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 (g) of the
Securities Exchange Act of 1934
KIDSTOYSPLUS.COM, INC.
- - --------------------------------------------------------------------------------
(Name of Small Business Issuer in our charter)
Nevada 98-0203927
- - --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1000 - 355 Burrard Street
Vancouver, B.C. V6C 2G8
- - --------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (604) 682-4755
Securities to be registered under Section 12(b) of the Act:
None
- - --------------------------------------- ------------------------------------
Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Shares
- - --------------------------------------------------------------------------------
(Title of Class)
Not Applicable
- - --------------------------------------------------------------------------------
(Title of Class)
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
PART I ....................................................................................................1
ITEM 1 DESCRIPTION OF BUSINESS.............................................................................1
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............18
ITEM 3 DESCRIPTION OF PROPERTY............................................................................21
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....................................22
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS......................................22
ITEM 6 EXECUTIVE COMPENSATION.............................................................................24
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................25
ITEM 8 DESCRIPTION OF SECURITIES..........................................................................25
PART II ...................................................................................................26
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER RELATED
STOCKHOLDER MATTERS................................................................................26
ITEM 2 LEGAL PROCEEDINGS..................................................................................26
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS......................................................26
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES............................................................26
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................................................26
PART III ....................................................................................................1
ITEM 1. INDEX TO EXHIBITS...................................................................................1
</TABLE>
<PAGE>
NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for statements of historical fact, certain information contained herein
constitutes "forward-looking statements," including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, as well as all projections of future results. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results or achievements of the Company
to be materially different from any future results or achievements of the
Company expressed or implied by such forward-looking statements. Such factors
include, but are not limited to the following: the Company's lack of an
operating history, the Company's lack of revenues and unpredictability of future
revenues; the Company's lack of functional operating systems, distribution
infrastructure and web site; the seasonality of the toy industry; the Company's
future capital requirements to develop our operating systems, distribution
facilities, web site and administrative support systems; intense competition
from established competitors with greater resources; the Company's reliance on
internally developed systems and system development risks; the risks of system
failure; the Company's dependence on the Internet and continued growth of online
commerce; the uncertainty of participating in developing a market; the Company's
reliance on merchandise suppliers and third parties and lack of agreements with
such third parties; the risks associated with rapidly changing technology;
intellectual property risks; risks associated with online commerce security; the
risks associated with governmental regulations and legal uncertainties; and the
other risks and uncertainties described under "Description of Business - Risk
Factors" in this Form 10-SB. Certain of the forward looking statements contained
in this registration statement are identified with cross-references to this
section and/or to specific risks identified under "Description of Business -
Risk Factors".
PART I
ITEM 1 DESCRIPTION OF BUSINESS
History of the Registrant
Kidstoysplus.com Inc. was organized and incorporated under the laws of the State
of Nevada on February 4, 1999. The Company's principal office is located at 1000
- - - 355 Burrard Street, Vancouver, B.C., V6C 2G8. The Company's URL is
www.kidstoysplus.com.
We organized Kidstoysplus to develop and operate a retail web site on the
Internet specializing in children's products that will initially include
children's toys and in the future may include books, music, story line CD's,
audio tapes, movies, video games, educational products, hobbies and collectable
toy items.
Business of the Registrant
General Overview
We plan to operate a retail web site on the Internet specializing in children's
products and to offer information about children's toys, entertainment products
and other related topics of interest to children and their parents.
We are currently in the development stage of our business and are in the process
of entering into arrangements and agreements to implement our business plan. In
June 1999, we retained Reticular Consulting of Victoria, British Columbia to
design our web site, the "Kidstoysplus.com Website." We anticipate that the
Kidstoysplus.com Website will be posted on the Internet for initial viewing and
testing in September 1999. We are in the process of locating a distribution and
warehouse facility, which is anticipated to be located in the Comox Valley on
Vancouver Island, British Columbia. We are currently negotiating with
manufacturers, vendors and distributors to secure inventory and distribution
channels for merchandise, and anticipate it will enter into procurement
arrangements for the merchandise marketed and sold through the Kidstoysplus.com
Website. We are also in the process of negotiating with various consultants,
companies and individuals to provide other services required to launch the
Kidstoysplus.com Website and to process and ship orders, to market the
Kidstoysplus.com Website, to process credit card transactions, to staff our
distribution facility and to provide computer hardware and server capacity for
the Kidstoysplus.com Website.
-1-
<PAGE>
We anticipate that we will have a warehouse, distribution and customer service
facility established in the last quarter of 1999. In the last quarter 1999, we
anticipate that we will launch phase one of our the Kidstoysplus Website
development plan: the "Limited Launch Phase." During this phase, we plan to
begin procuring a limited inventory of approximately 300-500 select items and to
transact business over the Internet on a limited basis before the 1999 Christmas
season (beginning in late November) to test our Kidstoysplus Website operating
and software systems, which are anticipated to include shopping and browsing
features; on-line ordering; inventory management; accounting and billing
controls; customer service and support systems; search and link capabilities and
statistical tracking and analysis capabilities. We also intend to test and
refine internal operational and distribution systems, order processing,
inventory management, procurement systems, customer service procedures,
logistical vendor strategies and human resources requirements. We anticipate
that the Limited Launch Phase will be completed during the first quarter 2000.
After the Limited Launch Phase, we anticipate our Kidstoysplus Website will be
fully operational offering approximately 1000-1500 items. We plan to monitor the
demand for our products and increase our inventory offerings accordingly.
As of May 31, 1999, we have not entered into any agreements or arrangements with
respect to securing the computer hardware and server capacity necessary to
launch the Kidstoysplus.com Website; inventory procurement or leasing or
improving a physical distribution facility. We also have not established
relationships with a credit card processing facility, finalized our inventory
for the Limited Launch Phase, purchased any inventory, hired any personnel for
our distribution facilities or customer support and service systems, secured
licensing for operating a distribution facility, purchased any computer systems
or software required to for the operation of our distribution or customer
service facility or developed the policies and procedures for the Limited Launch
Phase. We anticipate we will successfully enter into agreements and establish
the necessary systems to launch the Kidstoysplus.com Website before the Limited
Launch Phase begins. There can be no assurance that we will be able to enter
such agreements or arrangements on acceptable terms, if at all. There can also
be no assurance that we will be able to develop the Kidstoysplus.com Website and
our policies and procedures for the Limited Launch Phase in a timely manner, if
at all, or that our projected cost and timing for such development will be
accurate. Any material delay in entering into arrangements or developing the
Kidstoysplus.com Website or distribution systems will have a material adverse
effect on our business and results of operations.
Industry Background
Growth of the Internet and E-commerce
The Internet is an increasingly significant global medium for communications,
content and online commerce. There are an estimated 97 million users of the
Internet and that number is anticipated to grow to approximately 320 million by
2002 according to Forrester Research Inc. The growth in Internet usage can
likely be attributed to factors such as:
i) the large and growing base of installed personal computers in the
workplace and at home,
ii) advances in the performance and speed of personal computers and
modems,
iii) improvements in network infrastructure, and
iv) easier and cheaper access to the Internet and increased awareness of
the Internet among businesses and consumers.
The Internet has become an attractive commercial medium for business as the
functionality, accessibility and overall usage has increased over the last few
years. The Internet and other online services are evolving into a unique sales
and marketing channel. In theory, electronic retailers are not limited by the
traditional constraints of physical shelf space and have the potential to offer
customers a vast selection of products through efficient search and retrieval
interfaces. Moreover, electronic retailers can interact directly with customers
by frequently adjusting their featured selections, editorial insights, shopping
interfaces, pricing and visual presentations.
Beyond the benefits of selection, purchasing can be more convenient than
shopping in a physical retail store as electronic shopping can be done 24 hours
a day and eliminates physical travel to a store. Web sites can present
advertising and marketing materials, display hundreds or thousand of products in
catalog form, process transactions and fulfill orders, provide customers with
rapid and accurate responses to their questions and gather customer feedback
efficiently. Generally the cost of publishing on the Internet is lower than
traditional advertising and
-2-
<PAGE>
marketing mediums and the Internet offers the ability to reach and serve a large
and global customer base electronically from a central location.
As the field known as "e-commerce" develops, becomes more sophisticated and is
accepted by a wider range of consumers, we anticipate that the potential for
personalized low-cost customer interaction will additional economic benefits and
economies that are unique to the Internet. Additionally, e-commence may
eliminate several of the burdensome costs of managing and maintaining a retail
store infrastructure, the need for continuous printing and mailing costs of
catalog marketing and the costs of maintaining customer service personnel and
support in several locations. Based on these advantages over traditional
retailers, we believe that e-commence retailers have the potential to build
large, global customer bases quickly and to achieve superior economic returns
over the long term. Currently, there is an increasing number of products that
are being sold online, including computers, travel services, brokerage services,
automobiles, music, and books. We believe the number of products and services
sold over the Internet and the volume of products will increase substantially in
the future.
We believe that marketing children's toys and related products over the Internet
presents an excellent business opportunity. Our business strategy to compete
with traditional facilities based retailers using e-commerce marketing
techniques. We intend to compete with other e-commerce marketers of children's
toys and related products by positioning our Kidstoysplus.com Website by
differentiating our offerings and by establishing a reputation for high quality
customer service. Despite our optimism about the future of e-commerce and our
ability to compete, we cannot assure you that we will successfully implement our
business plan or that we will be able to compete with established retailers of
children's toys and related products. Our business is subject to considerable
risks. See "Risk Factors."
