<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
-------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1999 Commission file number 1-12850
XDOGS.COM, INC.
Formerly known as The Sled Dogs Company
(Exact name of small business issuer as specified in its charter)
80 SOUTH EIGHTH STREET, SUITE 3660
MINNEAPOLIS, MINNESOTA 55402
(Address of principal executive offices)
Incorporated under the laws of 84-1168832
the State of Nevada ----------------------------
I.R.S. Identification Number
(612) 359-9020
(Small Business Issuer's telephone number including area code)
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01
PAR VALUE PER SHARE (Title of Class)
Indicate by check mark whether the Company (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past 90 days. Yes No x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [x]
<PAGE> 2
The issuer's revenues for its most recent fiscal year were $34,829
The aggregate market value of the Company's common stock held by non-affiliates
of the Company on March 31, 1999 was approximately $7,954,438 computed by
reference to the average of the closing bid and ask prices as quoted on that
date.
Check whether the Company has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Securities Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes x No
The Company has one class of equity securities outstanding: Common Stock, $.01
par value per share. On March 31, 1999, there were 6,604,625 shares outstanding.
As of June 30, 1998, the date of our reorganization in Bankruptcy, our common
shares were subject to a 54 for 1 reverse split. All references to our shares in
this Registration Statement include the effect of the 54 for 1 reverse split of
our common stock.
<PAGE> 3
XDOGS.COM, INC.
FORM 10-KSB ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I
ITEM 1. BUSINESS 1
ITEM 2. PROPERTIES 4
ITEM 3. LEGAL PROCEEDINGS 4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 5
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
ITEM 7. FINANCIAL STATEMENTS 8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 9
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A)
OF THE EXCHANGE ACT 9
ITEM 10. EXECUTIVE COMPENSATION 11
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 12
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 13
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 14
</TABLE>
<PAGE> 4
References in this document to "us," "we," or "the Company" refer to
Xdogs.com, Inc., its predecessor, and its subsidiary.
PART I
ITEM 1. BUSINESS
GENERAL
We had limited operations as of March 31, 1999. We filed for protection
under Chapter 11 of the U.S. Bankruptcy Code on November 5, 1997. The Plan of
Reorganization was approved on June 30, 1998; and the Order and Final Decree
closing the Chapter 11 case was issued on September 10, 1998. We filed for
protection under the Bankruptcy Code principally because we went into default on
our loan agreement with our senior lender, Norwest Credit, Inc. relating to,
among other things, a requirement to have a minimum net worth, which we fell
below. We eventually entered into a settlement agreement with Norwest Credit,
Inc. The terms of the settlement agreement required us to surrender our
inventory (which consisted primarily of snow skates) and related intellectual
property and to pay $280,000 in additional cash over a defined period. The cash
was paid in increments, with the final payment made on May 1, 1999. As of March
31, 1999, we should be considered to have no operations and to be only minimally
capitalized.
HISTORY
Prior to our Bankruptcy reorganization, we had historically marketed,
manufactured and distributed Sled Dogs(TM) brand snow skates and related
accessories. The prototype to the snow skate was developed by Hannes Jacob, a
Swiss citizen. Mr. Jacob filed a U.S. patent application on his snow skate in
1988, subsequently filing corresponding patent applications in 20 countries. A
number of countries, including the U.S., have granted patents to Mr. Jacob. Mr.
Jacob also registered the trademark "SnowRunner" in 15 countries, including the
U.S. In February 1990, Mr. Jacob granted an exclusive world-wide license to the
patented technology and the SnowRunner trademark to DalBello Sport S.R.L., an
Italian company ("DalBello"), which developed a commercial snow skate and began
to market and manufacture snow skates on a limited basis. In 1991, our
predecessor secured exclusive U.S. distribution rights for the SnowRunner(R)
snow skate from DalBello.
After one season of product testing, we were able to expand our operations
by raising $1,125,000 from the sale of preferred stock. In September, 1993,
through our wholly-owned subsidiary, SnowRunner (Properties) Inc., we acquired
from Mr. Jacob the patent rights, trademark rights and the rights to a
manufacturing agreement between Hannes Jacob and DalBello relating to the snow
skates. Other than holding such rights, SnowRunner (Properties) Inc. is inactive
and is expected to remain so. In exchange for such rights, we paid Mr. Jacob
$250,000 in cash and granted him a $4.00 per pair royalty payable until the
earlier of June 30, 2003 or the date on which we would have paid an aggregate
royalty of $2 million to Mr. Jacob. At the same time that we acquired such
rights, we canceled the manufacturing agreement with
1
<PAGE> 5
DalBello, DalBello transferred all of the product-specific assets used to
manufacture the SnowRunner(R) snow skate to us in exchange for 100,000 shares of
our Common Stock plus a payment to DalBello by us of $250,000. We also entered
into manufacturing and product development agreements with DalBello under which
DalBello would continue to manufacture snow skates exclusively for us.
In March 1994, we completed an initial public offering of 1,750,000 shares
of common stock and received net proceeds of $7,101,862.
In November 1995, we sold 8,000,000 units (the "Units") in a private
placement, each Unit consisting of one share of common stock and one warrant to
purchase one share of common stock. The price per Unit was $.50. We received net
proceeds of $3,421,131 from the sale of the Units.
We were originally incorporated in Colorado under the name Snow Runner
(USA), Inc. in April 1991. In June 1991, our name was changed to Snow Runner
Holdings, Inc. We were the general partner of Snow Runner (USA) Ltd., a Colorado
limited partnership (the "Partnership"). Our organization was restructured in
July 1992. As part of the restructuring, the limited partners, including Nigel
Alexander and Steven Clarke (our founders), contributed their limited
partnership interests to us in exchange for stock in us. The Partnership then
transferred all of its assets to us and we assumed all the liabilities and
obligations of the Partnership. The Partnership was dissolved in August 1992 and
our name was changed to Snow Runner (USA) Inc. In late 1993, we relocated our
operations to Minnesota and, in January 1994, changed our name to SnowRunner,
Inc. In November 1994, we changed our name to The Sled Dogs Company.
In May, 1999, we changed our state of domicile to Nevada and our name to
Xdogs.com, Inc.
PROPOSED BUSINESS
As of March 31, 1999, we had limited operations. It is our intention to
develop into an internet seller of action sports hard goods and related apparel.
We plan to become the premier destination for consumers involved in action
outdoor activities. We plan to build our brand through direct on-line sales to
consumers and through traditional wholesale distribution. We are planning a
website which will be a dynamic and vibrant on-line community. Our goal is to
build brand awareness, support our retail dealers, and increase the level of
consumer interest in the outdoor active lifestyle.
We plan to provide the North American market access to unique products not
currently available. Our plan is to have exclusive distribution relationships
with best-in-class and well-branded manufacturers based in Europe,
2
<PAGE> 6
which do not have a market presence in North America. We believe that offering
exclusive and unique product lines will differentiate us from our competitors
and will be a key to its competitive advantage.
Our proposed activities will benefit our Internet based community,
manufacturing partners and retail dealers by:
o Creating a strong community within our website.
o Giving community members access to unique products, technical
information, product reviews, expert advice, testimonials,
outdoor news, schedules for action and outdoor sports, trip
planning and packing checklists for a variety of events.
o Giving visitors a unique and user-friendly shopping experience.
o Providing manufacturers access to the North American market via
www.xdogs.com and traditional brand building through wholesale
distribution and marketing.
o Increasing retailer sales by attracting customers interested in
unique, "best-in-class" products for the outdoor lifestyle.
Our most significant accomplishment for the period ended March 31, 1999 was
the execution of a distribution agreement with Berghaus Limited. Under this
agreement, we became their North American distributor. Berghaus Limited is a
manufacturer of outdoor sporting goods, including performance clothing,
footwear, and equipment. We anticipate that this relationship will lead to
substantial revenues in the next fiscal year.
COMPETITION
The operations in which we propose to engage will be extremely competitive
and subject to numerous risks. Selling on the Internet is new and highly
competitive, with many companies having access to the same market. The
profitability of this business is unproven. Further, the barriers to entry are
not substantial. It is expected that most, if not all of our potential
competitiors have greater financial resources and longer operating histories
than ours and can be expected to compete within the business which we plan to
engage. We plan to use the Internet to give ourself the marketing edge to be
able to compete. Although we expect ultimately to be competitive in the markets
in which we compete, there can be no assurance that we will have the necessary
resources to be competitive.
3
<PAGE> 7
PATENTS, TRADEMARKS, AND PROPRIETARY RIGHTS
As of March 31, 1999, we owned registered trademarks "Extreme Dog" and "the
Extreme Dogs" logo with the U.S. Patent and Trademark Office. We had also filed
for U.S. trademark registration for the trademark "Life Without Limits". While
we are not aware of any conflicting trademark rights owned by other parties, no
assurance can be given that no such rights exist. We disposed of certain of its
registered marks as a result of our settlement agreement with Norwest Credit,
Inc. in 1999.
With respect to our foreign patent and trademark filings, no assurance can
be given that we will secure patent or trademark registrations in all foreign
countries in which applications are now pending or in which applications are
expected to be filed sometime in the future, or that we will maintain all
existing applications or registrations.
EMPLOYEES
As of March 31, 1999, we had six employees, including one executive and
five staff members. At that time, our directors and officers managed our
corporate affairs. Since February 1, 1998, Mr. Rodriguez, our President, had
been accruing a monthly salary of $7,000, plus a $500 per month car allowance.
On November 23, 1999, we entered into a five year employment agreement with Mr.
Rodriguez. Under the terms of the agreement, we accrue $5,000 per month in
salary for him. He has stock options to acquire up to 550,000 common shares at
exercise prices between $1.00 and $3.00 per share within five years of the date
of the grant. Mr. Rodriguez will be entitled to a five percent fee, payable in
stock, on funds raised by him. Otherwise, no officer or director is paid a
salary. Our employees are not represented by any collective bargaining
organization.
RESEARCH AND DEVELOPMENT
Our expenditures for research and development activities amounted to $-0-
in 1999 and 1998.
FORWARD-LOOKING STATEMENTS
Forward-looking statements herein are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Certain
important factors could cause results to differ materially from those
anticipated by some statements made herein. You are cautioned that all
forward-looking statements involve risks and uncertainties. Among the factors
that could cause results to differ materially are the following: inability to
control costs or expenses; manufacturing and distribution problems; and lack of
market acceptance of our products.
ITEM 2. PROPERTIES
Our corporate office is located at 80 South Eighth Street, Suite 3660,
Minneapolis, Minnesota 55402. This office space is leased from an unaffiliated
third party for $1700 per month on a lease ending December 31, 2003. We do not
plan to maintain manufacturing facilities. All manufacturing is planned to be
done by third party contractors.
ITEM 3. LEGAL PROCEEDINGS
As of March 31, 1999, neither we, nor any of our officers or directors, in
their capacities as such were the subject of any pending or threatened legal
proceeding, and Management is not aware of any contemplated action against us or
such officers or directors.
4
<PAGE> 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of fiscal year 1999.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Principal Market or Markets
Our Common Stock was listed on the NASDAQ Small Cap Market under the symbol
SNOW and on the Boston Stock Exchange under the symbol SNW. Effective with the
close of business on June 19, 1997, our Common Stock was delisted from the
NASDAQ Small Cap Market. After this date, we began trading on the NASD Bulletin
Board. Market makers and other dealers provided bid and ask quotations of our
Common Stock.
The table below represents the range of high and low bid quotations of our
Common Stock as reported during the reporting period herein. The following bid
price market quotations represent prices between dealers and do not include
retail markup, markdown, or commissions; hence, they may not represent actual
transactions.
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Twelve Months Ended
March 31, 1999
First Quarter
Common Shares $0.06 $0.04
Second Quarter
Common Shares $3.00 $0.04
Third Quarter
Common Shares $0.63 $0.13
Fourth Quarter
Common Shares $3.25 $0.34
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year ended 1998 High Low
----- -----
<S> <C> <C>
First Quarter
Common Shares $0.34 $0.06
Second Quarter $0.25 $0.07
Common Shares
Third Quarter $0.19 $0.02
Common Shares
Fourth Quarter $0.17 $0.02
Common Shares
</TABLE>
5
<PAGE> 9
(b) Approximate Number of Holders of Common Stock
As of March 31, 1999, a total of 6,604,625 shares of our Common Stock were
outstanding and the number of holders of record of our common stock at that date
was approximately 1,000. However, we estimate that it has a significantly
greater number of shareholders because a substantial number of our shares are
held in nominee names by our market makers.
(c) Dividends
Holders of common stock are entitled to receive such dividends as may be
declared by our Board of Directors. No dividends on the common stock were paid
by us during the periods reported herein nor do we anticipate paying dividends
on common stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
On November 5, 1997 We filed for protection under Chapter 11 of the United
States Bankruptcy Code. The Plan of Reorganization was approved on June 30,
1998; and the Order and Final Decree closing the Chapter 11 case was issued on
September 10, 1998. As of June 30, 1998, the date of our reorganization in
Bankruptcy, our common shares were subject to a 54 for 1 reverse split. All
references to our shares in this Registration Statement include the effect of
the 54 for 1 reverse split of our common stock.
We filed for protection under the Bankruptcy Code principally because we
went into default on our loan agreement with our senior lender, Norwest Credit,
Inc. relating to, among other things, a requirement to have a minimum net worth,
which we fell below. We eventually entered into a settlement agreement with
Norwest Credit, Inc. in February, 1999. Under this settlement agreement, we paid
50,000 of our common shares and $280,000 in exchange for release of all amounts
owed.
As of March 31, 1999, we had limited operations. We were in the process of
implementing our business plan to develop into an internet seller of action
sports hard goods and related apparel. Our most significant accomplishment for
the period ended March 31, 1999 was our execution of a distribution agreement
with Berghaus Limited. Under this agreement, we became
6
<PAGE> 10
their North American distributor. Berghaus Limited is a manufacturer of outdoor
sporting goods, including performance clothing, footwear, and equipment. We
anticipate that this relationship will lead to substantial revenues in the next
fiscal year.
The accounting presentation for a reorganized company such as ours is shown
under what is known as "fresh-start accounting." This type of presentation
restates all assets and liabilities to reflect their reorganization value, which
approximates the applicable fair value at the date of reorganization. The gain
from forgiveness of debt was reflected on our June 30, 1998 Statement of
Operations, and our historical retained deficit of $14,519,354 was eliminated.
Therefore, beginning July 1, 1998, none of our financial statements reflected
any retained earnings or deficit. With the changes made under "fresh-start
accounting," as of March 31, 1999, we had current assets and total assets of
$104,252. We had outstanding liabilities not subject to compromise of $17,150
and liabilities subject to compromise of $32,438.
After implementing "fresh-start accounting," we had total sales of $34,829
for the period ended March 31, 1999. We had no cost of goods sold during that
period and selling, general, and administrative expenses of $545,739. We also
had an interest expense of $84,620. Our net loss, which included losses from
continuing operations and reorganization items was $1,492,349, or a loss of
$0.49 per share. We recorded an extraordinary gain of $402,625 on debt
extinguishment. As a result of this extraordinary item, we had a net loss of
$0.36 per share for the nine months ended March 31, 1999.
Our plan for the fiscal year ended March 31, 2000 is to implement our plan
to develop into an internet seller of action sports hard goods and related
apparel. We plan to actively develop our relationship with Berghaus Limited.
While we anticipate generating substantial revenues under our agreement with
Berghaus Limited during the fiscal year ended March 31, 2000, we do not expect
to be profitable during this period.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents were $86,919 on March 31, 1999, compared to
$6,424 on March 31, 1998. During the period ended March 31, 1999, our operations
used net cash of $410,138, primarily to fund operating losses.
During the nine months ended March 31, 1999, we had no investing
activities.
Our financing activities for the period ended March 31, 1999 provided cash
of $777,014, which consisted of proceeds from sales of common stock. We paid
$293,206 in notes payable. Therefore, our net cash provided by financing
activities was $483, 808, which we used for general and administrative expenses,
as well as working capital.
As of March 31, 1999, we were at the beginning of the development of our
business plan. We plan to raise additional capital during the coming fiscal
year, but did not have any definitive plans as of March 31, 1999.
7
<PAGE> 11
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-KSB ARE MADE PURSUANT TO
THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. CERTAIN
IMPORTANT FACTORS COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED BY SOME STATEMENTS MADE IN THIS FORM 10-KSB. AMONG THE FACTORS THAT
COULD CAUSE RESULTS TO DIFFER MATERIALLY ARE THE FOLLOWING: LACK OF AVAILABILITY
OF FINANCING; INABILITY TO CONTROL COSTS OR EXPENSES; MANUFACTURING AND
DISTRIBUTION PROBLEMS; AND LACK OF MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS.
REFERENCE IS ALSO MADE TO THE RISK FACTORS CONTAINED IN THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-3 (NO. 33-80875), WHICH ARE INCORPORATED HEREIN
BY REFERENCE.
ITEM 7. FINANCIAL STATEMENTS
8
<PAGE> 12
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED FINANCIAL REPORT
MARCH 31, 1999
<PAGE> 13
CONTENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT 1
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
Consolidated balance sheet 2
Consolidated statements of operations 3
Consolidated statements of changes in stockholders' deficit
4
Consolidated statements of cash flows 5 - 6
Notes to consolidated financial statements 8 - 11
- --------------------------------------------------------------------------------
<PAGE> 14
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
XDogs.Com (Formerly The Sled Dogs Company)
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheet of XDogs.Com
(formerly The Sled Dogs Company) as of March 31, 1999, and the related
consolidated statements of operations, changes in stockholders' deficit, and
cash flows for the nine months ended March 31, 1999, the three months ended June
30, 1998, and the year ended March 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of XDogs.Com
(formerly The Sled Dogs Company) as of March 31, 1999, and the consolidated
results of its operations and its cash flows for the nine months ended March 31,
1999, the three months ended June 30, 1998, and the year ended March 31, 1998,
in conformity with generally accepted accounting principles.
On June 30, 1998, the Company emerged from bankruptcy. As discussed in Note 2 to
the consolidated financial statements, the Company accounted for the
reorganization using fresh-start reporting. Thus, the postreorganization
consolidated financial statements are not comparable to the prereorganization
consolidated financial statements.
