the Company, who once owned 100% of a
company with no operations and some mining assets, became ten (10%) percent
owners of National Law's parent company. Because of these fundamental changes in
the control and in the operations of the Company, the selected financial data
shown below and the consolidated financial statements contained in Part IV of
this Form 10-K are presented as if National Law had acquired the Company.
Accordingly, the selected financial data and the consolidated financial
statements reflect the assets, liabilities, results of operations and cash flows
of the business conducted by National Law for the period beginning with its
inception on November 30, 1998, through June 30, 1999, and by the Company's new
subsidiary, New Planet, from the date of the reverse acquisition through June
30, 1999. The historical financial data presented in the table below are derived
from the Consolidated Financial Statements of Internet Law. The financial
results are not necessarily indicative of Internet Law's future operations or
financial results. The data presented below should be read in conjunction with
Internet Law's Consolidated Financial Statements and the notes thereto included
elsewhere herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
PERIOD FROM
INCEPTION
(NOVEMBER 30, 1998)
THROUGH
JUNE 30, 1999
------------------------
STATEMENT OF OPERATIONS DATA:
Revenues $ 53,520
Sales and marketing expense 244,775
General and administrative expense 211,891
Amortization and depreciation 142,783
Computer service expenses 65,073
Interest expense 1,212
--------
Net loss $612,214
========
Net loss per share $ 0.06
========
JUNE 30, 1999
-------------
BALANCE SHEET DATA:
Cash (1) $ 54,629
Working capital deficit (481,949)
Total assets (1) 2,690,000
Total debt, all current 180,000
Stockholders' equity $2,140,806
____________
(1) Cash includes $32,515 that is to be distributed to New Planet's
stockholders pursuant to the Distribution Agreement. In addition, total
assets include recorded mining assets of $10,000 which will also be
distributed under this agreement. The Company has recorded a current
liability in the amount of $42,515, representing its total obligation under
the Distribution Agreement.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements of Internet Law Library, Inc. ("Internet Law"
or the "Company"), which are included elsewhere in this Form 10-K. The
following discussion contains certain forward-looking statements regarding the
Company's expectations for its business and its capital resources. These
expectations are subject to various uncertainties and risks that may cause
actual results to differ significantly from these forward-looking statements.
The following is management's discussion and analysis of certain
significant factors that have affected the Company's financial condition and
results of operations during the period from the inception on November 30, 1998,
of National Law Library, Inc. ("National Law"), the Company's operating
subsidiary, through June 30, 1999 (the "Period from Inception to June 30,
1999").
Internet Law Library, Inc., formerly known as Planet Resources, Inc., is a
Delaware corporation that operates an Internet portal that provides subscription
access to databases used for legal research primarily in the Texas market
through its wholly owned subsidiary, National Law. The content of these
databases consists of federal and state case law, statutory law and regulatory
materials that can be useful to individual lawyers, judges, law firms, corporate
legal departments, government agencies, businesses, and individuals involved in
litigation, legislative efforts, and corporate legal planning. Interfacing with
these databases is a software retrieval engine that is also owned and operated
by National Law. Customers using the Internet portal pay subscription fees to
National Law for monthly or longer-term service.
Internet Law was originally incorporated as Allied Silver-Lead Company in
the State of Idaho in 1967 and, until 1992, operated as an exploratory mining
company. In January 1996, Internet Law was reincorporated in Delaware as a
result of a merger and, among other shareholder actions taken at that time,
changed its name to Planet Resources, Inc. Between 1992 and its acquisition of
National Law in March of 1999, Internet Law had no operations; however, it
maintained certain mining properties which are to be indirectly distributed to
those stockholders who were stockholders of Internet Law prior to its
acquisition of National Law. To effect this distribution, New Planet Resources,
Inc., a Delaware corporation and a wholly owned subsidiary of the Company ("New
Planet"), will, under the terms of an Agreement and Plan of Distribution, dated
March 25, 1999 (the "Distribution Agreement"), succeed to Internet Law's
interests in these mining properties and $32,515 in cash at such time as the
common stock of New Planet is registered under the Securities Act of 1933. New
Planet has filed a registration statement with the United States Securities and
Exchange Commission to register such stock.
National Law, a Texas corporation, was formed in November 1998 for the
purpose of developing and marketing an Internet portal to be used for legal
research. Following its formation, National Law's then sole stockholder, and
the current President, Chief Executive Officer and Chairman of Internet Law (the
"Company's CEO"), contributed to National Law all of his rights and interests in
certain retrieval and database software and database content valued at $934,000
and $1,096,000, respectively, in exchange for 15,152,500 shares of common stock
of National Law. Commercial operations began in January 1999, the same month in
which National Law agreed in principle to be acquired by Internet Law.
Preliminary funding for these operations occurred in December 1999 with an
investor's purchase of a $200,000 2% subordinated convertible debenture. In
February 1999, this debenture was converted into 500,000 shares of National
Law's common stock. Also in February 1999, National Law issued and sold
2,337,500 shares of its common stock for approximately $406,000 in cash. Issued
and outstanding National Law common stock amounted to 18,000,000 shares.
Pursuant to an Agreement and Plan of Reorganization, dated March 25, 1999,
as amended, among the Company, National Law, and the stockholders of
National Law, effective as of March 30, 1999, each share of National Law common
stock was exchanged for one share of unregistered Internet Law common stock. In
contemplation of the merger, Internet Law's original stockholders agreed to a
one-for-two reverse stock split, which resulted in two million shares of
Internet Law common stock being outstanding immediately prior to the merger. As
a result of these transactions (collectively referred to below as the "National
Law Transaction"), former National Law stockholders currently hold 18,000,000
unregistered shares of the Company's common stock and Internet Law's original
stockholders currently hold 2,000,000 shares of the Company's common stock.
15
<PAGE>
The Company and IT/IS, Inc. ("IT/IS"), a company wholly owned by the
Company's CEO, executed certain agreements under which IT/IS provides database
content and various management, staffing and procurement services and office
space to National Law. In addition, the Company's CEO provided executive
management and marketing services to National Law under a personal service
contract. Apart from the content agreement with IT/IS, the service agreements
were put in place to provide National Law with an interim-operating
infrastructure until such time as additional financing and cash from operations
became available. Effective July 1, 1999, the personal service contract with
the Company's CEO was terminated when this individual became a salaried officer
of the Company. In addition, certain individuals whose salaries and benefits
were allocated to National Law by IT/IS also became full-time officers and
employees of National Law on July 1, 1999. As the Company attracts more
investment capital, it plans to make the necessary resource commitments to
achieve a stand-alone capability.
In the first quarter of the Company's fiscal year ending June 30, 2000, the
Company issued approximately 1,283,800 shares of unregistered common stock at an
average price per share of $1.11, yielding cash proceeds of approximately
$1,420,700.
The Company may experience high volatility in operating results, net income
and cash flows from quarter to quarter and from year to year. The Company's
revenues depend on its ability to attract and retain customers. The Company's
customers will have the option of discontinuing their service at the end of each
month or any reason. The Company's expense levels are based, in part, on its
expectations as to future revenues. Also, the Company expects that its
operations often will require upfront expenses, but will result in trailing
revenues. To the extent that revenues are below expectations, the Company may
be unable or unwilling to reduce expenses proportionately, and operating
results, net income and cash flows are likely to be adversely affected.
RESULTS OF OPERATIONS
Revenues. The Company's revenues are derived from the sale of
subscriptions entitling a subscriber to access National Law's databases of legal
content. Subscribers may sign-up for one or more databases on an unbundled or
bundled basis for a flat monthly fee. For instance, case law for Texas and the
Federal 5th Circuit represent two separate databases, either one or both of
which may be included in a subscription. Typically, the more databases that are
included, then the higher the monthly subscription fee. During the Period from
Inception to June 30, 1999, revenue was $53,520. At March 31, 1999, National
Law had 144 subscribers who were paying average subscription fees of $43.12 per
month. At June 30, 1999, the number of subscribers increased to 719, and the
average subscription fee increased to $43.65 per month.
Sales and Marketing Expense. Sales and marketing expense amounted to
$244,775 for the Period from Inception through June 30, 1999. This amount
consisted primarily of allocated charges from IT/IS for contract telemarketing
personnel and direct sales management totaling $133,000, senior management
charges under the personal service contract with the Company's CEO totaling
$75,400, telephone expenses of $20,000, and advertising and media relations
totaling $12,500. Since June 30, 1999, National Law has hired its own sales
management personnel and, in the telemarketing area, intends to replace contract
personnel with employees.
General and Administrative Expense. General and administrative expense
amounted to $211,891 during the Period from Inception to June 30, 1999.
Significant components in this category include legal and accounting fees
totaling $97,400 (including contract legal and accounting services allocated
from IT/IS amounting to $41,500), allocated charges for rent, building services
and supplies totaling $47,300, charges related to stockholder relations and
business development totaling $30,300, and allocated charges for health
insurance and other employee benefits of $14,400.
Amortization and Depreciation. Amortization and depreciation expense
totaled $142,783 during the Period from Inception to June 30, 1999. Of this
amount, approximately $43,500 is attributable to additional database content,
and approximately $97,800 is due to retrieval and database software. During the
period, National Law added database content costing $691,400, comprised of
Federal case law at $601,000 and additional Texas case law at $90,400. There
were no increases due to retrieval and database software during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ability to execute its business strategy, particularly the
expansion of its products and services, depends to a significant degree on its
ability to obtain additional capital. The Company's principal demands for
liquidity are cash for operations, including funds for payables to IT/IS, and
funds for investment.
16
<PAGE>
For the Period from Inception to June 30, 1999, the Company's cash
increased by $54,629, consisting of $126,068 of cash used in operations, $
631,393 of cash used in investment activities, and $812,090 of cash provided
from financing activities.
For the Period from Inception to June 30, 1999, National Law's operations
consumed $121,631 of cash. Majors factors offsetting the reported net loss of
$612,214 include $265,931 of payables due to related parties and the Company's
use of common stock, valued at $29,300, to compensate consultants and vendors
for services rendered. For future periods, the Company's payables to related
parties are expected to decrease as existing payables are liquidated and as
National Law attains more of a stand-alone capability.
During the Period from Inception to June 30, 1999, investment activities
consumed net cash of $624,535. The principal components of this usage include
the increase to database content of $691,409, offset in part by $90,275 of cash
acquired in the National Law Transaction. Of the cash acquired in the National
Law Transaction, $32,515 will be distributed to the original stockholders of the
Company under the terms of the Distribution Agreement. Management expects that
future investment activities may include adding the case law content for states
other than Texas. In addition, management of the Company is considering
developing or acquiring new product lines that would be useful to Internet
subscribers who are engaged in or interacting with the legal profession.
Cash flows from financing activities during the Period from Inception to
June 30, 1999 amounted to $800,795. The financing transactions comprising this
amount include the sale of a $200,000 subordinated convertible debenture
(subsequently converted to shares National Law common stock prior to the
National Law Transaction), the proceeds from a $180,000 note made by the Company
in June 1999, and the sale of $420,795 of common stock (comprised of sales by
National Law prior to the National Law Transaction of shares of National Law's
common stock for approximately $406,300 and sales by the Company following the
National Law Transaction of 130,050 shares of the Company's common stock for
approximately $14,495).
The Company believes that its current sources of liquidity will be
sufficient to meet the Company's short-term liquidity and committed capital
requirements. However, in order to fund growth beyond existing commitments, the
Company will need to raise additional funds for operations and investment. As a
result, management of the Company is presently considering various equity-based,
private financing proposals that may or may not fit the Company's long-term
strategic growth objectives. Management of the Company is also considering the
pros and cons of a public offering of its common stock. Decisions
with regard to these further financings will be driven by the increasing need
for working capital to augment existing marketing and sales efforts and to add
new and updated legal content to its databases, and by the quality and timing of
suitable acquisition opportunities. There can be no assurance that such capital
will be available at reasonable cost.
YEAR 2000 ISSUE
Many of the world's computers, software programs and other equipment using
microprocessors or embedded chips currently have date fields that use two digits
rather than four digits to define the applicable year. These computers, programs
and chips may be unable to properly interpret dates beyond the year 1999. For
example, computer software that has date sensitive programming using a two-digit
format may recognize a date using "00" as the year 1900 rather than the year
2000. This inability to properly process dates is commonly referred to as the
"Year 2000 issue," the "Year 2000 problem" or the "Millennium Bug." Such errors
could potentially result in a system failure or significant miscalculations.
This could result in system failures or miscalculations, causing disruptions of
operations, including, among others, an inability to process transactions, send
invoices or engage in similar normal business activities.
17
<PAGE>
The Company does not believe that the Year 2000 issue will have a material
effect on its network computer systems or operations. However, it will continue
to assess the potential impact of the Year 2000 issue. Any failure of the
Company to become Year 2000 compliant on a timely basis could have a material
adverse effect on the Company. To the extent that the Company relies on
external vendors and network providers with Year 2000 exposure, any failure by
such third-party providers to resolve any Year 2000 issues on a timely basis or
in a manner that is compatible with the Company's systems could have a material
adverse effect on the Company.
Most of the Company's critical third-party providers have made
representations to the effect that they are, or will be, Year 2000 compliant.
The Company, however, has not undertaken an in-depth evaluation of such
providers in relation to the Year 2000 issue, and furthermore the Company has no
control over whether its third-party providers are, or will be, Year 2000
compliant. Any failure on the part of such third-party providers to become Year
2000 compliant on a timely basis or in a manner that is compatible with the
Company's systems could have a material adverse effect on the Company. In the
event the Company encounters Year 2000 problems, it would expect to take all
reasonably necessary measures to address such problems.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to the General Instructions to Item 305 of Regulation S-K, the
quantitative and qualitative disclosures called for by Item 7A of Form 10-K and
by Item 305 of Regulation S-K do not require additional disclosure by Internet
Law at this time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Included herein beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
18
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Information called for by Item 10 is incorporated by reference from Internet
Law's definitive Proxy Statement, which will be filed not later than 120 days
after the end of Internet Law's fiscal year ended June 30, 1999.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by Item 11 is incorporated by reference from Internet
Law's definitive Proxy Statement, which will be filed not later than 120 days
after the end of Internet Law's fiscal year ended June 30, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information called for by Item 12 is incorporated by reference from
Internet Law's definitive Proxy Statement, which will be filed not later than
120 days after the end of Internet Law's fiscal year ended June 30, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by Item 13 is incorporated by reference from Internet
Law's definitive Proxy Statement, which will be filed not later than 120 days
after the end of Internet Law's fiscal year ended June 30, 1999.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are being filed as part of this Report:
(a)(1) Consolidated Financial Statements
See Index to Consolidated Financial Statements on page F-1.
(a)(2) All other schedules are omitted because they are not applicable,
not required or the required information is in the Financial Statements or the
Notes thereto.
(a)(3) The following exhibits are filed or incorporated by reference as
part of this report as required by Item 601 of Regulation S-K.
EXHIBIT
NUMBER DESCRIPTION
------ -----------
2.1 Agreement and Plan of Reorganization dated March 25, 1999, between
Planet Resources, Inc., National and the stockholders of National
(incorporated by reference to Exhibit A to Registrant's Form 8-K
filed April 2, 1999).
