U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
Amendment #1
General Form For Registration of Securities
Of Small Business Issuers under
Section 12(b) or (g) of The Securities Exchange Act of 1934
LCS, Golf, Inc.
(Name of Small Business Issuer in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
11-3200338
(I.R.S. Employer Identification No.)
809 North Dixie Highway, Suite 200, West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip Code)
(561) 835-8484
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001
<PAGE>
TABLE OF CONTENTS
Part I
Item 1. Description of Business................................................3
Item 2. Management's Discussion and Analysis
or Plan of Operation...........................................12
Item 3. Description of Property...............................................15
Item 4. Security Ownership of Certain Beneficial
Owners and Management..........................................16
Item 5..Directors, Executive Officers, Promoters
and Control Persons............................................17
Item 6. Executive Compensation................................................19
Item 7. Certain Relationships and Related Transactions........................21
Item 8. Description of Securities.............................................21
Part II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters....................22
Item 2. Legal Proceedings.....................................................23
Item 3. Changes in and Disagreements with Accountants.........................23
Item 4. Recent Sales of Unregistered Securities...............................23
Item 5. Indemnification of Directors and Officers.............................29
Part F/S
Financial Statements..........................................................30
Part III
Item 1. Index to Exhibits.......................................................
Item 2. Description of Exhibits.................................................
Signatures......................................................................
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
To simplify the language in this registration statement, references to "We,"
"Us" or "LCS Golf" refer to LCS Golf, Inc. and its subsidiaries.
Business Development.
We were incorporated in the State of Delaware on October 8, 1997 as Linkun
Enterprise, Inc. to design and distribute golf clubs and golf related products.
On October 27, 1997, we changed our name to LCS Golf, Inc.
On October 28, 1999, we entered into an Agreement and Plan of Merger with LCS
Golf, Inc. New York, which was incorporated in the State of New York on March 8,
1994. We exchanged 980,904 shares of our common stock for $50,000 cash and
980,904 shares of LCS Golf, Inc. New York, which were all of the issued and
outstanding shares of LCS Golf, Inc. New York. We were the surviving entity.
We entered into this transaction to obtain the name LCS Golf, Inc. Prior to this
transaction, our officers and directors had no affiliation with LCS Golf, Inc.
New York.
On May 1, 1998, we acquired Golf Universe, Inc., which became our wholly owned
subsidiary. Golf Universe, Inc. was incorporated in the state of Florida on
October 23, 1996. We acquired all of the outstanding stock in Golf Universe in
exchange for the following consideration:
o 400,000 shares of our common stock issued to Golf Universe's
shareholders,
o A promissory note for $100,000, which we paid prior to February 28,
1999, and
o Expenses of $16,750 associated with the transaction
We entered into this transaction to acquire Gold Universe's plans for
development of a golf related website. Prior to this transaction, our officers
or directors had no affiliation with Golf Universe.
On November 17, 1998, we entered into a stock purchase agreement with Milton
Besen who controlled all of the issued and outstanding common stock of Mr. "B"
III, Inc. B III was incorporated in the state of Florida on September 3, 1996.
In this transaction, we exchanged 150,000 shares of our common stock and
$250,000 for all of the issued and outstanding shares of B III. B III became our
wholly owned subsidiary. We entered into this transaction to acquire B III's
manufacturing operations. Prior to this transaction, our officers and directors
had no affiliation with B III.
On January 26, 1999, we entered into a common stock purchase agreement with Alex
Bruni, the holder of 100% of the issued and outstanding shares of Play Golf Now,
Inc. Play Golf was
<PAGE>
incorporated on November 27, 1998 in the state of New York. We acquired all of
the issued and outstanding shares of Play Golf in exchange for:
o 200,000 shares of our common stock issued to Mr. Bruni,
o 250,000 shares of our common stock issued to consultants, and
o an unconditional option issued to Mr. Bruni to purchase an
additional 200,000 shares of our common stock at a purchase price of
$0.50 per share that may be exercised in whole or in part on or
before January 25, 2001.
Play Golf Now then became our wholly owned subsidiary. We entered into this
transaction to acquire Play Golf's golf membership discount program, consisting
of a network of golf courses, driving ranges, and pro shops offering discounted
rates to Play Golf's members. Prior to this transaction, our officers and
directors had no affiliation with Play Golf.
On February 15, 1999, we entered into a common stock purchase agreement with
Leigh Ann Colguhoun, the holder of 100% of the issued and outstanding shares of
Golfpromo, Inc. Golfpromo was incorporated in the state of Florida on February
10, 1999. We acquired all of the issued and outstanding shares of Golfpromo in
exchange for 350,000 shares of our common stock. Golfpromo then became our
wholly owned subsidiary. We entered into this transaction to acquire Golfpromo's
mailing database list of golfers. Prior to this transaction, our officers and
directors had no affiliation with Golfpromo.
On August 27, 1999, we incorporated I Fusion Corp. as our wholly owned
subsidiary, to provide both Internet and traditional marketing services.
Business of Issuer.
We sell products and offer information over the Internet through our five wholly
owned subsidiaries:
o Golf Universe
o B III
o Play Golf
o Golf Promo
o I Fusion
Internet Operations.
Golf Universe.com
o Golfuniverse.com has been operational since March of 1999 and currently
averages approximately 150,000 hits per day. Golfuniverse.com delivers
information and details on over 24,000 golf courses located world wide and
over 10,000 golf related businesses as well as other golf related data and
information.
o Golfuniverse.com offers an online pro shop, where golf-related products
and services are sold through third party vendors. The website offers
products and services from major golf equipment manufacturers, apparel
designers, and other golf related manufacturers.
<PAGE>
We obtain commissions when site visitors purchase products, reserve tee
times, and make travel plans online. Our commissions on these transactions
range from 12% to 20% depending on the vendor, type and amount of
reservation or sale.
o The Golf Universe site offers a Golf Universe Preferred Members Club that
provides members discounts on golf services and products. Through
alliances with Choice Hotels International, Avis(R), Alamo(R), Budget(R),
National(R) and Nike Golf Schools, the Club offers members discounts at
over 2000 golf courses, resorts, practice facilities, as well as on
equipment and apparel through the Online Pro Shop. We plan to develop
benefits for Club members such as a monthly online newsletter, a
bi-monthly magazine, a Recreation Directory, savings on condo rentals,
short notice airfare savings, vacation package savings, discounts on
cruises, motor home savings and skiing discounts.
iFusionco.com
iFusionco.com is a full-service Internet marketing company that plans to provide
the following services:
o creative and concept development;
o national marketing program implementation and management;
o corporate and package development; and
o sweepstaking and couponing.
iFusion generates revenues from monthly retainers, subcontract work, and per
project work.
Targetmails.com is a website operated by iFusion, which utilizes our databases.
Our database of golfers includes:
o in excess of 4.2 million email addresses:
o 2 million physical mail addresses,
o 24,000 golf course names and addresses; and
o over 15,000 golf retailers and pro shops.
Additionally, we have databases of individuals associated with the travel,
healthcare, and investment industries.
With our diverse databases we are able to:
o direct market specific Golf Universe and Preferred Members Club products
and services;
o rent the database to advertisers, researchers, and golf industry
consumers; and
o increase traffic to the Golfuniverse.com and WallStreetGolf.com web sites
through the targetmail.com website.
Golfpromo.net and playgolfnow.com are used principally as links to our other
web-sites.
B III
We formerly designed and manufactured consumer products through B III, but we
ceased our manufacturing operations in November of 1999. We plan to continue to
sell B III therapeutic magnet products and specialty pillows on our websites.
The manufacturing of our products is
<PAGE>
done by Allied Packaging and Manufacturing. Allied will be using B III's
manufacturing equipment to produce these product lines. We are in the process of
negotiating a formal agreement for the manufacturing of these products. Until a
manufacturing agreement is executed, we compensate Allied on a per project
basis.
Namath Agreement.
In December 1998, we entered into a ten-year agreement with Mr. Joe Namath
providing that for six days a year Mr. Namath will produce infomercials
containing his endorsement of B III's therapeutic magnet products. This
agreement expires on December 1, 2008. Mr. Namath was paid consideration of
600,000 shares of our common stock and $25,000 upon the signing of the
agreement. Additionally, Mr. Namath is to receive royalties of 5% of the gross
sales price of all endorsed products sold. To date, Mr. Namath has received no
royalty payments. We also paid 600,000 shares of our common stock to Mr.
Namath's licenser, Planned Licensing, Inc., as consideration for the use of Mr.
Namath's services.
Suppliers and Consumer Base.
We are not dependent upon suppliers of raw materials or upon any single
customer. We do not sell any of our own products on our Golf Universe website
and we maintain no inventory. We provide links to the websites of vendors who
sell their own products on their websites. All shipping and credit card
transactions are processed by the vendors whose products are displayed.
Competition for our Internet Operations.
We compete with consumer products and specialty retail businesses with physical
locations as well as with other websites selling products similar to ours. Our
leading competitors include retail stores such as Target stores, Wal-Mart
Stores, Inc., and other physical store locations that sell golf related
products. We attempt to compete on the basis of content, quality, uniqueness,
pricing, assortment of our merchandise, brand name, service to customers, and
proprietary customer lists.
Government Approval and Compliance with Governmental Regulation.
We will not collect sales or other similar taxes from goods sold on our website
except where required by law. Some states or the federal government may seek to
impose sales tax collection obligations on out-of state companies that engage in
or facilitate online commerce. Proposals have been made at the state and local
level that would impose additional taxes on the sale of goods and services
through the Internet. Such proposals, if adopted, could substantially impair the
growth of electronic commerce, and could adversely affect our opportunity to
derive financial benefit from such activities.
Due to the increasing popularity and use of the Internet, a number of laws and
regulations may be adopted, covering privacy, pricing, and quality of products
and services regarding the Internet. The growth of Internet commerce may prompt
calls for more stringent consumer protection laws that may impose additional
burdens on our business. The adoption of any additional laws or regulations may
decrease the growth of the Internet, which, in turn, could decrease the demand
for our Internet products or increase our cost of doing business, results of
operations and financial condition.
<PAGE>
We sell our products and services to numerous consumers residing in such states
and jurisdictions that may claim that we are required to qualify to do business
as a foreign corporation in each such state or foreign country. Our failure to
qualify as a foreign corporation in a jurisdiction where it is required to do so
could subject us to taxes and penalties for failure to qualify. Any such
existing or new legislation or regulation, including state sales tax, or the
application of laws or regulations from jurisdictions whose laws do not
currently apply to our business, could have a material adverse effect on our
business, results of operations and financial condition.
Quintel Agreements.
On February 16, 2000, we entered into a series of related agreements with
Quintel Communications, Inc., including a loan agreement to borrow $500,000 from
Quintel in the form of a convertible promissory note. The promissory note is
secured by our database of information. The note bears interest at a variable
rate not to exceed 14%. The note is due on demand any time after August 16,
2000. The note may be prepaid without penalty, provided that we give 15 days
notice of our intention to prepay, during which Quintel may convert the
remaining principal into shares of our common stock. If the note is converted
into shares, such shares have registration rights as set forth in a registration
rights agreement executed contemporaneously with the loan agreement. Further,
any additional shares issued upon conversion of the debt are protected by
anti-dilution provisions, subject to our repurchase right that may be used once
in twelve months from the date of the agreement.
On the same date, we entered into a marketing agreement and licensing agreement
with Quintel. As consideration for Quintel providing marketing services for a
period of two years, we issued 200,000 options to purchase our common stock to
Quintel. 100,000 of the options are exercisable for a period of two years from
issuance at $1.00 per share and 100,000 of the options are exercisable for a
period of two years from issuance at $2.00 per share. The shares underlying
these options have registration rights as described in the registration rights
agreement above.
Under the licensing agreement, Quintel will acquire a license to our database of
information in exchange for payment of $5,000 per month, if we default on the
terms of our loan from Quintel. Quintel may credit this monthly amount towards
any amounts in arrears under the terms of the loan agreement. The licensing
agreement is for a term of ten years with an option to renew for an additional
five years.
Intellectual Property.
Through our acquisition of B III, we own patent serial number 29/073.138 to a
product sold under the label "Adorables," that is an animal pillow with a pouch.
We have not sought trademark registration of the "Adorables" name with the U.S.
Patent & Trademark Office. Golf Universe has registered the following domain
names:
o golfuniverse.com o skiuniverse.com
o golfpromo.net o universe-online.com
<PAGE>
o ifusionco.com o ifusionco.net
o playgolfnow.com o junior-golf.com
o targetmail.com o mygolfuniverse.com
o wallstreetgolf.com o freeis4me.com
o lcsgolf.com o golfuniverse-online.com
Research and Development.
We have conducted no research and development in the past two (2) fiscal years.
Status of Publicly Announced New Products or Services.
We have no publicly announced new products or services.
Employees.
LCS Golf and its subsidiaries have 15 full-time employees, and a total of 15
employees.
Risk Factors.
Our Financial Condition is Poor and We May Be Unable to Continue as a Going
Concern.
Our operations have been dependent upon short-term borrowing and other funding
resources. From March 1, 1999 through November 30, 1999, our president has made
additional net advances of approximately $261,000. Our independent auditors
report on our consolidated financial statements for the year ended February 28,
1999, raises substantial doubt as to our ability to continue as a going concern.
Our financial statements show a deficit of $6,170,817. We expect to continue to
incur net losses for the foreseeable future and negative cash flow from
operations through at least the year 2000. We expect to significantly increase
our operating expenses as a result of expanding our sales and marketing, product
development and administrative operations and developing new strategic
relationships to promote our future growth. As a result, we will need to
generate increased sales to meet these expenses and to achieve profitability.
Therefore, an investment should not be made in our securities unless an investor
is prepared to lose his or her entire investment.
We Recently Redirected Our Strategic Focus; Therefore Our Recent Operating
Results Are Not Comparable to Our Results for Prior Periods.
We were founded in 1997 to design and distribute golf clubs and related
products. In early 1999, we began to provide permission email and Internet
services. For the nine months ended November 30, 1999, permission email
marketing services represented 40% of our revenue, compared to 0% in the nine
months ended November 30, 1998. Accordingly, our operating results since the
year ended February 28, 1999 are not comparable to our results for prior
periods. We cannot be certain that our business strategy will be successful, or
that we will adequately address these risks.
We Have Only Been In Existence For a Short Time Period; Therefore, You May Not
Be Able to Assess Our Business for Investment Purposes.
Because our business has been in existence only since October 1997, you may not
be able to assess our future performance.
<PAGE>
We May Not Be Able to Obtain Funds From Other Funding Sources to Stay In
Business.
If our revenues are not sufficient to continue our business, we may have to seek
other funding. If we are unable to obtain any such funding, our ability to
continue in business will be negatively impacted.
Our Management May Not Have the Requisite Experience or be Able to Devote the
Time Necessary to Develop Our Business.
Our management has little experience in managing Internet based companies. Such
inexperience could hinder our ability to fully develop our business. Although
our Chief Executive Officer works full-time for us, his employment agreement
with LCS Golf requires him to devote a minimum of only twenty hours per week to
our operations. The inability of our CEO to devote his full attention to our
business, could effect our growth and sales.
The Golf Industry is Highly Seasonal and Subject to Fluctuations.
The majority of golf sales occur during warmer weather. Therefore, our revenues
may be higher during the golf season. If we are unable to effectively develop
marketing strategies that off set decreased sales during these months, we may
not generate sufficient sales during certain financial quarters to be
profitable. In addition, due to such seasonal fluctuations, our quarterly
results may not be indicative of our future earnings.
Our Success is Dependent Upon Broad Market Acceptance of Permission Email
Marketing Services.
We do not know if our products and services will be successful. The market for
permission email marketing services is in its infancy, and we are not certain
whether our target customers will widely adopt and deploy this technology. Even
if they do so, they may not choose our products for technical, cost, support or
other reasons. Adoption of permission email marketing services, particularly by
those entities that have historically relied upon traditional means of direct
marketing, such as telemarketing and direct mail, requires the broad acceptance
of a new and substantially different approach to direct marketing.
If We Fail to Develop and Maintain Our Sales, Marketing, and Support
Organization and Relationships With Our Network Partners and Third Party List
Managers, Our Growth Will Be Limited.
We must continue to maintain and expand our relationships with network partners
who provide us with access to permission email lists. We began to enter into
agreements with our network partners in the first quarter of 1999. These
contracts are generally short-term, ranging from a one-time project to an
initial term of six months. In accordance with these contracts, we provide our
network partners with tracking services and generate revenues by reselling the
permission
<PAGE>
email lists to direct marketers. Our network partners receive a percentage of
our revenues from such resale. We cannot assure that the growth of our business
as a result of our entering into these agreements will be sufficient to meet our
expectations for sales growth and profitability.
We also have our proprietary lists, which include the majority of the email
addresses used in our operations. We complement our lists through reseller
arrangements with network partners, under which we pay a fixed fee for
nonexclusive use of their list for a specific campaign. These network partners
are not contractually obligated to provide us with access to their lists. If we
fail to maintain or grow our relationships with our network partners, our
business could be negatively impacted.
The Loss of Any of Our Executive Officers or Key Personnel Would Likely Have an
Adverse Effect on Our Business.
We need to hire a significant number of additional sales, support, marketing and
product development personnel to expand our business. If we fail to attract
qualified personnel or retain current employees, our sales may not increase and
could decline. Competition for these individuals is intense, and we may not be
able to attract, assimilate or retain additional highly qualified personnel in
the future. Our future success also depends upon the continued service of our
executive officers and other key sales, marketing and support personnel. We do
not have "key person" life insurance policies covering any of our employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for historical information, the discussion in this report contains
forward-looking statements that involve risks and uncertainties. These
forward-looking statements include, among others, those statements including the
words "expects," "anticipates," "intends," "believes" and other similar
language. Our actual results could differ materially from those discussed
herein. You should not place undue reliance on these forward-looking statements,
which apply only as of the date of this report. Factors that could cause or
contribute to such differences include, but are not limited to, the risks
discussed in "Certain Factors That May Affect Future Results of Operations."
Overview
LCS Golf Inc. is a holding company that provides:
o permission email direct marketing services through Golfpromo.net and
Targetmails.com;
o Internet and direct marketing services through ifusionco.com.
o Golf ecommerce, news and information through GolfUniverse.com ; and
o discounts on golf services through Playgolfnow.com.
We began to refocus our business on permission email direct marketing,
newsletter marketing and Internet & direct marketing in early 1999. To implement
our permission based email business strategy, we acquired Golf Promo and created
TargetMails.com and ifusionco.com. As
<PAGE>
a result of our new focus, we have built a network and developed reseller
relationships, which collectively provide us with access to over 3 million
approved golfers. Our current strategy is to focus our resources on our
permission email business by continuing to build our network of subscribers and
customer base.
We derive sales by charging fees for sending permission email messages to our
golf database. Sales are recognized when emails are sent to subscribers. Our
customers are primarily e-commerce companies, interactive advertising agencies
and golf related companies.
We deliver email messages to members of our golf related segment that consists
of our own permission email list and lists from network partners. We pay our
network partners either a percentage of sales derived from the delivery of email
messages to members on the lists they provide or a fixed fee. Substantially all
of our customers purchase our permission email services under agreements that
are short-term or less than one year. We expect to continue to derive a
substantial majority of our sales from short-term contracts and one-time users.
We expect to increase spending on sales and marketing as we expand our sales
force, increase our subscriber base and promote awareness of our business. We
also expect substantially higher general and administrative expenses as we
expand our infrastructure to support our expected growth and as we continue to
develop new product lines and make enhancements to our existing products. As a
result of these increases, we expect to incur significant losses for the
foreseeable future.
Our manufacturing operations of B III have been outsourced to Allied Packaging
and Manufacturing, Inc., who utilize our machinery and equipment, to produce our
line of B III products.
In view of the rapidly evolving nature of our business, our limited operating
history, and our recent focus on permission email and Internet marketing
services, we believe that period-to-period comparisons of our sales and
operating results, including our gross profit or losses and operating expenses
as a percentage of total sales, are not meaningful and should not be relied upon
as an indication of future performance. We do not believe that our historical
growth rates are indicative of future results.
Results of Operations
Nine Months Ended November 30, 1999
Sales. Our sales consisted of fees from providing Internet marketing services
that include:
o delivery of permission email
o direct marketing messages to members in our network
o newsletter-marketing
o e-commerce
o banner advertising
o sales of our products
<PAGE>
Total sales were approximately $1,665,000 for the nine months ended November 30,
1999, compared with approximately $108,000 for the year ending February 28,
1999. Our sales for the nine months ended November 30, 1999, consisted of
approximately $1,003,000 from our manufacturing and $662,000 from the golf
related segments.
Cost of Sales. Cost of sales was approximately $1,063,000 for the nine months
ended November 30, 1999, consisting of about $985,000 of manufacturing costs and
$78,000 of online and reproduction services and labor.
Selling, General, and Administrative Expenses. Total selling, general, and
administrative expenses for the 9 months ended November 30, 1999, were
approximately $3,701,000.
General and administrative expenses were approximately $3,187,000 for the 9
months ended November 1999, primarily comprised of the following expense areas:
o personnel
o finance
o accounting
o legal
o shares issued for financial consulting services and settlement of
claims
Sales and marketing expenses were approximately $514,000 for the nine months
ended November 30, 1999, primarily comprised of the following expense areas:
o direct sales force
o marketing staff
o marketing programs
o trade shows
o advertising
o public relations.
Because we created a direct sales force, increased our marketing expenditures to
build our permission email and Internet marketing strategy, and we will hire
additional sales and marketing personnel over the next year, we expect increased
sales and marketing expenses.
Interest Expense. Interest expense was approximately $40,000 for the nine months
ending November 30, 1999, and consists of interest on debt obligations.
Income Taxes. Because we had losses since our inception through November 30,
1999, we were not required to record federal or state income taxes. The deferred
tax benefit of these net operating losses has been reduced by a 100 % valuation
allowance.
Liquidity and Capital Resources
<PAGE>
From inception to November 30, 1999, we have funded our growth through
short-term borrowings and private placement proceeds. In February of 2000, we
entered into a 6 month, $500,000 loan agreement with Quintel Communications with
an interest rate equal to prime plus 4%, not to exceed 14%. The loan is
convertible, at Quintel's election, into shares of our common stock at a rate of
one (1) share for each $1 of the loan.
We expect that sales from our golf-related segments for the year ending February
29, 2000 will exceed $900,000, compared to $0 for the fiscal year ended February
28, 1999. We have agreements with several companies to manage and represent
their company's database and broker their client's list. These agreements may
result in increased sales and brand awareness.
We will continue our search for strategic partners and/or acquisition candidates
for our Golf Network Services.
We are currently seeking to raise additional capital through investment banking
firms to achieve our growth objectives. If adequate funds are not available, we
believe that our planned growth could be significantly affected. Operations
could continue to be reliant upon the cash flow from additional short-term
borrowings from Dr. Mitchell or from other sources.
Year 2000 Readiness Disclosure
We have not experienced any problem with any of our systems and software and do
not expect to spend any funds on Year 2000 issues.
ITEM 3. DESCRIPTION OF PROPERTY
We do not own any real property. We lease office space at 809 North Dixie
Highway, Suite 200, West Palm Beach, Florida for our Internet operations. This
space is approximately 5000 square feet. The monthly rental for this premise is
$5,000.00 and the term of the lease is three years. This lease expires on August
11, 2002, but provides an option to renew for an additional two years if the
tenant is not in default on the terms of the lease.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following tables set forth certain information with respect to the
beneficial ownership of our common stock by (a) each person known to us to be
the beneficial owner of more than five percent of our common stock, (b)
directors and executive officers both individually and as a group, as of March
31, 2000. Unless otherwise indicated, we believe that the beneficial owner had
sole voting and investment power over such shares.
Security Ownership of Certain Beneficial Owners
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name and Address of Beneficial Number of Beneficially Percentage
Title Owner Owned Shares Ownership of Class
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dr. Michael Mitchell
President 24 East 12th Street 4,118,309(1) 20.31%
and CEO New York, NY 10003
- -----------------------------------------------------------------------------------------------
</TABLE>
Security Ownership of Management
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name and Address of Beneficial Number of Beneficially Percentage
Title Owner Owned Shares Ownership of Class
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dr. Michael Mitchell
President 24 East 12th Street 4,118,309(1) 20.31%
and CEO New York, NY 10003
- -----------------------------------------------------------------------------------------------
Mr. John H. Flood, III
Director 24 East 12th Street 50,000 0.25%
New York, NY 10003
- -----------------------------------------------------------------------------------------------
Mr. Don Klosterman
Director 809 N Dixie Hgwy, Suite 200 50,000 0.25%
West Palm Beach, FL 33401
- -----------------------------------------------------------------------------------------------
Mr. Charles Gargano
Director
633 3rd Ave., 37th Fl. 250,000 1.23%
New York, NY 10017
- -----------------------------------------------------------------------------------------------
Mr. Kenneth Greenblatt
Director 809 N Dixie Hgwy, Suite 200 100,000 0.49%
West Palm Beach, FL 33401
- -----------------------------------------------------------------------------------------------
Mr. Lawrence Slavin
Director 87 St. Jon's Road 205,000(3) 1.01%
Wilton, CT 06897
- -----------------------------------------------------------------------------------------------
Chief Alex Bruni
Operating 809 N Dixie Hgwy, Suite 200 550,000(2) 2.69%
Officer West Palm Beach, FL 33401
- -----------------------------------------------------------------------------------------------
Mr. James Walsh
Director 5874 Deerfield Place 600,000 2.96%
Lake Worth, FL 33463
- -----------------------------------------------------------------------------------------------
All Executive Officers and
Directors as a group (8 people) 5,923,809 28.92%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) This amount includes 200,000 shares earned by Lynn Mitchell, Dr.
Mitchell's wife, for services to us.
(2) This amount includes 200,000 shares that may be obtained at any time by
Mr. Bruni upon exercise of his outstanding options.
(3) This amount includes 5,000 shares issued to Mr. Slavin's wife for services
rendered to us.
Changes in Control.
We are unaware of any arrangements, which may cause a change in control.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Directors and Executive Officers.
The following sets forth the names, ages, positions and terms of office of our
officers and directors. Our directors are elected annually by the shareholders,
and the officers are elected by the board at the first meeting of the board
following the annual meeting.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name Age Position Term of Office
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dr. Michael Mitchell 44 President and CEO Annual
- -----------------------------------------------------------------------------------------------
Mr. Charles A. Gargano 64 Director Annual
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Mr. Lawrence J. Slavin 46 Director Annual
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Mr. Alex Bruni 41 Chief Operating Officer Annual
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Mr. James C. Walsh 58 Director Annual
- -----------------------------------------------------------------------------------------------
Mr. Don Klosterman 69 Director Annual
- -----------------------------------------------------------------------------------------------
Mr. John H. Flood, III 49 Director Annual
- -----------------------------------------------------------------------------------------------
Mr. Kenneth Greenblatt 52 Director Annual
- -----------------------------------------------------------------------------------------------
</TABLE>
Dr. Michael Mitchell
Dr. Mitchell obtained a degree in biology from Jacksonville University in 1976.
In 1980, he obtained his M.D. degree from the University of Dominica. From 1985
through the end of 1999, he has been a physician at Greenwich Village
Pediatrics. He is board certified in pediatrics and has memberships in the
Academy of Pediatrics and the New York County Medical Society. He has now left
the practice of pediatrics to devote his full attention to LCS Golf.
<PAGE>
Mr. Charles A. Gargano
Mr. Gargano earned his B.S. and M.B.A. degrees from Fairleigh Dickinson
University and an M.S. in civil engineering from Manhattan College. He served
under Presidents Reagan and Bush as the Ambassador to the Republic of Trinidad
and Tobago. Since 1995, Mr. Gargano has served as the Commissioner for the New
York State Department of Economic Development, while simultaneously serving his
appointment as Chairman of Empire State Development, Inc. Mr. Gargano is a
licensed Professional Engineer and a Civil Engineer.
Mr. Lawrence J. Slavin
In 1974, Mr. Slavin received his history degree at Hofstra University. He then
received his M.A. in Healthcare Administration at C.W. Post College in 1977.
From 1991 through 1996, he worked as Executive Director and Managing Partner of
Hartsdale Diagnostic & Women's Imaging Service in Hartsdale, New York. In 1996,
Mr. Slavin became Vice President of Business Development and Marketing at U.S.
Management Systems, Inc., a healthcare management service company, where he
developed and managed sales and marketing plans for entities in the healthcare
industry. In 1998, Mr. Slavin began service as the President of Slavin
Consulting, LLC, a healthcare consulting firm in Wilton, Connecticut, where he
focuses on the development of strategic growth plans for healthcare related
facilities.
Mr. Alex Bruni
Mr. Bruni serves as our Chief Operating Officer. He obtained a BBA in Accounting
and a MS in Taxation from Hofstra University. From 1988 through 1998, Mr. Bruni
worked at American Express as the Director of International Taxes, managing a
staff of five tax accountants while also managing and planning American Express
international operations. In addition, Mr. Bruni worked as a tax manager for
Nomura Securities from 1986 through 1988 and as a tax specialist for Wertheim
Schroder from 1984 through 1986.
