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Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PLAYNET TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2706304
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Maritime Plaza, San Francisco, CA 94111
Formerly 152 West 57th Street, NY, NY 10019
(Address of Principal Executive Offices) (Zip Code)
Compensation Agreement with Mark Neuhaus
Compensation Agreement with John Banas
Compensation Agreement with Langley Downey Entertainment, Inc.
Compensation Agreement with Palex Metals, Inc.
Compensation Agreement with MAG & Associates, Inc.
Compensation Agreement with Sound Capital, Inc.
Compensation Agreement with Henry Steeneck
(Full title of the plan)
Mr. Shmuel Cohen, President With Copies to:
PlayNet Technologies, Inc. Philip K. Yachmetz, Esq.
One Maritime Plaza 7 North Koewing Place
San Francisco, California 94111 West Orange, New Jersey 07052-4014
(415) 217-3600 Telephone: (973) 243-8799
(Name, address, including zip code, and Facsimile: (973) 243-9333
telephone number, including area
code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
PROPOSED PROPOSED
TITLE OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, par 2,359,834 shares $ 1.109 (1) $2,617,056 (1) $793.05
value $.001 per
share
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(1) Estimated solely for the purpose of calculating the registration fee on the
basis of, pursuant to Rule 457(c), the average of the high and low prices per
share of the registrant's Common Stock on the National Association of Securities
Dealers Automated Quotation System on August 5, 1997
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PART I.
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
SUBJECT TO COMPLETION - DATED AUGUST 6, 1997
PROSPECTUS
PLAYNET TECHNOLOGIES, INC.
2,359,834 SHARES OF COMMON STOCK
(PAR VALUE $.001)
----------------
The 2,359,834 shares of Common Stock, $.001 par value, of PlayNet
Technologies, Inc. (the "Company") (collectively, the "Shares") to which this
Prospectus relates will be sold by the Company from time to time, or at any one
time, in negotiated transactions as compensation in lieu of cash pursuant to
Compensation Agreements with or in payment of services previously rendered from
various consultants or vendors to the Company. The costs of registering the
Shares under the Securities Act, estimated at $793.05, will be paid by the
Company. The Company will not receive any proceeds from the sale of 359,834 of
the Shares, but will benefit from the services rendered under the Compensation
Agreements. Upon the exercise of the Nonqualified Stock Option to purchase
2,000,000 shares at a purchase price of $0.50 per share granted to one
Consultant as compensation under his Compensation Agreement, the Company will
receive aggregate gross proceeds of $1,000,000.
As of August 6, 1997, the Common Stock is traded through the Over The
Counter Market. Immediately prior to such date the Common Stock was traded
through the Nasdaq SmallCap Market under the symbol "PLNTC." The last reported
sales price for the Common Stock on the Nasdaq SmallCap Market on August 5, 1997
was $1.00 per share.
----------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS
AND RECIPIENTS OF THE SHARES OFFERED HEREBY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE
----------------
The date of this Prospectus is August 6, 1997
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NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING HEREIN CONTAINED, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE OR ISSUANCE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
----------------
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations promulgated thereunder, and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the following regional
offices of the Commission: 7 World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
The Company has filed with the Commission, 450 Fifth Street, N.W.
Washington, D.C. 20549, a Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act, as amended, with respect to the securities
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits thereto. For further information
regarding the Company and the securities offered hereby, reference is made to
the Registration Statement and to the exhibits filed as a part thereof, which
may be inspected at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 without charge or copied upon request to the Public
Reference Section of the Commission and payment of the prescribed fee. This
Registration Statement has been filed electronically through the Electronic Data
Gathering Analysis and Retrieval system (EDGAR) and is publicly available
through the Commission's web site (http://www.sec.gov). Statements contained in
this Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's (i) Annual Report on Form 10-KSB and 10-KSB/A for the fiscal
year ended October 31, 1996, (ii) Quarterly Reports on Form 10-Q for the
quarters ended January 31, 1997 and April 30, 1997, and (iii) the Current Report
on Form 8K, filed by the Company on August 1, 1997 are incorporated in and made
a constituent part of this Prospectus by reference. All reports and proxy
statements filed by the Company with the Commission pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus and
prior to termination of the offering of the Shares of Common Stock to which the
Prospectus relates shall likewise be deemed incorporated herein and made a
constituent part hereof by reference from the respective dates of filing.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified and superceded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that is also incorporated herein modifies
or replaces such statement. Any statement so modified or superceded shall not be
deemed, except as so modified or superceded, to constitute a part of this
Prospectus.
UPON WRITTEN OR ORAL REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO
EACH PERSON WHO RECEIVES A COPY OF THIS PROSPECTUS, A COPY OF ANY OF THE
INFORMATION THAT IS INCORPORATED BY REFERENCE HEREIN. ANY SUCH REQUEST SHOULD BE
MADE TO THE ATTENTION OF SHMUEL COHEN AT PLAYNET TECHNOLOGIES, INC., ONE
MARITIME PLAZA, SAN FRANCISCO, CALIFORNIA 94111, TELEPHONE NO. (415) 217-3600.
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THE COMPANY
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus may contain various "forward-looking statements," within the
meaning of the Securities Act and the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"), that are based on management's beliefs, and
assumptions, as well as information currently available to management. When used
in this document, the words "anticipate," "estimate," "expect," "will" and
similar expressions may identify forward-looking statements. Although the
Company believes that the expectations reflected in any such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to be correct. Any such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results, performance or financial condition may vary materially from
those anticipated, estimated or expected. Among the key factors that may have a
direct bearing on the Company's results, performance or financial condition are
fluctuations in the economy; the degree and nature of competition; demand for
the Company's products; changes in laws and regulations affecting the Company's
business; and the Company's ability to recruit and retain individuals with the
requisite technological expertise to continue to develop new products and
enhancements to existing products, to complete the development of its PlayNet
Music and PlayNet Sports products, to expand into new markets, and to transition
successfully from a development stage company to an operating company and other
matters described in "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
The Company designs, develops and sells entertainment systems which include
pay-per-play electronic game, entertainment and music juke box terminals
networked over the Internet. The Company's primary product, PlayNet Web, as well
as two products currently under development, PlayNet Music Station and PlayNet
Sports, are all designed to accept both cash and credit cards, have touch
screens, user-friendly interfacing and come pre-loaded with the Company's
proprietary software and other licensed content. The market for the Company's
products includes bars, theme bars and restaurants, hotel and restaurant chains,
coffee cafes, theme parks, studio stores, gyms, airport lounges and new "cyber"
establishments. All three products are intended to run on Microsoft Windows NT
platform networked by IBM Global Services.
The Company's business reflects the growing trend to connect people via computer
networks and, as a result, to create new forms of interactive entertainment in a
social setting. According to the Vending Times 1996 Census, total revenue in the
United States in 1995 for all amusements was approximately $6.3 billion, and the
United States electronic pay-per-play video game business generated
approximately $2.0 billion of that revenue
The Company's terminals are designed to utilize the Internet to enhance the
traditional entertainment and competitive game experience through innovations
such as linking multiple players in remote locations, offering tournament prize
play for sports, strategy and video game enthusiasts, and offering, for both
pay-per-play and purchase, catalogues of music titles from a broad array of
artists and eras. In addition, the terminals are designed to provide convenient
"out-of-home" access to select Internet services to provide a voice activated
chat feature, E-mail, World Wide Web browsing and Web casting, while
simultaneously functioning as points of purchase for entertainment tie-in
merchandise.
The Company's distribution strategy is to maximize both domestic and foreign
penetration of all three networked entertainment terminals. The Company's
experienced sales force is currently calling upon its long-term relationships
with a large roster of domestic and foreign distributors. These distributors are
now purchasing the PlayNet Web terminals directly from the Company and reselling
them to operators in their respective territories for installation in bars and
restaurants in the United States. It is the Company's intention to consummate
direct agreements with hotel and restaurant chains, theme bars and restaurants,
cyber lounges, coffee cafes, theme parks and airport lounges to insure
installations in prime global locations.
PlayNet is currently negotiating to acquire the rights to the libraries of
various music publishers and record labels for use on its PlayNet Music Station.
Concurrently, the Company is negotiating to enter into sponsorship and
advertising programs for its sports games, tournaments and prize contests with
high-profile consumer goods and beverage companies. In addition, the Company
also intends to establish various contractual arrangements, joint ventures and
other mutually advantageous programs with technology providers, equipment
manufacturers, distributors, major hospitality chains, consumer products
companies, music-related companies,
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content providers and others to develop more efficient and higher-profile
adaptations of its products and services, which could be customized to meet
marketplace requirements.
The Company's primary objective is to install a global network or "web" of its
terminals in choice locations which would, in turn, create a ready-made market
for its software offerings and merchandise. The Company believes that content
providers including those in the Web casting field will be attracted to the
Company's products both by virtue of design and by an allied desire to penetrate
out-of-home computer markets. Moreover, the Company believes that its
entertainment network will present a new and desirable forum for advertisers and
sponsors.
Pursuant to its agreement with IBM Global Services, the Company has established
an "Intranet within the Internet" creating an efficient, secure, and private
circuit to connect its digital terminals throughout the United States and the
world. This network, utilizing IBM's worldwide points of presence, provides for
prompt universal access to all offered games and services as well as for the
remote downloading to all installed terminals of new games and tournaments,
music titles, merchandise catalogues and other content and for the uploading of
financial and customer data. In addition, IBM will provide for the confidential
and expeditious verification of credit card authorizations.
CURRENT OPERATIONS
Through June 1997, the Company shipped 671 PlayNet Web networked entertainment
terminals. The 671 units aggregated revenues of approximately $1.48 million, to
be accounted for in accordance with the Company's revenue recognition policy.
Additionally, the Company currently has purchase orders outstanding for the
shipment of another 3,020 terminals, which is expected to generate sales of
approximately $6.8 million. However, in early April 1997 the Company experienced
system failure based on unexpected software incompatibility, the malfunction
being triggered by the daylight savings time change. To date, this malfunction
has been corrected, all units previously shipped have received the appropriate
upgrades and normal operations have resumed. However, the resolution of this
malfunction and the related upgrading of all the PlayNet Web terminals has
caused a delay in completing the financing arrangements and/or receiving
payments for certain of the shipped terminals. Completion of these sales
transactions is dependent upon the demonstration of the reliability of the
terminals.
On May 20, 1997, the Company entered into a non-binding agreement with
Tournament Associates, Inc. ("TAI") relating to a joint venture that will
operate computerized poker tournaments through retail locations in Pennsylvania.
TAI owns the proprietary rights to electronic video software that supports
competition and tournament poker play. Rulings under Federal and Pennsylvania
law have held that the poker game system is not a gambling device because it
awards prizes based on a player's skill rather than random chance. Accordingly,
the game can be offered throughout Pennsylvania in tournaments in which prizes
are awarded to contestants. The non-binding agreement contemplates that TAI will
grant a non-exclusive, non-transferable sublicense to the joint venture for the
use of its poker game software and related intellectual property, and that
PlayNet will provide the hardware for integrating the licensed software into its
PlayNet Web terminals and will be responsible for the promotion, distribution,
placement and servicing of such terminals. Under the proposed agreement, PlayNet
and TAI will each own one-half of the issued and outstanding capital stock of
the joint venture, make equal capital contributions to fund operations, if
required, and share equally in distributions. It is expected that the joint
venture will continue for an initial term of two years, and thereafter, be
renewable annually. The Company is still in the process of negotiating and
completing final agreements. When and if consummated, PlayNet believes this
agreement will accelerate its opportunities with respect to its business
strategy to develop new markets and for revenues generated from tournaments.