2.2+ First Amendment to Agreement and Plan of Reorganization dated as of
March 30, 1999, between Planet Resources, Inc., National Law and the
stockholders of National Law.
2.3 Agreement and Plan of Distribution dated as of March 25, 1999, between
Planet Resources, Inc., New Planet and National Law (incorporated by
reference to Annex B to Registrant's Information Statement Pursuant to
Section 14(c) of the Securities Exchange Act of 1934 filed April 19,
1999).
3.1 Certificate of Incorporation, as amended of the Company (incorporated
by reference to Exhibit 2 to the Company's Form 8-A12G/A filed October
4, 1999).
3.2+ Bylaws, as amended, of the Company.
10.1 Option Agreement between the Company and Hunter M.A. Carr
(incorporated by reference to Exhibit B to Schedule 13D filed October
12, 1999, by Hunter M.A. Carr).
20
<PAGE>
10.2 Option Agreement between the Company and Jack I. Tompkins
(incorporated by reference to Exhibit B to Schedule 13D filed October
12, 1999, by Jack I. Tompkins).
10.3 Consulting Agreement between National Law and Castle Development,
Ltd. (incorporated by reference to Exhibit 4(A) to Registrant's
Registration Statement on Form S-8 filed April 2, 1999).
10.4+ Continuing Service Agreement between National Law and IT/IS,
effective December 1, 1998.
10.5+ Management and Financial Services Agreement between National Law and
IT/IS, effective March 1, 1999.
10.6+ Software Development and Consulting Agreement between National Law
and IT/IS, dated March 24, 1999.
10.7+ Option Agreement to Purchase Stock, effective March 30, 1999, by and
between the Company and Jonathan Gilchrist.
21+ Subsidiaries of the Company.
24 Power of Attorney (included on signature page).
27+ Financial Data Schedule for the period from inception on November 30,
1998, to June 30, 1999.
________________________________
+ Filed herewith
(B) REPORTS ON FORM 8-K
The following report on Form 8-K was filed during the last quarter of the
period covered by this report:
Form 8-K dated April 1, 1999, reporting (a) under Item 1 of Form 8-K, the
change in control resulting from the acquisition of the capital stock of
National Law, and the related transactions, which resulted, among other things,
in the former stockholders of National Law holding 90% of the outstanding shares
of common stock of Internet Law and (b) under Item 2 of Form 8-K, such
acquisition of National Law. In Item 7 of such Form 8-K, Internet Law undertook
to file a report on Form 10-KSB, which will include the required financial
statements relating to such acquisition.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTERNET LAW LIBRARY, INC.
By: /s/ HUNTER M.A. CARR
---------------------
Hunter M.A. Carr,
President, Chief Executive Officer and
Chairman
Date: October 12, 1999
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes and constitutes
Hunter M.A. Carr and Malcolm F. McNeill, and each of them singly, his true and
lawful attorneys-in-fact with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities to sign and file
any and all amendments to this report with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
and he hereby ratifies and confirms all that said attorneys-in-fact or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Hunter M.A. Carr October 12, 1999
- ------------------------------ President, Chief Executive Officer and
Hunter M.A. Carr Chairman (Principal Executive Officer)
/s/ Joe H. Reynolds Director, General Counsel October 12, 1999
- ------------------------------
Joe H. Reynolds
/s/ Kelley V. Kirker Director October 12, 1999
- ------------------------------
Kelley V. Kirker
/s/ Malcolm F. McNeill Chief Financial Officer (Principal October 12, 1999
- ------------------------------ Financial Officer and Accounting
Malcolm F. McNeill Officer)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Director October ___, 1999
- ------------------------------
Jack I. Tompkins
</TABLE>
23
<PAGE>
INDEPENDENT AUDITORS' REPORTS AND
FINANCIAL STATEMENTS
Page
----
Independent Auditors' Reports............................... F-1a and F-1b
Balance Sheet at June 30, 1999, and 1998.................... F-2
Statements of Operations for the period from November 30,
1998 to June 30, 1999, and the years ended June 30, 1998
and 1997.................................................... F-3
Statements of Changes in Stockholders' Equity for the period
from November 30, 1998 to June 30, 1999..................... F-4
Statements of Cash Flow for the period from November 30,
1998 to June 30, 1999, and the years ended June 30, 1998
and 1997.................................................... F-5
Notes to Financial Statements............................... F-6
24
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Internet Law Library, Inc.
Houston, Texas
We have audited the accompanying consolidated balance sheet of Internet Law
Library, Inc. (formerly Planet Resources, Inc. as of June 30, 1999, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows from November 30, 1998 (date of inception) to June 30, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Internet Law Library, Inc. at
June 30, 1999 and the results of their operations and cash flows for the period
ended June 30, 1999 in conformity with generally accepted accounting principles.
As more fully discussed in the accompanying financial statements, the Company
has entered into material agreements and contracts with related individuals and
entities owned by related individuals and entities that have resulted in
material transactions and balances with these related parties.
s/HARPER & PEARSON COMPANY
Houston, Texas
September 16, 1999
F-1a
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Planet Resources, Inc.
Houston, Texas
We have audited the accompanying balance sheets of Planet Resources, Inc.
(formerly Allied Silver-Lead Company) as of June 30, 1998 and 1997, and the
related statements of operations, changes in stockholders' equity and cash flows
for the years ended June 30, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Planet Resources, Inc. at June
30, 1998 and 1997, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
s/HARPER & PEARSON COMPANY
Houston, Texas
August 13, 1998
F-1b
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
--------------------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, including $32,515 at June 30, 1999, that is to be distributed
to the stockholders of New Planet Resources, Inc. $ 54,629 $108,356
Due from stockholders 11,295 -
Accounts receivable 1,322 -
---------- --------
Total current assets 67,246 108,356
---------- --------
INTELLECTUAL PROPERTY AND EQUIPMENT:
Law library assets, net of amortization 2,579,392 -
Furniture and equipment, net of depreciation 33,362 -
---------- --------
Net property 2,612,754 -
--------- --------
MINING AND RELATED ASSETS, net of depreciation, to be distributed to the
Stockholders of New Planet Resources, Inc. 10,000 10,000
--------- --------
Total assets $2,690,000 $118,356
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $180,000 $ -
Accounts payable:
Third party vendors 55,857 -
Related parties 265,931 -
Accrued expenses 4,891 -
Assets distributable to stockholders 42,515 -
---------- --------
Total current liabilities 549,194 -
---------- --------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.001; authorized shares of
1,000,000 with no shares issued - -
Common stock, par value $.001; at June 30, 1999, pending
authorized, issued and outstanding shares of
30,000,000, 21,132,288, and 21,121,550, respectively;
at June 30, 1998, authorized, issued and outstanding
shares of 10,000,000, 1,605,147, and 1,583,672,
respectively 21,122 1,605
Additional paid-in capital 2,775,082 252,184
Retained deficit (612,214) (92,249)
Treasury stock, at cost; at June 30, 1999, 10,738 shares;
at June 30, 1998, 21,475 shares (43,184) (43,184)
---------- --------
Total stockholders' equity 2,140,806 118,356
---------- --------
Total liabilities and stockholders' equity $2,690,000 $118,356
========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FROM INCEPTION ON YEAR ENDED JUNE 30,
NOVEMBER 30, 1998 -----------------------
TO JUNE 30, 1999 1998 1997
--------------------- ------ ------
<S> <C> <C> <C>
REVENUE:
Law library subscriptions $ 53,520 $ - $ -
OPERATING EXPENSES:
Sales and marketing 244,775 - -
General and administrative 211,891 13,377 32,633
Computer service 65,073 - -
Amortization and depreciation 142,783 - -
Interest expense 1,212 - -
--------- --------- ---------
Total expenses 665,734 13,377 32,633
--------- --------- ---------
NET LOSS $(612,214) $ (13,377) $ (32,633)
========= ========= =========
BASIC AND DILUTED LOSS PER SHARE: $ (0.06) $ (0.01) $ (0.02)
========= ========= =========
WEIGHTED AVERAGE SHARES:
Basic 10,763,581 1,583,672 1,583,672
========= ========= =========
Diluted 11,551,081
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
INTERNET LAW LIBRARY, INC
(FORMERLY PLANET RESOURCES, INC.)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From Inception on November 30, 1998 to June 30, 1999
<TABLE>
<CAPTION>
NUMBER OF ADDITIONAL
SHARES C0MMON PAID-IN RETAINED TREASURY
ISSUED STOCK CAPITAL DEFICIT STOCK TOTAL
---------- ------ ---------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Shares issued to founding
stockholder in exchange
for contributed law library
assets 15,152,500 $15,153 $2,014,207 $2,029,360
Pre-acquisition transactions:
Sale of shares 2,337,500 2,338 403,987 406,325
Shares issued for services 10,000 10 6,990 7,000
Conversion of convertible
Debenture 500,000 500 199,500 200,000
Reverse acquisition 2,000,000 2,000 98,954 $ (43,184) 57,770
Post-acquisition transactions:
Sale of shares 130,050 130 25,635 25,765
Shares issued for services 991,500 992 25,809 26,800
Net loss $(612,214) (612,214)
---------- ------- ---------- --------- --------- ----------
21,121,550 $21,122 $2,775,082 $(612,214) $ (43,184) $2,140,805
========== ======= ========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FROM INCEPTION ON YEAR ENDED JUNE 30,
NOVEMBER 30, 1998 -------------------------------
TO JUNE 30, 1999 1998 1997
--------------------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(612,214) $(13,377) $(32,631)
Adjustments to reconcile net loss to net cash used
By operating activities:
Consulting services paid for with
common stock 29,300 - -
Amortization and depreciation 142,783 - -
Changes in:
Accounts receivable (1,322) - -
Accounts payable:
Third party vendors 49,000 - -
Related parties 265,931 - -
Accrued expenses 4,891 - -
--------- -------- --------
Net cash used by operating activities (121,631) (13,377) (32,631)
--------- -------- --------
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Cash acquired in reverse acquisition 90,275
Additions to law library content (691,409) - -
Purchase of furniture and equipment (23,401) - -
--------- -------- --------
Net cash used in investment activities (624,535) - -
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of subordinated convertible
Debenture 200,000
Proceeds from the sale of stock 420,795 - -
Proceeds from note 180,000 - -
--------- -------- --------
Net cash provided by financing activities 800,795 - -
--------- -------- --------
Net increase (decrease) in cash 54,629 (13,377) (32,631)
Cash, beginning of period - 121,733 154,364
--------- -------- --------
CASH, END OF PERIOD $ 54,629 $108,356 $121,733
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - BUSINESS, CORPORATE HISTORY, AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Business -
Internet Law Library, Inc. (formerly Planet Resources, Inc.) (the
"Company" or "Internet Law") through its wholly owned subsidiary, National Law
Library, Inc. ("National Law"), operates an Internet portal that provides
subscription access to databases used for legal research. The content of these
databases consists of federal and state case law, statutory law and regulatory
materials that can be useful to attorneys and other parties involved in
litigation, legislative efforts and corporate legal planning. Interfacing with
these databases is a software retrieval engine that is also owned and operated
by National Law. Customers using the Internet portal pay subscription fees to
National Law for monthly or longer-term service.
Corporate History -
National Law was formed in November 1998 as a Texas corporation for
the purpose of developing and marketing an Internet portal to be used for legal
research. Following its formation, National Law's then sole stockholder
contributed to National Law all of his rights and interests in certain retrieval
and database software and database content valued at $934,000 and $1,096,000,
respectively, in exchange for 15,152,500 shares of common stock. National Law's
initial operations were confined to raising capital and developing a business
strategy, and commercial operations did not begin until January 1999. That same
month, National Law agreed in principle to be acquired by the Company in a
transaction structured as reverse acquisition. This reverse acquisition was
accomplished through a one-for-one tax-free exchange of shares of common stock
pursuant to an Agreement and Plan of Reorganization, dated March 25, 1999, as
amended (the "Merger Agreement"), which became effective on March 31, 1999. The
parties to the Merger Agreement include the Company, National Law and its
stockholders, and New Planet Resources, Inc. ("New Planet"), a wholly owned
subsidiary of the Company. Immediately following the reverse acquisition, the
Company's stockholders voted to change the name of the Company to Internet Law
Library, Inc.
The Company was originally incorporated as Allied Silver-Lead Company
in the State of Idaho in 1967 and, until 1992, operated as an exploratory mining
company. In January 1996, the Company was reincorporated in Delaware as a
result of a merger and, among other shareholder actions taken at that time,
changed its name to Planet Resources, Inc. Between 1992 and its acquisition of
National Law, the Company has had no operations; however, it has maintained
certain mining properties which are to be distributed to those stockholders who
were stockholders of the Company prior to the reverse acquisition by National
law. To effect this distribution, New Planet was organized as a Delaware
corporation and will, under the terms of an Agreement and Plan of Distribution,
dated March 25, 1999, (the" Distribution Agreement") succeed to the Company's
interests in these mining properties and $32,515 of cash at such time as the
common stock of New Planet is registered under the Securities Act of 1933, as
amended. As of September 30, 1999, New Planet
F-6
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
had filed a registration statement with the United States Securities and
Exchange Commission to register such stock.
Summary of significant accounting policies -
Basis of Presentation - Implementation of the Merger Agreement brought about
fundamental changes in the control and in the operations of the Company.
Accordingly, these consolidated financial statements reflect the assets,
liabilities, results of operations and cash flows of the business conducted by
National Law since its inception on November 30, 1998, through June 30, 1999,
and by the Company's new subsidiary, New Planet, from the date of the reverse
acquisition through June 30, 1999 (together, the "Period from Inception to June
30, 1999").
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, National Law and New
Planet. All significant inter-company balances and transactions have been
eliminated.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Estimates that materially impact the Company's financial
statements at June 30, 1999, include the valuation and amortization of the
Company's investment in law library assets. Actual results could differ from
those estimates and the results could have a material impact on the results of
operations of the Company.
Law Library Assets - Law library assets are comprised of content databases,
which include federal and state case law, statutory law and regulatory
materials, and database and retrieval software developed by a related party and
acquired by National Law at its formation. The capitalized value of a content
database is determined from the cost of purchasing, verifying and installing the
database for release to Internet customers. Once a content database has been
capitalized, the cost of maintaining the database with current case law and new
regulations is expensed. The capitalized value of software is derived from
programming expenses incurred directly in the application/development of the
database and retrieval software in accordance with SOP 98-1, "Accounting for
Costs of Computer Software Developed or Obtained for Internal Use". Due to the
speed with which changes are developing in the computer industry, it is possible
that the unamortized cost of the law library assets and their estimated economic
lives could change in the near term. The Company uses the straight-line method
to amortize the components of the law library as shown below:
Component Number of years
--------- ---------------
Content databases 20
Database and retrieval software 8
F-7
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
During the Period from Inception to June 30, 1999, the Company recognized
amortization expense of approximately $141,000 on its law library assets. At
June 30, 1999, law library assets consist of the following:
Database and
Content Retrieval
Component Databases Software
- --------- --------- ------------
Capitalized balance $1,787,022 $933,757
Less: Accumulated amortization (43,546) (97,841)
---------- --------
$1,743,476 $835,916
========== ========
Furniture and Equipment - Furniture and equipment is recorded at cost and
depreciated using the straight-line method over a five-year period. For the
Period from Inception to June 30, 1999, the Company recognized $1,395 of
depreciation expense.