Mr. James C. Walsh
Mr. Walsh received his B.S. and J.D. degrees from the University of Alabama. He
is admitted to practice law in Louisiana and New York, where he has been
practicing since 1966. Mr. Walsh practices in his own firm, specializing in the
representation of entertainers and professional athletes. He is also the
President of Namanco Productions, Inc. specializing in the marketing and
management of athletes. Mr. Walsh is a Director of Sportsline, USA, Inc., a
NASDAQ publicly traded company under the symbol "SPLN." This company is an
Internet based sports media company.
Mr. Don Klosterman
Mr. Klosterman graduated from Loyola University of Los Angeles in 1952. He is a
former Chairman of the Board and currently Director for the public television
company NTN (an AMEX company). He also serves as Director for Aldila, a golf
shaft manufacturing company traded on NASDAQ, Director for the National
Registry, Inc., a software development company traded on NASDAQ, and as a
Director of the Bel-Air Country Club.
Mr. John H. Flood, III
<PAGE>
Mr. Flood received his A.B in Psychology from Harvard College in 1975. He
obtained his J.D. from the University of Virginia School of Law in 1978. Mr.
Flood is currently the President of Oldron Sports & Entertainment Company, which
does professional sports team marketing and consulting. Prior to his current
position, Mr. Flood directed and managed the National Football League
Properties, Inc. for eleven years where he held the positions of Director of
Legal and Business Affairs, Executive Vice President, General Counsel, and
President.
Mr. Kenneth Greenblatt
Mr. Greenblatt has a BBA degree in Finance from the University of Miami. He
currently serves as a member of the President's Council of the University of
Miami and as a member of the Board of Directors of the Helen Hayes Theatre, in
addition to his position with our company. In 1987, Mr. Greenblatt founded
Waverly Converting, Inc., a textile company, and served as its President until
the company was sold to Missbrenner, Inc. in 1997. Prior to founding Waverly
Converting, Inc., Mr. Greenblatt served as Chairman for Guilford Mills
Incorporated.
Significant Employees.
Eric Reinertsen was a significant employee of Golf Promo prior to their
acquisition and continued his employment with LCS Golf after the acquisition to
facilitate a smooth transition with the transfer of control. Mr. Reinertsen's
duties with LCS Golf include customer relations and email distribution, which
comprise two essential areas of our business. Prior to joining Golf Promo in
October of 1997, Mr. Reinertsen served as General Manager for Eric's Outboard,
Inc., a company involved in boat sales. Concurrent with his employment with
Golfpromo, Inc., Mr. Reinertsen has worked as a national accounts sales manager
for Vitarich, Inc., a company involved in production and sales of vitamins.
Other than those mentioned above, we currently have no significant employees.
Family Relationships.
There are no family relationships among our directors, executive officers or
persons nominated for such positions.
Involvement in Certain Legal Proceedings.
As of the date of this registration statement, no events have occurred during
the past five years, which would be material to an evaluation of the ability or
integrity of any director, officer or persons nominated for such positions.
ITEM 6. EXECUTIVE COMPENSATION
Summary Compensation Table
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Long Term Compensation
- -------------------------------------------------------------------------------------------------------------
Annual Compensation(1) Awards Payouts
- -------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -------------------------------------------------------------------------------------------------------------
Restricted Securities
Name and Fiscal Salary Bonus Other Annual Stock Underlying LTIP All Other
Principle ($) ($) Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) (#) ($) ($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael 1997 0 0 0 0 0 0 0
Mitchell, 1998 0 0 0 0 0 0 0
President 1999 0 0 0 $1,925,000 0 0 0
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Dr. Michael Mitchell did not receive compensation pursuant to the terms of
his employment agreement during fiscal year ended 2/29/00 because the Company
operated at a loss. Such compensation has been accrued on our financial
statements.
Michael Mitchell, M.D.
On June 1, 1998, we entered into an employment agreement with Dr. Michael
Mitchell for his services as our President and Chief Executive Officer. The
agreement is for a term of five (5) years. There may be termination for cause
ninety (90) days after a written demand for services by our board of directors
has been provided. Termination without cause requires at least three (3) months
notice to Dr. Mitchell. Dr. Mitchell's duties include all those customary for
such positions, as well as any duties reasonably imposed or removed from such
customary duties under our discretion. Dr. Mitchell is to perform such services
at least twenty (20) hours per week. As consideration for these services, we
have agreed to pay Dr. Mitchell an annual salary of two hundred, sixty thousand
dollars ($260,000.00) payable in weekly installments of five thousand dollars
($5,000.00). This salary is to be increased each year by at least four percent
(4%) during the term of the agreement.
Since we were unable to pay Dr. Mitchell pursuant to the terms of his agreement
with us, we issued 2,000,000 restricted shares of our common stock to Dr.
Mitchell in January of 1999. Such shares had a market value of $1,925,000 at the
time of issuance, based on the trading price of free-trading shares of the same
class. Dr. Mitchell's shares were unable and unavailable to be sold at the then
prevailing market price per share. Given that the shares were restricted and
illiquid, management decided that the shares were equivalent in value to the
amounts owed to Dr. Mitchell under the terms of his employment agreement through
December 31, 1998.
Alex Bruni.
In accordance with the agreement in which we purchased all of the outstanding
shares of Play Golf, we agreed to employ Alex Bruni for a period of two-years
from May 26, 1999 as Chief Operating Officer of Play Golf and Golf Universe at
an annual salary of $104,000 payable in bi-weekly installments.
Eric Reinertsen.
In accordance with the agreement in which we purchased all of the outstanding
shares of Golf Promo, we agreed to employ Eric Reinertsen for a period of
one-year from the date of the agreement at an annual salary of $60,000 payable
in bi-weekly installments. This agreement is renewable at the mutual option of
the parties.
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In January 1999, as compensation for services rendered under his employment
contract for the period from June 1, 1998 through December 31, 1998, we issued
Dr. Michael Mitchell, our President and Director, 2,000,000 shares of our common
stock valued at $1,925,000. In September of 1998, we issued 200,000 shares of
our common stock valued at $75,000 to Lynn Mitchell, wife of Dr. Michael
Mitchell, for services rendered to the Company. In addition, Dr. Mitchell
periodically makes short-term loans to the Company for operations without
specific repayment terms.
Other than those described above, we have no transactions which involved or are
planned to involve a direct or indirect interest of a director, nominee,
executive officer, 5% shareholder or any family of such parties. We are not a
subsidiary of any other company.
ITEM 8. DESCRIPTION OF SECURITIES.
Common Stock.
In General. We are authorized to issue 50,000,000 shares of common stock, par
value $0.001 per share, of which 20,282,225 shares were issued and outstanding
as of March 31, 2000. All of the issued and outstanding common stock is fully
paid and nonassessable.
Voting. Each share of our common stock entitles the holder thereof to one vote
per share in the election of directors and in all other matters upon which
stockholders are entitled to vote.
The holders of shares of common stock do not have cumulative voting rights,
which means that the holders of more than 50% of such outstanding shares voting
for the election of directors can elect all of the directors to be elected, if
they so choose. In such event the holders of the remaining shares will not be
able to elect any of our directors.
Dividends. Each share of common stock entitles the holder thereof to receive
cash dividends, as the Board of Directors may declare from funds legally
available therefore. However, we do not intend to declare any dividend on our
common stock in the foreseeable future.
Preemptive Rights. There are no preemptive rights with respect to the common
stock. Upon liquidation, dissolution or winding up of our affairs, and after
payment of creditors, the assets legally available for distribution will be
divided ratably on a share-for-share basis among the holders of the outstanding
shares of common stock.
Debt Securities.
As of the date of this registration statement, we have no debt securities
outstanding.
Other Securities.
As of the date of this registration statement, we have 200,000 options
outstanding to Alex Bruni, which are exercisable through January of 2001. In
addition, we issued 200,000 options to
<PAGE>
Quintel Communications, Inc. for their services under a marketing agreement.
100,000 of these options are exercisable at $1.00 per share until February 16,
2002. The remaining 100,000 options are exercisable at $2.00 per share until
February 16, 2002. These options have registration rights. We are not authorized
to issue preferred stock. We have 50 warrants outstanding, which are each
eligible to be exercised for 7 shares at $0.35 per share.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Market Information.
From mid-1998 through January 19, 2000, our common stock was traded on the
NASDAQ Over-The-Counter Bulletin Board under the symbol "LCSG." The following
chart sets forth the high and low sales prices for each quarter since listing of
the Company's common stock.
1998 Quarter High Low
------------ -----------------
July 1 - September 30 $0.50 $0.20
October 1 - December 31 $1.49 $0.25
1999 Quarter
------------
January 1 - March 31 $2.75 $0.75
April 1 - June 30 $3.62 $2.25
July 1 - September 30 $2.63 $1.22
October 1 - December 31 $1.63 $0.69
On January 19, 2000, we were de-listed from the Over the Counter Bulletin Board
for failure to comply with the new listing standards set forth by the NASD
before our phase-in date. Since January 20, 2000, our stock has been quoted in
the National Quotation Bureau pink sheets. If we obtain compliance with the NASD
listing requirements, we intend to reapply for listing on the Over the Counter
Bulletin Board. There is no guarantee that we will ever re-obtain such listing.
No prediction can be made as to the effect, if any, that future sales of shares
of common stock or the availability of common stock for future sale will have on
the market price of the common stock prevailing from time-to-time. Sales of
substantial amounts of common stock on the public market could adversely affect
the prevailing market price of the common stock.
Holders.
As of March 31, 2000, there were approximately 425 holders of common stock.
Dividends.
We have not paid a cash dividend on the common stock since the arrival of our
current management, and we do not plan to declare dividends at this time.
Management anticipates that any funds available will be reinvested in our
business. The payment of dividends may be made
<PAGE>
at the discretion of our Board of Directors and will depend upon, among other
things, our operations, capital requirements, and overall financial condition.
ITEM 2. LEGAL PROCEEDINGS
Currently, there are no legal proceedings pending against us. However, from time
to time we could be subject to suits arising in the ordinary course of business.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have not had any changes in or disagreements with our accountants on any
accounting and financial disclosure issue. In early 1999, we hired Cornick,
Garber & Sandler, LLP located in New York, New York to conduct our audit. Prior
to such hiring, J.T. Shulman and Company, P.C. was our primary auditor.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On October 14, 1997, we issued 10,279,216 shares of common stock to Linkun
Holding Company in exchange for certain assets of Linkun Holding Company.
On October 17, 1997, we transferred these assets to WMF Holding Company in
exchange for services valued at $1,500.00.
On October 28, 1997, we issued 850,000 shares of our common stock in our merger
with LCS New York.
On May 1, 1998, we issued 400,000 shares of our common stock in our acquisition
of Golf Universe.
On November 17, 1998, we issued 150,000 shares of our restricted common stock in
our acquisition of B III.
On January 26, 1999, we issued 200,000 shares of our common stock and an option
to purchase an additional 200,000 shares of our common stock in our acquisition
of Play Golf.
On March 8, 1999, we issued 350,000 shares of our common stock in connection
with our acquisition of Golf Promo on February 15, 1999.
The aforementioned share issuances were all made in reliance upon the exemption
from registration provided in Section 4(2) of the Securities Act of 1933, as
amended. We believe the exemption from registration in Section 4(2) of the
Securities Act was available because the transactions did not involve a public
offering. No commissions were paid in any of these transactions.
<PAGE>
We issued the following securities in reliance up on the exemption provided in
Rule 504 of Regulation D, of the Securities Act. Our basis for claiming this
exemption is i) we were not a reporting company at the time of the transactions;
ii) we were not an investment company; iii) we were not a development stage
company without a specific plan of business or purpose; and iv) we did not
receive aggregate proceeds of more than $1,000,000 in a twelve-month period. No
commissions were paid in these transactions.
On September 21, 1998, we issued 905,000 shares of our common stock for
Consulting and Business Services rendered to us.
On October 6, 1998, we issued 42,000 shares of our common stock for Legal and
Administrative Services rendered to us.
On October 15, 1998, we issued 18,000 shares of our common stock for Legal
Services rendered to us.
On October 22, 1998, we issued 137,000 shares of our common stock for Legal and
Management Services rendered to us.
On November 3, 1998, we issued 34,200 shares of our common stock for Legal
Services rendered to us.
On November 12, 1998, we issued 35,000 shares of our common stock for Consulting
Services rendered to us.
On November 15, 1998, we issued 16,500 shares of our common stock for Legal
Services rendered to us.
On November 19, 1998, we issued 50,000 shares of our common stock for Consulting
Services rendered to us.
On November 23, 1998, we issued 20,000 shares of our common stock for Consulting
Services rendered to us.
On November 30, 1998, we issued 11,800 shares of our common stock for Legal
Services rendered to us.
On December 1, 1998, we completed the sale of 200,000 units, each comprised of 1
share of common stock and 2 warrants for the purchase 7 shares of common stock
at an exercise price of $0.35, at $0.10 per unit pursuant to an offering under
Rule 504 of Regulation D of the Securities Act. Our basis for claiming this
exemption is i) we were not a reporting company at the time of the transactions;
ii) we were not an investment company; iii) we were not a development stage
company without a specific plan of business or purpose; and iv) we did not
receive aggregate proceeds of more than $1,000,000 in a twelve-month period. No
commissions were paid in
<PAGE>
these transactions. No commission was paid with respect to the offering, as the
shares were sold by our officers and directors. We raised $993,752.50 in cash
proceeds from the offering.
On December 7, 1998, we issued 125,000 shares of our common stock for Consulting
Services rendered to us.
On December 9, 1998, we issued 350,000 shares of our common stock for Consulting
Services rendered to us.
On December 10, 1998, we issued 11,100 shares of our common stock for Legal
Services rendered to us.
On December 11, 1998, we issued 55,000 shares of our common stock for Consulting
Services rendered to us.
On December 15, 1998, we issued 400,000 shares of our common stock for payment
of a Licensing Fee due from us.
On December 16, 1998, we issued 7,000 shares of our common stock for Legal
Services rendered to us.
On December 21, 1998, we issued 7,200 shares of our common stock for Legal
Services rendered to us
On December 22, 1998, we issued 35,000 shares of our common stock for
Management Services rendered to us.
The aforementioned securities were issued in reliance on Rule 504 of Regulation
D promulgated under the Securities Act, as amended. Our basis for claiming this
exemption is i) we were not a reporting company at the time of the transactions;
ii) we were not an investment company; iii) we were not a development stage
company without a specific plan of business or purpose; and iv) we did not
receive aggregate proceeds of more than $1,000,000 in a twelve month period. No
commissions were paid in these transactions.
On January 26, 1999, we issued 25,000 shares of our common stock for Legal
Services rendered to us.
On March 1, 1999, we issued 20,000 shares of our common stock for Legal Services
rendered to us.
On March 1, 1999, we issued 175,000 shares of our common stock for Public
Relations and Consulting Services rendered to us.
On March 3, 1999, we issued 20,000 shares of our common stock for Consulting
Services rendered to us.
<PAGE>
On March 4, 1999, we issued 7,500 shares of our common stock for Legal Services
rendered to us.
On April 9, 1999, we issued 115,000 shares of our common stock for Legal
Services rendered for the Company.
On April 21, 1999, we issued 50,000 shares of our common stock for Legal
Services rendered for the Company.
The aforementioned securities were issued in reliance on Rule 504 of Regulation
D promulgated under the Securities Act, as amended. Our basis for claiming this
exemption is i) we were not a reporting company at the time of the transactions;
ii) we were not an investment company; iii) we were not a development stage
company without a specific plan of business or purpose; and iv) we did not
receive aggregate proceeds of more than $1,000,000 in a twelve-month period. No
commissions were paid in these transactions.
We issued the following securities in reliance up on the exemption provided in
Section 4(2) of the Securities Act. We believed that this exemption was
available in each of the above transactions, as they did not involve a public
offering. No commissions were paid in these transactions.
On September 21, 1998, we issued 120,000 restricted shares of our common stock
for Business Consulting Services rendered to us.
On October 23, 1998, we issued 15,000 restricted shares of our common stock for
Business Consulting Services rendered to us.
On November 6, 1998, we issued 35,000 restricted shares of our common stock for
Business Consulting Services rendered to us.
On December 7, 1998, we issued 75,000 restricted shares of our common stock for
the repayment of debt owed by us.
On December 11, 1998, we issued 115,000 restricted shares of our common stock
for Business Consulting Services rendered to us.
On December 15, 1998, we issued 200,000 restricted shares of our common stock as
payment of a Licensing Fee due by us.
On December 21, 1998, we issued 110,000 restricted shares of our common stock
for Consulting Services rendered to us.
On January 4, 1999, we issued 15,000 restricted shares of our common stock for
Public Relations Services rendered to us.
<PAGE>
On January 5, 1999, we issued 2,000,000 restricted shares of our common stock to
our President, Dr. Michael Mitchell, in lieu of compensation for services
rendered to us.
On January 7, 1999, we issued 1,200,000 restricted shares of our common stock as
payment of a Licensing Fee due by us.
On January 26, 1999, we issued 1,015,000 restricted shares of our common stock
for various Consulting Services rendered to us.
On February 17, 1999, we issued 265,000 restricted shares of our common stock
for Consulting Services rendered to us.
On March 1, 1999, we issued 80,000 restricted shares of our common stock for
Consulting Services rendered to us.
On March 4, 1999, we issued 20,000 restricted shares of our common stock for
Consulting Services rendered to us.
On March 8, 1999, we issued 30,000 restricted shares of our common stock for
Consulting Services rendered to us.
On March 25, 1999, we issued 80,000 restricted shares of our common stock for
Consulting Services rendered to us.
On April 9, 1999, we issued 15,000 restricted shares of our common stock for
Administrative Services rendered to us.
On May 21, 1999, we issued 30,000 restricted shares of our common stock for
Consulting Services rendered to us.
On June 1, 1999, we issued 50,000 restricted shares of our common stock for
Consulting Services rendered to us.
On June 24, 1999, we issued 125,000 restricted shares of our common stock for
Executive Services rendered to us.
On June 28, 1999, we issued 200,000 restricted shares of our common stock for
Consulting Services rendered to us.
On July 27, 1999, we issued 200,000 restricted shares of our common stock for
Consulting Services rendered to us.
On August 23, 1999, we issued 275,000 restricted shares of our common stock for
Consulting Services rendered to us.
<PAGE>
On September 23, 1999, we issued 3,000 restricted shares of our common stock for
Consulting Services rendered to us.
On October 28, 1999, we issued 200,000 restricted shares of our common stock for
settlement of a dispute.
On November 30, 1999, we issued 50,000 restricted shares of our common stock for
management services rendered to us.
On December 1, 1999, we issued 55,000 restricted shares of our common stock for
management services rendered to us.
On December 6, 1999, we issued 25,000 restricted shares of our common stock for
management services rendered to us.
On December 17, 1999, we issued 82,500 restricted shares of our common stock for
employee compensation rendered to us.
On January 13, 2000, we issued 170,000 restricted shares of our common stock for
settlement of a dispute rendered to us.
On February 6, 2000, we issued 200,000 restricted shares of our common stock for
financial consulting services rendered to us.
On February 11, 2000, we issued 75,000 restricted shares of our common stock for
management services rendered to us.
On March 21, 2000, we issued 150,000 restricted shares of our common stock for
management services rendered to us.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our bylaws provide that we shall indemnify each of our directors and officers
against all costs and expenses actually and necessarily incurred by him or her
in connection with the defense of any action, suit or proceeding in which he or
she may be involved or to which he or she may be made a party by reason of his
or her being or having been such director or officer, except in relation to
matters as to which he or she shall be finally adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998 AND 1999
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998 AND 1999
TABLE OF CONTENTS
Page
----
Independent Auditors' Reports 1-2
Consolidated Balance Sheets
as at February 28, 1999 and November 30, 1999 3
Consolidated Statements of Operations
for the Years Ended February 28, 1998 and 1999
and the Nine Months Ended November 30, 1998 and 1999 4
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended February 28, 1998 and 1999 and the
Nine Months Ended November 30, 1999 5
Consolidated Statements of Cash Flows 7
for the Years Ended February 28, 1998 and 1999
and the Nine Months Ended November 30, 1998 and 1999
Notes to Consolidated Financial Statements 9
<PAGE>
Independent Auditors' Report
To the Shareholders
LCS Golf, Inc.
We have audited the accompanying consolidated balance sheet of LCS GOLF,
INC. AND SUBSIDIARIES as at February 28, 1999 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 LCS Golf, Inc.
and Subsidiaries as at February 28, 1999 and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred significant losses from operations for the year ended
February 28, 1999 and has relied on loans from its major stockholder. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding this matter are also described in
Note A. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ CORNICK GARBER & SANDLER, LLP
----------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
September 1, 1999
-1-
<PAGE>
Independent Auditors' Report
LCS Golf, Inc.
New York, New York
We have audited the accompanying statements of operations, stockholders'
equity and cash flows of LCS Golf, Inc. for the year ended February 28, 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of LCS Golf,
Inc. for the year ended February 28, 1998 in conformity with generally accepted
accounting principles.
/s/ J.T. SHULMAN & COMPANY, P.C.
--------------------------------
J.T. SHULMAN & COMPANY, P.C.
Carle Place, New York CERTIFIED PUBLIC ACCOUNTANTS
May 19, 1998
-2-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, November 30,
1999 1999
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash $ 289,029 $ 2,727
Accounts receivable (Note C) 164,417
Due from factor (Note C) 94,584 53,064
Inventory (Note D) 73,377 87,739
Prepaid and other current assets 335,617 23,919
Loans to stockholder - officer (Note E) 26,515
---------- ----------
Total current assets 819,122 331,866
Fixed assets - at cost, less accumulated
depreciation and amortization (Note F) 43,050 83,373
Prepaid license fee (Note G) 1,546,912 1,427,918
Intangible assets (Note A) 1,522,886 1,405,523
Security deposits 10,200 18,000
---------- ----------
TOTAL $3,942,170 $3,266,680
========== ==========
</TABLE>
The notes to financial statements are made a part hereof.
-3-
<PAGE>
<TABLE>
<CAPTION>
February 28, November 30,
1999 1999
------------ ------------
LIABILITIES (Unaudited)
<S> <C> <C>
Current liabilities:
Cash overdraft $ 3,127
Accounts payable and accrued expenses $ 156,762 532,919
Notes payable 50,000
Loans from officer/stockholder (Note E) 260,746
Other current liabilities 41,928 71,002
----------- -----------
Current liabilities before liabilities
subsequently paid with common stock 198,690 917,794
----------- -----------
Liabilities subsequently paid with common
stock (Notes I and L) 1,830,796 224,783
----------- -----------
Commitments (Notes H and I)
<CAPTION>
STOCKHOLDERS' EQUITY
(Notes A, B, G, H, I and L)
<S> <C> <C>
Common stock - $.001 par value each -
authorized 50,000,000 shares; issued and
outstanding 17,519,225 shares at February 28,
1999 and 19,524,725 shares at November 30,
1999 17,519 19,525
Additional paid-in capital 8,065,982 11,404,483
Deficit (6,170,817) (9,299,905)
----------- -----------
Total stockholders' equity 1,912,684 2,124,103
----------- -----------
TOTAL $ 3,942,170 $ 3,266,680
=========== ===========
</TABLE>
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
February 28, November 30,
---------------------------- ----------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Sales $ 107,840 $ 509 $ 1,664,795
Cost of sales 191,872 1,063,016
------------ ------------ ------------
Gross profit (loss) (84,032) 509 601,779
Selling, general and administrative
expenses (includes $3,916,
$5,141,680, $3,706,411 and
$1,734,495, respectively, of
expenses paid with common stock) $ 21,100 5,551,559 3,815,267 3,701,127
------------ ------------ ------------ ------------
(Loss) from operations (21,100) (5,635,591) (3,814,758) (3,099,348)
Other income (expense):
Other income 22,910 23,720 8,663
Interest income 1,282
Interest expense (2,204) (5,602) (1,121) (39,685)
------------ ------------ ------------ ------------
NET (LOSS) $ (23,304) $ (5,618,283) $ (3,792,159) $ (3,129,088)
============ ============ ============ ============
Basic and diluted net (loss) per share $ (.01) $ (.63) $ (.55) $ (.16)
============ ============ ============ ============
Weighted average number of
shares outstanding 3,615,735 8,961,285 6,955,885 18,968,875
============ ============ ============ ============
</TABLE>
The notes to financial statements are made a part hereof.
-4-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 28, 1998 and 1999 (AUDITED)
AND THE NINE MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
(NOTES A, B, G, H, I AND L)
<TABLE>
<CAPTION>
Total
Stockholders'
Common Shares Additional Equity
------------------------- Paid-in (Capital
Shares Amount Capital Deficit Deficiency)
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balances - March 1, 1997:
As previously reported 988,250 $ 988 $ 276,268 $ (405,526) $ (128,270)
Adjustment of prior year's expenses (123,704) (123,704)
----------- -------- ---------- ---------- ----------
As adjusted 988,250 988 276,268 (529,230) (251,974)
Additional shares provided to existing
shareholders prior to recapitalization 364,750 365 (365)
Recapitalization:
Payments to consultants in connection
with the merger (50,000) (50,000)
Adjustment to reflect reverse merger 980,904 981 (981)
Common stock issued at par value in exchange
for services rendered in connection with reverse
merger 3,916,360 3,916 3,916
Contribution of stockholder loans to
additional paid-in capital 223,180 223,180
Net (loss) for year ended February 28, 1998 (23,304) (23,304)
----------- -------- ---------- ---------- ----------
Balances - March 1, 1998 (carry forward) 6,250,264 6,250 448,102 (552,534) (98,182)
</TABLE>
-5-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 28, 1998 and 1999 (AUDITED)
AND THE NINE MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
(NOTES A, B, G, H, I AND L)
-2-
<TABLE>
<CAPTION>
Total
Stockholders'
Common Shares Additional Equity
------------------------- Paid-in (Capital)
Shares Amount Capital Deficit Deficiency)
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balances - March 1, 1998 (brought forward) 6,250,264 $ 6,250 $ 448,102 $ (552,534) $ (98,182)
Shares issued In Regulation D offering 2,982,150 2,982 976,722 979,704
Shares issued in connection with
acquisitions 1,500,000 1,500 1,302,450 1,303,950
Options issued in connection with
acquisition 169,755 169,755
Shares issued for services 6,786,811 6,787 5,168,953 5,175,740
Net (loss) for the year ended
February 28, 1999 (5,618,283) (5,618,283)
---------- -------- ----------- ----------- -----------
BALANCES - FEBRUARY 28, 1999 17,519,225 17,519 8,065,982 (6,170,817) 1,912,684
Liabilities paid with common stock 1,107,500 1,108 1,526,117 1,527,225
Shares issued for services 898,000 898 1,812,384 1,813,282
Net (loss) for the nine months
ended November 30, 1999 (3,129,088) (3,129,088)
---------- -------- ----------- ----------- -----------
BALANCES - NOVEMBER 30, 1999 19,524,725 $ 19,525 $11,404,483 $(9,299,905) $ 2,124,103
========== ======== =========== =========== ===========
</TABLE>
The notes to financial statements are made a part hereof.
-6-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
February 28, November 30,
--------------------------- ---------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net (loss) $ (23,304) $(5,618,283) $(3,792,159) $(3,129,088)
Adjustments to reconcile results of
operations to net cash effect of
operating activities:
Depreciation and amortization 80,206 14,628 243,950
Issuance of common stock for services -
net 3,916 5,141,680 3,706,411 1,734,495
Changes in assets and liabilities, net of
effects of acquisition of businesses:
Accounts receivable (164,417)
Due from factor 178,539 68,071 41,520
Inventory (21,573) (15,540) (14,362)
Prepaid and other current assets (30,223) (24,818) 311,698
Prepaid licensing fee (25,000)
Security deposits (7,800)
Accounts payable and accrued expenses (95) 71,543 (23,543) 376,157
Other current liabilities (2,148) 21,041 29,074
----------- ----------- ----------- -----------
Net cash used for operating
activities (19,483) (225,259) (45,909) (578,773)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Payment for purchases of businesses (50,000) (369,446) (19,282)
Purchase of fixed assets (47,917)
Officer/stockholder (loans) loan
repayments (26,515) 26,515
----------- ----------- ----------- -----------
Net cash used for investing
activities (50,000) (395,961) (19,282) (21,402)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Cash overdraft 3,127
Net proceeds from issuance of shares
in Regulation D 979,704 250,933
Proceeds from notes issued 50,000
Proceeds of loans from officer/stock-
holder 70,450 468,606
Repayment of officer/stockholder's
loans (70,450) (9,377) (207,860)
----------- ----------- ----------- -----------
Net cash provided by
financing activities 70,450 909,254 241,556 313,873
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH $ 967 $ 288,034 $ 176,365 $ (286,302)
CASH - beginning of period 28 995 995 289,029
----------- ----------- ----------- -----------
CASH - END OF PERIOD $ 995 $ 289,029 $ 177,360 $ 2,727
=========== =========== =========== ===========
</TABLE>
-7-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-2-
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
February 28, November 30,
--------------------------- ---------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Supplementary disclosures of cash paid for:
Interest $ 333 $ 30,729
====== =========
Income taxes $ 5,602 $ 488
======== ======
</TABLE>
The notes to financial statements are made a part hereof.
