-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q+6Zhu+2Rk88UjBctX5McGrJ0hmAHjVrt2vksA8FSetLKovuTk4PGrwCKTlh01oM Az/KP5hpc8o3wDn4cQuF/w== /in/edgar/work/20000825/0001015769-00-000249/0001015769-00-000249.txt : 20000922 0001015769-00-000249.hdr.sgml : 20000922 ACCESSION NUMBER: 0001015769-00-000249 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20000825 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASINOBUILDERS COM CENTRAL INDEX KEY: 0001003930 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] IRS NUMBER: 880343834 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-30452 FILM NUMBER: 710454 BUSINESS ADDRESS: STREET 1: 2278 HEFLIN AVE CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 7027354764 MAIL ADDRESS: STREET 1: 2278 HEFLIN AVE CITY: LAS VEGAS STATE: NV ZIP: 89119 FORMER COMPANY: FORMER CONFORMED NAME: MAGIC LANTERN GROUP INC DATE OF NAME CHANGE: 19951122 10SB12G 1 0001.txt 10SB12G UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B) OR 12 (G) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- CASINOBUILDERS.COM, INC. (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER) ---------------- NEVADA 880343834 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 2110 VICKERS DRIVE, SUITE 100 COLORADO SPRINGS, COLORADO 80918 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) 1-800-288-7506 (ISSUER'S TELEPHONE NUMBER) ---------------- SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of Each Class Name of Each Exchange on To be so Registered Which Each Class is to be registered ------------------- ------------------------------------ None Securities to be registered under Section 12(g) of the Act: Common Stock, Par Value $.001 Per Share (Title of Class) - ----------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- PART I ITEM 1. DESCRIPTION OF BUSINESS............................................ 3 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.......... 11 ITEM 3. DESCRIPTION OF PROPERTY............................................ 13 ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS....... 13 ITEM 6. EXECUTIVE COMPENSATION............................................. 16 ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 16 ITEM 8. DESCRIPTION OF SECURITIES.......................................... 16 PART II ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS........................................ 18 ITEM 2. LEGAL PROCEEDINGS.................................................. 19 ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS...................... 19 ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES............................ 20 PART F/S.....................................................................F-1 PART III................................................................ 21 ITEM 1. INDEX TO EXHIBITS............................................. PART I Item 1. Description of Business Business Development. We were incorporated in the State of Nevada on August 23, 1995, as Magic Lantern Group, Inc. On May 13, 1999, we changed our name to CasinoBuilders.com., Inc. We have not been involved in any bankruptcy, receivership, or similar proceeding. We have not been involved in any material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business. On March 3, 1998, we underwent a forward stock split on a 30:1 basis, increasing the issued and outstanding number of our shares to 4,890,000. We also cancelled 1,890,000 shares of our common stock resulting in 3,000,000 shares of common stock issued and outstanding. This cancellation increased the percentage of the Company owned by the remaining shareholders from 60.24% to 100%. On May 13, 1999, we underwent a forward stock split on a 2:1 basis, resulting in 6,000,000 shares of our common stock issued and outstanding. Our existing Board of Directors resigned and was replaced with current Board Members, Andy P. Ruppanner and Steve Randall. Our original business plan was to provide consulting and management services to the restaurant, bar, nightclub, and gaming industries in Southern Nevada by hiring managers from the casino industry and using their expertise to accomplish these objectives. We were not able to raise sufficient funding to pursue these objectives and we abandoned our original business plan. From approximately August 23, 1995 to approximately May 13, 1999 we conducted no business. Our principal place of business is located in Colorado Springs, Colorado. Since changing our name, we have focused our efforts on attempting to establish agreements with companies that provide various products and services connected with the on-line casino business. Products and Services Our products and services consist of the following: o Reselling of Avatar Casino Software - Avatar Casino Software enables casino operators to offer their Internet casino customers a three-dimensional Internet casino environment. Through this software Internet casino customers assume the appearance of cartoon like characters and travel throughout the Internet casino to engage in the following activities: o Chatting in a lounge o Chatting while playing casino table games for fun such as black jack, roulette and Caribbean poker o Chatting and betting while playing casino table games. We attempt to resell the Avatar gaming software to the Internet gaming industry. Lost Boys N.V. located in Amsterdam, The Netherlands developed this software. We have exclusive world wide marketing rights for the Lost Boys gaming software platform. Software prices will vary by the client, but will typically be in the $100,000 to $200,000 range, depending upon the extent of our customization of the software on behalf of the customer. 3 o Casino Licensing - We intend to provide, through our agreement with Cyberluck Curacao N.V., an apparatus to apply for Internet casino licensing in the Netherlands Antilles. Cyberluck Curacao N.V. is authorized by the Netherlands Antilles government to designate others to operate under their license and supervise Internet gaming enterprises. Cyberluck and the Netherlands Antilles government set license fees. o Hosting/Co-Location Services - We intend to provide casino operators, through our agreement with Conet.N.V. website hosting, e-mail, and website design services. Our hosting and service fees will vary by individual client requirements, however, they will typically range from $1,000 to $7,000 monthly. o E-Commerce - We intend to provide through our agreement with Global Cash N.V., an Internet technology "gateway" connecting service, based in Curacao, Netherlands Antilles. This connection enables Internet casino customers to establish a gaming account and the Internet casino to reach external E-commerce sources and merchant accounts for transaction processing. Global Cash processes credit card transactions to provide electronic currency credits to customer accounts that can be redeemed at the Internet casino operator's establishment. Our revenue from these services will be based on a negotiated percentage of each transaction. o Marketing - We intend to provide direct marketing services to assist the Internet casino operator in advertising, development of marketing plans, market analysis, target market identification, designing Internet advertisements, buying Internet and print advertising space, and monitoring effectiveness of advertisements placed. Our consulting fees will range from $150 to $400 per hour depending upon the complexity of the job or requisite skill level required to complete the job. o We have an exclusive contract from Fennel Promotions of Atlanta, Georgia to market a premier "Loyalty Awards Program," called the "E-Players Club". This program is designed to increase player loyalty at Internet gaming sites by awarding "points" for dollars wagered. Our revenue from these services will be based on a negotiated percent of each transaction. In September 1999, our president, Mr. Ruppanner began attending casino trade shows. These marketing efforts have only resulted in one written agreement with Asian Star Development, Ltd. of Hong Kong, a prospective Internet casino operator. The agreement provides for Asian Star's purchase of the Avatar gaming software. Asian Star has paid us consideration of $65,750; a remaining $200,000 balance became due when we completed our customization of this software for Asian Star. Despite several communications to Asian Star that our customization of the software was complete and that the remaining $200,000 payment was due, Asian Star never paid the remaining balance and failed to otherwise respond to our demands for payment. Accordingly, we considered Asian Star to be in breach of our contract with them. We have received an offer to license this same customized software from a European operator in the amount of $135,000. We are in the process of completing that Agreement. We have received no other revenues. In addition, we have entered into no other agreements providing for payments to us that may result in revenues. 4 From approximately July 1999 to approximately November 1999, our business plans included: (1) development of an Internet gaming portal called GamblersPortal.com that would provide an information source for the entire gambling community; and (2) A management contract with a Panama based casino, wherein we would have provided management and advertising support services. We abandoned development of GamblersPortal.com because we had insufficient funds to establish and/or to develop this website. We abandoned our management contract with the Panama casino because that casino ceased doing business in September 1999. We have had discussions with other companies regarding sale of our exclusive worldwide marketing agreement with Lost Boys Interactive, sale of the E-Players Loyalty program, sale of a majority interest to non-U.S. interests, and relocating our operations to a non-U.S. jurisdiction with non-U.S. shareholder control. We have not entered into any agreements, letters of intent or arrangements with any of these companies providing for any such occurrence. Further negotiations with any such companies are contingent upon the Commission's clearance of this Form 10-SB. We provide a demonstration version of our Avatar Casino software at our website located at www.casinobuilders.com. This site provides information to prospective Internet casino operators and also enables them to have a hands on experience with our software. The games are used only to display our products and services to prospective clients and are not utilized for any actual gambling services. The software will enable a prospective Internet casino to operate Online Casino games using our software technology. The software that we provide to the Internet casino operator enables its customers to download a software program to enter the virtual Casino, enabling the Internet casino customer to enter the virtual casino environment and interact with other players and/or play casino games. The software will enable an Internet casino to open casino accounts on behalf of its customers. The software program will accommodate e-commerce providers such as Global Cash or other providers that the casino operator will select and will require a customer to provide certain personal and financial information, including a user name and password. In order to play games and make wagers, a person must purchase electronic cash by making one or more credit card deposits into the person's account. The software will enable an Internet casino operator to offer the following casino style games: o Slots o Blackjack o Video Poker o Roulette o Five Card Stud Poker o Caribbean Poker We have incurred cumulative losses of $2,238,000 from our inception of August 23, 1995 to December 31, 1999. In addition, we had working capital and total capital deficiencies of $237,000 and $79,000, respectively at December 31, 1999. These conditions raise substantial doubt about our ability to continue as a going concern. We have been unsuccessful in marketing our services and software. In addition to our poor financial condition and our failure to successfully market our products and services, other factors may negatively impact our operations, including possible cessation of all our operations, as follows: 5 o Termination of our agreements with Cyberluck Curacao, N.V., Conet N.V., Global Cash N.V. or Fennell Promotions o If any of the services or products offered by Cyberluck Curacao, N.V., Conet N.V., Global Cash N.V. or Fennell Promotions are terminated o Our worsening financial condition necessitates restructuring our existing debt or raising additional capital through future issuances of debentures, thereby creating additional obligations that we may not be able to meet o Internet Gambling is declared illegal be U.S. law or foreign jurisdictions, causing decreased or no demand for our services. o Our only officer that devotes full time to our operations, Mr. Ruppanner, is no longer able to manage our operations Moreover, there is no assurance that we will be able to accomplish any of our objectives in marketing our products and services. Technology and Infrastructure We provide prospective Internet casinos operators and Internet casino operators with gaming software through our agreement with Lost Boys Interactive. We have not independently developed and do not intend to develop any technologies, including gaming software. Distribution and Marketing We now have no distribution agreements for distribution of our products and services. We now have no plan to obtain any such agreements. We market our products and services through: o Our Internet website - This website can be found through major search engines such as Yahoo.com, Excite.Com, and Infoseek.Com. Our website provides specific information regarding all our products and services, including a live demonstration of the Avatar casino software. The website provides general information about us, a downloadable example of the Avatar casino software enabling users to play the games of chance for fun, information regarding licensing of Internet casinos, banking and E-Commerce, marketing, and hosting of casino operators computers. Also we provide general information about the Internet gaming industry. o Conferences and Business shows - These conferences and shows concentrate in the casino business. We have attended the following casino conferences over the past year: o 1999 World Gaming Expo in Las Vegas, Nevada o 1999 Global Internet Conference in London, England o 1999 Gaming Online Conference in London, England o 2000 European Gaming Conference in Amsterdam o Global Interactive Gaming Summit, Montreal, Canada May 2000 At these conferences industry software venders market their products at exhibit booths. 6 o Links to Our Website - We submit our web address to other websites that provide a listing of various products and services in the Internet gaming services. When Internet users visit those websites they have the ability to click on a link then sends them directly to our website. These websites do not charge us any fees for the listing of our products and services. We plan to continue to market our products and services through these various methods. There is no assurance that any of our marketing strategies will be successful. There are no assurances that we will be able to provide any of the foregoing services. We may not develop any contracts or otherwise secure any business that would enable us to provide such products services. We may find that our financial resources are not sufficient to provide such products or services. To date, we have not provided any services or received any revenue in connection with the following products and services: o Sale and customization of Avatar Casino Software developed by Lost Boys N.V., Amsterdam o Casino Licensing through Cyberluck Curacao, N.V. o Hosting/Co-Location Services through Conet, N.V. o E-Commerce Services through our agreement with Global Cash, N.V. Other than the Asian Star transaction, the only services we have thus far provided have been marketing services for a French casino operator for which we received $56,000. Material Agreements: Avatar Gaming Software Agreement On September 28, 1999 we entered into an exclusive licensing agreement with Lost Boys Interactive, an Amsterdam based software developer. Lost Boys Interactive granted us exclusive global marketing rights for their Avatar based casino gaming software platform that includes black jack, roulette and Caribbean poker. We issued consideration of 250,000 shares to Lost Boys Interactive for these rights. This agreement is effective until December 2001. We have an exclusive written contract with Lost Boys Interactive B.V. to re-sell their gaming platform software. The Company "commissioned" Lost Boys to improve their existing software platform to its current competitive level. The "commissioning" was paid for through an exchange by providing Lost Boys with information pertaining to current technology and market requirements. In the strategic alliance, Lost Boys is the software developer, and will provide software technological research and development as well as on-line gaming and entertainment technology in customized applications for the global market. CasinoBuilders.com will provide the global marketing and sales function. Fennell Promotions, Inc. Agreement. On August 13, 1999, we entered into an agreement with Fennell Promotions, Inc., granting us exclusive global marketing rights to Fennell's Supreme Privileges Awards that we have called our E-Players Club program. This program offers Internet casino customer points for every dollar waged at their casinos. The points may be redeemed for air travel, merchandise and sporting events tickets in which a specified number of points entitle players to certain such awards. Under the terms of this agreement, we will partner with Fennel to market the Supreme Privileges Awards Program to the Internet Gaming Industry under the brand E-Players Club. We provided Fennel with consideration of 40,000 shares of our common stock. 7 Future net Holdings, Ltd. Agreement. On August 31, 1999 we entered into a purchase agreement with Futurenet Holdings, Ltd. to acquire all the outstanding shares of Cyberluck, Curacao N.V. A $50,000 deposit was made upon execution of the agreement. The agreement also provided that Futurenet Holdings had the authority to deliver to us all of the outstanding shares of Conet N.V. and Global Cash N.V. Cyberluck is the holder of a Master license for Internet gaming in the Netherlands Antilles. In accordance with the terms of the agreement, we were required to make total payments of $1.5 million in specified payments from September 1999 to October 1999. In the event we failed to make payments in accordance with the schedule we agreed to, we would incur a $250,000 penalty. We did make payments totaling $650,000, but not in accordance with the schedule we agreed to and we incurred a penalty of $250,000. As of the end of September 1999, we had made payments to Futurenet in the amount of $400,000 and incurred a $250,000 penalty towards the purchase price. In October 1999, we only made one payment of $200,000 to Futurenet of the required total payment due of $900,000. On October 31, 1999, we entered into a new agreement with Futurenet Holdings, Ltd., to acquire all of the outstanding shares of Cyberluck, Curacao Holdings, Ltd. The acquisition, if consummated, would have provided us with a Netherlands Antilles exclusive master license whereby we intended to sublicense qualified applicants to operate Internet gaming casinos in addition to certain computer equipment and software adapted for such purpose. The purchase price was payable in installments due as follows: October 31, 1999 - $650,000 December 1, 1999 - $350,000 February 29, 2000 - $600,000 July 1, 2000 - $100,000 The initial payment of $650,000 was non-refundable and was paid as follows: $450,000 was paid through September 30, 1999 and the balance of $200,000 in October 1999. We were unable to make the scheduled payment of $350,000 due on December 1, 1999 and accordingly lost the right to consummate the acquisition with the result that the $650,000 initial payment has been forfeited. Our financial statements at December 31,1999 give effect to the termination of the acquisition and the related loss incurred. We issued 750,000 shares valued at $468,750 to an investment group, contingent on the successful completion of the acquisition. The acquisition was terminated, thereby requiring that person's return of the shares. These shares were returned in June 2000. Internet Growth E-Commerce Growth On January 13, 2000, CyberAtlas, an Internet survey company published the following information contained in articles at HTTP://CYBERATLAS.INTERNET.COM "The number of Internet users around the world is constantly growing. On January 4, 2000, The Computer Industry Almanac reported that by the year 2002, 490 million people around the world will have Internet access, that is 79.4 per 1,000 people worldwide, and 118 people per 1,000 by year-end 2005. The top 15 countries will account for nearly 82 percent of these worldwide Internet users (including business, educational, and home Internet users). By the year 2000 there will be 25 countries where over 10 percent of the population will be Internet users." 8 "The US has an overwhelming lead in Internet users with more than 110 million projected for year-end 1999, which is nearly 43 percent of the total 259 million worldwide Internet users. The US will have one-third of the total Internet users in 2002, and that number will decline to 27 percent by the end of 2005." We do not know the percentage of e-commerce attributable to Internet casino gaming. Status of any Publicly Announced New Product or Service. We have no new products or services. All of our products and services derive from our agreements with third parties. Competition. We face intense competition in every facet of our business, as follows: Internet Gaming Software - The following companies are our competitors in the area of Internet gaming software: o MicroGaming Systems, Inc. o Cryptologic,Inc. o Boss Media AB o StarNet All of these companies have substantially greater assets and resources than we do. Their ability to market their products is greater. In addition, their software programs offer a more expansive collection of casino games. These companies have established distribution networks. In contrast, we are beginning the marketing of our products and services and have little assets or resources at this time to compete with companies of this size. We anticipate that strategic competition will become more intense as new companies will enter the Internet Gaming Software market. To remain competitive, we may have to reduce the cost of our products and services, which may negatively affect our potential profitability or lead to additional losses. We believe that potential new competitors, including large interactive and online software companies, media companies, and electronic gaming companies, such as Sega and Sony, may increase their focus on the interactive wagering market. The timing of competitive product and services releases and the similarity of such products or services to our products and services, may result in significant competition or reduced profit margins and influence competition. We also anticipate that significant overseas competition will emerge. This may eventually result in additional competition as these overseas competitors expand into the United States or as we possibly expand internationally. Specifically, several well capitalized Australian media and gaming companies are already developing systems and services similar to us. Casino Licensing and Hosting Service Provider - Cryptologic, MicroGaming, Boss Media, StarNet and others offer through third parties licensing and hosting services, because of their greater marketing resources. Premium Awards Program Software - Cryptologic offers a incentive programs for its licensees. Similarly, MicroGaming and StarNet offer such programs. 9 All of these companies have substantially more assets and resources than we do. All of these companies have extensive marketing resources and distribution networks. We will face intense competition from all of these companies. The November 1998 issue of the Casino and Gaming Business Market Research Handbook predicts that the Internet gaming market could reach $100 to $200 billion in annual revenues by 2005. Our competitors are prepared to meet this increasing market. Moreover, due to the expected growth of the Internet gaming market, established land based casinos, such as Trump and Wynn, with assets of hundreds of millions of dollars may enter the Internet gaming market. We will face intense competition from companies that are better equipped financially, technically, and professionally than we are to capture this market. Sources and Availability of Raw Materials/Names of Principal Suppliers Our business is not dependent upon the availability of raw materials, nor do we use suppliers. All of our software products are obtained from Lost Boys Interactive. Dependence on one or a Few Major Customers. We have one pending draft software licensing contract that has not yet been executed by one potential customer. We do not intend upon becoming dependent upon one or a few major customers. Our revenues may become dependent upon one or a few major customers for a certain time period, until such time that we develop additional customers. Patents, Trademarks, Licenses, Royalty Agreements We do not own any patents, copyrights or trademarks. In addition, we are not a party to any agreements in which we are obligated to pay royalties. Government Regulation Jurisdictional regulation of Internet gaming is the process whereby Governments (jurisdictions) through law and licensing, control the fair and equitable operation of gaming businesses. Jurisdictional Regulation provides a confirmation to the Internet gambler, that the games originating from that jurisdiction are fair, and operated by responsible business people. The Company continues to support activities that protect both the consumer and the operator of such businesses. We do not operate Internet casinos and therefore are not subject to any government regulation regarding Internet gaming. Nonetheless, because our business is dependent upon sales of our products and services to Internet casinos, our revenues may be negatively affected due to regulation of the Internet gaming business. While we concentrate our marketing efforts upon the Australian, Caribbean, European and African gaming markets, that permit Internet gaming, international, federal, state of local laws may be imposed at any time. The uncertainty surrounding the regulation of Internet gaming could have a material adverse effect on the Company's business, revenues, operating results and financial condition. We monitor the changes in any laws regarding Internet gaming. Should Internet gaming be declared illegal in certain jurisdictions we contemplate doing business in, and/or there is a materially adverse effect upon our business due to such declared illegality, we may be forced to change our business plan. 10 Our management remains concerned about the continued interest by federal and state lawmakers to outlaw Internet gambling. If Internet gambling is outlawed, interest in our products and services will diminish or will be non-existent. Pending United States Legislation and Other Existing Laws On November 19, 1999, the United States Senate passed S. 692, called the Internet Gambling Prohibition Act. On July 17, 1999, the U.S. House of Representatives failed to pass H.R. 3125, the U.S. House of Representative's version of the Senate bill S. 692. Passage of such a gambling prohibition law would prohibit all Internet gambling sites from soliciting or collecting wagers from bettors in the United States. We do not now or intend in the future to transact business with any Internet gambling sites located in the United States or that solicits or collects wagers from bettors in the United States. Our policy is to provide our software product only to casino operators who hold a license or demonstrate that they have a license pending. Research and Development We have spent no funds or time on research and development activities. We do not intend on spending any funds or time on research and development activities. Our products are derived from third parties. Environmental Compliance Our products and services do not involve the emission of any environmental pollutants, emissions, or waste. Therefore, we do not anticipate being subject to any environmental compliance matters. Employees and Labor Relations We currently have 2 total employees, of which only Mr. Ruppanner is a full time employee. None of our employees are represented by labor unions. We are not a party to any collective bargaining agreements or labor union contracts, nor have we been subjected to any strikes or employment disruptions in our history. Item 2. Management's Discussion and Analysis or Plan of Operation Management's Discussion and Analysis of Financial Conditions and Results of Operation The following discussion of the financial condition and results of our operations should be read in conjunction with our financial statements and related to notes appearing elsewhere in this Form 10-SB. Except for the historical information contained herein, the discussion in this Form 10-SB contains forward-looking statements that involve risks, uncertainties and assumptions. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "believe" and similar language. These statements involve known and unknown risks, including those resulting from economic and market conditions, the regulatory environment in which we operate, competitive activities, and other business conditions, and are subject to uncertainties and assumptions set forth elsewhere in this registration statement. Our actual results may differ materially from results anticipated in these forward-looking statements. We base our forward-looking statements on information currently available to us, and we assume no obligation to update these statements for the Next 12 Months. 11 LIQUIDITY AND CAPITAL RESOURCES At the commencement of our business plan in May of 1999, we assumed two primary sources of revenue, beginning in the third quarter of 1999, to provide liquidity and capital resources. The first was capital raised through equity investments and the second was sales. Approximately $700,000 was raised through equity sales and $50,000 of that amount went to operations and $650,000 was invested as a partial payment to acquire three operating Internet infrastructure companies in Curacao, Netherlands Antilles. In the first quarter of 2000, we were unable to raise the funds required to complete the acquisition, and the contract was terminated. We have recorded a complete loss of our investment in our financial statements. This situation combined with low stock price caused us to rely solely on sales as a source of liquidity. As of the present time, our only source of liquidity is current sales and consulting fees. There are two potential sales outstanding, which will yield approximately $200,000 revenue by the end of the third quarter of 2000. Despite our lack of success in completing sales, we continue to receive inquiries from potential customers who wish to license our software. We are also exploring alternative sources of funds and have had informal discussions including merger with other companies in the entertainment, e-commerce business sectors and non-U.S. based gaming companies RESULTS OF OPERATIONS Our revenues have been far below what we anticipated in our business plan. Initial sales, which were anticipated in the fourth quarter of 1999, were delayed due to late development and completion of our Internet gaming software. One sale, which did occur in that quarter, was defaulted in the first quarter of 2000 for lack of complete payment. We did receive a down payment on the defaulted contract in the amount of $67,500 which is reported in our financial statements as revenue. Due to this significant revenue shortfall we have reduced all operations to a minimum level until sales revenues arrive. Company management has received no salary payments since the company's inception, and will continue operating in that mode until profitability occurs. 12 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS At the time of the commencement of trading our stock in 1999, the common stock began to trade under the symbol CSNO on the OTC Bulletin Board at $5.00. The stock price fell to the $1.00 range in the third quarter, and to the $.25 range in the fourth quarter. In December 1999 we filed our Form10SB. We changed Company counsel in January 2000 and withdrew our Form10SB in February 2000. In February 2000, the Company's securities were removed from the Over-The-Counter-Bulletin-Board "OTCBBB" and are now traded on the National Quotation Bureau's "pink sheets" under the symbol CSNO. Since February 2000, there has been an extremely limited market for our securities. During the second quarter of 2000, we have focused on completing software-licensing sales. We have pending contracts to license software that we expect will result in approximately $200,000 in revenue. In the second quarter of 2000 CSNO common stock trading has been very limited with a current price of $.08. Item 3. Description of Property Prior to our business in Internet gaming products and services, we did not own or lease any real property, but used office space at no charge from our Resident agent, Incorp Services, Inc. We had only a verbal agreement with the resident agent in which we paid our own bills relating to long distance telephone calls, secretarial, photocopying and other expenses. We maintain a corporate office in Colorado Springs, Colorado and Kirkland, Washington from which we receive mailing and secretarial services on a month-by-month basis for $50 per month. We do not have any physical space that we occupy or use at these locations. We have no lease agreement regarding these locations, but receive monthly invoices. Item 4. Security Ownership of Certain Beneficial Owners and Management The following table sets forth each person known to the Company, as of August 14, 2000 to be a beneficial owner of five percent (5%) or more of the Company's common stock, by the Company's directors individually, and by all of the Company's directors and executive officers as a group. Except as noted, each person has sole voting and investment power with respect to the shares shown. a) Security Ownership of Certain Beneficial Owners TITLE OF CLASS NAME & ADDRESS OF BENEFICIAL NUMBER OF BENEFICIALLY PERCENTAGE OWNER OWNED SHARES OWNERSHIP OF CLASS - -------------- ---------------------------- ----------------------- --------- COMMON PAUL A. RUPPANNER 2,002,913(1) 10.2% 9.8% 2110 VICKERS DRIVE, SUITE 100 COLORADO SPRINGS, COLORADO 80918 - -------------- ---------------------------- ----------------------- --------- COMMON STEVE RANDALL 1,620,097(2) 8.2% 2110 VICKERS DRIVE, SUITE 100 COLORADO SPRINGS, COLORADO 80918 13 - -------------- ---------------------------- ----------------------- --------- COMMON BRADERLUX ALR 2,166,666(3) 11.02% RICHARD BULLOCK 2ND FLOOR-BROADCASTING HOUSE ROUGE BOULLION ST. HELIER, JERSEY JE43ZA - -------------- ---------------------------- ----------------------- --------- COMMON ZZG HOLDINGS 1,337,736 (4) 6.81% 120 STATE AVENUE 536 OLYMPIA WASHINGTON 98501 ZVI Y. ZELIKOWITZ P.O. BOX 4068 JERUSALUEM, ISRAEL (1) This amount includes options to purchase 666,666 shares of our common stock at $0.35 per share which are exercisable as of June 1, 2000. Mr. Ruppanner has 666,666 options which are exercisable on June 1, 2001 and 666,666 which are exercisable on June 1, 2002. Each option issued to Mr. Ruppanner is exercisable into one (1) share of common stock, at a price of $.35 per share. We have included the options which are exercisable as of June 1, 2000. We have not included the options which cannot yet be exercised within 60 days. (2)This amount includes options to purchase 666,666 shares of our common stock at $0.35 per share which are exercisable as of June 1, 2000. Mr. Randall has 666,666 options which are exercisable on June 1, 2001 and 666,666 which are exercisable on June 1, 2002. Each option issued to Mr. Randall is exercisable into one (1) share of common stock, at a price of $.35 per share. We have included the options which are exercisable as of June 1, 2000. We have not included the options which cannot yet be exercised within 60 days. (3) The beneficial owner of Braderlux ARL became Richard Bullock of Belfast, Northern Ireland. (4) ZZG Holdings is the holder of the Company's convertible debentures. These are convertible into common stock upon the holder's demand. As of September 30, 1999, the Company had issued 334,434 shares for conversion of $150,000 of the debenture. If the remaining debenture was converted at a similar rate, ZZG Holdings would control a total of 1,337,736 shares or 6.00% of the then-outstanding shares (b) Security Ownership of Directors and Executive Officers COMMON PAUL A. RUPPANNER 2,002,913(1) 10.2% 9.8% 2110 VICKERS DRIVE, SUITE 100 COLORADO SPRINGS, COLORADO 80918 - -------------- ---------------------------- ----------------------- --------- COMMON STEVE RANDALL 1,620,097(2) 8.2% 2110 VICKERS DRIVE, SUITE 100 COLORADO SPRINGS, COLORADO 80918 -------------- ---------------------------- ----------------------- -------- (1) This amount includes options to purchase 666,666 shares of our common stock at $0.35 per share which are exercisable as of June 1, 2000. Mr. Ruppanner has 666,666 options which are exercisable on June 1, 2001 and 666,666 which are exercisable on June 1, 2002. Each option issued to Mr. Ruppanner is exercisable into one (1) share of common stock, at a price of $.35 per share. We have included the options which are exercisable as of June 1, 2000. We have not included the options which cannot yet be exercised within 60 days. (2) This amount includes options to purchase 666,666 shares of our common stock at $0.35 per share which are exercisable as of June 1, 2000. Mr. Randall has 666,666 options which are exercisable on June 1, 2001 and 666,666 which are exercisable on June 1, 2002. Each option issued to Mr. Randall is exercisable into one (1) share of common stock, at a price of $.35 per share. We have included the options which are exercisable as of June 1, 2000. We have not included the options which cannot yet be exercised within 60 days. There are no arrangements that may result in a change in our control. Item 5. Directors, Officers, Promoters and Control Persons. The members of our Board of Directors serve until the next annual meeting of the stockholders, or until their successors have been elected. Our officers serve at the pleasure of our Board of Directors. There are no agreements for any officer or director to resign at the request of any other person, and none of the officers or directors named below is acting on behalf of, or at the direction, of any other person. 14 Information as to our directors and executive officers is as follows: NAME AGE POSITION TERM OF OFFICE - -------------------------------------------------------------------------------- Paul A. Ruppanner 60 President/Director Annual 2110 Vickers Drive Suite 100 Colorado Springs, Co 80918 Steven B. Randall 56 Secretary/Treasurer Annual 2110 Vickers Drive Director Suite 1oo Colorado Springs, CO 80918 Dr. Claus Wagner/Bartek 63 Director Annual 4092 Lee Highway Arlington, VA 22207 Paul A. Ruppanner - President/Chairman of the Board of Directors/Director/Chief Executive Officer 60 years of age. From 1998 to 1999, Mr. Ruppanner was a vice president of the marketing and sales department of Command Software, an Anti-Virus software developer. From 1997 to 1998 Mr. Ruppanner were the president and chief executive officer of Softlock Services, a software developer in the area of content security on the Internet. From September 1996 to May 1997, Mr. Ruppanner was president and chief operating officer of HotOffice Technologies, an office network company, providing computer network infrastructure to small business. From 1994 to 1996 Mr. Ruppanner was a vice president and general manager of Office Depot. From 1992 to 1994, he was a vice president of Marketing at Technology Service Solutions. From 1996 to 1996 Mr. Ruppanner was a general manager, area general manager, vice president of business development, and director of operations at IBM CORPORATION. Steven B. Randall - Secretary/Treasurer/Director 56 years of age. Mr. Randall is retired and participates in our affairs only on a part-time basis. From 1992 to 1999 Mr. Randall was the president of Direct Marketing Concepts, Inc., a marketing company located in Great Neck, New York. From 1988 to 1990, Mr. Randall was a director and treasurer of the Water Authority of Great Neck, New York. Dr. Claus G. Wagner-Bartak - Director, 63 years of age, has been the director and chief operating officer of BA Technologies, Inc., a firm involved in the engineering business. From 1982 to present, Dr. Wager-Bartak has also president of Energy Dynamics, Inc., a firm involved in the engineering business. Dr. Wager-Bartak received his Doctoral of Science Degree in Physics, Chemistry and Radiology in 1969 from the Ludig-Maximilians University in Munich, Germany. Mr. Ruppanner, Mr. Randall and Dr. Wager-Bartag have served as directors since May 19, 1999. They serve for indefinite terms. We have no significant employees other than our officers. There are no family relationships among our directors or officers. Investment Company Act. Although we will be subject to regulation under the Securities Act of 1933 and the Securities Exchange Act of 1934, we believe that we are not subject to regulation under the Investment Company Act of 1940 because: (1)we are in the business of providing Internet gaming products and services and we represent to the public that are in that business; (2) we are not engaged in the business of investing or trading in securities; (3) we were not organized as an Investment Company; (4) we do not and have not previously held ourself out to the public as being engaged primarily in the business of investing, reinvesting, owning, holding, or trading in securities; (5) none of our assets are comprised of common stock from other companies; and (6) we do not offer for sale any securities to the public or any value, net asset value, or current asset value attributable to redeemable securities or a portfolio of securities. 15 Involvement in Certain Legal Proceedings. There have been no bankruptcies, criminal proceedings, or other legal proceedings during the past five years which would be material to the evaluation of the ability or integrity of any director, executive officer, any person nominated for such positions, any control person or any promoter of the Company. Item 6. Executive Compensation SUMMARY COMPENSATION TABLE - ----------------------------
NAME AND YEAR SALARY BONUS OTHER ANNUAL RESTRICTED SECURITIES LTIP OTHER PRINCIPLE POSITION ($) ($) COMPENSATION ($) STOCK AWARD(S) UNDERLYING PAYOUTS ($) ($) OPTIONS (#) ($) - ------------------ ---- -------- ------ ---------------- -------------- ----------- -------- ------ ANDY RUPPANNER(1) 1998 0 0 0 0 0 0 0 PRESIDENT, 1999 0 0 0 1,336,427 2,000,000 0 0 2000 0 0 0 0 0 0 0 STEVEN B. RANDALL(2)1998 0 0 0 0 0 0 0 SECRETARY/DIRECTOR 1999 0 0 0 953,431 2,000,000 0 0 2000 0 0 0 0 0 0 0 DR. WAGER-BARTAG(3) 1998 0 0 0 0 0 0 0 DIRECTOR 1999 0 0 0 0 0 0 0 2000 0 0 0 0 0 0 0
(1) Mr. Ruppanner has received 1,336,427 shares of our stock in lieu of cash compensation during 1999. (2) Mr. Steven B. Randall has received 953,431 shares of our stock in lieu of cash compensation during 1999. Both officers have agreed to forego cash compensation until funds are available for such compensation and our Board of Directors' authorizes such action. (3) Dr. Wager-Bartag received no compensation for his services. We do not anticipate paying our officers any cash compensation until our revenues are sufficient to authorize such payments. Item 7. Certain Relationships and Related Transactions At the time of the contemplated transaction of Global Cash, N.V., Mr. Randall was a director of Global Cash; N.V. Mr. Randall resigned as a director of Global Cash, N.V. in approximately July 2000. Global Cash, N.V. was never ultimately acquired. Subsequent to the agreement with Futurenet and in connection with that agreement, Mr. Ruppanner became a director of Conet N.V. There are no other such relationships and related transactions, except for the securities transactions with Mr. Ruppanner and Mr. Randall described in Part II, Item 4 "Recent Sales of Unregistered Securities." Item 8. Description of Securities The Company's Articles of Incorporation authorizes the issuance of 50,000,000 shares of common stock, of which 19,650,899 are issued and outstanding as of August 18, 2000. Of the shares issued and outstanding, a total of 12,823,106 are restricted pursuant to Rule 144. The shares are non-assessable, without pre-emptive rights, and do not carry cumulative voting rights. Holders of common shares are entitled to one vote for each share on all matters to be voted on by the stockholders. The shares are fully paid, non-assessable, without pre-emptive 16 rights, and do not carry cumulative voting rights. Holders of common shares are entitled to share ratably in dividends, if any, as may be declared by the Company from time-to-time, from funds legally available. In the event of a liquidation, dissolution, or winding up of the Company, the holders of shares of common stock are entitled to share on a pro-rata basis all assets remaining after payment in full of all liabilities. In general, under Rule 144, a person (or persons whose shares are aggregated) who has satisfied a one year holding period, under certain circumstances, may sell within any three-month period a number of shares which does not exceed the greater of one percent of the then outstanding Common Stock or the average weekly trading volume during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of shares without any quantity limitation by a person who has satisfied a two-year holding period and who is not, and has not been for the preceding three months, an affiliate of the Company. Management is not aware of any circumstances in which additional shares of any class or series of the Company's stock would be issued to management or promoters, or affiliates or associates of either. DEBENTURES. In July 1999, we issued a Series A Convertible Debentures in the amount of $700,000 and received net proceeds of $600,000 after deducting debt issue costs of $100,000. The debentures are payable with interest at one percent per annum commencing August 1999 and are due in full on July 16, 2001. The debentures are convertible at any time into common stock at 75 percent of the closing bid price, quoted on the day preceding the conversion date, as reported by the NASD OTC bulletin board. We issued 995,224 shares of our common stock upon conversion of $300,000 of debentures through December 31,1999. At December 31, 1999, we incurred debt service costs of $49,500,which were included as interest expense in our financial statements at such date. The following shares were issued to the debenture holder in accordance with the conversion option: August 11, 1999 13,333 shares August 26, 1999 32,000 shares August 30, 1999 55,467 shares September 10, 1999 36,530 shares October 11, 1999 41,425 shares November 1, 1999 155,679 shares November 4, 1999 350,000 shares December 13, 1999 164,204 shares January 7, 2000 496,586 shares January 18, 2000 240,000 shares March 24,2000 195,804 shares June 12, 2000 1,475,193 shares STOCK OPTIONS. The Company has instituted a stock option plan, which is available to selected directors, officers, Employees and Consultants of the Company (Participants). The term of each Option will be ten years from the date of grant or a shorter term as determined by the Stock Option Committee (the "Committee") except for an ISO granted to 10% shareholders, in which the term of the option will be five years. The exercise price will be determined by the Committee and will not to be less than 100% of the Fair Market Value of the Shares subject to the option on the date of grant. The Stock Option Committee is comprised of Paul A. Ruppanner, President & CEO, and Steve Randall, Secretary and Treasurer. 17 As of the date of this filing, Andy Ruppanner and Steve Randall have each been granted 2,000,000 options to purchase our common stock. These options are effective as of September 15, 1999 and expire December 31, 2009. Each option issued to Mr. Ruppanner is exercisable into one (1) share of common stock, at a price of $.35 per share. None of the options outstanding have been exercised. Of the options granted to Ruppanner, 666,666 vested on June 1, 2000. Mr. Ruppanner has 666,666 options which vest on June 1, 2001 and 666,666 which vest on June 1, 2002. Of the options granted to Randall, 666,666 vested on June 1, 2000. Mr. Randall has 666,666 options which vest on June 1, 2001 and 666,666 which vest on June 1, 2002. PART II Item 1. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters The Company's common stock is quoted on the National Quotation Bureau's Pink Sheets under the symbol CSNO. It was formerly listed under the symbol MGIL. As of August 25,2000 the Company traded at a High/Ask price of $.07 and a Low/Bid price of $.03. The Company has had no prior history of trading. Effective August 11, 1993, the Securities and Exchange Commission adopted Rule 15g-9, which established the definition of a "penny stock," for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. 18 The National Association of Securities Dealers, Inc. (the "NASD"), which administers NASDAQ, has recently made changes in the criteria for initial listing on the NASDAQ Small Cap market and for continued listing. For initial listing, a company must have net tangible assets of $4 million, market capitalization of $50 million or net income of $750,000 in the most recently completed fiscal year or in two of the last three fiscal years. For initial listing, the common stock must also have a minimum bid price of $4 per share. In order to continue to be included on NASDAQ, a company must maintain $2,000,000 in net tangible assets and a $1,000,000 market value of its publicly-traded securities. In addition, continued inclusion requires two market-makers and a minimum bid price of $1.00 per share. Management intends to strongly consider undertaking a transaction with any merger or acquisition candidate, which will allow the Company's securities to be traded without the aforesaid limitations. However, there can be no assurances that, upon a successful merger or acquisition, the Company will qualify its securities for listing on NASDAQ or some other national exchange, or be able to maintain the maintenance criteria necessary to insure continued listing. The failure of the Company to qualify its securities or to meet the relevant maintenance criteria after such qualification in the future may result in the discontinuance of the inclusion of the Company's securities on a national exchange. In such events, trading, if any, in the Company's securities may then continue in the non-NASDAQ over-the-counter market. As a result, a shareholder may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, the Company's securities. Stockholders. There are 100 holders of the Company's Common Stock. Dividends The Registrant has not paid any dividends to date, and has no plans to do so in the immediate future. Item 2. Legal Proceedings We are not a party to any material pending legal proceedings. We are not aware of any pending or threatened legal proceedings, in which are involved. Item 3. Changes in and Disagreements with Accountants We have had no disagreements with our auditors. Item 4. Recent Sales of Unregistered Securities On May 9, 1997, we sold 100,000 shares of our common stock for $25,000 in reliance upon Rule 504 of Regulation D. On May 29, 1999, we issued a total of 500,000 shares of our common stock to Paul A. Ruppanner for services rendered and we issued 500,000 shares to Steve Randall. On May 29, 1999 we issued 2,166,666 shares to Braderlux ALR; 1,666,667 shares to Burgandy Holdings, Ltd.; 1,666,667 shares to Artistocrat Group, and 500,000 shares to Riva Investments Ltd. We relied upon Section 4(2) of the Securities Act of 1933, as amended ("the Act"). We believe Section 4(2) was available because the transactions did not involve a public offering. In July 1999, we issued a Series A Convertible Debentures in the amount of $700,000 and received net proceeds of $600,000 after deducting debt issue costs of $100,000. The debentures are payable with interest at one percent per annum commencing August 1999 and are due in full on July 16, 2001. The debentures are convertible at any time into common stock at 75 percent of the closing bid price, quoted on the day preceding the conversion date, as reported by the NASD 19 OTC bulletin board. We issued 995,224 shares of our common stock upon conversion of $300,000 of debentures through December 31,1999. We relied upon Rule 504 of Regulation D of the Act. The following shares were issued to the debenture holder in accordance with the conversion option: August 11, 1999 13,333 shares August 26, 1999 32,000 shares August 30, 1999 55,467 shares September 10, 1999 36,530 shares October 11, 1999 41,425 shares November 1, 1999 155,679 shares November 4, 1999 350,000 shares December 13, 1999 164,204 shares January 7, 2000 496,586 shares January 18, 2000 240,000 shares March 24,2000 195,804 shares June 12, 2000 1,475,193 shares On August 30, 1999, we issued 40,000 shares of our common stock to Frank Fennell to offer Supreme Privileges Point System to Internet Gaming Customers and 250,000 shares to Austin Burrell to become chairman of our advisory board which we later decided to discontinue. We relied upon Section 4(2) of the Act of 1933. We believe Section 4(2) was available because the transactions did not involve a public offering. On September 28, 1999 and November 17, 1999, we issued 125,000 shares (Total 250,000 shares) of our common stock to Team Lost Boy BV for the exclusive global marketing rights of their Avatar gaming platform software. We believe Section 4(2) was available because the transactions did not involve a public offering. On September 15, 1999, our board of directors granted Mr. Ruppanner and Mr. Randall, our officers, options to purchase up to 2,000,000 shares each of common stock at $0.35 per share through December 2009. 666,666 vested on June 1, 2000; 666,666 options vest on June 1, 2001 and 666,666 which vest on June 1, 2002. Each option is exercisable into one (1) share of common stock, at a price of $.35 per share. These options are the only outstanding options at December 31, 1999. As of August 13, 2000 none of these options have been exercised. We believe Section 4(2) was available because the transactions did not involve a public offering. On October 11, 1999, we issued the following shares: Date Amount Name Consideration 10/11/99 19,000 Saundra Rosenblum Purchase URL 10/11/99 25,000 R Garcia Administrative assistance at start-up 10/11/99 25,000 Chanelle Olivier Administrative assistance at start-up 10/11/99 25,000 Charissa Olivier Administrative assistance at start-up 10/11/99 25,000 Colin Ruppanner Administrative assistance at start-up 10/11/99 5,000 Shernalda Raphelia Outsourced employee incentive 10/11/99 5,000 Anthony P.M. Dick Outsourced employee incentive 10/11/99 5,000 Scott Moar Outsourced employee incentive 10/11/99 100,000 Whitehorse Investments Investment Advisory services Ltd 20 We believe Section 4(2) was available because the transactions did not involve a public offering. During November 1999, we issued 2,263,678 shares of common stock in return for services. We believe Section 4(2) was available because the transactions did not involve a public offering. These shares were issued as follows: Date Amount Name Consideration 11/17/99 836,247 Paul A. Ruppanner Shares in lieu of $200,000 Annual Salary; and serving as Chairman of Board 11/17/99 549,000 Cactus Consulting Intl. In lieu of fee for providing financial services *Pres. of Cactus is Jan Olivier. 11/17/99 100,000 Claus Wagner-Bartak To serve as a Director 11/17/99 125,000 Team Lost Boys NV Balance of incentive to give CSNO Worldwide Exclusive Marketing rights 11/21/99 50,000 Adam Barnett Partial Payment for Financial Consulting 11/21/99 150,000 Stock Exposure Inc.Payment for Marketing Services 11/29/99 453,431 Steven B. Randall In lieu of salary ($175,000); serving on Board of Directors. We believe Section 4(2) was available because the transactions did not involve a public offering. On January 2000, we issued shares of our common stock for services rendered as follows: Date Amount Name Consideration 1/6/00 82,000 Istrategic LLC Purchase URLs 1/18/00 100,000 Adam Barnett Final Payment for Financial Consulting We believe Section 4(2) was available because the transactions did not involve a public offering. On May 2000, we issued shares of our common stock as follows: Date Amount Name Consideration 5/31/00 150,000 Henrik Ponteyn Technology Consulting and Trade Show Assistance 5/31/00 150,000 Dan Luther Full Year Payment for Management Consulting We believe Section 4(2) was available because the transactions did not involve a public offering. Item 5. Indemnification of Officers and Directors. The Company's Bylaws provide for indemnification of the Company's directors, officers, employees and other agents of the Company to the extent and under the circumstances permitted by the Indiana Business Corporation Law (the "IBCL"). The Company's Bylaws also provide that the Company will have the power to purchase and maintain insurance covering its directors, officers and employees against any liability or loss asserted against any of them and incurred by any of them, whether or not the Company would have the power to indemnify them against such liability under the IBCL. The Company has a pending application to obtain directors' and officers' liability insurance. 21 Section 5.1 of Article V of the Bylaws of the Company provides for indemnification of directors and officers of the Company to the fullest extent authorized by the IBCL, and is set forth below: Section 5.1 Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in ay action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of any other corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to any employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is an alleged action or failure to act in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, will be indemnified and held harmless by the Corporation to the fullest extent authorized by the BCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including, without limitation, attorneys' fees, court costs, judgments, fines, excise taxes or penalties under the Employee Retirement Income Security Act of 1974, as amended, and amounts paid or to be paid in settlement) reasonably incurred by such indemnities in connection therewith; provided, however, that except as provided in Section 5.3 with respect to proceedings seeking to enforce rights to indemnification, the Corporation will indemnify any such indemnities seeking indemnification in connection with a proceeding (or part thereof) initiated by such indemnities only if such proceeding (or part thereof) was authorized by the Board of Directors. PART III ITEM 1. INDEX TO EXHIBITS EXHIBITS DESCRIPTION OF DOCUMENT 3.1 Articles of Incorporation 3.2 Bylaws 3.3 Certificate of Amendment to Articles of Incorporation 10.1 Employee Contract - Ruppanner 10.2 Employee Contract - Randall 10.3 1999 Stock Option and Restricted Stock Plan 10.4 Stock Option Agreement - Ruppanner 10.5 Stock Option Agreement - Randall 10.6 Agreement Lost Boys - The Netherlands 10.7 Financial Consulting Agreement - Portfolio 27.1 Financial Data Schedule - December 31, 1999 27.2 Financial Data Schedule - June 30, 2000 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. By: /s/ Paul A. Ruppanner Paul A. Ruppanner, President and Director Dated August 25, 2000 CASINOBUILDERS.COM, INC. (A DEVELOPMENT STAGE COMPANY) INDEX TO FINANCIAL STATEMENTS Independent Auditors' Report................................................ F-2 Balance Sheet............................................................... F-3 Statements of Operations.................................................... F-4 Statement of Stockholders' Equity........................................... F-5 Statements of Cash Flows.................................................... F-6 Notes to Financial Statements........................................ F-7 - F-13 F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors Casinobuilders.Com, Inc. We have audited the accompanying balance sheet of Casinobuilders.Com, Inc. (A Development Stage Company) as of December 31, 1999, and the related statements of operations, changes in stockholders deficit and cash flows for the years ended December 31, 1999 and 1998 and for the period from inception (August 23, 1995) to December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Casinobuilders.Com, Inc. as of December 31, 1999 and the results of its operations and cash flows for the years ended December 31, 1999 and 1998 and for the period from inception (August 23, 1995) to December 31, 1999 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 discussed in Note 2 to the financial statements, the Company incurred cumulative losses of $2,238,000 from inception (August 23, 1995 to December 31, 1999). Additionally, the Company had working capital and total capital deficiencies of $237,000 and $79,000, respectively, at December 31, 1999. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with respect to these matters are also described in Note 2 to the financial statements. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern. As discussed in Note 14, the Company became aware in June 2000 of a potential claim against the Company involving the Series A Senior Subordinated Convertible Debentures. There is currently no pending litigation in this matter. The Company is unable to assess the merits of the potential claim if such action were brought against the Company, nor is it able to quantify the potential loss, if any, that might result if such claim was asserted. Accordingly, the financial statements do not include a provision for loss that might arise from such claim. /s/Feldman Sherb & Co., P.C. Feldman Sherb & Co., P.C. Certified Public Accountants New York, New York June 30, 2000 F-2 CASINOBUILDERS.COM, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS
