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Exhibit 1
AMENDMENT NO. 1
TO
STRATEGIC COOPERATION AGREEMENT
THIS AMENDMENT NO. 1 to STRATEGIC COOPERATION AGREEMENT
("Amendment No. 1"), dated as of this 8th day of June, 2001, is made and entered
into by and among eLOT, Inc., a Virginia corporation ("Parent"), eLOTTONET Inc.,
a Delaware corporation ("Buyer"), and PlasmaNet, Inc., a Delaware corporation
("Seller").
RECITALS
WHEREAS, Parent, Buyer and Seller are the parties to the
Strategic Cooperation Agreement dated as of June 8, 2000 (the "Agreement");
WHEREAS, Seller has informed Parent that Seller has delivered
to Parent a total of 2.2 million unique users pursuant to Section 2.2 of the
Agreement through March 31, 2001 (the "Qualified Unique User Base");
WHEREAS, Seller and Parent wish to resolve the issue of the
number of unique users actually delivered to Parent by Seller and this Amendment
No. 1 shall hereby serve to resolve such issue;
WHEREAS, since the signing of the Agreement, the market price
of the Parent Common Stock has declined substantially, as has the value of
unique users in the advertising market place;
WHEREAS, the parties desire to enter into certain agreements
to, among other things, amend the Agreement to compensate Seller for delivering
the Qualified Unique User Base, recognize the current financial and economic
marketplaces and maximize the value of the Parent Common Stock;
NOW, THEREFORE, in consideration of the foregoing premises,
and the agreements and representations contained herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used herein without definition shall have
the respective meanings assigned to those terms in the Agreement.
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ARTICLE II
AMENDMENTS TO THE AGREEMENT
2.1. Amendments to ARTICLE I of the Agreement.
(a) The definition of the term "Average Parent Stock Price"
set forth in the Agreement is hereby deleted in its entirety and replaced with
the following:
"Average Parent Stock Price" means the average (rounded to the
nearest cent) of the volume weighted averages (rounded to the nearest
cent) of the trading prices of the Parent Common Stock on the principal
exchange or trading market of the Parent Common Stock, as reported by
Bloomberg Financial Markets (or such other source as Parent and Seller
shall agree) during period (i) beginning on April 1, 2001 and ending
June 30, 2001, with respect to the June 30, 2001 Measurement Date and
(ii) beginning July 1, 2001 and ending September 30, 2001 with respect
to the September 30, 2001 Measurement Date.
(b) The definition of the term "Maximum Quarterly Unique User
Amount" set forth in the Agreement is hereby deleted in its entirety and
replaced with the following:
"Maximum Quarterly Qualified Unique User Amount" has the
meaning set forth in Section 2.2(d).
(c) The definition of the term "Measurement Date" set forth in
the Agreement is hereby deleted in its entirety and replaced with the following:
"Measurement Date" means each of June 30, 2001 and September
30, 2001.
(d) The definition of the term "Net Advertising Revenues" set
forth in the Agreement is hereby deleted in its entirety.
(e) The definition of the term "Previous High Number of Unique
Users" set forth in the Agreement is hereby deleted in its entirety and replaced
with the following:
"Previous High Number of Qualified Unique Users" means, with
respect to (i) the June 30, 2001 Measurement Date, two million two
hundred thousand (2,200,000) Qualified Unique Users and (ii) the
September 30, 2001 Measurement Date, the greater of (a) the number of
Qualified Unique Users provided by Seller and retained by Buyer as of
the June 30, 2001 Measurement
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Date or (b) two million two hundred thousand (2,200,000) Qualified
Unique Users.
(f) The definition of the term "Promissory Note" set forth in
the Agreement is hereby deleted in its entirety and the following definition is
added:
"Qualified Unique User" means a Unique User located in the
United States, Canada or Great Britain or any other jurisdiction approved in
writing by Parent for purposes of this definition.