Federal Income Taxes - No provision for Federal, state and local income taxes
has been made because the Company's operating subsidiary, National Law, has
sustained cumulative losses since its inception in November 1998. The related
deferred tax assets have been fully reserved due to the uncertainty of
realization of the tax benefit. Prior to the reverse acquisition by National
Law, the Company had net operating loss carryforwards amounting to approximately
$173,000 that the Company does not expect to utilize due to its reorganization
under the Merger Agreement.
Loss per share - Loss per share has been calculated using the weighted average
number of shares outstanding. Shares issued in the share exchange between the
Company and National Law have been treated as outstanding since the date of the
merger. Shares of the Company outstanding at the time of the reverse
acquisition have been treated as outstanding during the entire period, after
adjustment for a 1 for 2 reverse stock split immediately preceding the reverse
acquisition. Shares of National Law outstanding before the reverse acquisition
have been included in weighted average shares outstanding.
The following sets forth the weighted average shares used in computing basic and
diluted earnings per share at June 30, 1999:
Weighted average shares outstanding - basic 10,763,581
Conversion of dilutive stock options 787,500
----------
Adjusted weighted average shares outstanding
- diluted 11,551,081
==========
Fair Value of Financial Instruments - The fair values of financial instruments,
comprised of cash and account receivables, approximate their reported carrying
amounts at June 30, 1999.
Revenue Recognition - Revenues consist of subscriptions to on-line services and
are recorded as earned.
NOTE 2 - BUSINESS COMBINATION:
Effective as of March 30, 1999, the Company and National Law completed
a reorganization pursuant to the terms of the Merger Agreement. Under this
agreement, National Law's stockholders exchanged all of their issued and
outstanding shares of common stock, consisting of 18 million shares, for a like
amount of new shares of common stock to be issued by the Company. In
contemplation of the reverse acquisition, the Company's original stockholders
agreed to a 1 for 2 reverse stock split which resulted in two million issued and
outstanding shares of common stock immediately prior to the reverse acquisition.
These shares are to be retained by the Company's original stockholders and,
pursuant to the Distribution Agreement, New Planet's shares of common stock are
to be distributed to the original stockholders once a registration statement
covering the shares becomes effective. Under the terms of the Merger Agreement,
the members of the Company's original board of directors resigned and were
replaced with directors elected by the new stockholders of the Company. At the
time of the reverse acquisition, the Company had approximately $90,275 in cash.
Under the terms of the Merger Agreement, eventual control of $54,000 of this
cash was conveyed to the Company with the remainder to be distributed to its
original stockholders under the Distribution Agreement.
F-8
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
At the time of the reverse acquisition, the Company's authorized
shares of common stock were 10 million. The terms of the Merger Agreement
required that the Company's stockholders approve an amendment to its certificate
of incorporation that would increase the authorized shares of common stock to 30
million and change the name of the Company to Internet Law Library, Inc. While
this amendment was approved by the Company's stockholders on March 31, 1999, the
amendment itself was not filed with the Secretary of State of Delaware until
July 8, 1999. Because it was the intent of the parties to the Merger Agreement
and because the parties, in fact, completed the reverse acquisition as
contemplated in the Merger Agreement, the Company's financial statements for the
year ended June 30, 1999, have been prepared on the basis that the Company was
able to issue up to 30 million shares of its common stock as of March 31, 1999.
The Company has accounted for the reverse acquisition under the
purchase method of accounting, whereby National Law is treated as the
accounting acquirer and the Company as the acquired entity. Using this method,
the retained deficit of the Company as of the reverse acquisition date and the
par value of National Law's common stock were closed to the Company's additional
paid-in capital. This accounting reflects the intent of the parties;
specifically, that National Law as an operating entity acquired the Company in
order to implement a capital development program from which both the Company's
original stockholders and its new stockholders expect to benefit.
Shown below is a reconciliation of balances in the Company's
stockholders' equity accounts from June 30, 1998, through the date of the
reverse acquisition:
<TABLE>
<CAPTION>
Additional
Shares Common Paid-in Retained Treasury
Issued Stock Capital Deficit Stock Total
------------ ---------- ------------ ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1998 1,605,147 $ 1,605 $252,184 $ (92,249) $(43,184) $118,356
Sale of shares to an
existing stockholder 2,394,853 2,395 57,460 59,855
Reverse 1 for 2 stock
Split (2,000,000) (2,000) 2,000
Net loss through the
reverse acquisition date (120,441) (120,441)
--------- ------- -------- --------- -------- --------
Balances, as of the reverse
acquisition date 2,000,000 $ 2,000 $311,644 $(212,690) $(43,184) $ 57,770
========= ======= ======== ========= ======== ========
</TABLE>
NOTE 3 - COMMITMENTS AND TRANSACTIONS WITH RELATED PARTIES:
The law library assets of the Company were conveyed to National Law upon its
formation by an individual who is now the Chairman of the Board of Directors of
the Company, its Chief
F-9
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Executive Officer, President and its largest stockholder (the "Company's CEO").
The Company's CEO is also the sole stockholder of IT/IS, Inc., a Texas
corporation formed in 1994 for the purpose of developing software to be used in
the area of litigation support ("IT/IS"). IT/IS and the Company's CEO provided a
variety of services to National Law prior to the reverse acquisition and
continued to provide the same services through June 30, 1999. Set forth below is
a summary of the agreements between National Law, IT/IS, and the Company's CEO
together with the related costs and expenses incurred by National Law during the
Period from Inception to June 30, 1999:
1. In December 1998, National Law and IT/IS entered into a continuing service
agreement under which IT/IS provides database content to National Law. Under
the terms of this agreement, IT/IS provides National Law with data files
containing case law and statutes that are in the public domain together with
coding and proprietary editing services covering these data files. National
Law is charged $.65 per 1000 characters for those data files that satisfy
certain prescribed quality control requirements. Under the agreement,
National Law is obligated for a three-year period to provide IT/IS with
minimum orders for data files containing an aggregate of 750 million
characters per month. However, pricing under this agreement is to reflect
market prices for comparable work, and National Law may select another
vendor should IT/IS's prices not be competitive. During the Period from
Inception to June 30, 1999, National Law incurred charges totaling
approximately $691,500 for data files containing case law, and at June 30,
1999, National Law owed $115,700 to IT/IS;
2. Effective in March 1999, National Law and IT/IS operated under a management
and financial services agreement under which IT/IS provides accounting,
staffing, and procurement services and office space to National Law. Under
the agreement, accounting services are charged at the rate of $85 per hour,
staffing services are charged at 125% of cost, office supplies, equipment
and telephone services are charged at 120% of cost, and office space rental
is based on 120% of cost. In addition, IT/IS is entitled to charge a $3,600
monthly management fee under the agreement. Under this agreement, the
following charges were incurred during the Period from Inception to June 30,
1999:
Staffing services $182,055
Accounting services 27,098
Supplies and equipment rental 20,721
Telephone service 18,580
Office space 19,336
Other 31,041
--------
Total $298,831
========
Included in staffing services are charges of $46,700 comprising the
salaries and benefits of certain contract individuals who, effective in
July 1999, became officers or employees of the Company and National Law.
At June 30, 1999, National Law owed IT/IS $97,800 under this agreement;
F-10
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
3. Effective in December 1998, National Law entered into an agreement with
IT/IS to receive software development and consulting services for its
database and retrieval. As of June 30, 1999, no work had been performed or
billed to National Law under this agreement; and
4. Effective in November 1998, National Law and the Company's CEO entered into
a personal service contract covering executive services, marketing and
business development, public relations and general management. During the
Period from Inception to June 30, 1999, National Law incurred total charges
of $55,400 under this agreement, and at June 30, 1999, owed the Company's
CEO $40,400. The agreement was terminated on July 1, 1999, when the
Company's CEO became a salaried officer of the Company.
Since November 1998, National Law has received co-location and rack
space for its Internet servers from an affiliated company in which the Company's
CEO is a member of the board of directors and a major stockholder. Under this
three-year letter agreement, National Law makes monthly payments of $3,000.
During the Period from Inception to June 30, 1999, National Law was billed
charges of $24,000 under this agreement and at June 30, 1999, had recorded a
payable of $12,000 to this affiliated company. The parties to this agreement
are negotiating a new monthly rate, a portion of which may be allocated to
months earlier than June 1999.
Prior to the reverse acquisition by National Law, the Company paid
approximately $70,000 for accounting and management services and rent to a
company controlled by an individual who was the then Chairman of the Board of
Directors, President and a significant stockholder of the Company.
NOTE 4 - NOTE PAYABLE:
In June 1999, the Company executed a demand promissory note in the
amount of $180,000 payable to a third party on August 2, 1999, unless the due
date is extended at the maker's option to September 2, 1999. The note bears an
annual interest rate of ten (10%) percent, is payable in full plus accrued
interest on the due date, and is fully guaranteed by National Law. The Company
exercised its option to extend the due date to September 2, 1999, and was
granted other extensions by the lender to October 11, 1999, on which date the
principal and accrued interest were paid in full. During the Period from
Inception to June 30, 1999, the Company recognized interest expense of $1,212
related to this note.
NOTE 5 - COMMITMENTS AND CONTINGENCIES:
The Company is a party to an agreement with a consulting firm that was
engaged in January 1999, to assist National Law in identifying and structuring
the reverse acquisition
F-11
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
agreement similar to the one executed with the Company (the "Consulting Firm").
The Consulting Firm now provides the Company with advice and services in the
areas of business development and financing, and is entitled to receive monthly
consulting fees that are based on the price performance of the Company's
publicly traded stock. At June 30, 1999, because of the price performance of the
Company's stock, the provisions of this agreement require the Company to make a
monthly payment of $5,000 to the Consulting Firm for a period of five years.
Should the price performance of the Company's stock continue to improve, this
payment obligation could increase to $12,000 per month.
On September 9, 1999, Loislaw.com, Inc. ("Lois") commenced legal
proceedings in the District Court of Harris County, Texas, 11th Judicial
District (Case No. 1999-45563), against the Company, National Law, and IT/IS.
Lois, a competitor of Internet Law, alleged that IT/IS breached an agreement
between Lois and IT/IS by allegedly providing certain materials to National Law
for use on National Law's web site. The suit seeks, among other things, to
enjoin National Law from utilizing such material, actual damages equal to the
value of its market position prior to defendants' alleged tortious interference
with the contract and actual damages for alleged lost profits. Management and
counsel for the Company consider the suit without merit, and management intends
to vigorously defend the case.
NOTE 6 - STOCK OPTIONS:
On March 30, 1999, the Board of Directors of the Company adopted the
1999 Stock Option Plan for the Company (the "Plan"). Under the Plan, the
Option Committee of the Board of Directors, consisting of at least two non-
employee members of the Board of Directors, may grant stock options to purchase
common stock of the Company (either incentive or non-qualified stock
options) and stock appreciation rights ("SARs") to officers and
employees, including directors who are employees, of the Company. The Option
Committee has discretion to determine the terms and conditions upon which the
options may be exercised. The Company has reserved 300,000 shares of common
stock for the grant of options under the Plan, subject to anti-dilution
provisions. In addition, the 1999 Director Option Plan (the "Director Plan")
was approved by the Board of Directors on March 30, 1999, subject to
stockholder approval. The Director Plan provides for automatic grants of
stock options to non-employee directors. The Company has reserved 200,000
shares of common stock for the grant of options under the Director Plan,
subject to anti-dilution adjustments. During the Period from Inception to June
30, 1999, no options were awarded or granted under either the Plan or the
Director Plan.
In addition to the foregoing plans, the Company's Board of Directors
has awarded options to consultants and representatives of the Company for
services rendered. During the Period from Inception to June 30, 1999, the Board
awarded the following options:
1. In January 1999, in contemplation of the Company's reverse acquisition by
National Law, National Law awarded options for the purchase of 600,000
shares of common stock at an exercise price of $.30 per share to the
Consulting Firm. These options were exercisable for a period of ten (10)
days following the first day on which the quoted market price of the
Company's common stock reached a price of $1.10 per share.
F-12
<PAGE>
INTERNET LAW LIBRARY, INC.
(FORMERLY PLANET RESOURCES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Pursuant to this award, options for 300,000 shares were exercised in July
1999; and
2. On March 30, 1999, following the reverse acquisition, the Company awarded
options to a consultant for services rendered in connection with the reverse
acquisition. This award provides for the immediate exercise of options, in
whole or in part, covering 450,000 shares of common stock at an exercise
price of $1.00 per share. The option period is for a period of five years.
3. In April 1999, the Board awarded options to the Company's CEO and a
consultant (who subsequently became a Board member in August 1999) for their
service in identifying and introducing certain potential acquisition
candidates to the Company. Options for 1,250,000 shares and 1,000,000 shares
were awarded to the Company's CEO and this consultant, respectively. These
options may be exercised in whole or in part at any time for a period of ten
(10) years at an exercise price of $3.00 per share.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," encourages, but does not require, companies to record
compensation costs for stock-based employee compensation plans at fair value.
The Company has chosen to continue to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation costs, including consulting expense, is measured as
the excess, if any, of the quoted market price of the Company's common stock at
the date of the grant over the exercise price of the option. Had the Company
determined compensation expense based on the fair value at the date of grant for
its stock options under SFAS No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below:
Net loss:
As reported $ 612,214
Pro forma $3,129,707
Basic and diluted loss per share:
As reported $ 0.06
Pro forma $ 0.39
The Company is presently negotiating stock option agreements with certain
officers, employees and other individuals who have provided services to the
Company.
NOTE 7 - SUBSEQUENT EVENTS:
In the first quarter of the Company's fiscal year ending June 30, 2000,
the Company issued approximately 1,283,800 shares of common stock at an average
price per share of $1.11, yielding cash proceeds of approximately $1,420,700.
F-13
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
------ -----------
2.1 Agreement and Plan of Reorganization dated March 25, 1999, between
Planet Resources, Inc., National and the stockholders of National
(incorporated by reference to Exhibit A to Registrant's Form 8-K
filed April 2, 1999).
2.2+ First Amendment to Agreement and Plan of Reorganization dated as of
March 30, 1999, between Planet Resources, Inc., National Law and the
stockholders of National Law.
2.3 Agreement and Plan of Distribution dated as of March 25, 1999,
between Planet Resources, Inc., New Planet and National Law
(incorporated by reference to Annex B to Registrant's Information
Statement Pursuant to Section 14(c) of the Securities Exchange Act of
1934 filed April 19, 1999).
3.1 Certificate of Incorporation, as amended of the Company (incorporated
by reference to Exhibit 2 to the Company's Form 8-A12G/A filed
October 4, 1999).
