EXHIBIT 10.4
EXHIBIT C
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT made as of the 16th day of February, 1999
BETWEEN:
PLAYSTAR WYOMING HOLDING CORP., a corporation organized and
existing under the laws of Antigua
(hereinafter referred to as "PlayStar")
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CYBERSTATION LIMITED, a corporation organized and existing
under the laws of St. Kitts
(hereinafter referred to as the "Service Provider")
WHEREAS PlayStar and its subsidiaries (collectively referred
to as the "Company") are engaged in the business of (i) developing proprietary
software, systems and services used to provide electronic commerce solutions
that enable businesses to sell products and services on the Internet; and (ii)
providing on-line gaming activities;
AND WHEREAS the Service Provider has agreed to provide to the
Company certain management services as provided for herein;
AND WHEREAS the Service Provider has agreed to use, and it is
a condition of this agreement that the Service Provider uses, Xxxxxx Xxxxx
("Xxxxx") and Xxxxxx Xx Xxxxxxxxx ("Xxxxxxxxx"), of Toronto, Ontario, primarily
for the purposes of providing the services provided herein;
AND WHEREAS the parties wish to record this agreement in
writing.
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration
of the mutual covenants herein contained and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged by each
party, the parties agree as follows:
ARTICLE 1
1.1 PROVISION OF MANAGEMENT SERVICES. During the term of this Agreement, the
Service Provider agrees to provide to the Company such management and
administrative services as may be required by the Company and its board of
directors, including:
(a) the services of Xxxxx and Conceicao, subject to the
exception provided in Section 1.3, on a full-time
basis; and
(b) planning assistance and advice.
The Service Provider agrees to make Xxxxx and Xxxxxxxxx
available to the Company to perform such duties as may from time to time be
assigned or delegated by the board of directors of the Company (the "Board").
The Service Provider, Xxxxx and Conceicao shall perform these duties in
accordance with the instructions of the Board and the Company's policy insofar
as they relate to the electronic commerce business operations of the Company.
1.2 TERM OF AGREEMENT. The Term of this Agreement shall mean the period
beginning on February 16, 1999 and terminating on the date on which the first of
the following occurs:
(a) the termination of this Management Services Agreement
as provided for in Article 4;
(b) in the event that either or both of Xxxxx and
Conceicao cease to be employed by the Service
Provider or ceases to be available to perform, or is
for any reason unable to perform, the services
provided for herein at any time thereafter, upon
notice given by PlayStar to the Service Provider;
(c) June 30, 2002.
1.3 SPECIFIC DUTIES AND RESPONSIBILITIES. Without limiting the generality of
Section 2.1 or any other provision of this Agreement, the Service Provider
shall, and shall cause Xxxxx and Xxxxxxxxx to:
(a) perform their duties in a competent and professional
manner and act in the best interests of the Company;
(b) ensure that the business and operations of the
Company are conducted in a proper and efficient
manner;
(c) faithfully serve the Company and use their best
efforts to promote its interests;
(d) cause Xxxxx to report to the Board and perform such
services and duties necessary or appropriate for the
running of the electronic commerce business of the
Company; and
(e) unless prevented by ill health and except for
reasonable vacations and other absences approved by
the Board, cause Xxxxx and Xxxxxxxxx to devote the
whole of their time, attention and ability to the
business and affairs of the Company.
Nothing in this Agreement shall prevent Xxxxx and Conceicao
from acting as officers, directors and employees of Cyberstation Computers &
Support Inc. (`Cyberstation') or any affiliates of Cyberstation.
1.4 PROHIBITED INVESTMENTS. The Service Provider shall not be an investor,
shareholder, joint venturer, or partner (each, an "Investor") in any enterprise,
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association, corporation, joint venture, or partnership (each, an "Investment")
if the Investment (i) conflicts with the interests of the Company, (ii) requires
the Service Provider's involvement in the management or operation of the
Investment (recognizing that the Service Provider is permitted to monitor the
Investment, as would any prudent investor), or (iii) interferes with the
performance of the Service Provider's duties and obligations hereunder.
ARTICLE 2
2.1 BUSINESS DAY. "Business Day" as used in this Agreement shall mean any day
except Saturday, Sunday or any statutory or civic holiday in the Province of
Ontario.
2.2 BASE MANAGEMENT FEE. The base management fee of the Service Provider shall
be $160,000 per annum (the "Base Management Fee") payable on the 15th and last
day of each month. The Company may withhold from any amounts payable under this
Agreement such federal or provincial taxes and other statutory remittances as
shall be required by law to be so withheld.