2.2 Amendments to Section 2.2 of the Agreement. Section 2.2 of
the Agreement is hereby deleted in its entirety and replaced with the following:
2.2 Additional Unique Users.
(a) As consideration for all of the Unique Users provided by
Seller to, and retained by, Buyer pursuant to Article III hereof for
all periods ending on or prior to March 31, 2001, Parent shall issue to
Seller eleven million one hundred thousand (11,100,000) shares of
Parent Common Stock within three (3) business days of the date of
Amendment No.1 to this Agreement. As consideration for Qualified Unique
Users in excess of two million two hundred thousand (2,200,000)
provided by Seller to, and retained by, Buyer pursuant to Article III
hereof, Parent shall, on the terms set forth in this Section 2.2, pay
or cause to be paid to Seller either cash or shares of Parent Common
Stock as hereinafter provided in this Section 2.2. Shares of Parent
Common Stock issued pursuant to this Section 2.2 are referred to herein
as "Subsequent Shares".
(b) Within three (3) business days after each Measurement
Date, Buyer shall give written notice to Seller of the number of
Qualified Unique Users provided by Seller to, and retained by, Buyer as
of such Measurement Date. At Seller's request, Buyer shall provide
Seller access to its books and records during normal business hours to
enable Seller to verify Buyer's calculation of such Qualified Unique
Users.
(c) Within ten (10) business days after each Measurement Date
as of which the number of Qualified Unique Users provided by Seller to,
and retained by, Buyer exceeds the Previous High Number of Qualified
Unique Users, Parent shall pay to Seller as consideration for such
Qualified Unique Users in excess of the Previous High Number of
Qualified Unique Users any combination of cash or Parent Common Stock
provided in clauses (i) and (ii) below; provided, however, that,
subject to Section 2.2(d), Parent shall not be obligated to pay
consideration to Seller pursuant to this Section 2.2(c) for more than
three hundred and seventy five thousand (375,000) Qualified Unique
Users with respect to either Measurement Date:
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(i) to the extent Parent elects to pay cash as
consideration for all or a portion of such Qualified Unique
Users, the amount payable shall equal the product of (x)
seventy-five cents ($0.75) and (y) the number of such
Qualified Unique Users with respect to which Parent has
elected to pay cash consideration; or
(ii) to the extent Parent elects to pay Parent Common
Stock as consideration for all or a portion of such Qualified
Unique Users, the number of shares of Parent Common Stock to
be issued shall equal (x) the product of (A) seventy-five
cents ($0.75) and (B) the number of such Qualified Unique
Users with respect to which Parent has elected to issue Parent
Common Stock as consideration, divided by (y) the Average
Parent Stock Price.
(d) If the number of Qualified Unique Users delivered by
Seller to, and retained by, Buyer as of the June 30, 2001 Measurement
Date is such that Parent would be obligated to pay consideration with
respect to more than three hundred and seventy-five thousand (375,000)
Qualified Unique Users with respect to such Measurement Date (the
"Maximum Quarterly Unique User Amount"), Parent may elect not to pay
consideration with respect to Qualified Unique Users in excess of the
Maximum Quarterly Qualified Unique User Amount, in which event the
"Previous High Number of Qualified Unique Users" for the September 30,
2001 Measurement Date shall be deemed to exclude that number of
Qualified Unique Users in excess of the Maximum Quarterly Qualified
Unique User Amount; provided that the number of Qualified Unique Users
in excess of the Maximum Quarterly Qualified Unique User Amount shall
be credited to the September 30, 2001 Measurement Date and; provided,
further, however, that notwithstanding such credit Parent shall not be
obligated to pay consideration to Seller for more than three hundred
and seventy-five thousand (375,000) Qualified Unique Users with respect
to the September 30, 2001 Measurement Date.
(e) For purposes of this Section 2.2, in the event of any
change in the Parent Common Stock by reason of any stock dividend,
stock split, combination or recapitalization with respect to the Parent
Common Stock, the number of shares of Parent Common Stock thereafter
issuable pursuant to this Section 2.2 shall be in the same amount that
Seller would have been entitled to if the Parent Common Stock been
issued to Seller prior to any such dividend, stock split, combination
or recapitalization. In the event that Parent shall be a party to any
merger, consolidation, declare any liquidating dividend after a sale of
all or substantially all of Parent's assets or other similar
transaction pursuant
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to which the outstanding Parent Common Stock is converted into cash,
securities or other property, thereafter, in lieu of issuing shares of
Parent Common Stock which may be issued to Seller pursuant to this
Section 2.2, Parent shall pay to Seller the cash, securities and other
property that Seller would have received had it held at the effective
time of such merger, consolidation or other similar transaction the
number of shares of Parent Common Stock that would have been issuable
pursuant to this Section 2.2.