The Traditional Toy Industry
The retail toy industry is large, growing and fragmented. Several large
retailers such as Toys-R-Us, Kay Bee Toys, Target Stores, Sears, Wal-Mart,
K-Mart and others dominate the toy industry and carry a large selection of toys.
There are also many retailers in this industry carry specialty toy products. We
believe that most large retailers are located in metropolitan areas and that
there is a large potential e-commerce target market for children's toys and
related products: customers that reside in suburban and rural areas.
Toy sales in the United States were estimated to be approximately $23 billion in
1996 and are expected to grow to approximately $28 billion in 2000.
The Traditional Distribution Channels
Toy manufacturers generally sell the toys directly to retailers and to a network
of distributors. Distributors serve as the primary vendors for most retailers
and carry 1,000-3,000 of the best-selling products. We believe a large portion
of all toys sold are sold by small independent toy retailers. These small
retailers generally sell products that fit into the market niche that each store
has created and carry a limited selection of toys at any given time. The market
has several retail chains that dominate the large superstore category. The
largest U.S. retailers (Wal-Mart, Toys-R-Us, Kay Bee Toys, Target Stores, Sears
and K-Mart), together are estimated to account for over 25% of total United
States toy sales. Toys R Us and Kay Bee Toys have focused aggressively on
superstore growth. Based on publicly available data, we estimate that each
superstore carries approximately 5,000 products, with the largest stores
carrying between 10,000 and 12,000 products on site. Independent toy retailers
typically carry a more limited selection of products in smaller retailing spaces
and we believe they face increasing competitive pressures from the superstore
format.
We believe that several characteristics of the traditional toy industry have
created inefficiencies that may be eliminated by e-commerce including:
(i) the capital intensive investments required for inventory, real estate
and personnel for each retail location;
(ii) limits in the amount of inventory that can be economically carried in
a retail location (we estimate that the average superstore stocks less
than 25% of the toy products available);
(iii)difficulties implementing uniform operating policies and managing
customer service levels, customer satisfaction programs and customer
expectations in all locations;
(iv) risks associated with managing demand and inventory for each retail
store;
(v) high cost of maintaining inventories spread across several retail
locations;
-3-
<PAGE>
(vi) inability managing human and managerial resources;
(vii)inability to use customer specific information to develop unique
marketing communications to individual customers; (viii) high costs of
disseminating marketing materials to customers; and (ix) high costs of
offering individualized customer services.
We believe that we can use e-commerce marketing to build strategic relationships
with toy manufacturers and distributors that will reduce these inefficiencies,
while allowing us to develop a distribution channel that will capitalize on
opportunities for direct marketing.
Competition
Retailing children's toys and entertainment products is intensely competitive.
We will compete with a variety of competitors with significantly greater
experience and with greater financial, human and technical resources than us.
These competitors include:
(i) traditional store-based toy and children's product retailers such as
Toys R Us, Kay-Bee Stores, FAO Schwarz, and others;
(ii) major discount retailers such as Wal-Mart, Target Stores, Sears, Kmart
and others;
(iii)independent and specialty children's toy stores including Disney,
Warner Bros. and others;
(iv) catalog retailers; (v) Internet portals such as AOL and YAHOO etc; and
(vi) various online competitors such as etoys and Toys R Us.
Marketing toys over the Internet is new, rapidly evolving and becoming intensely
competitive. Barriers to entry are minimal and new competitors can launch new
sites at a relatively low cost. In addition, traditional retailers have begun to
launch websites and online services that are expected to compete directly with
us and our Kidstoysplus.com Website. Competitive pressures created by any one of
these companies, singularly or collectively, could have a material adverse
effect on our business, prospects, financial condition and results of
operations.
We believe that the principal competitive factors are brand recognition,
selection, convenience, price, speed and accessibility, customer service and
reliability and speed of fulfillment.
Currently, we estimate that there are approximately 130 toy retailers with
Internet websites and that most of these Web sites belong to small specialized
companies marketing specific categories or lines of toys. We believe that there
are two online retailers that currently dominate the on-line market for
children's toys and related products: etoys.com and Toys R Us.com. We intend to
compete directly against these e-commerce companies.
Toys R Us, Inc. is one of the world's largest toy resellers with gross revenues
of approximately $11 billion in 1998. Toys R Us launched its website in 1997.
"etoys" is a toy retailer that markets its products exclusively through the
Internet. etoys launched its website in 1997 and has sold toys through its
distribution and customer service system on a commercial basis since October
1997. etoys had gross sales revenues of approximately $22.9 million in 1998. We
believe that etoys has a significant competitive advantage over most on-line toy
retailers, including us, based on its established website; brand name; and
customer base. etoys also has a competitive advantage in the marketplace because
it has penetrated the market and developed the infrastructure and technology
support systems required for marketing, distribution and customer service. etoys
has also established relationships with toy manufactures and distributors as
well as advertisers that purchase banner advertisements on the etoys website.
There can be no assurance we will be able to develop our Kidstoysplus.com
Website, the technologies and/or the distribution systems required to market
children's toys and related products over the Internet in a timely manner, if at
all. We also cannot assure you that our business concepts will be accepted by
our target market or that we will be able to enter into strategic relationships
with toy manufacturers or distributors to procure a product line and mix that
will appeal to the marketplace. If we fail to develop our Kidstoysplus.com
Website or any of the technologies, systems, or strategic relationships
necessary to implement our business plan in a timely manner, we will not be able
to successfully compete in the marketplace and such failure will have a material
adverse effect on our business and results of operations.
-4-
<PAGE>
We believe that the principal competitive factors in our market will be:
o ease in access to the Website;
o brand recognition;
o product selection and availability;
o personalized services and free services;
o user friendly shop and browse Web features; o a comprehensive easy to
use search engine and tools;
o superior graphics and technical support;
o combination of entertainment and unique product offerings;
o quality of editorial and other site content;
o highly visible order buttons on every screen and easy to use ordering
systems;
o immediate access to a sales consultant either by phone or e-mail;
o customer focus with superior support and service;
o experienced knowledgeable management and personnel; and
o reliable and speed of order fulfillment.
The Company believes that it will differentiate the Kidstoysplus.com Website
from our competitors by considering these factors in developing marketing and
systems strategies and by offering an array of both traditional and
non-mainstream toy products. We anticipate that our products will range from
children's educational products, hobby products, collectable toys and a wide
range of unique imaginative toy products manufactured by small toy manufactures
across the country that are not carried by current mainstream retailers.
Many of our current and potential competitors have experience in the retail toy
industry, experience in the e-commerce industry, longer operating histories,
customer bases, brand recognition and significantly greater financial, marketing
and other resources than us. We have no operations and no experience marketing
toys over the Internet. We have no developed systems or technologies, and there
can be no assurance that we are capable of developing such systems or
technologies.
In addition, online retailers may be acquired by, receive investments from or
enter into other commercial relationships with larger, well-established and
well-financed companies as use of the Internet and other online services
increases. Certain of our competitors may be able to secure merchandise from
vendors on more favorable terms, devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing or inventory availability
policies and devote substantially more resources to website and systems
development than us. We cannot assurance you that we will be able to compete
successfully against current and future competitors, and competitive pressures
faced by us may have a material adverse effect on our business, prospects,
financial condition and results of operations. Further, as a strategic response
to changes in the competitive environment, we may from time to time make certain
pricing, service or marketing decisions or acquisitions. New technologies and
the expansion of existing technologies may increase the competitive pressures on
our business. In addition, companies that control access to transactions through
network access or Web browsers could promote our competitors websites or charge
us a substantial fee for access through their in their portals.
The Kidstoysplus Concept
We believe children's toy and entertainment products, like other consumer
products such as books, music CD's and movies, can be merchandised and sold over
the Internet in a commercially viable manner. As an online retailer, we
anticipate we will have some advantages over the traditional toy retailers
including the following:
1) We will potentially have unlimited online shelf space at lower costs
incurred by traditional toy retailers who are typically restricted by
higher fixed overhead costs resulting from their locations in retail
leases in malls or popular urban shopping areas.
2) We anticipate we will have the potential to offer a vast selection of
toy and entertainment products via the Internet by developing
procurement, distribution and logistical strategies that will allow us
to fill orders using a variety of channels. Unlike traditional toy
retailers who are generally limited in their offerings because of
their physical space, we intend to inventory a select number of
popular items and establish
-5-
<PAGE>
purchasing, shipping and distribution arrangements with strategic
partners to enable us to offer and fill orders for a broad range of
merchandise.
3) We believe that the Internet provides a unique opportunity to market
toys and other children's products by providing efficient search and
browsing capabilities that are generally not available in a
traditional toy store. The Internet search capabilities is anticipated
to allow us to provide specific product data, reports and manufacturer
information related to a potentially large number of offerings on a
uniform and consistent platform. The delivery of this information can
generally be facilitated at reduced (per contact) personnel overhead
expense. We believe that the delivery of information in this manner
can more efficient and effective as the content is anticipated to be
specific to the product and the target audience. Moreover, we believe
this new form of product merchandising will make shopping for products
at our Kidstoysplus.com Website quick, easy and pleasurable
4) We anticipate that we will be able to bring products to market in a
more timely manner. Toy manufacturers introduce new lines of toys
yearly adding to several hundred to the market. By developing
distribution channels that are not dependent on our physical location,
we believe we can disseminate information to the marketplace faster
than traditional retailers and that we may have the capability of
delivering products to consumers by eliminating the traditional
distribution channels and warehousing/retailing facilities.