2.3 PROFIT SHARING PAYMENTS
(1) The Service Provider shall be entitled to receive profit sharing
payments from PlayStar and Players Limited ("Players"), a wholly-owned
subsidiary of PlayStar, which payments shall be based upon the amount of Pre-Tax
Profits (as defined below) of PlayStar and Players for (i) the six month fiscal
period ending June 30, 1999, and (ii) each of the financial years ending June
30, 2000 (the "First Financial Year"), June 30 2001 (the "Second Financial
Year") and June 30, 2002 (the "Third Financial Year") as shown below:
(a) in respect of the six months ended June 30, 1999:
(i) if Players has Pre-Tax Profits for such
period, the Service Provider shall be
entitled to a payment equal to 15% of the
amount of such Pre-Tax Profits; and
(ii) if PlayStar has Pre-Tax Profits in excess of
US$500,000 for such period, the Service
Provider shall be entitled to a payment
equal to 10% of the amount of such excess;
(b) in respect of the First Financial Year:
(i) if Players has Pre-Tax Profits for such
financial year, the Service Provider shall
be entitled to a payment equal to 15% of the
amount of such Pre-Tax Profits; and
(ii) if PlayStar has Pre-Tax Profits in excess of
US$1,000,000 for such financial year, the
Service Provider shall be entitled to a
payment equal to 10% of the amount of such
excess;
(c) in respect of the Second Financial Year:
(i) if Players has Pre-Tax Profits for such
financial year, the Service Provider shall
be entitled to a payment equal to 15% of the
amount of such Pre-Tax Profits; and
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(ii) if PlayStar has Pre-Tax Profits in excess of
US$2,000,000 for such financial year, the
Service Provider shall be entitled to a
payment equal to 10% of the amount of such
excess;
(d) in respect of the Third Financial Year:
(i) if Players has Pre-Tax Profits for such
financial year, the Service Provider shall
be entitled to a payment equal to 15% of the
amount of such Pre-Tax Profits; and
(ii) if PlayStar has Pre-Tax Profits in excess of
US$3,000,000 for such financial year, the
Service Provider shall be entitled to a
payment equal to 10% of the amount of such
excess.
(2) For the purposes of this Agreement, Pre-Tax Profits of PlayStar and
Players for (a) the six months ended June 30, 1999 means the net income before
deduction of any income taxes as shown on its unaudited financial statements for
such six month period, and (b) any financial year means the net income before
deduction of any income taxes as, in the case of PlayStar, shown on its audited
financial statements for such financial year and in the case of Players, on its
unaudited financial statements prepared by Players in connection with the
preparation of the audited financial statements of PlayStar for such financial
year. In determining Pre-Tax Profits, no charge shall be made in respect of any
options granted below fair market.
(3) The financial statements referred to in subsection 2.3(2) shall be
prepared in accordance with US generally accepted accounting principles
consistently applied. In the event of any dispute with respect to the amount of
the Pre-Tax Profits, such dispute shall be determined by the auditors of
PlayStar.
(4) Any profit sharing payments earned by the Service Provider in
respect of any financial year shall be paid by PlayStar or Players, as the case
may be, within 30 days of completion of the audited financial statements of
PlayStar for such financial year.
2.4 STOCK OPTIONS
(1) PlayStar shall grant the Service Provider, or if directed by the
Service Provider, to Xxxxx and/or Conceicao, three options (the "Options") to
acquire an aggregate of 5,000,000 ordinary shares in the capital of PlayStar
(the "Ordinary Shares") pursuant to an option agreement which shall be
substantially in the form of Annex "A" hereto. The Options are to vest and to be
on terms and conditions set out below:
(a) an option (the "First Option") to acquire 1,000,000
Ordinary Shares exercisable at a price of US$0.25 per
share shall vest on the earlier of (i) the end of the
First Financial Year provided that the Pre-Tax
Profits of PlayStar for such financial year equal to
or exceed US$1,000,000, (ii) the end of the Second
Financial Year provided that the cumulative Pre-Tax
Profits of PlayStar for the First Financial Year and
the Second Financial Year equal to or exceed
US$3,000,000, and (iii) the end of the Third
Financial Year provided that the cumulative Pre-Tax
Profits of PlayStar for the First Financial Year, the
Second Financial Year and the Third Financial Year
equal to or exceed US$6,000,000;
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(b) an option (the "Second Option") to acquire 2,000,000
Ordinary Shares exercisable at a price of US$0.50 per
share shall vest on the earlier of (i) the end of the
Second Financial Year provided that either (A) the
Pre-Tax Profits of PlayStar for such financial year
equal or exceed US$2,000,000, or (B) the cumulative
Pre-Tax Profits of PlayStar for the First Financial
Year and the Second Financial Year equal or exceed
US$3,000,000, and (ii) the end of the Third Financial
Year provided that the cumulative Pre-Tax Profits of
PlayStar for the First Financial Year, the Second
Financial Year and the Third Financial Year equal or
exceed US$6,000,000; and
(c) an option (the "Third Option") to acquire 2,000,000
Ordinary Shares exercisable at a price of US$1.00
shall vest at the end of the Third Financial Year
provided that either (i) the Pre-Tax Profits of
PlayStar for such financial year equal or exceed
US$3,000,000, or (ii) the cumulative Pre-Tax Profits
of PlayStar for the First Financial Year, the Second
Financial Year and the Third Financial Year equal or
exceed US$6,000,000.