(f) With respect to quarterly periods after September 30,
2001, the parties shall review the then-current conditions in the
advertising market and endeavor in good faith to agree to an
appropriate rate per name for such quarter. If the parties are unable
to reach agreement, Seller may stop providing, and Buyer may stop
accepting, additional Unique Users; provided that, in such case, Seller
shall continue to provide Qualified Unique Users to Buyer to the extent
necessary to maintain the aggregate number of Qualified Unique Users
for which it has been compensated pursuant to this Article II (i.e.,
two million two hundred thousand (2,200,000) plus the number of
Qualified Unique Users for which Seller receives compensation pursuant
to Section 2.2(c)).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Parent and Buyer. Parent
and Buyer hereby represent and warrant to Seller as follows:
(a) The shares of Parent Common Stock to be issued to Seller
hereunder have been duly authorized and, when issued in compliance with the
provisions of this Amendment No. 1, will be validly issued, fully paid and
non-assessable and will be free of any liens, subject to restrictions on
transfer under state and/or federal securities laws.
(b) The authorized capital Parent consists of (i) 1,000,000
shares of Preferred Stock, par value 0.01 per share, of which no shares were
issued and outstanding as of the date hereof; and (ii) 130,000,000 shares of
Parent Common Stock, of which 73,356,027 shares were issued and outstanding as
of May 31, 2001. As of May 31, 2001, Parent had reserved (A) 7,190,855 shares of
Parent Common Stock for issuance pursuant to Parent's option plans, (B) 300,00
shares of Parent Common Stock for issuance pursuant to outstanding warrants and
(C) 1,537,882 shares of Parent Common Stock for issuance upon conversion of
Parent's 7 1/2 % Convertible Subordinated Debentures due 2011.
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(c) The issued and outstanding shares of Parent Common Stock
have been duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of Parent Common Stock was issued
in violation of the preemptive and other similar rights of any securityholder of
the Parent.
(d) Assuming the accuracy of Seller's representations and
warranties set forth herein, the issuance by the Parent of the Subsequent Shares
pursuant to this Amendment No. 1 does not constitute an offer or a sale of such
securities by means of any general solicitation or general advertising within
the meaning of Rule 502(e) of the Securities Act of 1933, as amended.
(e) Assuming the accuracy of Seller's representations and
warranties set forth herein, it is not necessary in connection with the issuance
and delivery of such Subsequent Shares in the manner contemplated by this
Amendment No. 1 to register any of such securities under the Securities Act of
1933, as amended (the "Securities Act"), other than pursuant to the Registration
Rights Agreement (as defined in the Asset Purchase Agreement).
3.2 Representations and Warranties of Seller. Seller hereby
represents and warrants to Parent and Buyer as follows:
(a) Seller is capable of evaluating the merits and risks of
its investment in Parent as a result hereof, and has the capacity to protect its
own interests in making its investment in Parent. Seller (i) understands that
the Parent Common Stock to be issued to it hereunder has not been registered
under the Securities Act (except in accordance with the provisions of the
Registration Rights Agreement), or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is acquiring the Parent
Common Stock to be issued to it hereunder solely for its own account for
investment purposes, and not with a view to the distribution thereof, (iii) is a
sophisticated investor with knowledge and experience in business and financial
matters, (iv) has received certain information concerning Parent and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Parent Common Stock, and (v) is
able to bear the economic risk and lack of liquidity inherent in holding the
Parent Common Stock.
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ARTICLE IV
MISCELLANEOUS
4.1 Agreement Remains In Effect. Except as amended by this
Amendment No. 1, the Agreement remains in full force and effect and constitutes
the entire agreement among the parties pertaining to the subject matter hereof.
4.2 Governing Law. This Amendment No. 1 shall be construed in
accordance with and governed by the laws of the State of New York applicable to
agreements made and to be performed wholly within such jurisdiction without
regard to the conflicts of laws provisions thereof.
4.3 Severability. Should any provision of this Amendment No. 1
be determined to be invalid, it shall be severed from the Agreement and the
remaining provisions hereof and thereof shall remain in full force and effect.
4.4 Counterparts. This Amendment No. 1 may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date written above by their duly authorized
representatives.
eLOT, INC.
By:
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Name:
Title:
eLOTTONET INC.
By:
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Name:
Title:
PLASMANET, INC.
By:
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Name:
Title:
