LAW OFFICES
XXXXXXX & XXXXX
A PROFESSIONAL LIMITED LIABILITY COMPANY
June 15, 1999
BY FACSIMILE
-------------
(000) 000-0000
Xxx Xxxxxxx, Esq.
Beach, Hepburn
00 Xxxxxxx Xxxxxx - Xxxxx 0000
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Re: Xxxxxxxx.xxx Corporation Your Reference No. 20692
Dear Xxx:
As discussed, this letter is intended to set forth the matters that remain to be
satisfied in connection with the sale of 1,400.000 shares of common stock of the
above referenced company (the company") at US$1.43 per share ($1.43 "Placement")
by your client Xxxxxxx Xxxxxxxxx & Co. Limited ("TK") sometimes referred to
herein as the "Agent". (TK warrants and represents that Xxxxxxxx & Xxxxxxxx
Securities Inc. is no longer an agent, but is a subagent, in the $1.43
Placement) This letter incorporates by reference the attached engagement letter
("Engagement Letter") for a proposed placement of 11000,000 shares of the
Company's common stock at US$3.50 per share (3.50 Placement").
if any term set forth in this letter is inconsistent with any term set forth in
any other document relating to acquisition of LAL Ventures ("LALV"), the $1.43
Placement or the $3.50 Placement, the terms set forth in this letter will apply
and control. The foregoing includes, but is not limited to, the Agreement of
Exchange relating to the acquisition of LALV and all documents relating to the
$1.43 Placement.
The objective of the Company and the Agent is to satisfy all outstanding matters
relating to the $1.43 Placement no later than Friday, June 24, 1999. By signing
this Agreement in the places provided below, the Company and the Agent agree
that the outstanding matters relating to the $1.43 Placement consist of only the
following and they agree to use all reasonable efforts to satisfy these matters
on or before June 24, 1999:
1. Completion of the Agents due diligence with respect to the following
matters:
000 Xxxxx Xxxxxx, Xxxxx 000x XXXXXXX, XXXXXXXXXX 00000
TELEPHONE (000) 000-0000 E-MAIL: X00XX@XX0000.XXX FACSIMILE: (000) 000-0000
Xxx Xxxxxxx, Esq. June 18, 1999
a. Outstanding and Reserved Equity Securities. Satisfying the Agent that,
subject to completion of various ministerial acts, the outstanding and reserved
equity securities of the Company consist of the following:
No. of Shares
---------------
Common Stock of LALV outstanding prior to
$1.43 Placement 1,050,000
Common Stock issued to Xxxxxxxx.xxx (Ireland) Ltd.
("CYB Ireland") in connection with the Company's
acquisition of all outstanding equity of CYB Ireland 8,659,650
Common Stock issued to the shareholders of eBanx (Isle
of Man) Ltd. ("eBanx IOM") in connection with CYB
Ireland's acquisition of all outstanding equity of eBanx IOM 1,500,000
Common Stock to be issued in the fully subscribed
$1.43 Placement 1,490,000
---------
Total Outstanding 12,609.650
Common Stock reserved for issuance upon exercise of stock
options of the Company granted to key personnel (1.700,000
shares subject to outstanding options) 2,200,000
Common Stock to be issued in a fully subscribed
$3.50 Placement (excludes 15% option) 1,000,000
---------
Total Outstanding and Reserved for Issuance 15,659,650
----------
b. Of the 8,659,650 shares delivered in the CYB Ireland transaction, Xxxx
Xxxxxxxx has agreed to accept 1,250,000 shares in full satisfaction of all debts
of the Company to him.
c. The Company is the owner, directly or indirectly, of all of the
outstanding equity securities of the following companies:
(1) Xxxxxxxx.xxx [Ireland) Ltd.
(2) Xxxxxxxx.xxx (Isle of Man) Ltd.
(3) Information y Technologies Canadian (ITC)
(4) Sistemes de Informacion Tecnologies (Sir)
(5) xXxxx.xxx (Isle of Man) Ltd;
(6) eBanx [Nevada) Ltd.
d. Directly, or indirectly through one or more of the subsidiaries listed
above, the Company's assets include the following:
Xxx Xxxxxxx, Esq June 18. 1999
(1) ownership of 100% of xXxxx.xxx [Isle of Man] Ltd;
(2) the right to receive a royalty of 20% off the revenues of
xxxxxxxxxx.xxx for a five-year term and, subject to xxxxxxxxxx.xxx being
responsible for all operating costs relating to xxxxxxxxxx.xxx and Cyberoad
Gaming, the party entitled to the 80% of revenues retained by xxxxxxxxxx.xxx
(but after such costs) being required to apply same to marketing of
xxxxxxxxxx.xxx for a five-year period;
(3) a five-year option to purchase xxxxxxxxxx.xxx website
business for US$200,000;
(4) the right to receive royalties of the following percentages of
the revenues of the following website businesses:
(i) xxxxxxxxxxxxxxx.xxx (approximately 16%)
(ii) Xxxxxxxxxxx.xxx (approximately 20%)
(5) a vertical sports and entertainment internet portal,
currently in development
(6) the domain name and right to use in connection with a
website "xxxxxxxx.xxx?