5) We believe our target market is larger than the target market for
traditional retailers who are generally limited in geographical scope.
We believe we can compete on a global basis and we can service our
clientele on a worldwide basis from one or more centralized
distribution and operation centers. We believe we can realize
structural cost advantages relative to traditional small, medium and
large toy merchandisers.
6) We believe we can offer superior customer support and information
services by offering uniform 24 hour per day service through a
centralized facility. We believe that we can implement internal
controls that will increase customer satisfaction, provide uniform
quality in our service delivery system and reduce incremental costs
generally attributable to the traditional retail customer service
systems. We believe that we can train our personnel to use information
systems to deliver superior customer service, to answer customer
questions and to respond to customer complaints. We believe that these
strategies can substantially reduce customer dissatisfaction and build
consumer confidence in the Kidstoysplus.com Website.
By offering customers a large selection of children's toys and entertainment
products at competitive prices though an easy to use and browse website, we
believe we have the ability to become a top Internet children's toy retailer.
See "Note Regarding Forward-Looking Statements."
Kidstoysplus Marketing Strategy
Our marketing strategy is to market children's toys and related products over
the Internet. Our target market consists of Internet users that are searching
for children's toys or related products or searching for information related to
such products on the Internet. We intend to market our products through our
Kidstoysplus.com Website that is anticipated to resemble a traditional toy store
in a virtual setting. Our pricing strategy will be to sell our products at
prices that are competitive with or below the prices charged by physical
facilities based toy stores. We intend to process and deliver orders for our
products in one to three business days.
Shopping at the Kidstoysplus Virtual Store
We anticipate that our customers will enter the Kidstoysplus virtual store
through the Kidstoysplus.com Website and that upon entering our virtual store,
the visitor will be able to view a variety of toy and entertainment products,
obtain prices, order products and conduct targeted product searches. We
anticipate that the visitor will also be able to browse highlighted selections,
bestsellers, unique categories and other features, read and post reviews,
register for personalized services, participate in promotions and check order
status. We anticipate our Kidstoysplus.com Website will allow customers to
simply click on a button to add and subtract toy products to a virtual shopping
cart as they browse, just like in a physical store.
-6-
<PAGE>
To execute orders, our Kidstoysplus ordering system will prompt customers to
click on the buy button and to supply shipping and credit card information.
Alternatively, we anticipate that customers may phone our 24 hour 1-800 customer
service line and speak to a qualified Kidstoysplus toy consultant for placing
orders and obtaining information about our products or our company.
We anticipate we will offer our customers a variety of delivery services,
including overnight and other shipping options. We also anticipate we will offer
a wide range of personalized services including free gift wrapping for select
items that are inventoried in our distribution warehouse, special shipping
instructions, a gift request service and an important-date (birthdays, special
occasions, etc.) reminder service. We also intend to provide access to a
separate 24 hour 1-800 customer service line and a satisfaction guarantee and
return policy. We intend to post full details of our policies relating to
pricing, sales tax, sales terms and conditions, credit card security, product
specials and our customer satisfaction guarantee on our Kidstoysplus.com
Website.
We anticipate that our Kidstoysplus.com Website will offer customers the
convenience of online research of a variety of children's merchandise and
entertainment products that are designed to allow customers to make educated
purchase decisions. We that children toys and entertainment products are
especially suited for online marketing because they generally maintain or hold a
consistent quality and are often brand specific. In addition, we believe that
online toy retailing can potentially eliminate or mitigate critical
inefficiencies and problems faced by customers trying to find a specific toy.
We are in the processing of developing the software and systems required to make
our virtual store operational. We have not established our 1-800 customer
service line or the physical support systems to implement our business plan.
There can be no assurance that we will successfully develop the software,
hardware or distribution systems contemplated in our business plan on a timely
basis, if at all. A substantial delay in obtaining the required financing or
developing the Kidstoysplus.com Website and the support services would have a
materially adverse effect on our business and results of operations. See "Note
Regarding Forward Looking Statements."
Our Technology
We intend to develop and use technology to deliver outstanding service and to
achieve the economies we believe are inherent in our online virtual store model.
Our strategy is to build strong brand recognition, customer loyalty and supplier
relationships, while creating an economic model that is superior to that of the
capital and real estate-intensive traditional kids toy retailing business. We
believe that our success will depend on our ability to develop technology to
offer an online experience that is easy to use, useful, functional, entertaining
and educational. We believe that our technology must meet or exceed the general
expectations of the virtual shopper who we believe will have experience shopping
with other online retailers and who will expect a high level of technical
sophistication from our Kidstoysplus.com Website.
We have recently engaged Retricular Consulting of Victoria, British Columbia to
develop our Kidstoysplus.com Website and anticipate that we will begin testing
our Kidstoysplus.com Website in the third quarter 1999. Under the terms of our
agreement, we agreed to pay Retricular a per diem consulting fee of $200.00 for
the initial planning stage of the development of our Kidstoysplus.com Website.
We anticipate we will enter into a definitive development agreement with
Retricular to complete the development of our website, and we will need to spend
approximately $35,000 - $50,000 to complete development and successfully launch
our website for commercial use. We also anticipate we will spend approximately
$75,000 - $100,000 to develop the technology related to our customer service and
support systems, inventory control systems, distribution and logistical
facilitation systems, accounting systems and other internal control systems.
The cost for developing technology is expensive and the process will require
testing and refinement. Our commercial success will depend on our ability to
attract visitors and shoppers to our Kidstoysplus.com Website. This will require
us to develop and use increasing sophisticated technologies to generate, sustain
and maintain user interest and satisfaction. See "Note Regarding Forward Looking
Statements."
We are in the processing of developing the technologies, software and systems
for the Kidstoysplus.com Website and we have not entered into any agreements or
arrangements for the development of the technologies related to our internal
control and distribution systems. We do not anticipate that our technologies
will be ready for testing until at least August 1999. There can be no assurance
that we will successfully develop and test the technologies related to
Kidstoysplus.com Website or contemplated in our business plan on a timely basis,
if at all. A substantial delay in obtaining the required financing or developing
the Kidstoysplus.com Website and the support services would have a
-7-
<PAGE>
materially adverse effect on our business and results of operations. See "Note
Regarding Forward Looking Statements."
Web Site Marketing and Promotion
We intend to build customer loyalty by creatively applying technology to deliver
personalized programs and service. We also intend to be able to provide
increasingly targeted and customized services by using the extensive customer
preference and behavioral data obtained as a result of our planned online
retailing. We believe that e-commerce allows rapid and effective experimentation
and analysis, instant user feedback and efficient "redecorating of the store"
for each and every customer, all of which we intend to incorporate in our
merchandising. We plan to use personalized notification services to send
customers highly customized notices at their request. By offering customers a
compelling and personalized value proposition, we will seek to increase the
number of visitors that make a purchase, to encourage repeat visits and
purchases and to extend customer retention. We believe we can create loyal,
satisfied customers to generate word-of-mouth advertising and awareness that
will enable us to reach other customers and potential customers. We intend to
employ a variety of media, program and product development, business development
and promotional activities to achieve these goals.
Online Service and Internet Advertising
We intend advertise on various high-traffic Internet portals to build awareness
of our Kidstoyplus.com Website. We also intend to offer banner ads on our
Kidstoyplus.com Website that are anticipated to encourage readers to click
directly to a Kidstoysplus toy offering or one of our sponsoring toy
manufacturer's websites.
Advertising and Public Relations
We intend to engage in a coordinated program of print advertising through
specialized and general circulation newspapers and magazines. The Company may
also advertise in other media. As a result of our planned public relations
activities and current Internet e-commerce interest, we may receive publicity.
There can be no assurance that we will have sufficient resources to carry out
our promotional and advertising strategy or that we will receive any publicity.
Personalized Shopping Services
We plan to offer personalized notification and shopping services through an
automated email reminder service and gift wish list service. Visitors may be
allowed to request email reminders of specific dates (holidays, birthdays, etc.)
via email or have a toy wish list sent to an email address. We also intend to
add a match filtering service that can monitor editorials on children's toys and
the toy industry and email messages to visitors that request this information.
Customer Service
We believe that our ability to establish and maintain long-term relationships
with our customers and encourage repeat visits and purchases depends, in part,
on the strength of our customer support and service operations and staff.
Furthermore, we intend to use frequent communication with and feedback from our
customers in order to continually improve the store and our services. We intend
to offer an e-mail address to enable customers to request information and to
encourage feedback and suggestions. We also intend to establish a team of
customer support and service personnel who will be responsible for handling
general customer inquiries, answering customer questions about the ordering
process, and investigating the status of orders, shipments and payments.
We anticipate we will staff a toll-free line with "toy product consultants,"
personnel who we plan to train to provide product information, assurances to
customers related to their purchase decision and general customer support for
the Kidstoysplus.com Website. We anticipate we will automate certain tools used
by our customer support and service staff.
Warehouse and Fulfillment
We plan to source our products from a network of toy manufacturers and
distributors. We plan to carry minimal inventory and rely to a large extent on
rapid fulfillment from major manufacturers, distributors and wholesalers that
-8-
<PAGE>
carry a broad selection of products. We anticipate we will purchase a majority
of our products from several large industry suppliers.