MCGLADREY & PULLEN, LLP
Minneapolis, Minnesota
October 22, 1999
1
<PAGE> 15
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
Reorganized
ASSETS Company
- -------------------------------------------------------------------------------------------
<S> <C>
Current Assets
Cash $ 86,919
Prepaid expenses 17,333
------------
TOTAL CURRENT ASSETS 104,252
------------
TOTAL ASSETS $ 104,252
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities Not Subject to Compromise
Accounts payable $ 17,150
Liabilities Subject to Compromise (Notes 1 and 4) 32,438
------------
TOTAL CURRENT LIABILITIES 49,588
------------
Stockholders' Deficit (Notes 1, 2, and 5)
Convertible preferred stock, Series A, $0.10 par value; authorized
shares--1,000,000; no issued or outstanding shares
Common stock, $0.01 par value; authorized shares--20,000,000;
issued and outstanding shares 1999: 6,604,625; 1998: 250,244 66,046
Additional paid-in capital 513,828
Common stock paid for but not issued 564,514
Accumulated deficit (1,089,724)
------------
54,664
------------
$ 104,252
============
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 16
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1999, THREE MONTHS
ENDED JUNE 30, 1998, AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
REORGANIZED Predecessor Company
COMPANY, -------------------------------
NINE MONTHS Three Months
ENDED Ended Year Ended
MARCH 31, 1999 June 30, 1998 March 31, 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 34,829 $ 10,940 $ 232,874
Cost of goods sold -- -- 1,104,189
------------ ------------ ------------
GROSS MARGIN 34,829 10,940 (871,315)
Selling, general, and administrative expense 545,739 10,362 1,265,733
------------ ------------ ------------
OPERATING INCOME (LOSS) (510,910) 578 (2,137,048)
Interest expense 84,620 -- 159,972
Interest income -- -- (35)
------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
REORGANIZATION ITEMS AND EXTRAORDINARY ITEMS (595,530) 578 (2,296,985)
Reorganization items:
Guaranty fee (Note 7) 843,500 -- --
Legal fees 53,319 -- 13,300
Debt issuance costs -- -- 91,250
Impairment of patents and trademarks -- -- 108,364
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS (1,492,349) 578 (2,509,899)
Extraordinary items:
Extraordinary gain on discharge of prepetition liabilities -- 2,564,734 --
Extraordinary gain on debt extinguishment (Note 8) 402,625 -- --
------------ ------------ ------------
NET INCOME (LOSS) $ (1,089,724) $ 2,565,312 $ (2,509,899)
============ ============ ============
Basic and diluted earnings (loss) per common share:
Income (loss) before extraordinary item $ (0.49) $ -- $ (10.03)
Extraordinary items 0.13 9.90 --
------------ ------------ ------------
NET INCOME (LOSS) $ (0.36) $ 9.90 $ (10.03)
============ ============ ============
Weighted-average number of common shares outstanding 3,042,768 259,038 250,244
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 17
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
NINE MONTHS ENDED MARCH 31, 1999, THREE MONTHS
ENDED JUNE 30, 1998, AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Common Stock Convertible Preferred Stock Additional
-------------------------- --------------------------- Paid-In
Shares Amount Shares Amount Capital
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1997 250,244 $ 2,502 -- $ -- $ 13,729,268
Net loss for the year ended March 31, 1998 -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1998 250,244 2,502 -- -- 13,729,268
Common stock issued, bankruptcy (Note 1) 1,704,613 17,046 -- -- 50,786
Net income for the three months ended June 30, 1998 -- -- -- -- --
Fresh-start accounting, bankruptcy (Note 2) -- -- -- -- (13,780,054)
------------ ------------ ------------ ------------ ------------
Balance at June 30, 1998 1,954,857 19,548 -- -- --
Common stock issued for services 3,089,102 30,891 -- -- --
Private issuance of common stock in December 1998;
January, February, and March 1999 at $0.25 per
share, net of stock issuance costs of $48,000 974,000 9,740 -- -- --
Private issuance of common stock in January 1999 20,000 200 -- -- --
Private issuance of common stock in January 1999 16,666 167 -- -- --
Common stock issued in connection with debt
extinguishment (Note 8) 50,000 500 -- -- --
Common stock issued in connection with guaranty
fee (Note 7) 500,000 5,000 -- -- 513,828
Common stock to be issued, net of commissions of
$13,901 (Note 5) -- -- -- -- --
Net loss for the nine months ended March 31, 1999 -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1999 6,604,625 $ 66,046 -- $ -- $ 513,828
============ ============ ============ ============ ============
<CAPTION>
Total
Common Stock Stockholders'
Discount Paid for, but Accumulated Equity
on Shares Not Issued Deficit (Deficit)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at March 31, 1997 $ -- $ -- (14,574,767) $ (842,997)
Net loss for the year ended March 31, 1998 -- -- (2,509,899) (2,509,899)
------------ ------------ ------------ ------------
Balance at March 31, 1998 -- -- (17,084,666) (3,352,896)
Common stock issued, bankruptcy (Note 1) -- -- -- 67,832
Net income for the three months ended June 30, 1998 -- -- 2,565,312 2,565,312
Fresh-start accounting, bankruptcy (Note 2) (739,300) -- 14,519,354 --
------------ ------------ ------------ ------------
Balance at June 30, 1998 (739,300) -- -- (719,752)
Common stock issued for services 128,385 -- -- 159,276
Private issuance of common stock in December 1998;
January, February, and March 1999 at $0.25 per
share, net of stock issuance costs of $48,000 185,760 -- -- 195,500
Private issuance of common stock in January 1999 7,800 -- -- 8,000
Private issuance of common stock in January 1999 8,833 -- -- 9,000
Common stock issued in connection with debt
extinguishment (Note 8) 83,850 -- -- 84,350
Common stock issued in connection with guaranty
fee (Note 7) 324,672 -- -- 843,500
Common stock to be issued, net of commissions of
$13,901 (Note 5) -- 564,514 -- 564,514
Net loss for the nine months ended March 31, 1999 -- -- (1,089,724) (1,089,724)
------------ ------------ ------------ ------------
Balance at March 31, 1999 $ -- $ 564,514 (1,089,724) $ 54,664
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 18
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1999, THREE MONTHS
ENDED JUNE 30, 1998, AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
REORGANIZED
COMPANY, Predecessor Company
NINE MONTHS -------------------------------
ENDED Three Months Year Ended
MARCH 31, 1999 Ended March 31,
June 30, 1998 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (1,089,724) $ 2,565,312 $ (2,509,899)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Extraordinary items (402,625) (2,564,734) --
Depreciation and amortization -- 32,369 196,507
Noncash expense related to stock issued (Note 7) 1,002,776 -- --
Impairment loss on patents and trademarks -- -- 119,313
Loss on asset disposals -- -- 41,792
Changes in operating assets and liabilities:
Receivables -- -- 225,168
Inventories -- -- 940,226
Prepaid expenses (17,333) -- 23,385
Accounts payable 17,150 -- 206,174
Other accrued expenses 79,618 (7,374) (383,716)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (410,138) 25,573 (1,141,050)
------------ ------------ ------------
Cash Flows From Investing Activities
Purchases of equipment -- -- (30,395)
Acquisition of patents and trademarks -- -- (16,798)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES -- -- (47,193)
------------ ------------ ------------
Cash Flows From Financing Activities
Net proceeds from sale of common stock 777,014 -- --
Proceeds on notes payable -- -- 1,137,500
Payments on notes payable and debtor-in-possession note (293,206) -- (45,000)
Net change in payable to banks -- -- 71,877
Cash in excess of bank balance -- (18,748) 18,748
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 483,808 (18,748) 1,183,125
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 73,670 6,825 (5,118)
Cash
Beginning 13,249 6,424 11,542
------------ ------------ ------------
Ending $ 86,919 $ 13,249 $ 6,424
============ ============ =============
</TABLE>
5
<PAGE> 19
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1999, THREE MONTHS
ENDED JUNE 30, 1998, AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
REORGANIZED
COMPANY, Predecessor Company
NINE MONTHS -------------------------------
ENDED Three Months Year Ended
MARCH 31, 1999 Ended March 31,
June 30, 1998 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information
Cash paid for interest $ -- $ -- $ 93,611
============ ============ =============
Supplemental Schedule of Noncash Investing and Financing Activities (see Note 1
for discussion of noncash activity related to the reorganization)
Common stock issued relating to prepetition liabilities $ -- $ 67,832 $ --
Equipment surrendered -- 150,557 --
Common stock issued in connection with settlement of debt (Note 8) 84,350 -- --
============ ============ =============
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 20
NOTE 1. REORGANIZATION
On November 4, 1997, XDogs.Com (formerly The Sled Dogs Company) (the Company)
filed voluntary petitions in the United States Bankruptcy Court for the District
of Minnesota for reorganization under Chapter 11 of the Bankruptcy Code. On June
30, 1998, following approval by creditors, the Bankruptcy Court confirmed the
Company's plan of reorganization, and the plan became effective 30 days later.
During the period from November 4, 1997, through June 30, 1998, the Company
operated as debtor-in-possession.
Under the terms of the plan, the allowed claims are being settled as follows:
PRIORITY CLAIMS: Wage and salary claims of the Company's employees totaling
approximately $6,000 were paid in cash.
SECURED DEBT: The Company's approximately $367,000 asset-based line of credit
was exchanged for new debt in the same amount plus the surrender of equipment
with a carrying value of $150,557.
SENIOR NOTEHOLDERS: The holders of $355,000 of senior secured notes received
2.15 shares of common stock for every dollar of debt held by the senior
noteholder. The total number of shares issued was 763,250.
SUBORDINATED DEBENTURES: The holders of $812,500 of subordinated debentures
received 0.92 shares of common stock for every dollar of debt held. The total
number of shares issued was 747,500.
UNSECURED CREDITORS: The holders of approximately $727,000 of allowed trade and
other miscellaneous claims received 0.2666 shares of common stock for every
dollar of debt held. The total number of shares issued was 193,863. In addition,
approximately $32,000 in debt was paid in cash. Trade and other miscellaneous
claims of approximately $888,500 were not allowed.
COMMON STOCK: The holders of the Company's existing common stock received, in
exchange for their shares, one share of the new issue of outstanding voting
common stock of the Company for each 54 shares owned at the effective date of
the reorganization.
OPTIONS AND WARRANTS: All existing options and warrants of the Company
authorized, issued, or outstanding on the effective date of the bankruptcy were
canceled.
The Company accounted for the reorganization using fresh-start accounting.
Accordingly, all assets and liabilities are restated to reflect their
reorganization value, which approximates fair value at the date of
reorganization. See Note 2.
7
<PAGE> 21
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. FRESH-START REPORTING
In accounting for the effects of the reorganization, the Company has implemented
Statement of Position 90-7 (SOP 90-7), Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code, issued by the American Institute of
Certified Public Accountants in November 1990. SOP 90-7 is applicable because
pre-reorganization shareholders will receive less than 50 percent of the
Company's New Common Stock, and reorganization value of the assets of the
reorganized Company is less than the total of all post-petition liabilities and
allowed claims.
Under fresh-start accounting, all assets and liabilities are restated to reflect
their reorganization value, which approximates fair value at the date of
reorganization. In accordance with fresh-start accounting, the gain on
forgiveness of debt resulting from the bankruptcy proceedings was reflected on
the predecessor Company's statement of operations for the three months ended
June 30, 1998. In addition, the retained deficit of the predecessor Company at
June 30, 1998, totaling $14,519,354, was eliminated, and at July 1, 1998, the
reorganized Company's financial statements reflected no beginning retained
earnings or deficit.
The reorganization value of the reorganized Company was determined in
consideration of several factors. Management believes the estimated fair value
of the emerging entity before considering liabilities approximates the amount a
willing buyer would pay for the assets of the entity immediately after the
restructuring. The Company determined that the fair value of the assets at June
30, 1998, approximated carrying value and, therefore, recognized no
reorganization value in excess of amounts allocable to identifiable assets.
As a result of the implementation of fresh-start accounting, the consolidated
financial statements of the Company after consummation of the plan are not
comparable to the Company's consolidated financial statements of prior periods.
The effect of the plan and the implementation of fresh-start accounting on the
Company's consolidated balance sheet as of June 30, 1998, was as follows
(unaudited):
<TABLE>
<CAPTION>
Pre-Fresh-Start Adjustments to Fresh-Start
Balance Sheet, Record Plan Fair Value Balance Sheet,
June 30, 1998 Confirmation Adjustments June 30, 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $ 13,249 $ -- $ -- $ 13,249
Equipment 150,557 (150,557) -- --
------------ ------------ ------------ ------------
$ 163,806 $ (150,557) $ -- $ 13,249
============ ============ ============ ============
Liabilities $ 3,516,123 $ (2,783,122) $ -- $ 733,001
Stockholders' deficit (3,352,317) 2,632,565 -- (719,752)
------------ ------------ ------------ ------------
$ 163,806 $ (150,557) $ -- $ 13,249
============ ============ ============ ============
</TABLE>
8
<PAGE> 22
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: The Company was incorporated in Colorado in 1991 as a
distributor of SnowRunner snow skates. Between 1991 and 1994, the Company was
restructured, and the name of the Company was changed several times, including
such names as SnowRunner (USA) Inc., SnowRunners, Inc., and The Sled Dogs
Company.
As discussed in Note 1, the Company filed for bankruptcy protection in 1997. As
a result of the bankruptcy, the Company was reorganized and in 1999 was renamed
XDogs.Com. The intent of the Company is to develop into a "clicks and mortar"
seller of action sports hard goods and related apparel and to create an Internet
destination site for active outdoor lifestyle enthusiasts. In addition, in 1999
the Company has signed a distribution agreement with Berghaus International to
become their North American distributor. Berghaus International is a
manufacturer of outdoor sporting goods, including performance clothing,
footwear, and equipment.
Revenues on the accompanying statements of operations are from sources other
than Internet sales. The Company has not generated any revenues as an Internet
seller of action sporting goods. The Company's ability to generate revenues from
operations and achieve profitability is dependent upon a number of factors,
including acceptance in the United States of the European products. The ability
to continue as a going concern is ultimately dependent upon the Company's
ability to generate additional financing and to generate revenues and
profitability. An officer of the Company has agreed to assist with funding of
short-term cash needs through March 2000.
CONSOLIDATION: The financial statements include the accounts of the Company and
its wholly owned subsidiary, SnowRunner (Properties) Inc., which was established
and incorporated in April 1993. The subsidiary was inactive in fiscal 1999 and
1998.
CASH: The Company maintains deposits at banks which, at times, exceed federally
insured limits. The Company has not experienced any losses in such accounts.
DISCOUNT ON SHARES: Discount on shares represents the amount by which the
liabilities exceeded the fair value of the assets when applying fresh-start
accounting (see Note 2).
INCOME TAXES: Deferred taxes are provided on an asset and liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carryforwards, and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
LOSS PER SHARE: The Company computes net loss per share based upon the
weighted-average number of common shares outstanding during each year. As of
March 31, 1999, the Company had no common stock equivalents.
9
<PAGE> 23
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FAIR VALUE: The Company's financial instruments consist of cash for which the
current carrying amount approximates fair value.
NOTE 4. LIABILITIES SUBJECT TO COMPROMISE
As a result of the Chapter 11 proceedings, all unsecured and undersecured
prepetition liabilities were reclassified to liabilities subject to compromise
at March 31, 1998. Substantially all of these claims were settled in fiscal 1999
in accordance with the Plan of Reorganization (see Note 1). The liabilities
subject to compromise at March 31, 1999, consisted of the following:
Trade and other miscellaneous claims $ 32,438
NOTE 5. COMMON STOCK AND SUBSEQUENT EVENTS
STOCK SPLIT: In conjunction with the bankruptcy, the Company effected a 54-for-1
reverse common stock split. The earnings per common share for the years ended
March 31, 1999 and 1998, have been retroactively adjusted for this split as if
it occurred on April 1, 1997. In addition, the statement of changes in
stockholders' equity has been retroactively adjusted as if the split occurred on
March 31, 1997.
SUBSEQUENT EVENTS: In June 1999, the Company completed additional private
offerings of common stock at prices ranging from $0.25 to $1.50 per share. The
total number of shares issued in conjunction with the offerings was 1,532,929,
with gross proceeds of approximately $1,030,000 before offering costs and
commissions. $564,514 was received prior to March 31, 1999, net of commissions
of $60,986.
In addition, the Company issued 674,500 of additional common shares in lieu of
cash for various expenses. The expense recorded was based upon quoted market
price of the stock issued.
NOTE 6. INCOME TAXES
At March 31, 1999, the Company has accumulated a net operating loss of
approximately $12,200,000, which may be used to reduce future taxable income
through 2014. A valuation allowance has been recognized to completely reserve
for the deferred tax assets related to the loss carryforwards. The reserve has
been established because of the uncertainty of future taxable income, which is
necessary in order to realize the benefits of the net operating loss
carryforwards. Any tax benefits realized in the future from preconfirmation
operating loss carryforwards will be reported as a direct addition to additional
paid-in capital.
10
<PAGE> 24
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6. INCOME TAXES (CONTINUED)
The Company's ability to utilize these carryforwards to offset future taxable
income is subject to certain restrictions under Section 382 of the Internal
Revenue Code due to certain changes in the equity ownership of the Company.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes. Components of the Company's
deferred tax assets are:
<TABLE>
<CAPTION>
March 31
------------------------------
1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 4,880,000 $ 5,480,000
------------ ------------
Total deferred tax assets 4,880,000 5,480,000
Less valuation allowance (4,880,000) (5,480,000)
------------ ------------
Net deferred tax assets $ -- $ --
============ ============
</TABLE>
Loss carryforwards for tax purposes as of March 31, 1999, have the following
expiration dates:
<TABLE>
<CAPTION>
Expiration Date Amount
- --------------------------------------------------------------------------------
<S> <C>
2009 $ 530,000
2010 2,970,000
2011 3,210,000
2012 2,990,000
2013 2,500,000
------------
$ 12,200,000
============
</TABLE>
NOTE 7. TRANSACTIONS WITH OFFICER/STOCKHOLDER
During the year ended March 31, 1999, the Company issued a total of 3,374,102
shares to an officer of the Company in exchange for compensation of $105,000 and
$843,500 for a personal guaranty provided on certain company debt. The value of
the stock issued was recorded at quoted market price on the date of issuance.
NOTE 8. EXTRAORDINARY ITEM ON DEBT EXTINGUISHMENT
On February 3, 1999, the Company reached an agreement with the bank on certain
indebtedness owing to the bank in the amount of $780,181. The Company exchanged
50,000 shares of common stock and $293,206 in exchange for release of the
amounts owed. The market value of the stock issued as of February 3, 1999, was
$84,350 based on quoted market price. The resulting gain of $402,625 is shown as
an extraordinary item in the accompanying consolidated statement of operations.
There is no tax effect on the gain due to operating loss carryforwards and a
loss for the nine-month period ended March 31, 1999.
11
<PAGE> 25
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Our Directors and Executive Officers as of March 31, 1999 are shown below:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Kent Rodriguez 43 Chairman, President, Director
Bryant Loving 47 Director
Robert Corliss 46 Director
Douglas Barton 56 Director
Craig Avery 51 Secretary
</TABLE>
Each Director is serving a term of office which will continue until the next
annual meeting of shareholders and until the election and qualification of his
respective successor.