-8-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE A - Description of Business and Summary of Significant Accounting Policies
The Company
On October 28, 1997, LCS Golf, Inc. (the Company), an inactive New
York corporation, was merged in a reverse merger transaction into an
inactive Delaware corporation with the same name ("LCS Delaware") in
exchange for 980,904 shares of LCS Delaware's common stock. The
Company paid $50,000 to consultants in connection with the merger
which has been charged to additional paid-in capital. In addition,
3,916,360 shares were issued to certain existing shareholders of the
Company for services rendered in connection with the merger. For
financial accounting purposes, the merger on October 28, 1997 has been
treated as the acquisition of LCS Delaware by the Company in the form
of a recapitalization. Therefore, no value has been ascribed to the
common stock held by the LCS Delaware shareholders or to the
additional shares issued to the Company's shareholders for services
rendered in connection with the merger.
The Company was formed under the laws of the State of New York on March
8, 1994. On October 26, 1994, the Company commenced business operations
with the purchase of substantially all of the assets and the assumption
of specific liabilities of Bert Dargie Golf, Inc., a Tennessee
corporation engaged in the business of designing, assembling and
marketing golf clubs and related accessories.
In August, 1996, the Company conveyed, assigned, transferred and
delivered substantially all of its business assets to Dargie Golf Co.
(the "Purchaser") in exchange for the: i) cancellation of the remaining
debt owed to the Purchaser arising from the October 26, 1994 purchase,
ii) sale by Herbert A. Dargie III of his 5 percent ownership interest
in the Company to the Company and, iii) the assumption of certain
liabilities of the Company by the Purchaser.
The Company retained all of its rights to the specialty golf club known
as the "Rattler." Additionally, the Purchaser granted to the Company a
license to use the "Dargie" name in connection with the marketing of
the "Rattler" utility club outside a 200 mile radius of Memphis,
Tennessee for a term of no less than eighteen months.
After the acquisitions described in Note B, the Company is primarily
engaged in the acquisition and operation of companies which provide
products and services to the golf playing public. These products and
services include magnetic therapeutic devices, discounted greens fees
and other services, and a golf website (http:www.golfuniverse.com)
which provides various golf-related hyperlinks to other golf websites
and golf course previews.
(Continued)
-9-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE A - Description of Business and Summary of Significant Accounting Policies
(Continued)
Principles of Consolidation
The consolidated financial statements include the accounts of LCS and
its subsidiaries, all of which are wholly owned. All material
intercompany accounts and transactions have been eliminated in
consolidation.
Basis of Presentation
The accompanying consolidated financial statements have been prepared
on a going concern basis which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business.
Through November 30, 1999, the Company has not been able to generate
significant revenues from its operations to cover its costs and
operating expenses. Although the Company has been able to issue its
common stock (Note I) for a significant portion of its expenses or has
obtained cash advances from its principal stockholder (Note E), it is
not known whether the Company will be able to continue this practice or
be able to obtain continuing cash advances or if its revenue will
increase significantly to be able to meet its cash operating expenses.
This, in turn, raises substantial doubt about the Company's ability to
continue as a going concern. Management believes that the subsidiaries
acquired during the year ended February 28, 1999 will begin to generate
higher revenues and that the Company will be able to raise additional
funds through an offering of its common stock or alternative sources of
financing. However, no assurances can be given as to the success of
these plans. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
Interim Financial Data
The unaudited consolidated financial information as of November 30,
1999 and for the nine months ended November 30, 1999 and 1998 has been
prepared on the same basis as the audited consolidated financial
statements and, in the opinion of management, contain all adjustments
(consisting of normal recurring adjustments) necessary to present
fairly the financial information in accordance with generally accepted
accounting principles. The results of the interim periods are not
necessarily indicative of the results to be expected for a full year.
(Continued)
-10-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE A - Description of Business and Summary of Significant Accounting Policies
(Continued)
Inventories
Inventories are valued at the lower of cost determined on a first-in,
first-out basis or market.
Depreciation of Equipment
Depreciation is provided utilizing the straight-line method over the
estimated useful lives of the related assets. For income tax purposes,
accelerated depreciation methods are utilized for certain assets.
Deferred Income Taxes
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences 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 bases.
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.
As a result of the Company's net losses to date, the Company has
provided a valuation allowance of $2,169,000 at February 28, 1999 and
$3,376,000 at November 30, 1999 against the income tax benefit
attributable to its net operating loss carryforwards and other
temporary differences which aggregate approximately $5,618,000 and
$8,747,000 at February 28, 1999 and November 30, 1999, respectively.
Almost all of such temporary differences relate to the Company's net
operating loss carryforwards which expire substantially in 2019 and
2020.
Intangible Assets
Intangible assets which are comprised of the goodwill, customer lists
and website costs relating to acquisitions (Note B) are being amortized
on a straight-line basis over ten years.
The Company plans to evaluate these assets for impairment on the basis
of whether their cost is recoverable from projected, undiscounted net
cash flows for each related business.
(Continued)
-11-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE A - Description of Business and Summary of Significant Accounting Policies
(Continued)
Concentrations
Financial instruments which potentially subject the Company to
concentration of credit risk consist of accounts receivable and cash
deposits. Cash balances are held principally at one financial
institution and may exceed Federal Deposit Insurance Corporation
insured amounts.
For the year ended February 28, 1999, sales to two customers accounted
for approximately 89% of total sales, the largest of which represented
approximately 73% of the total. For the nine months ended November 30,
1999, sales to two customers accounted for approximately 40% of total
sales, the largest of which accounted for approximately 21%. In
addition, two customers accounted for approximately 78% of accounts
receivable at November 30, 1999, the largest of which accounted for
55%.
Advertising Costs
The Company expenses its advertising costs when incurred. However,
$10,000 of expenses relating to an infomercial which was in production
as of February 28, 1999 are included in prepaid expenses at that date
and were expensed upon the first showing of the infomercial during the
nine months ended November 30, 1999.
Advertising costs were approximately $6,700 for the year ended February
28, 1999 and $146,000 for the nine months ended November 30, 1999 which
includes approximately $134,000 for expenses of the infomercial. There
were no advertising costs incurred for the year ended February 28, 1998
and the nine months ended November 30, 1998.
Loss Per Share
Loss per share has been computed by dividing the net loss by the
weighted average number of common shares outstanding during each
period. The effect of outstanding stock options is not included in the
per share calculations as it would be antidilutive.
(Continued)
-12-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE A - Description of Business and Summary of Significant Accounting Policies
(Continued)
Prior Period Adjustment
The deficit balance as at March 1, 1997 has been adjusted to reflect
the write off of a trademark which had no value to the Company and
should have been written off in a prior year's financial statements.
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 reported amounts of assets, liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE B - Acquisitions
The results of operations of the following acquisitions are included in
the attached consolidated statements of operations and cash flows from
their respective dates of acquisition.
Golf Universe, Inc.
On May 1, 1998, the Company acquired, in a purchase transaction, the
outstanding common stock of Golf Universe, Inc., which operates a golf
website that provides hyperlinks to other golf related websites. The
purchase price was $245,250, which included 400,000 shares of the
Company's common stock with a market value of $128,500 as at the date
of issuance and a note payable of $100,000 which was paid prior to
February 28, 1999. The purchase price also includes $16,750 in
expenses.
Mr. B III, Inc.
On November 17, 1998, the Company acquired, in a purchase transaction,
the outstanding common stock of Mr. B III, Inc. ("B III"), which
designs, manufactures, markets and distributes therapeutic magnetic
products and specialty pillows. The purchase price was approximately
$679,000, which included a cash payment of $250,000 and 150,000 shares
of the Company's common stock with a market value of $71,250 as at the
date of issuance. The purchase price also includes expenses of
approximately $358,000, which includes 150,000 shares of the Company's
common stock with a market value of approximately $355,000 as at the
date of issuance.
(Continued)
-13-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE B - Acquisitions (Continued)
Play Golf Now, Inc.
On January 26, 1999, the Company acquired, in a purchase transaction,
the outstanding common stock of Play Golf Now, Inc., which sells
memberships that enable the holder to play at specified golf courses
across the country at reduced greens fees and entitle the holder to
receive various other discounts from participating vendors on golf
related items. The purchase price was approximately $602,000, which
included 200,000 shares of the Company's common stock to the seller and
250,000 shares of common stock to consultants with a market value
aggregating approximately $432,000 as at the date of issuance. The
seller also received non-qualified stock options to purchase to January
25, 2001, 200,000 shares of the Company's common stock at $.50 per
share. The value of these options at grant date utilizing the
Black-Scholes option-pricing model, was approximately $170,000. The
assumptions used in determining the value of these options was an
expected volatility of 181.00%, an average interest rate of 4.64% per
annum and an expected holding period of two years.
Golfpromo, Inc.
On February 15, 1999, the Company acquired, in a purchase transaction,
the outstanding common stock of Golfpromo, Inc., whose principal asset
is a mailing list of golfers. The purchase price was approximately
$316,000, representing the market value as at the date of issuance of
350,000 shares of the Company's common stock issued to the seller.
The agreements for the acquisitions of B III, Play Golf Now, Inc. and
Golfpromo, Inc. include a provision that if the price of the Company's
common stock is less than $1.00 per share, one year from the date(s) of
issuance, additional shares were to be issued to the seller(s). The
Company believes that the price per share was not less than $1.00 on
the applicable dates and, accordingly, no additional shares will be
issued.
(Continued)
-14-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE B - Acquisitions (Continued)
B III is the only one of the foregoing acquisitions which is considered
material in relation to those of the Company. The following presents,
on an unaudited pro forma basis, the net sales, net loss and loss per
share had the B III acquisition occurred on March 1, 1997. The
information for B III is based upon its unaudited financial data for
the period March 1, 1998 through November 16, 1998 and for the year
ended February 28, 1998. The pro forma information does not purport to
be indicative of the results of operations that would have occurred had
the transaction taken place at the beginning of the periods presented
nor is it indicative of the expected future results of operations:
Year Ended February 28,
--------------------------
1999 1998
----------- ---------
Net sales $ 1,130,000 $ 1,242,000
=========== ===========
Net loss $(5,635,000) $ (249,000)
=========== ===========
Loss per share $ (.62) $ (.06)
=========== ===========
NOTE C - Due from Factor
B III's agreement with a factor provides for the sale of all credit
approved accounts receivable of B III only at the invoice price less a
factoring commission of 1.75%. Minimum factoring commissions of $15,000
a year, payable monthly are required. The agreement is automatically
renewable by the Company each October 31, unless the factor gives the
Company 30 - 60 days notice of cancellation prior to that date. The
Company is given credit for the sale within two weeks of collection by
the factor. If a receivable is not collected for any reason other than
the customer's financial inability to pay, the credit approval is
automatically terminated and it becomes a "client risk" receivable. A
client risk receivable is a purchase by the factor with recourse and
can be charged back to the Company at the factor's option. The factor
may advance up to 80% of the purchase price of uncollected accounts
receivable. These advances bear interest at a rate the greater of 9% or
2% above the prime rate. The factor is collateralized under this
agreement by the accounts receivable, cash in banks and intangible
assets of B III. At February 28, 1999 and November 30, 1999, the
Company has a receivable due from the factor which bears interest at 2%
below the prime rate.
(Continued)
-15-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE C - Due from Factor (Continued)
In March 1999, the President of the Company personally guaranteed the
above agreement.
Accounts receivable on the consolidated balance sheet are not subject
to the factoring agreement at November 30, 1999.
NOTE D - Inventory
Inventory is summarized as follows:
February 28, November 30,
1999 1999
------------ ------------
Raw materials $30,768 $47,739
Work-in-process 4,069
Finished goods 38,540 40,000
------- -------
Total $73,377 $87,739
======= =======
NOTE E - Loans to/from Major Stockholder/Officer
Loans to/from a major stockholder/officer are payable on demand with
interest at 10% a year. These loans are unsecured. From February 28,
1999 to November 30, 1999, the loans receivable from the
stockholder/officer were repaid and the stockholder/officer made net
advances to the Company of approximately $261,000. At February 29,
2000, the net advances from the stockholder/officer were approximately
$229,000.
NOTE F - Equipment
Equipment consists of the following:
<TABLE>
<CAPTION>
February 28, November 30, Useful Lives
1999 1999 (Years)
------------ ------------ ------------
<S> <C> <C> <C>
Office equipment and computers $10,515 $58,432 5
Machinery and equipment 34,425 34,425 5
------ ------
Total 44,940 92,857
Less accumulated depreciation 1,890 9,484
------ ------
Total $43,050 $83,373
======= =======
</TABLE>
(Continued)
-16-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE F - Equipment (Continued)
Depreciation expense for the year ended February 28, 1999 and the nine
months ended November 30, 1999 was $1,890 and $7,594, respectively.
NOTE G - Licensing Agreement
In December 1998, the Company entered into a ten year licensing
agreement for the services of Joe Namath to be a spokesperson to
promote the Company's products. The license fee of approximately
$1,586,500, which is being amortized over the life of the agreement,
was paid for by the issuance of 1,200,000 shares of the Company's
common stock with a market value of $1,174,500, the issuance of 600,000
shares of common stock with a market value of approximately $387,000 to
two individuals who assisted in obtaining the agreement and $25,000 in
cash. The amortization expense for the year ended February 28, 1999 and
for the nine months ended November 30, 1999 was approximately $40,000
and $119,000, respectively. In addition, Mr. Namath is entitled to a
royalty fee of 5% of the gross sales, as defined, generated from
products promoted in accordance with the agreement. No royalties are
due for the year ended February 28, 1999 and the nine months ended
November 30, 1999.
NOTE H - Commitments
Employment Agreements
On June 1, 1998, the Company entered into a five year employment
agreement with its President which provides for a minimum annual salary
of $260,000 with annual increases of not less than four percent.
However, in lieu of cash payments of $150,000 due under the agreement
through December 1998, the Company issued 2,000,000 shares of common
stock to its President. The $1,925,000 quoted market value of these
shares on the date of issuance has been charged to operations for the
year ended February 28, 1999, as officer's salary.
On February 18, 1999, the Company entered into a one year employment
agreement with the Vice President of Golfpromo, Inc., which provides
for a minimum annual salary of $60,000. Additionally, the agreement
provides for a bonus of five percent of sales of Golfpromo, Inc. up to
$500,000 and three percent of its sales between $500,001 and
$1,000,000. The agreement is renewable at the option of both parties.
Golfpromo had no sales for the period ended February 28, 1999 and sales
of approximately $567,000 for the nine months ended November 30, 1999.
In addition, the Company agreed to continue the employment of two
employees for one year at a combined annual salary of approximately
$76,000.
(Continued)
-17-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE H - Commitments (Continued)
Employment Agreements (Continued)
In connection with the acquisition of Play Golf Now, Inc., the Company
entered into an employment agreement with the seller for a two year
period commencing on May 26, 1999 at an annual salary of $104,000.
Lease
In August 1999, the Company entered into a three year lease for office
space in Florida. The lease can be renewed for an additional two year
term. Rent is $5,000 a month with an annual cost of living increase and
is subject to further adjustments for any increases in real estate
taxes or insurance. The minimum annual base rentals under this lease
are as follows:
Year ending February 28:
2000 $ 40,000
2001 60,000
2002 60,000
2003 20,000
---------
Total $ 180,000
=========
The Company's other locations are leased on a month-to-month basis.
Rent expense was $15,980 for the year ended February 28, 1999 and
$1,200 and $60,056 for the nine month periods ended November 30, 1998
and 1999, respectively.
NOTE I - Stockholders' Equity
During the year ended February 28, 1999, the Company sold, under
Regulation D of the Federal Securities Act, 200,000 units at $.10 a
unit. Each unit consists of one share of the Company's common stock and
two common stock warrants. Each warrant is for the purchase of seven
shares of common stock at $.35 a share. As of November 30, 1999,
2,782,150 shares have been issued for the exercise of the warrants,
warrants to purchase 350 shares are outstanding and warrants to
purchase 17,500 shares have been surrendered by the holders. The
Company received $979,704 in proceeds from the sale of the units and
exercise of the warrants, net of offering expenses of $14,048.
(Continued)
-18-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE I - Stockholders' Equity (Continued)
The Company has issued shares of common stock for the following
services rendered (the shares have been recorded at the quoted market
value of the Company's stock) on the dates issued:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
February 28, 1999 November 30, 1999
----------------------- -------------------------
Quoted Quoted
Number of Market Number of Market
Shares Issued for Services Shares Value Shares Value
---------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Employment contract settlement
(Note K) 200,000 $ 268,750
Licensing agreement (Note G) 1,800,000 $1,561,576
Board of Directors fees 200,000 108,124 50,000 53,126
Consulting services 1,461,811 760,065 640,000 1,476,718
President's wages (Note H) 2,000,000 1,925,000
Consulting fees - related parties* 1,325,000 820,975
Finance costs 8,000 14,688
--------- ---------- ------- ----------
Total 6,786,811 $5,175,740 898,000 $1,813,282
========= ========== ======= ==========
</TABLE>
*The Company utilized consulting services provided by certain family
members of the President of the Company.
On June 25, 1999, the stockholders of the Company approved an increase
in the number of authorized shares from 20,000,000 shares to 50,000,000
shares.
NOTE J - Segments
LCS Golf, Inc., through its subsidiaries, provides products and
services to the golf playing public. The Company's two reportable
business segments are managed separately based on fundamental
differences in their operations. They consist of the golf related and
manufacturing segments. The golf related segment commenced operations
subsequent to February 28, 1999.
(Continued)
-19-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE J - Segments (Continued)
The golf related segment provides diverse services through its web
sites, including direct marketing services and e-mail direct marketing
services, e-commerce news and information, internet access and
discounts on golf products and services.
The manufacturing segment is involved in the design, manufacture,
marketing and distribution of therapeutic magnetic and specialty
products. In November 1999, the Company ceased manufacturing operations
and, utilizing its manufacturing assets, is outsourcing this phase of
the segment.
The following table reflects information for the segments as at
February 28, 1999 and November 30, 1999 and for the nine months ended
November 30, 1999, consistent with the Company's management system.
These results are not necessarily a depiction that is in conformity
with generally accepted accounting principles. Certain significant
assets and expenditures which related to the overall management and
operations of the Company are not allocated to any segment. These
expenses include consulting fees of approximately $1,387,000,
professional fees of approximately $351,000, settlement of claims of
approximately $433,000 and general corporate salaries of approximately
$200,000. The Golf related segment of the Company had no operations for
the year ended February 28, 1999.
<TABLE>
<CAPTION>
Unallocated
Golf Management/
Total Related Manufacturing Operations
----------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Total assets:
February 28, 1999 $ 3,942,170 $1,152,037 $ 623,624 $ 2,166,509
November 30, 1999 3,266,680 1,290,773 536,760 1,439,147
----------- ---------- ----------- -----------
(Decrease) increase
in total assets $ (675,490) $ 138,736 $ (86,864) $ (727,362)
=========== ========== =========== ===========
Sales $ 1,664,795 $ 662,243 $ 1,002,552
=========== ========== ===========
Net (loss) $(3,129,088) $ (73,558) $ (454,698) $(2,600,832)
=========== ========== =========== ===========
</TABLE>
(Continued)
-20-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE K - Claim Settlement
During January 2000, the Company reached a final settlement of a claim
from a former employee of LCS New York. The Company issued 200,000
shares of common stock in October 1999 and an additional 170,000 shares
of common stock in January 2000. The market value of these shares of
approximately $403,000 has been reflected in the November 30, 1999
financial statements. These shares are restricted and have piggyback
registration rights should the Company file a registration statement
with the SEC, subject to the agreement of the managing underwriter.
NOTE L - Subsequent Events
On February 16, 2000, the Company borrowed $500,000 from an internet
marketing and development company (the "lender") in the form of a
convertible promissory note. The note is due on demand at any time
after August 16, 2000 and is convertible into 500,000 shares of common
stock of the Company at any time prior to repayment. Any shares issued
by the Company will have registration and piggyback registration rights
and are subject to anti-dilution adjustments in certain cases. If any
additional shares are issued under the anti-dilution provisions, the
Company will have a one-time repurchase right at a $1.00 per share
during the twelve month period following the date of conversion of the
note. The note is without interest until the earlier of August 17, 2000
or an event of default under the note. Interest to be charged will be
at prime plus 4%, not to exceed 14%. The note may be prepaid at anytime
after giving 15 days prior written notice. The note is secured by the
Company's database and all related records, contract rights and
intangibles which has been delivered to the lender and must be updated
upon request, until the obligation has been paid. If the Company should
be in default under this agreement, the lender can use the database and
related items for a period of ten years for a fee of $5,000 a month.
The Company also entered into a two year marketing agreement with the
lender to develop programs to market products and services and send
promotional e-mails to the visitors and customers of the Company's
websites. The lender will pay the Company $.25 for each individual who
"opts in" to be registered with the lender at its site. Revenues
generated from these programs (less direct "out-of-pocket" costs,
including royalties, cost of producing the marketing materials and
other expenses directly related to the programs) will be divided
equally and distributed quarterly less any required reserves.
(Continued)
-21-
<PAGE>
LCS GOLF, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT NOVEMBER 30, 1999 AND
FOR THE NINE MONTH PERIODS ENDED
NOVEMBER 30, 1998 AND 1999 IS UNAUDITED)
NOTE L - Subsequent Events (Continued)
In connection with the marketing agreement, the Company issued two year
options to purchase 100,000 shares of the Company's common stock at
$1.00 a share and 100,000 shares at $2.00 per share. These options are
subject to certain anti-dilution provisions and provide registration
rights for the underlying shares. The agreement can be terminated in
the event of a default under the agreement by either party which is not
corrected within 30 days after notice is given.
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
/s/ Dr. Michael Mitchell, President
-----------------------------------
By: Dr. Michael Mitchell, President
Dated: April 7, 2000
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
- --------------------------------------------------------------------------------
Exhibit
Number Description
- --------------------------------------------------------------------------------
2.1 Linkun Holding Company (as filed in the Form 10-SB filing on 12/9/99)
- --------------------------------------------------------------------------------
2.2 LCS Golf, Inc. Merger (as filed in the Form 10-SB filing on 12/9/99)
- --------------------------------------------------------------------------------
2.3 Golf Universe, Inc. (as filed in the Form 10-SB filing on 12/9/99)
- --------------------------------------------------------------------------------
2.4 Mr. "B" III, Inc. (as filed in the Form 10-SB filing on 12/9/99)
- --------------------------------------------------------------------------------
2.5 GolfPromo, Inc. (as filed in the Form 10-SB filing on 12/9/99)
- --------------------------------------------------------------------------------
2.6 Play Golf Now, Inc. (as filed in the Form 10-SB filing on 12/9/99)
- --------------------------------------------------------------------------------
3.1 Articles of Incorporation (as filed in the Form 10-SB filing on
12/9/99)
- --------------------------------------------------------------------------------
3.2 By-laws (as filed in the Form 10-SB filing on 12/9/99)
- --------------------------------------------------------------------------------
4.1 Form of Common Stock Certificate (as filed in the Form 10-SB filing
on 12/9/99)
- --------------------------------------------------------------------------------
10.1 Namath Agreement
- --------------------------------------------------------------------------------
10.2A Quintel Loan Agreement
- --------------------------------------------------------------------------------
10.2B Quintel Convertible Promissory Note
- --------------------------------------------------------------------------------
10.2C Quintel Security Agreement
- --------------------------------------------------------------------------------
10.2D Quintel License Agreement
- --------------------------------------------------------------------------------
10.2E Quintel Marketing Agreement
- --------------------------------------------------------------------------------
10.2F Quintel Registration Rights Agreement
- --------------------------------------------------------------------------------
21 Subsidiaries of the Registrant
- --------------------------------------------------------------------------------
27 Financial Data Schedule
- --------------------------------------------------------------------------------
Exhibit 10.1
LICENSE AGREEMENT
LICENSE AGREEMENT, dated the ______ day of December, 1998, by and between
PLANNED LICENSING, INC., a Nevada corporation having offices at 300 East 51st
Street, New York, New York 10022 ("Licensor"), LCB GOLF, INC. having offices at
24 East 12th Street, New York, New York 10003 ("LCSGI"), and Mister (B) III,
Inc., ("MBIII") a Florida corporation, having offices at 275 East 10th Avenue,
Hialeah, Florida 33010 ("Licensee").
WITNESSETH:
WHEREAS, Licensor has the rights to the services of JOSEPH W. NAMATH
(hereinafter referred to as "NAMATH") and the rights to the utilization of the
Name and Character, as hereinafter defined, and will continue to have such
rights during the period of this Agreement; and
WHEREAS, Licensee desires to retain Licensor to provide the services of
NAMATH as a spokesperson to advertise and promote its products; and
WHEREAS, Licensee further desires the right to exclusively utilize the
Name and Character upon and in connection with certain articles, as hereinafter
described, including the manufacture, advertising and promotion thereof; and
WHEREAS, LCSGI is a publicly traded holding corporation, incorporated,
formed and existing under the law of the State of Delaware; and
WHEREAS, the Licensee is a wholly owned subsidiary of LCSGI, and is a
corporation incorporated, formed and existing under the laws of the State of
Florida; and
WHEREAS, MBIII is the developer, manufacturer and distributor of
therapeutic magnetic products and devices.
NOW, THEREFORE, in consideration of the promises set forth below, the
parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:
a. "Name and Character" shall individually or collectively
mean the name of Joseph W. Namath (hereinafter referred to as "NAMATH"), his
initials, character, likeness, visual and vocal representations, including
television and film representations generated hereunder, autograph, photographs,
repro-
<PAGE>
ductions thereof, biographical data, and in association with the marketing of
products licensed hereunder, any trademark used to convey to the public any of
the foregoing aspects of representation of NAMATH.
b. "Endorsed Products" as used herein shall be therapeutic
magnetic products and devices developed, manufactured, distributed or sold by
Licensee.
c. A company shall be deemed a "wholly-owned subsidiary" of
Licensee if at least ninety (90%) percent of all the voting securities thereof
are owned by Licensee.
d. "Territory" shall mean the United States of America and
wherever Endorsed Products are sold.
e. "Contract Year" shall be a consecutive 365 day period,
except for the first Contract Year which shall commence on the execution hereof
and run through November 30, 1999.
2. SERVICES OF NAMATH AND LICENSOR.
a. On condition that Licensee and LCSGI shall keep and perform
each and every term of this Agreement on their part to be performed, NAMATH
will, during the term of this Agreement, perform or appear, at Licensee's
request, in infomercials (including "openings", "closings", "lead-ins", and
"lead-outs") involving Endorsed Products and to make personal endorsements
therein of Endorsed Products;
b. Each time that Licensee requires the personal appearance
services of NAMATH, Licensee shall give to Licensor at least thirty (30) days
written notice of such performance requirements. Licensor shall then, within
seven (7) days of receiving notice, advise Licensee and its duly appointed
agency as to NAMATH's availability for such performance requirements. In the
event NAMATH is unavailable for such performance requirements, the Licensee may
supply alternate dates and thereafter Licensee and Licensor shall agree upon
performance dates that are satisfactory. Once mutually agreeable date or dates
are established, NAMATH shall not enter into conflicting commitments. Such
services will be rendered in a competent manner, to the best of NAMATH's
ability, and all his services will be subject to Licensee's approval, direction
and control at all times, and NAMATH promptly will comply with whatever
reasonable instructions Licensee may give him in connection with the rendition
of such services.
c. Licensor will make NAMATH available to Licensee for up to
six days each Contract Year for the purpose of making infomercials.
2
<PAGE>
d. If Licensee requires NAMATH's services at a location other
than that at which NAMATH is then located, Licensee shall provide Licensor with
first-class air and ground transportation and accommodations for NAMATH and two
associates to and from the location at which NAMATH's services are required,
plus reimbursement of their other reasonable out-of-pocket expenses.
e. If Licensee uses the services of NAMATH hereunder for
television broadcast commercials, its agency or producer shall either be
signatories to or submit to the jurisdiction of the Screen Actors Guild (SAG) or
the American Federation of Television and Radio Artists (AFTRA).
(i) Licensee agrees to make all required applicable
pension and welfare payments to SAG, or AFTRA if, and to the extent applicable
on account of such services as furnished by the Licensor hereunder; and
(ii) All applicable residual fees on account of services
shall be computed at the applicable union minimum scales; provided, however,
that Licensee shall not be obligated to make any such residual payments to
NAMATH unless and to the extent that such residual payments payable hereunder in
any Contract Year exceed the consideration received for that year. Any such
required excess payments shall be made to NAMATH on the thirtieth day of the
Contract Year following the year in which the obligation to make such payment
accrues. NAMATH shall be paid at Union scale for all performances.
f. All statements, testimonials and endorsements made by
NAMATH in connection with his services hereunder will be true representations
and to the extent that said services purport to reflect NAMATH's opinion and
experience, they will reflect his true opinion and experience. Licensee agrees
that NAMATH will not be required to make any statement, testimonial or
endorsement, in connection with his services hereunder, unless said statement,
testimonial or endorsement is true. It is expressly understood between the
parties that NAMATH is familiar with Endorsed Products now being manufactured,
sold or distributed. Licensor represents to Licensee that NAMATH has found said
products to be of the finest quality and that he has used or is prepared to use
those products and has recommended and/or is prepared to recommend the use of
all said products to others.