STRATEGY
The Company's primary strategic objective is to establish and rapidly grow
an installed base of its out-of-home, networked entertainment terminals. The
Company believes that its products and system architecture will enable it to
expand the variety of content and services available beyond that which is
available in existing products, as well as to increase the range of venues at
which such networked entertainment terminals can be profitably located. The
Company believes that the breadth of entertainment choices which its products
will deliver, coupled with a highly diverse range of public venues, will extend
the demographics of its potential users beyond that of adolescent males who
currently dominate the out-of-home video game market. The Company's primary
strategies consist of the following key elements:
Enhancement of the Out-of-Home Entertainment Experience -- The Company
intends to offer networked entertainment content with multi-player,
multi-location and tournament prize play which it believes will result in
significantly more appealing entertainment
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experiences than are possible with existing stand-alone, out-of-home,
pay-per-play machines. Unlike most competing entertainment systems, which are
primarily based on proprietary hardware platforms, the Company's entertainment
terminals will offer touch-screen activated access to a wide variety of video
games including parlor, trivia, strategy and action games and prize tournament
play. Future enhancements of PlayNet Web, will include access to Internet
content, the ability to purchase general entertainment merchandise, and
ancillary features such as E-mail, World Wide Web browsing and "real-time chat"
with other users of the system. Future enhancements to the PlayNet Music Station
will include the ability to purchase thousands of music titles as well as
music-related merchandise.
Hospitality Focus and Penetration Beyond Traditional Venues -- The Company
intends to focus its efforts on the hospitality sector which, according to the
1996 Vending Times Census of the Industry, comprise approximately 60% of the
out-of-home entertainment industry. This sector primarily includes bars,
restaurants and hotels and is distinguished from the remainder of the industry,
which is made up of specialized game arcades and venues such as movie theaters.
The Company believes that the greater variety of entertainment content offered
on its products could significantly expand the number of potential venues in the
hospitality sector and allow it to enter non-traditional venues such as airport
lounges, railroad stations, shopping malls, theme bars and restaurant chains.
The Company intends to accelerate the distribution of its products by forming
strategic alliances with major hospitality companies, both in the United States
and internationally.
Expansion of Potential User Base -- The Company intends to offer a range of
games and tournaments, music titles and other content and features to appeal to
a broader user base than existing arcade offerings which historically target the
adolescent male demographic segment. The Company will initially target
hospitality venues, especially bars, theme bars and restaurant chains for
distribution of its terminals. Networked and prize tournaments and promotions
will be aimed at a broad array of consumers who are interested in social,
interactive entertainment and competitive tournament prize play. The Company
believes that its broad-based strategy will allow it to increase average revenue
per unit and the number of potential venues for its networked machines.
Product Innovation and Improvement -- The Company believes that its flexible
system architecture will allow it to update and continually improve its game and
entertainment offerings on a cost effective basis through remote downloads from
central servers, based on customer feedback and demand. PlayNet Sports offerings
will be changed based on sport seasons. The Company also intends to support
prize tournaments with extensive promotional and sponsorship campaigns.
Recurring Revenue Streams -- The Company believes that other out-of-home
entertainment product manufacturers only receive revenue from the sale of
machines. The Company believes that its products will result in continuous
revenue from its out-of-home entertainment terminals as it expects that it will
be able to share in on-going terminal revenues. The Company intends to promote,
arrange sponsorship for, and organize national and local game tournaments with
cash and other prizes. The Company believes that tournament play involving other
electronic game products has resulted in an increase in terminal usage and
revenues, especially since such tournaments require higher game fees.
Ancillary Revenue Opportunities -- The Company believes that other
opportunities to generate revenues exist. For example, sponsorship and
advertising revenue could be generated from on-screen advertisements and
tournaments. The Company could also collect fees on merchandise sales made
through its networked entertainment terminals. In addition, the Company may in
the future design a system to re-market data collected from user polls, music
selections and other similar usage to content providers, advertisers and product
and service vendors.
CURRENTLY AVAILABLE PRODUCT
PlayNet Web
PlayNet Web is a compact, multi-purpose networked entertainment terminal
designed to sit on a counter-top and accommodate a number of games and
entertainment-related activities. Users will be able to interact with the system
through its easy-to-use touch-screen interface, and select an activity from a
menu of options, including:
- Games: Users will be able to select from a menu of ten to twelve games
including parlor, trivia, puzzle and action games. Fresh content will be
remotely downloaded on a regular basis. User scores will be compared to players
in the same venues.
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- Tournaments: Users may play a number of games competing against other
local, regional or national users of the PlayNet Web for cash and other prizes.
The Company believes that the limited local tournament play offered in existing
out-of-home games has demonstrated significant increases in game utilization and
revenue.
- Chat: Users will be able to engage in voice activated chat with other
participants in remote locations through attached handsets. The chat bulletin
boards will be similar to those on America Online with moderators and special
interest groups; however, users will also be able to leave voice file messages
for retrieval at PlayNet Web terminals.
- Internet: PlayNet Web will offer standard Internet access and e-mail for
users. PlayNet has designed a touch-screen interface which will prominently
display the most popular web sites which are likely to appeal to a location's
clientele (i.e. ESPN Sportzone in sports bars). Particularly popular sites will
be loaded periodically into the PlayNet Web terminals memory for high speed
retrieval upon use.
- Other: Users will be able to order a variety of merchandise using credit
card acceptors and to access and post classified and personal advertisements.
PlayNet Web terminals will also be networked with any PlayNet Music Stations
in the same venue, allowing users to choose and play music on PlayNet Music
Station through the PlayNet Web terminal. Software will be updated as necessary
from the Company's central server location, allowing the Company to introduce
new games and improve features as necessary to maintain end-user interest in the
terminal.
PlayNet Web is designed to accept $1, $5, $10 and $20 bills and credit
cards. PlayNet Web will have the capability to broadcast promotional messages on
the terminal while it is not being used and is exploring promotional
opportunities and tie-ins with potential sponsors.
PRODUCTS UNDER DEVELOPMENT
PlayNet Music Station
PlayNet Music Station is a networked juke box designed to provide real-time
access to thousands of songs via an Internet connection to the Company's central
server database. Through the same Internet connection, customers will be able to
access information about specific artists and to order merchandise and other
related ancillary products. PlayNet Music Station looks like a standard juke
box, but with the addition of two touch screens to facilitate navigation through
multiple song playing and merchandise options. Customers will be able to access
songs by format, e.g. country & western, jazz, rock, or search for and select a
particular song in the music database by title or by artist name.
To date, juke boxes have typically been limited to the approximately 100 CDs
physically present in the box. PlayNet Music Station will be linked to a large
database of readily accessible music, so customers will have significantly
greater choice of titles and artists. The Company expects its most popular
selections will be stored locally and will be augmented by a large database of
music stored at remote server sites. The Company will be able to update easily
the database of songs available at each location from remote servers in order to
keep song choices from becoming old or stale. In addition, the Company will be
able to customize song offerings according to location preferences and data
collected in the field.
PlayNet Music Station does not require any mechanical movements to replace
and play CDs, which the Company expects will reduce breakdowns and maintenance
costs and allow machines to play selections continuously without any pauses
between songs or even start a queued selection before the end of the previous
selection. In this way, the number of songs played during peak hours is
potentially greater, resulting in increased revenue at each location. The
Company also anticipates being able to program individual terminals to play
certain music selections in locales at specified times or during periods that
the juke box is not being used by paying customers. Additionally, PlayNet Music
Station is designed to be able to display the name of the artist and song being
played along with promotional information while the music is playing. In this
way, record companies can promote their new or established artists in
demographically targeted locales (e.g. country music songs in country music
bars.)
PlayNet Music Station is designed to accept $1, $5, $10 and $20 bills and
credit cards.
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PlayNet Sports
PlayNet Sports is an interactive networked game system which will allow two
teams of up to four players each to compete against each other in sports games
such as tennis, football, soccer and baseball. Each unit is the size of a small
billiards table and will accommodate up to eight players, each with a trackball
controller. The Company plans to change the sports games available on PlayNet
Sports in accordance with the relevant sports seasons, offering variety for the
users. The Company plans to eventually introduce other non-sports games,
although sports games will at first dominate PlayNet Sports system's offerings
since one of the Company's initial objectives is to penetrate upscale sports
bars. Games are expected to change about once per quarter, and are expected to
provide not only challenging game play, but also highly charged competition.
Game updates will be downloaded remotely from the Company's central servers.
PlayNet Sports has been specifically designed to support head-to-head and
tournament play. Teams or individuals will be able to compete against a computer
opponent, or against teams in either the same location or other venues through
an Internet connection. PlayNet plans to promote head-to-head play, matching up
opponents and allowing teams in one venue to challenge teams in other venues or
cities. The Company intends to set up weekly tournaments with cash and other
prizes to spark interest and spur competition. Teams will be able to customize
uniform colors, team member names and numbers. It is also intended that team
statistics will be available and displayed on a national basis.
PlayNet Sports is designed to accept $1, $5, $10 and $20 bills and credit
cards and to broadcast promotional messages on the terminal while it is not
being used. PlayNet intends to attract major companies to sponsor PlayNet Sports
tournaments.
Effective June 30, 1997, the Company relocated its corporate headquarters to
its California facility to maximize the use of its assets and more efficiently
manage the business. At that time the New York City headquarter offices closed.
It is estimated that this relocation could reduce the general and administrative
costs of the organization approximately $1.0 million annually. In connection
with this relocation, the Company recorded a one time charge of $394,477 in the
second quarter for expenditures related to the closing of the New York office.
RISK FACTORS
The shares offered hereby involve a high degree of risk. Each prospective
investor should carefully consider, among other things, the following risk
factors in addition to the other information presented in this Prospectus before
making an investment decision. The Company undertakes no obligation to release
publicly the result of any revisions to these forward-looking statements that
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
History of Net Losses; Accumulated Deficit. The Company has only a limited
operating history upon which an evaluation of the Company and its prospects can
be based. Prior to 1995, the Company was engaged in the developing and licensing
of consumer products. Since 1995 and through February 1997, the Company had been
engaged in the development of networked entertainment products, which led to its
current product line. In February 1997, the Company commercially launched the
PlayNet Web game and entertainment terminal, while continuing its development
activities with respect to its PlayNet Music Station and PlayNet Sports
networked entertainment terminals. As of April 30, 1997 the Company had received
purchase orders for an aggregate of 3,626 PlayNet Web networked terminals
representing anticipated gross sales of approximately $8.2 million. See "Current
Operations" above.
The Company has incurred net losses since inception and, as of April 30,
1997, the Company had an accumulated deficit of $38,838,496. As it continues its
entry into the commercial operating stage, the Company's losses are expected to
increase as a result of expenditures required to building inventory, expanded
outsourced manufacturing capacity, increased levels of spending on marketing and
sales and continuing expenditures on product and content development. In
addition, as a new business in an emerging industry, the Company may encounter
unforeseen difficulties, some of which may be beyond the Company's ability to
control, related to marketing, product development, manufacturing, regulation
and proprietary technology. There can be no assurance that the Company will
achieve or sustain profitability in the near future.
New Business Focus. The Company's future financial performance will depend
in large part upon the successful development, introduction and customer
acceptance of its networked entertainment products. There can be no assurance
that the Company will be successful in attracting and retaining customers for
such entertainment products. The Company's prospects must be considered in light
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of the risks, expenses and difficulties frequently encountered by companies in
their development stage, particularly companies in new and rapidly evolving
markets. To address these risks, the Company must, among other things, respond
to competitive developments, continue to attract, retain and motivate qualified
persons, and continue to upgrade its technologies and commercialize products and
services incorporating such technologies. There can be no assurance that the
Company will be successful in addressing such risks.
Developing Market; New Entrants; Unproven Acceptance of the Company's
Products and Revenue Model; Uncertain Adoption of Internet as a Medium of
Commerce and Communications. The market for the Company's entertainment
hardware, software and services is rapidly evolving and may see an increasing
number of market entrants. As is typical in the case of a new and rapidly
evolving industry, demand and market acceptance for recently introduced products
and services are subject to a high level of uncertainty. Critical issues
concerning the commercial use of the Internet (including security, reliability,
cost, ease of use and access, and quality of service) remain unresolved and may
impact the growth of Internet use. While the Company believes that its
entertainment units offer significant advantages for networked, location-based,
pay-per-play entertainment using the Internet, there can be no assurance that
entertainment over the Internet will become widespread, or that the Company's
entertainment units will become widely adopted for these purposes.
Because the market for the Company's products and services is new and
evolving, it is difficult to predict the future growth rate, if any, and size of
this market. There can be no assurance as to the size of the market for the
Company's products and services or that the Company's proposed revenue sharing
model, which is an innovation in the industry, will be accepted by significant
market players. If the market develops more slowly than expected or becomes
saturated with competitors, the Company's business, operating results and
financial condition will be materially adversely affected.