3.2+ Bylaws, as amended, of the Company.
10.1 Option Agreement between the Company and Hunter M.A. Carr
(incorporated by reference to Exhibit B to Schedule 13D filed October
12, 1999, by Hunter M.A. Carr).
10.2 Option Agreement between the Company and Jack I. Tompkins
(incorporated by reference to Exhibit B to Schedule 13D filed October
12, 1999, by Jack I. Tompkins).
10.3 Consulting Agreement between National Law and Castle Development,
Ltd. (incorporated by reference to Exhibit 4(A) to Registrant's
Registration Statement on Form S-8 filed April 2, 1999).
10.4+ Continuing Service Agreement between National Law and IT/IS,
effective December 1, 1998.
10.5+ Management and Financial Services Agreement between National Law and
IT/IS, effective March 1, 1999.
10.6+ Software Development and Consulting Agreement between National Law
and IT/IS, dated March 24, 1999.
10.7+ Option Agreement to Purchase Stock, effective March 30, 1999, by and
between the Company and Jonathan Gilchrist.
21+ Subsidiaries of the Company.
<PAGE>
24 Power of Attorney (included on signature page).
27+ Financial Data Schedule for the period from inception on November 30,
1998, to June 30, 1999.
________________________________
+ Filed herewith
<PAGE>
EXHIBIT 2.2
FIRST AMENDMENT TO AGREEMENT AND
PLAN OF REORGANIZATION
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (this
"AMENDMENT"), is dated to be effective as of March 30 1999, by and among PLANET
RESOURCES, INC., a Delaware corporation ("PLANET"), NATIONAL LAW LIBRARY, INC.,
a Texas corporation ("NATIONAL") and each of the undersigned stockholders of
National (the "STOCKHOLDERS").
RECITALS
WHEREAS, Planet, National and the Stockholders entered into that certain
Agreement and Plan of Reorganization dated March 25, 1999 (the "AGREEMENT"),
pursuant to which National became a wholly-owned-subsidiary of Planet on the
terms described therein; and
WHEREAS, the parties to the Agreement desire to amend and modify the
Agreement as hereinafter set forth.
NOW, THEREFORE, BE IT RESOLVED, National, Planet and Stockholders
accordingly hereby amend the Agreement as described in this Amendment.
IN CONSIDERATION of the foregoing recitals, the agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, National, Planet and Stockholders hereby agree
as follows:
1. AMENDMENT OF SECTION 1 OF THE AGREEMENT. Section 1 of the Agreement is
amended to read in its entirety as follows:
"EXCHANGE OF SHARES. Planet and Stockholders agree that as of March 30,
1999, (the "Closing Date") Stockholders will exchange all of the issued and
outstanding shares of common stock of National (18,000,000 shares presently
outstanding) for 6,000,000 shares (the "Shares") of Planet's common stock, $.001
par value per share (the "Common Stock"). Planet and Stockholders further
agree, that, subject to Section 5(k) herein, as additional consideration to
Stockholders, Planet will deliver to Stockholders an additional 12,000,000
shares (the "Additional Shares") of Common Stock at such time when Planet has
increased its authorized shares of Common Stock from 10,000,000 shares to
30,000,000 shares."
2. AMENDMENT OF SECTION 2 OF THE AGREEMENT. Section 2 of the Agreement is
amended to read in its entirety as follows:
"DELIVERY OF SHARES. On the Closing Date, Stockholders will deliver to
Planet the certificates representing all of the outstanding shares of National's
common stock, duly endorsed (or with duly executed stock powers) so as to make
Planet the sole owner thereof, free and clear of all claims and encumbrances
except as specifically assumed by Planet. Simultaneously, on the Closing Date,
Planet will deliver the certificates representing the Shares to Stockholders or
<PAGE>
their duly authorized representative. In addition, pursuant to Section 5(k)
herein, Planet will deliver the certificates representing the Additional Shares
to Stockholders or their duly authorized representative dated as of a date
within 120 days from the Closing Date."
3. AMENDMENT OF SECTION 4(A) OF THE AGREEMENT. Section 4(a) of the Agreement
is amended to read in its entirety as follows:
"(i) Shares of Common Stock. The Shares to be delivered to Stockholders at
Closing will be valid and legally issued shares of Common Stock, free
and clear of all liens, encumbrances and preemptive rights, and will
be fully-paid and non-assessable shares.
(ii) The Additional Shares. The Additional Shares to be delivered to
Stockholders according to Section 5(k) herein, will be valid and
legally issued shares of Common Stock, free and clear of all liens,
encumbrances and preemptive rights, and will be fully-paid and non-
assessable shares."
4. AMENDMENT OF SECTION 4(J) OF THE AGREEMENT. Section 4(j) of the Agreement
is amended to read in its entirety as follows:
"Capitalization. As of the date of this Agreement, the capitalization of
Planet consists of authorized common stock of 10,000,000 shares, of which
4,000,000 shares are outstanding. However, on the Closing Date, after giving
effect to the reverse stock split referred to in Section 5(k) herein, 2,000,000
shares of Common Stock will be outstanding. All of the Shares have been duly
authorized, validly issued, and are fully-paid and non-assessable, and the
Shares were issued in compliance will all applicable federal and state
securities laws. Except for the shares of Common Stock owned by the
stockholders of Planet as of March 25, 1999, and the further issuance of
securities referred to in and contemplated by this Agreement, there are no
outstanding or presently authorized securities, warrants, preemptive rights,
subscription rights, options or related commitments of any nature to issue any
securities of Planet."
5. ADDITION OF SECTION 5(K) OF THE AGREEMENT. There is added a Section 5(k) of
the Agreement, to read in its entirety as follows:
"(k) Reverse Stock Split and Additional Shares. Planet expressly agrees
and covenants that:
(1) on or before the Closing Date, Planet will cause a reverse stock split
to occur, pursuant to which, as of the Closing Date, prior to giving effect to
the transactions reflected in this Agreement, 2,000,000 shares of Common Stock
will be outstanding;
FIRST AMENDMENT TO AGREEMENT AND
PLAN OR REORGANIZATION -- Page 2
<PAGE>
(2) as soon as practicable, and, in any event, within 120 days from the
Closing Date, the Additional Shares will be authorized, validly issued, and will
be fully-paid and non-assessable, and all such shares will be issued to
Stockholders in compliance will all applicable federal and state securities
laws;
(3) it will deliver certificates representing the Additional Shares to
Stockholders as soon as practicable, and, in any event, within 120 days from the
Closing Date, after Planet has filed a Certificate of Amendment to its
Certificate of Incorporation with the State of Delaware increasing Planet's
authorized Common Stock from 10,000,000 shares to 30,000,000 shares; and
(4) except for the issuance of securities referred to in and contemplated
by this Agreement, there will be no outstanding or authorized securities,
warrants, preemptive rights, subscription rights, options or related commitments
of any nature to issue any of Planet's securities."
6. AMENDMENT OF SECTION 6 OF THE AGREEMENT. Section 6 of the Agreement is
amended to read in its entirety as follows:
"CLOSING. The Closing (the "Closing") shall take place on the Closing
Date. The Closing shall take place at the offices of Sonfield & Sonfield, 770
South Post Oak Lane, Suite 435, Houston, Texas 77056, or at such place as may be
mutually agreed upon by the parties."
7. TERMS OF AGREEMENT. Except as expressly amended by this Amendment, the
Agreement is and shall be unchanged and continue in full force and effect.
8. EFFECT OF AMENDMENT. The Agreement and any and all other documents
heretofore, now or hereafter executed and delivered pursuant to the terms of the
Agreement are hereby amended so that any reference to the Agreement in the
Agreement or the other documents shall mean a reference to the Agreement as
amended hereby.
9. REAFFIRMATION. Each of Planet, National and the Stockholders hereby
represent and warrant to each other that:
(a) the execution, delivery and performance of this Amendment and any and
all other loan documents executed and delivered in connection with this
Amendment have been authorized by all requisite corporate action on the part of
Planet and National and will not violate the articles of incorporation (or other
charter documents) or bylaws of any of Planet and National; and
(b) the representations and warranties contained in the Agreement, as
amended hereby, are true and correct on and as of the date hereof as though made
on and as of the date hereof; and
FIRST AMENDMENT TO AGREEMENT AND
PLAN OR REORGANIZATION -- Page 3
<PAGE>
(c) each of Planet, National and Stockholders is in full compliance with
all covenants and agreements contained in the Agreement, as amended hereby.
10. ENFORCEABILITY. Planet, National and Stockholders hereby represent and
warrant to each other that, as of the date of this Amendment, the Agreement and
all documents and instruments executed in connection therewith are in full force
and effect and that there are no claims, counterclaims, offsets or defenses to
any of such documents or instruments.
11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF DELAWARE.
12. MULTIPLE COUNTERPARTS, ETC. This Amendment may be executed in a number
of identical separate counterparts, each of which for all purposes is to be
deemed an original, but all of which shall constitute, collectively, one
agreement. No party to this Amendment shall be bound hereby until a counterpart
of this Amendment has been executed by all parties hereto. Any party to this
Amendment may submit their signature hereto by facsimile, provided, however,
that each of Planet and National receive an originally executed signature of
each Stockholder within one week of each Stockholder's receipt of this
Agreement. References herein to "including" mean "including, without
limitation."
13. OTHER AGREEMENTS. THE WRITTEN AGREEMENT, AS AMENDED BY THIS AMENDMENT,
REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
FIRST AMENDMENT TO AGREEMENT AND
PLAN OR REORGANIZATION -- Page 4
<PAGE>
THIS AMENDMENT is executed and effective as of the date first written
above.
PLANET: PLANET RESOURCES, INC.,
a Delaware corporation
By: /s/ Al Dugan
-------------------------------
Name:
Title:
NATIONAL: NATIONAL LAW LIBRARY, INC.,
a Texas corporation
By: /s/ Hunter M.A. Carr
-------------------------------
Name:
Title: Chairman/CEO
STOCKHOLDERS: THE STOCKHOLDERS OF
NATIONAL LAW LIBRARY, INC.
By: /s/ Hunter M.A. Carr
-------------------------------
Name: Hunter M.A. Carr
Title: Attorney in Fact for each
Stockholder
FIRST AMENDMENT TO AGREEMENT AND
PLAN OR REORGANIZATION -- Page 5
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
INTERNET LAW LIBRARY, INC.
(Formerly Planet Resources, Inc.)
As Amended through July 13,1999
Internet Law Library, Inc.
A Delaware Corporation
BYLAWS
ARTICLE I
Principal Executive Office
The principal executive office of Internet Law Library, Inc. (the
"Corporation") shall be at 4301 Windfern Road, Houston, Texas 77041. The
Corporation may also have offices at such other places within or without the
State of Texas as the board of directors shall from time to time determine.
ARTICLE H
Stockholders
SECTION 1. Place of Meetings, All annual and special meetings of stockholders
shall be held at the principal executive office of the Corporation or at such
other place within or without the State of Delaware as the board of directors
may determine and as designated in the notice of such meeting.
SECTION 2. Annual Meeting. A meetings of the stockholders of the Corporation
for the election of directors and for the transaction of any other business of
the Corporation shall be held annually at such date and time as the board of
directors may determine.
SECTION 3. Special Meetings. Special meeting of the stockholders of the
Corporation for any purpose or purposes may be called at any time by the board
of directors of the Corporation, or by a committee of the board of directors
which as been duly designated by the board of directors and whose powers and
authorities, as provided in a resolution of the board of directors or in the
Bylaws of the Corporation, include the power and authority to call such meetings
but such special meetings may not be called by another person or persons.
SECTION 4. Conduct of Meetings. Annual and special meetings shall be conducted
in accordance with these Bylaws or as otherwise prescribed by the board of
directors. The chairman or the chief executive officer of the Corporation shall
preside at such meetings.
<PAGE>
SECTION 5. Notice of Meeting. Written notice stating the place, day and hour of
the meeting and the purpose or purposes for which the meeting is called shall be
mailed by the secretary or the officer performing his duties, not less than ten
days nor more than fifty days before the meeting to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the stockholder
at his address as it appears on the stock transfer books or records of the
Corporation as of the record date prescribed in Section 6, with postage thereon
prepaid. If a stockholder be present at a meeting, or in writing waive notice
thereof before or after the meeting, notice of the meeting to such stockholder
shall be unnecessary. When any stockholders' meeting, either annual or special,
is adjourned for thirty days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting, It shall not be necessary to give
any notice of the time and place of any meeting adjourned for less than thirty
days or of the business to be transacted at such adjourned meeting, other than
an announcement at the meeting at which such adjournment is taken.
SECTION 6. Fixing of Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as the record
date for any such determination of stockholders. Such date in any case shall be
not more than sixty days, and in case of a meeting of stockholders, not less
than ten days prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
SECTION 7. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten days
before each meeting of stockholders, a complete record of the stockholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number of shares held by each. The record, for a period of ten days
before such meeting, shall be kept on file at the principal executive office of
the Corporation, whether within or outside the State of Texas, and shall be
subject to inspection by any stockholder for any purpose germane to the meeting
at any time during usual business hours. Such record shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any stockholder for any purpose germane to the meeting during the
whole time of the meeting. The original stock transfer books shall be prima
facie evidence as to who are the stockholders entitled to examine such record or
transfer books or to vote at any meeting of stockholders.
SECTION 8. Quorum. One-fourth of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy,
<PAGE>
shall constitute a quorum at a meeting of stockholders. If less than one-fourth
of the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
SECTION 9. Proxies. At all meetings of stockholders, a stockholder may vote by
proxy executed in writing by the stockholder or by his duly authorized attorney
in fact. Proxies solicited on behalf of the management shall be voted as
directed by the stockholder or, in the absence of such direction, as determined
by a majority of the board of directors. No proxy shall be valid after eleven
months from the date of its execution unless otherwise provided in the proxy.
SECTION 10. Voting. At each election for directors every stockholder entitled to
vote at such election shall be entitled to one vote for each share of stock
held. Unless otherwise provided by the Certificate of Incorporation, by statute,
or by these Bylaws, a majority of those votes cast by stockholders at a lawful
meeting shall be sufficient to pass on a transaction or matter, except in the
election of directors, which election shall be determined by a plurality of the
votes of the shares present in person or by proxy at the meeting and entitled to
vote on the election of directors.
SECTION 11. Voting of Shares in the Name of Two or More Persons. When ownership
of stock stands in the name of two or more persons, in the absence of written
directions to the Corporation to the contrary, at any meeting of the
stockholders of the Corporation any one or more of such stockholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose name shares of stock stand, the vote or votes to
which these persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
SECTION 12. Voting of Shares by Certain Holders. Shares standing in the name of
another corporation may be voted by any officer, agent or proxy as the Bylaws of
such corporation may prescribe, or, in the absence of such provision, as the
board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares standing in the name of a receiver
may be voted by such receiver, and shares held in. or under the control of a
receiver may be voted by such receiver
<PAGE>
without the transfer thereof into his name if authority to do so is contained in
an appropriate order of the court or other public authority by which such
receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Corporation, nor shares
held by another corporation, if a majority of the shares entitled to vote for
the election of directors of such other corporation are held by the Corporation,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
SECTION 13. Inspectors of Election. In advance of any meeting of stockholders,
the chairman of the board or the board of directors may appoint any persons,
other than nominees for office, as inspectors of election to act at such meeting
or any adjournment thereof. The number of inspectors shall be either one or
three. If the board of directors so appoints either one or three inspectors,
that appointment shall not be altered at the meeting. If inspectors of election
are not so appointed, the chairman of the board may make such appointment at the
meeting. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment in advance of the
meeting or at the meeting by the chairman of the board or the president.