ASSETS December 31, June 30, 1999 2000 (Unaudited) CASH $ 54,964 $ 9,951 DEPOSITS 468,750 - INTANGIBLES AND OTHER ASSETS 50,238 58,180 ---------------------- ------------------- $ 573,952 $ 68,131 ====================== ================== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable and accrued expenses $ 170,788 $ 167,100 Advance payable - 100,000 Deferred licensing revenues 120,732 - ---------------------- ------------------- TOTAL CURRENT LIABILITIES 291,520 267,100 ---------------------- ------------------- DEBENTURES PAYABLE - Due July 2001 361,507 206,000 STOCKHOLDERS' DEFICIT: Common Stock, $.001 par value, 50,000,000 shares authorized; 17,657,902 and 19,650,899 shares issued and outstanding 17,657 19,650 Additional paid in capital 2,157,957 1,945,614 Deficit accumulated in the development stage (2,254,689) (2,370,233) ---------------------- ------------------- TOTAL STOCKHOLDERS' DEFICIT (79,075) (404,969) ---------------------- ------------------- $ 573,952 $ 68,131 ====================== =================== See notes to financial statements
F-3 CASINOBUILDERS.COM, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS
Inception Year Ended December 31, (August 23, 1995) Six Months Inception --------------------------- -------------------- Ended (August 23, 1995) 1998 1999 to December 31, 1999 June 30, 2000 to June 30, 2000 (Unaudited) (Unaudited) REVENUES $ - $ - $ - $ 123,232 $ 123,232 ----------- ------------- -------------------- ---------------- ------------------- COSTS AND EXPENSES: Cost of services - - - 43,050 43,050 Selling, general and administrative 10,802 1,266,167 1,291,482 154,242 1,445,724 Loss on terminated acquisition - 650,000 650,000 - 650,000 Interest on debentures - 313,207 313,207 41,484 354,691 ----------- ------------- -------------------- ---------------- ------------------- 10,802 2,229,374 2,254,689 238,776 2,493,465 ----------- ------------- -------------------- ---------------- ------------------- NET LOSS $ (10,802)$ (2,229,374)$ (2,254,689) $ (115,544) $ (2,370,233) ============ ============== ===================== ================ ================== BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.00)$ (0.19)$ (0.29) $ (0.01) $ (0.27) ============ ============== ===================== ================ ================== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 9,780,000 12,002,764 7,835,253 18,394,759 8,900,113 ============ ============== ===================== ================ ==================
Note: The Company was inactive during the six months ended June 30, 1999. Accordingly, no comparative operating results are presented herein. F-4 CASINOBUILDERS.COM, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Deficit Accumulated Additional in the Total Price per Common Stock, Par Val Paid Development Stockholders' Date Share Shares Amount Capital Stage Deficit Inception 8/23/95 - $ - $ - $ - $ - Issuance of shares for cash 10/20/95 0.03 60,000 60 1,440 1,500 ------- ------- ------- --------- --------- BALANCE, DECEMBER 31, 1995 60,000 60 1,440 - 1,500 Issuance of shares for cash 7/3/96 0.37 3,000 3 1,097 1,100 Net Loss (1,922) (1,922) ------- ------- ------- --------- --------- BALANCE, DECEMBER 31, 1996 63,000 63 2,537 (1,922) 678 Issuance of shares for cash 5/19/97 0.25 100,000 100 24,900 25,000 Net loss - - - (12,591) (12,591) ------- ------- ------- --------- --------- BALANCE, DECEMBER 31, 1997 163,000 163 27,437 (14,513) 13,087 Forward Split-30:1 3/2/98 4,727,000 4,727 (4,727) Net loss - - - (10,802) (10,802) ------- ------- ------- --------- --------- BALANCE, DECEMBER 31, 1998 4,890,000 4,890 22,710 (25,315) 2,285 Shares contributed to treasury and cancelled 5/13/99 (1,890,000) (1,890) 1,890 - Forward Split- 2-1 5/13/99 3,000,000 3,000 (3,000) - Beneficial conversion feature - debentures - - 200,000 200,000 Issuance of shares for: Services 5/17/99 0.0167 1,000,000 1,000 15,700 16,700 Cash 5/27/99 0.0167 6,000,000 6,000 94,000 100,000 Marketing rights and service 9/28/99 0.50 165,000 165 82,301 82,466 Director services 9/28/99 0.50 250,000 250 124,699 124,949 Conversion of debentures 9/10/99 0.55 137,330 137 75,863 76,000 Services - acquisition 10/11/99 0.63 750,000 750 468,000 468,750 Purchase of domain name 10/11/99 0.63 19,000 19 11,856 11,875 Services 10/11/99 0.63 215,000 215 134,160 134,375 Conversion of debentures 10/11/99 0.48 41,425 41 19,959 20,000 Conversion of debentures 11/1/99 0.35 155,679 156 53,845 54,000 Services 11/17/99 0.31 2,063,678 2,064 642,836 644,899 Services 11/21/99 0.32 200,000 200 63,800 64,000 Conversion of debentures 12/13/99 0.30 164,204 164 49,836 50,000 Conversion of debentures 12/20/99 0.20 496,586 496 99,504 100,000 Net loss - - - (2,229,374) (2,229,374) ------------ ------- --------- ----------- ---------- BALANCE, DECEMBER 31, 1999 17,657,902 17,657 2,157,957 (2,254,689) (79,075) Issuance of shares for: Services 1/6/00 0.20 100,000 100 19,900 20,000 Trade name 1/6/00 0.20 82,000 82 16,318 16,400 Conversion of debentures 2/8/00 0.17 435,804 436 74,564 75,000 Additional interest on debentures 3/31/00 0.10 350,000 350 34,650 35,000 Conversion of debentures 5/1/00 0.13 137,931 138 17,862 18,000 Conversion of debentures 5/9/00 0.05 750,000 750 35,250 36,000 Conversion of debentures 5/11/00 0.05 279,570 280 12,720 13,000 Services 5/31/00 0.09 300,000 300 26,700 27,000 Conversion of debentures 6/4/00 0.06 307,692 308 17,692 18,000 Return and cancellation of shares issued in connection with terminated acquisition 6/30/00 0.63 (750,000) (750) (468,000) (468,750) Net loss (115,544) (115,544) ------------ -------- --------- ----------- ---------- BALANCE, JUNE 30, 2000 (Unaudited) 19,650,899 $ 19,650 $1,945,614 $ (2,370,233) $(404,969) ============ ======== ========= ============ ==========
See notes to financial statements F-5 CASINOBUILDERS.COM, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS
Inception Six Months Inception Year Ended December 31, (August 23, 1995) Ended August 23, 1995) 1998 1999 to December 31, 1999 June 30, 2000 to June 30, 2000 (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (10,802) $ (2,229,374) $(2,254,689) $ (115,544) $ (2,370,233) ---------- ------------ ------------ ------------- ------------ Adjustments to reconcile net loss to net cash used in operating activities: Amortization of debt issuance costs - 61,507 61,507 4,493 66,000 Depreciation and amortization 74 4,199 4,446 8,458 12,904 Common stock issued for services - 1,067,389 1,067,389 47,000 1,114,389 Non-cash interest on debentures - 200,000 200,000 36,991 236,991 Changes in assets and liabilities: Increase (decrease) in accounts payable and accrued expenses 100 170,097 170,418 (5,679) 164,739 Increase (decrease) in deferred licensing revenues - 120,732 120,732 (120,732) - Total adjustments 174 1,607,224 1,607,792 (29,469) 1,578,323 ---------- ------------ ------------ ------------- ------------ NET CASH USED IN OPERATING ACTIVITIES (10,628) (605,450) (630,197) (145,013) (775,210) ---------- ------------ ------------ ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of intangible and other assets - (42,439) (42,439) - (42,439) ---------- ------------ ------------ ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock - 100,000 127,600 - 127,600 Proceeds from advance - - - 100,000 100,000 Proceeds from sale of debentures - 600,000 600,000 - 600,000 ---------- ------------ ------------ ------------- ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES - 700,000 727,600 100,000 827,600 ---------- ------------ ------------ ------------- ------------ NET INCREASE (DECREASE) IN CASH (10,628) 52,111 54,964 (45,013) 9,951 CASH - beginning of period 13,481 2,853 - 54,964 - ---------- ------------ ------------ ------------- ------------ CASH - end of period $ 2,853 $ 54,964 $ 54,964 $ 9,951 $ 9,951 =========== ============ ========== ========= ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: No cash payments were made for income taxes or interest during each of the above periods. Non-cash investing and financing activities Common stock issued for: Conversion of debentures $ - $ 300,000 $ 300,000 $ 160,000 $ 460,000 =========== ============ ========== =========== ================ Acquisition of intangible assets $ - $ 11,875 $ 11,875 $ 16,400 $ 28,275 =========== ============ ========== =========== ================
Note: The Company was inactive during the six months ended June 30, 1999. Accordingly, no comparative statement of cash flows is presented herein. See notes to financial statements F-6 CASINOBUILDERS.COM, INC. ------------------------ (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1999 AND 1998 1. THE COMPANY Casinobuilders.Com, Inc. (the "Company"), formerly known as Magic Lantern Group, Inc., was organized in Nevada in August 1995. The Company plans to provide consulting, marketing and operational services to clients offering electronic gaming entertainment through the Internet. The Company was in the development stage at December 31, 1999. UNAUDITED FINANCIAL STATEMENTS - The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments which include normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The results of operations for the six month period ended June 30, 2000 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2000. These financial statements should be read in conjunction with the Company's December 31, 1999 financial statements and accompanying notes thereto included in Form 10-SB. 2. GOING CONCERN The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred cumulative losses of $2,238,000 from inception (August 23, 1995) to December 31, 1999. Additionally, the Company had working capital and total capital deficiencies of $237,000 and $79,000 at December 31, 1999. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with respect to these matters include restructuring its existing debt, raising additional capital through future issuances of stock and or debentures and ultimately developing a viable business. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. F-7 3. SIGNIFICANT ACCOUNTING POLICIES A. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from these estimates. B. LOSS PER SHARE - Basic loss per share was computed using the weighted average number of shares of outstanding common stock. Weighted average share and per share amounts were restated to give retroactive effect to the stock splits occurring in March 1998 and May 1999. Diluted per share amounts when applicable also include the effect of dilutive common stock equivalents from the assumed exercise of options and conversion of debentures. C. REVENUE RECOGNITION - Revenues are recognized over the term of the contracts on a straight-line basis. D. INCOME TAXES - Income taxes are accounted for under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. E. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of the assets and liabilities reported in the balance sheet approximate their fair market value based on the short-term maturity of these instruments. F. STOCK-BASED COMPENSATION - The company accounts for stock transactions in accordance with APB No. 25, "Accounting for Stock Issued to Employees". In accordance with statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation", the Company adopted the pro forma disclosure requirements of SFAS 123. F-8 4. LOSS ON TERMINATED ACQUISITION On October 31, 1999, the Company entered into an agreement with Futurenet Holdings Ltd. ("Futurenet") to acquire all of the outstanding shares of Cyberluck, Curacao N.V., Conet N.V. and Global Cash N.V. for $1,700,000. The acquisition, if consummated, would have provided the Company with a Netherlands Antilles exclusive master license to operate Internet gaming casinos in addition to certain computer equipment and software adapted for such purpose. The purchase price was payable in installments due as follows: $650,000 - October 31, 1999; $350,000 - December 1, 1999; $600,000 - February 29, 2000; $100,000 - July 1, 2000. The initial payment of $650,000 was non-refundable and was paid $450,000 through September 30, 1999 and the balance of $200,000 in October 1999. The Company was unable to make the scheduled payment of $350,000 due on December 1, 1999 and accordingly lost the right to consummate the acquisition with the result that the $650,000 initial payment has been forfeited. The financial statements at December 31, 1999 give effect to the termination of the acquisition and to the related loss incurred. The Company issued 750,000 shares valued at $468,750 to a certain person, contingent on the successful completion of the acquisition. The acquisition was terminated, thereby requiring the return of the shares to the Company. Such shares were returned in June 2000 and cancelled. 5. INTANGIBLES AND OTHER ASSETS At December 31, 1999, intangibles and other assets consisted of the following: Estimated useful life Amount ---------------- ---------------- Office equipment 5 years $ 3,500 Domain name 5 years 11,875 Software platform 3 years 39,062 ---------------- 54,437 Less: Accumulated depreciation and amortization 4,199 ---------------- $ 50,238 ================ F-9 6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES At December 31, 1999, accounts payable and accrued expenses consisted of the following: Trade payables $ 89,841 Consulting fees 51,504 Professional fees 27,243 Interest on debentures 2,200 ------------------- $ 170,788 =================== 7. ADVANCE PAYABLE The Company received $100,000 in March 2000 as payment in advance for the issuance of the Company's common stock. As of June 30, 2000, the number of shares to be issued has not been determined. Accordingly, such funds are reflected in the financial statements as an "advance payable" 8. DEBENTURES PAYABLE In July 1999, the Company issued Series A Convertible Debentures in the amount of $700,000 and received net proceeds of $600,000 after deducting debt issue costs of $100,000. The debentures are payable with interest at one percent per annum commencing August 1999 and are due in full on July 16, 2001. The debentures are convertible at any time into common stock at 75 percent of the closing bid price, quoted on the day preceding the conversion date, as reported by the NASD "OTC-Bulletin Board". The discount provided to the debenture holders represents a beneficial conversion feature which at the time of issuance amounted to $200,000. Such amount was included in interest expense in the financial statements at December 31, 1999. Interest at one percent per annum is accrued monthly and is convertible into common shares as determined by the agreement. Debt issuance costs are being amortized over the life of the loan or July 16, 2001, whichever is sooner. At December 31, 1999 such costs amounted to $61,507 and were included in the financial statements as interest expense. Debentures payable at December 31, 1999 of $ 361,507 are net of unamortized debt issuance costs of $38,493. The Company issued 995,224 shares of common stock upon conversion of $300,000 of debentures through December 31, 1999. At December 31, 1999 the Company incurred debt service costs of $49,500, which were included as interest expense in the financial statements at such date. F-10 9. DEFERRED LICENSING REVENUES On September 15, 1999, the Company signed a contract to license a Turn-Key Internet Casino for a term of three years expiring in September 2002. The agreement called for an initial payment of $65,750 upon signing of the contract and $200,000 within 120 days thereafter. In January 2000, the customer terminated the agreement and accordingly forfeited the initial payment. In December 1999, the Company received an advance of $54,982 for services to be provided in the year 2000. Such receipts, totalled $120,732 and were included in the financial statements as deferred licensing revenues at December 31, 1999. The Company recorded the full amount of such revenue as income earned during the six months ended June 30, 2000. 10. LEASES Prior to May 1999, the Company neither owned nor leased any real property. The Company currently utilizes an executive suite in Colorado Springs, Colorado, which provides mailing and secretarial services to the Company on a month-to-month basis at $50 per month. The Company's client support offices are located in Kirkland, Washington. The Company leases this space on a month-to-month basis at $500 per month. Total rent expense for 1999 was $3,283. 11. STOCK SPLIT On March 3, 1998, the Company declared a forward stock split on a 30:1 basis. On May 13, 1999, the Company declared a forward stock split on a 2:1 basis. All share and per- share amounts in the accompanying financial statements have been restated to give retroactive effect to the stock splits. F-11 12. STOCK OPTIONS On September 15, 1999, the Company instituted a stock option and restricted stock plan which is available to selected directors, officers, employees and consultants of the Company ("Participants"). The term of each option is ten years from the date of grant or such shorter term as determined by the Stock Option Committee (the "Committee") except for a grant to a 10% shareholder, for which the term will be five years. The exercise price will be determined by the Committee and will not be less than 100% of the fair market value of the shares subject to the option on the date of grant. The restricted stock would be granted to Participants for services rendered at no additional cost to the Participants. The terms, conditions and restrictions of the stock will be determined by the committee on the date of grant. On the date the restriction period terminates, the restricted stock will vest in the Participant. On September 15, 1999, the board of directors granted Messrs. Ruppanner and Randall, both officers of the Company options to purchase up to 2,000,000 shares each of common stock at $0.35 per share through December 2009, with vesting over a three-year period from the date of hire. The aforementioned options were the only outstanding options at December 31, 1999. Pro forma information regarding net loss and loss per share is presented below as if the Company had accounted for its employee stock options under the fair value method of SFAS 123; such pro forma information is not necessarily representative of the effects on reported net income for future years due to, among other things: (1) the vesting period of the stock options and the (2) fair value of additional stock options in future years. Had compensation cost for the Company's stock option plan been determined based upon the fair value at the grant date for awards under the plan consistent with the methodology prescribed under SFAS 123, the Company's net loss for the period ended December 31, 1999 would have been approximately ($2,741,811) or ($0.23) per share. The weighted average fair value of the options granted during the period ended December 31, 1999 are estimated as $0.35 on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for the period ended December 31, 1999: expected dividend yield of 0%, expected volatility of 50%, risk free interest rate of 5.7%, and an estimated life of five years. F-12 13. INCOME TAXES The following is a reconciliation of income taxes and amounts computed using the U.S. Federal statutory rate and the effective tax rate for the years ended December 31, 1999 and 1998 1999 1998 ------------ ------------ Pre-tax loss $ (2,212,000) $ (10,800) ============ Tax benefit at Federal statutory rate (35%) (774,000) (3,800) Permanent differences 4,000 - Tax benefit not recognized 770,000 3,800 ------------- ------------ Taxes per financial statements $ - $ - ============= ============ The Company has adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under this standard, the Company records as an asset its net operating loss carryforward ("NOL") based upon current tax returns, and establishes a valuation allowance to the extent of any NOL which will not be utilized in the foreseeable future. At this time, the Company can not reliably predict future profitability. Accordingly, the deferred tax asset has been reduced in its entirety by the valuation allowance. As of December 31, 1999, the Company had net operating loss carry forwards of approximately $2,234,000 expiring variously through 2019. A significant portion of these carry forwards may be subject to limitations on annual utilization due to "equity structure shifts" or "owner shifts" involving "5 percent stockholders" (as defined in the Internal Revenue Code), which resulted in more than a 50% change in ownership. 14. SUBSEQUENT EVENT In June 2000, the Company issued 1,475,193 shares of its common stock in accordance with the conversion provisions of its Series A Subordinated Convertible Debentures. Under the advice of counsel, these shares were issued with a restrictive legend in accordance with the Securities Act of 1933. Although there is no pending litigation, nor threat of litigation in this matter, the debenture holder may take action against the Company to remove the restrictive legend from these shares. The Company is unable to assess the merits of a potential claim if such demand or action is brought against the Company, nor is it able to quantify the potential loss, if any, that might result if such claim is asserted. Accordingly, the financial statements do not include a provision for loss that might arise from such claim. F-13 EX-3.1 2 0002.txt ARTICLES OF INCORPORATION ARTICLES OF INCORPORATION ARTICLES OF INCORPORATION of MAGIC LANTERN GROUP, INC. The undersigned, being of the age of majority, file Articles of Incorporation to conduct business in corporate form according to Chapter 78 (Private Corporation Act) of the statutes and the law of the State of Nevada. 1.0 NAME The name of the corporation is MAGIC LANTERN GROUP, INC. 2.0 DURATION The period of duration of the Corporation is perpetual. 3.0 PURPOSES AND POWERS 3.1 PURPOSES The purposes for which the Corporation is organized are as follows: 3.1.1 To do everything necessary, proper, advisable, or convenient for the accomplishment of the foregoing purposes, and to do all things incidental to them or connected with them that are not forbidden by the Nevada Private Corporation Act (HEREINAFTER "ACT"), by other law, or by these Articles. 3.1.2 To carry on any other activities and business lawful in Nevada or the United States of America. 3.2 POWERS The Corporation, subject to any specific written limitations or restrictions imposed by the Act or by these ARTICLES OF INCORPORATION, shall have the right to and may exercise the following powers: 3.2.1 To have and exercise all powers specified in the Private Corporation Act of Nevada; 3.2.2 To enter into lawful arrangement for sharing profits, deferring compensation, making and entering into pension plans and the like for it's employees; to enter into reciprocal associations, joint ventures, partnerships, cooperative associations, limited liability companies and other similar activities; 3.2.3 To make any guaranty respecting stocks, dividends, securities, indebtedness, interest, contracts, or other obligations created by any domestic or foreign corporations, associations, partnerships, individuals, or other entities; 1 3.2.4Each of the foregoing clauses of this Section shall be construed as independent powers and the matters expressed in each clause shall not, unless otherwise expressly provided, be limited by reference to, or inference from, the terms of any other clause. The enumeration of specific powers shall not be construed as limiting or restricting in any manner either the meaning of general terms used in any of these clauses, or the scope of the general powers of the Corporation created by them nor shall the expression of one thing in any of these clauses be deemed to exclude another not expressed, although it be of like nature. 3.2.5 The corporation shall not engage in the trust, banking, insurance or railroad business. 3.3 CARRYING OUT OF PURPOSES AND EXERCISE OF POWERS IN ANY JURISDICTION The Corporation may carry out its purposes and exercise it's powers in any state territory, district, or possession of the United States, or in any foreign country, to the extent that these purposes and powers are not forbidden by the law of the state, territory, district, or possession of the United States, or by the foreign country; and it may limit the purpose or purposes that it proposes to carry out or the powers it proposes to exercise in any application to do business in any state, territory, district, or possession of the United States or foreign country. 3.4 DIRECTION OF PURPOSES AND EXERCISE OF POWERS BY DIRECTORS The Directors, subject to any specific written limitations or restrictions imposed by the Act or by these ARTICLES OF INCORPORATION, shall direct the carrying out of the purposes and exercise the powers of the Corporation without previous authorization or subsequent approval by the shareholders of the Corporation. 4.0 SHARES 4.1 NUMBER The aggregate number of the shares that the Corporation shall have authority to issue shall be 50,000,000 shares of common stock, each share having a par value of 1 mil. All shares shall be common, voting, and non-assessable. 4.2 DIVIDENDS The holders of the Capital Stock shall be entitled to receive, when and as declared by the Board of Directors, solely out of unreserved and unrestricted earned surplus, dividends payable either in cash, in property, or in shares of the Capital Stock. 2 No dividends shall be paid if the source out of which it is proposed to pay the dividend is due to or arises from unrealized appreciation in value or from a revaluation of assets; or if the corporation is incapable of paying its debts as they become due in the usual course of business. 4.3 CUMULATIVE VOTING; PRE-EMPTIVE RIGHTS There shall be no cumulative voting for Directors. Pre- emptive rights shall not be granted. 