9
<PAGE> 26
KENT RODRIGUEZ.
Mr. Rodriguez joined the Company as Chairman, President, and Chief Executive
Officer in January, 1997. Since 1995, he has been the Managing Partner of Weyer
Capital Partners, a Minneapolis-based venture capital corporation. From 1985 to
1995, he was employed by the First National Bank of Elmore, Minnesota in various
capacities. He has a B.A. degree from Carleton College.
BRYANT LOVING
Mr. Loving has served as a Director of the Company since November, 1997. Since
1991, he has been the Chief Executive Officer of LA Loving, a wholesale
distributor of sportswear apparel and distributor of active wear for several
major U.S. manufacturers, including Fruit of the Loom, Hanes, Lee, and Jerzees.
He has a B.A. degree from the University of Minnesota. Mr. Loving shall devote
such time as is necessary to carry out his responsibilities as an Officer and
Director of the Company.
ROBERT CORLISS
Mr. Corliss has served as a Director of the Company since July, 1997. Since 1993
until September, 1998, he has been the President of Infinity Sports and Leisure
Group of Lebanon, New Jersey, a designer, manufacturer and distributor of
athletic products under the Bike Athletic and Marksman brand names. He was also
President and Chief Executive Officer of Herman's Sporting Goods, Inc. which he
sold in 1993. In September, 1998, he was named Chief Executive officer of The
Athlete's Foot, a chain of retail athletic footwear stores. He has an MBA degree
from the University of Maryland. Mr. Corliss shall devote such time as is
necessary to carry out his responsibilities as an Officer and Director of the
Company.
DOUGLAS BARTON
Mr. Barton has served as a Director of the Company since November, 1998. From
1987 to the present, he has been the President of Douglas Communications, Inc.,
a private promotion, development, and marketing consulting firm. He has a B.S.
degree in Economics/History from the University of Minnesota. Mr. Barton shall
devote such time as is necessary to carry out his responsibilities as a Director
of the Company.
CRAIG AVERY
Mr. Avery has served as Secretary of the Company since August, 1997. For the
past several years, he has been the owner of Craig C. Avery Company, a
Minneapolis-based real estate development and investment company, which has
developed apartments, senior housing, office buildings, and industrial and
residential land subdivisions. Mr. Avery currently serves on the Boards of Call
4 Wireless, Rock Cliff Development, Cash-N-Pawn, and Host Partners. He has a
B.A. and MBA degree in Finance from the University of Minnesota. Mr. Avery shall
devote such time as is necessary to carry out his responsibilities as an Officer
of the Company.
10
<PAGE> 27
The Board of Directors has established no committees. Members of the Board
of Directors receive no additional compensation for their service on the Board
of Directors.
The Company's Directors will serve in such capacity until the next annual
meeting of the Company's shareholders and until their successors have been
elected and qualified. There are no family relationships among the Company's
officers and directors, nor are there any arrangements or understanding between
any of the directors or officers of the Company or any other person pursuant to
which any officer or director was or is to be selected as an officer or
director.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act")
requires our officers and directors and persons owning more than ten percent of
our Common Stock to file initial reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Additionally, Item 405 of
Regulation S-B under the 34 Act requires us to identify in its Form 10-KSB and
proxy statement those individuals for whom one of the above referenced reports
was not filed on a timely basis during the most recent fiscal year or prior
fiscal years. Given these requirements, we have the following report to make
under this section. All of our officers or directors, and all persons owning
more than ten percent of its shares have filed the subject reports, if required,
on a timely basis during the past fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
Only one executive officer accrued compensation and no other executive
officer or director accrued or received compensation in excess of $100,000
during the fiscal year ended March 31, 1999. Compensation does not include minor
business-related and other expenses paid by us for our officers during fiscal
year 1999 or 1998. Such amounts in the aggregate do not exceed $10,000.
Our Chief Executive Officer, Mr. Kent Rodriguez, was issued a total of
3,374,102 shares in 1999 in exchange for compensation of $105,000 and a personal
guaranty by him of $843,500 on one of our debts. On November 23, 1999, we
entered into a five year employment agreement with Mr. Rodriguez. Under the
terms of the agreement, we accrue $5,000 per month in salary for him. He has
stock options to acquire up to 550,000 common shares at exercise prices between
$1.00 and $3.00 per share within five years of the date of the grant. Mr.
Rodriguez will be entitled to a five percent fee, payable in stock, on funds
raised by him. Mr. Rodriguez accrued compensation of $15,000 for 1998, which
included a salary of $7,000 per month and a $500 per month car allowance. No
other executive officer or director accrued or received compensation for fiscal
year 1998.
From time to time, we have granted shares of our common stock as additional
compensation to its officers and key employees for their services, as determined
by our Board of Directors. During fiscal year 1999, no shares were granted to
officers or key employees.
As of March 31, 1999, we had no group life, health, hospitalization,
medical reimbursement or relocation plans in effect. Further, we have no pension
plans or plans or agreements which provide compensation on the event of
termination of employment or change in control of our Company.
We do not pay members of our Board of Directors any fees for attendance or
similar
11
<PAGE> 28
remuneration, but reimburses them for any out-of-pocket expenses incurred by
them in connection with our business.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of our
Common Stock as of March 31, 1999 by (i) each person known by us to be the
beneficial owner of more than five percent of our outstanding common stock; (ii)
each director of our Company; and (iii) all executive officers and directors of
our Company as a group. As of March 31, 1999, we had a total of 6,604,625 common
shares issued and outstanding.
<TABLE>
<CAPTION>
Names and Addresses Beneficial Percent
of Beneficial Owner Ownership of Class
<S> <C> <C>
Kent Rodriguez 3,374,102 51%
80 South Eighth Street
Suite 3660
Minneapolis, MN 55402
Craig Avery 263,000 4.0%
80 South Eighth Street
Suite 3660
Minneapolis, MN 55402
Bryant Loving 25,000 .4%
80 South Eighth Street
Suite 3660
Minneapolis, MN 55402
Robert Corliss 25,000 .4%
80 South Eighth Street
Suite 3660
Minneapolis, MN 55402
Douglas Barton 105,000 1.6%
80 South Eighth Street
Suite 3660
Minneapolis, MN 55402
Officers and Directors 3,792,102 57.4%
as a Group (5 persons)
</TABLE>
12
<PAGE> 29
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We issued our Chief Executive Officer, Mr. Kent Rodriguez, a total of
3,374,102 shares in 1999 in exchange for compensation of $105,000 and a personal
guaranty by him of $843,500 on one of our debts.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See "Exhibit Index" immediately following the signatures on
this report on Form 10-KSB.
(b) Reports on Form 8-K. No report on Form 8-K was filed during the last
quarter of fiscal year 1999.
13
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Company has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: March 1, 2000 XDOGS.COM, INC.
/s/ Kent Rodriguez
------------------------------------------
Kent Rodriguez, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Company in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature and Title Date
- ------------------- ----
<S> <C>
/s/ Kent Rodriguez March 1, 2000
- ------------------------------------------
Kent Rodriguez, President,
Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Craig Avery March 1, 2000
- ------------------------------------------
Craig Avery, Chief Financial Officer, Treasurer and
Secretary (Principal Financial and Accounting Officer)
/s/ Bryant Loving March 1, 2000
- -----------------------------------------
Bryant Loving, Director
/s/ Robert Corliss March 1, 2000
- -----------------------------------------
Robert Corliss, Director
/s/ Douglas Barton March 1, 2000
- -----------------------------------------
Douglas Barton, Director
</TABLE>
14
<PAGE> 31
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
THE SLED DOGS COMPANY
EXHIBIT INDEX TO FORM 10-KSB
For the fiscal year Commission File Number 1-12850
ended March 31, 1999
<TABLE>
<CAPTION>
Exhibit Description Page Number
- ------- ----------- -----------
<S> <C> <C>
3.1 Restated Articles of Incorporation (Incorporated by reference to *
Exhibit 3.1 to Registration Statement on Form SB-2, Registration
No. 33-74240C).
3.2 Restated Bylaws (Incorporated by reference to Exhibit 3.2 to *
Registration Statement on Form SB-2, Registration No.
33-74240C).
3.3 Articles of Incorporation for the State of Nevada.
3.4 Articles of Merger for the Colorado Corporation and the Nevada Corporation
3.5 Bylaws of the Nevada Corporation
4.1 Specimen of Common Stock (Incorporated by reference to Exhibit *
4.1 to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.1 Contract of Sale between Hannes Jacob and Allrounder Idea *
Realization, S.A. and Snow Runner (Properties) Inc. dated
September 3, 1993 (Incorporated by reference to Exhibit 10.1 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
10.2 Payment Agreement between Hannes Jacob and Allrounder Idea *
Realization, S.A. and Snow Runner (Properties) Inc. dated
September 3, 1993 (Incorporated by reference to Exhibit 10.2 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
</TABLE>
<PAGE> 32
<TABLE>
<S> <C> <C>
10.3 Termination and Release Agreement between Hannes Jacob and *
Allrounder Idea Realization, S.A. and Snow Runner (Properties)
Inc. dated September 3, 1993 (Incorporated by reference to
Exhibit 10.3 to Registration Statement on Form SB-2,
Registration No. 33-74240C).
10.4 Assignment, Bill of Sale and Agreement between DalBello Sport *
S.R.L. and Snow Runner (USA), Inc. effective September 3, 1993
(Incorporated by reference to Exhibit 10.4 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.5 Product Manufacturing Agreement between Snow Runner (USA) Inc. *
and DalBello Sport S.R.L. effective September 3, 1993
(Incorporated by reference to Exhibit 10.5 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.6 Product Development Agreement between Snow Runner (USA) Inc. and *
DalBello Sport S.R.L. effective September 3, 1993 (Incorporated
by reference to Exhibit 10.6 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.7 Termination and Release Agreement between DalBello Sport S.R.L. *
and Snow Runner (USA) Inc. effective September 3, 1993
(Incorporated by reference to Exhibit 10.7 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.8 Termination and Release Agreement between DalBello Sport S.R.L. *
and Snow Runner (Properties) Inc. effective September 3, 1993
(Incorporated by reference to Exhibit 10.8 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.9 Inter-company Assignment and Bill of Sale between Snow Runner *
(USA) Inc. and Snow Runner (Properties) Inc. effective September
3, 1993 (Incorporated by reference to Exhibit 10.9 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
10.10 License Agreement between Snow Runner (Properties) Inc. and Snow *
Runner (USA) Inc. effective September 3, 1993 (Incorporated by
reference to Exhibit 10.10 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.11 License Agreement between Hannes Jacob and Allrounder *
Realization SA and Snow Runner (USA) Inc. dated June 26, 1992
(Incorporated by reference to Exhibit 10.11 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.12 Amended and Restated Distribution Agreement between Snow Runner *
(USA) Inc. and DalBello Sport S.R.L. dated June 26, 1992
(Incorporated by reference to Exhibit 10.12 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
</TABLE>
<PAGE> 33
<TABLE>
<S> <C> <C>
10.13 Stock Purchase Agreement between Snow Runner (USA) Inc. and *
HAIFinance Corp. dated July 25, 1992 (Incorporated by reference
to Exhibit 10.13 to Registration Statement on Form SB-2,
Registration No. 33-74240C).
10.14 Assignment and Assumption Agreement between Snow Runner (USA) *
Ltd. and Snow Runner Holdings, Inc. dated July 23, 1992
(Incorporated by reference to Exhibit 10.14 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.15 SnowRunner, Inc. Stock Option Plan effective January 1994 *
(Incorporated by reference to Exhibit 10.15 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.16 Lease between the Company and Midtown Commons dated September *
29, 1993 (Incorporated by reference to Exhibit 10.16 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
10.17 Lease between the Company and McCann Developments dated *
September 29, 1993 (Incorporated by reference to Exhibit 10.17
to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.18 Shareholder Agreement by and among Snow Runner (USA) Inc., Nigel *
Alexander, Steven Clarke, Harbour Settlement, HAIFinance Corp.
dated July 28, 1992 (Incorporated by reference to Exhibit 10.18
to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.19 Reorganization Agreement by and among Snow Runner (USA) Ltd., *
Snow Runner Holdings, Inc., Nigel Alexander, Steven Clarke and
Harbour Settlement dated July 23, 1992 (Incorporated by
reference to Exhibit 10.19 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.20 Amendment to Limited Partnership Agreement by and among Snow *
Runner Holdings, Inc., Nigel Alexander, Steven Clarke and
Harbour Settlement dated July 23, 1992 (Incorporated by
reference to Exhibit 10.20 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.21 Option Agreement by and between Nigel Alexander and Steven *
Clarke dated July 28, 1992 (Incorporated by reference to Exhibit
10.21 to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.22 Employment Agreement dated January 1, 1994 for John Sundet *
(Incorporated by reference to Exhibit 10.22 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.23 Employment Agreement dated January 1, 1994 for Nigel Alexander *
(Incorporated by reference to Exhibit 10.23 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
</TABLE>
<PAGE> 34
<TABLE>
<S> <C> <C>
10.24 Employment Agreement dated January 1, 1994 for Mary Horwath *
(Incorporated by reference to Exhibit 10.24 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.25 Employment Agreement dated January 1, 1994 for Steven Clarke *
(Incorporated by reference to Exhibit 10.25 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.26 Loan Agreement by and between Snow Runner (USA), Inc. and *
HAIFinance Corp. dated January 7, 1994 (Incorporated by
reference to Exhibit 10.26 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.27 Term Note to HAIFinance Corp. dated January 7, 1994 *
(Incorporated by reference to Exhibit 10.27 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.28 Existing Loans Note to HAIFinance Corp. dated January 7, 1994 *
(Incorporated by reference to Exhibit 10.28 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.29 Bridge Financing Agreement by and between Snow Runner (USA), *
Inc. and HAIFinance Corp. dated January 7, 1994, with
Registration Rights Agreement (Incorporated by reference to
Exhibit 10.29 to Registration Statement on Form SB-2,
Registration No. 33-74240C).
10.30 Security Agreement dated January 7, 1994 made by Snow Runner *
(USA), Inc. to HAIFinance Corp. (Incorporated by reference to
Exhibit 10.30 to Registration Statement on Form SB-2,
Registration No. 33-74240C).
10.31 Subordinated Promissory Note dated September 16, 1993 to Seaton *
Place Nominees, Ltd. (Incorporated by reference to Exhibit 10.31
to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.32 Amended and Restated Shareholders Agreement dated January 7, *
1994 by and among Snow Runner (USA) Inc., Nigel Alexander,
Steven Clarke, Harbour Settlement, HAIFinance Corp.
(Incorporated by reference to Exhibit 10.32 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.33 Credit and Security Agreement dated June 30,1995 between the *
Company and Norwest Credit, Inc.
10.34 Revolving Note for $2,000,000 dated June 30, 1995 between the *
Company and Norwest Credit, Inc.
10.35 Patent and Trademark Security Agreement dated June 30, 1995 *
between the Company and Norwest Credit, Inc.
10.36 Consulting Agreement with Douglas Ellenoff dated January 1, 1995. *
10.37 Consulting Agreement with Stephen C. Martin dated January 1, *
1995.
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C>
10.38 Market Representative Agreement, dated July 24, 1996, between *
the Company and Japan Business Link, Inc.
10.39 Agency Services Agreement, dated July 26, 1996, between the *
Company and Williams Television Time, Inc.
10.40 Telesales Service Agreement, dated August 12, 1996, between the *
Company and Icon Health & Fitness, Inc.
10.41 Agreement, dated September 18, 1996, between the Company and *
Distribution Systems and Services Corporation
10.42 Agreement with Berghaus Limited dated
13 Portions of 1996 Annual Report to Shareholders *
21 List of Subsidiaries (Incorporated by reference to Exhibit 21 to Registration *
Statement on Form SB-2, Registration No. 33-74240C).
27 Financial Data Schedule
</TABLE>
---------------------
* Incorporated by reference to a previously filed exhibit or report.
<PAGE> 1
EXHIBIT 3.3
Articles of Incorporation for the State of Nevada
ARTICLES OF INCORPORATION
OF
Xdogs.com, Inc.
Pursuant to the provisions of the Nevada Private Corporations Act (Ch. 78,
NRS, as amended), the undersigned Corporation hereby adopts the following
Articles of Incorporation:
FIRST. The name of the Corporation is Xdogs.com, Inc.
SECOND. OFFICE: Its principal office in the State of Nevada is located at
Suite 3, 251 Jeanell Drive, Carson City, Nevada 89703. The name and address of
its resident agent is Corporate Advisory Services, Inc., Suite 3, 251 Jeanell
Drive, Carson City, Nevada 89703.
THIRD. PURPOSE: The nature of the business, or objects or purposes proposed
to be transacted, promoted or carried on are:
To engage in any lawful activity and to manufacture, purchase or otherwise
acquire, invest in, own, mortgage, pledge, sell, assign and transfer or
otherwise dispose of, trade, deal in and deal with minerals, goods, wares and
merchandise and personal property of every class and description.
To hold, purchase and convey real and personal estate and mortgage or lease
any such real and personal estate with its franchises and to take the same by
devise or bequest.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
<PAGE> 2
To acquire, hold, use, sell, assign, lease, grant licenses in respect of,
mortgage, or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trademarks and trade names, relating to,
or useful in connection with, works of art or any other business of this
Corporation. To guarantee, purchase, hold, sell, assign, transfer, mortgage,
pledge or otherwise dispose of the shares of the capital stock of, or any bonds,
securities or evidences of the indebtedness created by any other corporation or
corporations of this state, or any other state or government, and while owner of
such stock, bonds, securities or evidences of indebtedness, to exercise all the
rights, powers and privileges of ownership, including the right to vote, if any.
To borrow money and contract debts when necessary for the transaction of
its business, or for the exercise of its corporate rights, privileges or
franchises, or for any other lawful purpose of its incorporation; to issue
bonds, promissory notes, bills of exchange, debentures, and other obligations
and evidences of indebtedness, payable at specified time or times, or payable
upon the happening of a specified event or events, whether secured by mortgage,
pledge, or otherwise, or unsecured, for money borrowed, or in payment for
property purchased, or acquired, or for any other lawful objects.
To purchase, hold, sell and transfer shares of its own capital stock, and
use therefor its capital, capital surplus, surplus, or other property or funds;
provided it shall not use its funds or property for the purchase of its own
shares of capital stock when
2
<PAGE> 3
such use would cause any impairment of its capital; and provided further, that
shares of its own capital stock belonging to it shall not be voted upon,
directly or indirectly, nor counted as outstanding, for the purpose of computing
any stockholders' quorum or vote.
To conduct business, have one or more offices, and hold, purchase, mortgage
and convey real and personal property in this state, and in any of the several
states, territories, possessions and dependencies of the United States, the
District of Columbia, and in any foreign countries.