(2) Each of the Options and any rights of the Service Provider with
respect to them shall terminate on December 31, 2002.
(3) In the event that the Ordinary Shares of PlayStar are split or
consolidated or otherwise affected, the number of Ordinary Shares represented by
the Options that have not been exercised shall automatically be adjusted in
proportion to such split, consolidation or other effect.
2.5 EXPENSES INCIDENTAL TO EMPLOYMENT. The Company shall reimburse the Service
Provider for the Service Provider's travel and other expenses or disbursements
reasonably and necessarily incurred or made in connection with the Company's
business, provided that the Service Provider shall substantiate expenses by
furnishing to the Company such evidence relating to expenses for which the
Service Provider seeks reimbursement as may be required in accordance with
Company policy.
ARTICLE 3
3.1 NON-COMPETITION. The Service Provider acknowledges that the Service
Provider's services are unique and extraordinary. The Service Provider also
acknowledges that the Service Provider's position will give the Service Provider
access to confidential information of substantial importance to the Company and
its business. During the Non-Competition Period, the Service Provider shall not,
either individually or in partnership or jointly or in conjunction with any
other entity or organization, as principal, agent, consultant, lender,
contractor, employer, employee, investor, shareholder or in any other manner,
directly or indirectly, advise, manage, carry on, establish, control, engage in,
invest in, offer financial assistance or services to, or permit the Service
Provider name or any part thereof to be used by:
(a) any on-line gaming activities within:
(i) the world, or
(ii) Europe, Asia, Australia, Africa, South
America and North America, or
(iii) Europe, Asia, South America and North
America, or
(iv) South America and North America; or
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(b) any activities related to the development of
proprietary software, systems and services used to
provide electronic commerce solutions that enable
businesses to sell products and services on the
Internet within the countries and territories listed
in Schedule 1.1 to the Master Agreement dated as of
January 2, 1999 among PlayStar, Cyberstation
Computers & Support Inc., Cyberstation Limited and
Xxxxx and Xxxxxxxxx,
in either case, of the same nature as or of a similar nature to the business of
the Company, its affiliated or subsidiary companies or any business in which the
Company, its affiliated or subsidiary companies is engaged. For purposes of this
Agreement, "Non-Competition Period" means a period beginning on the date of
termination of this Agreement and ending three years after the Term of this
Agreement.
3.2 OTHER SERVICE PROVIDERS, CUSTOMERS. The Service Provider agrees that during
the Non-Competition Period, neither the Service Provider nor any entity with
whom the Service Provider is at the time affiliated shall, directly or
indirectly, hire or offer to hire or entice away or in any other manner persuade
or attempt to persuade any officer, employee, agent, supplier or customer of the
Company to discontinue or alter any one of their or its relationship with the
Company.
3.3 CONFIDENTIALITY. Except in the normal and proper course of the Service
Provider's duties hereunder, the Service Provider will not use for the Service
Provider's own account or disclose to anyone else, during or after the Term of
this Agreement, any confidential or proprietary information or material relating
to the Company's operations or business which the Service Provider obtains from
the Company or its officers or employees, agents, suppliers or customers or
otherwise by virtue of the Service Provider's employment by the Company.
Confidential or proprietary information or material includes, without
limitation, the following types of information or material, both existing and
contemplated, regarding the Company: corporate information, including
contractual licensing arrangements, plans, strategies, tactics, policies,
resolutions, patent, trade-xxxx and trade name applications, and any litigation
or negotiations; information concerning suppliers, marketing information,
including sales, investment and product plans, customer lists, strategies,
methods, customers, prospects and market research data; financial information,
including cost and performance data, debt arrangements, equity structure,
investors and holdings; operational and scientific information, including trade
secrets; technical information, including technical drawings and designs; and
personnel information, including personnel lists, resumes, personnel data,
organizational structure and performance evaluations.