We anticipate we will utilize automated interfaces for sorting and organizing
our orders to enable us to achieve the most rapid and economic purchase and
delivery terms possible. We believe we can purchase specialized software that
selects the orders that can be filled quickly via electronic interfaces with
vendors, and forward remaining orders to our special order group. Under our
arrangements (to be negotiated) with our distributors, we anticipate
electronically ordered products may be shipped by the distributor within hours
of receipt of an order from our customers. We anticipate we will develop a
customized information system and dedicated ordering personnel that specialize
in sourcing hard-to-find toy products.
We anticipate that we will require additional administrative, customer service,
warehouse and fulfillment space within the next 12 months, and that suitable
additional space will be available on commercially reasonable terms, although
there can be no assurance in this regard. We plan to establish our head office
and central distribution center in a rural area setting that may enable us to
take advantage of less expensive commercial rent leases and provide us access a
potential large workforce at reasonable hourly rates.
Kidstoysplus Plan of Operation
We anticipate we will have no sales until at least November 1999. We anticipate
our operating activities during the next few months will focus primarily on:
(i) initial strategic planning;
(ii) establishing strategic relationships with technology developers and
consultants, toy manufacturers, merchandisers and distributors;
(iii) development of the necessary computer infrastructure and systems
required to operate and develop the Kidstoysplus.com Website;
(iv) leasing and equipping our distribution facility;
(v) obtaining licenses and permits required for our operations;
(vi) securing a server for the Kidstoysplus.com Website;
(vii) installing internal system hardware and software for our
distribution and customer service facilities;
(viii) installing and equipping our customer service operations office;
(ix) installing communications support systems;
(x) developing and establishing an inventory management system;
(xi) selecting our initial product line for the Limited Launch Phase;
(xii) developing operating and management procedures and policies;
(xiii) arranging financing and establishing a credit facility;
(xiv) procuring our inventory for the Limited Launch Phase;
(xv) engaging logistical support for customer deliveries;
(xvi) procuring packaging inventories;
(xvii) testing Kidstoysplus internal operating, distribution and customer
service systems;
(xviii) establishing our 1-800 service line;
(xix) beta testing our website software;
(xx) developing content for the Kidstoysplus.com Website;
(xxi) promoting the initial launch of our website;
(xxii) finalizing the Kidstoysplus virtual store concept; and
-9-
<PAGE>
(xxiii) hiring and training customer service and distribution personnel.
After the Initial Launch Phase, we intend to focus on (i) debugging its systems;
(ii) recruiting and training additional qualified operational and sales
personnel; (iii) intensifying promotional efforts for the Kidstoysplus.com
Website and brand name; (iv) building market awareness and attracting customers
to the Kidstoysplus.com Website; (v) refining our distribution and fulfillment
operations strategy; (vi) actively marketing merchandise through our
Kidstoysplus.com Website; (vii) expanding the product line and mix of products
available on the Kidstoysplus.com Website; (viii) expanding the content on the
Kidstoysplus.com Website; and (ix) developing functional cross marketing
programs and marketing information systems for our client base.
In developing the Kidstoysplus.com Website, we will consider three major factors
that we believe are essential to our success in e-commerce. The factors are as
follows:
1. Developing back end system support for the Kidstoysplus.com Website.
2. Selection of the right initial product lines and offerings.
3. Launching the Kidstoysplus.com Website.
We believe that growth will be the key to our success and that developing and
managing growth will be a major challenge for us and our management.
Back End System Support
Initially, we intend to design a software system that integrates and is capable
of managing all of the Kidstoysplus.com Website, marketing, distribution and
other information. This information is anticipated to cover product offerings,
consumer information on products and manufacturers, promotions, pricing, margin,
customer lists and customer data, shipping and handling data, customer support
information, our procedures and policies, credit information, inventory control,
procurement and distributor information, catalogues, news and other information
required to integrate our operations. We anticipate that we will develop a
system will allow us to collect and analyze information in a single cohesive
system that allows us to use and exchange information within our organization.
We may also integrate certain parts of our systems with strategic partners.
Initial Product Lines and Growth
We believe that a key to online retailing is to avoid selling a large selection
of products immediately. After our Initial Launch Phase, we plan to market
approximately 1,000 to 1,500 of the most frequently purchased or popular toys.
We believe that this strategy will allow us to ensure our internal systems,
especially the back-end platform, are performing correctly before expanding our
product lines. We believe that the typical customer may initially buy from a
core group of products and later will seek a broader product offering.
Experienced on-line customers may become frustrated if they are unable to select
from a large inventory of products or are unable to locate specific products or
are forced to look for products in traditional stores. For the Kidstoysplus.com
Website to be successful, we believe it is critical that we increase our product
line rapidly once we are confident that it can support hundreds of transactions
concurrently and process thousands of orders daily. We believe that our larger
competitors have large extensive product offerings and currently have systems in
place to facilitate a large number of transactions. Consequently, we believe
that we must expand our product lines and services shortly after our Initial
Launch Phase to successfully compete. See "Competition." Our product offering
may include several thousand different products in the future.
Initial Launch Phase of Our Kidstoysplus.com Website
We plan to launch the Kidstoysplus.com Website and establish our distribution
facility prior to the Christmas season of 1999. We anticipate that sales during
the end of 1999 will assist us in testing it internal operating systems, from
customer order entry and credit transaction processing to final fulfillment,
shipping and delivery of the products ordered. Provided adequate financing is
available, the year 2000 will be the Company's first full year of operations as
an Internet retailer. There can be no assurance that we will be able to launch
the Kidstoysplus.com Website as anticipated or that we will have sufficient
financing to implement our business plan. Any substantial delay in the launch of
Kidstoysplus.com Website will have a material adverse affect on our business and
results of operation. During the calendar year of 1999, we intend to sell a
limited line of children's merchandise solely to test our new Website, internal
order processing, inventory systems, customer service and support procedures and
our shipping
-10-
<PAGE>
and logistical capabilities. We have not determined the product line we will
offer during the Initial Launch Phase or the number of products we will offer.
We believe we will have access to a number of products offered by toy
distributors and manufactures during our initial launch phase.
Capital Requirements
Capital requirements of a high technology start-up company are continuous,
especially in the early years, or until the company can establish a revenue
stream from product sales.
We have not entered into any arrangements or agreements to raise any additional
financing, and there can be no assurance that such financing will be available
on terms acceptable to us, if at all. If we are unsuccessful in raising the
financing required to implement our business plan, an investment in our common
shares may result in a loss of the investment made.
We completed two initial private placements of 4,368,084 our common shares
providing us approximately $243,642. See "Unregistered Offerings by the
Company." The proceeds from the private placements will be used to establish a
the Kidstoysplus.com Website, offset some of the costs required to establish our
distribution and warehouse facility, purchase inventories of select and limited
toy lines during the Initial Launch Phase, offset the cost of establishing our
distribution and customer service systems; and begin to fund our brand identity
marketing activities. These proceeds will not be sufficient to establish all of
the systems that we will need to fully implement our business plan.
During 1999 and 2000, we will seek additional financing to develop our
Kidstoysplus.com Website and distribution systems and to continue our marketing
activities. We anticipate it will need additional financing to increase and
diversify our initial product offerings and to maintain adequate inventory to
satisfy customer expectations and to meet customer demands. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Consultant
As of May 31, 1999, we had one consultant, Albert R. Timcke, a director and our
President, engaged in product research and development and two consultants,
Brian C. Doutaz, a director and our Secretary, and Gerald W. Williams, engaged
in general and administrative and marketing functions. Each of our consultants
will assist us in the development our business and our internal operating and
information systems. We may also engage additional consultants in the future to
assist us with the development of software and information systems and the
implementation of our business plan.
We anticipate we will hire up to 4 employees during 1999 to provide 1-800
consumer support services, 1 to providing marketing and sales support, 2 to
staff our distribution warehouse, 1 information systems employee and 2
administration employee.
Our success will depend in large part on our ability to attract and retain
skilled and experienced employees and consultants. We do not anticipate any of
our employees will be covered by a collective bargaining agreement. We do not
currently have any key man life insurance on any of our directors or executive
officers.
Intellectual Property
We have not registered any trademarks in the United States or elsewhere. We
currently have no technologies that are patentable.
Risk Factors
Our business is subject to a number of risks that are generally associated with
start-up companies in the development stage of their business and companies
engaged in business through the Internet. These risks could cause our actual
results to differ materially from the results we project and any forward-looking
statement we make
-11-
<PAGE>
in this registration statement. Below is a description of some of the risks that
we anticipate will be associated with our business and an investment in our
company.
Our Lack of an Operating History Makes Future Forecasting Difficult
We were incorporated on February 4, 1999, to engage in the business of marketing
children's toys and related products over the Internet. We are a development
stage company, which means we are in the process of developing our business and
have not generated any revenues from our operations. We intend to begin selling
products on our Kidstoysplus.com Website in the fourth quarter 1999. However, we
have not entered into all of the agreements or arrangements that will be
required to conduct our business including, among others: agreements for the
development of all of the technologies required to operate our business; lease
and related agreements to establish a warehouse, customer services office, order
processing center, server or any other physical facility that we will require to
market, sell and deliver products; agreements to procure our inventory of
products; arrangement to hire employees; arrangements for shipping and packaging
of orders; or agreements for credit facility or other financing. We cannot
assure you that we will successfully enter into these arrangements or agreements
in a timely manner, if at all.
As a result of our lack of an operating history, it is difficult to accurately
forecast our net sales and we have limited meaningful historical financial data
upon which to base planned operating expenses. We base our current and future
expense levels on our operating plans and estimates of future net sales, and
several of our expenses are anticipated to be fixed because of the amount of
capital required to establish our business and the expenditures we anticipate
will be necessary to maintain a minimum level of capacity. Our sales and
operating results are difficult to forecast because they will generally depend
on the volume and timing of the orders we receive. As a result, we may be unable
to adjust our spending in a timely manner to compensate for any unexpected
revenue shortfall. This inability could cause our net losses in a given quarter
to be greater than expected.
We Anticipate Future Losses and Negative Cash Flow
We expect operating losses and negative cash flow to continue for the
foreseeable future. We anticipate our losses will increase significantly from
current levels because we expect to incur additional costs and expenses related
to:
- brand development, marketing and other promotional activities;
- the expansion of our inventory management and distribution operations;
- the continued development of our Kidstoysplus.com Website, the systems
that we use to process customers' orders and payments, and our
computer network;
- increased marketing activities;
- increased inventory carrying costs;
- increased administrative costs;
- cost related to short term financings;
- the expansion of our product offerings and Kidstoysplus.com Website
content; and
- development of relationships with strategic business partners.
As of April 30, 1999, we had an accumulated deficit of $16,606. Our losses will
increase substantially in 2000 as we anticipate costs will increase due to a
number of factors including:
- an increase in the number of employees;
- an increase in sales and marketing activities;
- addition of warehouse facilities and infrastructure;
- increased inventory carrying costs;
- increase administrative costs; and
- increased training costs.
Our ability to become profitable depends on our ability to generate and sustain
substantial net sales while maintaining reasonable expense levels. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
Our Operating Results Are Difficult to Predict
Our operating results are anticipated to fluctuate significantly due to a
variety of factors, many of which are outside of our control. Factors that may
harm our business or cause our operating results to fluctuate include the
following:
-12-
<PAGE>
- our inability to obtain new customers at reasonable cost, retain
existing customers, or encourage repeat purchases;
- decreases in the number of visitors to our Kidstoysplus.com Website or
our inability to convert visitors into customers;
- the mix of toys and other products sold by us; - seasonality of the
toy industry and certain product lines; - our inability to manage
inventory levels; - our inability to manage our distribution
operations;
- our inability to adequately maintain, upgrade and develop our Web
site, the systems that we use to process customers' orders and
payments or our computer network;
- the ability of our competitors to offer new or enhanced Web sites,
services or products; - price competition; - an increase in the level
of our product returns; - fluctuations in the demand for children's
products associated with movies, television and other entertainment
events;
- our inability to obtain popular children's toys, video games,
software, videos and music from our vendors;
- fluctuations in the amount of consumer spending on children's toys,
video games, software, videos and music;
- the failure to develop new marketing relationships with key business
partners;
- the extent to which we are not able to participate in advertising
campaigns such as those conducted by strategic partners;
- increases in the cost of online or offline advertising;
- the amount and timing of operating costs and capital expenditures
relating to expansion of our operations;
- unexpected increases in shipping costs or delivery times, particularly
during the holiday season; - technical difficulties, system downtime
or Internet brownouts; - government regulations related to use of the
Internet for commerce or for sales and distribution of toys, video
games, software, videos and music; and
- economic conditions specific to the Internet, online commerce and the
children's toy and related product industries.
A number of factors will cause our gross margins to fluctuate in future periods,
including the mix of toys and other products sold by us, inventory management,
inbound and outbound shipping and handling costs, the level of product returns
and the level of discount pricing and promotional coupon usage. Any change in
one or more of these factors could reduce our gross margins in future periods.
We expect our sales to experience seasonal fluctuations that may affect our cash
flow and our ability to manage our inventory effectively. We expect to continue
to experience seasonal fluctuations in our net sales. These seasonal patterns
will cause quarterly fluctuations in our operating results. In particular, a
disproportionate amount of our net sales will be realized during the fourth
calendar quarter and we expect this trend to continue in the future.
In anticipation of increased sales activity during the fourth calendar quarter,
we anticipate that we will hire a significant number of temporary employees to
bolster our permanent staff and we will significantly increase our inventory
levels. For this reason, if our net sales were below seasonal expectations
during this quarter, our annual operating results could be below our
expectations.
Due to our lack of an operating history, it is difficult to predict the seasonal
pattern of our sales and the impact of such seasonality on our business and
financial results. In the future, our seasonal sales patterns may become more
pronounced, may strain our personnel and warehousing and order shipment
activities and may cause a shortfall in net sales as compared to expenses in a
given period.
We Face Significant Inventory Risk Because Consumer Demand Can Change for
Products Between the Time that We Order Products and the Time that We Receive
Them
We may carry a significant level of inventory. As a result, the rapidly changing
trends in consumer tastes in the market for children's toys and related products
will subject us to significant inventory risks. It is critical to our success
that we accurately predict these trends and do not overstock unpopular products.
The demand for specific products can change between the time the products are
ordered and the date of receipt. We are particularly exposed to this risk
because we anticipate that we will derive a majority of our net sales in the
fourth calendar quarter of each
-13-
<PAGE>
year. Our failure to sufficiently stock popular toys and other products in
advance of such fourth calendar quarter would harm our operating results for the
entire fiscal year.
In the event that one or more products do not achieve widespread consumer
acceptance, we may be required to take significant inventory markdowns, which
could reduce our net sales and gross margins. We anticipate that this risk may
be greatest in the first calendar quarter of each year, after we have
significantly increased inventory levels for the holiday season. We believe that
this risk will increase as we open new departments or enter new product
categories due to our lack of experience in purchasing products for these
categories. In addition, to the extent that demand for our products increase
over time, we may be forced to increase inventory levels. Any such increase
would subject us to additional inventory risks.
Because We do not Intend to have Long-Term or Exclusive Vendor Contracts, We May
not be able to Obtain Sufficient Quantities of Popular Children's Products in a
Timely Manner. As a Result, We could Lose Customers and Opportunities.
If we are not able to offer our customers sufficient quantities of toys or other
products in a timely manner, we could lose customers and our net sales could be
below our expectations. Our success depends on our ability to purchase products
in sufficient quantities at competitive prices, particularly for the holiday
shopping season. We believe it is common in the industry not to have long-term
or exclusive arrangements with any vendor or distributor that will guarantee the
availability of toys or other children's products for resale. Therefore, we will
not have a predictable or guaranteed supply of toys or other products.
If We Are Unable to Obtain Sufficient Quantities of Products From Our Key
Vendors, Our Net Sales Will Decrease.
If we were unable to obtain sufficient quantities of products from our key
vendors, we could lose customers and our net sales could be below expectations.
We may derive a significant percentage of our net sales from sales of products
manufactured by leading toy manufactures such as Mattel and Hasbro. We also
anticipate that we may derive a significant percentage of our net sales from the
sale of video game products that are primarily supplied to us by a single
distributor. From time to time, we anticipate we will experience difficulty in
obtaining sufficient product allocations from key vendors. In addition, we
believe our key vendors will have established, and may continue to expand, their
own online retailing efforts, which may impact our ability to get sufficient
product allocations from such vendors. We currently have no agreements or
arrangements to acquire inventory from manufacturers or distributors.
To Manage Our Growth and Expansion, We Need to Implement Financial and
Managerial Controls and Reporting Systems and Procedures. If We are Unable to do
so Successfully, Our Results of Operations will be Impaired
Our anticipated growth in personnel and operations will place a significant
strain on our management, information systems and resources. In order to manage
this growth effectively, we need to develop financial and managerial controls
and reporting systems and procedures. If we experience a significant increases
in the number of our personnel, our existing management team will not be able to
effectively train, supervise and manage all of our personnel. In addition, our
information must be able to handle adequately the anticipated volume of
information and transactions that would result from our operations and our
anticipated growth. Our failure to successfully implement, improve and integrate
these systems and procedures would cause our results of operations to be below
expectations.
We may not be able to Compete Successfully Against Current and Future
Competitors.
The online commerce market is new, rapidly evolving and intensely competitive.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any of which could seriously harm our net
sales and results of operations. We expect competition to intensify in the
future because current and new competitors can enter our market with little
difficulty and can launch new Websites at a relatively low cost. In addition,
should we decide to expand our product lines, the video game, software, video
and music retailing industries are intensely competitive.
We currently or potentially intend to compete with a variety of other companies,
including:
- traditional store-based toy and children's product retailers such as
Toys R Us, FAO Schwarz, Zany Brainy and Noodle Kidoodle;
- major discount retailers such as Wal-Mart, Kmart, Sears and Target
Stores;
-14-
<PAGE>
- online efforts of these traditional retailers, including the online
stores operated by Toys R Us, Wal-Mart and FAO Schwarz;
- physical and online stores of entertainment entities that sell and
license children's products, such as The Walt Disney Company and
Warner Bros.;
- catalog retailers of children's products;
- vendors or manufacturers of children's products that currently sell
some of their products directly online, such as Mattel and Hasbro;
- other online retailers that include children's products as part of
their product offerings, such as Amazon.com, Barnesandnoble.com,
CDnow, Beyond.com and Reel.com;
- Internet portals and online service providers that feature shopping
services such as AOL, Yahoo!, Excite and Lycos; and
- various smaller online retailers of children's products, such as
BrainPlay.com, Red Rocket and Toysmart.com.