To do all and everything necessary and proper for the accomplishment of the
objects hereinbefore enumerated or necessary or incidental to the protection and
benefit of the corporation, and, in general, to carry on any lawful business
necessary or incidental to the attainment of the objects of the corporation,
whether or not such business is similar in nature to the objects hereinbefore
set forth.
The objects and purposes specified in the foregoing clauses shall, except
where otherwise expressed, be in no way limited or restricted by reference to or
inference from the terms of any other clause in these articles of incorporation
but shall be regarded as independent objects and purposes.
FOURTH. CAPITAL STOCK: The amount of the total authorized capital stock of
the corporation is ONE HUNDRED TWENTY THOUSAND DOLLARS ($120,000) consisting of
Twenty Million (20,000,000) shares of one class of common stock of the par value
of One Mill ($.001) each; and One Million (1,000,000) shares of preferred stock
of the par value of Ten Cents ($.10) each, to have such classes, series and
preferences as the Board of Directors may determine from time to time.
3
<PAGE> 4
Any and all shares issued by the Corporation will be issued in registered
form, as may be directed by the Board of Directors from time to time, and the
fixed consideration for which has been paid and delivered shall be deemed fully
paid and not liable for any further call or assessment thereon, and the holders
of such stock shall not be liable for any further assessments.
There shall be no preemptive rights in connection with the acquisition of
any capital stock of the Corporation.
FIFTH. DIRECTORS: The governing board of this Corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the by-laws of this
Corporation, provided that the number of directors shall not be reduced to less
than one (1).
The name and post office address of the first board of directors, which
shall be one (1) in number, is as follows:
<TABLE>
<CAPTION>
NAME POST OFFICE ADDRESSES
- ---- ---------------------
<S> <C>
Kent Rodriguez 527 Marquette Ave.
Suite 2130
Minneapolis, MN 55402
Craig Avery 527 Marquette Ave.
Suite 2130
Minneapolis, MN 55402
Bryant Loving 527 Marquette Ave.
Suite 2130
Minneapolis, MN 55402
Robert Corliss 527 Marquette Ave.
Suite 2130
Minneapolis, MN 55402
Douglas Barton 527 Marquette Ave.
Suite 2130
Minneapolis, MN 55402
</TABLE>
4
<PAGE> 5
SIXTH. INCORPORATORS: The name and post office address of the incorporator
signing the articles of incorporation is as follows:
David J. Wagner 8400 E. Prentice Ave.
Penthouse Suite
Englewood, Colorado 80111
SEVENTH. TERM: The Corporation is to have perpetual existence.
EIGHTH. AUTHORIZATIONS: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
Subject to the by-laws, to make, alter or amend the by-laws of the
Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and cause to be executed mortgages and liens
upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole board, to designate one (1)
or more committees, each committee to consist of one (1) or more of the
directors of the Corporation, which, to the extent provided in the resolution or
in the by-laws of the Corporation, shall have and may exercise the powers of the
board of
5
<PAGE> 6
directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may be
stated in the by-laws of the Corporation or as may be determined from time to
time by resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a stockholders' meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the board of directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
Corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of directors deems expedient, and for the best
interest of the Corporation.
NINTH. MEETINGS: Meetings of stockholders may be held outside the State of
Nevada, if the by-laws provide. The books of the Corporation may be kept
(subject to any provision contained in the statues) outside the State of Nevada
at such place or places as may be designated from time to time by the board of
directors or in the by-laws of the Corporation.
TENTH. AMENDMENTS: This Corporation reserves the right to amend, alter,
change or repeal any provision contained in the articles of incorporation by
majority vote of the shareholders and in the manner now or hereafter prescribed
by statute, or by the articles of incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ELEVENTH. VOTING: There shall be no cumulative voting permitted in any
shareholder election of the Corporation.
6
<PAGE> 7
TWELFTH. INDEMNIFICATION: The Corporation shall indemnify and hold harmless
the officers and directors of the Corporation from any and all liabilities or
claims to the fullest extent now, or hereafter from time to time, permitted
pursuant to the General Corporation Law of the State of Nevada.
I, THE UNDERSIGNED, being the incorporator hereinbefore named for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Nevada, do make and file these articles of incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 22nd day of March, 1999.
//Signed//
--------------------------------------------------
DAVID J. WAGNER
STATE OF COLORADO )
) Section
COUNTY OF ARAPAHOE )
On this 22nd day of March, 1999, before me, a Notary Public, personally
appeared DAVID J. WAGNER, who acknowledged that he executed the above
instrument.
//Signed//
--------------------------------------------------
NOTARY PUBLIC
My Commission Expires:7-15-2000
7
<PAGE> 8
EXHIBIT 3.4
Articles of Merger for the Colorado Corporation and the Nevada Corporation
ARTICLES OF MERGER
OF
THE SLED DOGS COMPANY., a Colorado Corporation
INTO
Xdogs.com, Inc., a Nevada Corporation
THESE ARTICLES OF MERGER (the "Articles") are made this 6th day of May,
1999, by and between THE SLED DOGS COMPANY, a Colorado corporation (hereinafter
referred to as the "Non-surviving Corporation") and Xdogs.com, Inc. a Nevada
corporation (hereinafter the "Surviving Corporation"), pursuant to the
respective portions of Chapter 92A of the Nevada Private Corporations Act.
I. The Non-surviving Corporation shall merge with the Surviving Corporation
and upon the effective date of such merger, as hereinafter specified, the
Non-surviving Corporation shall cease to exist and shall no longer exercise its
powers, privileges and franchises subject to the laws of the State of Colorado,
its state of incorporation. The Surviving Corporation shall succeed to the
property and assets of and exercise all the powers, privileges and franchises of
the Non-surviving Corporation and shall assume and be liable for all of the
debts and liabilities, if any, of the Non-surviving Corporation.
II. The merger shall become effective as of May 6, 1999.
III. Immediately prior to the effective date of the merger contemplated
herein, the Non-surviving Corporation had 6,797,741 shares of its common stock
issued and outstanding. Immediately prior to the date of the merger contemplated
herein, the Surviving Corporation had one share of its common stock issued and
outstanding.
IV. As a result of the merger, all outstanding and issued shares of the
Non-surviving Corporation's common stock shall be exchanged for the exact amount
of shares of the Surviving Corporation.
V. A copy of the Agreement and Plan of Merger is attached hereto as Exhibit
A and incorporated herein by reference as though its provisions were fully set
forth herein.
VI. The Plan of Merger was submitted to the shareholders of the
Non-Surviving Corporation and approved by a sufficient number of shareholders of
the Non-Surviving Corporation on May 6, 1999 by a total of 4,275,047 shares out
of a total of 6,797,741 shares entitled to vote thereon, with a total of 4,048
shares voting against the proposal and 854 shares voting to abstain. The sole
shareholder of the Surviving Corporation unanimously approved the Plan on May 6,
1999.
<PAGE> 9
The undersigned respective President and Secretary of the Non-surviving
Corporation and of the Surviving Corporation each hereby acknowledges that the
execution of these Articles of Merger is the act and deed of the Corporation on
whose behalf he executes these Articles and that the facts stated herein are
true.
THE SLED DOGS COMPANY
a Colorado corporation
By: ///Signed/// By:///Signed///
--------------------------- ---------------------------
President Secretary
STATE OF MINNESOTA )
) Section
COUNTY OF Henn )
-----------------
On this 21st day of May , 1999, before me, a Notary Public, personally
appeared Kent Rodriguez and Aaron Killander who acknowledged that they are the
respective President and Secretary of THE SLED DOGS COMPANY, and that each has
executed the above instrument
///Signed///
---------------------------
NOTARY PUBLIC
My Commission Expires: Jan 31, 2000
Xdogs.com, Inc.
a Nevada corporation
By: ///Signed/// By:///Signed///
--------------------------- ---------------------------
President Secretary
STATE OF MINNESOTA )
) Section
COUNTY OF Henn )
-----------------
On this 21st day of May, 1999, before me, a Notary Public, personally
appeared Kent Rodriguez and Aaron Killander who acknowledged that they are the
respective President and Secretary of THE SLED DOGS COMPANY, and that each has
executed the above instrument
///Signed///
---------------------------
NOTARY PUBLIC
My Commission Expires: Jan 31, 2000
2
<PAGE> 10
AGREEMENT AND PLAN OF MERGER
OF
THE SLED DOGS COMPANY, a Colorado corporation
INTO
Xdogs.com, Inc., a Nevada corporation
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 6th day of
May, 1999 by and between THE SLED DOGS COMPANY, a Colorado corporation
(hereinafter referred to as the "Non-surviving Corporation") and Xdogs.com,
Inc., a Nevada corporation (hereinafter referred to as the "Surviving
Corporation"). Hereinafter the Non-surviving Corporation and Surviving
Corporation shall be referred to as the "Corporations".
WHEREAS, the respective Corporations desire to merge;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
I. Pursuant to the Nevada Private Corporations Act, the Non-surviving
Corporation shall merge with the Surviving Corporation and upon the effective
date of such merger, the Non-surviving Corporation shall cease to exist and
shall no longer exercise its powers, privileges and franchises subject to the
laws of the State of Colorado, its state of incorporation. The Surviving
Corporation shall succeed to the property and assets of and exercise all powers,
privileges and franchises of the Non-surviving Corporation and shall assume and
be liable for all of the debts and liabilities of the Non-surviving Corporation.
II. The Non-surviving Corporation's assets and liabilities shall otherwise
become the assets and liabilities of the Surviving Corporation.
III. The officers of the Corporations are authorized and directed to take
all appropriate and necessary action to dissolve the Non-surviving Corporation
under applicable law.
IV. This Agreement and Plan of Merger shall become effective as of May 6,
1999.
V. The state of incorporation of the Surviving Corporation after the
effective date of the merger shall be the State of Nevada.
VI. The officers and directors of the Surviving Corporation after the
effective date of the merger shall be the same officers and directors as prior
to the effective date of the merger.
VII. The Surviving Corporation' s name after the merger's effective date
shall remain the same.
VIII. The Articles of Incorporation of the Surviving Corporation shall
serve as the Articles of Incorporation for the Surviving Corporation and
Non-surviving Corporation as merged.
<PAGE> 11
IX. The authorized capital shares of the Surviving Corporation, whether
issued or unissued on the effective date of the merger, shall remain the same
and not be converted into a different number or class of shares as a result of
the merger.
X. Immediately prior to the effective date of the merger contemplated
herein, the Non-surviving Corporation had 6,797,741 shares of its common stock
issued and outstanding. Immediately prior to the date of the merger contemplated
herein, the Surviving Corporation had one share of its common stock issued and
outstanding.
XI. As a result of the merger, all outstanding and issued shares of the
Non-surviving Corporation's common stock shall be exchanged for all of the
outstanding and issued shares of the Surviving Corporation. The Non-surviving
Corporation's shares will then be canceled.
XII. The Non-surviving and Surviving Corporation shall take, or cause to be
taken, all actions necessary, proper or advisable under the laws of the State of
Nevada to consummate and make effective the merger.
XIII. It is intended that the transaction described herein qualifies as a
change of domicile within the definition of Section 368 of the Internal Revenue
Code of 1986, as amended.
The undersigned President and Secretary of each of the parties hereto
hereby acknowledge that the execution of this Agreement is the act and deed of
the Corporation on whose behalf each executes this Agreement, and that the facts
stated herein are true.
THE SLED DOGS COMPANY
a Colorado corporation
By: ///Signed/// By:///Signed///
------------------------------- -------------------------------
President Secretary
Xdogs.com, Inc.
a Nevada corporation
By: ///Signed/// By:///Signed///
------------------------------- -------------------------------
President Secretary
2
<PAGE> 1
EXHIBIT 3.4
Articles of Merger for the Colorado Corporation and the Nevada Corporation
ARTICLES OF MERGER
OF
THE SLED DOGS COMPANY., a Colorado Corporation
INTO
Xdogs.com, Inc., a Nevada Corporation
THESE ARTICLES OF MERGER (the "Articles") are made this 6th day of May,
1999, by and between THE SLED DOGS COMPANY, a Colorado corporation (hereinafter
referred to as the "Non-surviving Corporation") and Xdogs.com, Inc. a Nevada
corporation (hereinafter the "Surviving Corporation"), pursuant to the
respective portions of Chapter 92A of the Nevada Private Corporations Act.
I. The Non-surviving Corporation shall merge with the Surviving Corporation
and upon the effective date of such merger, as hereinafter specified, the
Non-surviving Corporation shall cease to exist and shall no longer exercise its
powers, privileges and franchises subject to the laws of the State of Colorado,
its state of incorporation. The Surviving Corporation shall succeed to the
property and assets of and exercise all the powers, privileges and franchises of
the Non-surviving Corporation and shall assume and be liable for all of the
debts and liabilities, if any, of the Non-surviving Corporation.
II. The merger shall become effective as of May 6, 1999.
III. Immediately prior to the effective date of the merger contemplated
herein, the Non-surviving Corporation had 6,797,741 shares of its common stock
issued and outstanding. Immediately prior to the date of the merger contemplated
herein, the Surviving Corporation had one share of its common stock issued and
outstanding.
IV. As a result of the merger, all outstanding and issued shares of the
Non-surviving Corporation's common stock shall be exchanged for the exact amount
of shares of the Surviving Corporation.
V. A copy of the Agreement and Plan of Merger is attached hereto as Exhibit
A and incorporated herein by reference as though its provisions were fully set
forth herein.
VI. The Plan of Merger was submitted to the shareholders of the
Non-Surviving Corporation and approved by a sufficient number of shareholders of
the Non-Surviving Corporation on May 6, 1999 by a total of 4,275,047 shares out
of a total of 6,797,741 shares entitled to vote thereon, with a total of 4,048
shares voting against the proposal and 854 shares voting to abstain. The sole
shareholder of the Surviving Corporation unanimously approved the Plan on May 6,
1999.
<PAGE> 2
The undersigned respective President and Secretary of the Non-surviving
Corporation and of the Surviving Corporation each hereby acknowledges that the
execution of these Articles of Merger is the act and deed of the Corporation on
whose behalf he executes these Articles and that the facts stated herein are
true.
THE SLED DOGS COMPANY
a Colorado corporation
By: ///Signed/// By:///Signed///
--------------------------- ---------------------------
President Secretary
STATE OF MINNESOTA )
) Section
COUNTY OF Henn )
-----------------
On this 21st day of May , 1999, before me, a Notary Public, personally
appeared Kent Rodriguez and Aaron Killander who acknowledged that they are the
respective President and Secretary of THE SLED DOGS COMPANY, and that each has
executed the above instrument
///Signed///
---------------------------
NOTARY PUBLIC
My Commission Expires: Jan 31, 2000
Xdogs.com, Inc.
a Nevada corporation
By: ///Signed/// By:///Signed///
--------------------------- ---------------------------
President Secretary
STATE OF MINNESOTA )
) Section
COUNTY OF Henn )
-----------------
On this 21st day of May, 1999, before me, a Notary Public, personally
appeared Kent Rodriguez and Aaron Killander who acknowledged that they are the
respective President and Secretary of THE SLED DOGS COMPANY, and that each has
executed the above instrument
///Signed///
---------------------------
NOTARY PUBLIC
My Commission Expires: Jan 31, 2000
2
<PAGE> 3
AGREEMENT AND PLAN OF MERGER
OF
THE SLED DOGS COMPANY, a Colorado corporation
INTO
Xdogs.com, Inc., a Nevada corporation
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 6th day of
May, 1999 by and between THE SLED DOGS COMPANY, a Colorado corporation
(hereinafter referred to as the "Non-surviving Corporation") and Xdogs.com,
Inc., a Nevada corporation (hereinafter referred to as the "Surviving
Corporation"). Hereinafter the Non-surviving Corporation and Surviving
Corporation shall be referred to as the "Corporations".
WHEREAS, the respective Corporations desire to merge;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
I. Pursuant to the Nevada Private Corporations Act, the Non-surviving
Corporation shall merge with the Surviving Corporation and upon the effective
date of such merger, the Non-surviving Corporation shall cease to exist and
shall no longer exercise its powers, privileges and franchises subject to the
laws of the State of Colorado, its state of incorporation. The Surviving
Corporation shall succeed to the property and assets of and exercise all powers,
privileges and franchises of the Non-surviving Corporation and shall assume and
be liable for all of the debts and liabilities of the Non-surviving Corporation.
II. The Non-surviving Corporation's assets and liabilities shall otherwise
become the assets and liabilities of the Surviving Corporation.
III. The officers of the Corporations are authorized and directed to take
all appropriate and necessary action to dissolve the Non-surviving Corporation
under applicable law.
IV. This Agreement and Plan of Merger shall become effective as of May 6,
1999.
V. The state of incorporation of the Surviving Corporation after the
effective date of the merger shall be the State of Nevada.
VI. The officers and directors of the Surviving Corporation after the
effective date of the merger shall be the same officers and directors as prior
to the effective date of the merger.
VII. The Surviving Corporation' s name after the merger's effective date
shall remain the same.
VIII. The Articles of Incorporation of the Surviving Corporation shall
serve as the Articles of Incorporation for the Surviving Corporation and
Non-surviving Corporation as merged.
<PAGE> 4
IX. The authorized capital shares of the Surviving Corporation, whether
issued or unissued on the effective date of the merger, shall remain the same
and not be converted into a different number or class of shares as a result of
the merger.
X. Immediately prior to the effective date of the merger contemplated
herein, the Non-surviving Corporation had 6,797,741 shares of its common stock
issued and outstanding. Immediately prior to the date of the merger contemplated
herein, the Surviving Corporation had one share of its common stock issued and
outstanding.
XI. As a result of the merger, all outstanding and issued shares of the
Non-surviving Corporation's common stock shall be exchanged for all of the
outstanding and issued shares of the Surviving Corporation. The Non-surviving
Corporation's shares will then be canceled.
XII. The Non-surviving and Surviving Corporation shall take, or cause to be
taken, all actions necessary, proper or advisable under the laws of the State of
Nevada to consummate and make effective the merger.
XIII. It is intended that the transaction described herein qualifies as a
change of domicile within the definition of Section 368 of the Internal Revenue
Code of 1986, as amended.
The undersigned President and Secretary of each of the parties hereto
hereby acknowledge that the execution of this Agreement is the act and deed of
the Corporation on whose behalf each executes this Agreement, and that the facts
stated herein are true.