New Product Development and Technological Change. The Company's revenues are
expected to be derived from the sale of out-of-home entertainment terminals, the
sale and licensing of additional game content for those terminals and the
provision of network services, including tournaments, competitions and networked
game software. Accordingly, broad acceptance of the Company's products and
services by customers is critical to the Company's future success, as is the
Company's ability to design, develop, test and support new products and
enhancements on a timely basis that meet changing customer needs and respond to
technological developments and emerging industry standards. In addition, there
can be no assurance that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of new
products and enhancements, or that its new products and enhancements will
adequately meet the requirements of the marketplace and achieve market
acceptance. The Company is substantially dependent upon its server and
integrated applications software products that have only recently been
commercialized. There can be no assurance that as the number of units in
operation increases that errors will not be found in the Company's products, or,
if discovered, successfully corrected in a timely manner. If the Company is
unable to develop on a timely basis new entertainment products, enhancements to
existing products or make error corrections, or if such new products or
enhancements do not achieve market acceptance, the Company's business, operating
results and financial condition will be materially adversely affected.
Evolving Distribution Channels. The Company's distribution strategies
include the traditional out-of-home game distribution channels and the Company
seeks to expand distribution into markets that were previously under-utilizing
out-of-home entertainment units. While these potential customers have
demonstrated significant interest in the Company's PlayNet Web during its
on-site tests and in the first weeks of commercial distribution, there can be no
assurance that the Company will be able to continue to attract or retain
distributors or access to other venues. In addition, the Company's agreements
with distributors typically do not restrict them from distributing competing
products. Further, in some cases the Company intends to grant exclusive
distribution rights that are limited by territory and in duration. Consequently,
the Company may be adversely affected should any distributor fail to adequately
penetrate its market segment. The inability to retain important distributors, or
their inability to penetrate their respective market segments, could materially
adversely affect the Company's business, operating results and financial
condition.
The Company anticipates that it will distribute and broadcast its networked
game software and other electronic content to the operators of its products over
the Internet. Distributing the Company's products over the Internet may make the
Company's software more susceptible than other software to unauthorized copying
and use. If users were to become less sensitive to avoiding copyright
infringement, as a result of changing legal interpretations with respect to
liability for unauthorized use of the Company's software or otherwise, users
were to become less sensitive to avoiding copyright infringement, the Company's
business, operating results and financial condition would be materially
adversely affected.
10
<PAGE> 11
Competition. The markets served by the Company are extremely competitive.
The Company expects competition to persist, intensify and increase in the
future. Because there are no substantial barriers to entry, an influx of new
market entrants is expected to continue in response to the growing demand for
entertainment, information and data communication technology products and
services. Many of the Company's current and potential competitors enjoy a
greater market presence and possess substantially greater technical, financial
and marketing resources than the Company. The market for Internet-enabled,
location-based entertainment products is new, and subject to rapid technological
change. The Company expects competition to intensify and increase in the future.
Almost all of the Company's potential competitors have longer operating
histories, greater name recognition in the marketplace, larger installed
customer bases for their preexisting product lines and significantly greater
financial, technical and marketing resources than the Company. Such competition
could materially adversely affect the Company's business, operating results or
financial condition. The Company is aware that other attempts are being
undertaken to develop networked juke boxes and Internet-enabled products for the
location-based entertainment marketplace. The Company believes that it competes
for discretionary spending in the overall entertainment business which includes
(i) home-based entertainment, such as television and home video, pre-recorded
music, books and magazines, and personal computer and console based
entertainment, and (ii) out-of-home entertainment, such as live events,
theatrical exhibitions, video games, billiards, pinball machines and movies.
Increased competition could result in significant price competition, which
in turn could result in significant reductions in the average selling price of
the Company's products. In addition, competition could result in increased
selling and marketing expenses, which could adversely affect the Company's
profitability. There can be no assurance that the Company will be able to offset
the effects of any such price reductions through an increase in the sales of its
entertainment units, higher revenue from enhanced services, cost reductions or
otherwise. Increased competition, price or otherwise, could result in erosion of
the Company's market share and adversely affect the Company's operating results.
There can be no assurance that the Company will have the financial resources,
technical expertise or marketing and support capabilities to continue to compete
successfully in the out-of-home entertainment market.
Dependence Upon Suppliers, Manufacturers, Licensors and Third-Party
Financing Sources; Limited Sources of Supply; Dependence Upon Network
Infrastructure. The Company relies on other companies to supply certain key
components of its network infrastructure, including telecommunications services
and networking equipment, which, in the quantities and quality demanded by the
Company, are available only from sole or limited sources. The Company is also
dependent upon local exchange carriers ("LECs") to provide telecommunications
services to, and Internet service providers ("ISPs") to provide Internet
connection for, the Company and its customers. In that regard the Company has
entered into a comprehensive Internet server delivery and support services
contract with IBM Global Services, one of the largest Internet service
providers. Any failures in such services or the receipt of timely correction to
such failures would have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company is also dependent on its suppliers' ability to provide necessary
products and components that comply with various Internet and telecommunications
standards and that operate with products and components from other vendors. Any
failure of the Company's sole or limited source suppliers to provide products or
components that comply with Internet standards or that are compatible with other
products or components used by the Company in its network infrastructure could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company currently has arrangements with an unaffiliated vendor to
manufacture PlayNet Web countertop units, with production having commenced in
January, 1997. The Company also intends to continue to outsource the
manufacturing of a significant portion of its other hardware requirements. Any
failure or delay by manufacturers to deliver such hardware, or any defect in, or
non-conforming production of, such hardware would disrupt the Company's
operations.
Management of Growth; Dependence on Key Personnel. The Company continues to
experience rapid growth that could strain the Company's managerial and other
resources. From July 31, 1995 through June 30, 1997, the number of the Company's
full-time employees increased from 22 to 80. Further selected additions to the
employee base to meet anticipated management, sales and marketing needs are
anticipated during the balance of 1997. Many of the key employees have worked
together only for a short time. The Company's ability to manage its growth
effectively will require it to continue to improve its operational, financial
and other internal systems, and to train, motivate, manage and retain its
current employees and attract equivalent new employees. Competition for highly
qualified personnel is intense. If the Company's management is unable to manage
growth effectively and employees are unable to achieve anticipated performance
levels, the Company's results of operations could be adversely affected.
Additionally, the
11
<PAGE> 12
Company depends on the services of certain of its key employees, including
Shmuel Cohen and Nolan K. Bushnell and the loss of any such services could have
a material adverse effect on the Company.
Risk of System Failure; Security Risks. The Company's operations are
dependent upon its ability, and the ability of its suppliers, to protect its
network infrastructure against damage from fire, earthquakes, power loss,
telecommunications failures and similar events. Despite precautions taken by the
Company and the industry in general, the occurrence of a natural disaster or
other unanticipated problems at the Company's network operations center or nodes
in the future could cause interruptions in the services furnished by the
Company. In addition, failure of the Company's telecommunications and Internet
service providers to supply the data communications capacity required by the
Company as a result of a natural disaster, operational disruption, Internet
capacity overload or for any other reason could cause interruptions in the
services provided by the Company. Any damage or failure that causes
interruptions in the Company's operations could have a material adverse effect
on the Company's business, financial condition and results of operations.
Despite the implementation of security measures, the core of the Company's
network infrastructure is vulnerable to computer viruses and disruptive
problems. Internet access providers have in the past experienced, and may in the
future experience, interruptions in service as a result of the accidental or
intentional actions of Internet users, current and former employees or others.
Unauthorized use could also potentially jeopardize the security of confidential
information stored in the Company's computer systems, which may result in
liability of the Company to its customers. Although the Company intends to
continue to implement industry-standard security measures, such measures have
been circumvented in the past, and there can be no assurance that measures
implemented by the Company will not be circumvented in the future. Eliminating
computer viruses and alleviating other security problems may require
interruptions, delays or cessation of service to the Company's customers which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's success will depend upon the capacity, reliability and
security of its network infrastructure. The Company must continue to expand and
adapt its network infrastructure as the number of users and the amount of
information they wish to transfer increases, and to meet changing customer
requirements. The expansion and adaptation of the Company's network
infrastructure will require substantial financial, operational and management
resources. There can be no assurance that the Company will be able to expand or
adapt its network infrastructure to meet additional demand or its customers'
changing requirements on a timely basis, at a commercially reasonable cost, or
at all. Any failure of the Company to expand its network infrastructure on a
timely basis or adapt it either to changing customer requirements or to evolving
industry standards could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company is aware
that significant delays exist for the installation of integrated services
digital network ("ISDN") lines in certain parts of the United States and that
such service is not available in all areas.
A significant barrier to the widespread acceptance of Internet commerce is
uncertainty over the secure exchange of value over public networks. The Company
relies on encryption and authentication technology necessary to provide the
security to effectuate the secure exchange of value, including credit card
transactions. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography or other events or developments
will not result in a compromise or breach of the algorithms used by the Company
to protect customer transaction data. If any such compromise of the Company's
security were to occur, it could have a material adverse effect on the Company's
business, financial condition and results of operations.
Governmental Regulation. In the United States and many other countries,
games of chance must be expressly authorized by law. Once authorized, such games
are subject to extensive and evolving domestic and foreign governmental
regulation, including federal, state and local regulation. There can be no
assurance that the operation of all of the Company's games, including prize
tournament games, will be approved by all of the jurisdictions in which the
Company intends to market and operate its game and prize tournament game
products or that those jurisdictions in which these games and prize tournament
game products are currently permitted will continue to permit such activities.
In addition, future government regulation could be burdensome to the Company,
its personnel and its stockholders. Moreover, material increases in taxes or
fees on the games' operations could adversely affect the Company.
The Company is not currently subject to direct regulation by the Federal
Communications Commission or any other agency, other than regulations applicable
to businesses generally. Changes in the regulatory environment relating to the
Internet access industry, including regulatory changes which directly or
indirectly affect telecommunication costs or the likelihood or scope of
competition, could have a material adverse effect on the Company's business,
financial condition and results of operations. Due to the increase in Internet
use and publicity, it is possible that laws and regulations may be adopted with
respect to the Internet, including privacy,
12
<PAGE> 13
pricing and characteristics of products or services. The Company cannot predict
the impact, if any, that future laws and regulations or legal or regulatory
changes may have on its business.
The law relating to the liability of on-line services companies and ISPs for
information carried on or disseminated through their systems is currently
unsettled. Several private lawsuits seeking to impose such liability upon
on-line services companies and ISPs are currently pending. In addition,
legislation has been proposed which would impose liability for or prohibit the
transmission on the Internet of certain types of information and content. The
imposition upon the Company or ISPs of potential liability for information
carried on or disseminated through their systems could require the Company to
implement measures to reduce its exposure to such liability, which may require
the expenditure of substantial resources, or to discontinue certain product
features. The increased attention focused upon liability issues as a result of
these lawsuits and legislative proposals could impact the growth of Internet
use. While the Company maintains certain insurance, such insurance may not be
adequate to compensate the Company in the event the Company becomes liable for
information carried on or disseminated through its systems. Any costs not
covered by insurance incurred as a result of such liability or asserted
liability could have a material adverse effect on the Company's business,
financial condition and results of operations.
Fluctuations in Quarterly Results. As a result of the Company's limited
operating history, the Company does not have historical financial data for a
significant number of periods on which to base planned operating expenses. The
Company's expense levels are based in part on its expectations as to future
revenues and are expected to increase. Quarterly sales and operating results
generally depend on the volume and timing of, and ability to fulfill, orders
received within the quarter, which are difficult to forecast. The Company may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenues shortfall. Accordingly, any significant shortfall of demand for the
Company's products and services in relation to the Company's expectations would
have an immediate adverse impact on the Company's business, operating results
and financial condition. In addition, with the recent launch of its PlayNet Web
terminal the Company plans to increase its operating expenses to fund greater
levels of sales and marketing activities and operations, develop new
distribution channels, broaden its customer support capabilities and continue
its research and development activities with respect to customized versions of
the PlayNet Web and its PlayNet Music and PlayNet Sports entertainment and
electronic game systems. To the extent that such expenses precede, or are not
subsequently followed by, increased revenues, the Company's business, operating
results and financial condition will be materially adversely affected.