Unless otherwise prescribed by applicable law, the duties of such inspectors
shall include: determining the number of shares of stock and the voting power of
each share, the shares of stock represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies; receiving votes,
ballots or consents; hearing and determining all challenges and questions in any
way arising in connection with the right to vote; counting and tabulating all
votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all stockholders.
SECTION 14. Nominating Committee. The board of directors or a committee
appointed by the board of directors shall act as nominating committee for
selecting the management nominees for election as directors. Except in the case
of a nominee substituted as a result of the death or other incapacity of a
management nominee, the nominating committee shall deliver written nominations
to the secretary at least twenty days prior to the date of the annual meeting.
Provided such committee makes such nominations, no nominations for directors
except those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by stockholders are made in writing and
delivered to the secretary of the Corporation in accordance with the provisions
of the Corporation's Certificate of Incorporation.
SECTION 15. New Business. Any new business to be taken up at the annual meeting
shall be stated in writing and filed with the
<PAGE>
secretary of the Corporation in accordance with the provisions of the
Corporation's Certificate of Incorporation. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors and committees, but in connection with such reports no new
business shall be acted upon at such annual meeting unless stated and filed as
provided in the Corporation's Certificate of Incorporation.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation shall be
under the direction of its board of directors. The chairman shall preside at all
meetings of the board of directors.
SECTION 2. Number, Term and Election. The number of directors of the Corporation
shall be such number, not less than one nor more than 15 (exclusive of
directors, if any, to be elected by holders of preferred stock of the
Corporation), as shall be provided from time to time in a resolution adopted by
the board of directors, provided that no decrease in the number of directors
shall have the effect of shortening the term of any incumbent director, and
provided further that no action shall be taken to decrease or increase the
number of directors from time to time unless at least two-thirds of the
directors then in office shall concur in said action. Exclusive of directors, if
any, elected by holders of preferred stock, vacancies in the board of directors
of the Corporation, however caused, and newly created directorships shall be
filled by a vote of two-thirds of the directors then in office, whether or not a
quorum, and any director so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of the class to which the
director has been chosen expires and when the director's successor is elected
and qualified. The board of directors shall be classified in accordance with the
provisions of Section 3 of this Article III.
SECTION 3. Classified Board. The board of directors of the Corporation (other
than directors which may be elected by the holders of preferred stock), shall be
divided into three classes of directors which shall be designated Class I, Class
II, and Class III. The members of each class shall be elected for a term of
three years and until their successors are elected and qualified. Such classes
shall be as nearly equal in number as the then total number of directors
constituting the entire board of directors shall permit, exclusive of directors,
if any, elected by holders of preferred stock, with the terms of office of all
members of one class expiring each year. Should the number of directors not be
equally divisible by three, the excess director or directors shall be assigned
to Classes I or II as follows: (1) if there shall be an excess of one
directorship over the number equally divisible by three, such extra directorship
shall be classified in Class I; and (2) if there be an excess of two
directorships over a number equally divisible by three, one shall be classified
in Class I and the other in Class II. At the organizational meeting of the
Corporation, directors of Class I shall be elected to hold office for a term
expiring at the first annual meeting of stockholders, directors of Class II
shall be elected to hold office for a term
<PAGE>
expiring at the second succeeding annual meeting of stockholders and directors
of Class Ill shall be elected to hold office for a term expiring at the third
succeeding annual meeting thereafter. Thereafter, at each succeeding annual
meeting, directors of each class shall be elected for three-year terms.
Notwithstanding the foregoing, the director whose term shall expire at any
annual meeting shall continue to serve until such time as his successor shall
have been duly elected and shall have qualified unless his position on the board
of directors shall have been abolished by action taken to reduce the size of the
board of directors prior to said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the position(s) to
be abolished. Notwithstanding the foregoing, no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Should the number of directors of the Corporation be increased, other
than directors which may be elected by the holders of preferred stock, the
additional directorships shall be allocated among classes as appropriate so that
the number of directors in each class is as specified in the immediately
preceding paragraph.
Whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right voting separately as a class, to elect one or
more directors of the Corporation, the board of directors shall include said
directors so elected and not be in addition to the number of directors fixed as
provided in this Article III. Notwithstanding the foregoing, and except as
otherwise may be required By Law, whenever the holders of any one or more series
of preferred stock of the Corporation elect one or more directors of the
Corporation, the terms of the director or directors elected by such holders
shall expire at the next succeeding annual meeting of stockholders.
SECTION 4. Regular Meetings. A regular meeting of the board of directors shall
be held at such time and place as shall be determined by resolution of the board
of directors without other notice than such resolution.
SECTION 5. Special Meetings. Special meetings of the board of directors may be
called by or at the request of the chairman, the chief executive officer or one-
third of the directors. The person calling the special meetings of the board of
directors may fix any place as the place for holding any special meeting of the
board of directors called by such persons.
Members of the board of the directors may participate in special meetings by
means of telephone conference or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person.
SECTION 6. Notice. Written notice of any special meeting shall be given to each
director at least two days previous thereto delivered personally or by telegram
or at least seven days
<PAGE>
previous thereto delivered by mail at the address at which the director is most
likely to be reached. Such notice shall be deemed to be delivered when deposited
in the United States mail so addressed, with postage thereon prepaid if mailed
or when delivered to the telegraph company if sent by telegram. Any director may
waive notice of any meeting by a writing filed with the secretary. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 7. Quorum. A majority of the number of directors fixed by Section 2
shall constitute a quorum for the transaction of business at any meeting of the
board of directors, but if less than such majority is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time.
Notice of any adjourned meeting shall be given in the same manner as prescribed
by Section 5 of this Article III.
SECTION 8. Manner of Acting. The act of the majority of the directors present at
a meeting at which a quorum is present shall be the act of the board of
directors, unless a greater number is prescribed by these Bylaws, the
Certificate of Incorporation, or the General Corporation Law of the State of
Delaware.
SECTION 9. Action Without a Meeting Any action required or permitted to be taken
by the board of directors at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the directors.
SECTION 10. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the home office of the Corporation
addressed to the chairman. Unless otherwise specified therein such resignation
shall take effect upon receipt thereof by the chairman.
SECTION 11. Vacancies. Any vacancy occurring on the board of directors shall be
filled in accordance with the provisions of the Corporation's Certificate of
Incorporation. Any directorship to be filled by reason of an increase in the
number of directors may be filled by the affirmative vote of two-thirds of the
directors then in office or by election at an annual meeting or at a special
meeting of the stockholders held for that purpose. The term of such director
shall be in accordance with the provisions of the Corporation's Certificate of
Incorporation.
SECTION 12. Removal of Directors. Any director or the entire board of directors
may be removed only in accordance with the provisions of the Corporation's
Certificate of Incorporation.
SECTION 13. Compensation. Directors, as such, may receive compensation for
service on the board of directors. Members of either standing or special
committees may be allowed such compensation as the board of directors may
determine.
<PAGE>
SECTION 14. Age Limitation. No Person 80 years or more of age shall be eligible
for election, reelection, appointment or reappointment to the board of the
Corporation. No director shall serve as such beyond the annual meeting of the
Corporation immediately following the director becoming 80 years of age. This
age limitation does not apply to an advisory director.
ARTICLE IV
Committees of the Board of Directors
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, as they may determine to be necessary
or appropriate for the conduct of the business of the Corporation, and may
prescribe the duties, constitution and procedures thereof Each committee shall
consist of one or more directors of the Corporation appointed by the chairman.
The chairman may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
The chairman shall have power at any time to change the members of, to fill
vacancies in, and to discharge any committee of the board. Any member of any
such committee may resign at any time by giving notice to the Corporation;
provided, however, that notice to the board, the chairman of the board, the
chief executive officer, the chairman of such committee, or the secretary shall
be deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective. Any member of any such committee may be removed
at any time, either with or without cause, by the affirmative vote of a majority
of the authorized number of directors at any meeting of the board called for
that purpose.
ARTICLE V
Officers
SECTION 1. Positions. The officers of the Corporation shall be a chairman, a
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be elected by the board of directors. The board of directors may
designate one or more vice presidents as executive vice president or senior vice
president. The board of directors may also elect or authorize the appointment of
such other officers as the business of the Corporation may require. The officers
shall have such authority and perform such duties as the board of directors may
from time to time authorize or determine. In the absence of action by the board
of directors, the officers shall have such powers and duties as generally
pertain to their respective offices.
SECTION 2. Election and Term of Office. The officers of the Corporation shall be
elected annually by the board of directors at the first meeting of the board of
directors held after each annual meeting of the stockholders. If the election of
officers is not held at such meeting, such election shall be held as soon
<PAGE>
thereafter as possible. Each officer shall hold office until his successor shall
have been duly elected and qualified or until his death or until he shall resign
or shall have been removed in the manner hereinafter provided.
Election or appointment of an officer, employee or agent shall not of itself
create contract rights. The board of directors may authorize the Corporation to
enter into an employment contract with any officer in accordance with state law;
but no such contract shall impair the right of the board of directors to remove
any officer at any time in accordance with Section 3 of this Article V.
SECTION 3. Removal. Any officer may be removed by vote of two-thirds of the
board of directors whenever, in its judgment the best interests of the
Corporation will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the board of directors
for the unexpired portion of the term.
SECTION 5. Remuneration. The remuneration of the officers shall be fixed from
time to time by the board of directors, and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
SECTION 6. Age Limitation. No person 80 or more years of age shall be eligible
for election, reelection, appointment or reappointment as an officer of the
Corporation. No officer shall serve beyond the annual meeting of the Corporation
immediately following the officer becoming 80 or more years of age.
ARTICLE VI
Contracts, Loans, Checks and Deposits
SECTION 1. Contracts. To the extent permitted by applicable law, and except as
otherwise prescribed by the Corporation's Certificate of Incorporation or these
Bylaws with respect to certificates for shares, the board of directors or the
executive committee may authorize any officer, employee, or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation. Such authority may be general or
confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and
no evidence of indebtedness shall be issued in its name unless authorized by the
board of directors. Such authority may be general or confined to specific
instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by one or more officers, employees or agents of
the Corporation in such manner, including in facsimile form, as shall from time
to time be determined by resolution of the board of directors.
<PAGE>
SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in any of its
duly authorized depositories as the board of directors may select.
ARTICLE VII
Certificates for Shares and Their Transfer
SECTION 1. Certificates for Shares. The shares of the Corporation shall be
represented by certificates signed by the chairman of the board of directors or
the president or a vice president and by the treasurer or an assistant treasurer
or the secretary or an assistant secretary of the Corporation, and may be sealed
with the seal of the Corporation or a facsimile thereof. Any or all of the
signatures upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation, If any officer who has
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before the certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of its issue.
SECTION 2. Form of Share Certificates. All certificates representing shares
issued by the Corporation shall set forth upon the face or back that the
Corporation will furnish to any stockholder upon request and without charge a
full statement of the designations, preferences, limitations, and relative
rights of the shares of each class authorized to be issued, the variations in
the relative rights and preferences between the shares of each such series so
far as the same have been fixed and determined, and the authority of the board
of directors to fix and determine the relative rights and preferences of
subsequent series.
Each certificate representing shares shall state upon the face thereof. that the
Corporation is organized under the laws of the State of Delaware; the name of
the person to whom issued; the number and class of shares, the designation of
the series, if any, which such certificate represents; the par value of each
share represented by such certificate, or a statement that the shares are
without par value. Other matters in regard to the form of the certificates shall
be determined by the board of directors.
SECTION 3. Payment for Shares. No certificate shall be issued for any share
until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration for the issuance of
shares shall be paid in accordance with the provisions of the Corporation's
Certificate of Incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of capital stock of the
Corporation shall be made only on its stock transfer books. Authority for such
transfer shall be given only to the holder of record thereof or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the
<PAGE>
Corporation. Such transfer shall be made only on surrender for cancellation of
the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Corporation shall be deemed by the Corporation
to be the owner thereof for all purposes.
SECTION 6. Lost Certificates. The board of directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
ARTICLE VIII
Fiscal Year; Annual Audit
The fiscal year of the Corporation shall end on the last day of June of each
year. The Corporation shall be subject to an annual audit as of the end of its
fiscal year by independent public accountants appointed by and responsible to
the board of directors.
ARTICLE IX
Dividends
Dividends upon the stock of the Corporation, subject to the provisions of the
Certificate of Incorporation, if any, may be declared by the board of directors
at any regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property or in the Corporation's own stock.
ARTICLE X
Corporation Seal
The corporate seal of the Corporation shall be in such form as the board of
directors shall prescribe.
ARTICLE XI
Amendments
In accordance with the Corporation's Certificate of Incorporation, these Bylaws
may be repealed, altered, amended or rescinded by the stockholders of the
Corporation only by vote of not less than 75% of the voting power of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting). In addition, the board of directors may
repeal, alter,
<PAGE>
amend or rescind these Bylaws by vote of two-thirds of the board of directors at
a legal meeting held in accordance with the provisions of these Bylaws.
PLANET RESOURCES, INC.
By /s/ Hunter M. A. Carr, Chairman/Director
By /s/ Kelley V. Kirker, Director
<PAGE>
IT/IS, INC., CONTINUING SERVICE AGREEMENT
NO. 00200
IT/IS, INC., a corporation organized and existing under the laws of the State of
Texas, hereinafter referred to as "IT/IS," agrees to provide services to
National Law Library, Inc., hereinafter referred to as "NLL" or "Customer," as
specified in this Agreement, subject to the terms and conditions set forth
herein.
TERMS AND CONDITIONS
1. SERVICES TO BE PROVIDED.
IT/IS shall provide Customer throughout the term of this Agreement with the
services specified on NLL Purchase Orders as set forth below, setting forth
specific work to be performed by IT/IS which are hereby made a part of this
Agreement, at the charges and according to the assumptions specified on that
Schedule in this Agreement.
The following terms as set forth herein shall have the following meaning as the
same are understood within the English language.
"Raw Materials" - Raw Materials shall be understood to mean the materials used
for conversion into an electronic format. Raw Materials shall generally consist
of legal materials or legally related materials. Raw Materials can be in the
form of print which are usually contained within a compiled format and bound
together, in the form of both soft and hard bound books, pamphlets, folders, and
the like. The legal materials can also be in electronic form in a variety of
formats. In such cases, the legal materials shall be handled as if they were
printed materials.
"Electronic Materials" - Electronic Materials shall be understood to mean Raw
Materials that have been keyed (or otherwise converted); formatted in accordance
with specific requirements; and supplied with all appropriate Coding Information
and Emphasis Tags as specified in the Basic Editing Guide and project
instruction sheets.