3. GRANT OF LICENSE. During the term of this Agreement, Licensor
hereby grants to Licensee, and Licensee hereby accepts, a non-transferable,
non-assignable, and non-sublicensable Agreement to use the Name and Character
solely within the Territory and solely on and in connection with the
advertising, promotion, sale and distribution of Endorsed Products. Licensee
shall make no use of the Name and Character in association with goods other than
Endorsed Products. It is intended by the parties that the
3
<PAGE>
endorsement of the Endorsed Product by NAMATH shall be sole and exclusive to
Licensee for Paid Endorsed Products.
4. TERM. The term of this Agreement shall commence on the date
hereof and continue for ten Contract Years unless terminated earlier pursuant to
this Agreement.
5. CONSIDERATION. In full consideration for the rights, licenses and
privileges herein granted to Licensee, Licensee shall pay to Licensor:
a. The sum of Twenty-five Thousand Dollars ($25,000), payable
upn the signing of this Agreement.
b. In addition, Licensee shall pay to Licensor a royalty equal
to five (5%) percent of the "Gross Sales Price" (as such term is defined herein)
of all sales by Licensee or any of its affiliated, associated, or subsidiary
companies of the Endorsed Products covered by this Agreement in perpetuity.
Royalties shall be paid concurrently with the periodic statements required in
subparagraph (e) hereof.
c. With respect to sales of Endorsed Products sold by Licensee
through the use of infomercials, 800 telephone numbers, or other methods of
direct sale, "Gross Sales Price" shall mean the invoice price of Endorsed
Products billed to the purchasers, less uncollectible invoices or portions
thereof, returns of merchandise and shipping and handling charges. No deduction
shall be made for discounts on account of prompt payment and other trade
discounts, allowances or credits. With respect to sales of Endorsed Products to
wholesalers or retailers for resale to the public, "Gross Sales Price" shall
mean the gross invoice price of Endorsed Products billed to the customer, less
uncollectible invoices or portions thereof, trade and prompt payment discounts,
and returns of merchandise. No deduction shall be made for costs incurred for
salesmen's commissions and freight allowances. In the event any sale is made at
less than a competitive price (as hereinafter defined) to any of Licensee's
affiliates, or to any other person, firm or corporation in which Licensee or its
principal officers, directors or major stockholders have a material interest,
Gross Sales Price shall be equal to the applicable competitive price, less
deductions as set forth above. For purposes of the foregoing sentence, the term
"competitive price" shall mean the price at which the particular sale would have
been made to an independent third party.
d. Licensee shall keep complete and accurate separate records
of all sales of Endorsed Products (in Licensee's principal place of business)
showing the types of products sold, the quantities sold, the dates of shipment,
the dates of invoices, the customers to whom sold, the invoice prices and terms,
credits
4
<PAGE>
and returns. The said records, and all underlying documents and other documents
relating to the Endorsed Products, shall be open to inspection by Licensor or
its designated representative at all reasonable times during business hours up
to four (4) times per Contract Year and shall be maintained and preserved by
Licensee. Licensee agrees not to cause or permit any interference with Licensor
or Licensor's representative in the performance of their duties of inspection
and audit. The exercise by Licensor in whole or in part, or at any time or times
of the right to audit records and accounts or of any other right herein granted,
the acceptance by Licensor of any statement or statements or the receipt and
deposit by Licensor of any payment tendered by or on behalf of Licensee shall be
without prejudice to any rights or remedies of Licensor and shall not stop or
prevent Licensor from thereafter disputing the accuracy of any such statement or
payment.
e. No later than the twenty-fifth day of each calendar month,
Licensee shall transmit to Licensor a complete and accurate statement, certified
to be accurate by an officer of Licensee, covering the immediately preceding
calendar month. Such report shall set forth the sales of all Endorsed Products
which were sold during the preceding month. Monthly reports are required even if
no sales have been made. In the event that any inconsistencies or mistakes are
discovered in such statements or payments, they shall immediately be rectified
and the appropriate payment be made by Licensee. Upon demand by Licensor,
Licensee shall at its own expense (to be deducted for royalties hereunder), but
no more than once in any twelve (12) month period, furnish to Licensor, a
detailed statement by an independent certified public accountant computing sales
of Endorsed Products under this Agreement distributed and/or sold by Licensee to
the date of Licensor's demands. If the certified audit discloses that royalties
were understated by more than ten (10%) percent per Contract Year, then Licensee
shall pay for such audit.
f. If Licensee shall fail to make any payment or deliver any
of the statements hereinabove referred to or to give access to the premises
and/or license records pursuant to the provisions hereof to Licensor's
authorized representatives for the purposes permitted hereunder, same shall be
an Event of Default (paragraph 15) and be treated as such.
6. PAYMENT. All payments due under this Agreement shall be made by
check,drawn upon a United States bank, payable to the order of Licensor.
Interest on any overdue payment under this Agreement shall be at the rate of two
percentage (2%) points over the prime rate, as announced from time to time by
Bank of New York, from ten (10) days after notification of non-payment by
Licensor to the date of their payment, irrespective of whether payment be made
before or after judgment. Payment of interest as described hereunder shall not
cure or excuse Licensee's default in making payments when due.
5
<PAGE>
7. RESERVATION OF RIGHTS. Licensor retains all rights not expressly
or exclusively conveyed to Licensee hereunder, and Licensor may grant licenses
to other to use and Name and Character in connection with products other than
Endorsed Products, or other products which are competitive with or substantially
similar to the Endorsed Products.
8. APPROVALS. Licensor shall not be required to approve any use of
the Name and Character which in Licensor's reasonable judgment would, due to the
nature of the Endorsed Product, reflect adversely on the image or reputation of
NAMATH.
For any use of the Name and Character in an infomercial, the
following procedures shall apply:
a. Licensee shall submit to Licensor for approval, storyboards
and a complete script of the proposed infomercial together with pre-production
samples of all Endorsed Products to be shown during the infomercial together
with any packaging, hangtags and wrapping materials. Such submission shall
include a written request for approval;
b. In the event Licensor does not disapprove of the
storyboards or script or the samples within three business days of its receipt
of same, the storyboards, script and samples shall be deemed to have been
approved. In the event Licensor disapproves, it shall specify the basis for such
disapproval. After rectifying any disapproved item, Licensee shall resubmit that
item for approval in accordance with the provisions of this paragraph 8;
c. Licensor reserves the right to approve, which approval will
not be unreasonably withheld, the director to be used in any infomercial.
Licensor also reserves the right to approve the production company that will be
producing the infomercial.
d. Prior to the airing of an infomercial, a complete copy
shall be provided to the Licensor for its final editorial approval. In the event
Licensor does not disapprove of the final cut of the infomercial within three
business days from its receipt of the final cut, the infomercial shall be deemed
to have been approved. In the event Licensor disapproves, it shall specify the
basis for such disapproval. After rectifying any disapproved portion of the
infomercial, Licensee shall submit the infomercial for approval in accordance
with the provisions of this paragraph 8;
e. In the event of changes being made at any time in the use
of the Name and Character in connection Endorsed Product or changes to the
infomercial, such changes shall be
6
<PAGE>
considered new items and shall be submitted for approval in the manner specified
above;
f. Licensee shall not use the Name and Character or any
colorable imitation of it on any product or item that has not been approved by
or which has been disapproved by the Licensor nor shall the Licensee air any
infomercials that has not been approved by or which has been disapproved by the
Licensor; and
g. Subject to final approval, twelve units of production
samples of the Endorsed Products will periodically be sent to Licensor, at
Licensor's request, to insure quality control.
9. GOOD WILL. The Licensee recognizes the great value of the
publicity and good will associated with the Name and Character and in such
connection, acknowledges that such good will exclusively belongs to Licensor and
that the Name and Character have acquired a secondary meaning in the mind of the
purchasing public. Licensee further recognizes and acknowledges that a material
breach by it of any of its covenants, agreements or undertakings hereunder will
cause Licensor irreparable damage, which cannot be readily remedied in damages
in an action at law, and may, in addition thereto, constitute an infringement of
Licensor's rights in the Name and Character, thereby entitling Licensor to
equitable remedies, costs and reasonable attorney's fees.
10. FREE GOODS.
a. Licensee shall deliver free of charge to Licensor on
request, such an amount of Endorsed Products as is deemed necessary by Licensor
for its own reasonable promotional purposes, not to exceed the wholesale value
of $2,500.00 per Contract Year.
b. At Licensee's sole discretion, Licensee shall deliver free
of charge to Licensor for personal use by NAMATH, and, within reason, by his
immediate family, any item or items than being manufactured or sold by Licensee.
11. LICENSOR'S WARRANTIES AND REPRESENTATIONS. Licensor warrants and
represents that:
a. It has, and will have throughout the term of this
Agreement, the right to license the Name and Character in accordance with the
terms and provisions of this Agreement; and,
b. The making of this Agreement by Licensor does not violate
any agreements, rights or obligations existing between the Licensor and any
other person, firm or corporation.
7
<PAGE>
The foregoing subparagraphs shall not be construed to limit
the right of NAMATH to appear in any of the entertainment fields and to grant
customary advertising and exploitation rights in connection with such
appearances, except that he may not appear in commercials for or endorse for
others, the products licensed hereunder, or other articles which are competitive
with or substantially similar to Endorsed Products.
12. DISTRIBUTION, SUB-LICENSE MANUFACTURE. Licensee shall not be
entitled to sub-license any of its rights under this Agreement except, Licensee
shall, subject to the prior written approval of Licensor (which approval shall
not be unreasonably withheld), be entitled to utilize a third party manufacturer
in connection with the manufacturer and production of Endorsed Products. In no
event shall any such sub-license agreement include the right to grant any
further sub-licenses.
13. SPECIFIC UNDERTAKINGS OF LICENSEE. During the term, Licensee
agrees that:
a. It will not attack the title of Licensor in and to the Name
and Character or any copyright or trademark pertaining thereto, nor will it
attack the validity of the License granted hereunder;
b. It will not harm, misuse or bring into disrepute the Name
and Character;
c. It will manufacture, sell and distribute Endorsed Products
in an ethical manner and in accordance with the terms and intent of this
Agreement;
d. It will not create any expenses chargeable to Licensor
without the prior written approval of Licensor;
e. It will protect to the best of its ability its right to
manufacture, sell and distribute Endorsed Products hereunder;
f. It will comply with all laws and regulations relating or
pertaining to the manufacture, sale, advertising or use of the Endorsed Products
and shall maintain the highest quality and standards, and shall comply with any
regulatory agencies which shall have jurisdiction over the Endorsed Products;
and
g. It will provide Licensor with the date(s) of first use of
the Endorsed Products in interstate and intrastate commerce.
8
<PAGE>
14. INDEMNIFICATIONS.
a. Licensor hereby indemnifies Licensee and shall hold it
harmless from any loss, liability, damage, cost or expense (including reasonable
counsel fees), arising out of any claims or suits, whether groundless or not,
which may be brought or made against it by reason of the breach by Licensor of
the warranties or representations as set forth in paragraph 11 hereof, provided
that it shall give prompt written notice, cooperation and assistance to Licensor
relative to any such claim or suit, and provided, further, that Licensor shall
have the option to undertake and conduct the defense of any suit so brought.
b. Licensee hereby indemnifies and agrees to hold Licensor and
NAMATH harmless from any loss, liability, damage, cost or expense (including
reasonable counsel fees), arising out of any claim or suits, whether groundless
or not, which may be brought or made against Licensor or NAMATH by reason of any
unauthorized use by it in connection with the Endorsed Products of the Name and
Character covered by this Agreement.
c. Licensee hereby indemnifies and agrees to hold Licensor and
NAMATH harmless from and against any loss, liability, damage, cost or expense
(including reasonable counsel fees), arising out of any claims or suits (whether
groundless or not), which may be brought or made against Licensor or NAMATH
arising out of the manufacture, offer, sale, advertising or promotion of the
Endorsed Products made by or for it (irrespective of Licensor's conduct and
relation thereto), as well as any alleged defects or inherent dangers in the
said Endorsed Products or the use thereof, provided that the Licensor and NAMATH
gives prompt written notice, cooperation and assistance to it relative to any
such suit or claim, and provided further that Licensee shall have the option to
undertake and conduct the defense of any suit so brought. Licensee agrees to
obtain and maintain, at its own cost and expense, product liability insurance
covering all Endorsed Products in the minimum amount of $10,000,000.00 with
Licensor and NAMATH being named as a beneficiary and insured under the said
policy of insurance as their interest may appear. Licensee shall cause a
Certificate of Insurance (with all riders and endorsements) to be issued to
Licensor within thirty (30) days from date hereof and shall instruct its insurer
to notify Licensor of any actual, threatened or prospective cancellation,
termination or modification of such policy. Licensee shall promptly reimburse
Licensor for any premiums or any other expenses Licensor incurs in order to
obtain or maintain such insurance because of Licensee's failure to do so. Such
reimbursements shall not cure or excuse Licensee's default in obtaining or
maintaining such insurance.
15. EVENTS OF DEFAULT. The following conditions and occurrence shall
constitute "Events of Default" by Licensee or LCSGI:
9
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a. If Licensee or LCSGI materially default in the performance
of any of their obligations provided for in this Agreement; or
b. Licensee shall have failed to deliver to Licensor or to
maintain in full force and effect the insurance referred to in subparagraph 14c
hereof; or
c. If Licensee shall fail to make any payment due hereunder on
the date due; or
d. If any governmental agency finds that the Endorsed Products
are defective in any way, manner or form which is likely to cause injury and if
Licensee has not remedied same; or
e. If either Licensee or LCSGI shall be unable to pay its
debts when due, or shall make any assignment for the benefit of creditors, or
shall file any petition under the bankruptcy or insolvency laws of any
jurisdiction, or shall have or suffer a receiver or trustee to be appointed for
their business or property, or be adjudicated a bankrupt or an insolvent; or
f. If Licensee shall manufacture, sell or distribute,
whichever first occurs, any of the Endorsed Products without the prior written
approval of Licensor as provided in paragraph 8 hereof; or
g. If a manufacturer approved pursuant to subparagraph 12
shall engage in conduct, which conduct if engaged in by Licensee would entitle
Licensor to terminate this Agreement.
16. TERMINATION. Without limiting Licensor's rights, upon the
occurrence of any Event of Default under paragraph 15, Licensor shall obtain the
option to terminate this Agreement at its will by sending written notice to the
defaulting party and the other party. If the default set forth in such written
notice is not cured within thirty (30) days of receipt of such notice (or within
such further period as Licensor may allow), then at the end of such period
termination shall automatically occur without further notice. In the event that
after the date of automatic termination Licensor allows a further period to cure
the default, termination will automatically occur without further notice if the
default is not cured within such further period. If this Agreement is terminated
pursuant to this paragraph 16, Licensee shall pay to Licensor all royalties in
perpetuity.
17. [OMITTED].
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18. DEFAULT BY LICENSOR AND NAMATH.
a. In the event NAMATH substantially neglects or refuses to
perform the services and obligations hereunder at times and in the manner
specified, or if NAMATH or Licensor in any manner breaches this Agreement
(hereinafter "a breach"), the Licensee shall have the right to cancel and
terminate this Agreement. Prior to terminating this Agreement, it must give
written notice to Licensor of the claimed breached. If the breach set forth in
such notice is not cured within ten (10) days of its mailing or a reasonable
time under the circumstances (or within such further period as it may allow),
then at the end of such period, termination shall automatically occur without
further notice to Licensor and Licensee and/or LCSGI may pursue their legal
remedies.
b. In the event any express representation, warranty or
undertaking by Licensor or NAMATH is at any time during the term of this
Agreement found to be untrue or is breached, the Licensee shall have the right
to cancel and terminate this Agreement and to pursue all other legal remedies.
Prior to terminating this Agreement, it must give written notice to Licensor of
the express representation, warranty or undertaking claimed to be untrue or
breached. If the untrue express representation, warranty or undertaking or
breach thereof set forth in such notice is not cured within ten (10) days of its
mailing or a reasonable time under the circumstances (or within such further
period as it may allow), than at the end of such period, termination shall
automatically occur without further notice to Licensor.
c. The services to be rendered by NAMATH hereunder are of a
special, unique, extraordinary and intellectual character, which gives them a
peculiar value impossible of replacement and for the loss of which the Licensee
may not be reasonably or adequately compensated in damages, and a breach by
Licensor or NAMATH of the provisions of this Agreement may cause it irreparable
injury and damage and Licensor therefore expressly agrees that it shall be
entitled to injuctive and other equitable relief to prevent a breach of this
Agreement, or any part thereof, and to secure its enforcement.
19. SURVIVOR. The provisions of paragraph 14, Licensee's obligation
to make payment under paragraphs 5 and 6 and paragraph 17 shall survive the
expiration or termination of this Agreement.
20. TRADEMARK. After termination of this Agreement, Licensee shall
give up all rights to the use of the Name and Character.
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<PAGE>
21. ACCEPTANCE BY LICENSOR. This instrument, when signed by Licensee
shall be deemed an application for a license, and not a binding agreement,
unless and until accepted by Licensor, by signature of a duly authorized
officer, and delivery of such signed copy to the other parties. The foregoing
shall apply to any documents relating to renewals or modifications hereof. The
acceptance and deposit of the initial $25,000 payment shall not be considered an
acceptance of this Agreement on the part of the Licensor.
22. ASSIGNMENT. This Agreement shall bind and inure to the benefit
of Licensor, LCSGI, their successors and assigns. This Agreement is personal to
Licensee and it shall not without written approval of Licensor, which may not be
unreasonably withheld, sublicense nor franchise (except as set forth in
paragraph 12 hereof), and neither this Agreement nor any of the rights hereunder
shall be sold, transferred or assigned by Licensee and no rights hereunder shall
devolve by operation of law or otherwise upon any receiver, liquidator, trustee
or other party.
23. NO JOINT VENTURE. Nothing herein contained shall be construed to
place the parties in the relationship of employer-employee, partners or joint
venturers and neither party shall have the power to obligate or bind the other
in any manner whatsoever.
24. NO WAIVER. No waiver or modification of any of the terms of this
Agreement shall be valid unless in writing. No waiver by either party of a
breach hereof or a default hereunder shall be deemed a waiver by such party of a
subsequent breach or default of like or similar nature.
25. NOTICES. Any notice required or permitted to be given under the
Agreement by either of the parties hereto shall be given by over-night courier,
registered or certified mail, return receipt requested, postage prepaid,
addressed to the parties to be notified at the following addresses:
If to Licensor: PLANNED LICENSING, INC.
c/o James C. Walsh, Esq.
300 East 51st Street
New York, New York 10022
with a copy to: CARL R. SLOAN, ESQ.
Penser and Sloan
342 Madison Avenue, Suite [ILLEGIBLE]
New York, New York 10173
12
<PAGE>
If to Licensee: MISTER (B) III, INC.
275 East 10th Avenue
Hialeah, Florida 33010
with a copy to: GENE R. KAZLOW, ESQ.
Kazlow & Kazlow
19 West 34th Street, Suite 905
New York, New York 10001
If to LCSGI: LCS GOLF, INC.
24 East 12th Street
New York, New York 10003
with a copy to: GENE R. KAZLOW, ESQ.
Kazlow & Kazlow
19 West 34th Street, Suite 905
New York, New York 10001
26. CONSTRUCTION. This Agreement shall be construed in accordance
with the laws of the State of New York. The parties acknowledge that this
Agreement is the result of negotiations conducted by them and their respective
independent legal counsel, and the parties agree that this Agreement shall not
be construed against the party that drafted the Agreement.
27. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties. There are no representations, warranties,
promises, covenants or undertakings other than those hereinabove contained.
28. RESOLUTIONS OF CONTROVERSIES. Any controversy arising out of
this Agreement or because of any duty created thereby, shall be resolved without
a jury in a court located within the City of New York. The parties consent to
jurisdiction in such courts, waive objection to such venue, waive trial by jury,
and agree that service of the summons to such proceeding (and of any papers
which accompany it), shall be deemed sufficient if made by certified or
registered mail, postage prepaid, addressed to the parties' addresses as
designated in or hereafter changed under paragraph 26. The parties stipulate and
agree that any judgment relating to this Agreement, which is entered in a court
located within the City of New York, shall be binding throughout the world and
may be sued upon, docketed, entered and/or enforced, without challenge or
opposition on their part and without re-trial of any of the issues which give
rise to such judgment in any state, county, province, commonwealth, or territory
having jurisdiction over their respective persons or properties. The parties
recognize that the above agreement to submit all controversies to
forever-binding adjudication by a court located within the City of New York does
not constitute a confession of judgment on anybody's part, but is simply an
agreement, like an arbitration agreement, to have particular controversies
resolved, once and for all, by a specified
13
<PAGE>
tribunal. All parties agree that equitable relief, including injunction and
specific performance, may be necessary and proper to enforce their obligations
and commitments under this paragraph and under paragraphs 2, 5, 8, 12, 14, 15,
and 17 of this Agreement.
29. PROVISIONS UNENFORCEABLE. In the event any provision of this
Agreement shall be held invalid or unenforceable, it shall be deemed modified,
only to the extent necessary to make it lawful. To effect such modification, the
said provision shall be deemed deleted, added to and/or rewritten, whichever
shall most fully preserve the intentions of the parties as originally expressed
herein.
30. LEGAL FEES. The prevailing party in any litigation between the
parties shall recover from the other party its reasonable legal fees and
expenses.
31. ADDITIONAL ENDORSED PRODUCTS. In the event Licensee desires to
include other products as an Endorsed Product, it shall submit such product to
Licensor for its consideration and approval. In the event Licensor agrees to
have the product added as an Endorsed Product, Licensee shall pay to Licensor
twenty-five thousand ($25,000) dollars for each infomercial in which NAMATH
and/or the Name and Character is utilized, plus a royalty of five (5%) parcent
of the Gross Sales Price (as defined in paragraph 5(b) above) of all sales of
the added products[ILLEGIBLE]. Such royalty shall continue to be paid as long as
the Endorsed Product is sold by Licensee, or any of its affiliated, associated
or subsidiary companies, even if such Endorsed Product is modified, changed,
renamed or otherwise changed.
32. ADDITIONAL CONSIDERATION. Upon the signing of this agreement,
LCSGI shall issue to Licensor or its nominee(s) 1,200,000 shares of LCSGI's
common stock. Such shares are restricted shares subject to Rule 144 and such
shares will be acquired by Licensor or its nominee(s) solely for their own
account for investment and will not be offered for sale in connection with any
distribution thereof. Licensor and its nominee(s) agree that they will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of all or any portion of the shares except in compliance with the
Securities Act and the rule and regulations of the Securities and Exchange
Commission thereunder, and in compliance with applicable state securities ("Blue
Sky") laws.
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<PAGE>
33. BOARD OF DIRECTORS OF LCSGI. LCSGI hereby offers to Licensor the
right to (1) seat on LCSGI's Board of Directors. Such seat may be held by any
nominee of Licensor. LCSGI will make such seat available to Licensor or its
nominee as long as this Agreement is in effect.
34. OTHER SUBSIDIARIES OF LCSGI. In the event LCSGI shall desire to
have NAMATH serve as spokesperson for any other subsidiary of LCSGI and Licensor
agrees to undertake to provide such services, Licensor shall receive the sum of
$25,000 for any infomercial utilizing the services of NAMATH and Licensor shall
receive a royalty equal to five percent (5%) of the Gross Sales Price (as such
term is defined herein) of all sales of such additional product in accordance
with paragraph 5(b). Such other subsidiary of LCSGI shall enter into an
agreement with the Licensor similar to this Agreement.
35. TRADE SECRETS. Licensor and NAMATH agree to keep confidential
all trade secrets of Licensee that are revealed to them as a result of this
Agreement.
36. COUNTERPART COPIES. This Agreement may be executed in
counterpart copies, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the day and year first above written.
PLANNED LICENSING, INC.
By: /s/ [ILLEGIBLE]
----------------------------------------
LCS GOLF, INC.
By: /s/ [ILLEGIBLE]
----------------------------------------
MISTER (B) III, INC.
By: /s/ [ILLEGIBLE]
----------------------------------------
/s/ [ILLEGIBLE]
- ---------------------------------
JOSEPH W. NAMATH
[As to his obligations herein]
15
Exhibit 10.2A
LOAN AGREEMENT
LOAN AGREEMENT dated as of January _____________, 2000 ("Agreement") by and
between QUINTEL COMMUNICATIONS, INC., a Delaware corporation, having an address
at One Blue Hill Plaza, Pearl River, New York 10965 (hereafter referred to as
"Quintel"); and LCS GOLF, INC. a Delaware corporation, having an address at 24
East 12th Street, New York, New York 10003 (hereafter referred to as "LCSG";
Quintel and LCSG are sometimes referred to as a "Party" or the "Parties").
W I T N E S S E T H :
WHEREAS, QUINTEL has agreed to loan LCSG $500,000.00 on the terms provided for
herein.
NOW, THEREFORE, in consideration of the agreements herein set forth and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1Article : DEFINITIONS.
Capitalized terms used in this Agreement shall, unless the context otherwise
requires, have the meanings specified in this Article 1. Certain additional
defined terms are set forth elsewhere in this Agreement.
1.1. Affiliate.
"Affiliate" means, with respect to any Person, any other Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.2. Balance Sheet Date.
"Balance Sheet Date" means February 28, 1999.
1.3. Blue Sky Filing.
"Blue Sky Filing" means the filing of any application, registration, statement
or other document with any Governmental Body of any state, the District of
Columbia, or any territory or other jurisdiction in the United States necessary
to register or qualify the sale of the Registrable Securities in such
jurisdiction in or through the public securities markets.
1.4. Blue Sky Laws.
"Blue Sky Laws" means the laws of any state, the District of Columbia, or any
territory or other jurisdiction in the United States governing the purchase
and/or sale of securities in such jurisdiction.
1.5. Business Day.
"Business Day" means a day, other than Saturday, Sunday or a day on which banks
in New York City are required or permitted to be closed.
1.6. Closing.
"Closing" means the closing of the transsactions described in this Agreement
pursuant to Section 4 of this Agreement.
1.7. Closing Date.
"Closing Date" means the date of this Agreement.
1.8. Code.
"Code" means the Internal Revenue Code of 1986, as amended.
1.9. Commission.
"Commission" means the United States Securities and Exchange Commission.
1.10. Common Stock.
"Common Stock" means the shares of common stock, par value $.001 per share, of
LCSG.
<PAGE>
1.11. Contracts.
"Contracts" means all contracts, leases, licenses, commitments, sales orders,
invoices, purchase orders and other agreements relating to the LCSG Business,
including the agreements listed on Schedule 1.14.
1.12. Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time
to time.
1.13. Financial Statements.
"Financial Statements" means LCSG's combined balance sheets, combined
statements of income and retained earnings, and combined statements of cash flow
and related footnotes thereto as at and for the twelve (12) month periods ending
February 28, 1999 and February 28, 1998, respectively.
1.14. GAAP.
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
1.15. Governmental Body.
"Governmental Body" means any applicable court, tribunal, arbitrator or any
government or political subdivision thereof, whether federal, state, county or
local, or any agency, authority, official or instrumentality of any such
government or political subdivision.
1.16. Guaranty.
"Guaranty" means the guaranty of the Note by Dr. Michael Mitchell in the form of
Schedule 1.19 annexed hereto.
1.17. Intellectual Property.
"Intellectual Property" means United States and foreign patents, patent
applications, patent licenses, software licenses and know-how licenses, trade
names, trademarks, copyrights, service marks, trademark registrations and
applications (whether pending or abandoned), service mark registrations and
applications, copyright registrations and applications (whether pending or
abandoned), job or shop rights, rights to inventions and all other items of
intellectual property or other intangible property used in the LCSG Business.
1.18. Knowledge.
"Knowledge" of any matter means, with respect to an individual, the actual
knowledge, but not constructive or imputed knowledge, after due inquiry, of such
matter of such Person and, with respect to any Person that is not an individual,
such actual knowledge of each individual that is a director, officer, manager,
employee, counsel, accountant, investment banker or other professional advisor
of such Person.
1.19. LCSG Shares.
"LCSG Shares" means all of the issued and outstanding shares of capital stock of
LCSG.
1.20. Material Adverse Effect.
"Material Adverse Effect" means any change or changes or effect or effects that
individually or in the aggregate are or may reasonably be expected to be
materially adverse to the condition (financial or otherwise) of LCSG.
1.21. Note.
"Promissory Note" means the promissory note, in the form attached hereto as
Schedule 1.21.
1.22. Order.
"Order" means any judgment, writ, decree, injunction or similar order of any
Governmental Body, in each case whether preliminary or final.
1.23. Other Documents.
"Other Documents" means all Schedules and Exhibits to this Agreement and all
other instruments, agreements and documents executed or to be executed by any
party hereto in connection with the transactions contemplated hereby.
<PAGE>
1.24. Person.
"Person" means and includes an individual, a partnership, a joint venture, a
joint stock company, a corporation, a limited liability company, a trust, an
unincorporated association or organization and a government or a department or
agency, authority, official or instrumentality thereof, or any group of the
foregoing acting in concert.
1.25. Pledge Agreement.
"Pledge Agreement" means the agreement by Dr. Michael Mitchell in the form of
Schedule 1.29 annexed hereto pledging _______ shares of common stock of Procept,
Inc. to secure his obligations under the Guaranty.
1.26. Register; Registered; Registration; Registration Statement.
The terms "register," "registered," "registration" and "registration statement"
shall refer to a registration of securities to be offered and sold under a
registration statement filed with the Commission, that becomes effective
pursuant to the Securities Act or the Exchange Act and the applicable rules and
regulations under either such Act.
