SECTION 10(A) PROSPECTUS OF
LEARNER'S WORLD, INC.
August 14, 2000: This document constitutes part of a prospectus
covering securities of Learner's World, Inc, a New York corporation (the
"Company"), that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"). This document, a Section 10(a) Prospectus,
contains and constitutes four sections: first, the "General Plan Information;"
second, the "Registrant Information and Fee Agreement Information;" third, the
Company's Form 10-KSB/A, which is incorporated herein by this reference, and
thereby constructively provided to offeree; and fourth, a Stock Option Agreement
and Notice of Exercise, which is to be completed and submitted within the time
allowed along with tender of the appropriate consideration if the Option is to
be exercised.
Item 1. General Plan Information
The Company's board of directors (the "Board") has adopted a Settlement
of Fees Agreement with Richard D. Surber ("Surber"), a consultant of the Company
(the "Agreement"). Pursuant to the Agreement, the Company has agreed to issue to
Surber 271,000 shares of $0.001 par value common stock of the Company, and has
granted to Surber an Option to purchase up to 250,000 shares of $0.001 par value
common stock of the Company (the "Common Stock") at an exercise price of $0.20
per share.
The Board approved the Agreement on August 11, 2000. The Agreement is
intended to aid the Company in paying for services rendered to the Company
respecting the Company's Section 12(g) filings (Forms 10-SB, 10-KSB and 10-QSB)
and responses of the Company to SEC comments on the said filings. The Settlement
of Fees Agreement resolved all issues between the Company and its consultant,
Surber, regarding payment for services rendered by Surber and his associates
from October of 1999 through August 1, 2000.
Securities to be Offered
Two hundred seventy one thousand (271,000) shares of Common Stock of
Learner's World, Inc. and an option to purchase two hundred fifty thousand
additional shares of Common Stock at an exercise price of $0.20 per share, for a
total of up to a maximum of five hundred twenty one thousand (521,000) total
shares of Common Stock were granted under the Agreement.
Purchase of Securities Pursuant to the Agreement and Payment for Securities
Offered
The securities are being issued by the Company and not purchased on the
open market or otherwise.
The Option granted under the Fee Agreement is exercisable at any time
on or before the close of Business on August 1, 2001. If the option granted
under the Fee Agreement should expire or
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terminate for any reason without having been exercised in full, the unpurchased
shares subject to that option will not be issued.
The exercise price payable to the Company for Option Shares is set
forth in the Fee Agreement at $0.20 per share. The exercise of the Option shall
be contingent on receipt by the Company of the exercise price paid in either
cash, certified or personal check payable to the Company.
The shares of Common Stock subject to the FeeAgreement and the exercise
price of the Option are subject to proportionate adjustment in the event of a
stock dividend on the Common Stock or a change in the number of issued and
outstanding shares of Common Stock as a result of a stock split, consolidation,
or other recapitalization.
Amendments and Termination
The Agreement cannot be amended or terminated without the written
consent of all parties to the agreement.
Resale of Common Stock
Shares of Common Stock issued pursuant to the Agreement, or on exercise
of the option granted under the Agreement will have been registered pursuant to
a Form S-8 Registration Statement filed by the Company. Subsequent resales of
shares obtained pursuant to the Agreement may be eligible for immediate resale
depending on whether an exemption from registration is available or whether the
shares are in fact registered. The Company makes no statement as to subsequent
saleability of specific shares obtained pursuant to the Plan and urges any
persons seeking to sell shares so obtained to seek counsel from independent
attorneys.
As may be applicable for subsequent resale of shares obtained under the
Agreement, the Board believes that the Company has filed all reports and other
materials required to be filed during the preceding twelve months under the
Securities Exchange Act of 1934 as of August 14, 2000.
Tax Effects of Plan Participation & Nonstatutory Options
The following discussion of the federal income tax consequences of
participation in the Plan is only a summary, does not purport to be complete,
and does not cover, among other things, state and local tax consequences.
Additionally, differences in participants' financial situations may cause
federal, state, and local tax consequences of participation in the Plan to vary.
Therefore, each participant in the Plan is urged to consult his or her own
accountant, legal or other advisor regarding the tax consequences of
participation in the Plan. This discussion is based on the provisions of the
Code as presently in effect.
Under the current provisions of the Code, if shares of Common Stock are
issued to the original holder of a non-qualified option granted and exercised
under the Plan (assuming there is not an active trading market for options of
the Company), (i) the option holder ("Holder") will not recognize income at the
time of the grant
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of the option; (ii) on exercise of the option the Holder will recognize ordinary
income in an amount equal to the excess of the fair market value of the shares
of Common Stock acquired at the time of exercise over the exercise price; (iii)
upon the sale of the shares of Common Stock the Holder will recognize a short
term or long term capital gain, or loss, as may be, in an amount equal to the
difference between the amount he or she receives from the sale of those shares
and the Holder's tax basis in the shares (as described below); and (iv) the
Company will be entitled to expense as compensation the amount of ordinary
income that the holder recognized, as set forth in Clause (ii) above.