The Company expects to experience significant fluctuations in future
quarterly operating results that may be caused by many factors, including demand
for the Company's products, expenses related to the introduction or enhancement
of products by the Company and its competitors, market acceptance of new
products, mix of distribution channels through which products are sold, mix of
products and services sold, mix of international and North American revenues,
and general economic conditions. As a result, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as any indication of future
performance. Due to all of the foregoing factors, it is likely that in some
future quarter the Company's operating results will be below the expectations of
public market analysts and investors. In such event, the price of the Company's
Common Stock would likely be materially adversely affected.
Uncertainty of Additional Financing. The Company anticipates, based on
currently proposed plans and assumptions relating to its operations (including
the costs associated with, and the timetable for, development of the networked
entertainment products), that the projected cash flow from operations and the
proceeds of various private placement financings, will be sufficient to satisfy
its contemplated cash requirements for at least twelve months following the
consummation of this offering. In the event that the Company's plans change, its
assumptions change or prove to be inaccurate or if the proceeds of the private
placements or expected cash flow prove to be insufficient, the Company may be
required to seek additional financing. There can be no assurance that the
proceeds of the private placements will be sufficient to permit the Company to
complete the development and launch of its networked entertainment products and
to achieve the expected growth of the Company. The Company may need to raise
additional funds through public or private debt or equity financings in order to
take advantage of unanticipated opportunities, including more rapid
international expansion or acquisitions of complementary businesses or
technologies, or to develop new products or otherwise respond to unanticipated
competitive pressures. If additional funds are raised through the issuance of
equity securities, the percentage ownership of the current stockholders of the
Company may be reduced and such equity securities may have rights, preferences
or privileges senior to those of the holders of the Company's Common Stock.
There can be no assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not available or are
not available on acceptable terms, the Company may not be able to take advantage
of unanticipated opportunities, develop new products or otherwise respond to
unanticipated competitive pressures. Such inability could have a material
adverse effect on the Company's business, financial condition and results of
operations.
13
<PAGE> 14
Possible Future Payments to Third Parties; Uncertain Protection of
Intellectual Property. The Company's success and ability to compete is dependent
in part upon its proprietary technology. While the Company relies on patent,
trademark, trade secret and copyright law to protect its technology, the Company
believes that factors such as the technological and creative skills of its
personnel, new product developments, frequent product enhancements, name
recognition and reliable product maintenance are more essential to establishing
and maintaining a technology leadership position. The Company presently has one
pending patent applications relating to the encryption technology used in its
out-of-home entertainment business. However, there can be no assurance that
others will not develop technologies that are similar or superior to the
Company's technology. The source code for the Company's proprietary software is
protected both as a trade secret and as a copyrighted work. The Company
generally enters into confidentiality or license agreements with its employees,
consultants and vendors, and generally controls access to and distribution of
its software, documentation and other proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's proprietary or licensed content, products or technology
without authorization, or to develop similar technology independently. In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries, and the global nature of the Internet
makes it virtually impossible to control the ultimate destination of the
Company's products. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's products is difficult.
There can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology or that such agreements will be enforceable.
In addition, litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets, to
determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, financial condition or results of
operations.
The Company also relies on certain technology which it licenses from third
parties, including software which is integrated with internally developed
software and used in the Company's products to perform key functions. There can
be no assurance that these third party technology licenses will continue to be
available to the Company on commercially reasonable terms. The loss of or
inability to maintain any of these technology licenses could result in delays or
reductions in product shipments which could materially adversely affect the
Company's business, financial condition or results of operations.
Risks Associated with International Expansion. A long-term component of the
Company's strategy is its planned expansion into international markets. To date,
the Company has no experience in developing localized versions of its products
and marketing and distributing its products internationally. There can be no
assurance that the Company or the entities with which it partners in these
international markets will be able to successfully market, sell and deliver the
Company products in these markets. In addition to the uncertainty as to the
Company's ability to expand its international presence, there are certain risks
inherent in doing business on an international level which could adversely
impact the success of the Company's international operations. These risks
include technical difficulty in localizing the products for the specific
territories, changes in regulatory requirements, export restrictions, export
controls relating to encryption technology, tariffs and other trade barriers,
difficulties in staffing and managing foreign operations, longer payment cycles,
problems in collecting accounts receivable, political instability, fluctuations
in currency exchange rates, seasonal reductions in business activity during the
summer months in Europe and certain other parts of the world and potentially
adverse tax consequences. In some cases, the prohibitive costs of telephones,
telephone lines, high speed links and Internet access may exclude whole
countries. There can be no assurance that one or more of such factors will not
have a material adverse effect on the Company's future international operations
and, consequently, on the Company's business, operating results and financial
condition.
Concentration of Stock Ownership. The present directors, executive officers
and their respective affiliates are the beneficial owners of approximately
27.17% of the outstanding Common stock and upon completion of this offering, the
present directors, executive officers and their respective affiliates will
beneficially own approximately 23.62% of the outstanding Common Stock. On July
30, 1997, holders of certain promissory notes, including certain of the holders
of Senior Secured Notes, issued by the Company agreed to convert their notes
into Common Stock of the Company on specified terms which will result in the
issuance of an 4,039,337 shares of the Company's Common Stock. When these
conversions and this Offering are completed, the present directors, executive
officers and their respective affiliates will beneficially own approximately
19.09% of the outstanding Common Stock. As a result, these stockholders are and
will be able to exercise significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. Such concentration of ownership may also
have the effect of delaying or preventing a change in control of the Company.
14
<PAGE> 15
Delisting from Nasdaq SmallCap Market. On April 4, 1997, the Company
received a notice from Nasdaq asserting a deficiency in its compliance with the
maintenance standards for continued inclusion on the Nasdaq SmallCap Market. In
response to this notice, the Company submitted a proposal for achieving
compliance with such standards and requested a delay of any action to delist the
Common Stock from the Nasdaq SmallCap Market. However, Nasdaq declined the
Company's request, and gave notice to the Company on May 15, 1997 that the
Common Stock would be delisted effective with the close of business on May 23,
1997, subject, however, to the Company's appeal of the Nasdaq decision.
Accordingly, the Company applied for an oral hearing to review the delisting
decision. A hearing was held on June 27, 1997. On July 11, 1997, the Listing
Qualifications Hearing Panel (the "Panel") notified the Company that in light of
its opinion that the Company had presented a plan of compliance which has a high
likelihood of success, that the Panel had determined to grant the Company a
limited time exception to the capital and surplus requirement as set forth in
NASD Marketplace Rule 4310(c)(03) on the condition that on or before July 31,
1997 the Company must make a public filing with the SEC and Nasdaq which
contains a June 30, 1997 balance sheet with pro forma adjustments for any
significant transactions on or before the filing date and that such pro forma
balance sheet must evidence minimum capital and surplus of $15,000,000. On
August 5, 1997, the Company was notified by the Panel that it had determined
not to accept the July 31, 1997 Form 8K filed by the Company as evidence that
the Company has met the terms of the listing exception and that, therefore, the
Company's securities would be delisted from The Nasdaq SmallCap Market
effective with the close of business on August 5, 1997. The Common Stock of the
Company is now traded through the Over The Counter Market. The Company is
examining the alternatives for the listing of its securities on a national
electronic securities market. The continued trading of the Common Stock of the
Company on Over The Counter Market may affect the market price of the Company's
Common Stock.
Possible Volatility of Stock Price. To date there has been a limited public
market for the Company's Common Stock, and there can be no assurance that an
active public market for the Common Stock will develop or be sustained after the
offering. The market price of the Company's Common Stock is likely to be highly
volatile and could be subject to wide fluctuations in response to quarterly
variations in operating results, delays in new feature or product introduction,
announcements of technological innovations or new products by the Company or its
competitors, changes in the regulatory environment, changes in financial
estimates by securities analysts, or other events or factors. In addition, the
stock market has experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of many technology
and entertainment companies and that often have been unrelated to the operating
performance of such companies. In the past, following periods of volatility in
the market price of a company's securities, class action litigation has often
been instituted against such a company. Such litigation could result in
substantial costs and a diversion of management's attention and resources, which
would have a material adverse effect on the Company's business, operating
results and financial condition. Any broad market fluctuations may adversely
affect the market price of the Company's Common Stock.
Shares Eligible for Future Sale. Sales of a substantial number of shares of
Common Stock in the public market following this offering could adversely affect
the market price for the Common Stock and could impair the Company's future
ability to raise additional capital through a private or public offering of its
equity securities. Under recently adopted amendments to Rule 144 of the
Securities Act of 1933 ("Rule 144"), 11,896,720 shares of the Company's Common
Stock, which were previously "restricted" securities under Rule 144, have
surpassed the new two year holding period and are eligible for unlimited resales
and an additional 96,364 shares of the Company's Common Stock will surpass such
two year period within 45 days after the date of this Prospectus. In addition,
as of the date of this Prospectus, an additional 636,327 shares of the Company's
Common Stock have surpassed the new one year holding period and are now eligible
for resale subject only to the fulfillment of certain restrictions on the
volume, method and manner of resale specified in Rule 144. Sales of such shares
could have a material adverse effect on the market price for the Company's
Common Stock.
Immediate, Substantial Dilution. Purchasers of shares of Common Stock in
this offering will incur immediate and substantial dilution in net tangible book
value per share. Additional dilution may occur upon exercise of outstanding
stock options or warrants or the conversion of certain of the Company's
convertible promissory notes, or in connection with possible future financings
to meet the Company's future capital requirements.
No Dividends. Pursuant to a settlement with certain stockholders of the
Astro-Stream corporation related to the Merger, a special dividend of $0.0932
per share was paid on or about August 6, 1996 to stockholders on the record date
of May 5, 1995. Except for this special dividend, the Company has never paid any
dividends on its Common Stock, nor does it anticipate paying dividends on its
Common Stock in the foreseeable future. The Company plans to retain any earnings
to finance the development and expansion of its business.
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<PAGE> 16
Anti-Takeover Effects of Preferred Stock. The Company's Restated Certificate
of Incorporation authorizes the issuance of "blank check" Preferred Stock with
such designations, rights and preferences as may be determined from time to time
by the Board of Directors. Accordingly, the Board is empowered, without
stockholder approval, to issue Preferred Stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the relative
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the Preferred Stock could be used, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of Preferred Stock, there can be no assurance that the Company will
not do so in the future. If the Company issues shares of Preferred Stock, the
issuance may have a dilutive effect upon the holders of the Company's Common
Stock, including the purchasers of the shares being offered hereby.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of 359,834 of the
Shares, but will benefit from the services rendered under the Compensation
Agreements. Upon the exercise of the Nonqualified Stock Option to purchase
2,000,000 of the Shares, at a purchase price of $0.50 per share, granted to one
Consultant as compensation under his Compensation Agreement, the Company will
receive aggregate gross proceeds of $1,000,000. The Company anticipates that it
will use such gross proceeds for general corporate and working capital purposes.
PLAN OF DISTRIBUTION
As soon as reasonably practicable, after the filing of this Registration
Statement, the Shares to which this Prospectus relates will be issued by the
Company from time to time, or at any one time, as compensation pursuant to
negotiated Compensation Agreements the following consultants to the Company and
in the following amounts.
<TABLE>
<CAPTION>
CONSULTANT AMOUNT OF SHARES
<S> <C>
Mark Neuhaus 2,000,000
John Banas 24,000
Langley Downey Entertainment, Inc. 40,834
Palex Metals, Inc. 30,000
MAG & Associates, Inc. 100,000
Sound Capital, Inc. 125,000
Henry Steeneck 40,000
---------
2,359,834
</TABLE>
Of the Shares, 359,834 shares are issued in lieu of cash compensation for
services rendered and to be rendered and 2,000,000 shares shall be issued upon
the exercise of the Nonqualified Stock Option granted to one Consultant as
compensation under his Compensation Agreement, at a purchase price of $0.50 per
share and for which the Company will receive aggregate gross proceeds of
$1,000,000. Upon issuance, all Shares will be, duly authorized, validly issued,
fully paid and nonassessable. All Shares are not subject to the provisions of
the Employee Retirement Income Security Act of 1974 and shall not have any
restrictions on resale. See also Item 4, Description of Securities.
PART II.