1.27. Registrable Securities.
"Registrable Securities" has the meaning given in Section 3.1.
1.28. Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
1.29. Shares.
"Shares" means any of the Shares of Common Stock into which the Shares are
convertible.
2Article : LOAN BY QUINTEL.
2.1. Loan.
Concurrently herewith Quintel has loaned to LCSG and LCSG has borrowed from
Quintel the sum of Five Hundred Thousand Dollars ($500,000.00), evidenced by the
Note, which has been executed and delivered by LCSG concurrently herewith. The
Note will come due on July __ , 2000, and will bear no interest until the
earlier of maturity or default. The principal amount of the Note is convertible,
at any time at Quintel's option into that number of shares of Common Stock which
constitute ___ percent of LCSG's issued and outstanding shares of voting stock
of all classes on the date of conversion on a fully diluted basis including the
shares of Common Stock issuable upon conversion of the Note.
2.2. Guaranty.
Concurrently herewith, Dr. Michael Mitchell has executed and delivered the
Guaranty to Quintel.
3Article : REGISTRATION OF SHARES
3.1. Demand Registration Right.
If all or any portion of the Note is converted into Common Stock, Quintel shall
have the one-time right at any time to make a written request that LCSG register
the Shares (the "Registrable Securities"), and LCSG thereafter agrees to use its
best efforts to file a registration statement with the Commission and to have
such registration statement declared effective, to permit, when such
registration statement becomes effective, the sale of the Registrable Securities
in the public securities markets. .
3.2. Piggy Back Registration Right.
If at any time LCSG proposes to register any of its securities under the
Securities Act (other than pursuant to a Registration Statement on Form S-8, S-4
or similar or successor form), LCSG shall give notice of such intention to
Quintel, and, if, within ten (10) business days thereafter LCSG receives a
written request by Quintel to register the Registrable Securities (which request
shall specify the Registrable Securities intended to be sold or disposed of and
shall state the intended method of disposition of the Registrable Securities by
LCSG), LCSG will use its best efforts to register such Registrable Securities
with the securities being registered by LCSG to permit the sale or other
disposition of the Registrable Securities (in accordance with the intended
methods thereof of which LCSG has been given notice) by LCSG. In the event that
the proposed registration under this Section 3.2 is, in whole or in part, an
underwritten public offering of Common Stock of LCSG, any request pursuant to
this Section 3.2 to register Registrable Securities
<PAGE>
may specify that such Registrable Securities are to be included in the
underwriting on the same terms and conditions as the shares of Common Stock, if
any, otherwise being sold through underwriters under such registration;
provided, however, that as to any registration pursuant to this Section 3.2, (i)
if the managing underwriter determines and advises Quintel in writing that the
inclusion of all Registrable Securities proposed to be included in the
underwritten public offering and other issued and outstanding shares of Common
Stock proposed to be included therein by persons other than LCSG or Quintel (the
"Other Shares") would interfere with the successful marketing of such
securities, then the number of Registrable Securities and Other Shares excluded
from such registration shall be allocated pro rata among the holders of the
Other Shares (based on the number of shares of Common Stock requested by the
holders thereof to be registered in such offering, except for Other Shares
included therein at the request of holders thereof exercising demand
registration rights with respect to such other Shares), and (ii) in each case
those shares of Common Stock that are excluded from the underwritten public
offering pursuant to this Section 3.2 shall be withheld from the market by the
holders thereof and Quintel for such period that the managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering.
3.3. Preparation and Filing of Registration Statement.
With respect to any registration statement to be prepared by LCSG under this
Agreement, LCSG shall, at its sole expense, as expeditiously as practicable:
3.3.1.1 prepare and file with the Commission a registration statement
necessary to permit the sale of the Registrable Securities in the
public securities markets when such registration statement becomes
effective, and such amendments and supplements to such registration
statement and the prospectus included therein as may be necessary,
to the extent reasonably practicable, to cause such registration
statement to become effective; to cause such registration statement
to become effective; and to maintain the effectiveness of such
registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement, in accordance
with the intended methods of disposition thereof; provided that LCSG
shall not be required to maintain such effectiveness for any time
after (a) the disposition of the Registrable Securities in
accordance with the intended methods of disposition thereof as set
forth therein or (b) nine months after the date of effectiveness of
such Registration Statement;
3.3.1.2 furnish to Quintel such number of conformed copies of such
registration statement and of each amendment or supplement thereto
(in each case including all exhibits and documents incorporated
therein by reference), such number of copies of any prospectus
included in such registration statement and such other documents, in
each case, as Quintel may reasonably request in order to facilitate
the sale of the Registrable Securities in the public securities
markets;
3.3.1.3 register or qualify the Registrable Securities under the Blue Sky
Laws of each state governing further purchase or sale of securities
as Quintel may reasonably request, keep such registration or
qualification in effect for so long as such registration statement
remains in effect and take any other action that may be reasonably
necessary or advisable to enable Quintel to consummate the
disposition in such states of the Registrable Securities; provided
that LCSG shall not be required to keep such registration or
qualification in effect at any time after (a) the disposition of the
Registrable Securities in accordance with the manner of disposition
set forth in the registration statement relating thereto or (b) nine
months after the date such registration statement becomes effective;
and provided, further, that LCSG will not be required to (A) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph or (B)
subject itself to taxation in any such jurisdiction;
3.3.1.4 notify Quintel promptly, and confirm such advice in writing:
(a) when the registration statement or any amendment thereto
has been filed and when it has become effective;
(b) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration
statement or the initiation of any proceedings for that
purpose; and
<PAGE>
(c) of the registration or qualification of the Registrable
Securities for sale under the Blue Sky Laws of any
jurisdiction affecting such registration or
qualification;
3.3.1.5 make every reasonable effort to obtain the withdrawal of any Order
suspending the effectiveness of the registration statement;
3.3.1.6 cause all of the Registrable Securities covered by the registration
statement to be listed on each securities exchange, or designated
for inclusion in each automated interdealer quotation system, on
which the Common Stock is listed or included;
3.3.1.7 provide and cause to be maintained a transfer agent for all
Registrable Securities covered by the registration statement from
and after a date not later than the effective date of the
registration statement;
3.3.1.8 cause all Registrable Securities covered by such registration
statement to be registered with or approved by such other
Governmental Bodies as may be reasonably necessary to enable each
holder thereof to consummate the disposition of such Registrable
Securities; provided that LCSG shall not be required to maintain
such registration or approval for any time after (a) the disposition
of the Registrable Securities in accordance with the intended
methods of disposition thereof as set forth therein or (b) nine
months after the date of effectiveness of such registration
statement;
3.3.1.9 furnish to Quintel a signed counterpart, addressed to Quintel (and
the underwriters, if any), of an opinion of counsel for LCSG, dated
the effective date of such registration statement (or, if such
registration relates to an underwritten public offering, dated the
date of any closing under the underwriting agreement), if and in the
form delivered to any underwriter or other purchaser of securities
offered thereunder, covering substantially the same matters with
respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of issuer's counsel
delivered to the underwriters in underwritten public offerings of
securities;
3.3.1.10 notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which any prospectus included
in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, and at the request of any such
holder promptly prepare and furnish to such holder a reasonable
number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; and
3.3.1.11 comply with all applicable rules and regulations of the Commission,
and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve (12) months, but not more than eighteen (18) months,
beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder.
3.4. Preparation; Reasonable Investigation.
In connection with the preparation and filing of the registration statement and
any amendments thereto and any Blue Sky Filing, LCSG will give Quintel and its
counsel and accountant the opportunity to review, in each case, a reasonable
time prior to their filing, the registration statement, each prospectus included
therein or filed with the Commission, each document incorporated by reference
therein and each amendment thereof or supplement thereto and any Blue Sky Filing
in order to verify the accuracy of any factual information concerning Quintel.
LCSG will make available for inspection by Quintel, any underwriter
participating in any disposition pursuant to such registration statement and any
<PAGE>
attorney, accountant or other agent retained by Quintel or any such underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of LCSG (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause LCSG's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection with such
registration statement and permit the Inspectors to participate in the
preparation of such registration statement and any prospectus contained therein
and any amendment thereof or supplement thereto. Records which LCSG determines,
in good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
the registration statement, (ii) the release of such Records is ordered pursuant
to a subpoena or other Order from a court of competent jurisdiction, or (iii)
the information in such Records has been made generally available to the public.
The seller of Registrable Securities agrees by acquisition of such Registrable
Securities that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to LCSG and allow LCSG, at
LCSG's expense, to undertake appropriate action to prevent or limit disclosure
of the Records deemed confidential. LCSG shall pay for all registration and
filing fees, printing expenses and fees and disbursements of LCSG's counsel and
one counsel for Quintel and Quintel's Accountants in connection with the
preparation, review and filing of the registration statement or any Blue Sky
Filing pursuant to this Article 3; provided, however, that LCSG shall pay
underwriting discounts and commissions applicable to the sale of the Registrable
Securities.
3.5. Future Agreements
LCSG shall not hereafter agree with the holders of any securities issued or to
be issued by LCSG to register or qualify such securities under the Securities
Act or any Blue Sky Law unless such agreement specifically provides that (a)
such holder of such securities may not participate in any registration under
Section 3.1 except as provided in the proviso to Section 3.1, and (b) the holder
of such securities may not participate in any registration under Section 3.2
except as provided in Section 3.2.
3.6. Other Conditions and Limitations.
Any other provision hereof notwithstanding:
(a) Quintel's registration rights under this Section 3 are subject to the
conditions that (i) in the case of a Registration under Section 3.1 relating to
an underwritten offering of Registrable Securities, the underwriting agreement
and other documents to which LCSG is a party or which purport to obligate LCSG
with respect to any matter be reasonably satisfactory to LCSG, and (ii) in the
case of a registration under Section 3.2 relating to an underwritten offering of
securities of LCSG, Quintel agrees to the terms and conditions of, and executes
and delivers the underwriting agreement, a custody or deposit agreement and a
power of attorney, each in the customary form required by the underwriters, and
such other underwriting documents as the underwriters may reasonably require as
a condition to effecting the offering or the inclusion of Registrable Securities
therein;
(b) the registration rights pursuant to Section 3.1 or 3.2 and LCSG's
obligations under this Article 3 shall be suspended at any time when LCSG does
not have a class of equity securities (as defined in Section 3(a)(11) of the
Exchange Act and Rule 3a11-1 thereunder) registered under Section 12(b) or 12(g)
of the Exchange Act; and
(c) notwithstanding that a demand for registration has been duly made pursuant
to Section 3.1 or 3.2, LCSG shall not be obligated to prepare or file a
registration statement under the Securities Act with respect to any Registrable
Securities as to which such demand relates, or to register or to qualify any
such Registrable Securities under any applicable Blue Sky Law, and if such a
registration statement has been filed or Blue Sky Filing has been made, LCSG may
suspend or withdraw such registration statement or Blue Sky Filing, if the Board
of Directors of LCSG determines in good faith that such registration would or
could reasonably be expected to interfere with or adversely affect the prospects
of consummating, or result in terms or conditions less favorable to LCSG
relating to, any material acquisition or disposition of assets (within the
meaning and scope of Item 2 of Form 8-K under the Exchange Act) or any public or
private financing as to which LCSG has entered into a definitive agreement or is
engaged in substantive negotiations for a period of 180 days after such demand
for registration is made; provided that LCSG may not so delay or suspend such
registration on more than one occasion in any period of twelve (12) consecutive
months.
3.7. Application to Subsequent Holders.
<PAGE>
The provisions of this Article 3 shall inure to the benefit of and be binding
upon any holder of Registrable Securities; provided that all such holders shall
be deemed to be represented by and act through Quintel and any notice or other
documents required or permitted to be given or delivered pursuant to the
provisions of this Article 3 to or by LCSG shall be deemed to be duly so given
or delivered if given to or by Quintel in accordance with Section 10.5, and any
right of the holders of Registrable Securities, including in connection with the
preparation of any documents or any investigation pursuant to Section 3.5
relating to any registration, shall be exercised or effected by or through
Ronald (or such successor).
4Article : REPRESENTATIONS AND WARRANTIES OF LCSG
LCSG represents and warrants to Quintel the following:
4.1. Existence and Good Standing.
Each of LCSG and its subsidiaries is a corporation, duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to own, lease
and operate all its properties and to carry on its business as now being
conducted. Each of LCSG and its subsidiaries is duly qualified and in good
standing in each jurisdiction in which the failure to qualify would have a
Material Adverse Effect.
4.2. Capital Stock.
The outstanding shares of LCSG and its subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and have not been
issued in violation of any preemptive rights of stockholders. There are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of LCSG except as
set forth in the Form 10SB filed _______, 1999 with the Commission and on
Schedule 4.2. Mitchell owns his shares of Common Stock free and clear of any
liabilities, liens, security interests, pledges, or encumbrances.
4.3. Financial Statements.
4.3.1. The Financial Statements, including the footnotes thereto, are true
and correct in all material respects. The balance sheets included in
the Financial Statements, taken together, fairly present in all
material respects the financial condition of LCSG as at the
respective dates thereof and, except as indicated therein, in all
material respects all known claims against and all debts and
liabilities of LCSG, fixed or contingent, as at the date thereof,
required by GAAP to be shown thereon and the related statements of
operations and cash flows for the periods indicated, taken together,
fairly present, in all material respects the results of operations
and financial condition for such periods.
4.3.2. Since the Balance Sheet Date, except as set forth on Schedule 4.3.2
there has been (a) no materially adverse change in the assets or
liabilities, or in the business or financial condition, or in the
results of operations of LCSG, and (b) to the knowledge of LCSG, no
fact or condition exists or is contemplated or threatened which
might cause such a materially adverse change in the future.
4.4. Contracts.
Except as set forth in Schedule 4.6 or any other schedule annexed hereto, LCSG
is not a party to or bound by any agreement, contract or commitment relating to
any collective bargaining agreement, any bonus, deferred compensation, pension,
profit sharing, stock option, retirement or other employee benefit plan; any
loan or advance to, or investment in, any other Person or any agreement relating
to the making of any such loan, advance or investment; any guarantee or other
contingent liability in respect of any indebtedness or obligation of any other
Person (other than the endorsement of negotiable instruments for collection in
the ordinary course of business); any management service, employment, consulting
or any other similar type of contract; any agreement, contract or commitment
limiting the freedom of LCSG to engage in any line of business or to compete
with any other Person; any secrecy or confidentiality agreement with any Person,
including any employee of or consultant to LCSG; any agreement, contract or
commitment which involves the payment by LCSG of Twenty-Five Thousand Dollars
($25,000) or more, in the aggregate, and is not cancelable without penalty
within thirty (30) days; any agreement with any officer or director of LCSG; any
licensing or franchise agreement; or any contract with customers or other third
parties for the delivery of goods or performance of services which involves
payment by LCSG of more than Twenty Five Thousand Dollars ($25,000.00).
<PAGE>
Except as set forth on Schedule 4.6, there exists no default or event of default
by LCSG, or occurrence, condition, or act (including this transaction) which,
with the giving of notice, the lapse of time or the happening of any other event
or condition, would become a default or event of default thereunder. Except as
set forth on Schedule 4.6, LCSG has not violated any material terms or
conditions of any Contract which would permit termination or modification of any
such Contract, there are no outstanding written claims of breach or
indemnification or written notice of default or termination of any such Contract
and, to the knowledge of LCSG, all of the covenants to be performed by any other
party thereto have been substantially performed.
4.5. Litigation.
Except as set forth in Schedule 4.5, there is no action, suit, proceeding at law
or in equity by any Person, or any arbitration or any administrative or other
proceeding by or before any Governmental Body, pending or, to the knowledge of
LCSG, threatened since the Balance Sheet Date, against or affecting LCSG or any
of its properties or rights or the operation of its business, and to the
knowledge of LCSG, there is no valid basis for any such action, proceeding or
investigation. Except as disclosed on Schedule 4.5, none of LCSG or any
Controlled Company is subject to any Order entered in any lawsuit or proceeding
which has a Material Adverse Effect or which would prevent or interfere with the
consummation of the transactions contemplated hereby.
4.6. Liabilities.
To the knowledge of LCSG, there are no outstanding claims, liabilities or
indebtedness, contingent or otherwise against LCSG, except as set forth in
Schedule 4.6 other than (i) liabilities incurred subsequent to the Balance Sheet
Date in the ordinary course of business and consistent with past practice and
other liabilities which in the aggregate do not have a Material Adverse Effect,
or (ii) liabilities set forth on any Schedule hereto or which are not required
to be set forth on any Schedule hereto because such liabilities are specifically
excluded from disclosure on the Schedules provided for by the provisions of this
Agreement. Schedule 4.6 sets forth a list of all current arrangements of LCSG
for borrowed money and all outstanding balances as of the date hereof with
respect thereto, but excluding accounts payable, wages payable and operating
expenses payable. LCSG is not in material default in respect of the terms or
conditions of any such indebtedness.
4.7. Intellectual Property.
Schedule 4.7 contains a materially accurate and complete list of all
Intellectual Property owned or used or anticipated to be used by LCSG in the
development, production, marketing and sale of the products and services offered
as part of the LCSG Business. Except as set forth on Schedule 4.10, to the
knowledge of LCSG, no written claim of infringement or misappropriation of
Intellectual Property has been made against LCSG and, LCSG does not infringe or
misappropriate any Intellectual Property of any third party.
4.8. Compliance with Laws.
To the knowledge of LCSG, except with respect to any Environmental Law, LCSG is
in compliance with all applicable material federal, state and local laws,
regulations and Orders and all other applicable requirements of any Governmental
Body having jurisdiction. Except with respect to any Environmental Law, LCSG is
not now charged with, and, to the knowledge of LCSG, LCSG is not now under
investigation with respect to, any violation of any law, regulation, or Order
affecting its business, and LCSG has filed all material reports required to be
filed with any Governmental Body.
4.9. Licenses.
To the knowledge of LCSG, LCSG has all licenses and permits and other
governmental certificates, authorizations and approvals (collectively,
"Licenses") required by any Governmental Body for the development, production,
marketing and sale of the products and services offered as part of the LCSG
Business and the use of its properties as presently operated or used, except
where the failure to have such Licenses would not have a Material Adverse
Effect. To the knowledge of LCSG, all of such Licenses are in full force and
effect and no action or claim is pending to revoke or terminate any of the
Licenses or declare any License invalid.
4.10. Supplier and Customer Relations.
Schedule 4.10 lists the ten largest suppliers and customers of LCSG, as at the
date hereof. Except as set forth on Schedule 4.10, to the knowledge of LCSG,
none of these current suppliers and none of these current customers has advised
LCSG, orally or in writing, formally or informally, that (i) it is terminating
or considering terminating, or is
<PAGE>
materially dissatisfied with its business relationship with LCSG, as a whole or
in respect of any particular product or service, or (ii) any of these current
customers is contemplating reducing or discontinuing in any material respect its
purchases from LCSG, or that any of these suppliers is contemplating reducing or
discontinuing in any material respect its services or sales to LCSG.
4.11. No Changes Since the Balance Sheet Date.
Since the Balance Sheet Date, except as specifically stated on Schedule 4.3.2 or
Schedule 4.11 or reflected on the Closing Date Balance Sheet, LCSG has not
incurred any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), except in the ordinary course of LCSG's business;
permitted any of its assets to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind, other than
Permitted Liens; sold, transferred or otherwise disposed of any assets except in
the ordinary course of LCSG's business; made any single capital expenditure or
commitment therefor involving the expenditure of more than Fifty Thousand
Dollars ($50,000.00); made any bonus or profit sharing distribution or payment
of any kind; granted any increase in the rate of wages, salaries, bonuses or
other remuneration of any employee who after giving effect to such increase or
prior thereto receives compensation at an annual rate of $80,000.00 or more,
except pursuant to a prior obligation or employment policy in the ordinary
course of LCSG's business; canceled or waived any claims or rights of
substantial value; made any change in any method of accounting or auditing
practice; otherwise conducted its business or entered into any transaction,
except in the usual and ordinary manner and in the ordinary course of its
business; amended or terminated any agreement which is material to the business
of LCSG; renewed, extended or modified any Lease or, except in the ordinary
course of business, any lease of personal property; or agreed, whether or not in
writing, to do any of the foregoing; and there has been no adverse change in the
financial condition or results of operations of LCSG, which changes, in the
aggregate, do not have a Material Adverse Effect.
4.12. Valid Agreements; Restrictive Documents.
LCSG has corporate authority, and Mitchell has the full legal right and
capacity, to execute, deliver and perform their respective obligations under
this Agreement and the Other Documents (including but not limited to the Note,
the Guaranty and the Pledge Agreement) to which it or he is a party, and all of
the foregoing have been duly authorized by all necessary shareholder and
corporate action of LCSG. This Agreement and the Other Documents to which LCSG
is a party (including but not limited to the Note) have been duly executed and
delivered by LCSG,, and constitute the valid and binding obligation of LCSG,,
enforceable against LCSG,, in accordance with their respective terms. Except as
set forth in Schedule 4.14, or in any other Schedule to this Agreement, LCSG is
not subject to, or a party to, any charter, by-law, mortgage, lien, lease,
license, permit, contract, instrument, law, regulation or, to the knowledge of
LCSG, Order or any other restriction of any kind or character, which has a
Material Adverse Effect, or which would prevent consummation of the transactions
contemplated by this Agreement and the Other Documents or compliance by LCSG
with the terms, conditions and provisions of this Agreement and the Other
Documents. The execution, delivery and performance of this Agreement and the
Other Documents (including but not limited to the Note) and the consummation of
the transactions contemplated hereby and thereby will not violate, conflict with
or result in the breach of any provision of the charter documents or by-laws of
LCSG; violate, conflict with or result in the breach or material modification of
any of the terms of, or constitute (or with notice or lapse of time or both
constitute) a default under, or otherwise give any other contracting party the
right to accelerate or terminate, any material obligation, contract, agreement,
lien, Order or other instrument to which LCSG is a party or by or to which it or
any of its respective assets or properties may be bound or subject; violate any
Order of any Governmental Body against, or binding upon LCSG or upon any of its
Assets and which violation would have a Material Adverse Effect; or violate any
statute, law or regulation of the U.S. or New York or Florida and, which
violation would have a Material Adverse Effect.
4.13. Required Approvals, Notices and Consents.
Except as set forth on Schedule 4.19, or elsewhere in this Agreement, no consent
or approval of, other action by, or notice to, any Governmental Body, or any
third party is required in connection with the execution and delivery by LCSG of
this Agreement and the Other Documents or the consummation by LCSG of the
transactions contemplated hereby or thereby.
4.14. Disclosure.
This Agreement, the Financial Statements, or any Schedule hereto, or any
certificate, document or statement in writing to be delivered as required under
this Agreement by or on behalf of LCSG does not contain, or will not contain,
any untrue statement of a material fact, or omits, or will omit, any statement
of a material fact required to be stated or necessary in order to make the
statements contained herein or therein not misleading. To the knowledge of LCSG,
<PAGE>
there is no fact which materially adversely affects the business or financial
condition of LCSG which has not been set forth in this Agreement or any Other
Document.
4.15. Copies of Documents.
LCSG has caused to be made available for inspection and copying by Quintel or
its officers or advisers, true and correct copies of all documents referred to
in this Article 4 or in any Schedule furnished pursuant to this Article 4.
4.16. No Brokers.
No broker, finder, agent or similar intermediary has acted on behalf of LCSG in
connection with this Agreement or the transactions contemplated hereby, and
there are no brokerage commissions, finder's fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement or
understanding with LCSG, or any action taken by LCSG.
4.17. Securities Laws.
The offering, issuance and delivery to Quintel by LCSG of the Promissory Note
and any Shares delivered upon conversion of the Note are not, and will not be,
required to be registered under the Securities Act or any applicable Blue Sky
Laws.
5Article : REPRESENTATIONS OF QUINTEL.
QUINTEL represents and warrants to LCSG as follows:
5.1. Existence and Good Standing.
Quintel is a corporation duly organized, validly existing and in good standing
under the laws of Delaware and has all requisite corporate power and authority
to own, lease and operate all its properties and to carry on its business as now
being conducted.
5.2. Valid Agreements; Restrictive Documents.
Quintel has the corporate authority to execute, deliver and perform its
obligations under this Agreement and the Other Documents to which it is a party,
including the Promissory Note, and all of the foregoing have been duly
authorized by all necessary stockholder and corporate action. This Agreement and
the Other Documents to which Quintel is a party have been duly executed and
delivered by Quintel, and constitute a valid and binding agreement of Quintel,
enforceable against it in accordance with their respective terms. Quintel is not
subject to, or a party to, any charter, by-law, mortgage, lien, lease, license,
permit, contract, instrument, law, rule, ordinance, regulation, or, to their
knowledge, Order or any other restriction of any kind or character, which would
prevent consummation of the transactions contemplated by this Agreement and the
Other Documents, or compliance by Quintel with with the terms, conditions and
provisions of this Agreement and the Other Documents. The execution, delivery
and performance of this Agreement and the Other Documents, and the consummation
of the transactions contemplated hereby and thereby will not (i) violate,
conflict with or result in the breach of any provision of the charter documents
or by-laws of Quintel; (ii) violate, conflict with or result in the breach or
material modification of any of the terms of, or constitute (or with notice or
lapse of time or both constitute) a default under, or otherwise give any other
contracting party the right to accelerate or terminate, any material obligation,
contract, agreement, lien, Order or other instrument to which Quintel is a party
or by or to which Quintel may be bound or subject; (iii) violate any Order of
any Governmental Body against, or binding upon, Quintel or any of their assets
which violation will or may reasonably be expected to be materially adverse to
the condition (financial or otherwise) of Quintel in the aggregate; or (iv)
violate any statute, law or regulation of the United States, Delaware or New
York which violation will or may reasonably be expected to be materially adverse
to the condition (financial or otherwise) of Quintel in the aggregate.
5.3. Required Approvals, Notices and Consents.
No consent or approval of, other action by, or notice to, any Governmental Body,
or any third party is required in connection with the execution and delivery by
Quintel of this Agreement and the Other Documents, or the consummation by
Quintel of the transactions contemplated hereby or thereby.
5.4. No Brokers.
No broker, finder, agent or similar intermediary has acted on behalf of Quintel
in connection with this Agreement or the transactions contemplated hereby, and
there are no brokerage commissions, finders' fees or similar fees or commissions
<PAGE>
payable in connection therewith based on any agreement, arrangement or
understanding with Quintel, or any action taken by Quintel.
6Article : MISCELLANEOUS
6.1. Expenses.
Except as otherwise provided herein, the parties hereto shall pay all of their
own expenses relating to the transactions contemplated by this Agreement and the
Other Documents, including, without limitation, the fees and expenses of their
respective counsel and financial advisers.
6.2. Governing Law; Jurisdiction.
The interpretation and construction of this Agreement and the Other Documents,
and all matters relating hereto, shall be governed by the law of the State of
New York, without reference to its conflict of laws provisions. Unless
applicable law requires a different method, any notice that must be given to
LCSG under this Agreement will be given by delivering it or mailing it by first
class mail to LCSG at its address set forth at the beginning of this Agreement
or at such other address as LCSG may give notice of to the holder of this
Agreement. Any action brought to enforce this Agreement may be brought in the
State of New York, and each Party hereby consents to the personal jurisdiction
of the federal and state courts located in the State of New York, and agrees
that unless applicable law requires a different method, service of process in
any such action may be made by first class mail upon a Party at its address set
forth in the beginning of this Agreement or at such other address as a Party
shall advise the other Party by written notice in accordance with this
Agreement.
6.3. Interchangeability of Schedules.
Any information contained on any Schedule to this Agreement or in the Financial
Statements shall be deemed to be contained on each and every other Schedule to
this Agreement.
6.4. Captions.
The article and section captions used herein are for reference purposes only,
and shall not in any way affect the meaning or interpretation of this Agreement.
6.5. Notices.
Any notice or other communications required or permitted hereunder shall be in
writing and shall be deemed effective (a) upon personal delivery, if delivered
by hand; (b) one day after the date of delivery by Federal Express or other
nationally recognized courier service that provides a delivery receipt, if
delivered by priority overnight delivery between any two points within the
United States; or (c) five days after deposit in the mails, if mailed by
certified or registered mail (return receipt requested) between any two points
within the United States, and in each case of mailing, postage prepaid,
addressed to a party at its address first set forth above, with copies to.
Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, 750 Lexington Avenue, New
York, New York 10022-1200, Attention: Geoffrey A. Bass and to
________________________________________________________. or such other address
as shall be furnished in writing by like notice by any such party.
6.6. Parties in Interest.
This Agreement and the Other Documents may not be transferred, assigned, pledged
or hypothecated by any party hereto, other than by operation of law. This
Agreement and the Other Documents shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. Notwithstanding anything to
the contrary in this Agreement, but subject to the Securities Act, nothing in
this Agreement shall prohibit or in any way restrict the ability of Quintel or
any of its Affiliates to transfer any or all of the Shares, to one or more
Affiliates of Quintel.
6.7. Severability.
In the event any provision of this Agreement or the Other Documents is found to
be void and unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement or such Other Documents shall nevertheless be
binding upon the parties with the same effect as though the void or
unenforceable part had been severed and deleted.