2. Ayre Employment Agreement. Xxxxxx Xxxx shall have entered into a two-year
employment agreement with the Company providing that during such period he shall
devote his full time and attention to the business of the Company. Such
agreement shall include non-competition and confidentiality provisions having a
two-year term and shall be consistent with any order to which Ayre is subject.
3. Satisfaction of Matters. Unless the Agent objects within 72 hours after
receipt to the documentation the Company provides as proof of satisfaction of
the above matters, the Company shall be deemed to have satisfied the above
matter(s) to which it relates. If the Agent does so object, its objection shall
state with reasonable particularity why the documentation furnished is not
satisfactory and the reasonable form of proof that the Agent will accept in
satisfaction of the related matter.
4. Release of Remaining Funds. Upon satisfaction of the above matters, the
Agent shall instruct Xxxxxxx & Xxxxx, P.L.L.C. (M&B'), and Xxxxxxx and Beam if
they still hold in escrow proceeds from the $1.43 Offering, to release to the
Company all remaining proceeds from the $1.43 Offering, less the commission
payable to the Agent of US$80,000 and a US$20,000 advance to the Agent against
expenses of the Agent relating to the $1.43 Placement and the $3.50 Placement,
i.e., an aggregate of US$1,200,000. Such instructions shall be accompanied or
preceded by delivery to the Company of original copies of appropriate
subscription agreements from all subscribers to the $1.43 offering, including
without limitation any addenda thereto reasonably requested by M&B.
It is agreed by the Company that as an inducement for Agent to enter into this
Agreement, the Company shall, in addition to paying the Agent an $80,000
commission in connection with the $1.43 Placement and agreeing to pay the
Xxx Xxxxxxx, Esq. June 18, 1999
reasonable expenses of the Agent relating to the $1.43 Placement (including
without limitation, reasonable fees and disbursements of its legal counsel),
grant to the Agent, upon release to the Company of the US$1,200,000 remaining
proceeds from the $1.43 Placement, 200,000 compensation options on the Company's
common stock exercisable for two years at a price of US$1.00 per share.
If the foregoing correctly sets forth the Agent's understanding of its agreement
with the Company, please have the Agent so indicate by signing this Agreement in
the place provided below and return the Agreement to us. If the Agent does not
so sign and return this Agreement within 24 hours after your receipt hereof, the
Company's offer of the above terms is withdrawn.
We look forward to a satisfactory completion of both the $1.43 Placement and the
$3.50 Placement,
Very truly yours,
XXXXXXX & XXXXX, P.L.L.C.
Xxxxx X. Xxxxx, Xx.
AGREED AND ACCEPTED:
THE COMPANY: THE AGENT:
XXXXXXXX.XXX CORPORATION THOMSON KERNAGHAN & CO. LIMITED
By: /s/ . By: /s/
----------------------- ----------------------------
Its: CEO Its: Sr. VP Corp Finance
Date: June 18, 1999 Date: June 18, 1999
Thomson Kernaghan & Co. Limited
June 18, 1999
BY HAND
-- ----
Xx. Xxxxxx Xxxx
Chief Executive Officer
Xxxxxxxx.xxx Corporation
c/o Calvex Corporation
0000 Xxxxxxx Xxxxxx - Xxxxx 000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0000
Re: Engagement of Thomson Xxxxxxxxx & Co. Limited
--- ---------- ----------- --------- - --- -------
Dear Xx. Xxxx:
We attach a term sheet ("Term Sheet") setting forth the terms and
conditions of the engagement of Thomson Kernaghan & Co. Limited ("TK") to act as
agent of Xxxxxxxx.xxx Corporation (the "Corporation') in connection with a
financing to raise US$3,500,000 (the "offering'). In addition to those
provisions set forth In the Term Sheet, it is agreed and understood that:
(a) this letter is not an agency, underwriting or other agreement, but
is evidence of the understanding between TX and the Corporation relating to
the Offering;
(b) TX's ability to successfully market the Offering will be contingent
upon several factors which will be included in an agency agreement mutually
agreeable to the parties (agreement to which shall not be unreasonably withheld
by either party), such factors include but are not limited to market conditions
at the time of the Offering and the completion of due diligence by it;
(c) Xxxxxxxx agrees to indemnify all of the officers, directors,
employees and agents of TIC against any material misrepresentation, or material
misleading statements, in any documentation provided to it in the preparation
and marketing of the Offering, where reliance on such misrepresentation or
misleading statements in such documents causes TX, its directors, officers,
employees or agents financial harm from clients and other third parties;
(d) this engagement letter shall (1) not become effective until all
proceeds from the fully subscribed previous $1.43 offering of common shares by
the Corporation are released to the Corporation, and (2) terminate and be of no
further force or effect if the Offering does not close on or before July 31,
1999; and
(e) The Corporation agrees not to make any corporate changes or take
any actions, without the prior written consent of TIC (which shall not be
unreasonably withheld), that result in currently free trading shares of the
Corporation becoming restricted from trading.