THE SLED DOGS COMPANY
a Colorado corporation
By: ///Signed/// By:///Signed///
------------------------------- -------------------------------
President Secretary
Xdogs.com, Inc.
a Nevada corporation
By: ///Signed/// By:///Signed///
------------------------------- -------------------------------
President Secretary
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EXHIBIT 3.5
Bylaws of the Nevada Corporation
BYLAWS
OF
Xdogs.com, Inc. Inc.
as of March 31, 1999
ARTICLE I
OFFICES
The principal office of the Corporation shall initially be located at 527
Marquette Ave., Suite 2130, Minneapolis, MN 55402, and other offices at such
places within or without the State of Nevada and as the Board of Directors may
from time to time establish.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be located at 251 Jeanell
Drive, Suite 3, Carson City, Nevada 89703, and the registered agent shall be
Corporate Advisory Service, Inc. The Board of Directors may, by appropriate
resolution from time to time, change the registered office and/or agent.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the Stockholders for the
election of Directors and for the transaction of such other business as may
properly come before such meeting shall be held at such time and date as the
Board of Directors shall designate from time to time by resolution duly adopted.
Section 2. Special Meetings. A special meeting of the Stockholders
may be called at any time by the President, the Chairman of the Board of
Directors, or the Board of Directors, and shall be called by the President or
the Chairman of the Board of Directors upon the written request of Stockholders
of record holding in the aggregate fifty-one percent (51%) or more of the
outstanding shares of stock of the Corporation entitled to vote, such written
request to state the purpose or purposes of the meeting and to be delivered to
the President or the Chairman of the Board of Directors.
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Section 3. Place of Meetings. All meetings of the Stockholders shall be
held at the principal office of the Corporation or at such other place, within
or without the State of Nevada, as shall be determined from time to time by the
Board of Directors or the Stockholders of the Corporation.
Section 4. Change in Time or Place of Meetings. The time and place
specified in this Article III for annual meetings shall not be changed within
thirty (30) days next before the day on which such meeting is to be held. A
notice of any such change shall be given to each Stockholder at least twenty
(20) days before the meeting, in person or by letter mailed to his last known
post office address.
Section 5. Notice of Meetings. Written notice, stating the place, day and
hour of the meeting, and in the case of a special meeting, the purposes for
which the meeting is called, shall be given by or under the direction of either
the President, the Chairman of the Board of Directors, or Secretary at least ten
(10) days but not more than fifty (50) days before the date fixed for such
meeting. Notice shall be given to each Stockholder entitled to vote at such
meeting, of record at the close of business on the day fixed by the Board of
Directors as a record date for the determination of the Stockholders entitled to
vote at such meeting, or if no such date has been fixed, of record at the close
of business on the day next preceding the day on which notice is given. Notice
shall be in writing and shall be delivered to each Stockholder in person or sent
by United States Mail, postage prepaid, addressed as set forth on the books of
the Corporation. A waiver of such notice, in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to such notice. Except
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as otherwise required by statute, notice of any adjourned meeting of the
Stockholders shall not be required.
Section 6. Quorum. Except as may otherwise be required by statute, the
presence at any meeting, in person or by proxy, of the holders of record of
one-third of the shares then issued and outstanding and entitled to vote shall
be necessary and sufficient to constitute a quorum for the transaction of
business. In the absence of a quorum, a majority in interest of the Stockholders
entitled to vote, present in person or by proxy, or, if no Stockholder entitled
to vote is present in person or by proxy, any Officer entitled to preside or act
as secretary of such meeting, may adjourn the meeting from time to time for a
period not exceeding sixty (60) days in any one case. At any such adjourned
meeting at which a quorum may be present, any business may be transacted which
might have been transacted at the meeting as originally called. The Stockholders
present at a duly organized meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough Stockholders to leave less
than a quorum.
Section 7. Voting. Except as may otherwise be provided by statute or these
Bylaws, including the provisions of Section 4 of Article VIII hereof, each
Stockholder shall at every meeting of the Stockholders be entitled to one (1)
vote, in person or by proxy, for each share of the voting capital stock held by
such Stockholder. However, no proxy shall be voted on after eleven (11) months
from its date, unless the proxy provides for a longer period. At all meetings of
the Stockholders, except as may otherwise be required by statute, the Articles
of Incorporation of this Corporation, or these Bylaws, if a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the Stockholders.
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Persons holding stock in a fiduciary capacity shall be entitled to vote the
shares so held, and persons whose stock is pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the Corporation he shall
have expressly empowered the pledgee to vote thereon, in which case only the
pledgee or his proxy may represent said stock and vote thereon.
Shares of the capital stock of the Corporation belonging to the Corporation
shall not be voted directly or indirectly.
Section 8. Consent of Stockholders in Lieu of Meeting. Whenever the vote of
Stockholders at a meeting thereof is required or permitted to be taken in
connection with any corporate action, by any provision of statute, these Bylaws,
or the Articles of Incorporation, the meeting and vote of Stockholders may be
dispensed with if all the Stockholders who would have been entitled to vote upon
the action if such meeting were held shall consent in writing to such corporate
action being taken.
Section 9. Telephonic Meeting. Any meeting held under this Article III may
be held by telephone, in accordance with the provisions of the Nevada Private
Corporations Act.
Section 10. List of Stockholders Entitled to Vote. The Officer who has
charge of the stock ledger of the Corporation shall prepare and make, at least
ten (10) days before every annual meeting, a complete list of the Stockholders
entitled to vote at such meeting, arranged in alphabetical order, and showing
the address of each Stockholder and the number of shares registered in the name
of each Stockholder. Such list shall be open to the examination of any
Stockholder during ordinary business hours, for
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a period of at least ten (10) days prior to election, either at a place within
the city, town or village where the election is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where said meeting is to be held. The list shall be produced and kept at the
time and place of election during the whole time thereof and be subject to the
inspection of any Stockholder who may be present.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by the Board of Directors, except as otherwise provided by
statute, the Articles of Incorporation of the Corporation, or these Bylaws.
Section 2. Number and Qualifications. The Board of Directors shall consist
of at least one (1) member, and not more than nine (9) members, as shall be
designated by the Board of Directors from time to time, and in the absence of
such designation, the Board of Directors shall consist of one (1) member. This
number may be changed from time to time by resolution of the Board of Directors.
Directors need not be residents of the State of Nevada or Stockholders of the
Corporation. Directors shall be natural persons of the age of eighteen (18)
years or older.
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Section 3. Election and Term of Office. Members of the initial Board of
Directors of the Corporation shall hold office until the first annual meeting of
Stockholders. At the first annual meeting of Stockholders, and at each annual
meeting thereafter, the Stockholders shall elect Directors to hold office until
the next succeeding annual meeting. Each Director shall hold office until his
successor is duly elected and qualified, unless sooner displaced. Election of
Directors need not be by ballot.
Section 4. Compensation. The Board of Directors may provide by resolution
that the Corporation shall allow a fixed sum and reimbursement of expenses for
attendance at meetings of the Board of Directors and for other services rendered
on behalf of the Corporation. Any Director of the Corporation may also serve the
Corporation in any other capacity, and receive compensation therefor in any
form, as the same may be determined by the Board in accordance with these
Bylaws.
Section 5. Removals and Resignations. Except as may otherwise be provided
by statute, the Stockholders may, at any special meeting called for the purpose,
by a vote of the holders of the majority of the shares then entitled to vote at
an election of Directors, remove any or all Directors from office, with or
without cause.
A Director may resign at any time by giving written notice to either the
Board of Directors, the President, the Chairman of the Board of Directors, or
the Secretary of the Corporation. The resignation shall take effect immediately
upon the receipt of the notice, or at any later period of time specified
therein. The acceptance of such resignation shall not be necessary to make it
effective, unless the resignation requires acceptance for it to be effective.
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Section 6. Vacancies. Any vacancy occurring in the office of a Director,
whether by reason of an increase in the number of directorships or otherwise,
may be filled by a majority of the Directors then in office, though less than a
quorum. A Director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office, unless sooner displaced.
When one or more Directors resign from the Board, effective at a future
date, a majority of the Directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective.
Each Director so chosen shall hold office as herein provided in the filling of
other vacancies.
Section 7. Committees. By resolution adopted by a majority of the Board of
Directors, the Board may designate one or more committees, including an
Executive Committee, each consisting of one (1) or more Directors. The Board of
Directors may designate one (1) or more Directors as alternate members of any
such committee, who may replace any absent or disqualified member at any meeting
of such committee. Any such committee, to the extent provided in the resolution
and except as may otherwise be provided by statute, shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers which may require the same. The designation of such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or him by law. If there be more than two (2) members on such committee,
a majority of any such committee may determine its action and may fix the time
and place of its meetings, unless provided otherwise by the Board. If there
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be only two (2) members, unanimity of action shall be required. Committee action
may be by way of a written consent signed by all committee members. The Board
shall have the power at any time to fill vacancies on committees, to discharge
or abolish any such committee, and to change the size of any such committee.
Except as otherwise prescribed by the Board of Directors, each committee
may adopt such rules and regulations governing its proceedings, quorum, and
manner of acting as it shall deem proper and desirable.
Each such committee shall keep a written record of its acts and proceedings
and shall submit such record to the Board of Directors. Failure to submit such
record, or failure of the Board to approve any action indicated therein will
not, however, invalidate such action to the extent it has been carried out by
the Corporation prior to the time the record of such action was, or should have
been, submitted to the Board of Directors as herein provided.
ARTICLE V
MEETINGS OF BOARD OF DIRECTORS
Section 1. Annual Meetings. The Board of Directors shall meet each year
immediately after the annual meeting of the Stockholders for the purpose of
organization, election of Officers, and consideration of any other business that
may properly be brought before the meeting. No notice of any kind to either old
or new members of the Board of Directors for such annual meeting shall be
necessary.
Section 2. Regular Meetings. The Board of Directors from time to time may
provide by resolution for the holding of regular
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<PAGE> 9
meetings and fix the time and place of such meetings. Regular meetings may be
held within or without the State of Nevada. The Board need not give notice of
regular meetings provided that the Board promptly sends notice of any change in
the time or place of such meetings to each Director not present at the meeting
at which such change was made.
Section 3. Special Meetings. The Board may hold special meetings of the
Board of Directors at any place, either within or without the State of Nevada,
at any time when called by the President, the Chairman of the Board of
Directors, or two or more Directors. Notice of the time and place thereof shall
be given to and received by each Director at least three (3) days before the
meeting. A waiver of such notice in writing, signed by the person or persons
entitled to said notice, either before or after the time stated therein, shall
be deemed equivalent to such notice. Notice of any adjourned special meeting of
the Board of Directors need not given.
Section 4. Quorum. The presence, at any meeting, of a majority of the total
number of Directors shall be necessary and sufficient to constitute a quorum for
the transaction of business. Except as otherwise required by statute, the act of
a majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors; however, if only two (2) Directors
are present, unanimity of action shall be required. In the absence of a quorum,
a majority of the Directors present at the time and place of any meeting may
adjourn such meeting from time to time until a quorum is present.
Section 5. Consent of Directors in Lieu of Meeting. Unless otherwise
restricted by statute, the Board may take any action required or permitted to be
taken at any meeting of the Board of
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Directors without a meeting, if a written consent thereto is signed by all
members of the Board, and such written consent is filed with the minutes of
proceedings of the Board.
Section 6. Telephonic Meeting. Any meeting held under this Article V may be
held by telephone, in accordance with the provisions of the Nevada Private
Corporations Act.
Section 7. Attendance Constitutes Waiver. Attendance of a Director at a
meeting constitutes a waiver of any notice to which the Director may otherwise
have been entitled, except where a Director attends a meeting for the express
purpose of objecting the transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE VI
OFFICERS
Section 1. Number. The Corporation shall have a Chairman of the Board, a
President, one or more Vice Presidents as the Board may from time to time elect,
a Secretary and a Treasurer, and such other Officers and Agents as may be deemed
necessary. One person may hold any two offices.
Section 2. Election, Term of Office, and Qualifications. The Board shall
choose the Officers specifically designated in Section 1 of this Article VI at
the annual meeting of the Board of Directors and such Officers shall hold office
until their successors are chosen and qualified, unless sooner displaced.
Officers need not be Directors of the Corporation.
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Section 3. Subordinate Officers. The Board of Directors, from time to time,
may appoint other Officers and Agents, including one or more Assistant
Secretaries and one or more Assistant Treasurers, each of whom shall hold office
for such period, and each of whom shall have such authority and perform such
duties as are provided in these Bylaws or as the Board of Directors from time to
time may determine. The Board of Directors may delegate to any Officer or the
Chairman of the Board of Directors the power to appoint any such subordinate
Officers and Agents and to prescribe their respective authorities and duties.
Section 4. Removals and Resignations. The Board of Directors may, by vote
of a majority of their entire number, remove from office any Officer or Agent of
the Corporation, appointed by the Board of Directors.
Any Officer may resign at any time by giving written notice to the Board of
Directors. The resignation shall take effect immediately upon the receipt of the
notice, or any later period of time specified therein. The acceptance of such
resignation shall not be necessary to make it effective, unless the resignation
requires acceptance for it to be effective.
Section 5. Vacancies. Whenever any vacancy shall occur in any office by
death, resignation, removal, or otherwise, it shall be filled for the unexpired
portion of the term in the manner prescribed by these Bylaws for the regular
election or appointment to such office, at any meeting of Directors.
Section 6. The Chairman of the Board. The Chairman of the Board shall be
the Chief Executive Officer of the Corporation and, subject to the direction and
under the supervision of the Board of Directors, shall have general charge of
all of the affairs of the Corporation. The Chairman shall preside at all
meetings of the Stockholders and of the Board of Directors at which he is
present.
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Section 7. The President. The President shall be the chief operating
officer of the Corporation and, subject to the direction and under the
supervision of the Board of Directors, shall have general charge of the
day-to-day operations and of the property of the Corporation, and shall have
control over its Officers, Agents and Employees. The President shall preside at
all meetings of the Stockholders and of the Board of Directors at which the
Chairman is not present. The President shall do and perform such other duties
and may exercise such other powers as these Bylaws or the Board of Directors
from time to time may assign to him.
Section 8. The Vice President. At the request of the President or in the
event of his absence or disability, the Vice President, or in case there shall
be more than one Vice President, the Vice President designated by the President,
or in the absence of such designation, the Vice President designated by the
Board of Directors, shall perform all the duties of the President, and when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the President. Any Vice President shall perform such other duties and may
exercise such her powers as from time to time these Bylaws or by the Board of
Directors or the President be assign to him.
Section 9. The Secretary. The Secretary shall:
a. record all the proceedings of the meetings of the Corporation and
Directors in a book to be kept for that purpose;
b. have charge of the stock ledger (which may, however, be kept by
any transfer agent or agents of the Corporation
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under the direction of the Secretary), an original or duplicate
of which shall be kept at the principal office or place of
business of the Corporation;
c. see that all notices are duly and properly given;
d. be custodian of the records of the Corporation and the Board of
Directors, and the and of the seal of the Corporation, and see
that the seal is affixed to all stock certificates prior to their
issuance and to all documents for which the Corporation has
authorized execution on its behalf under its seal;
e. see that all books, reports, statements, certificates, and other
documents and records required by law to be kept or filed are
properly kept or filed;
f. in general, perform all duties and have all powers incident to
the office of Secretary, and perform such other duties and have
such other powers as these Bylaws, the Board of Directors, the
Chairman of the Board of Directors, or the President from time to
time may assign to him; and
g. prepare and make, at least ten (10) days before every election of
Directors, a complete list of the Stockholders entitled to vote
at said election, arranged in alphabetical order.
Section 10. The Treasurer. The Treasurer shall:
a. have supervision over the funds, securities, receipts and
disbursements of the Corporation;
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b. cause all moneys and other valuable effects of the Corporation to
be deposited in its name and to its credit, in such depositories
as the Board of Directors or, pursuant to authority conferred by
the Board of Directors, its designee shall select;
c. cause the funds of the Corporation to be disbursed by checks or
drafts upon the authorized depositaries of the Corporation, when
such disbursements shall have been duly authorized;
d. cause proper vouchers for all moneys disbursed to be taken and
preserved;
e. cause correct books of accounts of all its business and
transactions to be kept at the principal office of the
Corporation;
f. render an account of the financial condition of the Corporation
and of his transactions as Treasurer to the President, the
Chairman of the Board of Directors, or the Board of Directors,
whenever requested;
g. be empowered to require from the Officers or Agents of the
Corporation reports or statements giving such information as he
may desire with respect to any and all financial transactions of
the Corporation; and
h. in general, perform all duties and have all powers incident to
the office of Treasurer and perform such other duties and have
such other powers as from time to time may be assigned to him by
these Bylaws or by the Chairman of the Board of Directors, the
Board of Directors or the President.
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Section 11. Salaries. The Board of Directors shall from time to time fix
the salaries of the Officers of the Corporation. The Board of Directors may
delegate to any person the power to fix the salaries or other compensation of
any Officers or Agents appointed, in accordance with the provisions of Section 3
of this Article VI. No Officer shall be prevented from receiving such salary by
reason of the fact that he is also a Director of the Corporation. Nothing
contained in this Bylaw shall be construed so as to obligate the Corporation to
pay any Officer a salary, which is within the sole discretion of the Board of
Directors.
Section 12. Surety Bond. The Board of Directors may in its discretion
secure the fidelity of any or all of the Officers of the Corporation by bond or
otherwise.
ARTICLE VII
EXECUTION OF INSTRUMENTS
Section 1. Checks, Drafts, Etc. The President or the Chairman of the Board
of Directors and the Secretary or Treasurer shall sign all checks, drafts,
notes, bonds, bills of exchange, and orders for the payment of money of the
Corporation, and all assignments or endorsements of stock certificates,
registered bonds, or other securities, owned by the Corporation, unless
otherwise directed by the Board of Directors, or unless otherwise required by
law. The Board of Directors or the Chairman of the Board of Directors may,
however, authorize any Officer or the Chairman of the Board to sign any of such
instruments for and on behalf of the Corporation without necessity of
countersignature,
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and may designate Officers, or Employees of the Corporation other than those
named above who may, in the name of the Corporation, sign such instruments.
Section 2. Execution of Instruments Generally. Subject always to the
specific direction of the Board of Directors, the President or the Chairman of
the Board of Directors shall execute all deeds and instruments of indebtedness
made by the Corporation and all other written contracts and agreements to which
the Corporation shall be a party, in its name, attested by the Secretary. The
Secretary, when necessary required, shall affix the corporate seal thereto.
Section 3. Proxies. The President, the Chairman of the Board and the
Secretary or an Assistant Secretary of the Corporation or by any other person or
persons duly authorized by the Board of Directors may execute and deliver
proxies to vote with respect to shares of stock of other corporations owned by
or standing in the name of the Corporation from time to time on behalf of the
Corporation.
ARTICLE VIII
CAPITAL STOCK
Section 1. Certificates of Stock. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed in the name of the Corporation
by either the Chairman of the Board of Directors or the President and by the
Secretary of the Corporation, certifying the number of shares owned by that
person in the Corporation.
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Certificates of stock shall be in such form as shall, in conformity to law,
be prescribed from time to time by the Board of Directors.