5.0 MINIMUM CAPITAL The Corporation will not commence business until consideration of the value of at least $1,000 has been received. 6.0 REGULATION OF INTERNAL AFFAIRS 6.1. BYLAWS The initial bylaws shall be adopted by the Board of Directors. The power to alter, amend, or repeal the Bylaws or to adopt new Bylaws shall be vested in the Board of Directors. The Bylaws may contain provisions for the regulation and management of the affairs of the Corporation not inconsistent with the Act or these Articles. 6.2. TRANSACTIONS IN WHICH DIRECTORS HAVE AN INTEREST Any contract or other transaction between the Corporation and one or more of its Directors or between the Corporation and any firm of which one or more of its Directors are members or employees, or in which they are interested, or between the Corporation and any corporation or association of which one or more of its Directors are shareholders, members, directors, officers, or employees or in which they are interested, shall be valid for all purposes, notwithstanding the presence of the Director or Directors at the meeting of the Board of Directors of the corporation that acts upon, or in reference to, the contract or transaction, and notwithstanding his or their participation in he action, if the fact of such interest shall be disclosed or known to the Board of Directors and the Board of Directors shall, nevertheless, authorize or RATIFY THE CONTRACT or transaction, the interested Director or Directors to be counted in determining whether a quorum is present and to be entitled to vote on such authorization or ratification. The section shall not be construed to invalidate any contract or other transaction that would otherwise be valid under common and statutory law applicable to it. 6.3. INDEMNIFICATION AND RELATED MATTERS 6.3.1. The Corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or 3 investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expense ( including attorneys fees), judgment, fines and amounts paid in settlement actually and reasonable incurred by him in connection with such action, suit of proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contenders or its equivalent, shall not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Corporation and, with respect to any criminal action or proceeding, had actual knowledge that his or her conduct was unlawful. 6.3.2. The Corporation shall have power to indemnify any person who was or is a party of is threatened to be made a party to any threatened or completed action or suit by or in the right of the Corporation to procure a judgment in it's favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys fees) actually and reasonable incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expense the court shall deem proper. 6.3.3. To the extent that a Director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in (a) and (b) or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys fees) actually and reasonably incurred by him in connection therewith. 6.3.4. Any indemnification under (a) and (b) (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination by the Corporation that indemnification of the Director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in (a) and (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or even if obtainable, if a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the shareholders. 4 6.3.5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided in (d) upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this section. 6.3.6. The indemnification provided by this section shall not be deemed exclusive of any other rights to which those identified MAY BE ENTITLED UNDER ANY BYLAW, agreement, vote of shareholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors, and personal representatives of such person. 6.3.7. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a Director, Officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising our of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this section. 6.3.8. A Director shall not be personally liable for breach of fiduciary duty when acting either as a Director or Officer except for acts involving intentional misconduct, fraud, a knowing violation of the law or the payment of illegal dividends. NRS 78.037. NRS 78.300 6.4. REMOVAL OF DIRECTORS REMOVAL SHALL BE GOVERNED BY THE BYLAW provisions and the Act. 6.5. AMENDMENT OF ARTICLES The Corporation reserves the right to amend the ARTICLES OF INCORPORATION in any manner now or hereafter permitted by the Act. 7.0 RESIDENT AGENT: ADDRESS OF CORPORATION 7.1. THE "REGISTERED OFFICE" of the corporation shall be 1700 E. Desert Inn Road, Suite 113, Las Vegas, Nevada 89109. 7.2. The initial resident agent shall be Robert C. Bovard, 1700 East Desert Inn Rd. Suite 113, Las Vegas, Nevada 89109. 5 8.0 IDENTITY OF DIRECTOR(S) The initial Board of Directors (the Directors shall be styled as Directors and not as Trustees) shall be three in number but may be increased or decreased at the formation and organization meeting or by authority of BYLAWS. Members of the Board of Directors need not be residents of Nevada. The names and addresses of the person(s) to serve as Director(s) until the formation meeting or first annual meeting and until their successor(s) shall have been elected and qualified or until the number of members of the Board of Directors is expanded is: ROBERT C. BOVARD 1700 East Desert Inn Road Suite 113 Las Vegas, Nevada 89109 The number of Directors may be changed from time to TIME BY AMENDMENT OF THE BYLAWS but no decrease shall have the effect of reducing such number below one or of shortening the term of any incumbent Director. Anything to the contrary notwithstanding, however, the number shall not be less than two if there are only two if there are only two shareholders of record or one if there is only one shareholder of record. The Board, if there are more than two shareholders, shall consist of not less than three nor more than seven members. 9.0 ORIGINAL INCORPORATORS The name, address and identity of the original Incorporator is: ROBERT C. BOVARD 1700 East Desert Inn Road Suite 113 Las Vegas, Nevada 89109 DATED this 22nd day of August, 1995 /S/ Robert C. Bovard ---------------- ROBERT C. BOVARD 6 EX-3.2 3 0003.txt BYLAWS BYLAWS BY-LAWS OF Magic Lantern Group, Inc. ARTICLE I MEETING OF STOCKHOLDERS SECTION 1. The annual meeting of the stockholders of the Company shall be held at its office in the City of Las Vegas, Clark County, at 1 o'clock in the afternoon on the 25th day of August in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding day not a legal holiday, for the purpose of electing directors of the company to serve during the ensuing year and for the transaction of such other business as may be brought before the meeting. At least five days' written notice specifying the time and place, when and where, the annual meeting shall be convened, shall be mailed in a United States Post Office addressed to each of the stockholders of record at the time of issuing the notice at his or her, or its address last known, as the same appears on the books of the company. SECTION 2. Special meetings of the stockholders may be held at the office of the company in the State of Nevada or elsewhere, whenever called by the President, or by the Board of Directors, or by vote of, or by an instrument in writing signed by the holders of 51% of the issued and outstanding capital stock of the company. At least ten days' written notice of such meeting, specifying the day and hour and place, when and where such meeting shall be convened, and objects for calling the same, shall be mailed in a United States Post Office, addressed to each of the stockholders of record at the time of issuing the notice, at his or her or its address last known, as the same appears on the books of the company. SECTION 3. If all the stockholders of the company shall waive notice of a meeting, no notice of such meeting shall be required, and whenever all of the stockholders shall meet in person or by proxy, such meeting shall be valid for all purposes without call or notice, and at such meeting any corporate action may be taken. The written certificate of the officer or officers calling any meeting setting forth the substance of the notice, and the time and place of the mailing of the same to the several stockholders, and the respective addresses to which the same were mailed, shall be prima facie evidence of the manner and fact of the calling and giving such notice. If the address of any stockholder does not appear upon the books of the company, it will be sufficient to address any notice to such stockholder at the principal office of the corporation. SECTION 4. All business lawful to be transacted by the stockholders of the company, may be transacted at any special meeting or at any adjournment thereof. Only such business, however, shall be acted upon at special meeting of the stockholders as shall have been referred to in the notice calling such meetings, but at any stockholders' meeting at which all of the outstanding capital stock of the company is represented, either in person or by proxy, any lawful business may be transacted, and such meeting shall be valid for all purposes. SECTION 5. At the stockholders' meetings the holders of more than 50 percent (50%) in amount of the entire issued and outstanding capital stock of the company, shall constitute a quorum for all purposes of such meetings. If the holders of the amount of stock necessary to constitute a quorum shall fail to attend, in person or by proxy, at the time and place fixed by these By-laws for any annual meeting, or fixed by a notice as above provided for a special meeting, a majority in interest of the stockholders present in person or by proxy may adjourn from time to time without notice other than by announcement at the meeting, until holders of the amount of stock requisite to constitute a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted as originally called. SECTION 6. At each meeting of the stockholders every stockholder shall be entitled to vote in person or by his duly authorized proxy appointed by instrument in writing subscribed by such stockholder or by his duly authorized attorney. Each stockholder shall have one vote for each share of stock standing registered in his or her or its name on the books of the corporation, ten days preceding the day of such meeting. The votes for directors, and upon demand by any stockholder, the votes upon any question before the meeting, shall be by voice vote. At each meeting of the stockholders, a full, true and complete list, in alphabetical order of all the stockholders entitled to vote at such meeting, and indicating the number of shares held by each, certified by the Secretary of the Company, shall be furnished, which list shall be prepared at least ten days before such meeting, and shall be open to the inspection of the stockholders, or their agents or proxies, at the place where such meeting is to be held, and for ten days prior thereto. Only the persons in whose names shares of stock are registered on the books of the company for ten days preceding the date of such meeting, as evidenced by the list of stockholders, shall be entitled to vote at such meeting. Proxies and powers of Attorney to vote must be filed with the Secretary of the Company before an election or a meeting of the stockholders, or they cannot be used at such election or meeting. SECTION 7. At each meeting of the stockholders the polls shall be opened and closed; the proxies and ballots issued, received, and be taken in charge of, for the purpose of the meeting, and all questions touching the qualifications of voters and the validity of proxies, and the acceptance or rejection of votes, shall be decided by two inspectors. Such inspectors shall be appointed at the meeting by the presiding officer of the meeting. SECTION 8. At the stockholders' meetings, the regular order of business shall be as follows: 1. Reading and approval of the Minutes of previous meeting or meetings; 2. Reports of the Board of Directors, the President, Treasurer and Secretary of the Company in the order named; 3. Reports of Committee; 4. Election of Directors; 5. Unfinished Business; 6. New Business; 7 Adjournment. ARTICLE II DIRECTORS AND THEIR MEETINGS SECTION 1. The Board of Directors of the Company shall consist of 3 persons who shall be chosen by the stockholders annually, at the annual meeting of the Company, and who shall hold office for one year, and until their successors are elected and qualify. SECTION 2. When any vacancy occurs among the Directors by death, resignation, disqualification or other cause, the stockholders, at any regular or special meeting, or at any adjourned meeting thereof, or the remaining Directors, by the affirmative vote of a majority therefor shall elect a successor to hold office for the unexpired portion of the term of the Director whose place shall have become vacant and until his successor shall have been elected and shall qualify. SECTION 3. Meeting of the Directors may be held at the principal office of the company in the state of Nevada or elsewhere, at such place or places as the Board of Directors may, from time to time, determine. SECTION 4. Without notice or call, the Board of Directors shall hold its first annual meeting for the year immediately after the annual meeting of the stockholders or immediately after the election of Directors at such annual meeting. Regular meetings of the Board of Directors shall be held at the office of the company in the City of Las Vegas, State of Nevada on November 1, at 3 o'clock in the P.M. Notice of such regular meetings shall be mailed to each Director by the Secretary at least three days previous to the day fixed for such meetings, but no regular meeting shall be held void or invalid if such notice is not given, provided the meeting is held at the time and place fixed by these by-laws for holding such regular meetings. Special meetings of the Board of Directors may be held on the call of the President or Secretary on at least three days notice by mail or telegraph. Any meeting of the Board, no matter where held, at which all of the members shall be present, even though without or of which notice shall have been waived by all absentees, provided a quorum shall be present, shall be valid for all purposes unless otherwise indicated in the notice calling the meeting or in the waiver of notice. Any and all business may be transacted by any meeting of the Board of Directors, either regular or special. SECTION 5: A majority of the Board of Directors in office shall constitute a quorum for the transaction of business, but if at any meeting of the Board there be less than a quorum present, a majority of those present may adjourn from time to time, until a quorum shall be present, and no notice of such adjournment shall be required. The Board of Directors may prescribe rules not in conflict with these By-laws for the conduct of its business; provided, however, that in the fixing of salaries of the officers of the corporation, the unanimous action of all of the Directors shall be required. SECTION 6. A Director need not be a stockholder of the corporation. SECTION 7. The Directors shall be allowed and paid all necessary expenses incurred in attending any meeting of the Board, but shall not receive any compensation for their services as Directors until such time as the company is able to declare and pay dividends on its capital stock. SECTION 8. The Board of Directors shall make a report to the stockholders at annual meetings of the stockholders of the condition of the company, and shall, at request, furnish each of the stockholders with a true copy thereof. The Board of Directors in its discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders called for the purpose of considering any such contract or act, which, it approved, or ratified by the vote of the holders of a majority of the capital stock of the company represented in person or by proxy at such meeting, provided that a lawful quorum of stockholders be there represented in person or by proxy, shall be valid and binding upon the corporation and upon all the stockholders thereof, as if it had been approved or ratified by every stockholder of the corporation. SECTION 9. The Board of Directors shall have the power from time to time to provide for the management of the offices of the company in such manner as they see fit, and in particular from time to time to delegate any of the powers of the Board in the course of the current business of the company to any standing or special committee or to any officer or agent and to appoint any persons to be agents of the company with such powers (including the power to subdelegate), and upon such terms as may be deemed fit. SECTION 10. The Board of Directors is invested with the complete and unrestrained authority in the management of all the affairs of the company, and is authorized to exercise for such purpose as the General Agent of the Company, its entire corporate authority. SECTION 11. The regular order of business at meetings of the Board of Directors shall be as follows: 1. Reading and approval of the minutes of any previous meeting or meetings; 2. Reports of officers and committeemen; 3. Election of officers; 4. Unfinished business; 5. New business; 6. Adjournment. ARTICLE III OFFICERS AND THEIR DUTIES SECTION 1. The Board of Directors, at its first and after each meeting after the annual meeting of stockholders, shall elect a President, a Vice-President, a Secretary and a Treasurer to hold office for one, year next coming, and until their successors are elected and qualify. The offices of the Secretary and Treasurer may be held by one person. Any vacancy in any of said offices may be filled by the Board of Directors. The Board of Directors may from time to time by resolution, appoint such additional Vice Presidents and additional Assistant Secretaries, Assistant Treasurer and Transfer Agents of the company as it may deem advisable; prescribe their duties, and fix their compensation, and all such appointed officers shall be subject to removal at any time by the Board of Directors. all officers, agents, and factors of the company shall be chosen and appointed in such manner and shall hold their office for such terms as the Board of Directors may by resolution prescribe. SECTION 2. The President shall be the executive officer of the company and shall have the supervision and, subject to the control of the Board of Directors, the direction of the Company's affairs, with full power to execute all resolutions and orders of the Board of Directors not especially entrusted to some other officer of the company. He shall be a member of the Executive Committee, and the Chairman thereof; he shall preside at all meetings of the Board of Directors, and at all meetings of the stockholders, and shall sign the Certificates of Stock issued by the company and shall perform such, other duties as shall be prescribed by the Board of Directors. SECTION 3. The Vice-President shall be vested with all the powers and perform all the duties of the President in his absence or inability to act, including the signing of the Certificates of Stock issued by the company, and he shall so perform such other duties as shall be prescribed by the Board of Directors. SECTION 4. The Treasurer shall have the custody of all the funds and securities of the company. When necessary or proper he shall endorse on behalf of the company for collection checks, notes, and other obligations; he shall deposit all monies to the credit of the company in such bank or banks or other depository as the Board of Directors may designate; he shall sign all receipts and vouchers for payments made by the company, except as herein otherwise provided. He shall sign with the President all bills of exchange and promissory notes of the company; he shall also have the care and custody of the stocks, bonds, certificates, vouchers, evidence of debts, securities, and such other property belonging to the company as the Board of Directors shall designate; he shall sign all papers required by law or by those By-Laws or the Board of Directors to be signed by the Treasurer. Whenever required by the Board of Directors, he shall render a statement of his cash account; he shall enter regularly in the books of the company to be kept by him for the purpose, full and accurate accounts of all monies received and paid by him on account of the company. He shall at all reasonable times exhibit the books of account to any Directors of the company during business hours, and he shall perform all acts incident to the position of Treasurer subject to the control of the Board of Directors. The Treasurer shall, if required by the Board of Directors, give bond to the company conditioned for the faithful performance of all his duties as Treasurer in such sum, and with such security as shall be approved by the Board of Directors, with expense of such bond to be borne by the company. SECTION 5. The Board of Directors may appoint an Assistant Treasurer who shall leave such powers and perform such duties as may be prescribed for him by the Treasurer of the company or by the Board of Directors, and the Board of Directors shall require the Assistant Treasurer to give a bond to the company in such sum and with such security as it shall approve, as conditioned for the faithful performance of his duties as Assistant Treasurer, the expense of such bond to be borne by the company. SECTION 6. The Secretary shall keep the Minutes of all meetings of the Board of Directors and the Minutes of all meetings of the stockholders and of the Executive Committee in books provided for that purpose. He shall attend to the giving and serving of all notices of the company; he may sign with the President or Vice-President, in the name of the Company, all contracts authorized by the Board of Directors or Executive Committee; he shall affix the corporate seal of the company thereto when so authorized by the Board of Directors or Executive Committee; he shall have the custody of the corporate seal of the company; he shall affix the corporate seal to all certificates of stock duly issued by the company; he shall have charge of Stock Certificate Books, Transfer books and Stock Ledgers, and such other books and papers as the Board of Directors or the Executive Committee may direct, all of which shall at all reasonable times be open to the examination of any Director upon application at the office of the company during business hours, and he shall, in general, perform all duties incident to the office of Secretary. SECTION 7. The Board of Directors may appoint an Assistant Secretary who shall have such powers and perform such duties as may be prescribed for him by the Secretary of the company or by the Board of Directors. SECTION 8. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority in behalf of the company to attend and to act and to vote at any meetings of the stockholders of any corporation in which the company may hold stock, and at any such meetings, shall possess and may exercise any and all rights and powers incident to the ownership of such stock, and which as the new owner thereof, the company might have possessed and exercised if present. The Board of Directors, by resolution, from time to time, may confer like powers on any person or persons in place of the President to represent the company for the purposes in this section mentioned. ARTICLE IV CAPITAL STOCK SECTION 1. The capital stock of the company shall be issued in such manner and at such times and upon such conditions as shall be prescribed by the Board of Directors. SECTION 2. Ownership of stock in the company shall be evidenced by certificates of stock in such forms as shall be prescribed by the Board of Directors, and shall he under the seal of the company and signed by the President or the Vice-President and also by the Secretary or by an Assistant Secretary All certificates shall be consecutively numbered; the name of the person owning the shares represented thereby with the number of such shares and the date of issue shall be entered on time company's books. No certificates shall be valid unless it is signed by the President or Vice-President and by the Secretary or Assistant Secretary. All certificates surrendered to the company shall be cancelled and no new certificate shall be issued until the former certificate for the same number of shares shall have been surrendered or cancelled. SECTION 3. No transfer of stock shall be valid as against the company except on surrender and cancellation of the certificate therefor, accompanied by an assignment or transfer by the owner therefor. Whenever any transfer shall be expressed as made for collateral security and not absolutely, the same shall be so expressed in the entry of said transfer on the books of the company. SECTION 4. The Board of Directors shall have power and authority to make all such rules and regulations not inconsistent herewith as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the company. The Board of Directors may appoint a transfer agent and a registrar of transfers and may require all stock certificates to bear the signature of such transfer agent and such registrar of transfer. SECTION 5. The Stock Transfer Books shall be closed for all meetings of the stockholders for the period of ten days prior to such meetings and shall be closed for the payment of dividends during such periods as from time to time may be fixed by the Board of Directors, and during such periods no stock shall be transferable. SECTION 6. Any person or persons applying for a certificate of stock in lieu of one alleged to have been lost or destroyed, shall make affidavit or affirmation of the fact, and shall deposit with the company an affidavit. Whereupon, at the end of six months after the deposit of said affidavit and upon such person or persons giving Bond of Indemnity to the company with surety to be approved by the Board of Directors in double the current value of stock against any damage, loss or inconvenience to the company which may or can arise in consequence of a new or duplicate certificate being issued in lieu of the one lost or missing, the Board of Directors may cause to be issued to such person or persons a new certificate, or a duplicate of the certificate, or a duplicate of the certificate so lost or destroyed. The Board of Directors may, in its discretion refuse to issue such new or duplicate certificate save upon the order of some court having jurisdiction in such matter, anything herein to the contrary notwithstanding. ARTICLE V OFFICES AND BOOKS SECTION 1. The principal office of the corporation, in Nevada shall be at 2278 Heflin Ave. Las Vegas, and the company may have a principal office in any other state or territory as the Board of Directors may designate. SECTION 2. The Stock and Transfer Books and a copy of the By- Laws and Articles of Incorporation of the company shall be kept at the office of its Resident Agent, Robert C. Bovard, Esq. 1700 E. Desert Inn Rd. #113, Las Vegas in the County of Clark, State of Nevada, for the inspection of all who are authorized or have the right to see the same, and for the transfer of stock. All other books of the company shall be kept at such places as may be prescribed by the Board of Directors. ARTICLE VI MISCELLANEOUS SECTION 1. The Board of Directors shall have power to reserve over and above the capital stock paid in, such an amount in its discretion as it may deem advisable to fix as a reserve fund, and may, from time to time, declare dividends from the accumulated profits of the company in excess of the amounts so reserved, and pay the same to the stockholders of the company, and may also, if it deems the same advisable, declare stock dividends of the unissued capital stock of the company. SECTION 2. No agreement, contract or obligation (other than checks in payment of indebtedness incurred by authority of the Board of Directors involving the payment of monies or the credit of the company for more than dollars) shall he made without the authority of the Board of Directors, or of the Executive Committee acting as such. SECTION 3. Unless otherwise ordered by the Board of Directors, all agreements and contracts shall be signed by the President and the Secretary in the name and on behalf of the company, and shall have the corporate seal thereto attached. SECTION 4. All monies of the corporation shall be deposited when and as received by the Treasurer in such bank or banks or other depository as may from time to time be designated by the Board of Directors, and such deposits shall be made in the name of the company. SECTION 5. No note, draft, acceptance, endorsement or other evidence of indebtedness shall be valid or against the company unless the same shall be signed by the President or a Vice- President, and attested by the Secretary or an Assistant Secretary, or signed by the Treasurer or an Assistant Treasurer, and countersigned by the President, Vice-President, or Secretary, except that the Treasurer or an Assistant Treasurer may, without countersignature, make endorsements for deposit to the credit of the company in all its duly authorized depositories. SECTION 6. No loan or advance of money shall be made by the company to any stockholder or officer therein, unless the Board of Directors shall otherwise authorize. SECTION 7. No director nor executive officer of the company shall be entitled to any salary or compensation for any services performed for the company, unless such salary or compensation shall be fixed by resolution of the Board of Directors, adopted by the unanimous vote of all the Directors voting in favor thereof. SECTION 8. The company may take, acquire, hold, mortgage, sell, or otherwise deal in stocks or bonds or securities of any other corporation, if and as often as the Board of Directors shall so elect. SECTION 9. The Directors shall have power to authorize and cause to be executed, mortgages, and liens without limit as to amount upon the property and franchise of this corporation, and pursuant to the affirmative vote, either in person or by proxy, of the holders of a majority of the capital stock issued and outstanding; the Directors shall have the authority to dispose in any manner of the whole property of this corporation. SECTION 10. The company shall have a corporate seal, the design thereof being as follows: ARTICLE VII AMENDMENT OF BY-LAWS SECTION 1. Amendments and changes of these By-Laws may be made at any regular or special meeting of the Board of Directors by a vote of not less than all of the entire Board, or may be made by a vote of, or a consent in writing signed by the holders of 77% of the issued and outstanding capital stock. KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned. being the directors of the above named corporation. do hereby consent to the foregoing By-Laws and adopt the same as and for the By-Laws of said corporation. IN WITNESS WHEREOF we have hereunto act our hands this 3rd. day of October, 1995. Magic Lantern Group, Inc. By_______/s/ Joseph Panebianco Joseph Panebianco, President EX-3.3 4 0004.txt CERTIFICATE OF AMENDMENT TO ARTICLES CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION OF MAGIC LANTERN GROUP, INC. ROBERT C. BOVARD, ESQ. certifies that: 1. He is the sole original incorporator of Magic Lantern Group, Inc. a Nevada corporation. 