"Coding Information" - Coding Information, commonly called "fielding" or "tagged
data" is used to identify and separate certain sections of Electronic Materials.
"Quality Standards" - Quality Standards shall mean Electronic Materials that are
accurately converted to Ninety-Nine point Nine Percent (99.9%) of the Raw
Materials.
"Measured Quality Standards" - Measured Quality Standards is the method used to
determine Quality Standards. Upon the receipt of Electronic Materials sent by
IT/IS to NLL, NLL shall select a 100 page continuous block of information, (or
as many 100 page blocks as NLL desires) and compare the Raw Materials to the
Electronic Materials. Accuracy of the conversion is checked by counting the
total number of characters within said 100-page block(s) and the number of
occurrences where the Raw Materials do not match the Electronic Materials. The
total number of correct characters can be determined by subtracting the total
number of incorrect characters from the total number of characters within said
100-page block. The total characters contained within a given
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100-page block of Electronic Materials shall then be divided into the total
characters of Electronic Materials converted correctly to determine the Quality
Standard. The results of the quality check shall be immediately sent to IT/IS
if the materials do not meet Quality Standards. IT/IS shall then check its copy
of the Electronic Materials to ascertain the veracity of said quality check. It
is understood by both IT/IS and NLL that the accuracy level of any 100-page
block so chosen by NLL shall be deemed to be that of the entire amount of
Electronic Materials for that shipment. It shall be understood that in the
event that NLL fails to make a quality check within 30 days of having received
the Electronic Materials, it shall be considered that said Electronic Materials
have met Quality Standards.
2. CUSTOMER DATA.
IT/IS shall provide to Customer data files containing certain case law and
statutes as set forth more particularly in each NLL Purchase Order. IT/IS does
not own the copy rights to the data provided hereunder and shall provide only
such data as is legally within the public domain, plus any coding or proprietary
editing provided on behalf of the Customer as set out in NLL's Editing
Guidelines. IT/IS shall not be responsible for errors in data entry or other
services, programs, hardware, data files, or output provided to or maintained
for Customer hereunder resulting from errors in Customer's input data or from
Customer's failure to comply with the provisions of this paragraph. IT/IS
warrants hereunder to provide data to the Customer that is no less than 99.9%
accurate to the original material supplied. Customer acknowledges that this
contract, unless otherwise specified is for the processing of a specific volume
of data, although prior to the completion of the work the exact volume is
unknown.
3. PROPRIETARY RIGHTS.
(A) IT/IS shall allow Customer reasonable access to all Customer data,
information, and media in the possession of IT/IS during the term of this
Agreement, subject to any reasonable IT/IS charges for copying or reformatting
data or otherwise providing services not specified in the schedules.
(B) Customer shall obtain no proprietary rights in the hardware, programs, or
non-copyrighted data documentation used by IT/IS in providing services
hereunder, whether such are developed specifically for performance of this
Agreement or otherwise.
(C) Company shall have a lien in any product it produces for Customer until
such time as timely payment for the product has been received.
4. LOSS OF DATA.
(A) IT/IS shall exercise reasonable care to prevent loss or destruction of
Customer's data files.
(B) IT/IS may charge for backup services and/or storage of Customer's data.
IT/IS shall re-create Customer's data files from such copies, with Customer's
assistance, at its prevailing charges for such services, upon request.
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(C) Customer shall be responsible for maintaining adequate backup data to
enable IT/IS to re-create Customer's data files. In the event Customer's data
files are lost or destroyed, IT/IS shall re-create, if necessary, Customer's
data files from Customer's backup data, with Customer's assistance and subject
to IT/IS' prevailing charges for such services.
5. ERROR CORRECTION.
It is agreed that case law materials provided to Customer by IT/IS will be no
less than 99.9% accurate. IT/IS will correct any error in the output it
furnishes to Customer or in the data files it maintains for Customer either by
re-running the output or by adjusting the files, as appropriate, whenever such
error is called to its attention. Such error correction shall be at no charge
to Customer with respect to any error which (1) results from defects in the
service provided by IT/IS hereunder and (2) is reported to IT/IS within thirty
(30) days of Customer's receipt of any output from IT/IS. Under no
circumstances is IT/IS responsible for error if improper or poor quality source
materials or incomplete or incorrect instructions provided by Customer or thirty
(30) business days have passed since Customer received the data.
6. LIMITATION OF LIABILITY.
The sole liability of IT/IS in the event of loss or destruction of Customer's
data files or in the event of errors in data entry or other services, programs,
hardware, data files, or output provided to or maintained for Customer by IT/IS
shall be as set forth in the following paragraph. In no event shall IT/IS be
liable for any special, incidental, or consequential damages, even if it is
advised of the possibility of such damages, nor shall IT/IS ever be liable in
damages in an amount greater than Customer has paid IT/IS for services
hereunder. This limitation of liability shall apply regardless of the form of
action, whether in contract, equity, or tort, including negligence. IT/IS shall
not be liable for any claim, suit, or cause of action based upon any use made of
the information provided hereunder by the Customer. Customer shall indemnify
IT/IS for all claims or suits made or brought by any third party to this
contract as to the use of any information provided hereunder.
7. PURCHASE ORDER AND PAYMENT PROCEDURES.
(A) NLL shall supply Raw Materials to IT/IS prior to the start of each new
project and IT/IS shall provide NLL an inventory of Raw Materials received
within seven days of receipt of Raw Materials. Upon receipt of the inventory,
NLL shall then issue a Purchase Order, along with an Irrevocable Standby Letter
of Credit for the Raw Materials contained on that Purchase Order inventory. The
value of the Irrevocable Standby Letter of Credit shall be equal to the value of
converting the Raw Materials on the Purchase Order into Electronic Materials at
a rate of .65 cents per one thousand characters converted to meet Quality
Standards. NLL hereby agrees to provide purchase orders for no less than 750
million characters per month for a period of three years from the date of this
agreement; however, IT/IS shall not be required to produce more than one (1)
billion characters per month under this agreement, unless otherwise agreed to in
writing. Pricing under this contract shall reflect market prices for comparable
work and the Customer shall have the right to select a different Vendor if IT/IS
does not offer competitive market prices.
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<PAGE>
(B) Payment.
At the time that each Purchase Order is issued by NLL to IT/IS, NLL shall pay to
IT/IS a retainer of one-third of the estimated value of that Purchase Order.
When Electronic Materials are delivered to NLL by IT/IS, another one-third (1/3)
shall be paid to IT/IS. Payment shall be due within four (4) days of delivery
of the Electronic Materials or upon receipt of each invoice. Approval of
material is due not more than three (3) days from receipt.
The final one-third (1/3) due under each Purchase Order shall be paid upon
confirmation that the Electronic Material meets the quality standards of NLL or
within thirty (30) days of the delivery of the Electronic Material, unless that
material has been returned to IT/IS with instructions to make corrections needed
to bring the Electronic Materials up to Quality Standards. Payment is due on
reworked material within ten (10) days of return to NLL from IT/IS.
(C) Customer shall pay any sales, use, excise, or similar taxes, which may be
imposed by federal, state, or local governments with respect to the services
provided by IT/IS. NLL is a reseller of data and will provide IT/IS with a
State Tax Certificate.
(D) In the event that any payments due hereunder are not received according to
the terms of the invoice, all discounts will be reversed and interest on the
due, but unpaid amounts, at a rate determined by IT/IS will be charged by IT/IS
provided, however that in no event shall such interest rate exceed the maximum
amount of nonusurious interest allowed by law, and any excess shall be credited
toward future services provided by IT/IS under the Agreement (or if this
Agreement has terminated, shall be refunded to Customer).
8. WARRANTIES.
IT/IS MAKES NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AS TO ANY MATTER WHATSOEVER, INCLUDING BUT NOT LIMITED TO THE HARDWARE,
PROGRAMS, DOCUMENTATION, DATA FILES, OUTPUT SERVICES, OR OTHER MATTERS PRODUCED
OR PROVIDED HEREUNDER. PARTIES EXPRESSLY WAIVE ANY CAUSES OF ACTION UNDER THE
TEXAS DTPA.
9. EXCUSABLE NONPERFORMANCE.
The obligations of IT/IS hereunder shall be suspended to the extent that IT/IS
is hindered or prevented from complying therewith because of labor disturbances
(including strikes or lockouts), war, acts of God, fires, storms, accidents,
governmental regulations, or any other cause whatsoever beyond IT/IS' control.
10. EARLY TERMINATION.
(A) If Customer terminates this Agreement prior to the expiration of its term,
IT/IS may retain any advance payments made under the terms of this Agreement.
Customer
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<PAGE>
acknowledges that any advance payments shall be retained and considered in the
nature of liquidated damages and does not constitute a penalty.
(B) If either party defaults in a material obligation under this Agreement and
continues in default for a period of ten days after notice of default is given
to it by the other, the other may terminate this Agreement by notice effective
on the date of such notice or on such future date as is specified in such
notice.
(C) In the event Customer defaults as provided in 10(B) above, IT/IS shall
retain its work product with respect to services rendered on behalf of Customer.
Company may, at its discretion, charge for early termination.
11. NOTICE.
All notices required by this Agreement shall be in writing sent by registered
mail, return receipt requested to IT/IS and Customer at the following addresses,
unless changed from time to time in which event each party shall promptly notify
the other in writing and all notices thereafter shall be sent to the addresses
then prevailing:
IT/IS, INC.
One Park Ten Place, Suite 200
Houston, Texas 77084
Attn: Kelley V. Kirker
President
Name:
Firm: NLL, Inc.
Add: One Park Ten Place, Suite 220
Attn: Hunter M. A. Carr
City: Houston State: Texas Zip: 77084
Phone: (713) 578-8800 Fax: (713) 578-8898
12. NONWAIVER.
Either party's failure at any time to require strict performance by the other
party of any of the provisions hereof shall not waive or diminish such party's
rights thereafter to demand strict compliance therewith or with any other
provision. Waiver by either party of any default by other party shall not waive
any other or similar default by the non-defaulting party.
13. ENTIRE AGREEMENT.
This Agreement and all schedules and attachments hereto, (which are hereby made
part of this Agreement), as they may be amended or modified, constitute the sole
and complete agreement and entire understanding between the parties concerning
the matters addressed herein and supersede all prior proposals, agreements,
representations, warranties, conditions, or understandings between the parties,
whether written or oral, regarding such matters. If any one or more of the
provisions of this
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<PAGE>
Agreement shall be for any reason held to be invalid, illegal, or unenforceable,
the remaining terms of this Agreement will continue in full force and effect.
14. TITLES.
Paragraph titles contained herein are for convenience only and shall not govern,
limit, modify or affect the scope, meaning, or intent of the provisions of this
Agreement.
15. MODIFICATION.
No modification to this Agreement shall be effective unless it is in writing
signed by duly authorized representatives of both parties.
16. GOVERNING LAW.
This agreement shall be governed by the laws of the State of Texas. Venue for
disputes shall be Houston, Texas.
17. OTHER WARRANTIES AND RESTRICTIONS.
IT/IS is an independent contractor and assumes full responsibility for the
payment of all compensation, social security, unemployment and other taxes and
charges for all persons engaged by it in the performance of the work herein.
IT/IS is not and shall not represent itself as authorized to enter into any
contract or other obligation on behalf of NLL.
The amounts to be paid herein are exclusive of all taxes. NLL shall be
responsible for, and shall hold IT/IS harmless with respect to: all sales, use,
personal property and similar taxes, if any, imposed upon or in respect of the
transactions and services under this Agreement as required by the United States
of America other than for taxes on IT/IS' income, if any.
Acquisition and delivery of Raw Materials to IT/IS shall be the responsibility
of NLL. IT/IS understands it has absolutely no right, title, interest, or usage
rights to, in, or with the Raw Materials or Electronic Materials so produced
under this Agreement. IT/IS furthermore understands that the Raw Materials so
produced under this Agreement are the sole and separate property of NLL. That
at any time, NLL may request the return of all Raw Materials, and if so
requested, IT/IS shall do so.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as indicated below.
IT/IS, INC. NLL, INC.
By /s/ Kelley Kirker By /s/ Hunter M. A. Carr
Typed Name: Kelley Kirker__ Typed Name: Hunter M. A. Carr
Title: President Title: Chairman/CEO
Date: Mar. 24, 1999 Date: 3/24/99
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<PAGE>
MANAGEMENT
AND
FINANCIAL SERVICES AGREEMENT
This Agreement, is made between the National Law Library, Inc. (the
"Company") and IT/IS, Inc., (the "Vendor"). The Company and the Vendor are
collectively referred to herein as the Parties.
WHEREAS, the NLL desires to develop its business of selling legal
information on the Internet with maximum efficiency, and
WHEREAS, IT/IS, Inc. is capable of providing various business support and
development services,
IT IS, THEREFORE, agreed between the Parties to this agreement that, after
discussion and negotiations the following terms and conditions shall apply:
1. The Vendor will provide complete bookkeeping and accounting services for the
Company. Bookkeeping services will be provided by the Vendor at a cost plus
20% basis. Accounting services will be provided at an hourly rate of $85.00
per hour. Bookkeeping services shall include, but not be limited to,
recordation of all financial transactions of the Company in conformance with
Generally Accepted Accounting Principals. Accounting services shall include,
but not be limited to, preparation of monthly, quarterly and annual
financial statements in a form acceptable to the Company.
2. The Vendor shall provide staffing services for the Company as requested in
writing by the Company as needed. Vendor shall interview, train and provide
such staff as requested in a timely manner on a cost plus 25% basis.
Staffing shall include, as requested, executive staff, marketing personnel,
secretarial services, technological support and other such staffing support
as requested by the Company.
3. Parties do hereby expressly agree that fees for office supplies, equipment,
telephone services and support services requested by the Company shall be
invoiced by the Vendor at a rate of cost plus 20%.
4. The Vendor shall procure, negotiate and manage office space for the
operations of the Company pursuant to the written request of the company.
Such lease space shall meet the needs and expressed requirements of the
Company for its operations. The vendor shall be responsible for all
communications with the leasing agent or owner and shall receive a
management fee of 15% of the cost of the rental fees to be paid on a monthly
basis.
5. Parties agree that a general management fee of thirty-six hundred dollars
($3,600) per month will be charged to the Company by the Vendor to fairly
<PAGE>
compensate the Vendor for the general management time needed to manage the
various services specifically contracted for herein.
6. Parties agree that the Vendor will manage and supervise an annual audit of
the Companies financial records. An audit fee equal to 20% of the actual
cost of the audit will be paid to the Vendor for this service.
7. Invoices received by the Company for the Vendor shall be due and payable
within ten (10) days of receipt. Unpaid balances on invoices hereunder shall
accrue interest at an annual rate of 14%.
8. The Parties agree that this Agreement is final and exclusive. The term of
this agreement shall be ten years and it shall automatically renew for a
like term unless terminated in writing by either party no less than 90 days
before the date of termination.