3.4 RETURN OF DOCUMENTS. The Service Provider agrees that all documents
(including software and information in machine-readable form) of any nature
pertaining to activities of the Company, including the information or materials
referred to in Section 3.3 hereof, in the Service Provider's possession now or
at any time during the Term of this Agreement, are and shall be the property of
the Company and that all such documents and all copies of them shall be
surrendered to the Company whenever requested by the Company.
3.5 BLUE PENCIL. If any court determines that any provision contained in this
Agreement including, without limitation, a restrictive covenant or any part
thereof is unenforceable because of the duration or geographical scope of the
provision or for any other reason, the duration or scope of the provision, as
the case may be, shall be reduced so that the provision becomes enforceable and,
in its reduced form, the provision shall then be enforceable and shall be
enforced.
3.6 ACKNOWLEDGEMENT. The Service Provider acknowledges that, in connection with
the Service Provider's employment by the Company, the Service Provider will
receive or will become eligible to receive substantial benefits and
compensation. The Service Provider acknowledges that the Service Provider's
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employment by the Company and all compensation and benefits and potential
compensation and benefits to the Service Provider from such employment will be
conferred by the Company upon the Service Provider only because and on condition
of the Service Provider's willingness to commit the Service Provider's best
efforts and loyalty to the Company, including protecting the Company's right to
have its confidential information protected from non-disclosure by the Service
Provider and abiding by the confidentiality, non-competition and other
provisions herein. The Service Provider understands the Service Provider's
duties and obligations as set forth in Article 3 and agrees that such duties and
obligations would not unduly restrict or curtail the Service Provider's
legitimate efforts to earn a livelihood following any termination of the Service
Provider's employment with the Company. The Service Provider agrees that the
restrictions contained in Article 3 are reasonable and valid and all defences to
the strict enforcement thereof by the Company are waived by the Service
Provider. The Service Provider further acknowledges that irreparable damage
would result to the Company if the provisions of Sections 3.1 through 3.4 are
not specifically enforced, and agrees that the Company shall be entitled to any
appropriate legal, equitable, or other remedy, including injunctive relief, in
respect of any failure or continuing failure to comply with the provisions of
Sections 3.1 through 3.4.
ARTICLE 4
4.1 TERMINATION FOR CAUSE. The Company may immediately terminate this Agreement
at any time for just cause by written notice to the Service Provider. Without
limiting the foregoing, any one or more of the following events shall constitute
just cause:
(1) theft, dishonesty, or other similar behaviour by the Service
Provider or Xxxxx or Xxxxxxxxx;
(2) breach of trust by the Service Provider or by Xxxxx or
Conceicao;
(3) any neglect of duty or misconduct of the Service Provider or
Xxxxx or Xxxxxxxxx in discharging any of the Service Provider's duties and
responsibilities hereunder;
(4) any conduct of the Service Provider or Xxxxx or Conceicao which is
materially detrimental or embarrassing to the Company, including but not limited
to the Service Provider being convicted of a criminal offense other than crimes
relating to cryptography;
(5) the Service Provider's or Xxxxx' or Xxxxxxxxx'x acceptance of a
gift of any kind, other than on behalf of the Company or gifts of nominal or
inconsequential value, from any source directly or indirectly related to the
Service Provider's engagement with the Company, unless prior approval by the
Board has been obtained;
(6) any default of the Service Provider's material obligations under
this Agreement that is not cured in all material respects within 10 days of
written notification thereof to the Service Provider by the Company; or
(7) any failure of or refusal by the Service Provider or by Xxxxx or by
Conceicao to comply with the material policies, rules and regulations of the
Company that is not cured in all material respects by the Service Provider
within 10 days of written notification thereof to the Service Provider by the
Company.
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If the Company terminates this Agreement for cause under this Section 4.1, the
Company shall not be obligated to make any further payments under this Agreement
except amounts due and owing at the time of the termination.
4.2 EFFECT OF TERMINATION ON STOCK OPTIONS. Upon termination of the Service
Provider's employment pursuant to Section 4.1 the Service Provider will be
entitled to exercise the Options which have already vested in accordance with
Section 2.4 (but not any Options which have not vested) during the period of 60
days following such termination or resignation.
4.3 RESULTS OF TERMINATION. Upon termination or resignation of the Service
Provider's employment pursuant to this Article 4, this Agreement and the
engagement of the Service Provider shall be wholly terminated, with the
exception of the clauses specifically contemplated to continue in full force and
effect beyond the termination of this Agreement, including those set out in
Article 3 and Section 4.2.