If you are in agreement with proceeding with the Offering on the foregoing
terms please so indicate by signing and returning closed copy of this letter.
Yours very truly,
Xxxxxx Xxxxxxxxx & Co. Limited
By: /s/
------------------------
Its: Sr. VP Corp Finance
The undersigned confirms its agreement with the foregoing.
Dated this 18 day of June, 1999.
Xxxxxxxx.xxx Corporation
By: /s/ .
------------------------
Its: _________________________
XXXXXXXX.XXX CORPORATION
PRIVATE PLACEMENT OF COMMON SHARES
Issuer: Xxxxxxxx.xxx Corporation (the "Corporation")
Agent: Xxxxxxx Xxxxxxxxx & Co. Limited ~l1~")
Offering: 1,000,000 shares of common stock of the Corporation
("Shares'), distributed by way of private placement on a
best efforts agency basis and an option exercisable by the
Agent to increase the size of the offering by up to 15%.
Amount: U.S. $3,500,000
Price: U.S. $3.50 per Share
Issue Type: Private placement to be sold on an all or none agency basis in
British Columbia, Ontario and other jurisdictions outside
of Canada and the United States.
Minimum
Subscription: Each subscriber's aggregate acquisition cost of
purchasing Shares must not be less than:
i) U.S. $105,000, if the subscriber is a resident of
Ontario;
ii) U.S. $70,000, if the subscriber is a resident of
British Columbia; or
iii) U.S. $100,000, if the subscriber is a resident of
another jurisdiction outside of Canada and the
United States;
to qualify to acquire the Shares under applicable Canadian
laws without the filing of a prospectus.
Suitability Standards
and Resale Restrictions:
The Shares are being issued to non-U.S. Persons (as defined in
Regulation S) pursuant to an exemption from registration
according to Regulation S of the Securities Act of 1933, as
amended ("Regulation S"). The Shares are restricted from
offer and resale unless the hold period applicable in the
Subscriber's jurisdiction of residence has expired (and any
related requirements satisfied), a registration statement or
prospectus has been filed in the applicable Subscriber's
jurisdiction of residence or an exemption from applicable
registration and prospectus requirements is available. Each
potential investor must complete a subscription agreement and
remit the full amount of the subscription in US. dollars to it
as described in the subscription agreement. The Corporation
reserves the right to refuse any subscription in its discretion.
Financial Information:
Attached are the Corporation's audited financial statements
as at February 28, 1999 and for the year then ended and
an unaudited balance sheet of the Corporation as at May 31,
1999.
Capitalization: The Corporation's current capitalization prior to this
Offering consisted of 12,609,659 shares, of which up to
1,050,000 shares currently may be traded without
restriction. The Corporation agrees not to make any corporate
changes or take any actions, without the consent of TK,
that result in such 1,050,000 shares becoming restricted from
trading.
The Corporation has a stock option plan in effect pursuant to
which options to purchase up to 2,200,000 shares may be
awarded from time to time (which amount cannot be increased for
one year), at exercise prices per share that are not less than
the fair market value of the shares at the date of grant. Not
more than 1,700,000 options have been awarded to date each of
which is exercisable at U.S. $1.00 per share. No other shares
are reserved for issue.
Registration Filings,
Escrow and Remedies:
The Corporation shall file with the U. S. Securities and
Exchange Commission (the "SEC") a Form 10-SB or Form 20-F
under the Securities Act of 1934, as amended ("l934 Act Form"),
seeking status as a reporting company in the United States
within 60 days of closing. In addition, the Corporation shall
file with the SEC a Registration Statement under the
Securities Act of 1933, as amended (the "1933 Act Registration
Statement") within 60 days of closing to permit resale of the
Shares and certain other securities issued by the Company
pursuant to a previous financing (the "First Financing"). The
Corporation agrees to keep the 1933 Act Registration Statement
effective for a period of not less than 24 months from the
closing date.