<PAGE>
6.8. Counterparts.
This Agreement may be executed in two or more counterparts, all of which taken
together shall constitute one instrument.
6.9. Entire Agreement; Amendments.
This Agreement, and the Other Documents, contain the entire understanding of the
parties hereto with respect to the subject matter contained herein and therein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter. This Agreement may not be changed
orally, but only by an agreement in writing signed by all parties.
<PAGE>
IN WITNESS WHEREOF, the parties have each caused its corporate name to be
hereunto subscribed by their respective duly authorized officers on the date
first written above.
QUINTEL COMMUNICATION, INC.
By:
Name:
Title: ____________________
LCS GOLF, INC.
By:
Name:
Title: ____________________
Exhibit 10.2B
CONVERTIBLE PROMISSORY NOTE
$ 500,000.00 January ___, 2000
LCS GOLF, INC., a Delaware corporation having an address at 24 East 12th Street,
New York, New York 10003 (hereafter referred to as the "MAKER") hereby promises
to pay on demand at any time after July __, 2000 to the order of QUINTEL
COMMUNICATIONS, INC., a Delaware corporation, having an address at One Blue Hill
Plaza, Pearl River, New York 10965 (hereafter referred to as the "HOLDER"), or
such other place as the holder hereof may from time to time designate in
writing, the principal sum of FIVE HUNDRED THOUSAND AND NO/100 ($500,000.00)
DOLLARS without interest until the first to occur of maturity or the occurrence
of an event of default at a rate of interest calculated on the unpaid principal
balance hereof from the date hereof until this Note is paid in full at an annual
rate equal to the prime rate (defined below) plus two (4 %) percent, but in no
event shall the annual rate of interest charged hereunder exceed twelve (14 %)
percent. Prime rate shall mean the rate identified as such from time to time as
published from time to time in The Wall Street Journal, New York, New York. The
interest rate in effect on and after the date interest first begins to accrue
shall be determined by the prime rate in effect on the first date immediately
preceding such date on which the prime rate is published and thereafter the
annual rate of interest charged hereunder shall change on and as of the first
day of the month following the date of the change on which the prime rate is
published. Interest shall be calculated on the basis of a 365 day year for each
day of the year actually outstanding. All payments shall be made in lawful money
of the United States of America.
If a law which applies to this Note and which sets maximum rates of interest
which may be charged, is finally interpreted so that the interest collected or
to be collected pursuant to this Note exceeds the permitted limits, then: (i)
such interest shall be reduced by the amount necessary to reduce the interest to
the permitted limit; and (ii) any sums already collected from the person or
persons as to whom such charged is determined to have exceeded the permitted
limits will be refunded to such person or persons. The holder of this Note may
choose to make this refund by reducing the principal amount owed under this Note
or by making a direct payment to such person or persons. If a refund reduces
principal, the reduction will be treated as a partial prepayment.
PREPAYMENTS - The entire principal balance may be prepaid, without penalty,
together with payment of all accrued and unpaid interest, at any time, provided,
however, that prior to making such prepayment the MAKER gives HOLDER fifteen
business (15) days prior written notice of such prepayment and HOLDER shall
during such period have the right to convert this Note into shares of MAKER's
common stock in accordance with the other provisions of this Note. A copy of any
prepayment notice given by MAKER to HOLDER shall be given to Geoffrey A. Bass,
Esq., Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, 750 Lexington Ave.,
NY, NY 10022-1200.
PAYMENT OF COSTS - In addition to the principal and interest payments specified
above, the MAKER shall pay to HOLDER or any other holder hereof upon demand, all
reasonable costs and expenses (including reasonable attorneys' fees and legal
expenses) which may be incurred by HOLDER or such holder, in the administration
of the loan evidenced by this Note or in the enforcement of the rights of HOLDER
or such holder hereunder.
DEFAULTS - The occurrence of any of the following events shall constitute a
ADefault@:
11.1 MAKER shall fail to pay any installment of principal and
interest due under this Note or under any other promissory note or
other instrument for the payment of money given by MAKER to HOLDER
on the due date thereof;
11.2 sale or transfer of all or substantially all of the assets of
MAKER;
11.3 MAKER liquidates, winds up its business, dissolves or
terminates it existence;
11.4 any voluntary proceeding by MAKER is commenced under any
chapter of the Federal Bankruptcy Code or other law relating to
bankruptcy, bankruptcy reorganization, insolvency or relief of
MAKER, or any such proceeding is commenced against MAKER and such
proceeding is not dismissed within sixty (60) days from the date on
which it is filed or instituted; or MAKER shall make an assignment
for the benefit of creditors or admit in writing its inability to
pay its debts as they mature or that it is otherwise insolvent;
<PAGE>
11.5 occurrence of an Event of Default under the Guaranty or the
Pledge Agreement;
11.6 occurrence of a default by MAKER under the Marketing Agreement
between the MAKER and the HOLDER of even date herewith (the
AMarketing Agreement@) which is not cured within thirty (30) days
after notice of such default is given to MAKER.
Upon the occurrence of a Default, the holder shall have the right to demand
immediate payment of all unpaid principal of and interest due under this Note if
the Default is not cured within thirty (30) days after written notice of the
Default is given to MAKER (the failure to so cure the Default shall be referred
to as an AAcceleration Event@), and upon such demand being made by notice to
MAKER, the entire unpaid principal of and interest due under this Note shall be
immediately due and payable, and the holder may proceed to protect and enforce
its rights hereunder by an action at law, suit in equity or other appropriate
proceeding. MAKER shall forthwith notify HOLDER, in writing, of the occurrence
of any of the events constituting a Default. If any Acceleration Event shall
occur, the MAKER will pay the holder such further amounts as shall be sufficient
to cover all costs and expenses incurred in connection with the collection of
this Note and/or the enforcement of the holder's rights, including but not
limited to reasonable attorneys' fees, expenses and disbursements.
ACCELERATION - Whenever the MAKER shall be in default as aforesaid the entire
unpaid amount of this Note shall at the option of HOLDER become immediately due
and payable without further notice to or demand on MAKER. Without limitation to
HOLDER rights hereunder, it is acknowledged that this note is payable on demand
after July __, 2000, and HOLDER may, therefore, at any time thereafter and for
any reason or no reason whatsoever, make demand and thereby accelerate the
maturity hereof. The MAKER waives all right to stay of execution and exemption
or property in any action to enforce any of the liabilities.
JURISDICTION - This Note shall be governed by and construed under the law of the
State of New York. Unless applicable law requires a different method, any notice
that must be given to MAKER under this Note will be given by delivering it or
mailing it by first class mail to MAKER at its address set forth at the
beginning of this Note or at such other address as MAKER may give notice of to
the holder of this Note. Any notice to the holder of this Note will be given by
mailing it first class mail to the holder of this Note at the address for the
holder set forth at the beginning of this Note or at such other address as the
holder may give notice of to MAKER.
Any action brought to enforce this Note may be brought in the State of New York,
and MAKER hereby consents to the personal jurisdiction of the federal and state
courts located in the State of New York, and agrees that unless applicable law
requires a different method, service of process in any such action may be made
by first class mail upon the MAKER at its address set forth in the beginning of
this Note or at such other address as MAKER shall advise the holder of this Note
by written notice to the address at which payments due under this Note are to be
sent pursuant to the first paragraph of this Note.
CONVERSION RIGHT - HOLDER may at any time prior to payment hereof convert the
principal amount of this Note into that number of shares of the MAKER's common
stock, par value $.001 per share which constitutes (1)percent of the MAKER's
issued and outstanding shares of voting stock of all classes on the date of
conversion on a fully diluted basis including the shares of common stock
issuable upon conversion of this Note. To convert this Note HOLDER must
surrender same at the office of the MAKER, together with a written notice of
conversion. This conversion right may only be exercised by HOLDER. The MAKER
represents and warrants to HOLDER that it has an authorized capitalization
consisting of20,000,000 shares of stock of one class only being common shares
without par value per share (the "common stock"), of which (2)shares are issued
and outstanding; no shares are held in the Corporation's treasury, and no other
class of capital stock is authorized or outstanding. MAKER agrees at all times
to reserve and hold available a sufficient number of shares
- ----------
1 2.7% (500,000 shares is 2.7% of 18, 826,725, assuming that the latter number
constitutes the total outstanding shares on a fully diluted basis.
2 17,519,225 issued and outstanding (?) and an additional 1,307,500 shares
subject to options (?)
<PAGE>
of common stock to cover the number of shares of common stock issuable upon
conversion of this Note. If the MAKER is recapitalized, consolidated with or
merged into any other corporation, or sells or conveys to any other entity all
or substantially all of its assets, provision shall be made as part of the terms
of the recapitalization, consolidation, merger or conveyance so that the holder
of this Note may receive, in lieu of the common stock otherwise issuable upon
conversion of this Note the same kind and amount of securities or other property
as may be distributable upon the recapitalization, consolidation, merger or
conveyance with respect to the common stock.
GUARANTY AND SECURITY INTEREST - Debtor's obligations under this Note have been
guaranteed by Dr. Michael Mitchell pursuant to a Guaranty of even date herewith
("Guaranty") and to secure his performance under the Guaranty, Dr. Michael
Mitchell has pledged to HOLDER certain securities pursuant to a Pledge Agreement
of date herewith (the "Pledge Agreement").
MISCELLANEOUS - The obligation of the MAKER to make payments hereunder is
absolute and unconditional and shall not be subject to any defense, set-off,
counterclaim or recoupment which the MAKER may have against the Holder by reason
of any indebtedness or liability at any time owing by the Holder to the MAKER,
including but not limited to by reason of any claim or dispute under the
Marketing Agreement. MAKER waives presentment, demand for payment, notice of
dishonor and any or all notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Promissory Note and
consents to any or all delays, extensions of time, renewals, releases of any
party to this Promissory Note and of any available security therefor to any
party to this Promissory Note or to the actual holder thereof and any and all
waivers or modifications that may be granted or consented to by the holder with
regard to the time of payment or with respect to any other provisions of this
Note and agrees that no such action or failure to act on part of the holder
shall be construed as a waiver by the holder of, or otherwise affect, its right
to avail itself of any remedy with respect thereto.
IN WITNESS WHEREOF, the MAKER has caused this Note to be signed and delivered by
its duly authorized officer this __ day of __________ 2000.
LCS GOLF, INC.
By:
Name:
Title:
STATE OF ____________________)
) ss.:
COUNTY OF ______________________)
On the day of , in the year 2000, before me, the undersigned, a notary public in
and for __ said __ state, personally appeared _________________ , personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and acknowledged to
me that she/he executed the same in her/his capacity, and that by her/his
signature on the instrument, the individual or the person upon behalf of which
the individual acted, executed the instrument.
Notary Public
Exhibit 10.2C
SECURITY AGREEMENT
THIS AGREEMENT, made as of the 16th day of February, 2000 by and between
(hereafter referred to as the "Company" or the "Debtor") LCS GOLF, INC. ,a
Delaware corporation, having an address at 24 East 12th Street, New York, New
York 10003 and QUINTEL COMMUNICATIONS, INC., a Delaware corporation, having an
address at One Blue Hill Plaza, Pearl River, New York 10965 (hereafter referred
to as the "Secured Party").
BACKGROUND
A. Concurrently herewith, Debtor has borrowed $500,000.00 from Secured Party
pursuant to a Loan Agreement between the Company and the Secured Party of even
date herewith (the "Loan Agreement"), and which borrowing is evidenced by the
Company's convertible promissory note of even date herewith (the "Note"). The
Company and the Secured Party are also parties to a license agreement of even
date herewith (the "License Agreement") pursuant to which the Company has given
the Secured Party the option to license the Company's Database (as defined
below).
B. In order to secure the obligations of the Company under the Note, the Loan
Agreement, and the License Agreement, the Company desires, by the execution and
delivery of this Agreement, to grant to the Secured Party on the terms and
conditions contained herein, a valid and enforceable lien on and security
interest in the collateral described herein as security for the due performance
and the payment of the amounts due under the Note and the obligations described
in this Agreement.
1 GRANT OF SECURITY INTEREST.
1.1 Grant of Security interest. Debtor hereby grants to Secured Party a
continuing security interest in order to secure the obligations of Debtor to pay
the Obligations, as such term is defined in Section 1.2 below.
1.1.1 "Database" means all of the information (including but not limited
to, names, telephone numbers, street or post office addresses,
e-mail addresses, purchase and order records, customer inquiry
records and records of responses to Company questionnaires)
contained in the Company's Records regarding all Persons who are
customers of or who have otherwise contacted the Company by any
means, including by means of the Company's internet web-sites.
1.1.2 "Records" means all files, data and all other information expressed
in print or through other means of expression or stored in any form
of media, and includes, but is not limited to, printed documents;
information stored by means of computer hardware or software;
information stored on computer storage disks, tapes, the internet or
any other forms of data storage now or hereafter in existence.
<PAGE>
1.2 Obligations Secured; Future Advances. The Database and all contracts,
contract rights and general intangibles of the Company relating to or necessary
in order to use the Database, together with any and all replacements and any
proceeds, whether cash or non-cash, of all of the foregoing shall be referred to
as the "Collateral".
The Collateral constitutes and will constitute security for the payment as and
when due of all indebtedness and the performance of all obligations under the
Note, the Loan Agreement, the License Agreement and this Agreement, and for the
payment of costs, fees, charges, and expenses which may be due or owing in
connection therewith, all of which shall be and remain additional liens on the
Collateral until each and all of the same have been filly paid, satisfied, and
discharged. Hereafter all of the payment and performance obligations described
in this paragraph shall be referred to collectively as the "Obligations".
2 COVENANTS.
2.1 Debtor's Covenants. Debtor covenants that it will perform the obligations
contained in each of the following paragraphs in accordance with the terms and
conditions thereof.
2.1.1 Further Assurances. Debtor shall execute and deliver to Secured
Party from time to time, at Secured Party's request, such documents
and instruments, including financing statements and continuation
statements, and take such action, as Secured Party may deem
necessary or proper to perfect or otherwise protect the security
interests created hereby.
2.1.2 Defense of Security Interest. Debtor shall appear in and defend,
without cost to Secured Party, any action or proceeding purporting
to affect the security interest hereunder or the rights or powers of
Secured Party and, when requested by Secured Party, shall commence
and maintain any action or proceeding necessary to protect such
security interest and such rights or powers, and to pay all the
costs and expenses, including without limitation attorneys, fees,
which Secured Party may incur in the event that Secured Party elects
to appear in, defend or commence and maintain any such action or
proceeding.
2.1.3 Payment of Secured Party's Expenses. The Debtor shall pay,
immediately and without demand, all suns expended by Secured Party
in the enforcement and protection of Secured Party's rights pursuant
to this instrument, including without limitation attorney's fees and
disbursements, with interest from date of expenditure at the rate
equal to nine percent per annum. All such sums expended shall be a
lien on the Collateral and shall be deemed to be secured hereby.
2.1.4 Execution of Financing Statements. Debtor authorizes the Secured
Party to sign and file financing statements and continuation
statements evidencing the security interest granted under this
Agreement without the Debtor's signature as permitted by applicable
law.
2
<PAGE>
2.1.5 Delivery of Database. Concurrently herewith Debtor has delivered to
the Secured Party a copy of the Database via e-mail at the e-mail
address specified by Secured Party attached to the e-mail as a
compressed file containing all of the information in the Database
(the "Attached File") in a compression format compatible with
Secured Party's computer equipment, and until the Obligations are
paid in full, such Attached File shall be updated monthly within
seven (7) days after the end of each month by e-mail to the e-mail
address specified by Secured Party for such purpose from time to
time.
2.2 Principal Place of Business. Debtor represents and warrants to Secured Party
that the Debtor's principal executive offices are located at 24 East 12th
Street, New York, New York 10003 and also maintains offices at 809 North Dixie
Highway, West Palm Beach, Florida 33401 Debtor will promptly advise Secured
Party of any change in the location of its offices.
2.3 Secured Party's Covenants. Secured Party will deliver termination statements
to the Debtor for filing by Debtor, terminating the Secured Party's interest in
the Acquired Assets upon payment and performance in full of all of the
Obligations.
3 RIGHTS OF SECURED PARTY.
In addition to those rights set forth elsewhere in this Agreement, Secured
Party has the rights contained in each of the following paragraphs.
3.1 Secured Party's Right to Act For Debtor. If there occurs an event of default
or an event which, with the giving of notice or passage of time, or both, would
constitute an event of default hereunder, then Secured Party has the right, but
not the obligation, without notice and without in any way releasing the Debtor
from any of the Obligations including, without limitation, any obligation under
the Note, to do any or all of the following:
(i) make the payment or do the act in such manner and to such extent as
Secured Party may deem necessary to protect the Collateral,
(ii) appear in and defend any action or proceeding purporting to affect
the Collateral or the rights or powers of Secured Party;
(iii) pay, purchase, contest or compromise any encumbrance, charge, or
lien which in the judgment of Secured Party appears to affect the
Collateral;
(iv) incur any liability and expend such amounts as Secured Party, in its
absolute discretion, may deem necessary to accomplish any of the matters
described in (i) through (iii) above, including without limitation paying
necessary expenses, employing counsel, paying counsel's fees, and so
forth.
3
<PAGE>
4 DEFAULT.
4.1 Events of Default. The happening of any of the following shall constitute an
event of delimit under this Agreement:
(i) the occurrence of a Default (as such term is defined in the Note)
under the Note;
(ii) Debtor defaults in any of its obligations under the Loan Agreement;
(iii) Debtor defaults in any of its obligations under the License
Agreement;
(iv) Debtor defaults in any of its obligations under this Agreement.
4.2 Remedies Upon Default. If an event of default as described in paragraph 4.1
occurs, Secured Party, after thirty (30) days written notice to Debtor and
failure to cure the default within such thirty (30) day period, may at its
option and in addition to all the rights and remedies of a secured party under
the Uniform Commercial Code, which rights and remedies are cumulative and not
exclusive or enforceable alternatively, successively or concurrently, take any
or all of the actions described in the following subparagraphs, at the same time
or at different times:
(i) sell, assign and deliver, grant options for, or otherwise dispose of
any part or all of the Collateral, at a public or private sale in the manner
provided in paragraph 4.3;
(ii) commence a legal action, or initiate such other proceeding as Secured
Party may decide, on the basis of the default.
4.3 Conduct of Sale of Collateral. In the event that Secured Party elects, under
the provisions of paragraph 4.2, to sell any part or all of the Collateral, on
one or more occasions, the following shall apply with regard to such sale in
addition to those rights and remedies applicable under the Uniform Commercial
Code.
4.3.1 The sale of any part or all of the Collateral shall have been made
in a commercially reasonable manner as long as it is made in
conformity with reasonable commercial practices for the disposition
of similar property. The sale may be conducted at such place and
time, to such person, for such price, and upon such terms as Secured
Party deems best, all without demand for performance or notice or
advertisement other than as may be required under the laws
regulating the sale of securities.
4.3.2 If applicable law requires reasonable notice of sale or other
disposition, Debtor hereby agrees that the sending often (10) days
notice to Debtor, in the manner as
4
<PAGE>
provided in paragraph 4.2, of the place and time of any public sale
or of the time after which any private sale or other intended
disposition is to be made shall be deemed reasonable notice thereof
4.3.3 Secured Party may bid for and purchase at any sale all or any part
of the Collateral or both offered for sale or any part thereof and
thereby become the owner thereof Secured Party may make payment for
any of the Collateral so purchased by any means.
4.4 Application of Proceeds of Sale, Deficiencies. Secured Party may apply the
cash proceeds from any sale or other disposition of the Collateral firstly to
the reasonable expenses of retaking, holding, preparing for sale, and selling
the Collateral, including without limitation broker's fees; secondly to
reasonable attorney's fees and all legal expenses, travel and other expenses
which may be incurred by Secured Party in attempting to collect the Obligations
or enforce this Agreement or in the prosecution or defense of any action or
proceeding related to the subject matter of this Agreement; and thirdly to all
unpaid Obligations. Any surplus shall be paid to the Debtor subject to any duty
of Secured Party imposed by law to the holder of any subordinate security
interest in the Collateral known to Secured Party. The Company shall remain
liable for, and will pay Secured Party on demand, any deficiency remaining and
the balance of any expenses unpaid. The Debtor shall have no personal liability
for any such deficiency.
5 GENERAL PROVISIONS
5.1 Power of Attorney. To effectuate the terms and provisions hereof, Debtor
hereby designates and appoints Secured Party and its officers, designees or
agents as attorneys-in-fact of Debtor irrevocably and with power of
substitution, with authority to each and every of the following acts in the
event of a default hereunder:
(i) to sell, assign and deliver, or otherwise dispose of any part or all
of the Collateral, at public or private sale at the option of Secured Party; and
(ii) to do all other acts and things necessary and advisable in the sole
discretion of Secured Party to carry out and enforce this Agreement, including
the execution and filing of financing statements and continuation statements
evidencing the security interest granted hereby. All acts of said attorney or
designee are hereby ratified and approved. Said attorney or designee shall not
be liable for any acts of commission or omission or for any error of judgment or
mistake of act or law.
This power of attorney, being coupled with an interest, is irrevocable while any
of the Obligations are due or not satisfied or fully performed.
5.2 Notices. All notices which are to be given by one party to the other party
hereunder shall be in a writing which shall be sent by certified or registered
mail, postage prepaid, return receipt
5
<PAGE>
requested, or by Federal Express or Express Mail, where available, or by a means
of telex or telefax followed by a confirmation letter sent by certified or
registered mail, postage prepaid, return receipt requested, addressed to each
party at the address first written above or such other address as shall be
notified in accordance with this paragraph.
5.3 Modifications. No supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party thereto to be
bound.
5.4 Waivers. Any term or condition of this Agreement may be waived by either
party only if that party signs a writing to such effect. No waiver of any of the
provisions of this Agreement shall be deemed a waiver of any other provision,
irrespective of similarity, or shall constitute a continuing waiver unless
otherwise expressly provided. No failure or delay on the part of Secured Party
in exercising any right, power or privilege under the Note shall operate as a
waiver thereof or hereof, nor shall a single or partial exercise preclude any
other or further exercise of any other right, power or privilege.
5.5 Survival of Contents. All covenants, agreements, representations and
warranties made herein shall survive the execution and delivery to Secured Party
of this Agreement and shall continue in full force and effect so long as all or
any portion of the indebtedness under the Note is outstanding and unpaid or any
other Obligation remains to be performed under the Note or this Agreement.
5.6 Headings. The headings of the articles and paragraphs contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
5.7 Applicable Law. The interpretation and construction of this Agreement and
the Other Documents, and all matters relating hereto, shall be governed by the
law of the State of New York, without reference to its conflict of laws
provisions. Unless applicable law requires a different method, any notice that
must be given to Debtor under this Agreement will be given by delivering it or
mailing it by first class mail to Debtor at its address set forth at the
beginning of this Agreement or at such other address as Debtor may give notice
of to the holder of this Agreement. Any action brought to enforce this Agreement
may be brought in the State of New York, and each Party hereby consents to the
personal jurisdiction of the federal and state courts located in the State of
New York, and agrees that unless applicable law requires a different method,
service of process in any such action may be made by first class mail upon a
Party at its address set forth in the beginning of this Agreement or at such
other address as a Party shall advise the other Party by written notice in
accordance with this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.
6
<PAGE>
QUINTEL COMMUNICATIONS, INC.
By: /s/ Jeffrey Schwartz
--------------------------------------
Name: Jeffrey Schwartz
Title: Chairman, CEO
LCS GOLF, INC.
By: /s/ Michael Mitchell
--------------------------------------
Name: Michael Mitchell
Title: Pres.
7
Exhibit 10.2D
LICENSE AGREEMENT
Agreement dated as of February 16, 2000, between LCS GOLF, INC. a Delaware
corporation, having an address at 24 East 12th Street, New York, New York 10003
(hereafter referred to as "LCSG" or "Licensor") and QUINTEL COMMUNICATIONS,
INC., a Delaware corporation, having an address at One Blue Hill Plaza, Pearl
River, New York 10965 (hereafter referred to as "Quintel" or "Licensee").
Quintel and LCSG are sometimes referred to as a "Party" or the "Parties".
WITNESSETH:
WHEREAS, Licensor is the owner of or has otherwise acquired the right to
use the database described in this Agreement; and
WHEREAS, Licensee desires to license from Licensor the right to use such
database in connection with the Licensee's business; and
WHEREAS, Licensor is willing to grant such license to the Licensee upon
the terms and conditions set forth herein;
NOW, THEREFORE, the parties, in consideration of the mutual
representations and covenants contained herein, hereby agree as follows:
ARTICLE 1 DEFINITIONS
1.1 "Affiliate" mean, with respect to any Person, any other Person,
directly or indirectly controlling, controlled by or under common control with
such Person.
1.2 "Company" means the Licensor and any of its Affiliates.
1.3 "Commencement Date" means the date hereof.
1.4 "Database" shall mean all of the information (including but not
limited to, names, telephone numbers, street or post office addresses, e-mail
addresses, purchase and order records, customer inquiry records and records of
responses to Company questionnaires) contained in the Records of the Company
Licensor or any of its Affiliates regarding all Persons who are customers of or
who have otherwise contacted the Company by any means, including by means of the
Company's internet web-sites.
1.5 "First Use Date" means the date on which Licensor first elects to use
the Database under this License Agreement by notice given to Licensor, which
date may not be earlier than the date on which a Default (as such term is
defined in the Note) occurs under the Note. A use of the Database by the
Licensee under the Marketing Agreement shall not be deemed a use of the Database
under the license granted under this Agreement.
1.6 "Licensed Property" shall mean the Database.
1
<PAGE>
1.7 "Marketing Agreement" means the Marketing Agreement between Licensor
and Licensee of even date herewith.
1.8 "Note" means the promissory note in the original principal amount of
$500,000.00 given by Licensor to Licensee to evidence a loan made concurrently
herewith by Licensee to Licensor.
1.9 "Person" means and includes an individual, a partnership, a joint
venture, a joint stock company, a corporation, a limited liability company, a
trust, an unincorporated association or organization and a government or a
department or agency, authority, official or instrumentality thereof, or any
group of the foregoing acting in concert.
1.10 "Records" means all files, data and all other information expressed
in print or through other means of expression or stored in any form of media,
and includes, but is not limited to, printed documents; information stored by
means of computer hardware or software; information stored on computer storage
disks, tapes, the internet or any other forms of data storage now or hereafter
in existence.
1.11 "Royalty Commencement Date" means the First Use Date.
1.12 "Term" shall mean the term of this agreement as set forth in Article
III hereafter.
ARTICLE 2 GRANT OF RIGHTS
2.1 Grant of License. The Licensor hereby grants to the Licensee the
exclusive right, during the Term, to use the Licensed Property in connection
with the Licensee's business throughout the world; provided, however, that the
Licensor reserves the right to use the Database in the conduct of its business
throughout the world.
2.2 Sublicense or Assignment. The Licensee shall have the right to grant a
sublicense or to assign any and all of its rights under this Agreement to a
Permitted Sublicensee upon written notice to the Licensor. The Licensee shall
not be permitted to sublicense or assign its rights hereunder to any other
person, without the prior written consent of the Licensor, which shall not be
unreasonably withheld or delayed.
2.3 Delivery of Database. Concurrently herewith Licensor has delivered to
the Licensee a copy of the Database via e-mail at the e-mail address specified
by Licensee attached to the e-mail as a compressed file containing all of the
information in the Database (the "Attached File") in a compression format
compatible with Licensee's computer equipment, and until the Obligations are
paid in full, such Attached File shall be updated monthly within seven (7)
calendar days after the end of each month by e-mail to the e-mail address
specified by Licensee for such purpose from time to time. Licensee shall inform
Licensor promptly after delivery of an Attached File if Licensee is unable to
properly extract, decompress and install the Database from the Attached File.
Licensor shall take steps promptly after such notification to either attempt
another e-mail delivery or to provide for physical delivery of the Database in a
floppy disk or zip disk format. Until the First Use Date, the Licensor shall not
use the Database except as otherwise permitted under the Marketing Agreement.
2.4 Licensor's Reserved Rights. Subject to the provisions of this
Agreement, the Licensee hereby acknowledges and agrees that the Licensor shall
have and retain the right to use the Database in
2
<PAGE>
the conduct of its business and such retained right may be exercised by the
Licensor concurrently with the rights licensed to the Licensee pursuant to this
Agreement.
ARTICLE 3 TERM
Subject to the provisions of this Agreement, the Term shall commence on the
Commencement Date and shall expire on the date which is ten (10) years after
such Commencement Date. The term may be extended for an additional five (5)
years at the option of the Licensee by notice to Licensor prior to the end of
the initial ten (10) year term.
ARTICLE 4 USE OF PROPERTY
4.1 Use in Accordance with Law. Licensee shall at all times use the
Database in accordance with all applicable governmental laws and regulations.
4.2 Ownership of Name, Logo and Design. It is hereby agreed and
acknowledged by the Licensee that all copyrights and trademarks and other
intellectual property rights related to the use of the Database, and any names,
styles, designs or other material used or developed by Licensee in connection
with its use of the Database and copyrights in any other items produced by the
Licensee during the Term hereof using the Database, or any part of the Licensed
Property, shall vest solely in the Licensee.