9. Both Parties agree that this Agreement was negotiated in good faith and that
both Parties do expressly understand the full extent and nature of this
Agreement and that this Agreement evidences the true agreed terms and
conditions set forth between the Parties.
10. This agreement may only be amended by written amendment referencing this
agreement. This agreement shall be governed by Texas law.
The effective date of this Agreement shall be the ____ day of ______ 1999.
National Law Library
One Park Ten Place, Suite 220
Houston, Texas 77084
By _________________________________
Hunter M. A. Carr, CEO
IT/IS, Inc.
One Park Ten Place, Suite 200
Houston, Texas 77084
By _________________________________
Kelley Kirker, President
<PAGE>
EXHIBIT 10.6
SOFTWARE DEVELOPMENT & CONSULTING SERVICES AGREEMENT
THIS AGREEMENT is effective on the 23 day of March 1999, by and between the
National Law Library, Inc. (hereinafter Purchaser), having an office at One Park
Ten Place, Suite 220, Houston, Texas, 77084 and, and IT/IS, Inc. (hereinafter
Vendor), having an office at One Park Ten Place, Suite 200, Houston, Texas
77084.
WHEREAS Purchaser wishes to develop and utilize the Litidex(R) search engine and
indexing software for the provision of Internet legal data, and;
WHEREAS Purchaser wishes Vendor to develop these custom software
Packages and manage the development of its software, and;
WHEREAS Vendor desires to develop and manage this custom software package
for Purchaser:
NOW THEREFORE, the parties hereto hereby agree as follows:
1. CONSULTING SERVICES DEFINED. The term "Consulting Services" when used in this
Agreement means the performance of professional services that include but are
not limited to system analysis, program development, personnel training,
testing, documentation writing and general business consulting.
2. SCOPE & SERVICES. Vendor shall provide and deliver to Purchaser custom
software and consulting services in regards thereto as outlined in Paragraph 3.
This software development shall result in software products which may be used
for search engine and indexing technology and software applications including
but not limited to applications on the Internet as well as other areas of
Purchaser's operation as mutually agreed between the parties.
3. VENDOR RESPONSIBILITIES.
(A) Vendor shall develop custom software which will modify, customize, amend,
enhance or otherwise change the pre-existing Vendor software packages to fulfill
the requirements of Purchaser:
Litidex(r) search engine software
Litidex(r) indexing software
(B) The requirements to be fulfilled by the custom programming to the above
listed packages are presently undefined. The defining of Purchaser requirements
shall occur in Phases as requested by the Purchaser in writing.
(C) Each Phase and Sub-phase shall be designed, approved, programmed,
delivered, tested, and accepted pursuant to the procedures listed below.
I. As for each Sub-Phase or Phase: "Phase" shall mean Phase or Sub-phase.
(a) Vendor shall consult with Purchaser personnel for the purpose of designing
programming specifications. Specifications shall contain those items listed on
Attachment A.
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(b) Once Vendor has designed said programming specifications, they will be
delivered to Purchaser together with their operation performance estimates (OPE)
for every program mentioned in the specifications. The OPE will indicate any
limitations on the program, e.g. size, and the estimated response times for on-
line programs or runtimes for the programs.
(c) Upon receipt of said programming specifications, Purchaser will either
approve or disapprove of said specifications. Such approval will be at the sole
discretion of Purchaser.
(i) Upon approval of the programming specifications, Vendor will design, in
conjunction with Purchaser, an Acceptance test for these specifications. The
Acceptance test will follow those standards listed in Attachment B. The
specifications, OPE's and the Acceptance test will be incorporated into a Phase-
Agreement to be signed by both parties.
(ii) If Purchaser does not approve said specifications, Vendor and Purchaser
will again consult and restart the procedure at Section I.(a) above.
(d) After the creation of the Acceptance Test, the parties shall create the
Phase Agreement.
(i) The Phase Agreement shall contain the following:
The fixed price for the Phase. The functional names of the applications to
be created.
The date of delivery, and that time is of the essence.
(ii) The Phase Agreement will also have the following items attached thereto:
The Functional Specifications which is a narrative explanation of the
operation of the programs, containing Exhibits of all screen and reports.
The Programming Specifications to be used by the programmers creating the
software for Purchaser.
File layouts for all files used or created in that Phase, including record
and/or data field descriptions.
The operation performance estimates. The Acceptance Tests, including test
data.
(iii) The Phase Agreement will make explicit and express reference to this
agreement, and the date this agreement was executed.
(iv) Upon the signing of the Phase Agreement by both Purchaser and Vendor,
Purchaser shall pay to Vendor 30 percent of the fixed cost indicated in the
Phase Agreement.
(v) Vendor will then proceed to write the programming for that phase.
(e) (i) On the delivery date specified in the Phase Agreement, Vendor shall
deliver to Purchaser the completed programming for that phase. For delivery on
or before the delivery date specified in the Phase Agreement, Purchaser shall
pay to Vendor the next 40 percent of the price for that Phase. For delivery
after the date specified in the Phase Agreement, but prior to the expiration of
a grace period of 30 days,
<PAGE>
Purchaser shall pay to Vendor 30 percent of the price for that Phase.
(ii) Failure by Vendor to deliver the completed programming by the end of the
30 days after the delivery date specified in the Phase Agreement, Purchaser
shall pay to Vendor 30 percent of the price for that Phase. Failure by Vendor
to deliver the completed programming by the end of the 30 days after the
delivery date specified in the Phase Agreement will entitle Purchaser to a 10
percent reduction in the cost of the entire Phase for each 30 day period in
which Vendor is late. The delivery date may only be modified by written
amendment to the Phase Agreement signed by both parties.
(iii) In the event that Vendor fails to deliver the completed programs five (5)
months after the original delivery date, and the delivery date was not modified,
Purchaser may cancel that Phase Agreement. In the event of such cancellation,
Vendor shall deliver to Purchaser all work in progress, program specifications,
etc., then in Vendor's possession. Cancellation pursuant to such failure to
deliver shall not require any further payments to Vendor as normally required
pursuant to Article 15.
(f) Upon delivery, Purchaser shall conduct the acceptance test that was created
by Vendor and Purchaser in section I(c)(i) above.
(i) Upon passing the acceptance test, Purchaser shall pay to Vendor an
additional 30 percent of the price of the phase, Vendor was paid 40 percent for
the delivery of the programs, of the 30%, 10% will be withheld for 90 days.
Purchaser shall pay to Vendor 20 percent for the passing of the Acceptance
Test. Purchaser shall retain the final 10 percent until the successful
completion of 90 days of actual live use of said phase.
(ii) If the programs fail to perform the acceptance tests, the parties shall
follow the following procedure:
(1) Purchaser shall immediately notify Vendor by telephone of the failure of
the test. Purchaser shall then confirm such notice by sending written
confirmation of the failure plus proper documentation of said failure to Vendor
by certified mail, return receipt requested.
(2) Vendor may immediately begin reprogramming to remedy the failure.
(3) If the failure can be remedied within five (5) days, then the Acceptance
testing shall continue.
(4) In the event that the failure cannot be remedied after the fifth day,
Vendor shall notify Purchaser within an additional five (business days of the
new delivery date for that Phase. In no event shall the new delivery date be
more than thirty (30) days after the original delivery date. The rescheduling of
the delivery date shall not invoke the penalty provisions for late delivery set
forth above.
(g) After Purchaser has used the phase programs for a period of 90 consecutive
days of uptime as defined in paragraph 10, without failure, Purchaser shall pay
to Vendor the final 10 percent
payment.
II. Nothing in this procedure shall be construed to prevent several Phases and
Sub-phases to be commenced simultaneously.
4. SOFTWARE DOCUMENTATION DELIVERABLES. Vendor shall deliver to Purchaser
software documentation products as required in each Phase Agreement.
5. PURCHASER'S RESPONSIBILITIES. Purchaser shall furnish information requested
by Vendor that is
<PAGE>
necessary for Vendor to fulfill their responsibilities under this Agreement.
Purchaser shall provide adequate work space and telephone for Vendor personnel
when such persons are performing on-site services for Purchaser. Purchaser shall
provide data entry services and computer test time if required for Vendor to
fulfill their responsibilities under this agreement. Unnecessary or unreasonable
delays attributable directly to Purchaser which result in additional costs to
Vendor are subject to negotiation for additional compensation to Vendor and may
extend the delivery date.
6. TERM OF THE AGREEMENT. This Agreement is effective as of the date it is
signed by both parties. The terms and conditions of the Agreement will remain in
effect until Vendor has delivered and Purchaser has accepted all software to be
developed hereunder. In no event shall this Agreement be in effect for more than
five (5) years unless both parties execute an amendment which extends the term
of this Agreement. The expiration of this Agreement shall not affect the
obligations of either party to the other with respect to those obligations
established under this Agreement. Either party may terminate this Agreement for
good cause upon thirty (30) days prior written notice.
7. SURVIVAL BEYOND COMPLETION. The provisions of this Agreement and Software
developed under this Agreement as well as confidentiality, indemnification, use,
assignment, reproduction, warranty, ownership, return or destruction shall
survive the delivery of the software and the payment of associated charges.
8. WARRANTIES.
(A) Vendor warrants that the software systems developed hereunder will be
capable of being integrated with existing hardware and software environment
listed in Article 9(B).
(B) Vendor warrants that the software developed hereunder will conform to the
programming specifications contained in subsequent Phase-Agreements, and to the
written "Acceptance Test" criteria contained in the subsequent Phase-Agreements.
If at any time subsequent to the ninety (90) day period defined in Article 10,
any of the software systems are deemed by Purchaser to not be in conformance
with the applicable specifications, Purchaser shall notify Vendor in writing
within ten (10) working days of such alleged nonconformance or failure. Vendor,
within thirty (30) days of receipt of written notice, shall either correct the
error(s) or provide Purchaser with a plan for correcting the deficiency within a
mutually agreed upon reasonable period of time. Where there is a disagreement as
to the satisfactory completion of the Acceptance Tests, the parties shall use
their best efforts to resolve such disagreement. Purchaser may cancel this
Agreement if Vendor fails to correct or provide a plan to correct the
deficiency.
(C) For six months after the final payment of each fully operational Phase or
Sub-phase, Vendor will, at no charge to Purchaser, correct any defects which
impair the software's ability to meet the specifications.
(D) After the expiration of the warranty period six (6) months, Vendor agrees
to maintain the software systems developed hereunder in conformance with the
applicable specifications for a period of three (3) additional years with all
reasonable costs to be paid for by Purchaser at rates for time and material, to
be mutually agreed upon but not more than the rates contained in Attachment "C"
increased by the lesser of 10 percent per year or the actual Cost of Living
Index increment per year as defined by the Department of Labor for the region of
this transaction.
9. GUARANTEE OF ORIGINAL DEVELOPMENT.
(A) Except for those components listed in 9(B) below, Vendor warrants that all
materials produced
<PAGE>
hereunder will be of original development by Vendor, and will be specifically
developed for the fulfillment of this Agreement and will not infringe upon or
violate any patent, copyright, trade secret or other proprietary right of a
third party, and Vendor will indemnify and hold Purchaser harmless from and
against any loss, cost, liability or expense (including reasonable counsel fees)
arising out of any breach or claimed breach of this warranty,
(B) Vendor is authorized to incorporate the following materials and/or
components into the system to be developed hereunder:
Existing Litidex search and indexing software including enhancements
developed for the National Law Library and HTML interfaces.
Should Vendor wish to add additional non-original components, Vendor shall
obtain the prior written approval of Purchaser.
Vendor shall assist Purchaser in the expeditious transfer of licenses
and/or title for use of perpetual license to Purchaser for such non-original
components unless Purchaser already has title or license to any non-original
components used hereunder. Any costs associated with such transfers shall be
paid by Purchaser provided that such software is used exclusively for the
Purchaser applicable specifications developed hereunder.
10. SYSTEMS UPTIME.
(A) System uptime, as set forth in Article 3(C)(I)(g) is defined as follows:
Vendor warrants that the system (including the software and hardware
configuration in which it is installed) shall be functionally operational within
the specifications of each Phase no less than 96 percent of any consecutive
ninety (90) day period beginning with the start of acceptance through the
warranty period. Any time that the system is not functionally operational due to
hardware failure or maintenance, or other causes beyond Vendor's design or
control shall be excluded from this computation.
(B) In the event of a failure of any program during the ninety (90) day period
stated in 10(A), Purchaser shall notify Vendor by telephone immediately.
Purchaser will confirm said telephone notice by serving Vendor with written
notice, with proper documentation of said error or failure, sent certified mail,
return receipt requested.
(C) Upon notification of the failure, Vendor may begin immediate repairs of
said failures. If the failure is remedied before the expiration of 3.6 twenty-
four hour days cumulative days, including previous failures, within that Phase,
the required ninety (9O) day uptime period will continue to run.
(D) If a failure, or group of failures exist for, or accumulate to more than
3.6 days within the 90 day period for the particular Phase, the 90 day period
will restart at the new delivery date stated in (E) below. Purchaser shall
notify Vendor in the manner stated in (B) above when such failure of 3.6 days
occurs.
(E) Upon notification of a full failure, Vendor shall have ten (10) working
days in which to notify Purchaser in writing of a new delivery date for that
Phase. In no event shall such delivery date be more than thirty (30) days after
the date Vendor received notice of the full failure.
11. CONFIDENTIALITY AND SECURITY OF THE SYSTEMS. Each party acknowledges that
all material and information which has or will come into the possession and
knowledge of each in connection
<PAGE>
with this Agreement or the performance hereof, consists of confidential and
proprietary data, whose disclosure to or use by third parties will be damaging,
Both parties, therefore, agree to hold such material and information in
strictest confidence, not to make use thereof other than for the performance of
this Agreement, to release it only to employees requiring such information, and
not to release or disclose it to any other party.
12. NON-COMPETITION. Unless otherwise consented to by Purchaser; and such
consent will not be unreasonably withheld, during the performance of this Phase
Agreement and for 36 months after its completion or termination, Vendor agrees
not to provide software or consulting services for any business competitive with
the business of the Purchaser.
13. RIGHTS TO NEW IDEAS. The parties acknowledge that performance of this
Agreement may result in the development of new proprietary and secret concepts,
methods, techniques, processes, adaptations and ideas. The parties agree that
the same shall belong solely to Purchaser without regard to the origin thereof
and that Vendor will not, other than in the performance of the Agreement,
without the express written consent, which will not be unreasonably withheld,
sell, make use or disclose same to any person, group, company or corporation
that competes with Purchaser's business as defined in Article 12.
14. PURCHASER'S RIGHT TO CONTRACT FOR SIMILAR WORK. Purchaser reserves the right
to contract with other parties for work similar to that being performed under
this Agreement if Vendor does not agree to perform such work at then prevailing
market rates.
15. CANCELLATION. In the event that Purchaser, at its option, elects to cancel
this Agreement pursuant to Article 6 or 8b herein, by written notice to Vendor;
in such event, Purchaser will pay Vendor the amount equal to the actual time and
materials charges incurred for that work so cancelled through the day receipt of
written notice of cancellation.