In the event that either filing is not completed within 60 days
of closing the Corporation will deliver to each purchaser of
Shares (in both the Offering and the First Financing), for no
additional consideration, an additional 0.02 Shares, in
respect of each Share purchased for each further 30 days,
or part thereof, beyond the foregoing 60 day filing deadlines
in which either filing is not complete.
In addition, in the event that both the 1934 Act Form
and the 1933 Act Registration Statement have not become
effective within 120 days after closing (the "120 Day Deadline")
unless waived by TK in writing, the Corporation will deliver
to each purchaser of Shares (in both the Offering and
the First Financing) for no additional consideration, an
additional 0.02 Shares, in respect of each Share purchased,
for each 30 days, or part thereof, beyond the 120 Day Deadline
in which either the 1934 Act Form or the 1933 Act Registration
Statement is not effective.
In order to provide a sufficient number of shares to
satisfy the foregoing penalty provisions, an additional
850,000 shares shall be issued and held in escrow by a third
party mutually acceptable to the Agent and the Corporation
(the "Custodian") until the earlier to occur of: (a)
the completion of both filings and (b) the date that is
12 months following closing.
An amount equal to 10% of the gross proceeds of the Offering
will be placed in escrow with the Custodian and released
to the Corporation on the earlier to occur of: (a) the effective
date of the 1933 Act Registration Statement; and (b) the date
that is 12 months after closing.
Conditions: Completion of the Offering is conditional on; (i) execution
of a mutually satisfactory agency agreement, (ii) approval
by the Agent of the form of subscription agreement (iii)
receipt by the Agent of favorable legal opinions, (iv) the
opportunity for the Agent to conduct due diligence (the results
of such due diligence to be satisfactory to the Agent, acting
reasonably, and to Include the Corporation's providing for the
Agent's interviews with staff and inspection of operating
facilities in Costa Rica and British Columbia); and (v) the
right to appoint one of five nominees to the board of
directors of the Corporation.
Closing: Payment and delivery for the Shares will occur on or about
July 15, 1999, or on such other date as may be mutually agreed
to by the Agents and the Corporation.
Business of the
Corporation: The Corporation is the successor company to LAL Ventures Corp.
(as a result of a name change). The shares trade on the NASD
OTCC: BB wider the symbol "FUNN". Through its indirect
Wholly-owned subsidiary,Xxxxxxxx.xxx [Isle of Man] Ltd.
("Cyberoad Opco"), the Corporation manages an Internet operation
that develops and manages distributed wide area network (WAN)
gaming (sports book and casino) systems. The Corporation
owns and operates websites at xxxxxxxx.xxx and xxxxxxxxxxxx.xxx
(ownership of 100% revenue), and manages websites at
xxxxxxxxxxxxxxx.xxx, (licensing fee of approximately 16%
revenue) and Xxxxxxxxxxx.xxx (licensing fee of approximately
20% revenue), in addition, the Corporation owns 100% of
x-Xxxx.xxx [Isle of Man] Ltd. ("e-Banx"), a company that
supplies transaction services for the Corporation's websites.
A chart detailing the Corporation's structure is attached.
The business of Cyberoad Opco was started in 1995.
Cyberoad Opco was incorporated in Isle of Man in 1999.
The board of directors of the Corporation consists of five
members, Xxxxxx Xxxx, Xxx Xxxxxx, Xxxx Xxxxxx, Xxxxx
Xxxxxxx and a nominee of the Agent The Corporation's
corporate office is located at Oficentro Xxxxxx Xxxx Xxxxxxxx 0,
0xx Xxxxx, Xxx Xxxx, Xxxxx Xxxx. The Corporation's North
American office is located at 0000 Xxxxxxx Xx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0, Xxxxxx.
Use of Proceeds:
The net proceeds, together with cash on hand, will be used by
the Corporation to finance operations of Cyberoad Opec and
e-Banx, including but not limited to, deposits with credit
card processors, development costs and marketing; capital
expenditures, including, but not limited to, collateralizing
leases, equipment purchases, furniture and fixtures, office
equipment, call center equipment and improvements and third
party licensing; working capital, corporate development and
investor relations; and development of a sports and
entertainment vertical portal.
Compensation Payable to Agents:
A cash commission of eight percent of the gross proceeds of
the Offering shall be payable to the Agent at closing, together
with all reasonable out-of-pocket costs incurred by the Agent
in completing the Offering including legal fees (provided that
any travel expenses incurred by the Agent for flights
will be for business class seats). In addition, the Agent
shall receive at closing compensation options entitling the
holders thereof to acquire that number of shares that equals
10% of the number of Shares issued and sold in the Offering,
exercisable for a period of two years at a price of U.S. $3.50
per share. The shares underlying the compensation options shall
be registered in the 1933 Act Registration Statement