2. The original Articles were filed in the Office of the Secretary of State on August 23, 1995. 3. As of the date of this certificate, no stock of the corporation has been issued. 4. They hereby adopt the following amendments to the Articles of Incorporation of this Corporation: Article 4.1 is amended to read as follows: 4.1 The aggregate number of shares that the Corporation shall have authority to issue shall be 50,000,000 shares of common stock, each share having a par value of 1 mil. All shares shall be common, voting, and non-assessable. Article 5.0 is amended to read as follows: 5.0 MINIMUM CAPITAL The Corporation will not commence business until consideration of the value of at least $1,000 has been recieved. /S/ Robert C.Bovard ROBERT C. BOVARD, Esq. EX-10.1 5 0005.txt EMPLOYMENT AGREEMENT - RUPPANNER [GRAPHIC OMITTED][GRAPHIC OMITTED] 2110 VICKERS DRIVE SUITE 100 COLORADO SPRINGS, CO. 80918 EMPLOYMENT AGREEMENT Employment Agreement made effective as of the date of signing, by and between CasinoBuilders.com a Nevada Corporation, with principal offices in Colorado Springs, Colorado ("Company"), and Paul A. Ruppanner, residing in, Boca Raton, Florida ("Employee"). In consideration of the promises and mutual covenants herein set forth, the Company and the Employee agree as follows: ARTICLE 1: EMPLOYMENT TERMS SECTION 1.1. EMPLOYMENT AND TERM. The Company hereby employs the Employee, and the Employee accepts such employment, upon the terms and conditions hereinafter set forth, for the period ("Employment Term") commencing on and as of the date of this contract signing hereunder and terminating as provided in Section 1.7 hereof. SECTION 1.2. EMPLOYMENT SERVICES. The Employee shall devote his full working time and effort to promote the business and affairs of the Company and its Affiliates as necessary in order to enable them to achieve their business objectives. The Employee's principal assignment shall be to serve as President and Chief Executive Officer. In this capacity as an executive of the company, the Employee shall be responsible for and shall also perform other duties and assignments, which are consistent with his responsibilities, which may be reasonably assigned to him from time to time by the Board of Directors of the Company. Nothing in this Section 1.2 shall be deemed to prevent the Employee from: A. Investing his assets in a manner not prohibited by Section 2.5 hereof, and in such form or manner as shall not require any material services on his part in the operations or affairs of the companies or other entities in which such investments are made; B. Serving on the board of directors of any other company, subject to the prohibitions set forth in Section 2.5 hereof, provided the Board of Directors of the Company shall have approved such service in writing, or; 1 C. Engaging in religious, charitable or other community or non-profit activities, which do not impair his ability to fulfill his duties and responsibilities under this Agreement. SECTION 1.3. EMPLOYMENT COMPENSATION. A. BASE SALARY - For services rendered by the Employee under this Agreement, the Company shall pay the Employee an initial annual salary of $200,000.00 per annum, payable in equal semi-monthly installments (the "Base Salary"). The Base Salary shall be subject to annual review by the Board of Directors of the Company on or about each January 1 thereafter for so long as this Agreement is in effect. B. INCENTIVE BONUS COMPENSATION - For services rendered by the Employee under this Agreement, the Company, by action of the Board of Directors, shall establish an annual executive incentive bonus plan in which the Employee shall participate in recognition of the Employee's contribution to the overall performance of the Company ("Bonus"). Such Bonus shall be granted within ninety (90) days following the conclusion of each calendar year commencing December 31, 1999, after assessment of the Employee's and Company's performance pursuant to the criteria, terms and conditions of the bonus plan to be established. The amount of any Bonus, which the Company may grant to the Employee from time to time shall be in addition to his Base Salary and shall, under no circumstances, be included in the Employee's Base Salary. C. STOCK OPTIONS - The Employee shall be entitled to participate in The Company's Stock Option Plan ("Option Plan"). Grants under the Option Plan shall be in amounts determined by the Option Plan administrators or Board of Directors of the Company. The initial amount of stock, which has been granted to the Employee under the Company Stock Option Plan, vesting in equal amounts at the conclusion of each of the subsequent (3) three years, beginning June 1, 1999, is 2,000,000 shares for founding the company. SECTION 1.4. BENEFITS. The Employee will participate in any employee benefit programs provided by the Company and its Subsidiaries, if any. SECTION 1.5. WITHHOLDING. The amount of payments to be made by the Company to the Employee are set forth herein prior to the deduction of any taxes or other amounts, and all such payments shall be made by the Company to the Employee under this Agreement net of any tax or other amounts required to be withheld by the Company under applicable law. SECTION 1.6. VACATION. The Employee shall be entitled to vacation and holiday plans under the same terms and considerations, as they are available to all Company employees, in accordance with Company policy. 2 SECTION 1.7. EMPLOYMENT TERM; TERMINATION The Employment Term shall run indefinitely, unless terminated pursuant to the following provisions of this Section 1.7. A. "THE EMPLOYMENT TERM" shall terminate: 1. At the death or 60 days after the Permanent Disability (as hereinafter defined) of the Employee 2. Immediately at the election of the Company, for Cause (as hereinafter defined), or; 3. At the election of either the Company or the Employee upon fifteen (15) days' prior written notice to the other. B. "PERMANENT DISABILITY", for purposes of this Section 1.7, shall mean any physical or mental incapacitation which would materially hinder the Employee from performing the responsibilities of his assigned duties, as determined by a medical professional of the company's choosing. C. "CAUSE", for purposes of this Section 1.7, shall mean any of the following, as determined by the management of The Company: 1. Refusal of the Employee to perform his duties hereunder or other material breach by the Employee of the terms of this Agreement; 2. Any substantial dishonesty by the Employee in connection with the performance of his duties hereunder; or 3. Any conviction of, or plea of guilty by, the Employee with respect to any crime, which conviction or plea is likely in the reasonable judgment of the management of the Company to adversely affect the Employee's professional reputation, the reputation of the Company or of any other member of the Group or the ability of the Employee to perform his duties satisfactorily hereunder. 4. The Company's right of termination pursuant to this Section 1.7 shall be in addition to, and shall not affect, its rights and remedies under any other provisions of this Agreement or under applicable law, and all such rights and remedies shall survive termination of this Agreement and the employment of the Employee hereunder. Nothing herein shall be deemed to constitute a waiver by the Employee of any rights he may have under applicable laws. 5. In the event of termination of employment pursuant to the terms of this Section 1.7, the Employee shall have no right to receive any compensation or fees for any period subsequent to the date of such termination; except that: 6. In the event such termination is due to death or Permanent Disability pursuant to Section 1.7 (B), the Company shall pay the Employee or his estate, as the case may be, a pro tanto portion of the Bonus, if any, for the year in which such termination occurs, a special 90 ninety day bonus severance, and vesting of the current year's stock options; 7. In the event that such termination is made by the Company pursuant to Section 1.7 (B) hereof, the Company agrees that during the Severance 3 Period (as such term is defined below) it will continue to pay the Employee his then current Base Salary. D. "SEVERANCE PERIOD", for purposes of this Section 1.7, shall mean the period commencing on the date of such termination and ending: fifteen (15) calendar days thereafter. E. "THE OBLIGATIONS" of the Employee pursuant to Sections 2.3 and 2.4 of this Agreement shall survive the termination for any reason of the Employment Term. The obligations of the Employee pursuant to Section 2.5 hereof shall survive the termination of this Agreement as provided for in Section 2.5. 1.7.1 COMPANY CHANGE OF CONTROL. Notwithstanding any provisions contained in this Plan or in a Stock Option Agreement deferring the right of employee to exercise an option, the option (referred to in 1.3.C above) shall, at the discretion of the Board, become fully vested and employee shall be entitled to exercise such option, in whole or in part, during the 30-day period following the first purchase of Shares of the Company pursuant to a tender offer or exchange offer (other than an offer by the Company) for all, or any part of, the Company's Shares or; A. Commencing on the date of approval by the shareholders of the Company of an agreement for: 1. A merger or consolidation or similar transaction in which the Company will not survive as an independent corporation,or 2. A sale, exchange or other disposition of all or more than 75% all of the Company's assets. ARTICLE 2: GENERAL PROVISIONS SECTION 2.1. EXPENSE ACCOUNT AND ALLOWANCE. The Company agrees to reimburse the Employee for all reasonable travel, entertainment and other documented, itemized business expenses incurred by him in connection with the performance of his duties under this Agreement; provided, however, that the amount available for such travel, entertainment, and other business expenses shall be consistent with expense reimbursement policies adopted by the Company as in effect at the time of the incidence of such expenses by the Employee or as may be fixed in advance by the Company's Board of Directors. SECTION 2.2. LOCATION. The Employee shall perform services under this Agreement at the Employee's private office and at such other location or locations reasonably specified by the Company. The Employee shall also make himself available to make reasonable business trips at the Company's expense, both within and outside the United States of America, for purposes of consulting with customers, agents, representatives and suppliers of the Company and its Affiliates, as well as with other members of the Company's management. SECTION 2.3. CONFIDENTIAL INFORMATION Sensitive Company data and information is the property of the Company, and must be protected: 4 A. The Employee hereby agrees to hold and maintain confidential and private all papers, plans, drawings, specifications, methods, processes, techniques, shop practices, formulae, customer lists, personnel and financial data, plans, trade secrets and all proprietary information belonging to the Company or any Affiliate thereof of which the Employee may have knowledge or acquire knowledge whether prior to, during or after the termination of the Employment Term, and to maintain as confidential and secret any new processes, formulations, designs, devices, research data, machines or compositions of matter of the Company or of any of its Affiliates or of any persons granting rights to the Company or any of its Affiliates revealed to the Employee or discovered, originated, made or conceived by the Employee in connection with the furnishing of employment and consulting services to the Company or any of its Affiliates. B. The Employee hereby agrees that he shall not at any time, either during or subsequent to the Employment Term, disclose or divulge to any person, other than to the Company's or any of its Affiliates' officers and other employees as required by the Employee's duties under this Agreement and to third parties when required in the ordinary course of business of the Company, any of the information specified in Section 2.4(a) above or any trade or business secrets or any other confidential information belonging to the Company or any of its Affiliates of which the Employee may have or acquire knowledge. Notwithstanding anything to the contrary set forth above, the confidentiality and nondisclosure provisions contained in this Section 2.4 shall not apply to any information or data, if and when such information or data becomes a matter of public knowledge through no act or omission of the Employee or to any information or data which was already known by the Employee or the other party in question other than as a result of a breach of this Agreement. C. Immediately upon the Company's request or promptly upon termination for any reason or expiration of this Agreement, the Employee shall deliver to the Company all memoranda, notes, records, reports, photographs, drawings, plans, papers or other documents made or compiled by the Employee in the course of his services to the Company or any of its Affiliates or made available to the Employee during the course of his services to the Company or any of its Affiliates which are in the possession of or under the control of the Employee, and any copies or abstracts thereof, whether or not of a secret or confidential nature, and all of such memoranda or other documents shall, during and after the termination of the Employment Term, be deemed to be and shall be the property of the Company. SECTION 2.4. INTELLECTUAL PROPERTY. Intellectual property is the property of the Company, and must be protected: 5 A. Any and all inventions, improvements, ideas and innovations, whether or not patentable, which the Employee may invent, discover, originate, make or conceive during his services to the Company or any of its Affiliates, whether prior to or during the Employment Term, either solely or jointly with others, and which in any way relate to or are or may be used in connection with the business of the Company or any of its Affiliates shall be, to the extent of the Employee's interest therein, the sole and exclusive property of the Company or such Affiliate and the Employee's interest therein shall be assigned by the Employee to the Company or such Affiliate, as the case may be, or to the Company's or such Affiliate's nominee(s). The Employee, upon the request and at the expense of the Company, shall and shall use his best efforts to cause any such other person(s) to promptly and fully disclose each and all such discoveries, inventions, improvements, ideas or innovations to the Company, the applicable Affiliate or any nominee(s) thereof. Further, the Employee, upon the request and at the expense of the Company, shall and shall use his best efforts to cause any such other person(s) to, assign to the Company or the applicable Affiliate, without further compensation therefore, all right, title and interest in and to each and all such discoveries, inventions, improvements, ideas or innovations which are reduced to writings, drawings or practice within two (2) years after the termination of the Employment Term. B. The Employee further agrees to execute at any time, upon the request and at the expense of the Company, for the benefit of the Company, any of its Affiliates or any nominee(s) thereof, any and all appropriate applications, instruments, assignments and other documents, which the Company shall deem necessary or desirable to protect its (or any of its Affiliate's) entire right, title and interest in and to any of the discoveries, inventions, improvements, ideas and innovations described in Section 2.5(a) hereof: C. The Employee agrees, upon the request and at the expense of the Company or any person to whom the Company or any of its Affiliates may have granted or grants rights, to execute any and all appropriate applications, assignments, instruments and papers, which the Company shall deem necessary for the procurement in the United States of America and foreign countries of patent protection for the discoveries, inventions, improvements, ideas or innovations to be so assigned, including the execution of new, provisional, continuing and reissue applications, to make all rightful oaths, to testify in any proceeding before any governmental authority authorized to grant or administer patent protection or before any court, and generally to do everything lawfully possible to aid the Company, its Affiliates and its and their successors, assigns and nominees to obtain, enjoy and enforce proper patent protection for the discoveries, inventions, improvements, ideas or innovations conceived or made by him during the course of his services to the Company or any of its Affiliates for a period of two (2) years after the termination of the Employment Term. SECTION 2.5. NON-COMPETITION. The Company and the Employee acknowledge that the Company and its Affiliates conduct business throughout the world and the engagement by the Employee in the Internet Gaming Industry anywhere in the 6 United States of America or Canada could cause the Company irreparable harm. For the period commencing on the date hereof and ending two (2) years after the termination of the Employment Term (the "Restricted Period"), the Employee shall not: A. Except as an officer and director of the Company and its Affiliates, utilize intellectual property or trade secrets, gained from the Company, which is an asset of the Company, to engage at any place within the United States of America or Canada in any business substantially similar to the business then being conducted by the Company or its Affiliates (the "Designated Industry"), whether directly or indirectly, for his own account or as an employee, partner, officer, director, consultant or holder of more than five percent (5%) of the equity interest in any other person, firm, partnership or corporation B. Divert to any competitor of the Company or its Affiliates any customer of the Company or its Affiliates, or C. Solicit or encourage any officer, key employee or consultant of the Company or its Affiliates to leave its or their employ for alternative employment in the Designated Industry, or hire or offer for employment to any person to whom the Company or any of its Affiliates has offered employment within the three (3) years preceding the termination of the Employment Term. The Employee will continue to be bound by the terms of this Section 2.5 until their expiration and shall not be entitled to any compensation with respect thereto. SECTION 2.6. SEVERABILITY. If any provision of this Agreement shall, in whole or in part, prove to be invalid for any reason, such invalidity shall affect only the portion of such provision which shall be invalid, and in all other respects this Agreement shall stand as if such invalid provision, or other invalid portion thereof, had not been a part hereof. Without limiting the generality of the preceding sentence, if any provision of Section 2.6 hereof shall be held to be invalid or unenforceable under any applicable law, as unreasonably restrictive in duration or geographical area or otherwise, it is the intention of the parties hereto that such provision shall be deemed to be immediately amended to provide for such maximum restriction as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction; and the Company and the Employee expressly agree that such provision, as so amended, shall be valid and binding. SECTION 2.7. EQUITABLE REMEDIES. Each of the parties hereto acknowledges and agrees that upon any breach by the Employee of his obligations under Section 2.3, 2.4 or 2.5 hereof, the Company will have no adequate remedy at law, and accordingly will be entitled to specific performance and other appropriate injunctive and equitable relief. SECTION 2.8. ASSIGNMENT. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company, provided that neither this Agreement nor the rights and obligations of the Company under this Agreement may be assigned by the 7 Company other than to an Affiliate of the Company. The Employee may not assign to any other person his rights and/or obligations under this Agreement. SECTION 2.9. AMENDMENT. This Agreement and any term, covenant, condition or other provision hereof may be changed, waived, discharged or terminated solely by an instrument in writing signed by the parties hereto. SECTION 2.10. WAIVER OF BREACH. The waiver by the Company of a breach of any provision of this Agreement by the Employee shall not operate or be construed as a waiver of any other breach by the Employee. SECTION 2.11. NOTICES. All notices, requests, demands, consents and other communications in connection with this Agreement shall be in writing or by written telecommunication and shall be delivered personally or mailed as follows: by registered or certified mail or by overnight courier, postage prepaid, or sent by written telecommunication as follows: If to the Company: CompanyBuilders.com Colorado Springs, CO. 80918 If to the Employee: Steve Randall Boca Raton, Florida or, at such other address as the parties hereto may from time to time designate in writing. SECTION 2.12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of Nevada. SECTION 2.13. ARBITRATION OF DISPUTES. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in accordance with the laws of Nevada by two arbitrators, one of whom shall be appointed by the Company, one of whom shall be appointed by the Employee and if agreement cannot be reached, by a third arbitrator which shall be appointed by agreement of the first two arbitrators. Such arbitration shall be conducted in Nevada in accordance with the rules of the prevailing Arbitration Association, except with respect to the selection of arbitrators which shall be as provided in this Section 2.13. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. All fees and expenses of the arbitration process shall be borne equally by the parties hereto regardless of the final outcome, unless and to the extent the arbitrators shall determine that under the circumstances the sharing of all or a part of any such fees and expenses would be unjust. 9 SECTION 2.14. ENTIRE AGREEMENT. This Agreement embodies the entire agreement between the Company and the Employee relating to the subject matter hereof, and, except as otherwise expressly provided herein, this Agreement shall not be affected by reference to any other document. SECTION 2.15. HEADINGS, ETC. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. SECTION 2.16. COUNTERPARTS. This Agreement may be executed in several identical counterparts, each of which when executed by the parties hereto and delivered shall be an original, but all of which together shall constitute a single instrument. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. SECTION 2.17. ADDITIONAL DEFINED TERMS: A. "AFFILIATE" means any person, corporation or other business entity that directly or indirectly controls, or is controlled by, or is under common control with another person, corporation or business entity. B. "SUBSIDIARY" means any corporation fifty percent (50%) or more of the capital stock of which having ordinary voting power for the election of directors is owned directly or indirectly by another corporation or business entity. ******************************************************************************** IN WITNESS WHEREOF, the parties have executed this Agreement as of this written date: May 22, 1999. ACCEPTED AND AGREED TO: Employee Signature [GRAPHIC OMITTED][GRAPHIC OMITTED] EMPLOYEE NAME PAUL A. RUPPANNER SOCIAL SECURITY # ---------------------------------------------- Company Officer Signature _________________________________________ Company Officer Name Steven Randall Secretary EX-10.2 6 0006.txt EMPLOYMENT AGREEMENT - STEVEN RANDALL [GRAPHIC OMITTED][GRAPHIC OMITTED] 2110 VICKERS DRIVE SUITE 100 COLORADO SPRINGS, CO. 80918 EMPLOYMENT AGREEMENT Employment Agreement made effective as of the date of signing, by and between CasinoBuilders.com a Nevada Corporation, with principal offices in Colorado Springs, Colorado ("Company"), and Steven Randall, residing in, Boca Raton, Florida ("Employee"). In consideration of the promises and mutual covenants herein set forth, the Company and the Employee agree as follows: ARTICLE 1: EMPLOYMENT TERMS SECTION 1.1. EMPLOYMENT AND TERM. The Company hereby employs the Employee, and the Employee accepts such employment, upon the terms and conditions hereinafter set forth, for the period ("Employment Term") commencing on and as of the date of this contract signing hereunder and terminating as provided in Section 1.7 hereof. SECTION 1.2. EMPLOYMENT SERVICES. The Employee shall devote his full working time and effort to promote the business and affairs of the Company and its Affiliates as necessary in order to enable them to achieve their business objectives. The Employee's principal assignment shall be to serve as President and Chief Executive Officer. In this capacity as an executive of the company, the Employee shall be responsible for and shall also perform other duties and assignments, which are consistent with his responsibilities, which may be reasonably assigned to him from time to time by the Board of Directors of the Company. Nothing in this Section 1.2 shall be deemed to prevent the Employee from: A. Investing his assets in a manner not prohibited by Section 2.5 hereof, and in such form or manner as shall not require any material services on his part in the operations or affairs of the companies or other entities in which such investments are made; B. Serving on the board of directors of any other company, subject to the prohibitions set forth in Section 2.5 hereof, provided the Board of Directors of the Company shall have approved such service in writing, or; 1 C. Engaging in religious, charitable or other community or non-profit activities, which do not impair his ability to fulfill his duties and responsibilities under this Agreement. SECTION 1.3. EMPLOYMENT COMPENSATION. A. BASE SALARY - For services rendered by the Employee under this Agreement, the Company shall pay the Employee an initial annual salary of $150,000.00 per annum, payable in equal semi-monthly installments (the "Base Salary"). The Base Salary shall be subject to annual review by the Board of Directors of the Company on or about each January 1 thereafter for so long as this Agreement is in effect. B. INCENTIVE BONUS COMPENSATION - For services rendered by the Employee under this Agreement, the Company, by action of the Board of Directors, shall establish an annual executive incentive bonus plan in which the Employee shall participate in recognition of the Employee's contribution to the overall performance of the Company ("Bonus"). Such Bonus shall be granted within ninety (90) days following the conclusion of each calendar year commencing December 31, 1999, after assessment of the Employee's and Company's performance pursuant to the criteria, terms and conditions of the bonus plan to be established. The amount of any Bonus, which the Company may grant to the Employee from time to time shall be in addition to his Base Salary and shall, under no circumstances, be included in the Employee's Base Salary. C. STOCK OPTIONS - The Employee shall be entitled to participate in The Company's Stock Option Plan ("Option Plan"). Grants under the Option Plan shall be in amounts determined by the Option Plan administrators or Board of Directors of the Company. The initial amount of stock, which has been granted to the Employee under the Company Stock Option Plan, vesting in equal amounts at the conclusion of each of the subsequent (3) three years, beginning June 1, 1999, is 2,000,000 shares for founding the company. SECTION 1.4. BENEFITS. The Employee will participate in any employee benefit programs provided by the Company and its Subsidiaries, if any. SECTION 1.5. WITHHOLDING. The amount of payments to be made by the Company to the Employee are set forth herein prior to the deduction of any taxes or other amounts, and all such payments shall be made by the Company to the Employee under this Agreement net of any tax or other amounts required to be withheld by the Company under applicable law. SECTION 1.6. VACATION. The Employee shall be entitled to vacation and holiday plans under the same terms and considerations, as they are available to all Company employees, in accordance with Company policy. 