Many traditional store-based and online competitors have long operating
histories, large customer or user bases, brand recognition and loyalty and
significant financial, marketing and other resources. Many of these competitors
can devote substantially more resources to Web site development than we can. In
addition, larger, well-established and well-financed entities may join with
online competitors or children's toy, video game, software, video and music
publishers or suppliers as the use of the Internet and other online services
increases.
Our competitors may be able to secure products from vendors on more favorable
terms, fulfill customer orders more efficiently and adopt more aggressive
pricing or inventory availability policies than we can. Traditional store-based
retailers also enable customers to see and feel products in a manner that is not
possible over the Internet.
We Expand Our Product Lines and Enter New Business Categories that may not
Achieve Market Acceptance.
Any new department or product category that is launched or acquired by us, which
is not favorably received by consumers could damage our brand or reputation.
This damage could impair our ability to attract new customers, which could cause
our net sales to fall below expectations. An expansion of our business into
other new department or product category will require significant additional
expenses, and strain our management, financial and operational resources. This
type of expansion would also subject us to increased inventory risk and could
aversely affect our levels of customer service. We may choose to expand our
operations by developing other new departments or product categories, promoting
new or complementary products, expanding the breadth and depth of products and
services offered or expanding our market presence through relationships with
third parties.
If We Experience Problems In Our Distribution Operations, We Could Lose
Customers.
We intend to rely upon third-party carriers for product shipments, including
shipments to and from our distribution facility. Consequently, we are subject to
the risks, including employee strikes and inclement weather, associated with
such carriers' ability to provide delivery services to meet our shipping needs.
In addition, failure to deliver products to our customers in a timely manner
would damage our reputation and brand. We also intend to depend upon temporary
employees to adequately staff our distribution facility, particularly during the
holiday shopping season. If we do not have sufficient sources of temporary
employees, we could lose customers.
If We do not Successfully Establish Our Kidstoysplus.com Website and the Systems
that Process Customers' Orders, We will be unable to Implement Our Business
Plan.
If we fail to establish our Kidstoysplus.com Website, we will be unable to carry
out our business plan. Furthermore, we must establish computer and information
systems that we will use to process and ship customer orders and process
payments or we may not be able to successfully distribute customer orders. Any
failure of our systems to act in an integrated manner could result in the loss
of customers and our net sales will be adversely affected.
In addition, our failure to rapidly upgrade our Kidstoysplus.com Website or
expand these computer systems without system downtime, particularly during the
fourth calendar quarter, would further reduce our net sales. We may experience
difficulty in improving and maintaining such systems if our employees or
contractors that develop or maintain our computer systems become unavailable to
us. We also expect periodic systems interruptions while enhancing and expanding
these computer systems that will affect the quality of our customer service.
-15-
<PAGE>
Our Facilities and Systems are Vulnerable to Natural Disasters and Other
Unexpected Problems. The Occurrence of a Natural Disaster or Other Unexpected
Problem could Damage Our Reputation and Brand and Reduce Our Net Sales
The occurrence of an earthquake or other natural disaster or unanticipated
problems at our planned facility in British Columbia, or at the third-party that
we anticipate will house substantially all of our computer and communications
hardware systems, could cause interruptions or delays in our business, loss of
data or render us unable to accept and fulfill customer orders. Any such
interruptions or delays at either of these facilities would reduce our net
sales. In addition, we anticipate that our systems and operations will be
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, break-ins, earthquake and similar events. We have no
formal disaster recovery plan and our business interruption insurance may not
adequately compensate us for losses that may occur. In addition, the failure by
the third-party facility to provide the data communications capacity required by
us, as a result of human error, natural disaster or other operational
disruptions, could result in interruptions in our service. The occurrence of any
or all of these events could damage our reputation and brand and impair our
business.
Our Net Sales could Decrease If Our Online Security Measures Fail
Our relationships with our customers may be adversely affected if the security
measures that we use to protect their personal information, such as credit card
numbers, are ineffective. If, as a result, we lose many customers, our net sales
could decrease. We intend to rely on security and authentication technology that
we intend to license from third parties. With this technology, we intend to
perform real-time credit card authorization and verification with our bank. We
cannot predict that whether events or developments will result in a compromise
or breach of the technology we use to protect a customer's personal information.
Furthermore, the servers we intend to rely on may be vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions. We may need
to expend significant additional capital and other resources to protect against
a security breach or to alleviate problems caused by any breaches. We cannot
assure you that we can prevent all security breaches.
Our Net Sales And Gross Margins Would Decrease If We Experience Significant
Credit Card Fraud
A failure to adequately control fraudulent credit card transactions would reduce
our net sales and our gross margins because we do not intend to carry insurance
against this risk. We intend to use developed technology to help us to detect
the fraudulent use of credit card information. Nonetheless, we expect to suffer
losses as a result of orders placed with fraudulent credit card data even though
the associated financial institution approved payment of the orders. Under
currently contemplated credit card practices, we are liable for fraudulent
credit card transactions because we do not obtain a cardholder's signature.
If We Do Not Respond To Rapid Technological Changes, Our Services Could Become
Obsolete And We Could Lose Customers
If we face material delays in introducing new services, products and
enhancements, our customers may forego the use of our services and use those of
our competitors. To remain competitive, we must continue to enhance and improve
the functionality and features of our online store. The Internet and the online
commerce industry are rapidly changing. If competitors introduce new products
and services embodying new technologies, or if new industry standards and
practices emerge, our Kidstoysplus.com Website and our proprietary technology
and systems may become obsolete.
The development of our Kidstoysplus.com Website and other proprietary technology
will entail significant technical and business risks. We may use new
technologies ineffectively or we may fail to adapt our Kidstoysplus.com Website,
systems that we use to process customers' orders and payments and our computer
network to customer requirements or emerging industry standards.
Intellectual Property Claims Against Us Can Be Costly And Could Impair Our
Business
Other parties may assert infringement or unfair competition claims against us.
We cannot predict whether third parties will assert claims of infringement
against us, or whether any assertions or prosecutions will harm our business. If
we are forced to defend against any such claims, whether they are with or
without merit or are determined in our favor, then we may face costly
litigation, diversion of technical and management personnel, or product shipment
delays. As a result of such a dispute, we may have to develop non-infringing
technology or enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may be unavailable on terms acceptable to us,
or at all. If there is a successful claim of product infringement against us and
we are unable to develop non-infringing technology or license the infringed or
similar technology on a timely basis, it could impair our business.
-16-
<PAGE>
If the Protection of Our Trademarks and Proprietary Rights is Inadequate, Our
Brand and Reputation could be Impaired and We Could Lose Customers
We intend to take steps to protect our proprietary rights, which may be
inadequate. We have not filed any applications for patents or registered any
trademark for protection. We anticipate our future copyrights, service marks,
trademarks, trade dress, trade secrets and similar intellectual property will be
critical to our success. We intend to rely on trademark and copyright law, trade
secret protection and confidentiality or license agreements with our employees,
customers, partners and others to protect our proprietary rights. We intend to
file trademark applications for "Kidstoysplus" for toys, games and playthings
and for sales of toys, games and playthings. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which we will sell our products and services online. Furthermore, the
relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. Therefore, we may be
unable to prevent third parties from acquiring domain names that are similar to,
infringe upon or otherwise decrease the value of our trademarks and other
proprietary rights.
The Loss of the Services of One or More of Our Key Personnel, or Our Failure to
Attract, Assimilate and Retain Other Highly Qualified Personnel in the Future,
Could Disrupt Our Operations and Result in Loss Of Sales
The loss of the services of one or more of our key personnel could seriously
interrupt our business. We depend on the continued services and performance of
our senior management and other key personnel, particularly Albert R. Timcke,
our President, Chief Executive Officer and Chairman of the Board. Our future
success also depends upon the continued service of our executive officers and
other key sales, marketing and support personnel. We have entered into a
consulting agreement with Mr. Timcke. Our relationships with these officers and
key employees are at will. We do not have "key person" life insurance policies
covering any of our employees.
We may be Adversely Impacted if the Software, Computer Technology and Other
Systems we Use are not Year 2000 Compliant
Any failure of our material systems, our vendors' material systems or the
Internet to be year 2000 compliant would have material adverse consequences for
us. Such consequences would include difficulties in operating our
Kidstoysplus.com Website effectively, taking product orders, making product
deliveries or conducting other fundamental parts of our business. We are
currently assessing the year 2000 readiness of the software, computer technology
and other services that we use which may not be year 2000 compliant. At this
time, we have not yet developed a contingency plan to address situations that
may result if our vendors or we are unable to achieve year 2000 compliance. The
cost of developing and implementing such a plan, if necessary, could be
material.
We also depend on the year 2000 compliance of the computer systems and financial
services used by consumers. A significant disruption in the ability of consumers
to reliably access the Internet or portions of it or to use their credit cards
would have an adverse effect on demand for our services and would have a
material adverse effect on us. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
Executive Officers And Directors Have Substantial Control Over The Company
Executive officers, directors and entities affiliated with them, if acting
together, would be able to significantly influence all matters requiring
approval by our stockholders, including the election of directors and the
approval of mergers or other business combination transactions. These
stockholders will, in the aggregate, beneficially own approximately 56.18% of
our outstanding common stock following the completion of this offering. See
"Principal Stockholders".