ARTICLE 5
5.1 REPRESENTATIONS AND WARRANTIES. The Service Provider represents and warrants
to the Company that the execution and performance of this Agreement will not
result in or constitute a default, breach, or violation, or an event that, with
notice or lapse of time or both, would be a default, breach, or violation, of
any understanding, agreement or commitment, written or oral, express or implied,
to which the Service Provider is a party or by which the Service Provider or the
Service Provider's property is bound. The Service Provider shall defend,
indemnify and hold the Company harmless from any liability, expense or claim
(including solicitor's fees incurred in respect thereof) by any person in any
way arising out of, relating to, or in connection with any incorrectness of
breach of the representations and warranties in this Section 5.1.
ARTICLE 6
6.1 RIGHTS AND WAIVERS. All rights and remedies of the parties are separate and
cumulative, and none of them, whether exercised or not, shall be deemed to be to
the exclusion of any other rights or remedies or shall be deemed to limit or
prejudice any other legal or equitable rights or remedies which either of the
parties may have.
6.2 WAIVER. Any purported waiver of any default, breach or non-compliance under
this Agreement is not effective unless in writing and signed by the party to be
bound by the waiver. No waiver shall be inferred from or implied by any failure
to act or delay in acting by a party in respect of any default, breach or
non-observance or by anything done or omitted to be done by the other party. The
waiver by a party of any default, breach or non-compliance under this Agreement
shall not operate as a waiver of that party's rights under this Agreement in
respect of any continuing or subsequent default, breach or non-observance
(whether of the same or any other nature).
6.3 SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of the prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
6.4 NOTICES
(1) Any notice, certificate, consent, determination or other
communication required or permitted to be given or made under this Agreement
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shall be in writing and shall be effectively given and made if (i) delivered
personally, (ii) sent by courier, or (iii) sent by fax or other similar means of
electronic communication, in each case to the applicable address set out below:
IF TO THE COMPANY, TO:
Players Limited
c/o PlayStar Wyoming Holding Corp.
The Dollar Building
Nevis Street, Top Floor
St. John's, Antigua, WI
Attention: Chairman of the Board
Fax: (000) 000-0000
IF TO THE SERVICE PROVIDER, TO:
Cyberstation Limited
6 Horizon Villas
Fort Tyson
Frigate Bay St. Kitts, WI
Attention: The President
Fax: (000) 000-0000
(2) Any such communication so given or made shall be deemed to have
been given or made and to have been received on the day of delivery if
delivered, or on the day of faxing or sending by other means of recorded
electronic communication, provided that the day in either event is a Business
Day and the communication is so delivered, faxed or sent prior to 4:30 p.m. on
that day. Otherwise, the communication shall be deemed to have been given and
made and to have been received on the next following Business Day. Any such
communication given or made in any other manner shall be deemed to have been
given or made and to have been received only upon actual receipt.
(3) Any party may from time to time change its address under this
Section 6.4 by notice to the other party given in the manner provided by this
Section.
6.5 TIME OF ESSENCE. Time shall be of the essence of this Agreement in all
respects.
6.6 SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit of, and be
binding on, the parties and their respective heirs, administrators, executors,
successors and permitted assigns. The Service Provider shall not assign or
transfer, whether absolutely, by way of security or otherwise, all or any part
of the Service Provider's rights or obligations under this Agreement without the
prior consent of the Company, which may be arbitrarily withheld.
6.7 AMENDMENT. No amendment of this Agreement will be effective unless made in
writing and signed by the parties.
6.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties pertaining to the subject matter of this Agreement and supersedes
all prior agreements, understandings, negotiations and discussions, whether oral
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or written. There are no conditions, warranties, representations or other
agreements between the parties in connection with the subject matter of this
Agreement (whether oral or written, express or implied, statutory or otherwise)
except as specifically set out in this Agreement.
6.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable in that Province and shall be treated, in all respects, as an Ontario
contract.
6.10 HEADINGS. The division of this Agreement into Sections and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
6.11 FURTHER ASSURANCES. The parties shall execute such other documents,
agreements and instruments as may be necessary to give effect to the
arrangements contemplated by this Agreement, or any of them.
6.12 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which when taken
together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement.
PLAYSTAR WYOMING HOLDING CORP.
By:
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Xxxxxxx X.X. Xxxxxx, President
CYBERSTATION LIMITED
By:
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Xxxxxx Xxxxxxx, Authorized Signing Officer
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