2 SECTION 1.7. EMPLOYMENT TERM; TERMINATION The Employment Term shall run indefinitely, unless terminated pursuant to the following provisions of this Section 1.7. A. "THE EMPLOYMENT TERM" shall terminate: 1. At the death or 60 days after the Permanent Disability (as hereinafter defined) of the Employee 2. Immediately at the election of the Company, for Cause (as hereinafter defined), or; 3. At the election of either the Company or the Employee upon fifteen (15) days' prior written notice to the other. B. "PERMANENT DISABILITY", for purposes of this Section 1.7, shall mean any physical or mental incapacitation which would materially hinder the Employee from performing the responsibilities of his assigned duties, as determined by a medical professional of the company's choosing. C. "CAUSE", for purposes of this Section 1.7, shall mean any of the following, as determined by the management of The Company: 1. Refusal of the Employee to perform his duties hereunder or other material breach by the Employee of the terms of this Agreement; 2. Any substantial dishonesty by the Employee in connection with the performance of his duties hereunder; or 3. Any conviction of, or plea of guilty by, the Employee with respect to any crime, which conviction or plea is likely in the reasonable judgment of the management of the Company to adversely affect the Employee's professional reputation, the reputation of the Company or of any other member of the Group or the ability of the Employee to perform his duties satisfactorily hereunder. 4. The Company's right of termination pursuant to this Section 1.7 shall be in addition to, and shall not affect, its rights and remedies under any other provisions of this Agreement or under applicable law, and all such rights and remedies shall survive termination of this Agreement and the employment of the Employee hereunder. Nothing herein shall be deemed to constitute a waiver by the Employee of any rights he may have under applicable laws. 5. In the event of termination of employment pursuant to the terms of this Section 1.7, the Employee shall have no right to receive any compensation or fees for any period subsequent to the date of such termination; except that: 6. In the event such termination is due to death or Permanent Disability pursuant to Section 1.7 (B), the Company shall pay the Employee or his estate, as the case may be, a pro tanto portion of the Bonus, if any, for the year in which such termination occurs, a special 90 ninety day bonus severance, and vesting of the current year's stock options; 7. In the event that such termination is made by the Company pursuant to Section 1.7 (B) hereof, the Company agrees that during the Severance 3 Period (as such term is defined below) it will continue to pay the Employee his then current Base Salary. D. "SEVERANCE PERIOD", for purposes of this Section 1.7, shall mean the period commencing on the date of such termination and ending: fifteen (15) calendar days thereafter. E. "THE OBLIGATIONS" of the Employee pursuant to Sections 2.3 and 2.4 of this Agreement shall survive the termination for any reason of the Employment Term. The obligations of the Employee pursuant to Section 2.5 hereof shall survive the termination of this Agreement as provided for in Section 2.5. 1.7.1 COMPANY CHANGE OF CONTROL. Notwithstanding any provisions contained in this Plan or in a Stock Option Agreement deferring the right of employee to exercise an option, the option (referred to in 1.3.C above) shall, at the discretion of the Board, become fully vested and employee shall be entitled to exercise such option, in whole or in part, during the 30-day period following the first purchase of Shares of the Company pursuant to a tender offer or exchange offer (other than an offer by the Company) for all, or any part of, the Company's Shares or; A. Commencing on the date of approval by the shareholders of the Company of an agreement for: 1. A merger or consolidation or similar transaction in which the Company will not survive as an independent corporation,or 2. A sale, exchange or other disposition of all or more than 75% all of the Company's assets. ARTICLE 2: GENERAL PROVISIONS SECTION 2.1. EXPENSE ACCOUNT AND ALLOWANCE. The Company agrees to reimburse the Employee for all reasonable travel, entertainment and other documented, itemized business expenses incurred by him in connection with the performance of his duties under this Agreement; provided, however, that the amount available for such travel, entertainment, and other business expenses shall be consistent with expense reimbursement policies adopted by the Company as in effect at the time of the incidence of such expenses by the Employee or as may be fixed in advance by the Company's Board of Directors. SECTION 2.2. LOCATION. The Employee shall perform services under this Agreement at the Employee's private office and at such other location or locations reasonably specified by the Company. The Employee shall also make himself available to make reasonable business trips at the Company's expense, both within and outside the United States of America, for purposes of consulting with customers, agents, representatives and suppliers of the Company and its Affiliates, as well as with other members of the Company's management. SECTION 2.3. CONFIDENTIAL INFORMATION Sensitive Company data and information is the property of the Company, and must be protected: 4 A. The Employee hereby agrees to hold and maintain confidential and private all papers, plans, drawings, specifications, methods, processes, techniques, shop practices, formulae, customer lists, personnel and financial data, plans, trade secrets and all proprietary information belonging to the Company or any Affiliate thereof of which the Employee may have knowledge or acquire knowledge whether prior to, during or after the termination of the Employment Term, and to maintain as confidential and secret any new processes, formulations, designs, devices, research data, machines or compositions of matter of the Company or of any of its Affiliates or of any persons granting rights to the Company or any of its Affiliates revealed to the Employee or discovered, originated, made or conceived by the Employee in connection with the furnishing of employment and consulting services to the Company or any of its Affiliates. B. The Employee hereby agrees that he shall not at any time, either during or subsequent to the Employment Term, disclose or divulge to any person, other than to the Company's or any of its Affiliates' officers and other employees as required by the Employee's duties under this Agreement and to third parties when required in the ordinary course of business of the Company, any of the information specified in Section 2.4(a) above or any trade or business secrets or any other confidential information belonging to the Company or any of its Affiliates of which the Employee may have or acquire knowledge. Notwithstanding anything to the contrary set forth above, the confidentiality and nondisclosure provisions contained in this Section 2.4 shall not apply to any information or data, if and when such information or data becomes a matter of public knowledge through no act or omission of the Employee or to any information or data which was already known by the Employee or the other party in question other than as a result of a breach of this Agreement. C. Immediately upon the Company's request or promptly upon termination for any reason or expiration of this Agreement, the Employee shall deliver to the Company all memoranda, notes, records, reports, photographs, drawings, plans, papers or other documents made or compiled by the Employee in the course of his services to the Company or any of its Affiliates or made available to the Employee during the course of his services to the Company or any of its Affiliates which are in the possession of or under the control of the Employee, and any copies or abstracts thereof, whether or not of a secret or confidential nature, and all of such memoranda or other documents shall, during and after the termination of the Employment Term, be deemed to be and shall be the property of the Company. SECTION 2.4. INTELLECTUAL PROPERTY. Intellectual property is the property of the Company, and must be protected: 5 A. Any and all inventions, improvements, ideas and innovations, whether or not patentable, which the Employee may invent, discover, originate, make or conceive during his services to the Company or any of its Affiliates, whether prior to or during the Employment Term, either solely or jointly with others, and which in any way relate to or are or may be used in connection with the business of the Company or any of its Affiliates shall be, to the extent of the Employee's interest therein, the sole and exclusive property of the Company or such Affiliate and the Employee's interest therein shall be assigned by the Employee to the Company or such Affiliate, as the case may be, or to the Company's or such Affiliate's nominee(s). The Employee, upon the request and at the expense of the Company, shall and shall use his best efforts to cause any such other person(s) to promptly and fully disclose each and all such discoveries, inventions, improvements, ideas or innovations to the Company, the applicable Affiliate or any nominee(s) thereof. Further, the Employee, upon the request and at the expense of the Company, shall and shall use his best efforts to cause any such other person(s) to, assign to the Company or the applicable Affiliate, without further compensation therefore, all right, title and interest in and to each and all such discoveries, inventions, improvements, ideas or innovations which are reduced to writings, drawings or practice within two (2) years after the termination of the Employment Term. B. The Employee further agrees to execute at any time, upon the request and at the expense of the Company, for the benefit of the Company, any of its Affiliates or any nominee(s) thereof, any and all appropriate applications, instruments, assignments and other documents, which the Company shall deem necessary or desirable to protect its (or any of its Affiliate's) entire right, title and interest in and to any of the discoveries, inventions, improvements, ideas and innovations described in Section 2.5(a) hereof: C. The Employee agrees, upon the request and at the expense of the Company or any person to whom the Company or any of its Affiliates may have granted or grants rights, to execute any and all appropriate applications, assignments, instruments and papers, which the Company shall deem necessary for the procurement in the United States of America and foreign countries of patent protection for the discoveries, inventions, improvements, ideas or innovations to be so assigned, including the execution of new, provisional, continuing and reissue applications, to make all rightful oaths, to testify in any proceeding before any governmental authority authorized to grant or administer patent protection or before any court, and generally to do everything lawfully possible to aid the Company, its Affiliates and its and their successors, assigns and nominees to obtain, enjoy and enforce proper patent protection for the discoveries, inventions, improvements, ideas or innovations conceived or made by him during the course of his services to the Company or any of its Affiliates for a period of two (2) years after the termination of the Employment Term. SECTION 2.5. NON-COMPETITION. The Company and the Employee acknowledge that the Company and its Affiliates conduct business throughout the world and the engagement by the Employee in the Internet Gaming Industry anywhere in the United States of America or Canada could cause the Company irreparable harm. For the period commencing on the date hereof and ending two (2) years after the termination of the Employment Term (the "Restricted Period"), the Employee shall not: A. Except as an officer and director of the Company and its Affiliates, utilize intellectual property or trade secrets, gained from the Company, which is an asset of the Company, to engage at any place within the United States of America or Canada in any business substantially similar to the business then being conducted by the Company or its Affiliates (the "Designated Industry"), whether directly or indirectly, for his own account or as an employee, partner, officer, director, consultant or holder of more than five percent (5%) of the equity interest in any other person, firm, partnership or corporation B. Divert to any competitor of the Company or its Affiliates any customer of the Company or its Affiliates, or C. Solicit or encourage any officer, key employee or consultant of the Company or its Affiliates to leave its or their employ for alternative employment in the Designated Industry, or hire or offer for employment to any person to whom the Company or any of its Affiliates has offered employment within the three (3) years preceding the termination of the Employment Term. The Employee will continue to be bound by the terms of this Section 2.5 until their expiration and shall not be entitled to any compensation with respect thereto. SECTION 2.6. SEVERABILITY. If any provision of this Agreement shall, in whole or in part, prove to be invalid for any reason, such invalidity shall affect only the portion of such provision which shall be invalid, and in all other respects this Agreement shall stand as if such invalid provision, or other invalid portion thereof, had not been a part hereof. Without limiting the generality of the preceding sentence, if any provision of Section 2.6 hereof shall be held to be invalid or unenforceable under any applicable law, as unreasonably restrictive in duration or geographical area or otherwise, it is the intention of the parties hereto that such provision shall be deemed to be immediately amended to provide for such maximum restriction as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction; and the Company and the Employee expressly agree that such provision, as so amended, shall be valid and binding. SECTION 2.7. EQUITABLE REMEDIES. Each of the parties hereto acknowledges and agrees that upon any breach by the Employee of his obligations under Section 2.3, 2.4 or 2.5 hereof, the Company will have no adequate remedy at law, and accordingly will be entitled to specific performance and other appropriate injunctive and equitable relief. SECTION 2.8. ASSIGNMENT. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company, provided that neither this Agreement nor the rights and obligations of the Company under this Agreement may be assigned by the Company other than to an Affiliate of the Company. The Employee may not assign to any other person his rights and/or obligations under this Agreement. SECTION 2.9. AMENDMENT. This Agreement and any term, covenant, condition or other provision hereof may be changed, waived,discharged or terminated solely by an instrument in writing signed by the parties hereto. SECTION 2.10. WAIVER OF BREACH. The waiver by the Company of a breach of any provision of this Agreement by the Employee shall not operate or be construed as a waiver of any other breach by the Employee. SECTION 2.11. NOTICES. All notices, requests, demands, consents and other communications in connection with this Agreement shall be in writing or by written telecommunication and shall be delivered personally or mailed as follows: by registered or certified mail or by overnight courier, postage prepaid, or sent by written telecommunication as follows: If to the Company: CompanyBuilders.com Colorado Springs, CO. 80918 If to the Employee: Steve Randall Boca Raton, Florida or, at such other address as the parties hereto may from time to time designate in writing. SECTION 2.12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of Nevada. SECTION 2.13. ARBITRATION OF DISPUTES. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in accordance with the laws of Nevada by two arbitrators, one of whom shall be appointed by the Company, one of whom shall be appointed by the Employee and if agreement cannot be reached, by a third arbitrator which shall be appointed by agreement of the first two arbitrators. Such arbitration shall be conducted in Nevada in accordance with the rules of the prevailing Arbitration Association, except with respect to the selection of arbitrators which shall be as provided in this Section 2.13. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. All fees and expenses of the arbitration process shall be borne equally by the parties hereto regardless of the final outcome, unless and to the extent the arbitrators shall determine that under the circumstances the sharing of all or a part of any such fees and expenses would be unjust. SECTION 2.14. ENTIRE AGREEMENT. This Agreement embodies the entire agreement between the Company and the Employee relating to the subject matter hereof, and, except as otherwise expressly provided herein, this Agreement shall not be affected by reference to any other document. SECTION 2.15. HEADINGS, ETC. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. SECTION 2.16. COUNTERPARTS. This Agreement may be executed in several identical counterparts, each of which when executed by the parties hereto and delivered shall be an original, but all of which together shall constitute a single instrument. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. SECTION 2.17. ADDITIONAL DEFINED TERMS: A. "AFFILIATE" means any person, corporation or other business entity that directly or indirectly controls, or is controlled by, or is under common control with another person, corporation or business entity. B. "SUBSIDIARY" means any corporation fifty percent (50%) or more of the capital stock of which having ordinary voting power for the election of directors is owned directly or indirectly by another corporation or business entity. ******************************************************************************** IN WITNESS WHEREOF, the parties have executed this Agreement as of this written date: May 22, 1999. ACCEPTED AND AGREED TO: Employee Signature [GRAPHIC OMITTED][GRAPHIC OMITTED] EMPLOYEE NAME Steven Randall SOCIAL SECURITY # xxx-xx-xxxx --------------------------------------------------- Company Officer Signature _________________________________________ Company Officer Name Steven Randall Secretary EX-10.3 7 0007.txt 1999 STOCK OPTION PLAN CASINOBUILDERS.COM, INC. 1999 STOCK OPTION AND RESTRICTED STOCK PLAN EFFECTIVE SEPTEMBER 15, 1999 ------------------------------------------------------------------------ SECTION 1 ESTABLISHMENT AND PURPOSE This Plan is established to (i) offer selected, directors, officers, Employees and Consultants of the Company or its Subsidiaries an equity ownership interest in the financial success of the Company, (ii) provide the Company an opportunity to attract and retain the best available personnel for positions of substantial responsibility and (iii) to encourage equity participation in the Company by eligible Participants. This Plan provides for the grant by the Company of (i) Options to purchase Shares, and (ii) shares of Restricted Stock. Options granted under this Plan may include Nonstatutory Options as well as ISOs intended to qualify under section 422 of the Code. SECTION 2 DEFINITIONS "BOARD OF DIRECTORS" shall mean the board of directors of the Company, as duly elected from time to time. "CHANGE IN CONTROL" shall mean such time as either (i) any "person", as such term is used in section 14(d) of the Exchange Act (other than the Company, a wholly-owned subsidiary of the Company, any employee benefit plan of the Company or its Subsidiaries is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act (or any successor rule), directly or indirectly, of fifty percent (50%) or more of the combined voting power of the Company's common stock or (ii) individuals who constitute the Board of the Directors on the effective date of this Plan (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election or nomination for election by the Company's shareholders was approved by a vote of at least three quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for the director without objection to such nomination) shall be, for purposes of this clause (ii) considered as though such person was a member of the Incumbent Board. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and as interpreted by the regulations thereunder. "COMMITTEE" shall mean the Stock Option Committee of the Company, or such other Committee as may be appointed by the Board of Directors from time to time. "COMPANY" shall mean CasinoBuilders.com, Inc., a Nevada corporation. "CONSULTANT" shall mean any individual that is expressly designated as a consultant of the Company or its Subsidiaries by the Committee in its sole discretion. 1 "DATE OF GRANT" shall mean the date on which the Committee resolves to grant an Option to an Optionee or grant Restricted Stock to a Participant, as the case may be. "DISINTERESTED DIRECTOR" shall mean a member of the Board of Directors who is both (a) a Non-Employee Director, within the meaning of Rule 16b-3 promulgated under the Exchange Act, as amended from time to time and (b) an Outside Director, within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder, as amended from time to time. "EMPLOYEE" shall include every individual performing Services to the Company or its Subsidiaries if the relationship between such individual and the Company or its Subsidiaries is the legal relationship of employer and employee. This definition of "Employee" is qualified in its entirety and is subject to the definition set forth in section 3401(c) of the Code and the regulations thereunder. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and as interpreted by the rules and regulations promulgated thereunder. "EXERCISE PRICE" shall mean the amount for which one Share may be purchased upon exercise of an Option, as specified by the Committee in the applicable Stock Option Agreement, but in no event less than the par value per Share. "FAIR MARKET VALUE" shall mean the closing price of the shares on the national securities exchange on which the Shares are listed (if the shares are so listed) as reported in the Wall Street Journal on the applicable date (or, if not so reported, as otherwise reported by the National Association of Securities Dealers Automated Quotation System) or on the NASDAQ National Market System (if the Shares are regularly quoted thereon), or, if not so listed or regularly quoted, the mean of the closing bid and asked prices of the securities in the over-the-counter market, on the applicable date or, if such bid and asked prices shall not be available, as reported by any nationally recognized quotation service selected by the Company, or as determined by the Committee in a manner consistent with the provisions of the Code. "ISO" shall mean a stock option which is granted to an individual and which meets the requirements of section 422(b) of the Code, pursuant to which the Optionee has no tax consequences resulting from the grant or, subject to certain holding period requirements, exercise of the option and the employer is not entitled to a business expense deduction with respect thereto. "NONSTATUTORY OPTION" shall mean any Option granted by the Committee that does not meet the requirements of sections 421 through 424 of the Code, as amended. "OPTION" shall mean either an ISO or Nonstatutory Option, as the context requires. "OPTIONEE" shall mean a Participant who holds an Option. "PARTICIPANTS" shall mean those individuals described in Section 1 of this Plan selected by the Committee who are eligible under Section 4 of this Plan for grants of either Options or Restricted Stock under this Plan. "PERMANENT AND TOTAL DISABILITY" shall mean that an individual is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of more than twelve (12) months. An individual shall not be considered to suffer from Permanent and Total Disability unless such individual furnishes proof of the existence thereof in such form and manner, and at such times, as the Committee may reasonably require. The scope of this definition shall automatically be reduced or expanded to the extent that section 22(e)(3) of the Code is amended to reduce or expand the scope of the definition of Permanent and Total Disability thereunder. 2 "PLAN" shall mean this CasinoBuilders.com, Inc. 1999 Stock Option and Restricted Stock Plan, as amended from time to time. "PLAN AWARD" shall mean the grant of either an Option or Restricted Stock, as the context requires. "RESTRICTED STOCK" shall have that meaning set forth in Section 7(a) of this Plan. "RESTRICTED STOCK ACCOUNT" shall have that meaning set forth in Section 7(a)(ii) of this Plan. "RESTRICTED STOCK CRITERIA" shall have that meaning in Section 7(a)(iv) of this Plan. "RESTRICTION PERIOD" shall have that meaning in Section 7(a)(iii) of this Plan. "SERVICES" shall mean services rendered to the Company by a Participant. "SHARE" shall mean one share of Stock, as adjusted in accordance with Section 9 of this Plan (if applicable). "STOCK" shall mean the Class A Common Stock of the Company, par value $.01 per share. "STOCK OPTION AGREEMENT" shall mean the agreement executed between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to the granting of an Option. "SUBSIDIARY" shall mean any corporation as to which more than fifty (50%) percent of the outstanding voting stock or shares shall now or hereafter be owned or controlled, directly by a person, any Subsidiary of such person, or any Subsidiary of such Subsidiary. "TEN-PERCENT SHAREHOLDER" shall mean a person that owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company or any Subsidiary, taking into account the attribution rules set forth in section 424 of the Code, as amended. For purposes of this definition of "Ten Percent Shareholder" the term "outstanding stock" shall include all stock actually issued and outstanding immediately after the grant of an Option to an Optionee. "Outstanding stock" shall not include reacquired shares or shares authorized for issuance under outstanding Options held by the Optionee or by any other person. "VEST DATE" shall have that meaning in Section 7(a)(v) of this Plan. 3 SECTION 3 ADMINISTRATION (A) GENERAL ADMINISTRATION. This Plan shall be administered by the Committee, which shall consist of at least two persons, each of whom shall be Disinterested Directors. The members of the Committee shall be appointed by the Board of Directors for such terms as the Board of Directors may determine. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, however caused, may be filled by the Board of Directors. (B) COMMITTEE PROCEDURES. The Board of Directors shall designate one of the members of the Committee as chairman. The Committee may hold meetings at such times and places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved in writing by a majority of all Committee members, shall be valid acts of the Committee. A majority of the Committee shall constitute a quorum. (C) AUTHORITY OF COMMITTEE. This Plan shall be administered by, or under the direction of, the Committee constituted in such a manner as to comply at all times with Rule 16b-3 (or any successor rule) under the Exchange Act. The Committee shall administer this Plan so as to comply at all times with the Exchange Act and, subject to the Code, shall otherwise have absolute and final authority to interpret this Plan and to make all determinations specified in or permitted by this Plan or deemed necessary or desirable for its administration or for the conduct of the Committee's business including without limitation the authority to take the following actions: (i) To interpret this Plan and to apply its provisions; (ii) To adopt, amend or rescind rules, procedures and forms relating to this Plan; (iii) To authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of this Plan; (iv) To determine when Plan Awards are to be granted under this Plan; (v) To select the Optionees and Participants; (vi) To determine the number of Shares to be made subject to each Plan Award; (vii) To prescribe the terms, conditions and restrictions of each Plan Award, including without limitation., the Exercise Price, the vesting schedule and the determination whether an Option is to be classified as an ISO or a Nonstatutory Option; (viii) To amend any outstanding Stock Option Agreement (other than the Exercise Price) or the terms, conditions and restrictions of a grant of Restricted Stock, subject to applicable legal restrictions and the consent of the Optionee or Participant, as the case may be, who entered into such agreement, or accelerate the vesting of any Plan Award; (ix) To establish procedures so that an Optionee may obtain a loan through a registered broker-dealer under the rules and regulations of the Federal Reserve Board, for the purpose of exercising an Option; 4 (x) To establish procedures for an Optionee (1) to have withheld from the total number of Shares to be acquired upon the exercise of an Option that number of Shares having a Fair Market Value, which, together with such cash as shall be paid in respect of fractional shares, shall equal the Exercise Price, and (2) to exercise a portion of an Option by delivering that number of Shares already owned by an Optionee having a Fair Market Value which shall equal the partial Exercise Price and to deliver the Shares thus acquired by such Optionee in payment of Shares to be received pursuant to the exercise of additional portions of the Option, the effect of which shall be that an Optionee can in sequence utilize such newly acquired shares in payment of the Exercise Price of the entire Option, together with such cash as shall be paid in respect of fractional shares; (xi) To establish procedures whereby a number of Shares may be withheld from the total number of Shares to be issued upon exercise of an Option, to meet the obligation of withholding for federal and state income and other taxes, if any, incurred by the Optionee upon such exercise; and (xii) To take any other actions deemed necessary or advisable for the administration of this Plan. All interpretations and determinations of the Committee made with respect to the granting of Plan Awards shall be final, conclusive, and binding on all interested parties. The Committee may make grants of Plan Awards on an individual or group basis. No member of the Committee shall be liable for any action that is taken or is omitted to be taken if such action or omission is taken in good faith with respect to this Plan or grant of any Plan Award. (D) HOLDING PERIOD. The Committee may in its sole discretion require as a condition to the granting of any Plan Award, that a Participant hold the Plan Awards for a period of six months following the date of such acquisition. This condition shall be satisfied with respect to a derivative security if at least six months elapse from the date of acquisition of the derivative security to the date of disposition of the derivative security (other than upon exercise or conversion) or its underlying equity security. SECTION 4 ELIGIBILITY (A) GENERAL RULE. Subject to the limitations set forth in subsection b below or elsewhere in this Plan, Participants shall be eligible to participate in this Plan. (B) NON-EMPLOYEE INELIGIBLE FOR ISOS. In no event shall an ISO be granted to any individual who is not an Employee on the Date of Grant, unless key consultants specifically included by written action of the Board. 5 SECTION 5 SHARES SUBJECT TO PLAN (A) BASIC LIMITATION. Shares offered under this Plan may be authorized but unissued Shares or Shares that have been reacquired by the Company. The aggregate number of Shares that are available for issuance under this Plan shall not exceed ten million (10,000,000) Shares, subject to adjustment pursuant to Section 9 of this Plan. The Committee shall not issue more Shares than are available for issuance under this Plan. The number of Shares that are subject to unexercised Options at any time under this Plan shall not exceed the number of Shares that remain available for issuance under this Plan. The Company, during the term of this Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of this Plan. (B) ADDITIONAL SHARES. In the event any outstanding Option for any reason expires, is canceled or otherwise terminates, the Shares allocable to the unexercised portion of such Option shall again be available for issuance under this Plan. In the event that Shares issued under this Plan revert to the Company prior to the Vest Date under a grant of Restricted Stock, such Shares shall again be available for issuance under this Plan. SECTION 6 TERMS AND CONDITIONS OF OPTIONS (A) TERM OF OPTION. The term of each Option shall be ten (10) years from the Date of Grant or such shorter term as may be determined by the Committee; provided, however, in the case of an ISO granted to a Ten-Percent Shareholder, the term of such ISO may be five (5) years from the Date of Grant or such shorter time as may be determined by the Committee. (B) EXERCISE PRICE. The Exercise Price shall be such price as is determined by the Committee in its sole discretion and set forth in the Stock Option Agreement; provided, however, in the case of an ISO granted to an Optionee, the Exercise Price shall not be less than 100% of the Fair Market Value of the Shares subject to such option on the Date of Grant (or 110% in the case of an Option granted to a Participant who is a Ten-Percent Shareholder on the Date of Grant). (C) METHOD OF PAYMENT. Payment for the Shares upon exercise of an Option shall be made in cash, by certified check, or if authorized by the Committee, by delivery of other Shares having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Shares as to which said Option is being exercised, or by any combination of such methods of payment or by any other method of payment as may be permitted under applicable law and this Plan and authorized by the Committee under Section 3(d) of this Plan. (D) EXERCISE OF OPTION. (l) PROCEDURE FOR EXERCISE; RIGHTS OF SHAREHOLDER. Any Option granted hereunder shall be exercisable at such times under such conditions as shall be determined by the Committee, including without limitation performance criteria with respect to the Company and/or the Optionee and in accordance with the terms of this Plan. 6 An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Stock Option Agreement by the Optionee entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Committee, consist of any form of consideration and method of payment allowable under Section 6(b)(ii) of this Plan. Upon the receipt of notice of exercise and full payment for the Shares, the Shares shall be deemed to have been issued and the Optionee shall be entitled to receive such Shares and shall be a shareholder with respect to such Shares, and the Shares shall be considered fully paid and nonassessable. No adjustment will be made for a dividend or other right for which the record date is prior to the date on which the stock certificate is issued, except as provided in Section 9 of this Plan. Each exercise of an Option shall reduce, by an equal number, the total number of Shares that may thereafter be purchased under such Option. (II) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. Except as provided in Subsections 6(d)(iii) and 6(d)(iv) below, an Optionee holding an Option who ceases to be an Employee, a Consultant or a director of the Company may, but only until the earlier of the date (x) the Option held by the Optionee expires, or (y) thirty (30) days after the date such Optionee ceases to be an Employee, a Consultant or a director, exercise the Option to the extent that the Optionee was entitled to exercise it on such date; provided, however, that in the event the Optionee is an Employee and is terminated without cause (as determined in the sole discretion of the Committee) then the thirty (30) day period described in this sentence shall be automatically extended to ninety (90) days (and in the case of a Nonstatutory Option, such period shall be automatically extended to six (6) months), unless the Committee further extends such period in its sole discretion. To the extent that the Optionee was not entitled to exercise an Option on such date, or if the Optionee does not exercise it within the time specified herein, such Option shall terminate. The Committee shall have the authority to determine the date an Optionee ceases to be an Employee, a Consultant or a director. (III) PERMANENT AND TOTAL DISABILITY. Notwithstanding the provisions of Section 6(c)(ii) above, in the event an Optionee is unable to continue to perform Services for the Company or any of its Subsidiaries as a result of such Optionee's Permanent and Total Disability (and, for ISOs, at the time such Permanent and Total Disability begins, the Optionee was an Employee and had been an Employee since the Date of Grant), such Optionee may exercise an Option in whole or in part notwithstanding that such Option may not be fully exercisable, but only until the earlier of the date (x) the Option held by the Optionee expires, or (y) twelve (12) months from the date of termination of Services due to such Permanent and Total Disability. To the extent the Optionee is not entitled to exercise an Option on such date or if the Optionee does not exercise it within the time specified herein, such Option shall terminate. (IV) DEATH OF AN OPTIONEE. Upon the death of an Optionee, any Option held by an Optionee shall terminate and be of no further effect; provided, however, notwithstanding the provisions of Section 6(c)(ii) above, in the event an Optionee's death occurs during the term of an Option held by such Optionee and, at the time of death, the Optionee was an Employee, Consultant or director (and, for ISOs, the Optionee had been an Employee since the Date of Grant), the Option may be exercised in whole or in part notwithstanding that such Option may not have been fully exercisable on the date of the Optionee's death, but only until the earlier of the date (x) the Option held by the Optionee expires, or (y) twelve (12) months from the date 7 of the Optionee's death, by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance. To the extent the Option is not entitled to be exercised on such date or if the Option is not exercised within the time specified herein, such Option shall terminate. (D) NON-TRANSFERABILITY OF OPTIONS. Except as may be permitted by the Committee in its sole discretion, any Option granted under this Plan may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder, and is not assignable by operation of law or subject to execution, attachment or similar process. During the Optionee's lifetime, any Option granted under this Plan can only be exercised by such Optionee. Any attempted sale, pledge, assignment, hypothecation or other transfer of the Option contrary to the provisions hereof and the levy of any execution, attachment or similar process upon the Option shall be null and void and without force or effect. No transfer of the Option by will or by the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished written notice thereof and an authenticated copy of the will and/or such other evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions of the Option. The terms of any Option transferred by will or by the laws of descent and distribution shall be binding upon the executors, administrators, heirs and successors of Optionee. (E) TIME OF GRANTING OPTIONS. Any Option granted hereunder shall be deemed to be granted on the Date of Grant. Written notice of the Committee's determination to grant an Option to a Participant, evidenced by a Stock Option Agreement, dated as of the Date of Grant, shall be given to such Participant within a reasonable time after the Date of Grant. (F) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the limitations of this Plan, the Committee may modify, extend or renew outstanding Options or may accept the cancellation of outstanding Options (to the extent not previously exercised) for the granting of new Options in substitution therefor. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair the Optionee's rights or obligations under such Option; provided that the Committee may, in its sole discretion, and without the consent of the Optionee or any other person, reduce the exercise price of all or any part of any Option or accelerate the vesting of all or part of any Option. (G) RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued upon exercise of an Option shall be subject to such rights of repurchase and other transfer restrictions as the Committee may determine in its sole discretion. Such restrictions shall be set forth in the applicable Stock Option Agreement. (H) SPECIAL LIMITATION ON ISOS. To the extent that the aggregate Fair Market Value (determined on the Date of Grant) of the Shares with respect to which ISOs are exercisable for the first time by an individual during any calendar year under this Plan, and under all other plans maintained by the Company, exceeds $100,000, such Options shall be treated as Options that are not ISOs. 8 (I) LEAVES OF ABSENCE. Leaves of absence approved by the Committee which conform to the policies of the Company shall not be considered termination of employment if the employer-employee relationship as defined under the Code or the regulations promulgated thereunder otherwise exists. (J) LIMITATION ON GRANTS OF OPTIONS TO COVERED EMPLOYEES. The total number of Shares for which Options may be granted and which may be awarded as Restricted Stock to any "covered employee" within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder, as amended from time to time, during any one-year period shall not exceed 350,000 in the aggregate. (K) DISQUALIFYING DISPOSITIONS. The Stock Option Agreement evidencing any ISO granted under this Plan shall provide that if the Optionee makes a disposition, within the meaning of Section 425(c) of the Code and the regulations promulgated thereunder, of any share or shares issued to him pursuant to the exercise of the ISO within the two-year period commencing on the day after the Date of Grant of such Option or within a one-year period commencing on the day after the date of transfer of the share or shares to him pursuant to the exercise of such Option, he shall, within ten days of such disposition, notify the Company thereof and immediately deliver to the Company any amount of federal income tax withholding required by law. (L) WITHHOLDING TAXES. The Committee shall require an Optionee to pay to the Company at the time of exercise of an Option the amount that the Company deems necessary to satisfy its obligation to withhold federal, state or local income or other taxes incurred by reason of the exercise. Upon the exercise of an Option requiring tax withholding, an Optionee may either pay such taxes in cash or make a written election to have Shares withheld by the Company from the shares otherwise to be received by the Optionee. The acceptance of any such election by an Optionee shall be at the sole discretion of the Committee. In addition, the Committee may require the Company to withhold Shares from the Shares otherwise to be received by an Optionee upon exercise of an option. The number of Shares withheld pursuant to this paragraph shall have an aggregate Fair Market Value on the date of exercise sufficient to satisfy the applicable withholding taxes. SECTION 7 RESTRICTED STOCK (A) AUTHORITY TO GRANT RESTRICTED STOCK. The Committee shall have the authority to grant to Participants Shares that are subject to certain terms, conditions and restrictions (the "Restricted Stock"). The Restricted Stock may be granted by the Committee either separately or in combination with Options. The terms, conditions and restrictions of the Restricted Stock shall be determined from time to time by the Committee without limitation, except as otherwise provided in this Plan; provided, however, that each grant of Restricted Stock shall require the Participant to remain an Employee of (or otherwise provide Services to) the Company or any of its Subsidiaries for at least twelve (12) months from the Date of Grant. The granting, vesting and issuing of the Restricted Stock shall also be subject to the following provisions: (I) NATURE OF GRANT. Restricted Stock shall be granted to Participants for Services rendered and at no additional cost to Participant; provided, however, that the value of the Services performed must, in the opinion of the Committee, equal or exceed the par value of the Restricted Stock to be granted to the Participant. 9 (II) RESTRICTED STOCK ACCOUNT. The Company shall establish a restricted stock account (the "Restricted Stock Account") for each Participant to whom Restricted Stock is granted, and such Restricted Stock shall be credited to such account. No certificates will be issued to the Participant with respect to the Restricted Stock until the Vest Date as provided herein. Every credit of Restricted Stock under this Plan to a Restricted Stock Account shall be considered "contingent" and unfunded until the Vest Date. Such contingent credits shall be considered bookkeeping entries only, notwithstanding the "crediting" of "dividends" as provided herein. Such accounts shall be subject to the general claims of the Company's creditors. The Participant's rights to the Restricted Stock Account shall be no greater than that of a general creditor of the Company. Nothing contained herein shall be construed as creating a trust or fiduciary relationship between the Participants and the Company, the Board of Directors or the Committee. (III) RESTRICTIONS. The terms, conditions and restrictions of the Restricted Stock shall be determined by the Committee on the Date of Grant. The Restricted Stock may not be sold, assigned, transferred, redeemed, pledged or otherwise encumbered during the period in which the terms, conditions and restrictions apply (the "Restriction Period"). More than one grant of Restricted Stock may be outstanding at any one time, and the Restriction Periods may be of different lengths. Receipt of the Restricted Stock is conditioned upon satisfactory compliance with the terms, conditions and restrictions of this Plan and those imposed by the Committee. (IV) RESTRICTED STOCK CRITERIA. At the time of each grant of Restricted Stock, the Committee in its sole discretion may establish certain criteria to determine the times at which restrictions placed on Restricted Stock shall lapse (i.e., the termination of the Restriction Period), which criteria may include without limitation performance measures and targets and/or holding period requirements (the "Restricted Stock Criteria"). The Committee may establish a corresponding relationship between the Restricted Stock Criteria and (x) the number of Shares of Restricted Stock that may be earned, and (y) the extent to which the terms, conditions and restrictions on the Restricted Stock shall lapse. Restricted Stock Criteria may vary among grants of Restricted Stock; provided, however, that once the Restricted Stock Criteria are established for a grant of Restricted Stock, the Restricted Stock Criteria shall not be modified with respect to such grant. (V) VESTING. On the date the Restriction Period terminates, the Restricted Stock shall vest in the Participant (the "Vest Date"), who may then require the Company to issue certificates evidencing the Restricted Stock credited to the Restricted Stock Account of such Participant. (VI) DIVIDENDS. The Committee may provide from time to time that amounts equivalent to dividends shall be payable with respect to the Restricted Stock held in the Restricted Stock Account of a Participant. Such amounts shall be credited to the Restricted Stock Account and shall be payable to the Participant on the Vest Date. (VII) TERMINATION OF SERVICES. If a Participant (x) with the consent of the Committee, ceases to be an Employee of, or otherwise ceases to provide Services to, the Company or any of its Subsidiaries, or (y) dies or suffers from Permanent and Total Disability, the vesting or forfeiture (including without limitation the terms, conditions and restrictions) of any grant under this Section 7 shall be determined by the Committee in its sole discretion, subject to any limitations or terms of this Plan. If the Participant ceases to be an Employee of, or otherwise ceases to provide Services to, the Company or any of its Subsidiaries for any other reason, all grants of Restricted Stock under this Plan shall be forfeited (subject to the terms of this Plan). 10 (B) DEFERRAL OF PAYMENTS. The Committee may establish procedures by which a Participant may elect to defer the transfer of Restricted Stock to the Participant. The Committee shall determine the terms and conditions of such deferral in its sole discretion. SECTION 8 ISSUANCE OF SHARES As a condition to the transfer of any Shares issued under this Plan, the Company may require an opinion of counsel, satisfactory to the Company, to the effect that such transfer will not be in violation of the Securities Act of 1933, as amended (the "Securities Act"), or any other applicable securities laws, rules or regulations, or that such transfer has been registered under federal and all applicable state securities laws. The Company may refrain from delivering or transferring Shares issued under this Plan until the Committee has determined that the Participant has tendered to the Company any and all applicable federal, state or local tax owed by the Participant as the result of the receipt of a Plan Award, the exercise of an Option or the disposition of any Shares issued under this Plan, in the event that the Company reasonably determines that it might have a legal liability to satisfy such tax. The Company shall not be liable to any person or entity for damages due to any delay in the delivery or issuance of any stock certificate evidencing any Shares for any reason whatsoever. SECTION 9 CAPITALIZATION ADJUSTMENTS; MERGER; CHANGE IN CONTROL (A) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Option, the aggregate number of Shares that have been authorized for issuance under this Plan and the number of Shares of Restricted Stock credited to any Restricted Stock Account of a Participant (as well as the Exercise Price covered by any outstanding Option), shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, payment of a stock dividend with respect to the Stock or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company. Such adjustment shall be made by the Committee in its sole discretion, which adjustment shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option. (B) DISSOLUTION, LIQUIDATION, SALE OF ASSETS OR MERGER. In the event of the dissolution or liquidation of the Company, other than pursuant to a Reorganization (hereinafter defined), any Option granted under the Plan shall terminate as of a date to be fixed by the Committee, provided that not less than 30 days written notice of the date so fixed shall be given to each Optionee and each such Optionee shall have the right during such period to exercise his Options as to all or any part of the Shares covered thereby including Shares as to which such Options would not otherwise be exercisable by reason of an insufficient lapse of time. 11 In the event of a Reorganization in which the Company is not the surviving or acquiring company, or in which the Company is or becomes a wholly-owned subsidiary of another company after the effective date of the Reorganization, then (i) if there is no plan or agreement respecting the Reorganization ("Reorganization Agreement") or if the Reorganization Agreement does not specifically provide for the change, conversion or exchange of the Shares under outstanding unexercised Options for securities of another corporation, then the Committee shall take such action, and the Options shall terminate, as provided above; or (ii) if there is a Reorganization Agreement and if the Reorganization Agreement specifically provides for the change, conversion or exchange of the shares under outstanding or unexercised options for securities of another corporation, then the Committee shall adjust the shares under such outstanding unexercised Options (and shall adjust the Shares which are then available to be optioned, if the Reorganization Agreement makes specific provisions therefore) in a manner not inconsistent with the provisions of the Reorganization Agreement for the adjustment, change, conversion or exchange of such stock and such options. The term "Reorganization" as used in this Subsection 9(b) shall mean any statutory merger, statutory consolidation, sale of all or substantially all of the assets of the Company, or sale, pursuant to an agreement with the Company, of securities of the Company pursuant to which the Company is or becomes a wholly-owned subsidiary of another company after the effective date of the Reorganization. Except as provided above in this Section 9(b) and except as otherwise provided by the Committee in its sole discretion, any Options shall terminate immediately prior to the consummation of such proposed action. Fractional shares resulting from any adjustments pursuant to this Section may be settled in cash or otherwise as the Committee shall determine. Notice of any adjustment shall be given by the Company to each holder of an Option or share of Restricted Stock which shall have been so adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan. (C) CHANGE IN CONTROL. Subject to Section 9(b), in the event there occurs a Change of Control, (i) the Optionees shall have the right to exercise from and after the date of the Change in Control the Option held by such Optionee in whole or in part notwithstanding that such Option may not be fully exercisable, and (ii) any and all restrictions on any Restricted Stock credited to a Restricted Stock Account shall lapse and such stock shall immediately vest in the Participants notwithstanding that the Restricted Stock held in such account was unvested. SECTION 10 NO EMPLOYMENT RIGHTS No provision of this Plan, under any Stock Option Agreement or under any grant of Restricted Stock shall be construed to give any Participant any right to remain an Employee of, or provide Services to, the Company or any of its Subsidiaries or to affect the right of the Company to terminate any Participant's service at any time, with or without cause. 12 SECTION 11 TERM OF PLAN; EFFECT OF AMENDMENT OR TERMINATION (A) EFFECTIVE DATE; TERM OF PLAN. This Plan shall become effective upon its adoption by the Board of Directors. This Plan shall continue in effect for a term of ten (10) years unless sooner terminated under this Section 11. (B) AMENDMENT AND TERMINATION. The Board of Directors in its sole discretion may terminate this Plan at any time. The Board of Directors may amend this Plan at any time in such respects as the Board of Directors may deem advisable; provided, that any change in the aggregate number of Shares that may be issued under this Plan, other than in connection with an adjustment under Section 9 of this Plan, shall require approval of the holders of a majority of the outstanding Shares entitled to vote. (C) EFFECT OF TERMINATION. In the event this Plan is terminated, no Shares shall be issued under this Plan, except upon exercise of an Option granted prior to such termination or issuance of Shares of Restricted Stock previously credited to a Restricted Stock Account. The termination of this Plan, or any amendment thereof, shall not affect any Shares previously issued to a Participant, any Option previously granted under this Plan or any Restricted Stock previously credited to a Restricted Stock Account. SECTION 12 GOVERNING LAW THIS PLAN AND ANY AND ALL STOCK OPTION AGREEMENTS AND AGREEMENTS RELATING TO THE GRANT OF RESTRICTED STOCK EXECUTED IN CONNECTION WITH THIS PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. 13 EX-10.4 8 0008.txt EMPLOYEE STOCK OPTION PLAN - RUPPANNER EMPLOYEE STOCK OPTION AGREEMENT (P.A. RUPPANNER) CasinoBuilders.com Inc. Employee Stock Option Agreement This Agreement, is effective as of September 15, 1999, between CasinoBuilders.com Inc., a Nevada corporation (the "Company"), and Steven Randall ("Grantee"). WHEREAS, Company has agreed to employ Grantee; and WHEREAS, the Company desires to provide an incentive to Grantee to encourage stock ownership and to remain an employee of the Company; and WHEREAS, the achievement of these goals will be assisted by the grant of a non-qualified option to purchase shares of the Company's Class A Common Stock, $.01 par value (the "Class A Common Stock"); NOW, THEREFORE, the parties agree as follows: 1. Grant of Option. The Company hereby grants to Grantee, subject to the terms and conditions herein set forth, the right and option to purchase from the Company all or any part of an aggregate of 2,000,000 (two million) shares of Class A Common Stock, vesting over a three year period from the Grantee's date of hire, at the purchase price of $35 (thirty-five cents) per share. Such option to be exercisable as hereinafter provided. 