16. TITLE RIGHTS, OWNERSHIP, RIGHT TO USE.
(A) The custom software applications system and associated documentation
developed under this Agreement which are the modifications, amendments,
enhancements or customizations of pre-existing Vendor software packages shall be
the sole and exclusive property of Purchaser, free from any claim or retention
of rights thereto on the part of Vendor. Vendor shall retain a non-exclusive
non-perpetual license in the software systems while they are under development
and during the warranty and maintenance periods. Upon completion or termination
of this Agreement, Vendor shall deliver to Purchaser all copies of any and all
materials which pertain to the systems developed under this Agreement provided
that Purchaser shall have paid in full all allowable Vendor invoices associated
with performance under this Agreement.
(B) Article 16(A) shall not be construed to give Purchaser any property right in
the pre-existing Vendor software which Vendor shall modify to fulfill the
requirements of this Agreement.
(C) Upon completion of each Phase of programming under this Agreement, Vendor
shall deliver to Purchaser all source code, or its equivalent, for all the
modified, amended, enhanced or customized programming performed for Purchaser.
Any inclusion of the source code or its equivalent, from the pre-existing Vendor
software packages shall not be deemed to be a waiver by Vendor of its ownership
of said code pursuant to Article 16(B).
(D) Vendor may use all software provided to it pursuant to this Agreement for
any purpose whatsoever, without restriction, subject only to those restrictions
herein elsewhere contained with respect to Purchaser's
<PAGE>
disclosure, reproduction or permitting other to use the package.
17. PAYMENTS. In consideration of the work to be performed hereunder and the
products to be delivered, Purchaser shall pay Vendor as follows:
(A) Vendor shall bill Purchaser on a time and materials basis at the rates
contained in Attachment C, for those hours dedicated to the design of the
programming specifications, creation of Acceptance Test, creation of Acceptance
Test Data, and for any assistance rendered to Purchaser to perform the
Acceptance Test beyond 8 hours. The billing for the above shall be done for each
Phase of the system development.
(B) Purchaser will pay Vendor a fixed price for the actual writing, testing and
implementation of each phase. The fixed price shall include the license fee for
any pre-existing Vendor software packages that will be used and or modified in
the creation of the system for Purchaser. The fixed price will be mutually
agreed to by the parties, and will be incorporated in the Phase-Agreement
mentioned in Article 3(C)I. Payments for each fixed price Phase Agreement shall
be made in accordance with the development procedure listed in Article 3.
18. INVOICES
(A) Vendor shall submit invoices not more often than bi-monthly to:
(B) At a minimum each invoice for design performed by Vendor shall be
accompanied by supporting documentation which details name of employee, hours
worked per employee, hourly charge and total; computer time used, the applicable
unit charge and total.
(C) All invoices for the design of programming specification, and the creation
of the Acceptance Tests and data for a particular Phase shall be submitted to
Purchaser prior to the signing of the Phase Agreement for that particular Phase.
(D) Invoices for fixed price Phase-Agreements need not be itemized, but Vendor
shall maintain detailed records of all time spent in the production of said
fixed price Phase, including name of employee, hours worked per employee, hourly
charge per employee.
19. TRAINING. Vendor shall provide the training to Purchaser personnel at the
time and material rates cited in Attachment "C". This training shall be made
available on a schedule basis to Purchaser personnel.
20. ASSIGNMENT OF CONTRACT BY PURCHASER. This Agreement may be assigned by
Purchaser to any Purchaser entity wherein Purchaser maintains majority interest
without the consent of Vendor. Upon such assignment by Purchaser and assumption
of liability hereunder by the assignee, Purchaser shall be discharged of any
liability hereunder.
21. NON-ASSIGNMENT OF CONTRACT BY VENDOR. This Agreement may not be assigned by
Vendor without the written consent (not unreasonably withheld) of Purchaser.
22. PATENT COPYRIGHT OR TRADE SECRET INDEMNITY. Vendor will defend at its
expense, any action brought against Purchaser or Vendor that is based on a claim
that the systems developed and furnished hereunder infringes a United States
patent or copyright or trade secret or other proprietary right of a third party
and will pay the loss, damages, and reasonable attorney fees finally awarded
against Purchaser in any such actions which are attributable to any such claim,
but such defense and payments are conditioned
<PAGE>
on the following: (1) Purchaser promptly notifies Vendor in writing of the
claim, and (2) Vendor shall have sole control of the defense of any such action
on such a claim and all negotiations for its settlement or infringement of a
United States patent or copyright, Purchaser shall permit Vendor, at its option
and expense, either to procure for Purchaser the right to continue using the
System(s), to replace or modify the same so that they become non-infringing, or
to accept Purchaser's return of the System(s) and grant Purchaser a refund of
monies paid under this Agreement.
Vendor shall have no obligation to defend Purchaser or to pay costs, damages, or
attorney's fees for any claim based upon (1) use of other than an unaltered
configuration of the Systems if such infringement would have been avoided by the
use of an unaltered configuration of the Systems, or the combination, operation,
or use of any Systems furnished hereunder with non-Vendor programs or data if
such infringement would have been avoided by the combination, operation, or use
of the Systems with other programs or data.
23. INDEMNIFICATION INCLUSION OF COSTS. Each party hereunder agrees to
indemnify the other against all losses, costs, expenses (including reasonable
counsel fees) which may occur by reason of the breach of any term, provision,
warranty or representation contained herein and/or in connection with the
enforcement of this Agreement or any provision thereof.
24. BANKRUPTCY. In the event Purchaser or Vendor shall (1) apply for the
appointment of or the taking of the possession by a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its property, (2)
make a general assignment for the benefit of creditors, (3) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect), or (4)
fail to contest in a timely or appropriate manner or acquiesce in writing to any
petition filed against it in an involuntary case under such Bankruptcy Code or
any application for the appointment of a receiver, custodian, trustee, or
liquidation of itself or of all or a substantial part of its property, or its
liquidation, reorganization, or dissolution, the other party may terminate this
Agreement as provided in Article 6.
25. PURCHASER'S RIGHT TO INSPECT ITS FINANCIAL RECORDS. For purposes of
validating charges made and paid for under this Agreement, Purchaser reserves
the right, at its own expense, to inspect Vendor time cards, or any other
documents that reveal time spent by Vendor personnel on the Purchaser programs.
Vendor shall make available such documents during normal hours of business, and
for at least 2 years following the termination of this contract.
26. ATTORNEYS FEES. Should litigation arise concerning this Agreement, the
prevailing party shall be entitled to its attorneys fees, court costs and
accrued interest (18 percent per annum) in addition to any other relief it may
be awarded.
27. FORCE MAJEURE. Neither party shall be responsible for delays or failures on
performance resulting from acts beyond the control of such party. Such acts
shall include but not be limited to acts of God, strikes, lockouts, riots, acts
of war, epidemics, government regulations superimposed after the fact, fire,
communication line failures, power failures, earthquakes or other disasters.
28. LIABILITY TO THIRD PARTIES. Except as provided for in Articles 22 and 29
hereto, neither party shall indemnify the other against liabilities to third
parties arising out of the use of the software systems developed and delivered
under this Agreement.
29. VENDOR EMPLOYEES ASSIGNED TO THIS AGREEMENT. All employees assigned to
perform under this Agreement shall be full-time employees of Vendor except for
those employees assigned to
<PAGE>
perform minor administrative tasks or those whom Vendor shall employ as
subcontractors. In the event that Vendor uses contractors or subcontractors,
Vendor specifically assumes all responsibilities for such contractors or
subcontractors as if they were employees of Vendor, and Vendor shall indemnify
and hold harmless Purchaser for the acts of such contractors or subcontractors.
Vendor-assigned employees may be rejected by Purchaser should Purchaser
determine unilaterally that any employee's services are unsatisfactory. Upon
written notification from Purchaser regarding an unsatisfactory employee, Vendor
shall remove such employee immediately and replace the removed employee with an
employee acceptable to Purchaser as soon as possible. Under no circumstances
shall Vendor employees be considered employees of or agents of Purchaser.
30. COMPLIANCE WITH ALL LAWS - PARTIAL INVALIDITY. Each party agrees that it
will perform its obligations hereunder in accordance with all applicable laws,
rules and regulations now or hereafter in effect. If any item or provision of
this Agreement shall be found to be illegal or unenforceable, them
notwithstanding, this Agreement shall remain in full force and effect and such
term or provision shall be deemed stricken.
31. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
32. ALL AMENDMENTS IN WRITING. No amendments to this Agreement shall be
effective unless it is in writing and signed by duly authorized representative
of both parties.
33. HEADINGS NOT CONTROLLING. Headings used in this Agreement are for reference
purposes only and shall not be deemed a part of this Agreement.
34. VENDOR EMPLOYEES HIRED BY PURCHASER. If a Vendor representative shall become
employed by Purchaser as an independent consultation or an employee within a
period of two years from the date of this Agreement, Purchaser shall pay Vendor
an amount deemed to be reasonable compensation as an employment fee. This fee
shall represent Vendor's sole and exclusive remedy against Purchaser. Purchaser
shall not be liable for any other damages caused to Vendor by the result of such
hiring. The above fee shall be waived in the event that Vendor has terminated
the employee's employment with Vendor prior to the employee's hiring by
Purchaser.
35. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter; all prior agreements,
representations, statements, negotiations and undertakings are superseded
hereby.
IN WITNESS WHEREOF, each of the parties hereto has causes this Agreement to be
duly executed as of the date below.
VENDOR: IT/IS, Inc.
BY: /s/ Kelley V. Kirker
Date: Mar. 24, 1999
PURCHASER: National Law Library, Inc.
BY: Hunter M. A. Carr
Date: 3/24/99
<PAGE>
ATTACHMENT A
Programming Specifications of Software shall contain the
following:
1. Functional narrative of each program or program to be modified
describing the operation of the program from the users
perspective.
2. Basic operational description of the program calculations, routines,
and other processing.
3. Samples of all Input screens, Output screens, reports,
invoices, and/or forms used, required or produced.
4. Time estimates for each Phase Order
NOTE: The above is merely a description of the programming
specifications. The actual programming specifications for a
particular Phase will be attached to the Phase Agreement.
<PAGE>
ATTACHMENT BA. Acceptance Test
I. All menu options shall be selected and executed without error.
II. Operating system specifications
II. Total (System) Price shall be as specified in each Phase Order
(a). Allocation of Project Responsibilities
1. Additional System Design Specifications
2. Site Preparation
3. Integration/Interfacing with existing system
4. Evaluation procedures
5. Problems to be solved
6. Test data
7. Time permitted for needed corrections
B. Reliability and Maintainability
1. Repetitions
2. Error frequency
3. Debugging and Remedial maintenance
4. Yearly charge for maintenance service, effective upon completion of warranty
period
<PAGE>
ATTACHMENT C
TIME AND MATERIAL RATES
Senior Programmers $100.00/hour
Programmers $75.00/hour
Technical Support $45.00/hour
Training Rate $45.00
<PAGE>
EXHIBIT 10.7
OPTION AGREEMENT TO PURCHASE STOCK
This Agreement is made between the parties effective March 30, 1999.
Internet Law Library, Inc., SELLER, and, Jonathan Gilchrist, PURCHASER, agree:
In consideration of the following terms, PURCHASER, who is a consultant of
Internet Law Library, Inc., or of its subsidiary, National Law Library, Inc.,
has the right to purchase from SELLER, all or any part of the shares described
below of Common stock issued by Internet Law Library, Inc. from the effective
date of this agreement for a period of five years, through March 30, 2004.
1. Payment by Purchaser to Seller of the sum of $450,000 (Four Hundred Fifty
Thousand dollars), representing 450,000 shares at $1 per share, made by
cash, certified funds, or wire transfer. The shares purchased are not
registered with the United States Securities and Exchange Commission, nor
with the Securities Commission of any state. Payment may also be made by
election to have shares of stock, which otherwise would be issued on
exercise of the option, withheld in payment of the exercise price.
2. Consulting services provided in the past and to be provided in the future
by PURCHASER to SELLER, the receipt of which is acknowledged, is further
consideration for this transaction.
3. PURCHASER represents that he is qualified to purchase these shares under
the relevant rules and regulations of the United States Securities and
Exchange Commission and the Securities Commission of any state that may
have jurisdiction.
4. PURCHASER further represents that he is not purchasing these shares with an
intent to resell, nor will he take any actions that may result in his being
considered an underwriter of the shares.
5. No sale, transfer, or other disposition of this option may be made other
than by the terms of this agreement, except if to a successor by merger or
consolidation or to shareholders of a successor in interest.
6. Prior to any transfer of these options, PURCHASER, will provide to SELLER,
the issuer of the stock, a legal opinion, in a form acceptable to the
counsel of the issuer, that the transfer will not result in the loss of
exemptions from registration of the securities then claimed by issuer.
7. Any stock issued under this option agreement will be subject to section 144
of the SEC Rules and will not be transferable for twelve months from the
date of issuance of the stock certificate(s), unless to an underwriter for
the purpose of exercising the option and making a public distribution of
the underlying shares.
8. SELLER agrees to notify PURCHASER at least ten days prior to any
dissolution, liquidation, winding up, or takeover of the SELLER, stating
the record date for any rights to be taken under this agreement.
<PAGE>
9. PURCHASER must exercise this option within five years after the effective
date of this Option Agreement, or this option will become void if not
exercised.
10. PURCHASER further represents that he/she has had adequate opportunity to
obtain any information relevant to the decision to purchase and has also
had adequate opportunity to consult with advisors of his/her/its choice.
11. Notices required to be delivered under this agreement are to be made to:
SELLER: Internet Law Library, Inc.
4301 Windfern Rd.
Houston TX 77041-8915
PURCHASER: Jonathan Gilchrist
6524 San Felipe, Suite 252
Houston, Texas 77057
Dated and Effective March 30, 1999.
INTERNET LAW LIBRARY, INC., Seller
By /s/ Hunter M.A. Carr
-------------------------------------
Hunter M.A. Carr
/s/ Jonathan Gilchrist, Purchaser
-------------------------------------
Jonathan Gilchrist
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF INTERNET LAW LIBRARY, INC
Name State of Incorporation Business Name
- ---- ---------------------- -------------
National Law Library, Inc. Texas National Law Library, Inc.
New Planet Resources, Inc. Delaware New Planet Resources, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial data extracted from the Consolidated
Financial Statements of Internet Law Library, Inc. for the period from inception
on November 30, 1998, to June 30, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 54,629
<SECURITIES> 0
<RECEIVABLES> 12,617
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,246
<PP&E> 2,755,536
<DEPRECIATION> (142,782)
<TOTAL-ASSETS> 2,690,000
<CURRENT-LIABILITIES> 549,195
<BONDS> 0
0
0
<COMMON> 21,122
<OTHER-SE> 2,775,082
<TOTAL-LIABILITY-AND-EQUITY> 2,690,000
<SALES> 53,520
<TOTAL-REVENUES> 53,520
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 664,522
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,213
<INCOME-PRETAX> (612,214)
<INCOME-TAX> 0
<INCOME-CONTINUING> (612,214)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (612,214)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