Section 2. Transfer of Stock. Shares of stock of the Corporation shall only
be transferred on the books of the Corporation by the holder of record thereof
or by his attorney duly authorized in writing, upon surrender to the Corporation
of the certificates for such shares endorsed by the appropriate person or
persons, with such evidence of the authenticity of such endorsement, transfer,
authorization and other matters as the Corporation may reasonably require.
Surrendered certificates shall be canceled and shall be attached to their proper
stubs in the stock certificate book.
Section 3. Rights of Corporation with Respect to Registered Owners. Prior
to the surrender to the Corporation of the certificates for shares of stock with
a request to record the transfer of such shares, the Corporation may treat the
registered owner as the person entitled to receive dividends, to vote, to
receive notifications, and otherwise to exercise all the rights and powers of an
owner.
Section 4. Closing Stock Transfer Book. The Board of Directors may close
the Stock Transfer Book of the Corporation for a period not exceeding fifty (50)
days preceding the
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date of any meeting of Stockholders, the date for payment of any dividend, the
date for the allotment of rights, the date when any change, conversion or
exchange of capital stock shall go into effect, or for a period of not exceeding
fifty (50) days in connection with obtaining the consent of Stockholders for any
purpose. However, in lieu of closing the Stock Transfer Book, the Board of
Directors may in advance fix a date, not exceeding fifty (50) days preceding the
date of any meeting of Stockholders, the date for the payment of any dividend,
the date for the allotment of rights, the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent, as a record date for the determination of the
Stockholders entitled to notice of, and to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, or to give such consent. In
such case such Stockholders of record on the date so fixed, and only such
Stockholders shall be entitled to such notice of, and to vote at, such meeting
and any adjournment thereof, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid.
Section 5. Lost, Destroyed and Stolen Certificates. The Corporation may
issue a new certificate of shares of stock in the place of any certificate
theretofore issued and alleged to have been lost, destroyed or stolen. However,
the Board of Directors may require the owner of such lost, destroyed or stolen
certificate or his legal representative, to: (a) request a new certificate
before the Corporation has notice that the shares have been acquired by a bona
fide purchaser; (b) furnish an affidavit as to such loss, theft or destruction;
(c) file with the Corporation a sufficient indemnity bond; or (d) satisfy such
other reasonable requirements, including evidence of such loss, destruction, or
theft as may be imposed by the Corporation.
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ARTICLE IX
DIVIDENDS
Section 1. Sources of Dividends. The Directors of the Corporation, subject
to the Nevada Revised Statutes, as amended, may declare and pay dividends upon
the shares of the capital stock of the Corporation.
Section 2. Reserves. Before the payment of any dividend, the Directors of
the Corporation may set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose, and the
Directors may abolish any such reserve in the manner in which it was created.
Section 3. Reliance on Corporate Records. A Director in relying in good
faith upon the books of account of the Corporation or statements prepared by any
of its officials as to the value and amount of the assets, liabilities, and net
profits of the Corporation, or any other facts pertinent to the existence and
amount of surplus or other funds from which dividends might properly be declared
and paid shall be fully protected.
Section 4. Manner of Payment. Dividends may be paid in cash, in property,
or in shares of the capital stock of the Corporation.
ARTICLE X
SEAL AND FISCAL YEAR
Section 1. Seal. The corporate seal, subject to alteration by the Board of
Directors, shall be in the form of a circle, shall
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bear the name of the Corporation, and shall indicate its formation under the
laws of the State of Nevada and the year of incorporation. Such seal may be used
by causing it or a facsimile thereof to be impressed, affixed, or otherwise re-
produced.
Section 2. Fiscal Year. The Board of Directors shall, in its sole
discretion, designate a fiscal year for the Corporation.
ARTICLE XI
AMENDMENTS
Except as may otherwise be provided herein, a majority vote of the whole
Board of Directors at any meeting of the Board, is required to amend or repeal
any provision of these Bylaws.
ARTICLE XII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. Exculpation. No Director or Officer of the Corporation shall be
liable for the acts, defaults, or omissions of any other Director or Officer, or
for any loss sustained by the Corporation, unless the same has resulted from his
own willful misconduct, willful neglect, or gross negligence.
Section 2. Indemnification. Each Director and Officer of the Corporation
and each person who shall serve at the Corporation's request as a director or
officer of another corporation in which the Corporation owns shares of capital
stock or of which it is a creditor shall be indemnified by the Corporation to
the fullest extent permitted from time to time by
20
<PAGE> 21
the Nevada Revised Statutes against all reasonable costs, expenses and
liabilities (including reasonable attorneys' fees) actually and necessarily
incurred by or imposed upon him in connection with, or resulting from any claim,
action, suit, proceeding, investigation, or inquiry of whatever nature in which
he may be involved as a party or otherwise by reason of his being or having been
a Director or Officer of the Corporation or such director or officer of such
other corporation, whether or not he continues to be a Director or Officer of
the Corporation or a director or officer of such other corporation, at the time
of the incurring or imposition of such costs, expenses or liabilities, except in
relation to matters as to which he shall be finally adjudged in such action,
suit, proceeding, investigation, or inquiry to be liable for willful misconduct,
willful neglect, or gross negligence toward or on behalf of the Corporation in
the performance of his duties as such Director or Officer of the Corporation or
as such director or officer of such other corporation. As to whether or not a
Director or Officer was liable by reason of willful misconduct, willful neglect,
or gross negligence toward or on behalf of the Corporation in the performance of
his duties as such Director or Officer of the Corporation or as such director or
officer of such other corporation, in the absence of such final adjudication of
the existence of such liability, the Board of Directors and each Director and
Officer may conclusively rely upon an opinion of independent legal counsel
selected by or in the manner designated by the Board of Directors. The foregoing
right to indemnification shall be in addition to and not in limitation of all
other rights which such person may be entitled as a matter of law, and shall
inure to his legal representatives' benefit.
Section 3. Liability Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation or
21
<PAGE> 22
who is or was serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust,
association, or other enterprise against any liability asserted against him and
incurred by him in any such capacity or arising out of his status as such,
whether or not he is indemnified against such liability by this Article XII.
22
<PAGE> 1
EXHIBIT 10.42
Agreement with Berghaus Limited dated September 10, 1999
BERGHAUS LIMITED
and
X DOGS.COM INC.
DISTRIBUTION AGREEMENT
<PAGE> 2
Table of Contents
<TABLE>
<S> <C>
1. Definitions and Interpretation ................ 1
2. Commencement .................................. 5
3. Grant ......................................... 5
4. Term .......................................... 6
5. Royalties ..................................... 6
6 Targets ....................................... 7
7. Purchase and Sale of Products ................. 8
8. Marketing of the Products ..................... 9
9. Indemnity and Insurance ....................... 13
10. Books and Records ............................. 14
11. Report and Remittance Forms ................... 15
12. Packaging and Advertising of Products ......... 16
13. Quality Control ............................... 18
14. Confidential Information ...................... 18
15. Sufficient Use of Trade Marks ................. 19
16. Benefit of Use of Trade Marks ................. 20
17. Rights not to be challenged ................... 20
18 Infringements ................................. 21
19. Sales Outside the Territory ................... 22
20. Sales by the Company in the Territory ......... 23
21. Sale of Competitive Products .................. 23
22. Termination ................................... 24
23. Rights and Obligations on Termination ......... 26
24. Representations and Warranties ................ 29
25. Agency Relationship ........................... 30
26. Notices ....................................... 31
27. Assignments ................................... 32
28. Legal and Ethical Requirements ................ 33
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
29. Local Law Compliance .......................... 34
30. Governing Law ................................. 35
31. Force Majeure ................................. 35
32. Whole Agreement ............................... 36
33. Agreement Severable ........................... 36
34. Agreement to Co-operate ....................... 37
35. Waiver and Variation .......................... 37
36. Execution in Counterpart ...................... 37
Schedule 1 ................................................ 39
Schedule 2 ................................................ 40
Schedule 3 ................................................ 41
</TABLE>
ii
<PAGE> 4
THIS AGREEMENT is made on 10th September 1999 between the following parties:
1. BERGHAUS LIMITED (Registration No: 871405) (incorporated in England & Wales)
whose registered office is at The Pentland Centre, Lakeside, Squires Lane,
Finchley, N3 2QL, England ("the Company"); and
2. X DOGS.COM INC incorporated in Nevada whose registered office is at 527,
Marquette Avenue, Suite 2130, Minneapolis, Minnesota 55402, United States of
America ("the Distributor").
RECITALS:
A. The Company is the owner of the Trade Marks in the Territory.
B. The Company has agreed to grant to the Distributor the right to import,
market, distribute and sell certain products under the Trade Marks on the terms
and conditions set out in this Agreement.
IT IS AGREED, as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 "ADVERTISING PERCENTAGE" means ten percent (10%)
"ANNIVERSARY DATE" means I January 2001 and each I January thereafter
during the term of this Agreement.
1
<PAGE> 5
"CHANGE OF CONTROL" means the acquisition by any person together with its
affiliates of more than 50% of the stock of the Distributor or stock
holding more than 50% of the voting rights in the Distributor.
"CONFIDENTIAL INFORMATION" means and includes all advice, information and
knowhow including (without limitation) any designs, processes,
developments, improvements, inventions, concepts, graphics and styling
relating to the Products and trade secrets relating to the Products or the
business of the Company or any associated company, whether tangible or
intangible, provided by the Company to the Distributor.
"CONSUMER PRICE INDEX" means the index of retail prices published by the
Government of the United States of America or, if for any reason such index
is not published, any similar index (whether or not published in the
Territory) specified by the Company.
"CONTRACT YEAR" means the period commencing with the Effective Date and
ending on 31 December 2000 for the first Contract Year, and each successive
twelve (12) month period commencing on an Anniversary Date.
"Effective Date" means 10th September 1999.
2
<PAGE> 6
"FOB PURCHASES" means the purchase price of Products invoiced to the
Distributor by the Company or its nominated suppliers calculated on an FOB
basis (as defined in Incoterms from time to time).
"INTELLECTUAL PROPERTY RIGHTS" means the Trade Marks and any patents,
copyright, registered or unregistered designs or any applications or rights
to apply for any of the foregoing which are owned or used by the Company.
"MANUAL" means the Company's brand manual together with its Strategic
Marketing Plan (as amended from time to time).
"NET SALES" means the total sum invoiced by the Distributor, plus the fair
market value in the case of transactions otherwise than at arm's length,
for sales of Products after deduction of
(i) taxes of the nature of sales, excise, value added or other similar tax
charged upon and included in the invoice price to the purchaser; and
(ii) where applicable, the usual discounts, allowances, rebates or refunds
actually and in good faith made or given by the Distributor to its
customers with respect to such sales other than all discounts,
allowances, rebates or refunds for or in respect of payment in cash or
payment within a particular time or given for promotional purposes.
"PERCENTAGE ROYALTY" means the following percentage, dependent on the
period in which such purchases are made.
3
<PAGE> 7
<TABLE>
<CAPTION>
PERIOD PERCENTAGE
- ------ ----------
<S> <C>
10th September 1999 to 31 December 2000 10
1 January 2001 to 31 December 2001 12
1 January 2002 to 31 December 2002 14
1 January 2003 to 31 December 2003 16
1 January 2004 to 31 December 2004 16
</TABLE>
"PRODUCTS" means such products as are purchased by the Distributor from the
Company (or any other source approved under clause 7. 1 (b)).
"QUARTER" means each of the three (3) month periods ending on 31 March, 30
June, 30 September and 31 December in each Contract Year. The first Quarter
shall be deemed to be from the Effective Date until 31 December 1999.
"TARGET" means the sale and/or purchase obligations of the Distributor
under clause 6.
"TERRITORY" means the country or countries listed in Schedule 2.
"TRADE MARKS" means the trade marks which are registered (or the subject of
pending applications for registration) in the Territory listed in Schedule
3, together with all other trade marks, trade names, service marks, style
names, trade dress, logos and other trade symbols which are under the
control or proprietorship of the Company and which the Company stipulates
are to be used by the Distributor from time to time in relation to the
Products.
1.2 In this Agreement, unless the context otherwise requires:
(a) headings and underlines are for convenience only and do not affect the
interpretation of this Agreement;
4
<PAGE> 8
(b) words importing the singular include the plural and vice versa;
(c) an expression importing a natural person includes any company,
partnership, joint venture, association, corporation or other body
corporate and any governmental agency or authority;
(d) a reference to any thing includes a part of that thing;
(e) references to clauses, parties and schedules are references to
clauses, parties and schedules to, this Agreement.
2. COMMENCEMENT
This Agreement shall commence and be deemed effective as of the Effective
Date notwithstanding that it may be executed after that date.
3. GRANT
3.1 Subject to the terms of this Agreement, the Company grants to the
Distributor the exclusive right to:
a) import the Products into the Territory; and
b) use the Trade Marks in relation to the Products in the Territory.
3.2 The rights granted under clause 3.1 shall not include sales over the
internet outside the Territory.
5
<PAGE> 9
3.3 Without limiting its other obligations, the Distributor shall comply with
the terms of the Manual.
4. TERM
This Agreement shall commence on the Effective Date and continue until 31st
December 2004 (subject to earlier termination as provided under this
Agreement).
5. ROYALTIES
5.1 The Distributor shall pay to the Company a royalty equal to the product of
the Percentage Royalty and the amount of FOB Purchases of Products invoiced
to the Distributor.
5.2 The Distributor shall make payment of the royalties referred to in clause
5.1 in US Dollars (or any other currency stipulated a reasonable time in
advance by the Company) by telegraphic transfer to the Company at such
place as may be nominated from time to time by the Company, within thirty
(30) days after the date of the FOB Purchase invoice giving rise to the
obligation to pay such royalty. The Distributor may deduct from such
payment such amount as it is required to deduct on account of any taxation
liability of the Company in the Territory. The Distributor shall obtain an
official receipt for any amount so paid and forward this immediately to the
Company together with a written explanation as to why such deduction is
necessary. The Distributor will also provide such assistance and sign such
documentation as may be available in order to enable such royalty to be
paid without any deduction.
5.3 The Distributor shall convert the royalties payable at the bank telegraphic
transfer selling rate prevailing for the currency so stipulated on the day
of each payment.
6
<PAGE> 10
5.4 The Distributor will provide each Quarter a statement as to the calculation
of the royalty certified as correct by a senior executive of the
Distributor approved by the Company.
5.5 The Distributor will also provide to the Company by 31 March in each
Contract Year a calculation of the royalty paid for the previous Contract
Year confirmed as correct by its auditors and the Distributor will also
provide to the Company each Quarter such other reports, statements,
accounts and records as are referred to in sub-clause 11.1.
6. TARGETS
6.1 The Distributor undertakes that the Net Sales of Products by the
Distributor in the following periods shall be not less than:
<TABLE>
<CAPTION>
PERIOD (CONTRACT YEAR) NET SALES TARGETS (US DOLLARS 000'S)
- ----------------------
USA CANADA MEXICO
--- ------ ------
<S> <C> <C> <C>
2000 5,811 0 0
2001 13,957 0 0
2002 25,735 260 0
2003 46,208 944 0
2004 68,645 2,140 713
</TABLE>
6.2 The Distributor undertakes that the FOB Purchases by the Distributor in the
following periods shall be not less than:
<TABLE>
<CAPTION>
PERIOD (CONTRACT YEAR) FOB PURCHASES (US DOLLARS 000'S)
<S> <C>
2000 3,823
2001 7,873
2002 15,046
2003 27,431
2004 40,671
</TABLE>
7
<PAGE> 11
6.3 The Company will be entitled to terminate this Agreement by notice in
writing to the Distributor in the event that the Distributor fails to
achieve:
(a) the aggregate Net Sales Target for any country for any calendar year;
or
(b) the FOB Purchase Target for any calendar year.
7. PURCHASE AND SALE OF PRODUCTS
7.1 The Distributor will purchase the Products ready packaged only from:
(a) the Company; or
(b) from such supplier as may be authorised from time to time in writing
by the Company
and the Distributor will not repackage any Products nor alter, amend or
modify any packaging in which any Products are supplied nor remove, deface,
obscure, alter or modify any Trade Marks, brand names, logos, graphics or
wording applied to any of the Products on their packaging without the prior
written consent of the Company.
7.2 All prices for the Products quoted by the Company or its suppliers shall
(unless otherwise agreed in writing) be for payment by irrevocable Letter
of Credit 30 days from shipment in US Dollars or in such other currency as
may be as specified by the Company or such supplier.
8
<PAGE> 12
7.3 Products shall be sold subject to the conditions of sale of the Company or
other authorised supplier as shall be notified to the Distributor from time
to time. If there is any conflict between the provisions of such conditions
of sale and the provisions of this Agreement, the latter shall prevail.
7.4 Neither the Distributor's standard conditions of purchase nor any terms or
conditions in any order forms or other documents prepared by the
Distributor shall apply to the sale of the Products by the Company or other
authorised supplier to the Distributor.
7.5 Title to the Products will pass to the Distributor at the point specified
in the purchase order and the confirmation thereof or at the point
specified in the conditions of sale of the Company or other authorised
supplier.
7.6 The responsibility for all operations, costs and expenses from the point
specified in the said conditions of sale or purchase order and the
confirmation thereof (including transportation, insurance, custom duties)
will be paid by the Distributor.
7.7 The Distributor shall maintain at all times a full range of stock of the
Products to meet all reasonable expectations of business including periods
of expected peak demand PROVIDED THAT the Distributor shall maintain at all
times a stock of Products in an amount necessary to accommodate sales for
45-60 days based on a reasonable sales estimate.
8. MARKETING OF THE PRODUCTS
8.1 The Distributor shall use its best endeavors to create, meet and expand
demand in the Territory for the Products.
9
<PAGE> 13
8.2 At the commencement of this Agreement, and for each Contract Year
thereafter the Distributor will provide to the Company a marketing plan for
the distribution of the Products within the Territory which marketing plan
is to be approved by the Company. The marketing plan for each Contract Year
of this Agreement other than the first Contract Year is to be agreed upon
three (3) months prior to each Anniversary Date and will be reviewed on a
Quarterly basis. The marketing plan will specify objectives and strategies
with respect to the following and any related matters which are consistent
with the Distributor's obligations under sub-clause 8. 1. The Company will
not unreasonably withhold its approval of or agreement to any marketing
plan presented by the Distributor.
(a) product lines and new product plans;
(b) pricing and margin structure;
(c) distribution channels;
(d) sales and distribution targets on a product by product basis;
(e) accumulation of market data including assessment of total market size
and segmentation in units and value (which will be updated on a six monthly
basis);
(f) overview of trading for the current year and objectives and strategies
for the following year;
(g) assessment of competition;
(h) advertising and promotional expenses; and
(i) overall advertising and promotional strategy including in particular
the use and cost of promotions, public relations, sponsorship, exhibitions,
point of sale and other in-store merchandising.