If the Holder pays the exercise price entirely in cash, the tax basis
of the shares of Common Stock will be equal to the amount of the exercise price
paid plus the ordinary income recognized by the Holder from exercising the
options. This basis should equal the fair market value of the shares of Common
Stock acquired on the date of exercise. The holding period will begin on the day
after the tax basis of the shares is determined.
The ordinary income received by the Holder on exercise of the option is
considered to be compensation from the Company. As with other forms of
compensation, withholding tax and other trust fund payments will be due with
respect to the exercise of the options. The Company will not pay the Optionee's
liability and optionee will have the responsibility to personally make any such
payments.
Item 2. Registrant Information and Employee Plan Annual Information
The Company will provide to Richard Surber upon request a copy, without
charge, of the Company's periodic reports filed with the SEC, including its
latest annual report on Form 10-KSB and its quarterly reports on Form 10-QSB.
The Company will also provide Richard Surber, upon written or oral request a
copy, without charge, of the documents incorporated by reference in Item 3 of
Part II of the Form S-8 registration statement. These documents are also
incorporated by reference into the Section 10(a) prospectus, of which this
document is a part. Requests for such information should be directed to the
Company at 369 Avenue U, Brooklyn, New York 11223, Telephone (718) 449-3194.
Learners World, Inc.
/s/ Sal Casaccio
---------------------
Sal Casaccio, President
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OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is entered into this 11th day of
August, 2000, by and between Learner's World, Inc., a New York corporation
("Learners "), and Richard D. Surber ("Surber").
WHEREAS, the Company proposes to issue to Surber an option to purchase
250,000 shares of its common stock (the "Common Stock") in connection with the
Company's settlement of fees agreement with Surber for services rendered by
Surber to Learner's, a copy of which is attached hereto as Exhibit "A" and
incorporated by reference herein (the "Fee Agreement"); and,
WHEREAS, to induce Surber to execute the Fee Agreement the Company
hereby grants Surber an option to purchase 250,000 shares of the Company's
Common Stock subject to the terms and conditions set forth below.
NOW, THEREFORE, for and in consideration of the mutual promises herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and subject to the terms and conditions set forth
below, Learner's and Surber agree as follows:
1. The Option
The Company hereby grants to Surber (hereinafter "Holder") an option
(the "Option") to acquire Two Hundred Fifty Thousand (250,000) shares
of the Company's Common Stock, subject to adjustment as set forth
herein (such shares, as adjusted, are hereinafter referred to as the
"Option Shares"), at a purchase price of $0.20 per share ("Option
Price").
2. Term and Exercise of Option
A. Term of Option. Subject to the terms of this Agreement, Holder
shall have the right to exercise the Option in whole or in part,
commencing the date hereof through the close of business on
August 1, 2001.
B. Exercise of the Option. The Option may be exercised upon written
notice to the Company at its principal office setting out the
number of Option Shares to be purchased, together with payment of
the Option Price
C. Issuance of Option Shares. Upon such notice of exercise and
payment of the Option Price, the Company shall issue and cause to
be delivered within five (5) business days following the written
order of Holder, or its successor as provided for herein, and in
such name or names as the Holder may designate, a certificate or
certificates for the number of Option Shares so purchased. The
rights of purchase represented by the Option shall be
exercisable, at the election of the Holder thereof, either in
full or from time to time in part, and in the event the Option is
exercised in respect of less than all of the Option Shares
purchasable on such exercise at any time prior to the date of
expiration hereof, the remaining Option Shares shall continue to
be subject to Adjustment as set forth in paragraph 4 hereof. The
Company irrevocably agrees to reconstitute the Option Shares as
provided herein.
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3. Reservation of Option Shares
The Company shall at all times keep reserved and available, out of its
authorized Common Stock, such number of shares of Common Stock as shall
be sufficient to provide for the exercise of the rights represented by
this Agreement. The transfer agent for the Common Stock and any
successor transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of such rights of purchase, will be
irrevocably authorized and directed at all times to reserve such number
of shares as shall be requisite for such purpose. The Company will
cause a copy of this Agreement to be kept on file with the transfer
agent or its successors.