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents heretofore filed by the Registrant with the
Securities and Exchange Commission (File No. 0-25296) pursuant to Section 13(a)
of the Securities Exchange Act of 1934 (the "1934 Act") are incorporated herein
by reference:
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<PAGE> 17
(a) The Registrant's Annual Report on Form 10-KSB and 10-KSB/A for the
fiscal year ended October 31, 1996;
(b) The Registrant's Quarterly Reports on Form 10-Q for the fiscal quarters
ended January 31, 1997 and April 30, 1997 and the Registrant's Current Report on
Form 8K, filed by the Registrant on August 1, 1997; and
(c) See Item 4, Description of Securities below.
All documents filed subsequent to the date of this Registration Statement
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act and prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be a part hereof from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated herein by
reference shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement.
ITEM 4. DESCRIPTION OF SECURITIES.
All of the 2,359,834 shares of Common Stock, par value $.001 per share (the
"Common Stock"), offered hereby are being offered by PlayNet Technologies, Inc.
(the "Registrant"). As of August 6, 1997, the Common Stock is traded through
the Over The Counter Market. Immediately prior to such date, the Common Stock
was traded through the Nasdaq SmallCap Market currently under the symbol
"PLNTC." The last reported sales price for the Common Stock on the Nasdaq
SmallCap Market on August 5, 1997 was $1.00 per share.
The Registrant is authorized to issue 40,000,000 shares of Common Stock, par
value $.001 per share, and 1,000,000 shares of preferred stock, par value $.001
per share. As of the date hereof, the Registrant had 15,612,985 shares of Common
Stock outstanding held of record by approximately 800 holders. In addition, on
July 30, 1997, holders of certain promissory notes, including certain of the
holders of Senior Secured Notes, issued by the Company agreed to convert their
notes into Common Stock of the Company on specified terms which, upon the
completion of such conversions, will result in the issuance of an 4,039,337
shares of the Company's Common Stock. No shares of Preferred Stock are currently
outstanding.
Holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of Preferred Stock which may from time to time be outstanding, if any,
holders of Common Stock are entitled to receive dividends when, as, and if
declared by the Board of Directors out of funds legally available therefor and,
upon the liquidation, dissolution or winding up of the Registrant, are entitled
to share ratably in all assets remaining after payment of liabilities and
payment of accrued dividends and liquidation preferences on the Preferred Stock,
if any. Holders of Common Stock have no preemptive rights and have no rights to
convert their Common Stock into any other securities. All outstanding shares of
Common Stock are, and the shares of Common Stock offered hereby upon issuance,
will be, duly authorized, validly issued, fully paid and nonassessable.
The Registrant's Restated Certificate of Incorporation authorizes the
issuance of "blank check" Preferred Stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the relative voting power or other rights of the
holders of the Registrant's Common Stock. In the event of issuance, the
Preferred Stock could be used, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Registrant.
Although the Registrant has no present intention to issue any shares of
Preferred Stock, there can be no assurance that the Registrant will not do so in
the future. If the Registrant issues shares of Preferred Stock, the issuance may
have a dilutive effect upon the holders of the Registrant's Common Stock,
including the purchasers of the shares being offered hereby.
17
<PAGE> 18
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Philip K. Yachmetz, Esq. has passed upon the legality under the law of
Delaware, the state in which the Company is incorporated, of the Common Stock of
the Company being offered hereby. Mr. Yachmetz is the holder of 1,000 shares of
the Common Stock of the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a
corporation, under certain circumstances, to indemnify its directors and
officers (including reimbursement for expenses incurred). The registrant has
provided for indemnification to the extent permitted by the provisions of the
Delaware statute in its charter and by-laws. The registrant also maintains
directors and officers' liability insurance (subject to certain exclusions and
limitations) against certain liabilities, including certain liabilities under
the Securities Act of 1933. See Item 9, "Undertakings."
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
4.01 Restated and Amended Certificate of Incorporation **
4.02 Certificate of Amendment to the Restated and Amended Certificate
of Incorporation***
4.06 By-Laws****
5.01 Opinion of Philip K. Yachmetz, Esq., counsel to the registrant,
as to the legality of the Common Stock being offered.*
23.01 Consent of Coopers & Lybrand., LLP.*
23.02 Consent of Philip K. Yachmetz, Esq. (contained in Exhibit 5.01).
24.01 Powers of Attorney of certain officers and directors of the
Registrant (included in signature page).
99.1 Compensation Agreement with Mark Neuhaus*
99.2 Compensation Agreement with John Banas*
99.3 Compensation Agreement with Langley Downey Entertainment, Inc.*
99.4 Compensation Agreement with Palex Metals, Inc.*
99.5 Compensation Agreement with MAG & Associates, Inc.*
99.6 Compensation Agreement with Sound Capital, Inc.*
99.7 Amendment Number 1 to Compensation Agreement with Henry
Steeneck*
99.8 Compensation Agreement with Henry Steeneck, incorporated by
reference to Exhibit 99.4 to Registrant's Registration
Statement on Form S-8, filed July 18, 1997.
* Filed herewith.
** Incorporated by reference to Exhibit 3.1 to Registrant's Annual Report on
Form 10-KSB for the year ended October 31, 1995, filed on January 29,
1996.
*** Incorporated by reference to Exhibit 3.1A to Registrant's Annual Report
on Form 10-KSB for the year ended October 31, 1996, filed on February 13,
1997.
**** Incorporated by reference to Exhibit 3.2 to Registrant's Annual Report on
Form 10-KSB for the year ended October 31, 1995, filed on January 29,
1996
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
18
<PAGE> 19
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8, and the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 6 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California, on the 6th day of
August, 1997.
PLAYNET TECHNOLOGIES, INC.
(Registrant)
By: /s/ Shmuel Cohen
-------------------------------------------
Shmuel Cohen
President and Chief Executive Officer
By: /s/ Andrew Nimitz
-------------------------------------------
Andrew Nimitz
Controller
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby constitutes
and appoints Shmuel Cohen his true and lawful attorneys-in-fact and agents, for
him and in his name, place and stead, in any and all capacities, with full power
to act alone, to sign any and all amendments to this Registration Statement, and
to file each such amendment to this Registration Statement with all exhibits
thereto, and any and all documents in connection therewith, with the Securities
and Exchange Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things required and necessary to be done, as fully and to all intents and
purposes as, he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Joseph Ettinger Director August 6, 1997
Joseph Ettinger
/s/ Yael Cohen Director August 6, 1997
Yael Cohen
/s/ Barry Frank Director August 6, 1997
Barry Frank
/s/ Mark Lewis Director August 6, 1997
Mark Lewis
</TABLE>
20
<PAGE> 1
Exhibit 5.01
August 6, 1997
PlayNet Technologies, Inc.
One Maritime Plaza
San Francisco, California 94111
Gentlemen:
I have acted as counsel to PlayNet Technologies, Inc. (the "Registrant") in
connection with its Registration Statement on Form S-8 (the "Registration
Statement") to be filed with the Securities and Exchange Commission relating to
2,359,834 shares of Common Stock, par value $.001 per share, of the Registrant
(the "Shares"), subject to the Compensation Agreements with Mark Neuhaus, John
Banas, Langley Downey Entertainment, Inc., Palex Metals, Inc., MAG & Associates,
Inc., Sound Capital, Inc. and Henry Steeneck (the "Compensation Agreements").
In connection with the foregoing, I have examined, among other things, the
Registration Statement and originals or copies, satisfactory to me, of all such
corporate records and of all such agreements, certificates and other documents
as I have deemed relevant and necessary as a basis for the opinion hereinafter
expressed. In such examination, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to me as originals and
the conformity with the original documents of documents submitted to me as
copies. As to any facts material to such opinion, I have, to the extent that
relevant facts were not independently established by me, relied on certificates
of public officials and certificates, oaths, representations and declarations of
officers or other representatives of the Registrant.
Based upon and subject to the foregoing, I am of the opinion that the Shares
to be issued in payment of compensation under such Compensation Agreements will
be, when issued, validly issued, fully paid and non-assessable.
I hereby consent to the filing of a copy of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
/s/ Philip K. Yachmetz
Philip K. Yachmetz, Esq.
21
<PAGE> 1
Exhibit 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference into the Registration
Statement on Form S-8 of our report dated February 13, 1997 with respect to the
consolidated financial statements of PlayNet Technologies, Inc. included in the
Annual Report (Form 10-KSB and 10-KSB/A) for the year ended October 31, 1996.
/s/ Coopers & Lybrand, LLP
COOPERS & LYBRAND, LLP
New York, New York
August 6, 1997
22
<PAGE> 1
Exhibit 99.1
CONSULTING AND MARKETING LICENSE AGREEMENT
THIS CONSULTING AND MARKETING LICENSE AGREEMENT (the "Agreement") made
as of August 1, 1997 by and between Mark Neuhaus (the "Consultant") and PlayNet
Technologies, Inc. (the "Company").
WITNESSETH:
WHEREAS, the Company intends to develop a market for the Company's
internet gaming business operations and other products and services offered by
the Company for potential customers who are racing car enthusiasts by utilizing
the Company's trademarks and logos for advertising purposes on Consultant's
racing cars;
WHEREAS, Consultant is a professional race car driver with name
recognition in the racing car industry;
WHEREAS, the Company desires to utilize the services of Consultant to
promote and develop a market for the Company's business operations;
WHEREAS, the Company desires to grant Consultant a non-exclusive,
non-assignable and non-transferable license for the limited use of certain
trademarks and logos of the Company;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, it is agreed as follows:
1. The Company hereby retains Consultant to promote and develop a
market for the Company's internet gaming business operations and other services
offered by the Company. Consultant agrees to use his best efforts during the
term of this Agreement to market and promote the Company's internet gaming
business operations and other services offered by the Company.
2. This Agreement shall become effective as of the date first set forth
above, and shall continue for a period of one (1) year. Notwithstanding the
foregoing, the Company and/or Consultant shall be entitled to terminate this
Agreement for cause upon 30 days' written notice, which written notice shall be
effective upon mailing by first class mail accompanied by facsimile transmission
to Consultant at the address and telecopier number last provided by Consultant
to the Company. Cause shall be determined solely as to the following: violation
of any rule or regulation of any regulatory agency; and other neglect, act or
omission detrimental to the conduct of Company's and/or Consultant's business;
material breach of this Agreement or any unauthorized disclosure of any of the
secrets or confidential information of Company; dishonesty related to
independent contractor status.
3. (a) Subject to the terms of this Agreement, the Company hereby
grants to Consultant, and Consultant hereby accepts, the non-exclusive,
non-assignable and non-transferable license to utilize the tradename, trademark
or logo "PlayNet(R)" (with the tri-screen graphics or any other tradename,
trademark or logo of the Company, as may be agreed upon by the parties (the
"Licensed Trademarks"), on Consultant's racing cars which shall be owned and/or
operated by Consultant or Consultant's racing team in professional racing car
competitions.
(b) During the term of this Agreement, Consultant shall not
negotiate or enter into any license, assignment or sublicense agreement of
subcontract or similar agreement with any third parties in respect of the
Licensed Trademarks, or any right or interest granted by the Company to
Consultant pursuant to this Agreement, and Consultant shall further refrain from
directly or indirectly, on his own behalf, licensing, sublicensing or
subcontracting the Licensed Trademarks, or other right or interest granted by
the Company to Consultant to such third parties without the Company's prior
written consent.
(c) No license or right is granted by this Agreement to Consultant,
either expressly or by implication, under any licenses or rights owned or
controlled by the Company, except as expressly set forth in this Agreement.
23
<PAGE> 2
(d) This license shall expire simultaneously with the term of this
Agreement, and further, shall be revocable at will by the Company upon written
notice to Consultant, and Consultant shall immediately refrain from the use of
any rights granted by the Company to Consultant with respect to this license
upon receipt of such written notice. (e) Consultant agrees to portray one of the
Company's Licensed Trademarks on Consultant's racing cars during the term of
this Agreement on a visible portion of such racing cars in the form of a decal
or other customary manner of portrayal (the "Portrayed Trademarks") for other
similar licensed trademarks on racing cars. The form of Portrayed Trademark
shall be selected by the Company, subject to Consultant's right of approval,
which shall not be unreasonably withheld. The Portrayed Trademark shall not be
less than 18 by 12 inches in width and height, respectively.