8.3 In addition to its obligations under clause 8.2 the Distributor at the
commencement of this Agreement and prior to each Contract Year thereafter
shall supply a Business Plan for the
10
<PAGE> 14
remaining term of the Agreement which is to be agreed by the Company not
less than three months prior to the beginning of each Contract Year. The
Business Plan shall be in a format reasonably specified by the Company and
will in particular include Key Success Factors and Key Performance
Indicators in the areas of distribution, marketing, operations and
corporate citizenship. The Company and the Distributor will review progress
against such plan on a Quarterly basis.
8.4 The Distributor shall:
(a) develop and agree with the Company as set out in clause 8.2 a legally
supportable distribution policy for the Products;
(b) promote and enhance the reputation and the recognition and awareness of
the Trade Marks in the Territory;
(c) develop a sales, marketing and merchandising facility for the Products
in the Territory;
(d) engage such key staff as the Company shall specify, such appointments
to be approved by the Company before implementation;
(e) offer a complete stock and refill service to all retailers;
(f) achieve distribution throughout all agreed trading channels;
(g) establish speciality shops within appropriate and agreed stores in the
Territory; establish Berghaus Centres (speciality stores) as requested by
the Company, provided that the Company shall not require any stores to be
established within the first 18 months from. the date of this Agreement and
thereafter any such request shall be on 9 months' notice in writing to the
Distributor;
11
<PAGE> 15
(i) establish the Company's signage where possible within agreed retail
stores in the Territory; and
(j) position the Berghaus Visual Merchandising System within agreed retail
outlets as stated within the annual marketing plan referred to in clause
8.2.
8.5 The Distributor will use its best endeavors to ensure that the Products are
distributed only through such specialist outdoor outlets, genuine outdoor
departments in department or sports stores and footwear or sports stores as
are approved in writing by the Company. In all cases, such stores should
have a clientele of medium to high quality. The Distributor shall not
distribute the Products in any circumstances through market stalls or
stores of low quality and image. The Distributor shall procure that
wherever possible, retailers who stock the Products shall use the fittings,
display units, advertisements and point of sale material provided by the
Company. The Distributor shall be permitted to distribute the Products
through mail order or over the internet, subject to the Company's written
approval but may not sell Products through either such channels to
purchasers outside the Territory.
8.6 In each Contract Year the Distributor must spend a minimum of the
Advertising Percentage of Net Sales (or in the first Contract Year the
Target) of Products for that year on consumer advertising and promotion in
the Territory. Within 30 days following the end of each Contract Year the
Distributor shall submit a statement to the Company, certified as true and
correct by a senior executive of the Distributor approved by the Company
detailing the amounts spent and how the money was spent.
8.7 The Distributor will at its own expense participate twice a year in the
Company's international meetings and four times a year in product
development meetings.
12
<PAGE> 16
8.8 The Company grants to the Distributor the non-exclusive right to
enter into preliminary negotiations for sponsorship or promotional
agreements relating to the Trade Marks directly with athletes, clubs,
federations, committees or similar organizations within the Territory
approved in writing by the Company. The Distributor shall have no
power to conclude any such agreement or enter into any such agreement
on the Company's behalf. Any proposed agreement shall be presented to
the Company for approval and, (unless the Company and the Distributor
otherwise agree), shall be entered into directly between the Company
and the relevant athlete, club, federation, committee or
organization. Fees or payments to be made under such agreements shall
be borne as between the Company and the Distributor in such
proportion as they may from time to time agree.
9. INDEMNITY AND INSURANCE
9.1 The Distributor shall, at its expense, carry comprehensive general
liability insurance and product liability insurance covering the
Products marketed or sold in connection with the Trade Marks under
this Agreement issued by a responsible insurer approved in advance by
the Company providing coverage approved in advance by the Company and
otherwise in terms approved in advance by the Company. Unless
otherwise agreed such insurance shall:
9.1.1 include insurance coverage for the Distributor's obligation to
indemnify the Company in accordance with clause 9.3.
9.1.2 be for the benefit of the Distributor but shall name the Company as
co-insured and payee.
9.1.3 remain in effect for the initial and any subsequent term of this
Agreement so long thereafter as the Distributor may continue to use
any of the Trade Marks.
13
<PAGE> 17
9.1.4 provide that 30 days written notice be furnished to the Company prior
to cancellation, or prior to any material modification or change.
9.2 Upon the execution of this Agreement, the Distributor shall promptly
furnish the Company with a certificate evidencing that insurance has
been effected in accordance with the provisions of this clause.
9.3 Subject to the provisions of clause 18, the Distributor agrees to
defend, indemnify and hold harmless the Company and the Proprietor,
including all subsidiaries, affiliates and assignees of the Company
and the Proprietor against all claims, judgements, actions, debts or
rights of action, of whatever kind, and all costs, including
reasonable legal fees, arising out of the promotion, marketing,
distribution or sale of the Products by the Distributor under this
Agreement.
10. BOOKS AND RECORDS
10.1 The Distributor shall keep full and correct records and accounts
showing details of the Products imported, distributed, bartered and
sold by it pursuant to this Agreement and otherwise containing such
information as may be necessary to enable the Company to monitor
compliance with this Agreement.
10.2 The Distributor shall throughout the continuance of this Agreement
give access to its records and accounts at all reasonable times (and
in any event within 48 hours of request) to the Company or any agent
or accountant authoriauthorized by the Company. Such person may take
extracts from or copies of any such records or accounts.
14
<PAGE> 18
10.3 In the event that this Agreement is terminated for any reason the
Distributor shall provide the same access to its records and accounts
for a period of one year thereafter.
10.4 Throughout this Agreement the Distributor agrees to provide to the
Company not later than one (1) calendar month after its preparation a
copy of the Distributor's most recent year-end financial accounts
(including balance sheet and profit and loss accounts) certified by an
independent chartered accountant (or the equivalent in the Territory).
11. REPORT AND REMITTANCE FORMS
11.1 Within forty five (45) days of the end of each Quarter the Distributor
shall provide to the Company a report showing:
(a) details of all sales of each of the Products made during that Quarter
to include the quantities of each type of the Products sold and a
breakdown of such sales by country and distribution channel together
with details of the computation from gross sales to net sales;
(b) estimates of anticipated sales of each of the Products for such period
as the Company may request;
(c) details of the quantity and value of all Quarter.
11.2 Within ninety (90) days of the end of each Contract Year the
Distributor shall provide to the Company a report showing a summary of
the data set out in clause 11. 1 for the relevant Contract Year.
15
<PAGE> 19
11.3 If so requested by the Company, any report provided under sub clauses
11. 1 or 11.2 shall be provided on forms furnished by the Company and
shall be confirmed as correct by a senior executive of the Distributor
approved by the Company.
11.4 The rendering of any report or the payment of any royalty shall not
prejudice any right of the Company to recover any additional amount
that may be found to be due in respect of royalties or otherwise and
no such right shall be deemed to have been waived by the lapse of time
or any act or omission on the part of the Company.
12. PACKAGING AND ADVERTISING OF PRODUCTS
12.1 The Distributor shall ensure that all the Products are marked with
such of the Trade Marks as may be appropriate and as prescribed in
writing by the Company from time to time.
12.2 The Distributor will imprint irremovably, legibly and prominently on
the Products and on any packaging, labelling and advertising or
promotional materials used in connection therewith, or otherwise, any
notice of trade marks and/or copyright together also with such
designation of ownership, registration and/or licence as shall
reasonably be requested by the Company including without limitation
the following:
(a) the symbol (R) in the upper right-hand comer next to the Trade Marks
which are registered with the appropriate patent and/or trade mark
body in the Territory; and
(b) the symbol (TM) in the upper right-hand comer next to the Trade Marks
which are not registered with the- appropriate patent and trademark
body in the Territory.
16
<PAGE> 20
12.3 No other marks or wording shall appear on any of the Products,
packaging, labelling, advertising or promotional materials unless the
Distributor first obtains the written consent of the Company PROVIDED
THAT the Distributor may continue to use the Distributor's name and
mark on hang tags, packaging materials and in advertising and on
promotional materials in accordance with the directions of the
Company.
12.4 The Distributor shall, at its expense, furnish to the Company;
(a) at the earliest opportunity, mock ups of all matter which is proposed
to be used by the Distributor containing or displaying any of the
Trade Marks including, without limiting the generality of the
foregoing, any label, brochure, packaging, business card, stationery,
letterhead, advertisement, point-of-sale and other publicity
materials, telephone or other directory entry, sign, decal and prior
to release final copies of all Display Material.
(b) In the event that the Company does not raise any questions relating to
the nature, quality or workmanship of such samples within twenty-eight
(28) days of receipt by the Company of such samples, the samples shall
be deemed satisfactory for the use pursuant to this Agreement. The
Distributor's obligations hereunder shall extend to all matters made
or used by its agents or sub-contractors appointed in accordance with
this Agreement. Wherever possible Display Material will be based on or
incorporate Display Material provided by the Company in order to
ensure that the brand image projected by the Products is in conformity
with the Company's world wide brand profile and image.
12.5 The Distributor shall not use any of the Trade Marks as part of its
corporate, business or trading name.
17
<PAGE> 21
12.6 The Distributor shall use the Trade Marks only in accordance with the
policies and guidelines and/or instructions laid down by the Company
or its agent from time to time.
13. QUALITY CONTROL
13.1 The Distributor shall ensure that all uses of the Trade Marks are
consistent with the high quality, character and image of the Trade
Marks and shall comply with any direction reasonably made by the
Company relating to the quality of the Products and/or their packaging
and/or any related promotional or advertising material.
13.2 The Distributor shall store and transport the Products in conditions
that will preserve the Products and their packaging in good condition
and shall comply with any reasonable requests from the Company in such
regard.
13.3 If requested, the Distributor shall, give all reasonable assistance in
locating and recovering any defective Products and, in particular,
shall comply (and procure so far as it is able that its customers
comply) with any product recall procedure adopted by the Company.
14. CONFIDENTIAL INFORMATION
14.1 All Confidential Information shall be used only for the performance of
this Agreement and shall be kept confidential by the Distributor and
shall be revealed to directors, officers, employees and agents of the
Distributor only to the extent necessary to enable the Distributor to
fulfil its obligations and responsibilities pursuant to this
Agreement. The Distributor shall impose upon all such directors,
18
<PAGE> 22
officers, employees and agents to whom any Confidential Information is
revealed obligations of confidentiality and restrictions on use in
respect thereof identical to these herein contained and shall be
responsible for any breach of any of such obligations by any of such
directors, officers, employees or agents. This provision shall not
apply to any Confidential Information which is in the public domain or
to the extent to which it may be required to be disclosed by law or
which is obtained by the Distributor in good faith from a third party
with the right to disclose it. In the event that the Distributor is
required to make any Confidential Information public as a result of
the requirements of any law or regulatory authority (including any
stock exchange) the Distributor will inform the Company beforehand and
use its best endeavours to ensure that any such disclosure is carried
out in a manner which the Company believes causes as little harm as
possible to the Company's reasonable commercial interests.
14.2 The Company makes no warranty as to the accuracy, sufficiency and
suitability for use by the Distributor of advice, information,
technical assistance or know-how provided by the Company for use by
the Distributor in the marketing of any Products and assumes no
responsibility or liability, including liability for direct, indirect
or consequential damages of any nature which arise out of or in
connection with the Distributor's use thereof.
15. SUFFICIENT USE OF TRADE MARKS
In order to preserve the Company's ownership of the Trade Marks in the
Territory, the Distributor will take all steps reasonably required to
ensure that sufficient use of the Trade Marks is made to avoid abandonment
by reason of non-use.
19
<PAGE> 23
16. BENEFIT OF USE OF TRADE MARKS
The Distributor acknowledges that
(i) all use of the Trade Marks in any form and for any class of goods or
services shall accrue without cost to the Company to the benefit of the
Company; and
(ii) except as otherwise provided in this Agreement it has no right in any
Intellectual Property Rights or any associated goodwill nor any right to
use any Intellectual Property Rights.
17. RIGHTS NOT TO BE CHALLENGED
17.1 The Distributor acknowledges the validity of the Intellectual Property
Rights and shall not at any time during the continuance of this
Agreement or thereafter directly or indirectly, by itself or through
its directors, officers, employers, agents or any person in which the
Distributor holds any issued share capital or controls, whether
directly or indirectly, the composition of its board of directors or
any of its voting power, contest or assist any other person in
contesting the validity of the Intellectual Property Rights or the
right, title and interest of the Company to the Intellectual Property
Rights.
17.2 Except as provided in this Agreement, the Distributor shall not use or
register whether during the continuance of this Agreement or
thereafter, any business or trade name, licensor name, trade mark or
labelling or packaging design which incorporates or which is
substantially identical with or deceptively or confusingly similar to
any of the Trade Marks or other Intellectual Property Rights.
17.3 The Distributor shall not supplement or interfere with or obliterate
the Trade Marks applied to the Products.
17.4 The Distributor shall take due care not to do or cause to be done any
action or thing which affects the validity of the Intellectual
Property Rights or the Company's ownership thereof or
20
<PAGE> 24
jeopardises the maintenance thereof, either during the continuance of
this Agreement or thereafter In the event that the validity or the
maintenance of the registration of any of the Trade Marks or other
Intellectual Property Rights is in jeopardy than the Distributor, if
reasonably requested by the Company, will cease distribution of such
of the Products as are affected by such potential invalidity.
17.5 Nothing contained in this Agreement, whether express or implied, shall
give to the Distributor any claim, right, title or interest in the
Confidential Information, and the Distributor acknowledges and agrees
that all rights in such Confidential Information belong to and are the
exclusive property of the Company and that, during and after any
termination of this Agreement, the Distributor will not claim any
rights in or to such Confidential Information nor dispute or assist
others to dispute the Company's ownership thereof.
18. INFRINGEMENTS
18.1 (a) If any suspected or actual infringement or illegal use of the
Intellectual Property Rights or any wrongful use of the
Confidential Information by any person in the Territory or
elsewhere shall come to the attention of the Distributor, the
Distributor shall immediately give notice thereof in writing to
the Company. The Company shall, at its absolute discretion, take
whatever action it deems appropriate at its own expense and shall
have the sole conduct of any such action. If requested, the
Distributor will provide such assistance as may be reasonably
required in any suit or action subject to the payment by the
Company of the Distributor's direct expenses in the provision of
such assistance.
(b) If the Company initiates any action respect of any such conduct, all
compensation recovered whether at trial or by way of settlement shall
belong entirely to the Company.
18.2 (a) If the Distributor receives any notice, claim or proceedings
alleging trade mark infringement, passing off, copyright
infringement, patent infringement, or related
21
<PAGE> 25
causes of action arising out of the Distributor's use of the
Intellectual Property Rights or the Confidential Information the
Distributor shall notify the Company forthwith and shall not make
any admissions or take any substantive steps in connection
therewith without the prior written consent of the Company.
(b) If such legal action referred to in 18.2(a) above relates to use by
the Distributor in accordance with the terms of this Agreement then
the Company shall defend or assist in the defence of such litigation,
and shall bear all costs and expenses of such defence. If any damages
or awards are assessed against the Distributor in such litigation and
provided that the Distributor has in fact complied with the relevant
terms of this Agreement they shall be satisfied and paid by the
Company.
(c) If such legal action referred to in 18.2(a) above relates to use
otherwise than in accordance with the terms of this Agreement, the
Company, in its sole discretion shall choose whether to defend or
assist in the defence of such action. If the Company chooses not to
defend or assist in the defence of such an action, the Distributor
shall bear all of its own costs and expenses and shall be responsible
for any awards against it or the cost of any settlement or compromise.
If the Company chooses to defend or assist in the defense the
Distributor shall reimburse the Company for all direct expenses
incurred by the Company and for all costs and damages awarded against
the Company.
19. SALES OUTSIDE THE TERRITORY
19.1 The Distributor will not sell or cause or permit to be sold any
Products outside the Territory, nor will the Distributor, directly or
indirectly, sell or cause or permit to be sold Products in the
Territory where, to its knowledge, such Products are intended for
re-sale or distribution outside the Territory. In particular the
Distributor shall not engage in advertising by reference to the Trade
Marks aimed at any place outside the Territory or use any branch or
distribution depot outside the Territory for the sale or marketing of
the Products and in the case of proposed sales over the internet will
specifically state that Products are only
22
<PAGE> 26
available in the Territory. The Distributor will use its best
endeavours lawfully to prevent any person from distributing or selling
the Products from the Territory.
19.2 During this Agreement the Company shall refer all enquiries received
by it relating to sales of the Products in the Territory to the
Distributor. During this Agreement the Distributor shall refer to the
Company all enquiries it receives for the Products for sales outside
or export from the Territory.
20. SALES BY THE COMPANY IN THE TERRITORY
20.1 The Company will not sell or cause or authorise to be sold in the
Territory any products similar to the Products and bearing the Trade
Marks provided that the Company and its authorised licensees and/or
distributors may sell to retailers operating both inside and outside
the Territory who may purchase Products outside the Territory all or
some of which are to be sold in the Territory at retail level whether
themselves or through an affiliate.
20.2 Nothing contained in this Agreement shall preclude the Company
manufacturing or authorising the manufacture of Products or other
goods in the Territory for sale to the Distributor or for export.
21. SALE OF COMPETITIVE PRODUCTS
Unless specifically authorised in writing so to do by the Company, the
Distributor will not, directly or indirectly, by itself or through its
directors, officers employees, agents or any person in which the
Distributor holds any issued share capital or controls whether directly or
indirectly the composition of its board of directors or any of its voting
power, sell or distribute any products in the Territory or procure the sale
or distribution of any products for sale in the Territory which are in
direct competition with the Products. If the Distributor proposes to, sell
any other products (which are not in direct competition), the Distributor
shall give the Company at least 60 days prior written notice of its
intention to sell such products. If the Company believes that the products
are in direct competition with
23
<PAGE> 27
the Products, it shall notify the Distributor whereupon the Chief
Executives of the Company and the Distributor shall meet and discuss in
good faith whether the products are directly competitive or not.