4.3 Information derived from Use of Database. All data, customers,
information, revenues, profits, and other property, tangible and intangible,
derived or obtained by Licensee from the use of the Database shall be the sole
and exclusive property of Quintel.
ARTICLE 5 ROYALTIES, STATEMENTS AND PAYMENTS
5.1 Royalties. The Licensee shall pay to the Licensor in U.S. Dollars a
royalty of Five Thousand Dollars ($5,000.00) per month.
5.2 Payment. Royalties shall be payable to the Licensor within thirty (30)
days after the end of each month during the Term. If there is any balance due of
principal or interest under the Note, then the monthly royalty payment shall be
made by credit issued by Licensee against and reduce the balance owed to
Licensee under the Note.
ARTICLE 6 PROTECTION OF THE LICENSED PROPERTY
6.1 Ownership of Licensed Property. The Licensee acknowledges that the
Licensor is the owner of the Licensed Property and agrees that it will not
dispute or contest the Licensor's interest therein.
6.2 Infringement.
6.2.1 In the event that any third party contravenes or infringes any of
the Licensed Property in a manner which concerns or affects the Licensee
or the Licensor, the Licensor shall, at its sole discretion and at its
expense, take such action as it decides and the Licensee shall, at the
Licensor's expense, assist the Licensor to the extent necessary (including
participation as a party in legal proceedings) to protect any of the
Licensor's rights and give the Licensor all reasonable assistance
therewith and all compensation damages costs and other benefits of such
action shall
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be the sole property of the Licensor. If the Licensor includes the
Licensee as a party in legal proceedings pursuant to the provisions of
this Section 6.2, the Licensor shall indemnify and hold the Licensee
harmless from any claims, suits, judgments, damages and reasonable
expenses, costs or attorneys' fees arising out of or related to any such
legal proceedings provided the Licensee's acts or omissions are not the
cause of such contravention or infringement.
6.2.2 If the Licensor chooses not to take any action pursuant to paragraph
(a) above, and such infringement affects the Licensee, then the Licensee
shall have the right to bring such action at the Licensee's expense, and
the Licensor shall assist the Licensee to the extent necessary (including
participation as a party in legal proceedings) and give the Licensee all
reasonable assistance therewith and all compensation damages, costs and
other benefits of such action shall be4 the sole property of the Licensee.
If the Licensee includes the Licensor as a party in legal proceedings
pursuant to the provisions of this paragraph 6.2.2, the Licensee shall
indemnify and hold the Licensor harmless from any claims, suits,
judgments, damages and reasonable expenses, costs or attorneys' fees
arising out of or related to any such legal proceedings provided the
Licensor's acts or omissions are not the cause of such contravention or
infringement.
6.3 Notification of Infringement. The Licensee shall promptly notify the
Licensor in writing of any infringements or imitations by others of the Licensed
Property on articles similar to the Covered Products, if and when such become
known to the Licensee.
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF LICENSEE
7.1 Authority. The Licensee represents and warrants that it has the right,
power and authority to enter into the Agreement and perform its obligations
hereunder.
7.2 Use of Licensed Property. The Licensee shall not use the Licensed
Property in any manner other than as authorized hereunder.
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF LICENSOR
8.1 Authority. The Licensor represents and warrants that it has the right,
power and authority to enter into the Agreement and perform its obligations
hereunder.
8.2 Right to License. The Licensor represents and warrants that it has all
rights required in order to license all rights granted to the Licensee
hereunder.
8.3 No Infringement. The Licensor represents and warrants that there is no
obstacle (legal or otherwise) concerning the Licensee's use of the Licensed
Property and that the Licensee's use of the Licensed Property as authorized
hereunder will not infringe the rights of any third party, and will net result
in any claims of unfair competition or violation of any other common law right
of any third party
ARTICLE 9 INDEMNIFICATIONS
9.1 Indemnification by Licensor. The Licensor agrees to indemnify and hold
harmless the Licensee, its officers, directors, employees and agents from and
against all claims, damages, losses, liabilities, suits and expenses (including
reasonable attorneys' fees) arising out of or by any reason of any breach by the
Licensor of any of the representations, warranties or arrangements made by it
hereunder.
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Licensee shall have the right to establish a trust fund upon filing of any such
suit, said amount to be applied to the defense cost and settlement of any such
claims; fifty (50%) percent of future royalty payments are subject to deduction
for cost and settlement payments at Licensee's discretion. Licensor's liability
under this indemnity shall not exceed the total amount of the royalties paid to
and payable to Licensor
9.2 Indemnification by Licensee. The Licensee shall indemnify the
Licensor, its agents and assigns and hold each of them harmless from and against
any and all claims, demands, losses, damages, liabilities, costs and expenses
(including reasonable attorneys' fees) arising out of or by reason of any breach
by the Licensee of any of the representations, warranties or arrangements made
by it hereunder
9.3 Obligation to Indemnify. Any claim or liability for which
indemnification is provided under this Agreement shall be referred to as a
"Claim". An indemnified party will give the indemnifying party notice of any
Claim as soon as practicable and in any event within ten days after such
indemnified party shall have had actual written notice thereof. The indemnifying
party shall be entitled at its expense to defend such Claim provided it gives
such indemnified party written notice of its election to do so within thirty
(30) days after receiving written notice from such indemnified party to defend
it. Such indemnified party shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be borne by such
indemnified party, unless (i) the indemnifying party has failed timely to serve
written notice of its election to provide counsel at its expense, (ii) the
employment of such counsel selected by the indemnified party has been authorized
by the indemnifying party, or (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to such indemnified party to defend
such action against it. In the event of either (i), (ii) or (iii), counsel to
the indemnifying party shall not be entitled to direct the defense of such
indemnified party and the fees and expenses of counsel employed by such
indemnified party shall be borne and reimbursed by the indemnifying party.
ARTICLE 10 TERMINATION
10.1 Licensor's Right to Terminate this Agreement. The Licensor shall have
the right to terminate this Agreement (without prejudice to any rights which it
may have either under the provisions of this Agreement or otherwise), effective
as of the date of receipt by the Licensee of written notice (unless provided
otherwise herein) of such termination by the Licensor, upon the occurrence of
any of the following events:
(i) If any order shall be made or resolution passed for the winding up of
the Licensee (other than for the purpose of bona fide reconstruction or
amalgamation), which order is not released within sixty (60) days, or if
the Licensee shall make any arrangement with or for the benefit of its
creditors or if a receiver or administrator shall be appointed in respect
of the Licensee's assets; or
(ii) Default by the Licensee in the performance of any of its material
obligations provided for in this Agreement; provided, however, that the
Licensee shall be entitled to thirty (30) days prior written notice from
the Licensor of such default, and this Agreement shall not be terminated
if the default is cured within such thirty (30) day period.
10.2 Licensee's Right to Terminate this Agreement. The Licensee shall have
the right to terminate this Agreement (without prejudice to any rights which it
may have either under the provisions of this Agreement or otherwise), upon the
default by the Licensor in the performance of any of its other material
obligations provided for in this Agreement; provided, however, that the Licensor
shall be
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entitled to thirty (30) days prior written notice from the Licensee of such
default, and this Agreement shall not be terminated if the default is cured
within such thirty (30) day period.
ARTICLE 11 MISCELLANEOUS
11.1 Notices. All notices and statements shall be in writing and shall
together with any payments be personally delivered or sent registered or
certified mail, return receipt requested, postage prepaid to the intended party
at the address set forth at the beginning of this Agreement (unless notification
of a change of address is given in writing), with a copy of any notice to
Licensor shall be given in the same manner to Don A. Paradiso, Don A. Paradiso
PA., 2072 South Military Trail, Suite 7, West Palm Beach, Florida 33415 and a
copy of any notice given to Licensee shall be given in the same manner to Feder,
Kaszovitz, Isaacson, Weber, Skala & Bass LLP, 750 Lexington Avenue, New York,
New York 10022. The date of mailing of a notice shall be deemed the date the
notice is given.
11.2 Waiver, Modification. The terms of this Agreement may not be waived
or modified except by an agreement in writing executed by the parties hereto.
The waiver by either party of any breach of this Agreement must be in writing
and shall not be deemed to be a waiver of any prior or succeeding breach.
11.3 Relationship of the Parties. Nothing herein contained shall be
construed to place the parties in the relationship of partners or joint
venturers and neither party shall have the power to obligate or bind the other
in any manner whatsoever.
11.4 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York applicable to agreements executed and to be
wholly performed therein. Any action brought to enforce the provisions of this
Agreement shall be brought in the State of New York, and each Party hereby
consents to the personal jurisdiction of the federal and state courts located in
the State of New York, and agrees that unless applicable law requires a
different method, service of process in any such action may be made by first
class mail upon a Party at its address set forth in the beginning of this
Agreement or at such other address as the Party shall advise the other Party by
written notice in the manner required under this Agreement.
11.5 Captions. Captions of paragraphs appearing herein are inserted for
reference and convenience only and do not define or limit the scope or intent of
any provision hereof.
11.6 Entire Agreement. There are no representations. warranties or
covenants, with respect to the subject matter contained herein, other than those
set forth in this Agreement which sets forth the entire understanding and
agreement among the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
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QUINTEL COMMUNICATIONS, INC.
By: /s/ Jeffrey Schwartz
--------------------------------------
Name: Jeffrey Schwartz
Title: Chairman, CEO
LCS GOLF, INC.
By: /s/ Michael Mitchell
--------------------------------------
Name: Michael Mitchell
Title: Pres.
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Exhibit 10.2E
AGREEMENT
AGREEMENT entered into as of the ___ day of January, 2000 by and between Quintel
Communications, Inc., a Delaware corporation with offices at One Blue Hill
Plaza, Pearl River, New York 10965 (hereafter referred to as "Quintel"), and LCS
Golf, Inc., a Delaware corporation with offices at 24 East 12th Street, New
York, New York 10003 (hereafter referred to as "LCSG"). Quintel and LCSG are
also sometimes referred to as a "Party" or the "Parties."
RECITALS:
A. WHEREAS, LCSG is engaged in the marketing of products and services related
to golf using the internet.
B. WHEREAS, Quintel is engaged in the development and operation of businesses
marketing a variety of products and services using the internet.
C. WHEREAS, Quintel and LCSG wish to develop programs to market products and
services to the visitors to and customers of LCSG's websites.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
acknowledged by the parties, it is hereby agreed as follows:
1 Definitions.
1.1 "Agreement" means this agreement between Quintel and LCSG.
1.2 "Customer" means any Person acquiring products or services pursuant
to the Marketing Program.
1.3 "GAAP" means generally accepted U.S. accounting principles,
consistently applied and consistent with past practices of the Party
responsible for preparing the calculation.
1.4 "Governmental Regulations" means any federal, state or local
governmental rules and regulations governing the activities
conducted under this Agreement.
1.5 "Exclusive Quintel Products" means the product and service
categories identified on Schedule 1.5 annexed hereto.
1.6 "LCSG's Common Stock" means shares of LCSG's common stock with a par
value of $.001 per share.
1.7 "LCSG Data Base" means the information regarding the visitors to and
customers of the LCSG Websites and other persons otherwise available
to LCSG, including but not limited to, their names, telephone
numbers, addresses, and e-mail addresses.
1.8 "LCSG Products and Services" means any of the products and services
marketed by LCSG or any of its Affiliates during the Term.
1.9 "LCSG Websites" means any of the websites owned, sponsored or
controlled by LCSG now or at any time during the term of this
Agreement; LCSG's current websites are identified on Schedule 1.9
annexed hereto.
1.10 "Marketing Materials" means advertisements in all media (including
the internet, print, television and radio), brochures, solicitation
materials, scripts, displays, or other information which describes
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or otherwise relates to the Marketing Programs and used to solicit
customers for the Marketing Programs.
1.11 "Marketing Program" means any one of the Actual Quintel Programs or
LCSG Sales Promotions for the marketing of products and services
developed by the parties under this Agreement.
1.12 "Member Record Fee" means the fee of twenty-five cents ($0.25) for
every valid Name delivered to Quintel or its Affiliate for
registration in multibuyer.com, referred to in paragraph 2.9.1 of
this Agreement.
1.13 "Member Record" has the meaning set forth in paragraph 2.10.1 of
this Agreement.
1.14 "Multibuyer Record Fee"has the meaning set forth in paragraph 2.10.1
of this Agreement.
1.15 "Names" means the name, address (street, post-office box or e-mail),
telephone number or other means of identification of any individual,
person or entity identified in the LCS Data Base.
1.16 "Net Revenue" means gross revenues generated by a Sales Program,
less direct out-of-pocket costs of acquiring Program Products and
Services (including royalties or fees to third parties), the cost of
producing the Marketing Materials and all other expenses directly
related to the Actual Quintel Program incurred by either Party,
determined in accordance with GAAP.
1.17 "Option" has the meaning set forth in Section 4.1 of this Agreement.
1.18 "Parties" means Quintel and LCSG.
1.19 "Person" means any individual, corporation, partnership, trust, or
other entity.
1.20 "Program Data Base" means the information regarding the Customers of
the Marketing Program and the other Persons solicited by or
responding to the Marketing Materials, including but not limited to,
their names, telephone numbers, addresses, and e-mail addresses, and
any list of customers generated by the Marketing Programs by either
Party.
1.21 "Program Products and Services" means any of the Quintel Products or
Services marketed as part of a Sales Program conducted under this
Agreement.
1.22 "Quintel Banner Ads" has the meaning set forth in Section 2.2 of
this Agreement.
1.23 "Quintel E-Mail Promotions" has the meaning set forth in Section 2.1
of this Agreement.
1.24 "Quintel-Golf Hyper-Link" has the meaning set forth in Section 2.3
of this Agreement.
1.25 "Quintel Off-line Promotions" has the meaning set forth in Section
2.4 of this Agreement.
1.26 "Quintel Products and Services" means any Quintel's or its
Affiliates' products, services, or programs or marketing campaigns
(including those of Quintel's marketing partners or co-venturers),
which Quintel markets or which Quintel acquires the right to market
from time to time, and includes product or service offerings whose
primary purpose is to capture customer data rather than generate
revenue.
1.27 "Quintel Promotion" means any of the Quintel Banner Ads, Quintel
E-Mail Promotions, Quintel-Golf Hyperlink or Quintel Off-line
Promotions.
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1.28 " Sales Program" means a particular program using any of the Quintel
Promotions to market specific Quintel Products and Services under
the Marketing Program.
2 Marketing Program.
2.1 During the term of this Agreement, Quintel shall have the right to
transmit e-mail messages marketing or promoting Quintel Products and
Services to the LCS Database (such e-mail messages are referred to
as "Quintel e-mail Promotions"). The maximum per month that number
of e-mail messages to the Names in the LCSG Data Base equal to the
product of (i) four (4) multiplied by (ii) the daily average during
the immediately preceding month of the entire number of Names on the
LCS Data Base, As an example of the foregoing calculation, if the
number of names in the LCS Database equals 50,000 on the date
hereof, Quintel may transmit up to 200,000 e-mail messages to Names
in the LCS Database. If as of six months after the date hereof, the
number of names in the LCS Database equals 100,000, the total number
of e-mail messages which Quintel may transmit shall have increased
to a total of 400,000.
2.2 During the term of this Agreement, LCSG will make banner
advertisements available to Quintel to for the marketing of the
Exclusive Quintel Products (hereafter such banner advertisements are
referred to as the "Quintel Banner Ads"). The banner advertisements
will be displayed prominently on the LCS Websites and in a manner so
that each visitor to an LCS website will see the banner
advertisement.
2.3 During the term of this Agreement, LCSG will permit Quintel to
create hyperlinks once per month on one of the LCSG Websites
selected by Quintel, to a Quintel Website designated by Quintel
(referred to as the "Quintel-Golf Hyperlink") using any of the
following methods: e-mail messages containing a Quintel-Golf
Hyperlink, a newsletter to subscribers, or through text messages on
the LCSG Website. The form and text of the methods used to create a
hyperlink will be Quintel Product and Service.
2.4 Quintel shall also have the right during the term of this Agreement
to market any Quintel Products and Services to those names in the
LCS Database which it deems appropriate using media other than the
internet once per month during the term of this Agreement. Such
solicitations may pertain to any Quintel Products and Services,
selected by Quintel in its discretion (such marketing referred to as
"Quintel Off-line Promotions").
2.5 Quintel will determine in its discretion the nature and terms of the
Quintel Products and Services to feature on the banner
advertisements. It is understood that the Quintel Products and
Services include products and services of Quintel's strategic
partners and other entities with which it has marketing
arrangements, including SkyMall, Inc., Cybergold and itarget, and
that the consent of such third parties will be required for Quintel
to market any of such products or services as part of the Marketing
Program.
2.6 Quintel will prepare the Marketing Materials for the Sales
Promotions and submit them to LCSG for approval, which approval
shall not be unreasonably withheld or delayed. LCSG will respond to
any request by Quintel for approval hereunder within a reasonable
period of time (not to exceed five (5) days), and if the approval is
not granted, the Parties will attempt in good faith to promptly
resolve any objections. Failure to respond shall be deemed to be
approval.
2.6.1 Each Party grants the other a non-exclusive license during the
Term to use the name, logos and trademarks and trade names of
the other approved as part of the approved Marketing
Materials.
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2.6.2 Following the end of the Term, each Party will have the right
to use the Marketing Materials as a basis for materials used
in the marketing of other products and services, provided that
the Party making use of the Marketing Materials does not use
the name, trademarks, trade names, logos or other Confidential
Information of the other Party.
2.7 Quintel will be responsible for the management and execution of each
Sales Program and will provide customer service for Quintel Products
and Services (and its direct out-of-pocket expenses incurred in
providing the foregoing services shall be borne equally by the
parties).
2.8 LCSG will provide at its expense any customer service required for
any LCSG Products and Services sold as part of a Sales Program.
2.9 LCSG will make available to Quintel the LCSG Web Sites for the
conduct of the Quintel Promotions and the Sales Programs and provide
Quintel with the LCSG Data Base.
2.10 LCSG will give all visitors to the LCSG Websites the opportunity to
opt-in to become a member of Quintel's the websites operated by
Quintel's subsidiary under the name "multibuyer.com." or
"grouplotto.com" as selected by Quintel. The Names of those persons
who opt-in will be delivered individually or in a batch as requested
by Quintel, in as fast a manner as possible (but at least once every
24 hours).
2.10.1 Quintel will pay LCSG twenty-five cents ($0.25) for every
valid Name delivered to Quintel or its Affiliate for
registration in multibuyer.com (hereafter each valid record
containing a Name is referred to as a "Member Record" and the
$0.25 fee is referred to as the "Multibuyer Record Fee");
such payment will be made monthly within thirty (30) days
after the end of each month in which a Member Record is
delivered.
2.10.2 Revenue derived by Quintel or its Affiliates from such
registrations will not be part of Net Revenue.
2.11 LCSG will permit Quintel to create a link for placement on the
golfuniverse.com website to a custom version of Quintel's
subsidiary's GroupLotto.com website, at which participants will be
given the opportunity to win a lottery prize in excess of
$1,000,000.00 (such custom version referred to as the "GroupLotto
Golf Link"). Revenue derived by Quintel or its Affiliates from the
GroupLotto Golf Link will not be part of Net Revenue, but the data
regarding Customers and visitors to the GroupLotto Golf Link will be
shared in accordance with Section 2.12 of this Agreement.
2.12 All data regarding Customers and visitors captured from the
promotions or sales conducted by Quintel and LCSG pursuant to the
Marketing Programs shall be part of the Program Data Base, and all
information contained in or derived from the Program Data Base may
be used as either Party chooses, provided such use does not violate
Governmental Regulations and except as otherwise provided in this
Agreement.
2.12.1 Each Party agrees that it will not during the term use the
Names in the Program Data Base to offer for sale products or
services which compete with the products or services offered
by the other Party.
2.12.2 Notwithstanding the foregoing, LCSG shall not have the right
to lease, rent or otherwise transfer the information
contained in the Program Data Base to any third party.
2.13 Customers of and visitors to the LCSG Web Sites responding to the
Marketing Program will be properly informed, prior to the capture of
any personal information about them, that such
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information to be included in the Program Data Base will be used for
marketing purposes and future solicitations.
2.14 Quintel will have the exclusive right during the Term to market the
Exclusive Quintel Products and Services to the LCSG Data Base.
2.15 If during the Term either Party is notified or otherwise becomes
aware of any complaint or formal investigation by any governmental
authority of an alleged unfair or deceptive business practice or any
other alleged violation of any Governmental Regulation with respect
to the Marketing Program ("Complaint"), it shall provide the other
Party with prompt written notice of the Complaint, and if the
Complaint is initiated on the basis of the approved Marketing
Materials, then such approved Marketing Materials shall be revised
immediately to resolve such Complaint or the use of such approved
Marketing Materials shall cease within five (5) calendar days of
notification to Quintel of a Complaint. If the Complaint arises from
a breach by a Party of its obligations under this Agreement, the
non-breaching Party shall have the right to terminate this Agreement
under the provisions of Paragraph 6.2 below.
3 Revenues and Expenses; Fees to Quintel for LCSG Sales Promotions.
3.1 Net Revenue generated from the sale of Program Products and Services
during the Term will be shared equally by the Parties. Quintel will
account to LCSG for all revenue received from the sale of Program
Products and Services, and if LCSG receives any revenue from the
sale of Program Products and Services it will account for such
revenue to Quintel; it is acknowledged and agreed that it is
anticipated that all Net Revenue will be collected and distributed
by Quintel. Only that revenue directly resulting from the sale of a
Quintel Product or Service offered as part of a Sales Program will
be included in revenue which is subject to the sharing provisions of
this Section 3. Net Revenue subject to sharing under this Agreement
shall be paid and distributed quarterly by the Party responsible for
such payment and distribution, less reserves for bad debt and other
reserves prudent and customary for the Sales Programs conducted
under this Agreement.
3.1.1 Each payment of Net Revenue will be accompanied by a report
explaining the calculation of Net Revenue.
3.1.2 It is understood and agreed that if a Quintel Promotion is
used to drive traffic to a website of Quintel or one of its
Affiliates, the revenue derived from any subsequent sale of a
Quintel Product or Service will not be part of Net Revenue
and will not be shared by the Parties, and that the revenue
sharing arrangements described in this Agreement will only
apply to the sale of a Quintel Product or Service offered for
sale as part of a Quintel Promotion in a Sales Program
conducted by Quintel.
3.2 The costs and expenses incurred in the conduct of the Sales Programs
will be paid by Quintel and deducted by Quintel in determining Net
Revenues.
3.3 Each Party shall bear its own general corporate overhead and
administrative expenses in connection with the activities under this
Agreement. Without limiting the foregoing, the LCSG Data Base will
be provided by LCSG to Quintel for use in connection with the Sales
Programs developed under this Agreement without any charge or
expense.
3.4 Each Party or its independent certified public accounting firm will
have the right no more than once per calendar year during the Term
of this Agreement and the two year period following the end of the
Term to audit and/or cause an audit to be made of the separate
records (collectively, the "Records") of the other Party with
respect to the Marketing Program, including with respect to the
calculation of Net Revenues. A Party seeking examination will have
free and full access to the Records for such purpose on reasonable
notice and at a mutually convenient time. Each Party will
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retain the Records for a period of three (3) years following its
rendition of any report or calculation of Net Revenue and amounts
due to the other Party under this Agreement. In the event of
underpayment or late payment of an amount due to a Party, the Party
owing the amount will be liable for interest on the unpaid amount at
the prime rate of interest announced as such in The Wall Street
Journal, New York, NY on the first date immediately preceding the
date payment was due, said interest to accrue from the date on which
payment was due until date of payment. A Party's receipt or
acceptance of any of any statements furnished hereunder or of any
payments paid hereunder shall not preclude a Party from questioning
the correctness thereof at any time, and in the event that any
inconsistencies or mistakes are discovered in such statements or
payments, they shall be immediately rectified and the appropriate
payment shall be made, with interest as provided for herein. In the
event that any audit of the Records indicates that amounts due a
Party have been underpaid in excess of $25,000.00, the underpaying
Party will reimburse the other Party to whom payment is due for its
reasonable costs and expenses for such audit with interest as
provided for herein.
3.5 The provisions of this Section 3 shall survive the termination of
this Agreement
4 Options to Purchase LCSG Stock.
4.1 In consideration for Quintel's entry into this Agreement, LCSG has
issued Quintel options (the "Options") to purchase up to 200,000
shares of LCSG's Common Stock exercisable for two (2) years from the
date of issuance at an exercise price of $1.00 per share for 100,000
of the Options, and an exercise price of $2.00 per share for 100,000
of the Options; the Options are in the form of the Option
Certificate annexed hereto as Schedule 4.
4.2 Concurrently with the execution of this Agreement, the Parties have
executed a Registration Rights Agreement with respect to the
Warrants in the form annexed hereto as Schedule 4-1.
5 Confidentiality.
5.1 A Party receiving information hereunder is hereinafter referred to
as the "Receiving Party" and the party disclosing information is
hereinafter referred to as the "Disclosing Party"; a Party's
officers, directors, employees, agents, professional advisors and
consultants are collectively referred to as "Representatives"). Both
Parties understand that each Party may provide the other Party with
certain proprietary and confidential information during the term of
this Agreement. All such proprietary and confidential information
furnished by the Disclosing Party or its Representatives to or on
behalf of the Receiving Party (irrespective of the form of
communication and whether such information is so furnished before,
on or after the date hereof) and all analyses, compilations, data,
studies, notes, interpretations, memoranda or other documents
prepared by the Disclosing Party or its Representatives containing
or based in whole or in part on any such furnished information is
collectively referred to herein as the "Confidential Information".
In addition, all such Confidential Information furnished by the
Disclosing Party to the Receiving Party or its Representatives,
(irrespective of the form of communication and whether such
information is so furnished before, on or after the date hereof) and
all analyses, compilations, data, studies notes, interpretations,
memoranda or other documents prepared by the Disclosing Party or its
Representatives containing or based in whole or in part on any such
furnished information are also collectively referred to as the
"Confidential Information." The term "Confidential Information"
shall not include any documents, data or other information which (i)
at the time of disclosure or thereafter is publicly available (other
than as a result of a disclosure by the Receiving Party or Receiving
Party's Representatives in violation hereof); (ii) was, is or
becomes available to Receiving Party on a non-confidential basis
from a source other than Disclosing Party or its advisors, provided
that such source was not known by Receiving Party to be prohibited
from disclosing such information to Receiving Party by a legal,
contractual or fiduciary obligation owed
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to Disclosing Party; (iii) was or is already in Receiving Party's
possession (other than Confidential Information furnished by or on
behalf of Disclosing Party); or (iv) is independently developed by
Receiving Party or on Receiving Party's behalf without violating
Receiving Party's obligations of confidentiality hereunder. All
Confidential Information provided by either Party shall not be
disclosed or referred to publicly, or to any third party, except as
permitted below. The Receiving Party will disclose the Confidential
Information only to its Representatives directly concerned with the
evaluation of the proposed Marketing Agreement. In the event that a
Receiving Party or any of its Representatives become legally
compelled (by deposition, interrogatory, request of documents,
subpoena, civil investigative demand or similar process) to disclose
any of the Confidential Information of the Disclosing Party, the
Receiving Party or other such person from whom such Confidential
Information is being sought shall provide the Disclosing Party with
prompt prior written notice of such requirement so that the
Disclosing Party may seek a protective order or other appropriate
remedy and/or waive compliance with the terms of this Agreement. In
the event that such protective order or other remedy is not
obtained, or the Disclosing Party waives compliance with the
provisions hereof, the person required to provide such information
agrees to furnish only such portion of the Confidential Information
that is legally required to be furnished.
5.2 Except as may be required by Governmental Regulations, neither Party
shall issue a press release or make any public announcement
regarding or relating to the Marketing Program without review by,
and the prior consent of, the other Party. Quintel and LCSG shall
consult with each other prior to any conference with the press or
other news media relating to the Marketing Program, including
consultation with regard to appropriate responses to questions from
the press or other media about the Marketing Program.
5.3 The provisions of this Section 5 shall survive the termination of
this Agreement
6 Representations and Warranties; Indemnification.
6.1 Each Party represents and warrants to the other Party that it is a
corporation, duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and has the
corporate power and authority to execute and deliver this Agreement,
to consummate the transactions hereby contemplated, and to take all
other actions required to be taken by it pursuant to the provisions
hereof, and is not subject to, or a party to, any contract,
agreement, instrument, order, judgment or decree, or any other
restriction of any kind or character, which would prevent its entry
into or performance under this Agreement, and no consent of or other
action by or notice to any third party is required in connection
with the Party's entering into and performing under this Agreement,
and that this Agreement and the transactions described in this
Agreement have been duly authorized by all necessary corporate
action.
6.2 LCSG represents that the issuance and delivery of the Options and
execution and delivery of the Registration Rights Agreement have
been duly authorized by all necessary corporate action, that it has
reserved for issuance a sufficient number of shares of LCSG Common
Stock issuable upon exercise of the Options, that all of such shares
have been duly authorized, and when the Options are exercised and
the exercise price has been paid, will be fully paid and
non-assessable.
6.3 The Parties will be jointly and severally responsible for any
liabilities of or claims against either of them arising from the
conduct of the Marketing Program, provided the Party whose
activities give rise to the claim conducted such activities in
accordance with the approved Sales Programs and Marketing Materials.