4. As compensation for Consultant's promotion and marketing services
and as a sponsorship fee of Consultant's racing cars, the Company shall issue to
Consultant upon the execution of this Agreement, pursuant to the terms of a
Non-Qualified Stock Option Agreement, a copy of which is attached as Exhibit "A"
hereto, a non-qualified stock option to purchase up to 2,000,000 shares of
Common Stock, which shall vest immediately upon execution of this Agreement, at
an exercise price of $0.50 per share, for services to be performed by Consultant
for the benefit of the Company. The Company further agrees to register the
2,000,000 shares in connection with a registration statement on Form S-8 with
respect to the shares of Common Stock underlying the non-qualified stock options
referenced in this Section 3, pursuant to the terms of the Non-Qualified Stock
Option Agreement, in the form attached as Exhibit "A" hereto.
5. Consultant covenants that all information concerning the Company,
including proprietary information, which it obtains as a result of the services
rendered pursuant to this Agreement shall be kept confidential and shall not be
used by Consultant except for the direct benefit of the Company nor disclosed by
Consultant to any third party without the prior written approval of the Company,
unless such confidential information becomes public knowledge.
6. Consultant and the Company hereby acknowledge that Consultant is an
independent contractor. Consultant shall not hold itself out as, nor shall it
take any action from which others might infer that it is a partner or agent of,
or a joint venturer with the Company. In addition, Consultant shall take no
action which binds, or purports to bind, the Company.
7. This Agreement contains the entire agreement between the parties,
and may not be changed except by agreement in writing signed by the party
against whom enforcement of any waiver, change, discharge or modification is
sought. Waiver of or failure to exercise any rights provided by this Agreement
in any respect shall not be deemed a waiver of any further or future rights. The
parties hereto agree to execute such other documents and agreements as is
necessary to effectuate the terms of this Agreement.
8. This Agreement shall be construed under the laws of the State of
Delaware. The parties hereto agree to the jurisdiction of the courts of the
state of California.
9. This Agreement shall be binding upon the parties, their successors
and assigns; provided, however, that Consultant shall not permit any other
person or entity to assume these obligations hereunder without the prior written
approval of the Company which approval shall not be unreasonably withheld and
notice of the Company's position shall be given within ten (10) days after
approval has been requested.
10. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute but one
agreement.
11. The Company shall indemnify Consultant for all loss or damage
sustained (including attorneys fees) by Consultant arising from Consultant
performing services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed or caused these
present to be executed as of the day and year first above written.
Mark Neuhaus PLAYNET TECHNOLOGIES, INC.
"Consultant" ("Company")
/s/ Mark Neuhaus By: /s/ Shmuel Cohen
- -------------------------- ----------------------------------
Mark Neuhaus Shmuel Cohen
Chief Executive Officer
24
<PAGE> 3
EXHIBIT "A"
PLAYNET TECHNOLOGIES, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of August 1, 1997 by and between PlayNet
Technologies, Inc., a Delaware corporation (the "Company"), and Mark Neuhaus
("Optionee").
R E C I T A L
The Board of Directors of the Company (the "Board of Directors") has
authorized the granting to Optionee, for services to be rendered by Optionee as
a consultant to the Company, pursuant to the terms of a Consulting and Marketing
License Agreement ("Consulting Agreement") between the Company and Optionee, of
a non-qualified stock option to purchase the number of shares of Common Stock of
the Company specified in Paragraph 1 hereof, at the price specified therein,
such option to be for the term and upon the terms and conditions hereinafter
stated.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and of the
undertakings of the parties hereto contained herein, it is hereby agreed:
1. Number of Shares; Option Price. Pursuant to said action of the Board
of Directors, the Company hereby grants to Optionee, in consideration of
consulting services to be performed for the benefit of the Company, the option
("Option") to purchase up to 2,000,000 shares ("Option Shares") of Common Stock
of the Company, at the exercise price of $0.50 per share.
2. Term. This Option shall expire on August 31, 1997.
3. Shares Subject to Exercise. All 2,000,000 Options shall be
immediately exercisable and shall thereafter remain subject to exercise for the
term specified in Paragraph 2 hereof.
4. Method and Time of Exercise. The Option may be exercised by written
notice delivered to the Company stating the number of shares with respect to
which the Option is being exercised, together with a check made payable to the
Company in the amount of the purchase price of such shares plus the amount of
applicable federal, state and local withholding taxes, and the written statement
provided for in Paragraph 10 hereof, if required by such Paragraph 10. Not less
than 100 shares may be purchased at any one time unless the number purchased is
the total number purchasable under such Option at the time. Only whole shares
may be purchased.
5. Tax Withholding. As a condition to exercise of this Option, the
Company may require the Optionee to pay over to the Company all applicable
federal, state and local taxes which the Company is required to withhold with
respect to the exercise of this Option. At the discretion of the Company and
upon the request of the Optionee, the minimum statutory withholding tax
requirements may be satisfied by the withholding of shares of Common Stock
otherwise issuable to the Optionee upon the exercise of this Option.
6. Exercise on Termination of Employment. This Option shall not
terminate as a result of the termination of Optionee's services as a consultant
to the Company.
7. Transferability. This Option may not be assigned and/or transferred
except, by will or by the laws of descent and distribution, and with consent of
the Company. If Optionee assigns this Option, written notice, including the
name, address and taxpayer ID number of the assignee, shall be provided to the
Company.
25
<PAGE> 4
8. Optionee Not a Shareholder. Optionee shall have no rights as a
shareholder with respect to the Common Stock of the Company covered by the
Option until the date of issuance of a stock certificate or stock certificates
to him upon exercise of the Option. No adjustment will be made for dividends or
other rights for which the record date is prior to the date such stock
certificate or certificates are issued.
9. Restrictions on Sale of Shares. Optionee represents and agrees
that, upon Optionee's exercise of the Option in whole or part, unless there is
in effect at that time under the Securities Act of 1933 a registration statement
relating to the shares issued to him, he will acquire the shares issuable upon
exercise of this Option for the purpose of investment and not with a view to
their resale or further distribution, and that upon each exercise thereof
Optionee will furnish to the Company a written statement to such effect,
satisfactory to the Company in form and substance. Optionee agrees that any
certificates issued upon exercise of this Option may bear a legend indicating
that their transferability is restricted in accordance with applicable state or
federal securities law. Any person or persons entitled to exercise this Option
under the provisions of Paragraph 4 hereof shall, upon each exercise of the
Option under circumstances in which Optionee would be required to furnish such a
written statement, also furnish to the Company a written statement to the same
effect, satisfactory to the Company in form and substance.
10. Registration. On or before thirty days after the date of this
Agreement, the Company shall, at the Company's expense, use its best efforts to
file with the Securities and Exchange Commission ("SEC"), a registration
statement ("Registration Statement") on Form S-8 or other comparable form, in
such form as to comply with applicable federal and state laws for the purpose of
registering or qualifying the Option Shares for resale by Optionee, and prepare
and file with the appropriate state securities regulatory authorities the
documents reasonably necessary to register or qualify such securities, subject
to the ability of the Company to register or qualify such securities under
applicable state laws.
11. Notices. All notices to the Company shall be addressed to the
Company at the principal office of the Company at One Maritime Plaza, San
Francisco, California 94111, Telecopier No. (415) 676-5791, and all notices to
Optionee shall be addressed to Optionee at the address and telecopier number of
Optionee on file with the Company, or to such other address and telecopier
number as either may designate to the other in writing. A notice shall be deemed
to be duly given if and when enclosed in a properly addressed sealed envelope
deposited, postage prepaid, with the United States Postal Service and followed
by telecopier to the addressee. In lieu of giving notice by mail as aforesaid,
written notices under this Agreement may be given by personal delivery to
Optionee or to the Company (as the case may be).
12. Adjustments. If there is any change in the capitalization of the
Company affecting in any manner the number or kind of outstanding shares of
Common Stock of the Company, whether by stock dividend, stock split,
reclassification or recapitalization of such stock, or because the Company has
merged or consolidated with one or more other corporations (and provided the
Option does not thereby terminate pursuant to Section 2 hereof), then the number
and kind of shares then subject to the Option and the price to be paid therefor
shall be appropriately adjusted by the Board of Directors; provided, however,
that in no event shall any such adjustment result in the Company's being
required to sell or issue any fractional shares. Any such adjustment shall be
made without change in the aggregate purchase price applicable to the
unexercised portion of the Option, but with an appropriate adjustment to the
price of each Share or other unit of security covered by this Option.
13. Cessation of Corporate Existence. Notwithstanding any other
provision of this Option, upon the dissolution or liquidation of the Company,
the reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or the sale of substantially all the assets of the Company or of more than 50%
of the then outstanding stock of the Company to another corporation or other
entity, the Option granted hereunder shall terminate; provided, however, that:
(i) each Option for which no option has been tendered by the surviving
corporation in accordance with all of the terms of provision (ii) immediately
below shall, within five days before the effective date of such dissolution or
liquidation, merger or consolidation or sale of assets in which the Company is
not the surviving corporation or sale of stock, become fully exercisable; or
(ii) in its sole and absolute discretion, the surviving corporation may, but
shall not be so obligated to, tender to any Optionee, an option to purchase
shares of the surviving corporation, and such new option or options shall
contain such terms and provisions as shall be required substantially to preserve
the rights and benefits of this Option.
26
<PAGE> 5
14. Invalid Provisions. In the event that any provision of this
Agreement is found to be invalid or otherwise unenforceable under any applicable
law, such invalidity or unenforceability shall not be construed as rendering any
other provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid or unenforceable provision were not contained herein.
15. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, however, the parties agree
to the jurisdiction of the courts of the State of California.
16. Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
hereto and delivered to the other.
17. Company represents that its Common Stock is qualified for trading
on the Nasdaq Bulletin Board and qualified for trading with the California
Department of Corporations.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PLAYNET TECHNOLOGIES, INC.
("Company")
By: /s/ Shmuel Cohen
----------------------------------------
Shmuel Cohen
Chief Executive Officer
Optionee's Social
Security Number
("Optionee")
###-##-####
/s/ Mark Neuhaus
----------------------------------------
Mark Neuhaus
Address:
9507 Heather Road
Beverly Hills, California 90210
Telecopier No. (310) 271-2899
27
<PAGE> 1
EXHIBIT 99.2
CONSULTING SERVICES AGREEMENT BETWEEN
PLAYNET TECHNOLOGIES, INC..
AND
JOHN BANAS
THIS CONSULTING SERVICES AGREEMENT (hereinafter referred to as the "Agreement")
effective as of the 22nd day of June, 1997 by and between PlayNet Technologies,
Inc., a corporation organized under the laws of the state of Delaware with a
place of business at One Maritime Plaza, San Francisco, California 94111
(hereinafter referred to as "PlayNet"), and John Banas, an individual, with a
place of business at 14 Plaza 9, Manalapan, NJ 07726 (hereinafter referred to as
"Consultant").
In consideration of the promises and mutual covenants contained herein and on
the terms and conditions hereinafter set forth, it is agreed as follows:
1. PROVISION OF SERVICES - Consultant shall provide to PlayNet the
following services:
(a) To the extent reasonably required in the conduct of the business
of PlayNet, to place at the disposal of PlayNet his judgment and
to provide business development services to PlayNet, including,
but not limited to:
(i) Advice and counsel with respect to business
development and marketing plans;
(ii) Assistance in the development of public relations
plans and media relations;
(iii) Advice with respect to short and long term strategic
business plans, strategic alliances and potential
acquisitions and/or joint ventures; and
(iv) Other related services deemed necessary and requested
by PlayNet (collectively, the "Services").
(b) Consultant agrees to use his best efforts in the
furnishing of the Services and for this purpose Consultant
shall at all times maintain or keep available an adequate
organization of personnel or a network of outside
professionals for the performance of its obligations under
this Agreement.
2. COMPENSATION - (a) PlayNet agrees and shall compensate Consultant in
consideration of his performance of the Services hereunder for the period
through July 9, 1997 by initially delivering Twenty Five Thousand (25,000)
shares of Common Stock of PlayNet, par value $.001 per share) (the
"Shares") in lieu of any cash payment for the Services. The Shares shall be
free and clear of all liens and shall be registered by PlayNet, at its
expense, with the Securities and Exchange Commission on Form S-8 as soon as
practicable after the date hereof. Additional compensation, if any, in cash
or stock, will be issued, as needed and mutually agreed upon by both
PlayNet and Consultant.