Risks Related To the e-commence Industry
If We Are Unable To Acquire The Necessary Web Domain Names, Our Brand And
Reputation Could Be Damaged And We Could Lose Customers
We may be unable to acquire or maintain Web domain names relating to our brand
in the United States and other countries in which we may conduct business. As a
result, we may be unable to prevent third parties from acquiring and using
domain names relating to our brand. Such use could damage our brand and
reputation and take customers away from our Kidstoysplus.com Website. We
currently hold various relevant domain names, including the "Kidstoysplus.com"
domain name. Governmental agencies and their designees generally regulate the
acquisition and maintenance of domain names. The regulation of domain names in
the United States and in foreign countries is subject to change in the future.
Governing bodies may also establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names.
-17-
<PAGE>
We may Need to Change the Manner in which We Intend to Conduct Our Business If
Government Regulation Increases
The adoption or modification of laws or regulations relating to the Internet
could adversely affect the manner in which we currently conduct our business. In
addition, the growth and development of the market for online commerce may lead
to more stringent consumer protection laws, both in the United States and
abroad, that may impose additional burdens on us. Laws and regulations directly
applicable to communications or commerce over the Internet are becoming more
prevalent. The United States Congress recently enacted Internet laws regarding
children's privacy, copyrights, taxation and the transmission of sexually
explicit material. The European Union recently enacted our own privacy
regulations. The law of the Internet, however, remains largely unsettled, even
in areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the Internet. In order to comply
with new or existing laws regulating online commerce, we may need to modify the
manner in which we do business, which may result in additional expenses. We may
need to spend time and money revising the process by which we fulfill customers'
orders to ensure that each shipment complies with applicable laws. We may need
to hire additional personnel to monitor our compliance with applicable laws.
We may be Subject to Liability for the Internet Content that we Publish
As a publisher of online content, we face potential liability for defamation,
negligence, copyright, patent or trademark infringement, or other claims based
on the nature and content of materials that we publish or distribute. If we face
liability, then our reputation and our business may suffer. In the past,
plaintiffs have brought these types of claims and sometimes successfully
litigated them against online services. Although we carry general liability
insurance, our insurance currently does not cover claims of these types.
However, this insurance is available, and we intend to obtain this insurance in
the near future. There can be no assurance that we will be able to obtain such
insurance or that it will be adequate to indemnify us for all liability that may
be imposed on us.
Our Net Sales Could Decrease If We Become Subject To Sales And Other Taxes
If one or more states or any foreign country successfully asserts that we should
collect sales or other taxes on the sale of our products, our net sales and
results of operations could be harmed. We do not currently intend to collect
sales or other similar taxes for physical shipments of goods. However, one or
more local, state or foreign jurisdictions may seek to impose sales tax
collection obligations on us. In addition, any new operation in states outside
Washington State could subject our shipments in such states to state sales taxes
under current or future laws. If we become obligated to collect sales taxes, we
will need to update our system that processes customers' orders to calculate the
appropriate sales tax for each customer order and to remit the collected sales
taxes to the appropriate authorities. These upgrades will increase our operating
expenses. In addition, our customers may be discouraged from purchasing products
from us because they have to pay sales tax, causing our net sales to decrease.
As a result, we may need to lower prices to retain these customers.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Kidstoysplus.com Inc. was organized and incorporated under the laws of the State
of Nevada on February 04, 1999 and has not commenced operations of its business.
This report discusses financial and organizational results from our inception to
April 30, 1999.
Except for statements of historical fact, certain information contained herein
constitutes "forward-looking statements," which involve known and unknown risks,
uncertainties and other factors which may cause our actual results or
achievements to be materially different from any future results or achievements
of the Company expressed or implied by such forward-looking statements.
General Overview
We intend to operate as a Web-based retailer focused exclusively on children's
toys and related products, which may include children's books, music, story line
CD's, audio tapes, kids' movies, video games, educational products, and hobby
items. We believe that by combining expertise in children's products, Internet
web site development and
-18-
<PAGE>
marketing and a commitment to excellent customer service through Internet
retailing, we will be able to deliver a unique shopping experience to consumers.
The following discussion and analysis explains our financial condition for the
period from incorporation on February 4, 1999 to April 30, 1999, and our plan of
operation for the next twelve months. You should review our discussion and
analysis of financial condition and our plan of operation in conjunction with
our audited financial statements and the related notes, as well as statements
made elsewhere in this Form 10-SB.
Period February 4, 1999 to April 30, 1999
Revenues. We anticipate we will not commence our operations until the fourth
quarter of 1999. We generated no revenues from operations since our inception on
February 4, 1999 to April 30, 1999. We had interest income in the amount of
$555.
Expenses. We incurred expenses of $17,161 related to the organization of our
corporation and the development of our business plan including $6,600 in
consulting fees, $2,800 in management fees (related to strategic planning
business development and market research and analysis) (paid to Albert R.
Timcke, our President, for services), $3,924 in legal and accounting expenses,
$3,070 in office and miscellaneous expenses and $767 in phone expenses. We
anticipate our operating and administrative expenses will increase as we develop
our Kidstoysplus.com Website and begin marketing our business.
Net Loss. We had a loss of $16,606 for the period since our inception on
February 4, 1999 to April 30, 1999.
Liquidity and Capital Resources
On April 5, 1999, we issued for cash 3,960,000 shares of our common stock at a
price of $0.01 per share for proceeds to us of $39,600. On April 6, 1999, we
issued for cash 408,084 shares of our common stock at a price of $0.50 per share
for proceeds to us of $204,042.
As of April 30, 1999, we had working capital of approximately $232,636. In the
subsequent quarter, our expenses are expected to rise dramatically.
Plan of Operation
We anticipate it our Kidstoysplus.com Website will be accessible for initial
viewing in the third quarter 1999. The Company intends to have our initial
distribution site, to be located at or near Comox, British Columbia, open for
stocking and organization late in the third quarter 1999; at a future date, we
may open another facility in Washington State to service customers in the United
States. We intend to commence purchasing inventory and entering into
merchandising and procurement agreements with toy manufactures and distributors
to supply merchandise marketed on the Kidstoysplus.com Website late in the third
quarter 1999. We anticipate it will begin selling merchandise through our
Kidstoysplus.com Website during our Limited Launch Phase in the fourth quarter
1999 for the purposes of testing our Kidstoysplus.com Website, our customer
service systems, our warehouse and facilities systems and our internal
record-keeping and billing systems. We anticipate that we will be fully
operational in the first half of 2000. Below is a summary of our plan of
operation through the first quarter ending March 31, 2000.
Capital Requirements
We anticipate it will need the following financing to implement our business
plan and to meet our financial obligations for the year ending December 31,
1999, and the first two calendar quarters of 2000.
-19-
<PAGE>
<TABLE>
PERIOD
1999 2000
-------------------------------------------------- --------------
DESCRIPTION 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter
May - June July - September October - January -
December March
---------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
Company set-up and legal exp. ................ $30,000 $20,000
Office and administration .................... $25,000 $30,000 $40,000 $40,000
Web site design and posting .................. $100,000
Web maintenance and software upgrades ........ $75,000 $30,000 $30,000
Establish warehouse and office facilities .... $25,000 $20,000 $20,000 $20,000
Company marketing expense - begin ............ $100,000 $100,000 $300,000
Selective product inventory for .............. $100,000 $200,000 $600,000
Christmas 1999 - Beginning Inv. 2000
Working capital .............................. $25,000 $100,000 $100,000 $100,000
Totals ....................................... $205,000 $445,000 $490,000 $1,090,000
---------- ---------------- --------- ---------
</TABLE>
As of April 30, 1999, we had working capital of $232,636. We anticipate that our
working capital is sufficient to satisfy our cash requirements only through our
second quarter 1999. We anticipate we will be required to raise addition
financing in the amount of approximately $1,500,000 during the next twelve
months to implement our business plan and to meet our anticipated cash
requirements. We believe our estimates of our capital requirements to be
reasonable. The capital requirements are only estimates and can change for many
different reasons, some of which are beyond our control. We are a development
stage company and are the process of designing our Kidstoysplus.com Website
design and establishing a warehouse facility. The cost for procuring a test
inventory for the 1999 Christmas season will be dependant on our ability to
purchase such inventory on acceptable terms, which is anticipated to include a
credit facility or manufacturer/distributor financing. We currently have no
arrangements for such procurement or for financing to acquire our initial
inventory, and there can be no assurance that we will successful acquire a
product line or financing on terms acceptable to us, if at all.
Product Research and Development
We have recently engaged Retricular Consulting of Victoria, British Columbia to
develop our Kidstoysplus.com Website and anticipate that we will begin testing
our Kidstoysplus.com Website in the third quarter 1999. Under the terms of our
agreement, we agreed to pay Retricular a per diem consulting fee of $200 for the
initial planning stage of the development of our Kidstoysplus.com Website. We
anticipate we will enter into a definitive development agreement with Retricular
to complete the development of our website, and we will need to spend
approximately $35,000 - $50,000 to complete development and successfully launch
our website into commercial use. We also anticipate we will spend approximately
$75,000 - $100,000 to develop the technology related to our customer service and
support systems, inventory control systems, distribution and logistical
facilitation systems, accounting systems and other internal control systems.
The cost for developing technology is expensive and the process will require
testing and refinement. Our commercial success will depend on our ability to
attract visitors and shoppers to our Kidstoysplus.com Website. This will require
us to develop and use increasing sophisticated technologies to generate, sustain
and maintain user interest and satisfaction. See "Note Regarding Forward Looking
Statements."