4. Adjustment of Option Shares
The number of Option Shares purchasable pursuant to this Agreement
shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
A. Adjustment for Recapitalization. Subject to paragraph 4.B below,
in the event the Company shall (a) subdivide its outstanding
shares of Common Stock, or (b) issue or convert by a
reclassification or recapitalization of its shares of Common
Stock into, for, or with other securities (a "Recapitalization"),
the number of Option Shares purchasable hereunder immediately
following such Recapitalization shall be adjusted so that the
Holder shall be entitled to receive the kind and number of Option
Shares or other securities of the Company measured as a
percentage of the total issued and outstanding shares of the
Company's Common Stock as of the hereof which it would have been
entitled to receive immediately preceding such Recapitalization,
had such Option been exercised immediately prior to the happening
of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph shall be calculated
and effected taking into account the formula set forth in
paragraph 4.B. below and shall become effective immediately after
the effective date of such event retroactive to the effective
date.
B. Adjustment of the Exercise Price and Number of Option Shares. In
the event of any change in the Company's Common Stock by reason
of a reverse stock split, the number and Option Price of the
shares subject to this Option shall not change or be adjusted.
C. Preservation of Purchase Rights Under Consolidation. Subject to
paragraph 4.B above, in case of any Recapitalization or any other
consolidation of the Company with or merger of the Company into
another corporation, or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety
or substantially as an entirety, the Company shall prior to the
closing of such transaction, cause such successor or purchasing
corporation, as the case may be, to acknowledge and accept
responsibility for the Company's obligations hereunder and to
grant the Holder the right thereafter upon payment of the Option
Price to purchase the kind and amount of shares and other
securities and property which he would have owned or have been
entitled to receive after the happening of such consolidation,
merger, sale or conveyance. The provisions of this paragraph
shall similarly apply to successive consolidations, mergers,
sales or conveyances.
D. Notice of Adjustment. Whenever the number of Option Shares
purchasable hereunder is adjusted, as herein provided, the
Company shall mail by first class mail, postage prepaid, to
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the Holder notice of such adjustment or adjustments, and shall
deliver to Holder setting forth the adjusted number of Option
Shares purchasable and a brief statement of the facts
requiring such adjustment, including the computation by which
such adjustment was made.
5. Registration Rights
Learner's agrees to take immediate steps to register with the
Securities and Exchange Commission, pursuant to an S-8 filing, the shares of
stock represented by this option.
6. Counterparts
A facsimile, telecopy or other reproduction of this instrument may be
executed by one or more parties hereto and such executed copy may be
delivered by facsimile or similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such party
can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any party
hereto, all parties agree to execute an original of this instrument as
well as any facsimile, telecopy or other reproduction hereof.
7. Further Documentation
Each party hereto agrees to execute such additional instruments and
take such action as may be reasonably requested by the other party to
effect the transaction, or otherwise to carry out the intent and
purposes of this Agreement.
8. Notices
All notices and other communications hereunder shall be in writing and
shall be sent by prepaid first class mail to the parties at the
following addresses, as amended by the parties with written notice to
the other:
To Surber: Richard D. Surber.
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Telephone: (801) 575-8073
Telefax: (801) 575-8092
To Learner's: Learner's World, Inc.
369 Avenue U
Brooklyn, New York 11223
Telephone: (718) 996-2118
Telefax (718) 996-2612
10. Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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11. Governing Law
This Agreement was negotiated, and shall be governed by the laws of
Utah notwithstanding any conflict-of-law provision to the contrary.
12. Entire Agreement
This Agreement sets forth the entire understanding between the parties
hereto and no other prior written or oral statement or agreement shall
be recognized or enforced.
13. Severability
If a court of competent jurisdiction determines that any clause or
provision of this Agreement is invalid, illegal or unenforceable, the
other clauses and provisions of the Agreement shall remain in full
force and effect and the clauses and provision which are determined to
be void, illegal or unenforceable shall be limited so that they shall
remain in effect to the extent permissible by law.
14. Amendment or Waiver
Every right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in equity,
and may be enforced concurrently herewith, and no waiver by any party
of the performance of any obligation by the other shall be construed as
a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to Closing, this
Agreement may be amended by a writing signed by all parties hereto.
15. Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first written above.
"Learner's"
Learner's World, Inc.
/s/ Sal Casaccio
By:________________________________
Name: Sal Casaccio
Title: President
/s/ Richard D. Surber
-----------------------------------
Richard D. Surber
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NOTICE OF EXERCISE
(To be signed only upon exercise of Option)
TO: Learner's World, Inc.
The undersigned, the owner of an Option to purchase 250,000 shares of
Common Stock of Learner's World, Inc., a New York corporation ("Learner's"),
hereby irrevocably elects to exercise all such Options and herewith pays for the
shares by giving Learner's a personal check in the amount of the exercise price
as specified in the Option. The undersigned requests that the certificate for
such shares be delivered to him according to instructions indicated below.
DATED this ___ day of _______________.
By:
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Instructions for delivery:
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