22. TERMINATION
22.1 The Company may (without prejudice to any other rights of termination
available to it) terminate this Agreement forthwith by giving notice
of termination to the Distributor in the circumstances set out in
clause 6 or upon any of the following events:
(a) if any sum payable to the Company or to any authorised supplier of any
Products hereunder is not paid by the due date for payment;
(b) if the Distributor commits any other breach of any of its obligations
hereunder and fails to remedy the same (if capable of remedy) within
thirty (30) days of the date of service by the Company of a notice
specifying the breach in question and requiring it to be remedied;
(c) if the Distributor is unable to pay its debts as they fall due or
suspends payment of any of its debts or enters into any arrangement
with creditors for the payment of any of its debts;
(d) if an administrator, receiver, manager or liquidator is appointed in
respect of the Distributor or any of its assets;
(e) if a winding up resolution is passed or a winding up or bankruptcy
order is made in respect of the Distributor or the Distributor goes
into liquidation;
(f) if there is any Change of Control;
(g) if any event or act occurs or is done by or in relation to the
Distributor which is equivalent or analogous to any of those described
in any of sub-clauses 22. 1 (c), (d) and (e);
24
<PAGE> 28
(h) if the Distributor shall at any time directly or indirectly contest or
assist any other licensee or person in contesting the validity of the
Intellectual Property Rights or the right title and interest of the
Company;
(i) if any marketing plan referred to in sub-clause 8.2 is not agreed at
the time referred to in sub-clause 8.2;
22.2 Where the Company is entitled to terminate this Agreement under
sub-clause 22.1 then the Company shall as an alternative to
termination have the right to amend the Agreement in all or any of the
following ways:
(a) by converting some or all of the rights granted under sub-clause 3.1
from exclusive rights to non-exclusive rights; and/or
(b) by removing any trade marks, trade names, service marks, style names,
trade dress, logos and/or other trade symbols from the definition of
"Trade Marks"; and/or
(c) by removing any products from the definition of "Products"; and/or
(d) by removing any country or countries or any part or parts of any
country or countries from the definition of "Territory".
Any such amendment shall be made by means of a notice served on the
Distributor and shall take effect from the date on which such notice is served
or such later date as may be specified in the notice.
22.3 The Distributor may (without prejudice to any other rights of
termination available to it) terminate this Agreement forthwith by giving notice
of termination to the Company upon any of the following events:
25
<PAGE> 29
(a) if the Company commits any breach of any of its obligations hereunder
and fails to remedy the same (if capable of remedy) within thirty (30)
days of the date of service by the Distributor of a notice specifying
the breach in question and requiring it to be remedied;
(b) if the Company is unable to pay its debts as they fall due or suspends
payment of any of its debts or enters into any arrangement with
creditors for the payment of any of its debts;
(c) if an administrator, receiver, manager or liquidator is appointed in
respect of the Company or any of its assets;
(d) if a winding up resolution is passed or a winding up or bankruptcy
order is made in respect of the Company or the Company goes into
liquidation;
(e) if any event or act occurs or is done by or in relation to the Company
which is equivalent or analogous to any of those described in any of
sub-clauses 22.3 (b), (c) and (d).
22.4 Any exercise by either party of any of its rights under this clause 22
shall be without prejudice to any accrued rights of either party under
this Agreement.
22.5 Without prejudice to the rights, powers and remedies of the Company
otherwise under this Agreement the Distributor will pay to the Company
interest at a rate three per cent (3%) per annum. above the Midland
Bank p1c, England, Base Rate for the time being in force on any monies
due but unpaid for fourteen (14) days by the Distributor on any
account whatsoever pursuant to this Agreement, such interest to be
calculated from the date upon which such monies become due and payable
until payment of such monies in full. Such interest will be compounded
monthly and if not paid shall itself bear interest.
23. RIGHTS AND OBLIGATIONS ON TERMINATION
23.1 Upon the termination of this Agreement, the Distributor shall promptly
return all Confidential Information together with any copies and shall
not thereafter make any use of
26
<PAGE> 30
such Confidential Information except insofar as the Distributor may
have been specifically released by the Company from its obligations of
confidentiality hereunder.
23.2 The Company or its nominee may, by giving the Distributor written
notice within thirty (30) days following termination of this
Agreement, purchase from the Distributor any part or all of the
Products not previously sold by the Distributor. The price payable for
such Products (or materials) shall be the Distributor's purchase cost
(including duties, taxes and delivery charges) or the net realisable
market value of such Products in the Territory whichever is the lower.
23.3 Should the Company fail to purchase the Products pursuant to clause
23.2, then notwithstanding such termination:
(a) the Distributor shall have the right for a reasonable period up to but
not exceeding six (6) calendar months after termination to sell the
Products manufactured or imported by it prior to termination in the
Territory under the Trade Marks in accordance with the terms of this
Agreement provided that the price charged for the Products shall be at
least sixty-five (65) per cent of the price prevailing immediately
prior to termination;
(b) After termination of the above sell-off period the Distributor shall
immediately destroy in the presence of the Company or its
representative any of the Products which are not then sold;
(c) all other provisions, terms and conditions of this Agreement shall
continue to apply during the period referred to in clause 23.3(a)
except that the Company shall be at liberty to appoint another person
as the distributor of the Products or the licensee of the Trade Marks
or both; and
(d) the six month period referred to in sub-clause 23.3(a) will not be
extended by an event of force majeure.
27
<PAGE> 31
23.4 After termination of this Agreement (but subject to clause 23.3) the
Distributor:
(a) shall cease using the Trade Marks and other Intellectual Property
Rights in the Territory and shall not thereafter use or register any
words or marks that incorporate or are substantially identical with or
deceptively similar to or so closely resemble any one or more of the
Trade Marks so as to be likely to cause confusion;
(b) shall execute any and all necessary documents with respect to the
cancellation of the Distributor as registered user of the Trade Marks;
and
(c) shall not knowingly do any act or thing that would have the effect of
causing another person in the Territory to believe that the
Distributor is still associated or connected with the Company.
23.5 Notwithstanding the termination of this Agreement:
(a) the provisions of clause 14 shall not terminate but shall continue to
remain in full force and effect;
(b) the Distributor shall continue to pay any royalties or other
applicable payments due hereunder and shall continue to provide access
to its records and accounts and furnish information and reports in
accordance with provisions of clauses 5, 10 and 11;
(c) the Company and the Distributor shall continue to have rights and
remedies with respect to damages and any other relief for breach of
this Agreement on the part of the other occurring prior thereto; and
(d) any provisions of this Agreement necessary to enable the parties to
enforce their respective rights and obligations hereunder shall remain
in full force and effect.
28
<PAGE> 32
23.6 Upon the expiry or termination of this Agreement for any cause
whatsoever except in accordance with clause 22.2(f) the Distributor
shall if requested supply to the Company a list of the Distributor's
customers for the Products.
23.7 The Distributor acknowledges that no rights whatsoever are extended to
it beyond the expiration or termination of this Agreement other than
as provided in this clause 25 and further acknowledges that it shall
not be entitled to any compensatory payment on the expiration or
termination of this Agreement.
24. REPRESENTATIONS AND WARRANTIES
24.1 The Company represents and warrants that:
(a) it is a corporation duly incorporated and validly existing under the
laws of its jurisdiction of incorporation as set forth on page I of
this Agreement;
(b) it has full corporate power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby;
(c) it is the owner of the Trade Marks.
The Company at its sole discretion may, upon written notice to the
Distributor, add or remove any trade marks to or from Schedule 3.
24.2 The Company does not warrant that the Trade Marks may safely be used
as a trade mark or business name in the Territory.
24.3 The Distributor represents and warrants that:
(a) it is a corporation duly incorporated and validly existing under the
laws of its jurisdiction of incorporation as set forth on page I of
this Agreement;
29
<PAGE> 33
(b) it has full corporate power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby;
(c) its board of directors has taken all action required by the law of its
jurisdiction of incorporation, its memorandum or articles of
association, by-laws or similar constituent documents or otherwise to
authorise execution of this Agreement and the consummation of the
transactions contemplated hereby;
(d) this Agreement is a valid and binding agreement by it and enforceable
against it in accordance with its terms;
(e) neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will violate any statute or law or
any judgement, decree, order, regulation or rule of any court or
governmental agency or authority in the Territory; and
(f) except for any required approvals of governmental agencies or
authorities which it will use its best efforts to obtain, no consent
of any person is necessary to the consummation of transactions
contemplated hereby. In the event that any required consents are not
obtained or are given on terms not acceptable to the Company, the
Company shall be entitled upon receipt of knowledge thereof forthwith
to terminate this Agreement.
(g)
25. AGENCY RELATIONSHIP
Except as otherwise provided herein, nothing in this Agreement shall render
one party the agent of the other in relation to any rights or obligations
granted under this Agreement or any transaction carried on pursuant to it, and
under no circumstances shall either party pledge or attempt to pledge the credit
of the other or incur any credit on behalf of the other.
30
<PAGE> 34
26. NOTICES
Any notice served by one party upon the other shall be in writing in the
English language and shall be delivered personally (including by courier) or be
sent by facsimile. Such notice or document shall be deemed to have been received
in the case of personal delivery when delivered or, if sent by facsimile, on the
day following that on which the facsimile was sent, PROVIDED THAT the party
serving such notice shall send a copy by registered air mail within two (2) days
after sending the notice.
Such notice shall be addressed as follows (or at such other place designated in
writing by the relevant party);
(a) If to the Company:
BERGHAUS LIMITED
1, Stephenson Road,
Stephenson Industrial Estate,
Washington, Tyne & Wear, NE37 3HR, ENGLAND.
Attention: Peter Smith
Telephone: 44 191415 0200
Facsimile: 44 191416 9886
With information copy but not for service to:
PENTLAND GROUP PLC
The Pentland Centre
Lakeside, Squires Lane
Finchley, London N3 2QL
England
31
<PAGE> 35
Attention: The Legal Department
Telephone: 44 181346 2600
Facsimile: 44 181343 4876
(b) If to the Distributor:
X DOGS-COM INC.
527, Marquette Avenue,
Suite 2130,
Minneapolis, Minnesota 55402,
UNITED STATES OF AMERICA
Attention: Kent Rodriguez
Telephone: 1612 359 4027
Facsimile: 1612 359 9017
27. ASSIGNMENT
27.1 The Company may assign any of its rights or delegate any of its duties
arising out of or under this Agreement.
27.2 The Distributor may not assign any of its rights or delegate any of
its duties arising out of or under this Agreement without the prior written
consent of the Company which consent may be withheld by the Company in its
absolute discretion.
27.3 In the event of a Change of Control the Distributor shall immediately
notify the Company in writing giving full particulars of such Change of Control.
27.4 Should ownership of the Trade Marks be assigned by the Company then,
upon such assignment, the Company shall assign all of its rights and delegate
all of its duties under this
32
<PAGE> 36
Agreement to the assignee of the Trade Marks and the Distributor shall, with
effect from the date of such assignment, release and discharge the Company from
all claims and demands whatsoever in respect of this Agreement relating to the
period after the date of the assignment and shall, from the date of such
assignment, accept the assignee as the owner of the Trade Marks.
27.5 On the request of the Company, the Distributor will execute,
acknowledge and deliver all such documents, deeds, agreements or other
instruments as may be requested by the Company to give effect to clause 27.4.
28. LEGAL AND ETHICAL REQUIREMENTS
28.1 The Distributor shall at its own expense ensure that all local and
national laws, rules, regulations and other requirements and codes of practice
applicable in the Territory and all policies and ethical and other standards
from time to time specified by the Company in respect of the treatment of any
persons involved in the sale of any Products hereunder or otherwise in respect
of any human rights or other issues are complied with in relation to all
activities of the Distributor and/or its authorised subcontractors under this
Agreement.
28.2 The Distributor shall ensure that adequate records are maintained to
demonstrate compliance with the obligations contained in sub-clause 28.1 and
shall as and when requested by the Company:
(a) furnish or cause to be furnished to the Company such proof of
compliance with the obligations contained in sub-clause 28.1 as the
Company may require;
(b) permit the Company or procure the Company to be permitted to undertake
such inspection of any activities of the Distributor as the Company
may require;
33
<PAGE> 37
(c) permit the Company or procure the Company to be permitted to inspect
any records required to be maintained under this sub-clause 28.2 and
to take copies thereof
29. LOCAL LAW COMPLIANCE
29.1 The Distributor shall at its own expense comply with all relevant
legislation and other requirements of the Territory in connection with
its activities under this Agreement The Distributor shall furnish
proof of such compliance to the Company when and if the Company
requires.
29.2 As soon as possible after the execution of this Agreement the Company
and the Distributor shall if requested by the Company, at the expense
of the Distributor, execute such further documents as may be necessary
to make and make joint application to record for the registration of
the Distributor as a registered or permitted user of the Trade Marks
in respect of such of the Trade Marks as are registered or as become
registered to the extent provided by the law of the Territory.
29.3 The Distributor shall obtain any consents, licences and approvals and
comply with any formalities required for the performance of this
Agreement and payment of royalties. In the event that the Distributor
is unable to obtain any such consent, licence or approval within 3
months of the date of signature of this Agreement the Company shall
have the right to terminate this Agreement by giving thirty (30) days
notice in writing to the Distributor.
34
<PAGE> 38
30. GOVERNING LAW
30.1 The formation, construction, validity and performance of this
Agreement shall be governed in accordance with the laws of England and
Wales.
30.2 The parties irrevocably submit to the exclusive jurisdiction of the
courts of England and Wales. Such submission shall not limit the right
of the Company to commence any proceedings arising out of this
Agreement in any jurisdiction it may consider appropriate.
30.3 The Distributor waives any objection to the venue of any legal process
on the basis that the process has been brought in an inconvenient
forum.
31. FORCE MAJEURE
31.1 Neither party shall be liable for delay or failure in the performance
of this Agreement arising from any one or more of the following causes
which shall forthwith be notified to the other upon such delay or
failure:
(a) act of God or public enemy or war (declared or undeclared);
(b) acts of persons engaged in subversive activities or sabotage;
(c) fires, floods, explosions or other catastrophes;
(d) epidemics or quarantine restrictions;
(e) strikes, similar labour disruptions or public demonstrations and
unrest;
(f) freight embargoes;
(g) unusually severe weather;
(h) delays of a supplier of either party due to any of the above causes or
events; any other causes, similar or dissimilar, beyond the reasonable
control of the party); or
(i) (in the case of the Distributor) a failure by the Company to meet
agreed delivery dates for products
35
<PAGE> 39
PROVIDED THAT in any case due diligence is exercised to cure such causes
and resume performance and the time for performance by such party shall be
extended by a period of any such delay.
31.2 If one or more causes of force majeure are asserted by either party as
a basis for nonperformance of this Agreement and such non performance
continues for a consecutive period of ninety (90) days the other party
shall have the right to terminate this Agreement forthwith by giving
written notice to that effect.
32. WHOLE AGREEMENT
This Agreement contains the entire agreement and understanding between the
parties hereto with regard to its subject matter and supersedes all prior
agreements whether written or oral.
33. AGREEMENT SEVERABLE
This Agreement is severable and if any provision shall be held invalid,
illegal or which reflects the original intent of the parties shall be
substituted for such invalid or unenforceable provision provided always
that if the reasonable opinion of either party any such severance
materially affects the commercial basis of this Agreement and no agreement
can be reached by the parties as to the means by which such matters can be
resolved, such party shall have the right to terminate this Agreement with
immediate effect upon giving 90 days written notice to the other containing
the reason(s) why the commercial basis has been materially affected.
36
<PAGE> 40
34. AGREEMENT TO CO-OPERATE
Each party hereto, upon the reasonable request of the other, will execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, all such further documents, deeds, assignments, licenses,
transfers or conveyances as may be required both to satisfy the requisites
of the law of the Territory and to give full effect to the terms and
conditions of this Agreement.
35. WAIVER AND VARIATION
A provision of or a right created under this Agreement may not be waived or
varied except in writing signed by a duly authorised representative of the
party or parties to be bound. No delay or failure of either party in
exercising or enforcing any of its rights or remedies shall operate as a
waiver thereof nor shall any partial exercise of such right or remedy
preclude any other or further exercise of such right.
36. EXECUTION IN COUNTERPART
This Agreement may be executed in any number of counterparts each of which
shall be deemed an original and all of such counterparts taken together
shall be deemed to constitute one and the same instrument.
EXECUTED by the parties as an agreement the day and year first above
written.
SIGNED on behalf of the Company
-------------------------------
by its authorized representative
in the presence of:
///Signed/// ///Signed///
----------------------------- ------------------------------
Witness Representative
37
<PAGE> 41
D. Kennedy P.A. Smith
- ---------------------------------- ------------------------------
Name Name
Address: Title: President
- -------- ------
Berghaus Ltd. Date: 10/09/99
-----
SIGNED ON BEHALF OF THE DISTRIBUTOR
- -----------------------------------
by its authorised representative
in the presence of:
/// Signed/// ///Signed///
- ---------------------------------- ------------------------------
Witness Representative
S.B. Carlson Kent A. Rodriguez
- ---------------------------------- ------------------------------
Name Name
Address: Title:
- -------- ------
80 S. 8th Street CEO
36th Floor Date:
-----
Mpls., MN 55402 9/10/99
38
<PAGE> 42
SCHEDULE 1
PRODUCTS
The following Berghaus ranges are covered by this Agreement:
Footwear: Trekking, Cross Terrain, Freescape
Apparel: Extrem, Performance, Freescape, ACL
Rucsacs: Extrem, Performance, Freescape
Accessories: Socks, hats, gloves, gaiters.
The Company will not grant distribution rights for other Berghaus branded
footwear, apparel, rucsacs or accessories to any third party within the
Territory without prior discussion with the Distributor.
In the case of any other products which would normally be sold mainly through
specialist outdoor retailers the Company may, at its sole discretion, grant to
the Distributor the right to distribute such products and provided that;
(a) the Distributor can satisfy the Company that it will be able to market and
sell the products to best effect; and
(b) the grant of rights to such products does not conflict with the Company's
strategy for sale of such products whether in the Territory or elsewhere.
In the case of other products (not normally sold mainly through specialist
outdoor retailers) the Company may, at its sole discretion, grant to the
Distributor the right to distribute such products but shall not be required to
do so.
39
<PAGE> 43
SCHEDULE 2
TERRITORY
United States of America, its territories and possessions.
Canada
Mexico
40
<PAGE> 44
Schedule 3
TRADE MARKS
<TABLE>
<CAPTION>
MARK NUMBER CLASS
<S> <C> <C>
USA
- ---
Berghaus 75/592487 (pending)18,25
CANADA
- ------
Berghaus 651778 N/A (equivalent goods to 18, 25)
Berghaus 651778(l) N/A (equivalent goods to 25)
MEXICO
- ------
Berghaus 169579 18
Berghaus 169587 25
</TABLE>
41
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 86,919
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 104,252
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 104,252
<CURRENT-LIABILITIES> 49,588
<BONDS> 0
0
0
<COMMON> 66,046
<OTHER-SE> (11,382)
<TOTAL-LIABILITY-AND-EQUITY> 104,252
<SALES> 45,769
<TOTAL-REVENUES> 45,769
<CGS> 0
<TOTAL-COSTS> 1,452,920
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,620
<INCOME-PRETAX> (1,491,771)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,491,771)
<DISCONTINUED> 0
<EXTRAORDINARY> 2,967,359
<CHANGES> 0
<NET-INCOME> 1,475,588
<EPS-BASIC> 9.54
<EPS-DILUTED> 9.54
</TABLE>