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6.4 Each Party will indemnify the other Party and hold the other Party
harmless from any liability, cost or expense arising solely from a
breach of its representations and warranties in Paragraphs 6.1 or a
breach by the Party of its obligations under paragraph 6.2.
6.5 A party entitled to indemnification under this Agreement shall be
referred to hereafter as an "Indemnified Party" and a party
obligated to provide indemnification shall be referred to hereafter
as an "Indemnifying Party". If at any time an Indemnified Party
shall claim indemnification from an Indemnifying Party for any Loss
or, in the reasonable judgment of the Indemnified Party, for what,
in the future, may result in a Loss ("Anticipated Loss") due to the
filing, at or before the time of such claim, of an action, claim or
suit with an arbitrator, mediator, court or other governmental
entity as to which the Indemnified Party is entitled to
indemnification under this Agreement ("Claim"), then the Indemnified
Party shall promptly send written notice of the same (a "Notice of
Claim") to the Indemnifying Party describing such Claim in
reasonable detail. A Notice of Claim shall specify the basis for
such Claim supported by relevant information and documentation.
6.5.1 If the Indemnifying Party shall allege that the Indemnified
Party is not entitled to indemnification with respect to such
Claim, it shall give written notice of such objection (a
"Notice of Objection") to the Indemnified Party within 15
business days after receipt by the Indemnifying Party of the
Notice of Claim, specifying the basis of the objections. If
the Indemnifying Party does not give a Notice of Objection
within such 15 business days, or shall have agreed to pay
such Claim in whole or in part within such 15 business-day
period, the Indemnifying Party shall thereupon be liable for
the payment of all Losses relating to such Claim, except as
otherwise provided in Section 6.4.2 herein.
6.5.2 In the event that the Indemnified Party shall have timely
given a Notice of Objection in whole or in part to any Notice
of Claim, during the 20-day period following that date, the
Indemnified Party and the Indemnifying Party shall privately
attempt to resolve the Claim. If the Indemnified Party and
the Indemnifying Party shall have failed to resolve or
compromise or agree to postpone resolution of the Claim
within such 20-day period, then the Claim shall be settled by
arbitration in New York, New York (the place in which the
arbitration is to be held shall be referred to as the
"Arbitration Venue"), as determined by the three arbitrators
referred to in Paragraph 6.4.3 below, in accordance with the
rules of the American Arbitration Association and the
procedures set forth below.
6.5.3 Each of (A) the Indemnified Party and (B) the Indemnifying
Party shall appoint one arbitrator, and the two arbitrators
so appointed shall then together appoint a third arbitrator
("neutral arbitrator") from a list of persons supplied by the
American Arbitration Association in the Arbitration Venue. If
one party shall fail to appoint the arbitrator to be
appointed by it within 15 days after the end of the 20-day
period provided for in Section 6.4.2 above, the arbitrator
appointed by the other party shall select from a list of
persons supplied by the American Arbitration Association a
person who shall serve as the single neutral arbitrator for
purposes of the arbitration. If each party shall have
appointed one arbitrator, but such designees cannot agree on
the person to act as the neutral arbitrator within a period
of 15 days after the appointment of the second arbitrator,
then either party may apply to the American Arbitration
Association in the Arbitration Venue, which shall appoint a
neutral arbitrator. The arbitrators shall conduct the
arbitration with all reasonable dispatch in accordance with
the rules of the American Arbitration Association, provided,
however, that the parties to such arbitration shall take such
action and execute such instruments as shall be necessary to
cause the rules of civil procedure of the state in which the
Arbitration Venue is located pertaining to pre-trial
discovery to be applicable in respect of such proceeding. The
arbitrators shall render a written award (the "Award") which
shall be delivered to the Indemnified Party and the
Indemnifying Party. An Award hereunder may be used as a basis
for the entry of
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judgment in any jurisdiction. In the event the parties have
submitted a Claim for an Anticipated Loss to arbitration
under this Section 6 then the arbitrators may, in their sole
discretion, postpone resolution of the Claim until the time
which they have determined, in their sole discretion, to be
the time when such Anticipated Loss shall have occurred or
passed.
6.5.4 Prior to making the Award, the arbitrators shall direct the
Indemnified Party and the Indemnifying Party to submit
statements describing any element of Loss or Anticipated Loss
as to which a Claim is made that is attributable to
attorneys' fees, disbursements, and any similar costs
incident to such Loss or Anticipated Loss, supported by
affidavits showing that such costs actually have been or are
likely to be incurred, and all such attorneys' fees,
disbursements and other costs shall be apportioned as
determined by the arbitrators. All fees of the arbitrator and
administrative expenses of the American Arbitration
Association shall be treated as costs for purposes of this
Section 6. As a part of each Award made pursuant to this
Agreement, the arbitrators shall allow interest thereon
(other than on the portion of the Award representing
attorneys' fees, disbursements and costs) from the date of
the Loss or the date the Anticipated Loss becomes a Loss to
the date of payment at the rate of 10% per annum.
6.5.5 The Award shall be a conclusive determination of the matter
and shall be binding upon the Indemnified Party and the
Indemnifying Party, and shall not be contested by either of
them. The Indemnifying Party shall satisfy its obligations to
pay an Award in cash.
6.5.6 If the subject of a Claim involves a third-party claim which
has not yet been determined, the arbitrators may in their
discretion make a separate determination solely as to whether
the third-party claim is one for which indemnification may be
had or may defer a determination as to whether
indemnification may be had pending the further development of
information as to the nature of the third-party claim. If the
arbitrators determine that the third-party claim is not
subject to indemnification, they shall set forth the basis of
his decision in detail, which decision shall be deemed to be
an "Award" hereunder.
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6.5.7 If the Indemnified Party requests that the Indemnifying Party
defend it against a Claim involving an Anticipated Loss, then
the Indemnifying Party may, at its option, assume the defense
of the Indemnified Party against such Claim (including the
employment of counsel, who shall be counsel satisfactory to
the Indemnified Party,) and the payment of expenses. If the
Indemnified Party does not request the Indemnifying Party to
defend it against such Claim or the Indemnifying Party fails
to assume the defense of such Claim within a reasonable time
after having been requested by the Indemnified Party to
assume the defense, then the Indemnified Party shall have the
right to defend himself in any such action and, if
appropriate under Section 4(a) above, be indemnified for his
costs and fees of defense by the Indemnifying Party. The
Indemnified Party, at its own cost, may employ separate
counsel to assert, based on an opinion of counsel to the
Indemnified Party, one or more legal defenses available to it
which are different from or additional to those available to
such Indemnifying Party; the Indemnifying Party shall not
have the right to direct the defense of such action on behalf
of the Indemnified Party in respect of such different or
additional defenses. The Indemnifying Party shall not be
liable to indemnify the Indemnified Party for any settlement
of any such action or claim effected without the consent of
the Indemnifying Party, but if settled with the written
consent of the Indemnifying Party, or if there be a final
judgment for the plaintiff in any such action, the
Indemnifying Party shall indemnify and hold harmless the
Indemnified Party from and against any Loss by reason of such
settlement or judgment and the Indemnifying Party shall
thereupon be liable for the payment of such Loss.
6.6 The provisions of this Section 6 shall survive the termination of
this Agreement.
7 Term; Termination.
7.1 The term of this Agreement shall commence on the date hereof and
continue for two (2) years thereafter, unless sooner terminated in
accordance with this Agreement.
7.2 Either Party may terminate this Agreement in the event of a default
by the other Party in the performance of any of its material
obligations under this Agreement which is not cured within thirty
(30) days after notice of such default has been given to the Party
alleged to be in default by the other Party.
7.3 Either Party may give the other Party notice of its intention to
terminate this Agreement if at least one (1) Sales Program is not
being conducted during any twelve (12) month period after the date
hereof, and if a Sales Program is not approved or conducted within
the sixty (60) day period following such notice, the Party giving
the notice may terminate this Agreement on notice to the other
Party.
7.4 Either Party may terminate this Agreement upon notice to the other
Party if an "Event" occurs with respect to the other Party. For
purposes of this paragraph, an "Event" shall mean:
7.4.1 a Party liquidates, winds up its business, dissolves or
terminates it existence;
7.4.2 any voluntary proceeding by a Party is commenced under any
chapter of the Federal Bankruptcy Code or other law relating
to bankruptcy, bankruptcy reorganization, insolvency or
relief of debtors, or any such proceeding is commenced
against a Party and such proceeding is not dismissed within
sixty (60) days from the date on which it is filed or
instituted; or a Party shall make an assignment for the
benefit of creditors or admit in writing its inability to pay
its debts as they mature or that it is otherwise insolvent.
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8 Miscellaneous.
8.1 Assignment. Neither Party may assign its rights and obligations
under this Agreement without the consent of the other Party.
8.2 Notices. Any notice or other communications required or permitted
hereunder shall be in writing and shall be deemed effective (a) upon
personal delivery, if delivered by hand and followed by notice by
mail or facsimile transmission; (b) one day after the date of
delivery by Federal Express or other nationally recognized courier
service, if delivered by priority overnight delivery between any two
points within the United States; or (c) five days after deposit in
the mails, if mailed by certified or registered mail (return receipt
requested) between any two points within the United States, and in
each case of mailing, postage prepaid, addressed to a party at its
address first set forth above, or such other address as shall be
furnished in writing by like notice by any such party.
8.3 Waiver. No waiver by a party of any breach of this Agreement by the
other shall be deemed to be a waiver of any preceding or subsequent
breach.
8.4 Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to the subject matter contained
herein.
8.5 No Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action
in or on behalf of any person other than the parties hereto and the
other persons executing this Agreement.
8.6 "Force Majeure". Neither Party shall be considered to be in default
in the performance of any obligations under this Agreement when a
failure of performance shall be due to an uncontrollable force. The
term "uncontrollable force," as used in this Agreement, shall mean
an unanticipated event which is not reasonably within the control of
the affected Party and which by exercise of reasonable due
diligence, such affected Party could not reasonably have been
expected to avoid, overcome or obtain or cause to be obtained a
commercially reasonable substitute therefor. Such causes may
include, without limitation, the following: flood, earthquake,
tornado, storm, fire, explosion, public emergency, civil
disobedience, labor dispute, labor or material shortage, sabotage,
restraint by court order or public authority (whether valid or
invalid), and action or non-action by or inability to obtain or keep
the necessary authorizations or approvals from any governmental
agency or authority; however, no Party shall be relieved of its
obligations hereunder, if its failure of performance is due to
removable or remediable causes which such Party fails to remove or
remedy using commercially reasonable efforts within a reasonable
time period. Either Party rendered unable to fulfill any of its
obligations under this Agreement by reason of an uncontrollable
force shall give prompt notice of such fact to the other, followed
by written confirmation of that notice, and shall exercise due
diligence to remove such inability with all reasonable dispatch. The
provisions of this paragraph, however, shall not affect a Party's
right to terminate this Agreement under the provisions of Paragraph
6.3 above.
8.7 Limitation of Liability. The exclusive measure of damages
recoverable from claims arising from, under or in connection with
the Agreement, whether arising by negligence, intended conduct or
otherwise shall be limited to actual damages only and such damages
shall be the sole and exclusive remedy hereunder and all other
remedies or damages are waived. In no event shall any Party be
liable for any incidental, consequential, punitive, exemplary or
indirect damages, lost profits or other business interruption
damages, lost or prospective profits, in tort, contract or
otherwise. The provisions of this Paragraph 7.6 shall survive the
termination of this Agreement.
8.8 Amendment. This Agreement may not be changed orally, but only by an
agreement in writing signed by the Party or parties to be charged
thereby.
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8.9 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the law of New York, including its
choice of law rules. Any judicial proceeding brought against any of
the parties to this Agreement on any dispute arising out of this
Agreement or any matter related hereto shall be brought in the
courts of the State of New York in New York County or in the United
States District Court for the Southern District of New York, and, by
execution and delivery of this Agreement, each of the parties to
this Agreement accepts for itself the jurisdiction of the aforesaid
courts, irrevocably consents to the service of any and all process
in any action or proceeding by the mailing of copies of such process
to such Party at its address provided for the giving of notices
under Section 13(c) above, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. Each
Party hereto irrevocably waives to the fullest extent permitted by
law any objection that it may now or hereafter have to the laying of
the venue of any judicial proceeding brought in such courts and any
claim that any such judicial proceeding has been brought in an
inconvenient forum.
8.10 No Partnership or Agency. This agreement does not constitute a joint
venture or partnership by the parties, and each Party is entering
into this Agreement as a principal and not as an agent of the other.
8.11 Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. In case any one or more of
the provisions contained in this Agreement or any application
thereof shall be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining
provisions contained herein and any other application thereof shall
not in any way be affected or impaired thereby, and the extent of
such invalidity or unenforceability shall not be deemed to destroy
the basis of the bargain among the parties as expressed herein, and
the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected
thereby, but rather shall be enforced to the greatest extent
permitted by law.
8.12 Section Headings. The section headings appearing in this Agreement
are for convenience of reference only and are not intended, to any
extent or for any purpose, to limit or define the text of any
section.
8.13 Counterparts. This Agreement may be executed in several counterparts
and all counterparts so executed shall constitute one agreement
binding on all the parties hereto, notwithstanding that all the
parties are not signatory to the original or the same counterpart.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers as of the date first written above.
Quintel Communications, Inc.
By:
Name:
Title:
LCSG GOLF, INC.
By:
Name:
Title:
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SCHEDULE 1.5
Exclusive Quintel Products
Long distance telephone service
cellular telephone service
satellite dishes
mortgages
credit cards
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SCHEDULE 1.9
LCSG WEBSITES
golfuniverse.com
golfpromo.net
playgolfnow.com
universecybermall.com
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SCHEDULE 4
Option Certificate
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SCHEDULE 4-1
Registration Rights Agreement
16
Exhibit 10.2F
REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of February 16,
2000, by and between LCS GOLF, INC..., a Delaware corporation (the "Company"),
and QUINTEL COMMUNICATIONS, INC. ("Quintel").
RECITALS
WHEREAS, Quintel and the Company are parties to a Marketing Agreement of
even date herewith (the "Marketing Agreement"), pursuant to which Quintel has
been issued and is the holder of certain options (the "Options") to purchase
200,000 shares of the Company's common stock (the "Common Stock"), and Quintel
has also loaned the Company $500,000.00 (the "Loan") as evidenced by the
Company's convertible promissory note of even date herewith (the "Note")
entitling the holder to convert the amount due under such note into shares of
Common Stock (the shares of Common Stock into which the Note is convertible are
referred to as the "Shares"); and
WHEREAS, in order to induce Quintel to enter into the Marketing Agreement
and to accept the Options and make the loan to the Company, the Company has
agreed to enter into this Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "the Act" means the Securities Act of 1933, as amended.
(b) The term "Common Stock" means the common stock, par value $001 per
share, of the Company.
(c) The term "Form S-3" means such form under the Act as in effect on the
date hereof or any registration form under the Act subsequently adopted by the
SEC which replaces such form.
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof
(e) The term "the 1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(f) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document by the SEC.
(g) The term "Registrable Securities" means (i) the Common Stock (or other
capital stock of the Company) issuable or issued upon exercise of the Options or
conversion of the Note, and (ii) any Common Stock (or other capital stock of the
Company) issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such Options or Common
Stock, excluding in all cases, however, any Registrable Securities sold in a
transaction
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in which the rights under this Section I are not assigned.
(h) The number of shares of "Registrable Securities then outstanding"
shall be equal to the number of shares of Common Stock (or other capital stock
of the Company) outstanding which are, and the number of shares of Common Stock
(or other capital stock of the Company) issuable pursuant to then exercisable or
convertible securities which are Registrable Securities.
(i) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 Request for Registration.
(a) If the Company shall receive at any time a written request (the
"Request") from (i) the Holders of a majority of the Options then outstanding,
or (ii) the Holder of the Note or of a majority of the Shares, that the Company
file a registration statement under the Act covering the registration of at
least fifty percent (50%) of the Registrable Securities then outstanding or a
lesser percent of the Registrable Securities if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$2,000,000), then the Company shall:
(i) within ten (10) days of the receipt of the Request, give written
notice thereof to all Holders; and
(ii) effect as soon as practicable, and in any event within 90 days
of the receipt of such Request, the registration under the Act of all
Registrable Securities which the Holders requested to be registered, subject to
the limitations of subsection 1.2(b),.
(b) If the Holders initiating the Request hereunder ("Initiating Holders")
intend to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their
Request and the Company shall include such information in the written notice
referred to in subsection 1.2(a)(i). The underwriter will be selected by the
Company and shall be reasonably acceptable to a majority in interest of the
Holders. In such event, the right of any Holder to include its Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 1.2, if the underwriter advises the Initiating
I-folders in writing that marketing factors require a limitation of the number
of shares to be underwritten, then the Initiating Holders shall so advise all
Holders of Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 1.2, a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such
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registration statement to be filed and it is therefore essential to defer the
filing of such registration statement, the Company shall have the right to defer
taking action with respect to such filing for a period of not more than 120 days
after receipt of the request of the Initiating Holders, provided, however, that
the Company may not utilize the right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect, or to take
any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected one (1) registration pursuant to
this Section 1.2;
(ii) During the period starting with the date thirty (30) days prior
to the Company's good faith estimate of the date of filing of, and ending on a
date one-hundred and eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become filed; or
(iii) If the Initiating Holders propose to dispose of shares of
Registrable Securities in such registration that may otherwise be immediately
registered on Form S-3 pursuant to a request made pursuant to Section 1.12
below.
1.3 Piggyback Registrations. The Company shall notify all Holders of Registrable
Securities in writing at least twenty (20) days prior to filing any registration
statement under the Act for purposes of effecting a public offering of
securities of the Company (other than any registration statement relating to any
registration under Section 1.12 or on Forms S-8 or S-4, or successor forms) and
will afford each such Holder an opportunity to include in such registration
statement all or any part of the Registrable Securities the held by such Holder.
Each Holder desiring to include in any such registration statement all or any
part of the Registrable Securities held by such Holder shall, within twenty (20)
days of receipt of the above-described notice from the Company, so notify the
Company in writing, and in such notice shall inform the Company of the number of
Registrable Securities such Holder wishes to include in such registration
statement. Notwithstanding anything contrary in this Agreement, if a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
1.4 Obligations of the Company. Whenever required under this Section 1 to effect
the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective, and keep such registration statement effective
for a period of up to the earlier of one hundred and twenty (120) days or until
the distribution contemplated in the Registration Statement has been completed;
provided, however, that (i) such 120 day period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (ii) in the case of any registration
of Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120 day period shall be extended, if
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necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section l0(a)(3) of the
Act or (II) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders; provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant to such
registration statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed not later than the effective
date of such registration statement.
(h) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant to such registration statement and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes
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effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
1.5 Furnish Information
(a) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be reasonably
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any registration
requested pursuant to Section 1.2 or Section 1.12 if, due to the operation of
subsection 1.5(a), the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in subsection 1.2(a) or subsection 1 . 12(b),
whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees,
reasonable fees and disbursements of counsel for the Company, and the reasonable
fees and disbursements (not to exceed $25,000.00) of one counsel for the selling
Holders shall be borne by the Company; provided, however, that the Company shall
not be required to pay for any expenses of any registration proceeding begun
pursuant to Section 1.2 if the registration request is subsequently withdrawn at
the request of the Holders of sixty-six and seven tenths percent (66.7%) of the
Registrable Securities to be registered (in which case all participating Holders
shall bear such expenses) unless such Holders agree to forfeit their right to
one demand registration pursuant to Section 1.2; provided further, however, that
if at the time of such withdrawal, the Holders have learned of a material
adverse change in the condition, business, or prospects of the Company from that
known to the Holders at the time of their request and have withdrawn the request
with reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 1 .2.
1.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.3 for each Holder, including (without limitation) all registration, filing,
and qualification fees, printers and accounting fees relating or apportionable
thereto and the reasonable fees and disbursements (not to exceed $25,000.00) of
one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to the disposition of such Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company's capital stock, the Company shall not be
required under
5
<PAGE>
Section 1.3 to include any of the Holders' securities in such underwriting
unless they accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata (as nearly as practicable) among the selling stockholders according to the
total amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders) but in no event shall (i) the amount of securities of the
selling Holders included in the offering be reduced below twenty percent (20%)
of the total amount of securities included in such offering or (ii)
notwithstanding (i) above, any shares being sold by a stockholder exercising a
demand registration right similar to that granted in Section 1.2 be excluded
from such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and stockholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling stockholder", and
any pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder", as defined in
this sentence.
1.9 Delay of Registration. Each Holder hereby waives any and all rights to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.9.
1.10 Indemnification. In the event that any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, any underwriter (as defined in the Act) for such Holder
and each officer, director and person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, or the 1934 Act, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, or any rule or regulation promulgated under
the Act, or the 1934 Act; and the Company will pay to each such Holder,
underwriter, officer, director or controlling person, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such
6
<PAGE>
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter, officer, director or
controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damages, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided
further that in no event shall any indemnity under this subsection I . 10(b)
exceed the net proceeds from the offering of its Registrable Securities received
by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 1.10
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.10, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the
indemnified and indemnifying parties; provided, however, that an indemnified
party (together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain one separate
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to thc indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1. 10.
(d) If the indemnification provided for in this Section 1.10 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand
7
<PAGE>
and of the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations; provided that in no event
shall any contribution by a Holder under this Section 1.10(d) exceed the net
proceeds from the offering of its Registrable Securities received by such
Holder. The relative fault of the indemnifying party and of the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into by a Holder and the Company in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control in respect to such holder.
(f) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1.
1.11 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to:
(a) timely make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act at all times after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;
(b) take such action, including the voluntary registration of its Common
Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities, such action to be
taken as soon as practicable after the end of the fiscal year in which the first
registration statement filed by the Company for the offering of its securities
to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other documents
required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144 under the Act (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration.If at any time the Company shall receive a written
request or requests from Holders of at least twenty percent (20%) of the
Registrable Securities
8
<PAGE>
outstanding that the Company effect a registration on Form S-3 if the Company is
eligible to use such form, or if not, on such other form which thc Company is
entitled to use. with respect to all or a part of the Registrable Securities
owned by such Holder or Holders (the "S-3 Request(s)"), the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, but in no even later than seventy-five (75)
days after the receipt of the S-3 Request(s), effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such S-3 Request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such S-3 Request as are specified in a written
request received by the Company within 15 days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration pursuant to this section 1.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $3,000,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has already effected three registrations on Form S-3
for the Holders pursuant to this Section 1.12; or(S) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the S-3 Request or
Requests of the Holders, but in no event later than sixty (60) days after the
receipt of such S-3 Request or Requests. All expenses incurred in connection
with a registration requested pursuant to Section 1.12, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of counsel for the selling Holder
or Holders, shall be paid pro rata by the Holders participating in such
registrations. Registrations effected pursuant to this Section 1.12 shall not be
counted as demands for registration or registrations effected pursuant to
Section 1 .2.
1.13 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to (i) such Holder's partner,
shareholder, parent, child, spouse, or trust or (ii) transferee or assignee of
such securities who, after such assignment or transfer, holds at least (A) one
percent (1%) of the outstanding capital stock of the Company on the date of the
transfer, or (B) all of the Registrable Securities owned or controlled by the
transferring Holder, provided: (a) the Company is, within a reasonable time
after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned, and; (b) such transferee or assignee
agrees in writing to be bound by and subject to the terms and conditions of this
Agreement,
9
<PAGE>
including without limitation the provisions of Section 1 . 15 below; and (c)
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who arc partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 1.
1.14 Limitations on Subsequent Registration Rights. From and after the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the outstanding Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the Company
which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 1.2 or Section 1.3 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of its securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of either of the dates set forth in subsection 1.2(a).
1.15 "Market Stand-Off' Agreement. Quintel hereby agrees that, during the period
of duration specified by the Company and an underwriter of common stock or other
securities of the Company, following the effective date of the first
registration statement for a public offering of securities of the Company filed
under the Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
(the "Lock Up"); provided, however, that:
(a) Such Lock Up shall not exceed one hundred eighty (180) days, and
(b) All officers and directors of the Company who own securities of the
Company also agree to such Lock Up.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Investors' Registrable Securities
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
1.16 Termination of Registration Rights. No Holder shall be entitled to exercise
any right to register the resale of its Registrable Securities provided for in
this Section 1 after the earlier of(i) five (5) years following the consummation
of the sale of securities pursuant to a registration statement filed by the
Company under the Act in connection with the initial firm commitment
underwritten offering of its securities to the general public, or (ii) such time
as the Holder can sell all of such stock pursuant to Rule 144 under the Act (or
successor rule) within a three month period.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall deliver to the Holders
as soon
10
<PAGE>
as practicable, but in any event within ninety (90) days after the end of each
fiscal year of the Company, an income statement for such fiscal year, a balance
sheet of the Company and statement of stockholder's equity as of the end of such
year such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP") and audited
and certified by independent public accountants selected by the Company.
2.2 Observation Rights. Subject to the conditions set forth in Section 2.4,
Quintel shall have the right to attend all meetings of the Board of Directors in
a nonvoting observer capacity, to receive notice of such meetings and to receive
the information provided by the Company to the Board of Directors; provided,
however, that the Company hereby requires as a condition precedent to the
Holder's rights under this Section 2.2 that each person proposing to attend any
meeting of the Board of Directors and each person to have access to any of the
information provided by the Company to the Board of Directors shall hold in
confidence and trust and to act in a fiduciary manner with respect to all
information so received during such meetings or otherwise and shall sign any
further agreement manifesting such obligations as the Company shall reasonably
require; and, provided further, that the Company reserves the right not to
provide information and to exclude Quintel (or its representative) from any
meeting or portion thereof if delivery of such information or attendance at such
meeting by Quintel (or its representative) would result in disclosure of trade
secrets to such holder or its representative or would adversely affect the
attorney-client privilege between the Company and its counsel or if Quintel or
its representative is a direct competitor of the Company.
2.3 Inspection. The Company shall permit the Holders, at the Holders' own
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Holders; provided, however, that the Company shall not bc obligated pursuant to
this Section 2.3 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information. In addition,
this Section 2.3 shall not apply to, and shall become unenforceable if the
Holders are reasonably deemed by the Company's Board of Directors to have (i)
interests adverse to the Company's or (ii) to have disproportionately diverted
the Company's management in connection with the exercise of rights pursuant to
this Section 2.3.
2.4 Termination of information. Observation and Inspection Covenants. Subject to
their earlier termination pursuant to the specific terms of each Section, the
covenants set forth in Sections 2.1, 2.2 and 2.3 shall terminate and be of no
further force or effect when the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the firm
commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.
2.5 Indemnification. The Company shall take all actions necessary to indemnify
its directors to the maximum extent permitted by applicable law, including,
without limitation, amending the Company's Certificate of Incorporation and
Bylaws and entering into contracts with the directors to provide such
indemnification; provided, however, that the Company shall not be required to
obtain directors insurance unless directed by the Board of Directors.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein, the terms and
11
<PAGE>
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties (including transferees of
any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed under the
laws of the State of New York as applied to agreements among New York residents
entered into and to be performed entirely within New York.
3.3 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or permitted under
this Agreement shall be sent to the address/fax number indicated for such party
on the signature page hereof (provided that any party at any time may change its
address/fax number by notice often (10) days' advance written notice to the
other parties), and shall be deemed effectively given upon (i) personal delivery
to the party to be notified, (ii) the time of successful facsimile transmission
to the party to be notified, (iii) sending by reputable overnight delivery
service, or (iv) upon deposit with the United States Post Office, by registered
or certified mail, postage p repaid.
3.6 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any Registrable Securities
then outstanding, each future holder of all such Registrable Securities, and the
Company.
3.8 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Aggregation of Stock. All shares of Registrable Securities held or acquired
by affiliated entities or persons shall be aggregated together for the purpose
of determining the availability of any rights under this Agreement.
3.10 Entire Agreement: Amendment; Waiver. This Agreement (including the
Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LCS GOLF, INC.
By: /s/ [Illegible]
---------------------
Title: President
QUINTEL COMMUNICATIONS, INC.
By: /s/ [Illegible]
---------------------
Title: Chairman and CEO
13
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Golf Universe, Inc., a Florida corporation
Mr. "B" III, a Florida corporation
Play Golf Now, Inc., a New York corporation
Golfpromo, Inc., a Florida corporation
I Fusion Corp., a Florida corporation
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 2,727
<SECURITIES> 0
<RECEIVABLES> 217,481
<ALLOWANCES> 0
<INVENTORY> 87,739
<CURRENT-ASSETS> 331,866
<PP&E> 92,857
<DEPRECIATION> 9,484
<TOTAL-ASSETS> 3,266,680
<CURRENT-LIABILITIES> 1,142,577
<BONDS> 0
0
0
<COMMON> 19,525
<OTHER-SE> 2,104,578
<TOTAL-LIABILITY-AND-EQUITY> 3,266,680
<SALES> 1,664,795
<TOTAL-REVENUES> 1,664,795
<CGS> 1,063,016
<TOTAL-COSTS> 1,063,016
<OTHER-EXPENSES> 3,691,182
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,685
<INCOME-PRETAX> (3,129,088)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,129,088)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,129,088)
<EPS-BASIC> (.16)
<EPS-DILUTED> (.16)
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