(b) In addition to the compensation set forth in paragraph 2(a) above,
the Company agrees to reimburse Consultant for reasonable
out-of-pocket expenses actually incurred by Consultant in the
performance of the Services, including, but not limited to the
purchase by Consultant of a cellular phone and service, monthly
cellular phone charges and calls, car rental, lodging, travel
expenses, meals and associated expenses. Any individual expense
item in excess of $1,000 shall be approved in advance in writing
by PlayNet.
3. TERM & TERMINATION - This Agreement shall enter into force and effect at
the date first written above and shall remain in force and effect for a
period ending on July 9, 1997, unless earlier terminated by either party,
for cause or convenience.
4. CONFIDENTIALITY OF INFORMATION AND DOCUMENTS - In the event that PlayNet
shall submit information and/or documents to Consultant in order to permit
him to perform the Services required under this Agreement, Consultant shall
keep such information and/or documents in the strictest confidence using
the same degree of care that Consultant uses in safeguarding his own
confidential information both during and after the completion of the
services under this Agreement and for a period of ten (10) years
28
<PAGE> 2
after completion of the Services, unless it shall receive from PlayNet the
consent of PlayNet in writing to disclose it. However, nothing herein shall
be interpreted as preventing Consultant from disclosing and/or using said
information or documents which (i) are already rightfully in the possession
of Consultant without obligation of confidence, but were not obtained
directly or indirectly from PlayNet or its affiliates; or (ii) are
independently developed by Consultant not as part of the Services rendered
or called for under the terms of this Agreement; or (iii) are or become
available to the general public without breach of this Agreement; or (iv)
are rightfully received by Consultant from a third party who is not under
obligation of confidence, but who did not obtain them directly or
indirectly from PlayNet or its affiliates; or (v) are required to be
disclosed pursuant to law or court order, or as may be authorized by
PlayNet.
5. LIABILITY OF CONSULTANT - In furnishing PlayNet with the Services provided
herein, neither Consultant nor any officer, director or agent thereof shall
be liable to PlayNet or its creditors for errors of judgment or for any
matters, except for willful malfeasance, bad faith or gross negligence in
the performance of the Services or the reckless disregard of its
obligations and duties under the terms of this Agreement. It is further
agreed and understood that Consultant may rely upon information furnished
to it by PlayNet which Consultant reasonably believes to be accurate and
reliable and that, except as provided herein, Consultant shall not be
accountable for any loss suffered by PlayNet by the reason of PlayNet's
action or non-action on the basis of any advice, recommendation or approval
of Consultant, its partners, officers, directors, employees or agents,
except as provided above.
6. INDEPENDENT CONTRACTOR - Execution of this Agreement in no way creates,
nor shall this Agreement be interpreted or construed as creating, an
employment, agency, partnership or joint venture relationship between
PlayNet and Consultant and it is understood Consultant will be acting
as an independent contractor
7. MISCELLANEOUS
a. OTHER ACTIVITIES OF CONSULTANT. PlayNet recognizes that
Consultant now renders and may continue to render management
and other advisory services to other companies which may or
may not have policies and conduct activities similar to those
of PlayNet. Consultant shall be free to render such advice and
other services and PlayNet hereby consents thereto. Consultant
shall not be required to devote its full time and attention to
the performance of the Services hereunder to PlayNet, but
shall only devote so much of its time and attention as PlayNet
and Consultant mutually deem reasonable and necessary for such
Services.
b. CONTROL. Nothing contained herein shall be deemed to require
PlayNet to take any action contrary to its Certificate of
Incorporation or By-Laws, or any applicable statute or
regulation, or to deprive its Board of Directors of their
responsibility for any control of the conduct or the affairs
of PlayNet.
c. This Agreement shall constitute the entire agreement between
PlayNet and Consultant relating to the Services to be
performed, and no representations, promises, understandings,
or agreements, oral or otherwise, not herein contained shall
be of any force or effect. No modification or waiver of any
provision of this Agreement shall be valid unless it is in
writing and signed by both PlayNet and Consultant. This
Agreement shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties hereto.
d. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
e. In the event of any litigation between the parties to declare
or enforce any provision of this Agreement, the prevailing
party shall be entitle to recover from the losing party, in
addition to any other recovery and costs, reasonable
attorney's fees and costs incurred in such litigation, in both
the trial and in the appellate courts.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have signed this Agreement as of the date first above written.
JOHN BANAS PLAYNET TECHNOLOGIES, INC.
By: /s/ John Banas By: /s/ Shmuel Cohen
------------------------ ----------------------------------------
John Banas Shmuel Cohen
President and Chief Executive Officer
29
<PAGE> 1
Exhibit 99.3
[PLAYNET LETTERHEAD]
August 1, 1997
Richard H. Langley
Langley-Downey Entertainment, Inc.
1875 Century Park East
Suite 150D
Century City, California 90067
Re: "Invest America" Interviews and Advertising Spots
Invoice No 13, dated 7/1/97
Dear Mr. Langley:
We are in receipt of your correspondence dated, July 29, 1997 with respect to
the outstanding balance due of $40,833.75 on the above captioned invoice
(original balance due of $50,000) after application of the 14,666 shares of
common stock, par value $.001 per share (the "Common Stock") of PlayNet valued
at $9,166.25 which were issued to your Company.
As discussed in your letter, PlayNet will issue to Langley Downey Entertainment,
Inc. an additional 40,834 shares of PlayNet Common Stock, registered with the US
Securities and Exchange Commission on a Form S-8 (the "Shares"), in payment of
the balance due on the above captioned invoice. In the event that the average
closing bid price for such Shares for the five (5) trading days immediately
following your receipt of the Shares results in a valuation less than the
$40,833.75, then PlayNet will pay the balance due in cash within five (5)
business days of receipt of a written invoice from you for the remaining
balance.
We appreciate the cooperation exhibited by your organization.
Very truly yours,
PLAYNET
TECHNOLOGIES, INC.
Agreed & Accepted
Langley Downey Entertainment, Inc
/s/ Shmuel Cohen
Shmuel Cohen
/s/ Richard H. Langley President and
Richard H. Langley Chief Executive Officer
30
<PAGE> 1
EXHIBIT 99.4
DEBT CONVERSION TO COMMON STOCK AGREEMENT BETWEEN
PLAYNET TECHNOLOGIES, INC.
AND
PALEX METALS, INC.
THIS DEBT CONVERSION AGREEMENT (hereinafter referred to as the "Agreement")
effective as of the 24th day of July, 1997 by and between PlayNet Technologies,
Inc. a corporation organized under the laws of the state of Delaware with a
place of business at One Maritime Plaza, San Francisco, California 94111
(hereinafter referred to as "PlayNet"), and Palex Metals, Inc., a corporation
organized and existing under the laws of the state of California, with a place
of business at 3170 Molinaro Street, Santa Clara, California 95054 (hereinafter
referred to as "Palex").
In consideration of services already provided by Palex for PlayNet, specifically
identified by Palex invoice number 20917 for $30,000 dated June 30, 1997,
PlayNet and Palex agree to the following:
1. Convert Palex invoice number 20917 into the equivalent value of Common Stock
of PlayNet in lieu of a cash payment. PlayNet agrees to issue 30,000 (Thirty
Thousand) shares of PlayNet Common Stock par value $.001, for purposes of this
agreement valued at $1.00 per share. The Shares shall be free and clear of all
liens and shall be registered by PlayNet, at its expense, with the Securities
and Exchange Commission on Form S-8 as soon as practicable after the date
hereof.
2. PlayNet also agrees to reimburse in cash any shortfall in the value of the
Common Stock in the event that the closing bid price of the stock does not meet
or exceed $1.00 per share on the close of the 10th business day after the
execution of this agreement.
3. This agreement shall be governed by, and construed in accordance with, the
law of the State of Delaware.
4. In the event of any litigation between the parties to declare or enforce any
provision of this Agreement, the prevailing party shall be entitled to recover
from the losing party, in addition to any other recovery and costs, reasonable
attorney's fees and costs incurred in such litigation, in both the trial and in
the appellate courts.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have signed this Agreement as of the date first above written.
PALEX METALS, INC PLAYNET TECHNOLOGIES, INC.
By: /s/ John Russo Lane By: /s/ Shmuel Cohen
--------------------------- ---------------------------------------
John Russo Lane Shmuel Cohen
Chief Financial Officer President and Chief Executive Officer
31
<PAGE> 1
EXHIBIT 99.5
CONSULTING SERVICES AGREEMENT BETWEEN
PLAYNET TECHNOLOGIES, INC..
AND
MAG & ASSOCIATES, INC.
THIS CONSULTING SERVICES AGREEMENT (hereinafter referred to as the "Agreement")
effective as of the 22nd day of July, 1997 by and between PlayNet Technologies,
Inc., a corporation organized under the laws of the state of Delaware with a
place of business at One Maritime Plaza, San Francisco, California 94111
(hereinafter referred to as "PlayNet"), and MAG & Associates, Inc, a corporation
organized and existing under the laws of the state of Nevada, with a place of
business at 19476 Dorado Drive, Trabuco Canyon, CA 92979 (hereinafter referred
to as "Consultant").
In consideration of the promises and mutual covenants contained herein and on
the terms and conditions hereinafter set forth, it is agreed as follows:
1. PROVISION OF SERVICES - Consultant shall provide to PlayNet the following
services:
(c) To the extent reasonably required in the conduct of the business
of PlayNet, to place at the disposal of PlayNet his judgment and
to provide business development services to PlayNet, including,
but not limited to:
(j) Advice and counsel with respect to business development
and marketing plans;
(v) Assistance in the development of public relations
plans and media relations;
(vi) Advice with respect to short and long term strategic
business plans, strategic alliances and potential
acquisitions and/orr joint ventures; and
(vii) Other related services deemed necessary and requested
by PlayNet
(collectively, the "Services").
(b) Consultant agrees to use his best efforts in the
furnishing of the Services and for this purpose Consultant
shall at all times maintain or keep available an adequate
organization of personnel or a network of outside
professionals for the performance of its obligations under
this Agreement.
6. COMPENSATION - (a) PlayNet agrees and shall compensate Consultant in
consideration of his performance of the Services hereunder by initially
delivering One Hundred Thousand (100,000) shares of Common Stock of
PlayNet, par value $.001 per share) (the "Shares") in lieu of any cash
payment for the Services. The Shares shall be free and clear of all liens
and shall be registered by PlayNet, at its expense, with the Securities and
Exchange Commission on Form S-8 as soon as practicable after the date
hereof. Additional compensation, if any, in cash or stock, will be issued,
as needed and mutually agreed upon by both PlayNet and Consultant.
(d) In addition to the compensation set forth in paragraph 2(a) above,
the Company agrees to reimburse Consultant for reasonable
out-of-pocket expenses actually incurred by Consultant in the
performance of the Services, including, but not limited to the
purchase by Consultant of a cellular phone and service, monthly
cellular phone charges and calls, car rental, lodging, travel
expenses, meals and associated expenses. Any individual expense
item in excess of $1,000 shall be approved in advance in writing
by PlayNet.
7. TERM & TERMINATION - This Agreement shall enter into force and effect at
the date first written above and shall remain in force and effect for a
period of twelve (12) months, unless earlier terminated by either party,
for cause or convenience, at its or his option upon thirty (30) days
written notice.
8. CONFIDENTIALITY OF INFORMATION AND DOCUMENTS - In the event that PlayNet
shall submit information and/or documents to Consultant in order to permit
him to perform the Services required under this Agreement, Consultant shall
keep such information and/or documents in the strictest confidence using
the same degree of care that Consultant uses in safeguarding his own
32
<PAGE> 2
confidential information both during and after the completion of the
services under this Agreement and for a period of ten (10) years after
completion of the Services, unless it shall receive from PlayNet the
consent of PlayNet in writing to disclose it. However, nothing herein shall
be interpreted as preventing Consultant from disclosing and/or using said
information or documents which (i) are already rightfully in the possession
of Consultant without obligation of confidence, but were not obtained
directly or indirectly from PlayNet or its affiliates; or (ii) are
independently developed by Consultant not as part of the Services rendered
or called for under the terms of this Agreement; or (iii) are or become
available to the general public without breach of this Agreement; or (iv)
are rightfully received by Consultant from a third party who is not under
obligation of confidence, but who did not obtain them directly or
indirectly from PlayNet or its affiliates; or (v) are required to be
disclosed pursuant to law or court order, or as may be authorized by
PlayNet.