2. Terms and Conditions. The option evidenced hereby is subject to the following terms and conditions (A) Expiration Date. The option shall expire on December 31, 2009. (B) Exercise of Option. One third of the option is vested on the dates of each of the Grantee's annual service anniversaries for a period of three years from the date of hire. It may be exercised, in whole or in part, at any time (from time to time) after the third service year anniversary, before the expiration date of the option as provided in paragraph (a) above. A written notice shall accompany any exercise to the Company specifying the number of shares as to which the option is being 1 exercised. If Grantee shall so request, shares of the Class A Common Stock purchased upon exercise of an option may be issued in the name of Grantee or another person. (C) Payment of Purchase Price. At the time of any exercise, Grantee shall deliver to the Company, together with the notice provided in paragraph (b) above, the full amount of the purchase price therefore either by bank cashiers check or certified check payable to the Company or in Class A Common Stock delivered by Grantee valued at the Closing Price of the Class A Common Stock, or any combination of cash or Class A Common Stock. The term "Closing Price" shall be the last sale price on the date of the exercise of the option or, in the case no sale takes place on such date, the average of the high and low sales prices on the next preceding trading day, in either case as reported by NASDAQ, or if the shares of Class A Common Stock are not listed or admitted to trading on NASDAQ, the average high bid and low asked prices on the principal National Securities Exchange in which the Class A Common Stock is listed or admitted to trading. If the Class A Common Stock is not traded such that the Closing Price can be determined in accordance with the preceding sentence, the Closing Price shall mean the fair market value of the Class A Common Stock as of the last day of the measuring period as determined by an independent investment banker approved by the Company and Grantee. (D) Exercise Upon Termination of Employment. After vesting, any option granted hereunder may be exercised by Grantee, his heirs, devises, legatees, legal representative or assigns at any time up to and including December 31, 2009, whether or not Grantee shall cease to be an employee of the Company for any reason, including, without limitation, termination by voluntary resignation, by action of the Company, for cause, without cause, or by reason of death or disability. (E) Transferability of Option and Shares Acquired Upon Exercise of Option. This option shall be transferable only by will or the laws of descent and distribution; provided Grantee may transfer the option only with the consent of the Company. Except as limited by applicable securities laws, shares of Class A Common Stock acquired upon exercise of this option hereunder shall be freely tradeable. (F) Adjustment of the Changes in the Stock. (i) In the event the shares of Class A Common Stock, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock o other securities of the Company or of another corporation (whether by reason o merger, consolidation, recapitalization, reclassification, split, reverse split, combination of shares, or otherwise) or if the number of such shares of Class A Common Stock shall be increased through the payment of a stock dividend, then there shall be substituted for or added to each share of Class A Common Stock theretofore appropriated or thereafter subject or which may become subject to an option, the number and kind of shares of stock or other securities into which each outstanding share of Class A Common Stock shall be so changed, or to which each such share shall be entitled, as the case may be. Outstanding options shal also be appropriately amended as to price and other terms as may be necessary to reflect the foregoing events, and immediately vested in their entirety. (ii) Further, in the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, consolidation, merger (other than a merger or consolidation which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares), any sale or transfer by the Company of al or substantially all of its assets or any tender offer or exchange offer for or th acquisition, directly or indirectly, by any person or group of all or a majority of th then outstanding voting securities of the Company, rights offering, or any othe change in the corporate structure or rights with respect to any shares of th Company, adjustments shall be made to the number or type of stock subject to thi Agreement and, in order to prevent dilution or enlargement of the rights o Grantee, to the number of shares of Class A Common Stock subject to the option and the type and option price of the Class A Common Stock subject to the then outstanding option. (G) Withholding. Grantee may elect that shares of the Class A Common Stock valued at the Closing Price b applied towards the payment of withholding taxes. (3) Registration. The Company shall register all the shares underlying the option on a Registration Statement with the Registration Statement filed for the shares underlying the Company's 1999 Stock Option and Restricted Stock Plan (the "Plan") or on Form S-8 as soon as reasonably practical after the filing of the Registration Statement for the Plan, but in no event later than 120 days after the date the Class A Common Stock shall first be traded on NASDAQ (on other than a when issued basis). If the shares underlying the option granted hereunder have not been registered by the Company by the date of exercise of the option, the Company shall cause such shares to be registered on Form S-3 upon Grantee's exercise of the option. (4) Non-Qualified Stock Options. The Company and Grantee acknowledge the stock options granted hereunder shall be treated as nonqualified stock options for U.S. federal income tax purposes. (5) Grantee to Have No Rights as a Stockholder. With regard to the stock underlying the option (from time to time) Grantee shall not have the rights of a stockholder until Grantee has timely exercise the option relating to such stock and paid in full the option price relating thereto. (6) Notice. Notice to the Company shall be deemed given if in writing and mailed to the Secretary of the Company at its principal executive offices by first class, certified mail at the then principal office of the Company. (7) Governing Law. This Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of Nevada. (8) Binding Agreement. This Agreement constitutes the binding agreement of the parties with respect to the grant of options to Grantee. The Company represents and warrants to Grantee that this Agreement and the grant of options hereunder have been duly authorized pursuant to any necessary corporate action. This Agreement may not be modified except by the mutual agreement of the parties in writing. In the event of any overlap, inconsistency, contradiction or any other conflict between this Agreement and any other agreement, option plan, policy or other statement, this Agreement shall be controlling. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year written above. CasinoBuilders.com Inc. Employee Andy Ruppanner Andy Ruppanner Chairman and CEO Director and Secretary CasinoBuilders.com CasinoBuilders.com EX-10.5 9 0009.txt EMPLOYEE STOCK OPTION PLAN - RANDALL EMPLOYEE STOCK OPTION AGREEMENT CasinoBuilders.com Inc. Employee Stock Option Agreement This Agreement, is effective as of September 15, 1999, between CasinoBuilders.com Inc., a Nevada corporation (the "Company"), and Steven Randall ("Grantee"). WHEREAS, Company has agreed to employ Grantee; and WHEREAS, the Company desires to provide an incentive to Grantee to encourage stock ownership and to remain an employee of the Company; and WHEREAS, the achievement of these goals will be assisted by the grant of a non-qualified option to purchase shares of the Company's Class A Common Stock, $.01 par value (the "Class A Common Stock"); NOW, THEREFORE, the parties agree as follows: 1. Grant of Option. The Company hereby grants to Grantee, subject to the terms and conditions herein set forth, the right and option to purchase from the Company all or any part of an aggregate of 2,000,000 (two million) shares of Class A Common Stock, vesting over a three year period from the Grantee's date of hire, at the purchase price of $35 (thirty-five cents) per share. Such option to be exercisable as hereinafter provided. 2. Terms and Conditions. The option evidenced hereby is subject to the following terms and conditions (A) Expiration Date. The option shall expire on December 31, 2009. (B) Exercise of Option. One third of the option is vested on the dates of each of the Grantee's annual service anniversaries for a period of three years from the date of hire. It may be exercised, in whole or in part, at any time (from time to time) after the third service year anniversary, before the expiration date of the option as provided in paragraph (a) above. A written notice shall accompany any exercise to the Company specifying the number of shares as to which the option is being 1 exercised. If Grantee shall so request, shares of the Class A Common Stock purchased upon exercise of an option may be issued in the name of Grantee or another person. (C) Payment of Purchase Price. At the time of any exercise, Grantee shall deliver to the Company, together with the notice provided in paragraph (b) above, the full amount of the purchase price therefore either by bank cashiers check or certified check payable to the Company or in Class A Common Stock delivered by Grantee valued at the Closing Price of the Class A Common Stock, or any combination of cash or Class A Common Stock. The term "Closing Price" shall be the last sale price on the date of the exercise of the option or, in the case no sale takes place on such date, the average of the high and low sales prices on the next preceding trading day, in either case as reported by NASDAQ, or if the shares of Class A Common Stock are not listed or admitted to trading on NASDAQ, the average high bid and low asked prices on the principal National Securities Exchange in which the Class A Common Stock is listed or admitted to trading. If the Class A Common Stock is not traded such that the Closing Price can be determined in accordance with the preceding sentence, the Closing Price shall mean the fair market value of the Class A Common Stock as of the last day of the measuring period as determined by an independent investment banker approved by the Company and Grantee. (D) Exercise Upon Termination of Employment. After vesting, any option granted hereunder may be exercised by Grantee, his heirs, devises, legatees, legal representative or assigns at any time up to and including December 31, 2009, whether or not Grantee shall cease to be an employee of the Company for any reason, including, without limitation, termination by voluntary resignation, by action of the Company, for cause, without cause, or by reason of death or disability. (E) Transferability of Option and Shares Acquired Upon Exercise of Option. This option shall be transferable only by will or the laws of descent and distribution; provided Grantee may transfer the option only with the consent of the Company. Except as limited by applicable securities laws, shares of Class A Common Stock acquired upon exercise of this option hereunder shall be freely tradeable. (F) Adjustment of the Changes in the Stock. (i) In the event the shares of Class A Common Stock, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock o other securities of the Company or of another corporation (whether by reason o merger, consolidation, recapitalization, reclassification, split, reverse split, combination of shares, or otherwise) or if the number of such shares of Class A Common Stock shall be increased through the payment of a stock dividend, then there shall be substituted for or added to each share of Class A Common Stock theretofore appropriated or thereafter subject or which may become subject to an option, the number and kind of shares of stock or other securities into which each outstanding share of Class A Common Stock shall be so changed, or to which each such share shall be entitled, as the case may be. Outstanding options shal also be appropriately amended as to price and other terms as may be necessary to reflect the foregoing events, and immediately vested in their entirety. (ii) Further, in the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, consolidation, merger (other than a merger or consolidation which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares), any sale or transfer by the Company of al or substantially all of its assets or any tender offer or exchange offer for or th acquisition, directly or indirectly, by any person or group of all or a majority of th then outstanding voting securities of the Company, rights offering, or any othe change in the corporate structure or rights with respect to any shares of th Company, adjustments shall be made to the number or type of stock subject to thi Agreement and, in order to prevent dilution or enlargement of the rights o Grantee, to the number of shares of Class A Common Stock subject to the option and the type and option price of the Class A Common Stock subject to the then outstanding option. (G) Withholding. Grantee may elect that shares of the Class A Common Stock valued at the Closing Price b applied towards the payment of withholding taxes. (3) Registration. The Company shall register all the shares underlying the option on a Registration Statement with the Registration Statement filed for the shares underlying the Company's 1999 Stock Option and Restricted Stock Plan (the "Plan") or on Form S-8 as soon as reasonably practical after the filing of the Registration Statement for the Plan, but in no event later than 120 days after the date the Class A Common Stock shall first be traded on NASDAQ (on other than a when issued basis). If the shares underlying the option granted hereunder have not been registered by the Company by the date of exercise of the option, the Company shall cause such shares to be registered on Form S-3 upon Grantee's exercise of the option. (4) Non-Qualified Stock Options. The Company and Grantee acknowledge the stock options granted hereunder shall be treated as nonqualified stock options for U.S. federal income tax purposes. (5) Grantee to Have No Rights as a Stockholder. With regard to the stock underlying the option (from time to time) Grantee shall not have the rights of a stockholder until Grantee has timely exercise the option relating to such stock and paid in full the option price relating thereto. (6) Notice. Notice to the Company shall be deemed given if in writing and mailed to the Secretary of the Company at its principal executive offices by first class, certified mail at the then principal office of the Company. (7) Governing Law. This Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of Nevada. (8) Binding Agreement. This Agreement constitutes the binding agreement of the parties with respect to the grant of options to Grantee. The Company represents and warrants to Grantee that this Agreement and the grant of options hereunder have been duly authorized pursuant to any necessary corporate action. This Agreement may not be modified except by the mutual agreement of the parties in writing. In the event of any overlap, inconsistency, contradiction or any other conflict between this Agreement and any other agreement, option plan, policy or other statement, this Agreement shall be controlling. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year written above. CasinoBuilders.com Inc. Employee Andy Ruppanner Andy Ruppanner Chairman and CEO Director and Secretary CasinoBuilders.com CasinoBuilders.com EX-10.6 10 0010.txt LOST BOYS AGREEMENT CO-OPERATION CONTRACT DRAFT 6/12/99 THE UNDERSIGNED CASINOBUILDERS.COM INC. a public company, with registered and business offices at 2110 Vickers Drive in Colorado Springs, CO. 80918, lawfully represented for this purpose by its executive vice president, Mr. S. Randall and/or its CEO Mr A. Ruppanger, and referred to hereinafter as "CasinoBuilders"; and LOST BOYS INTERACTIVE B.V., a private limited liability company, with its registered and business offices at Herengracht 410 in (1017 BX) Amsterdam, the Netherlands, lawfully represented for this purpose by its managing directors Mr C.J.W. Kousemaker and Mr M.J. Mol, and to be referred to hereinafter as "Lost Boys"; WHEREAS: Lost Boys engages in the manufacture of software and in design work for new media productions in the broadest sense of the words; CasinoBuilders is an internet marketing and services company focused on the internet gaming industry and engages inter alia in the commercial exploitation of online casino's by licensing; CasinoBuilders intends to have online Avatar based casino's developed and produced by Lost Boys and Lost Boys is willing to develop and produce the software and design for such casino's; Parties wish to agree upon the terms and conditions which will apply to their co-operation with regard to the development of online Avatar based casino's; AGREE AS FOLLOWS ARTICLE 1 - COMMISSION 1.1 For the purpose of this contract an `online Avatar based casino' is defined as an online client server based casino where casino games can be played together with other people through online connections. 1.2 When CasinoBuilders commissions Lost Boys, and Lost Boys accepts the commission to produce (a part of) an on-line Avatar based casino (such as the art deco casino), hereinafter the "Application", the provisions set out in this Contract will apply to such commissions. This contract will not apply to any commissions regarding other then the aforementioned Applications. 1.2 Lost Boys shall produce the Applications in accordance with the functional/technical specifications, hereinafter referred to as the "Specifications". 1.3 Regular consultations shall be held between CasinoBuilders and Supplier as regards the content, structure and design of the Applications. Final editorial responsibility for the Applications shall, however, be the sole responsibility of CasinoBuilders. ARTICLE 2 - DELIVERY 2.1 The delivery dates of the Applications shall be agreed in mutual consent. Lost Boys will describe details with regard to the planning and the delivery for each Application, hereinafter referred to as the "Planning". 2.2 CasinoBuilders shall be obliged to furnish all the requisite co-operation to Lost Boys for the performance of the Applications under this Contract, and to make available to Lost Boys the information, data, software, assets, materials and/or other necessary items as described in the Planning, hereinafter the "Documentation", on or by the dates mentioned therein. 2.3 If CasinoBuilders and/or any third parties retained by CasinoBuilders fail to make (any part) of the Documentation available by or on the dates mentioned in the Planning, Lost Boys may - having first consulted CasinoBuilders - then postpone the Delivery Date without being obliged to compensate CasinoBuilders in any way. 2.4 Lost Boys shall not be liable for any faults in or, as the case may be, problems with the Application's software that result from the Documentation furnished by CasinoBuilders of any third parties retained by the latter. 2.5 If Lost Boys executes any specific changes in and/or additions to the Specifications for the Application to be supplied by Lost Boys, and does so at the request of CasinoBuilders as provided for in Article 3.4, Lost Boys may - having first consulted CasinoBuilders - postpone the Application's Delivery Date to the extent that this is required in order to execute the relevant changes or additions. ARTICLE 3 - PAYMENT 3.1 For each Application CasinoBuilders shall be due Lost Boys the fees as mentioned in the price quotation and/or invoices of the particular Application. The way of payment of the fees shall be decided in mutual consent for each Application, hereinafter the "Conditions of Payment". Payment might be effected partly in shares of CasinoBuilders. 3.2 If CasinoBuilders issues a request to change and/or add to the Specifications for an Application produced by Lost Boys, it shall notify Lost Boys accordingly, Lost Boys shall then issue CasinoBuilders with a price quotation for any additional work to be performed as a result of such change(s) and/or addition(s). The aforementioned quotation will be based upon a reduced price of $ 600,-- (six hundred dollars) excluding VAT a day. 3.3 If Lost Boys is required to carry out additional work as the result of a failure to furnish (any part of) the Documentation on time on the part of CasinoBuilders and/or any third parties retained by the latter, Lost Boys shall be entitled to charge on the entire cost of this additional work to CasinoBuilders. ARTICLE 4 - GRANTING OF RIGHTS 4.1 The Applications shall be delivered by Lost Boys to CasinoBuilders together with the exclusive right to use, publish and market the Applications world-wide during the term of this contract. For each Application parties will agree upon the exact conditions, such as additional consideration, under which CasinoBuilders will be granted the right to grant third parties a sublicense to use and/or publish a particular Application. The term of such licenses will be at most three years. All sublicenses will be in conformity with this contract and CasinoBuilders will provide Lost Boys with a copy of each sublicense granted. 4.2 All the (intellectual) property rights in the Application, the software, the concept and its design, the INFORMATION OR DATA STORED THEREIN AND ANY OTHER MATERIAL OWNED BY LOST BOYS PRIOR to the co-operation between parties, shall be exclusively reserved for and remain vested in Lost Boys. 4.3 All (intellectual) property rights in the Application, the software, the concept and its design, the INFORMATION OR DATA STORED THEREIN AND ANY OTHER MATERIAL DEVELOPED BY LOST BOYS DURING the co-operation between parties, shall be reserved for parties together in case CasinoBuilders has delivered a substantial contribution to this development. In case CasinoBuilders has not delivered a substantial contribution to this development all such (intellectual) property rights shall be exclusively reserved for and remain vested in Lost Boys. 4.4 Article 4.3 does not apply to the Documentation furnished by CasinoBuilders. All intellectual property rights in this Documentation shall remain vested in CasinoBuilders. ARTICLE 5 - WARRANTIES AND INDEMNIFICATION 5.1 The parties represent and warrant towards one another that no obligations exist which stand in the way of them entering into and executing this Contract. 5.2 The parties represent and warrant towards one another that they are each fully entitled to grant each other the rights described in this Contract and that they shall indemnify each other against any and all third-party claims in that regard. 5.3 CasinoBuilders represents and warrants towards Lost Boys that it is entitled to dispose freely of the Documentation (to be) made available to Lost Boys and that it shall indemnify Lost Boys against any and all third-party claims in that regard. 5.4 Either party to this Contract shall compensate the other party for any and all damage, including any legal costs reasonably incurred, which said other party may sustain as the result of any default on the part of the former in its performance of any obligation under this Contract, and shall indemnify the other party against any and all third-party claims in that regard. 5.5 The indemnifications issued to CasinoBuilders by Lost Boys in this Article shall lapse if CasinoBuilders has made any changes and/or adjustments in or to the Application or, as the case may be, has had such changes or adjustments made on its behalf and/or if CasinoBuilders has used the application in any manner other than one that has been agreed on. ARTICLE 6 - APPENDIXES For each Application developed under this contract the following information will be attached in an appendix to this contract: The Specifications; The Planning; The Documentation; The Conditions of Payment. ARTICLE 7 - TERM 7.1 This co-operation contract shall continue for an initial period of three years, and shall take effect on the first of December 1999. In mutual consultation parties can decide to extend this contract with each time another period of three years. 7.2 The sublicenses as referred to in article 4.1 of this contract which are granted before parties have decided to terminate this contract, will not be effected by the termination of this contract. All other sublicenses will end at the termination of this contract, unless parties decide otherwise in mutual consent. 7.3 After termination of this contract parties will decide in mutual consultation if, how and under which conditions the joint (intellectual) property rights as referred to in article 4.2 of this contract might be used by each party. 7.4 After termination of this contract Lost Boys shall repair at its customary commercial rates defects in the software of the delivered Applications to the best of its ability (corrective maintenance) upon request of CasinoBuilders. Parties will enter into an maintenance contract for this purpose in due course. This maintenance contract will be effective during the remaining term of the latest sublicense granted by CasinoBuilders as referred to in article 4.1, with a minimum of one year. However, in case this contract is terminated by Lost Boys in accordance with article 15 of Lost Boys' General Terms and Conditions of Delivery and Payment, Lost Boys will not be obliged to provide CasinoBuilders with the aforementioned maintenance. ARTICLE 8 - GENERAL TERMS AND CONDITIONS 8.1 Lost Boys' General Terms and Conditions of Delivery and Payment shall form an integral part of this Contract. By signing this Contract, CasinoBuilders represents that it has accepted the contents of said General Terms and Conditions. 8.2 If any provision in this Contract and/or its appendixes should be in violation of Lost Boys' General Terms and Conditions of Delivery and Payment, the relevant provision in this Contract shall take precedence. 8.3 In departure from the General Terms and Condition of Delivery and Payment (GTC) the parties have agreed that: a. The following sentence shall be added to Article 12 of the GTC: "Identical confidentiality obligations will apply to Supplier." b. Article 15.1 of the GTC shall be replaced in full by the following text: "If one of the parties, having first received a written demand from the other party, continues to default on any of its essential obligations under this contract and/or these General Terms and Conditions, the party concerned shall be entitled, without further notice of default to the other party or court intervention, to terminate the contract - with immediate effect and without being obliged to pay the other party any kind of compensation - by means of a registered letter, without this prejudicing the right of the terminating party to exercise its other statutory rights, such as its right to compensation. If, at the time of the Contract's termination under this Article, the terminating party has already partially performed its obligations, the other party shall be obliged in return to perform its relevant obligations to an equivalent degree." c. The following sentence shall be added to Article 15.2 of the GTC: "Customer will be entitled to terminate a contract on the same grounds." d. Article 18.1 of the GTC shall be replaced by the following text: "During the term of the co-operation contract between the Customer and the Supplier, the Supplier shall remedy for free any defects in the software as a result of its not satisfying the specifications, if and to the extent that it is notified of these defects in writing by the Customer within this period." THUS AGREED AND SIGNED IN DUPLICATE ORIGINALS IN AMSTERDAM, THE NETHERLANDS/ COLORADO, USA DATE: ....................... 1999 Lost Boys Interactive B.V. CasinoBuilders.com Inc. ........................................... ....................... C.J.W. Kousemaker P. A. Ruppanner ......................................... M.J. Mol EX-10.7 11 0011.txt CONSULTING AGREEMENT - PORTFOLIO CONSULTING AGREEMENT CONSULTING AGREEMENT dated as of July 16. 1999 between CasinoBuilder.com,Inc., a Nevada corporation, with a principal place of business at 8756 122nd Avenue NE. Kirkland, Washington, 98033 ("CBC"), and Portfolio Investments Strategies Corp., with a principal place of business at 6 Lake Street, Suite 1800. Monroe, New York 10950 ("PiSC"). WHEREAS: A. CBC has done a private placement of its Senior Series A Senior Subordinated Convertible Redeemable Debenture to ZZG Holdings L.L.C. ("PURCHASER") pursuant to a Securities Subscription Agreement of even date between CBC and Purchaser ("AGREEMENT"); and B. CBC wishes to compensate PiSC for rendering consulting services in connection with the Agreement and the private placement of its securities. NOW THEREFORE, it is agreed: 1. COMPENSATION. CBC shall pay PiSC a consulting fee of $117,000 ("Fee"), which Fee shall also cover expenses; as follows; $32,500 upon the execution of the Agreement, $42,500 upon payment of the first Demand and $42.500 upon payment of the second Demand ("FEE INSTALLMENTS"). PiSC shall be paid such Fee, in cash, by the Purchaser who shall deduct the Fee Installments from each of the Debenture payments made to CBC. 2. MISCELLANEOUS. This Agreement (i) shall be governed by the laws of the State of Colorado; (ii) may be executed in counterparts each of which shall constitute an original: (iii) shall be binding upon the successors, representatives, agents, officers and directors of the parties; and (iv) may not be modified or changed except in a writing signed by all parties. This Consulting Agreement has been executed as of the date first above written. CASINOBUILDERS.COM, INC. By: /s/Paul A. Ruppanner Paul A. Ruppanner PORTFOLIO iNVESTMENT STRATEGIES CORP. By:/s/ Not Legible EX-27.1 12 0012.txt FDS --
5 0001003930 CASINOBUILDERS.COM, Inc. 1 U.S. DOLLARS 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 1 54,964 0 0 0 0 54,964 3,500 350 573,952 291,520 361,507 0 0 17,657 (96,732) 573,952 0 0 0 0 1,266,167 650,000 313,207 0 0 (2,229,374) 0 0 0 (2,229,374) (0.19) (0.19)
EX-27.2 13 0013.txt FDS --
5 0001003930 CASINOBUILDERS.COM, Inc. 1 U.S. DOLLARS 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 9,951 0 0 0 0 9,951 3,500 700 68,131 267,100 206,000 0 0 19,650 (424,619) 68,131 123,232 123,232 43,050 43,050 154,242 0 41,484 (115,544) 0 (115,544) 0 0 0 (115,544) (0.01) (0.01)
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