9. LIABILITY OF CONSULTANT - In furnishing PlayNet with the Services provided
herein, neither Consultant nor any officer, director or agent thereof shall
be liable to PlayNet or its creditors for errors of judgment or for any
matters, except for willful malfeasance, bad faith or gross negligence in
the performance of the Services or the reckless disregard of its
obligations and duties under the terms of this Agreement. It is further
agreed and understood that Consultant may rely upon information furnished
to it by PlayNet which Consultant reasonably believes to be accurate and
reliable and that, except as provided herein, Consultant shall not be
accountable for any loss suffered by PlayNet by the reason of PlayNet's
action or non-action on the basis of any advice, recommendation or approval
of Consultant, its partners, officers, directors, employees or agents,
except as provided above.
6. INDEPENDENT CONTRACTOR - Execution of this Agreement in no way creates,
nor shall this Agreement be interpreted or construed as creating, an
employment, agency, partnership or joint venture relationship between
PlayNet and Consultant and it is understood Consultant will be acting
as an independent contractor
7. MISCELLANEOUS
f. OTHER ACTIVITIES OF CONSULTANT. PlayNet recognizes that
Consultant now renders and may continue to render management
and other advisory services to other companies which may or
may not have policies and conduct activities similar to those
of PlayNet. Consultant shall be free to render such advice and
other services and PlayNet hereby consents thereto. Consultant
shall not be required to devote its full time and attention to
the performance of the Services hereunder to PlayNet, but
shall only devote so much of its time and attention as PlayNet
and Consultant mutually deem reasonable and necessary for such
Services.
g. CONTROL. Nothing contained herein shall be deemed to require
PlayNet to take any action contrary to its Certificate of
Incorporation or By-Laws, or any applicable statute or
regulation, or to deprive its Board of Directors of their
responsibility for any control of the conduct or the affairs
of PlayNet.
h. This Agreement shall constitute the entire agreement between
PlayNet and Consultant relating to the Services to be
performed, and no representations, promises, understandings,
or agreements, oral or otherwise, not herein contained shall
be of any force or effect. No modification or waiver of any
provision of this Agreement shall be valid unless it is in
writing and signed by both PlayNet and Consultant. This
Agreement shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties hereto.
i. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
j. In the event of any litigation between the parties to declare
or enforce any provision of this Agreement, the prevailing
party shall be entitle to recover from the losing party, in
addition to any other recovery and costs, reasonable
attorney's fees and costs incurred in such litigation, in both
the trial and in the appellate courts.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have signed this Agreement as of the date first above written.
MAG & ASSOCIATES, INC PLAYNET TECHNOLOGIES, INC.
By: /s/ Michel Attias By: /s/ Shmuel Cohen
--------------------------- --------------------------------------
Shmuel Cohen
President and Chief Executive Officer
33
<PAGE> 1
EXHIBIT 99.6
CONSULTING SERVICES AGREEMENT BETWEEN
PLAYNET TECHNOLOGIES, INC..
AND
SOUND CAPITAL, INC.
THIS CONSULTING SERVICES AGREEMENT (hereinafter referred to as the "Agreement")
effective as of the 22nd day of July, 1997 by and between PlayNet Technologies,
Inc., a corporation organized under the laws of the state of Delaware with a
place of business at One Maritime Plaza, San Francisco, California 94111
(hereinafter referred to as "PlayNet"), and Sound Capital, Inc., a corporation
organized and existing under the laws of the State of New York, with a place of
business at 2000 Island Blvd., Suite 1501, Williams Island FL 33160 (hereinafter
referred to as "Consultant").
In consideration of the promises and mutual covenants contained herein and on
the terms and conditions hereinafter set forth, it is agreed as follows:
1. PROVISION OF SERVICES - Consultant shall provide to PlayNet the
following services:
(e) To the extent reasonably required in the conduct of the business
of PlayNet, to place at the disposal of PlayNet his judgment and
to provide business development services to PlayNet, including,
but not limited to:
(k) Advice and counsel with respect to business development
and marketing plans;
(viii) Assistance in the development of public relations
plans and media relations;
(ix) Advice with respect to short and long term strategic
business plans, strategic alliances and potential
acquisitions and/or joint ventures; and
(x) Other related services deemed necessary and requested
by PlayNet
(collectively, the "Services").
(b) Consultant agrees to use his best efforts in the
furnishing of the Services and for this purpose Consultant
shall at all times maintain or keep available an adequate
organization of personnel or a network of outside
professionals for the performance of its obligations under
this Agreement.
2. COMPENSATION - (a) PlayNet agrees and shall compensate Consultant in
consideration of his performance of the Services hereunder by initially
delivering One Hundred Twenty Five Thousand (125,000) shares of Common
Stock of PlayNet, par value $.001 per share) (the "Shares") in lieu of any
cash payment for the Services. The Shares shall be free and clear of all
liens and shall be registered by PlayNet, at its expense, with the
Securities and Exchange Commission on Form S-8 as soon as practicable after
the date hereof. Additional compensation, if any, in cash or stock, will be
issued, as needed and mutually agreed upon by both PlayNet and Consultant.
The Board of Directors of PlayNet has approved this Agreement and the
compensation to be paid hereunder.
(f) In addition to the compensation set forth in paragraph 2(a) above,
the Company agrees to reimburse Consultant for reasonable
out-of-pocket expenses actually incurred by Consultant in the
performance of the Services, including, but not limited to the
purchase by Consultant of a cellular phone and service, monthly
cellular phone charges and calls, car rental, lodging, travel
expenses, meals and associated expenses. Any individual expense
item in excess of $1,000 shall be approved in advance in writing
by PlayNet.
3. TERM & TERMINATION - This Agreement shall enter into force and effect at
the date first written above and shall remain in force and effect for a
period of twelve (12) months, unless earlier terminated by either party,
for cause or convenience, at its or his option upon thirty (30) days
written notice.
4. CONFIDENTIALITY OF INFORMATION AND DOCUMENTS - In the event that PlayNet
shall submit information and/or documents to Consultant in order to permit
him to perform the Services required under this Agreement, Consultant shall
keep such information and/or documents in the strictest confidence using
the same degree of care that Consultant uses in safeguarding his own
confidential information both during and after the completion of the
services under this Agreement and for a period of ten (10) years
34
<PAGE> 2
after completion of the Services, unless it shall receive from PlayNet the
consent of PlayNet in writing to disclose it. However, nothing herein shall
be interpreted as preventing Consultant from disclosing and/or using said
information or documents which (i) are already rightfully in the possession
of Consultant without obligation of confidence, but were not obtained
directly or indirectly from PlayNet or its affiliates; or (ii) are
independently developed by Consultant not as part of the Services rendered
or called for under the terms of this Agreement; or (iii) are or become
available to the general public without breach of this Agreement; or (iv)
are rightfully received by Consultant from a third party who is not under
obligation of confidence, but who did not obtain them directly or
indirectly from PlayNet or its affiliates; or (v) are required to be
disclosed pursuant to law or court order, or as may be authorized by
PlayNet.
5. LIABILITY OF CONSULTANT - In furnishing PlayNet with the Services provided
herein, neither Consultant nor any officer, director or agent thereof shall
be liable to PlayNet or its creditors for errors of judgment or for any
matters, except for willful malfeasance, bad faith or gross negligence in
the performance of the Services or the reckless disregard of its
obligations and duties under the terms of this Agreement. It is further
agreed and understood that Consultant may rely upon information furnished
to it by PlayNet which Consultant reasonably believes to be accurate and
reliable and that, except as provided herein, Consultant shall not be
accountable for any loss suffered by PlayNet by the reason of PlayNet's
action or non-action on the basis of any advice, recommendation or approval
of Consultant, its partners, officers, directors, employees or agents,
except as provided above.
6. INDEPENDENT CONTRACTOR - Execution of this Agreement in no way creates,
nor shall this Agreement be interpreted or construed as creating, an
employment, agency, partnership or joint venture relationship between
PlayNet and Consultant and it is understood Consultant will be acting
as an independent contractor
7. MISCELLANEOUS
k. OTHER ACTIVITIES OF CONSULTANT. PlayNet recognizes that
Consultant now renders and may continue to render management
and other advisory services to other companies which may or
may not have policies and conduct activities similar to those
of PlayNet. Consultant shall be free to render such advice and
other services and PlayNet hereby consents thereto. Consultant
shall not be required to devote its full time and attention to
the performance of the Services hereunder to PlayNet, but
shall only devote so much of its time and attention as PlayNet
and Consultant mutually deem reasonable and necessary for such
Services.
l. CONTROL. Nothing contained herein shall be deemed to require
PlayNet to take any action contrary to its Certificate of
Incorporation or By-Laws, or any applicable statute or
regulation, or to deprive its Board of Directors of their
responsibility for any control of the conduct or the affairs
of PlayNet.
m. This Agreement shall constitute the entire agreement between
PlayNet and Consultant relating to the Services to be
performed, and no representations, promises, understandings,
or agreements, oral or otherwise, not herein contained shall
be of any force or effect. No modification or waiver of any
provision of this Agreement shall be valid unless it is in
writing and signed by both PlayNet and Consultant. This
Agreement shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties hereto.
n. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
o. In the event of any litigation between the parties to declare
or enforce any provision of this Agreement, the prevailing
party shall be entitle to recover from the losing party, in
addition to any other recovery and costs, reasonable
attorney's fees and costs incurred in such litigation, in both
the trial and in the appellate courts.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have signed this Agreement as of the date first above written.
SOUND CAPITAL, INC. PLAYNET TECHNOLOGIES, INC.
By: /s/ Richard Chancis By: /s/ Shmuel Cohen
------------------------------ --------------------------------------
Richard Chancis Shmuel Cohen
President and Chief Executive Officer
35
<PAGE> 1
EXHIBIT 99.7
AMENDMENT NUMBER 1 TO
CONSULTING SERVICES AGREEMENT BETWEEN
PLAYNET TECHNOLOGIES, INC..
AND
HENRY STEENECK
RE: STRATEGIC AND BUSINESS PLANNING ADVISORY SERVICES
THIS AMENDMENT (hereinafter referred to as the "Amendment") effective as of the
1st day of August, 1997 by and between PlayNet Technologies, Inc., a corporation
organized under the laws of the state of Delaware with a place of business at
One Maritime Plaza, San Francisco, California 94111 (hereinafter referred to as
"PlayNet"), and Henry Steeneck, an individual, with a place of business at 2676
Old Yorktown Road, Yorktown Heights, New York 10598 (hereinafter referred to as
"Consultant") amends that certain Consulting Services Agreement between the
parties, dated July 16, 1997 (the "Consulting Agreement").
In consideration of the promises and mutual covenants contained herein and on
the terms and conditions hereinafter set forth, it is agreed as follows:
1. Paragraph 2 of the Consulting Agreement is amended by increasing the
compensation due thereunder to add an additional Forty Thousand
(40,000)] shares of Common Stock of PlayNet, par value $.001 per share)
(the "Shares") in lieu of any cash payment for the Services, in
addition to the Eighteen Thousand (18,000) shares of Common Stock
previously issued to Consultant as compensation. The Shares shall be
free and clear of all liens and shall be registered by PlayNet, at its
expense, with the Securities and Exchange Commission on Form S-8 as
soon as practicable after the date hereof. Additional compensation, if
any, in cash or stock, will be issued, as needed and mutually agreed
upon by both PlayNet and Consultant.
2. Other than as specifically amended hereby, the terms and conditions of
the Consulting Agreement shall remain in full force and effect.
3. This Amendment and the Consulting Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have signed this Agreement as of the date first above written.
HENRY STEENECK PLAYNET TECHNOLOGIES, INC.
By: /S/ Henry Steeneck By: /s/ Shmuel Cohen
------------------------ -------------------------------
Henry Steeneck Shmuel Cohen
President and
Chief Executive Officer
36