-20-
<PAGE>
We have are in the processing of developing the technologies, software and
systems for the Kidstoysplus.com Website and we have not entered into any
agreements or arrangements for the development of the technologies related to
our internal control and distribution systems. We do not anticipate that our
technologies will be ready for testing until at least August 1999. There can be
no assurance that we will successfully develop and test the technologies related
to Kidstoysplus.com Website or contemplated in our business plan on a timely
basis, if at all. A substantial delay in obtaining the required financing or
developing the Kidstoysplus.com Website and the support services would have a
materially adverse effect on our business and results of operations. See "Note
Regarding Forward Looking Statements."
Acquisition of Plant and Equipment for Our Distribution Center and Customer
Service Center
We are in the process of locating a distribution and warehouse and customer
service facility, which is anticipated to be located in the Comox Valley on
Vancouver Island, British Columbia. We anticipate that we will require a
facility of approximately 5,000 to 8,000 square feet, including office,
warehouse and delivery space for our distribution and customer service
operations. We anticipate that the cost of acquiring, finishing, furnishing and
equipping our facility will be approximately $60,000 during the next twelve
months. The rent for our facility is estimated to be approximately $3,000 per
month.
We also intend to acquire computer systems and to develop system software to
support our distribution and warehouse and customer service facility. We
anticipate that the cost of such equipment and systems will be approximately
$15,000 - $20,000 during the next twelve months.
Consultants
As of May 1, 1999, we engaged 3 consultants to assist us in product research and
development and marketing functions on a part- and full-time basis. We intend to
engage additional consultants to develop our internal operating and information
systems.
We also anticipate that we will hire 4 employees during 1999 to provide 1-800
consumer support services, 1 to providing marketing and sales support, 2 to
staff our distribution warehouse, 1 information systems employee and 2
administration employees.
The Company's success will depend in large part on our ability to attract and
retain skilled and experienced employees. The Company does not anticipate any of
our employees will be covered by a collective bargaining agreement. The Company
does not currently have any key man life insurance on any of our directors or
executive officers.
We have not entered into any agreements or arrangements with respect to product
inventory, distribution facilities, internal systems development, server
systems, human resource, credit facilities and other related needs. There can be
no assurance that we will be able to enter such agreements or arrangements on
acceptable terms, if at all. There can also be no assurance that we will be able
to develop our Kidstoysplus.com Website and our distribution systems in a timely
manner, if at all, or that the Company's projected costs and timing of such
development will be accurate. Any material delay in entering into arrangements
or developing our Kidstoysplus.com Website or distribution systems will have a
material adverse effect on the Company's business and results of operations.
ITEM 3 DESCRIPTION OF PROPERTY
Our corporate headquarters are located at 1000 - 355 Burrard Street, Vancouver,
British Columbia, V6C 2G8, Canada.
Our plan of operations is focused on developing, marketing, and distributing
children's products on the Internet as described in Item 1. Accordingly, we have
no particular policy regarding each of the following types of investments:
1. Investments in real estate or interests in real estate;
2. Investments in real estate mortgages; or
-21-
<PAGE>
3. Securities of or interests in persons primarily engaged in real estate
activities.
We anticipate that we will enter into a lease agreement related to our proposed
distribution and customer service center. As of May 31, 1999, we have not
entered into any such agreement.
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of
shares of Common Stock owned beneficially as of May 31, 1999 by: (i) each person
known to us to own more than five percent (5%) of any class of our voting
securities; (ii) each of our directors; and (iii) all our directors and officers
as a group. Unless otherwise indicated, the shareholders listed possess sole
voting and investment power with respect to the shares shown.
<TABLE>
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
CLASS BENEFICIAL OWNER OF BENEFICIAL OWNER CLASS(1)
- - -------- ------------------- ----------------- ----------
<S> <C> <C> <C>
Albert R Timcke
Common Stock 10300 Second Avenue, Richmond, BC V7E 1V7 6,600,000(2) 59.63(2)
Brian C. Doutaz
Common Stock 35-12880 Railway Ave, Richmond, BC V7E 1V7 900,000(3) 8.94(3)
Common Stock All directors and officers as a group 7,500,000 shares(2)(3) 75.24(2)(3)
</TABLE>
(1) Based on an aggregate 9,968,084 shares outstanding as of May 31, 1999.
(2) Includes Mr. Timcke's (i) options to acquire 500,000 shares of our common
stock at $0.10 per share and (ii) options to acquire 600,000 shares of our
common stock at $0.25 per share within 60 days of May 31, 1999. These
options expire on the earlier of May 15, 2005; thirty days after the
termination (except for death or disability) of Mr. Timcke as a consultant
to the company; or one year after termination due to death or disability.
(3) Includes Mr. Doutaz's (i) options to acquire 400,000 shares of our common
stock at $0.10 per share and (ii) options to acquire 400,000 shares of our
common stock at $0.25 per share within 60 days of May 31, 1999. These
options expire on the earlier of May 15, 2005; thirty days after the
termination (except for death or disability) of Mr. Doutaz as a consultant
to the company; or one year after termination due to death or disability.
We are not aware of any arrangement, which might result in a change in control
in the future.
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Officers
All of our directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until their successors
are duly elected and qualified, unless they sooner resign or cease to be
directors in accordance with our Articles of Incorporation. We have not held an
annual regular general meeting and the next regular meeting is anticipated to be
held in May 2000. Our executive officers are appointed by and serve at the
pleasure of our Board of Directors.
-22-
<PAGE>
As at May 31, 1999, the following persons were our directors and/or executive
officers:
Name Age Position with the Registrant
---- --- ----------------------------
Albert R. Timcke 35 Director, President, CEO
Brian C. Doutaz 53 Director, Secretary, Treasurer
Members of our Board of Directors are elected by our shareholders to represent
the interests of all our shareholders. Our Board of Directors meets periodically
to review significant developments affecting us and our business and to act on
matters requiring Board approval. Although our Board of Directors may delegate
many matters to others, it reserves certain powers and functions to itself. The
only standing committee of the Board of Directors of the Registrant is an Audit
Committee. The Audit Committee currently consists of Albert R. Timcke and Brian
C. Doutaz. This committee is directed to review the scope, cost and results of
the independent audit of our books and records, the results of the annual audit
with management and the adequacy of our accounting, financial and operating
controls; to recommend annually to our Board of Directors the selection of the
independent auditors; to consider proposals made by our independent auditors for
consulting work; and to report to our Board of Directors, when so requested, on
any accounting or financial matters.
None of the our directors or executive officers are parties to any arrangement
or understanding with any other person pursuant to which the individual was
elected as a director or officer.
None of our directors or executive officers has any family relationship with any
other officer or director.
None of the officers or directors of the Registrant have been involved in the
past five years in any of the following: (1) bankruptcy proceedings; (2) subject
to criminal proceedings or convicted of a criminal act; (3) subject to any
order, judgment or decree entered by any court limiting in any way his or her
involvement in any type of business, securities or banking activities; or (4)
subject to any order for violation of federal or state securities laws or
commodities laws.
The following is a brief biographical information on each of the officers and
directors of listed:
Albert (Rick) Timcke
Mr. Timcke is a director and services as our President and CEO. Mr. Timcke's
work experience for the last few years includes serving as Vice President
Corporate Development for Impact Travel Technology Inc. (August 1998 Present);
Vice President Corporate Development for International Panorama Resource Corp.
(December 1996 - July 1998); Owner and President of Markets West (Web site)
(October 1995 - December 1997); and Sales Executive (B.C.
Region) (March 1990 - December 1996).
Brian Doutaz
Brian C. Doutaz is a Director and serves as our Secretary and Treasurer. Mr.
Doutaz is also President of Anina International Capital Corp., a private company
engaged in management consulting. For the past 15 years, Mr. Doutaz has also
provided consulting services to start-up and developing businesses in Canada and
the United States.
Advisory Board
We anticipate that we will appoint an advisory board to assist the company in
strategic development and Internet development as business develops.
-23-
<PAGE>
ITEM 6 EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table sets forth compensation information for our fiscal period
ended April 30, 1999:
Summary Compensation Table
<TABLE>
All Other
Name and Fiscal Period Long Term Compensation
Principal Position Compensation Compensation ($)
Salary Bonus Other Securities
($) ($) Annual Under Options
Compensation (#)
($)
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Albert R Timcke April 30, 1999 Nil Nil Nil $ 2,800(1) Nil
Brian C. Doutaz April 30, 1999 Nil Nil Nil Nil(2) Nil
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include Mr. Timcke's (i) options to acquire 500,000 shares of our
common stock at $0.10 per share and (ii) options to acquire 600,000 shares
of our common stock at $0.25 per share. These options were granted pursuant
to a consulting agreement between us and Mr. Timcke dated May 1, 1999.
These options expire on the earlier of May 15, 2005; thirty days after the
termination (except for death or disability) of Mr. Timcke as a consultant
to the company; or one year after termination due to death or disability.
(2) Does not include Mr. Doutaz's (i) options to acquire 400,000 shares of our
common stock at $0.10 per share and (ii) options to acquire 400,000 shares
of our common stock at $0.25 per share. These options were granted pursuant
to a consulting agreement between us and Mr. Doutaz dated May 1, 1999.
These options expire on the earlier of May 15, 2005; thirty days after the
termination (except for death or disability) of Mr. Doutaz as a consultant
to the company; or one year after termination due to death or disability.
Material Consulting Agreements
We have entered into three consulting agreements with consultants engaged to
assist us with the development of our business strategy, internal operating
systems and marketing and sales strategies on a part- and full-time basis. Below
is a summary of the material terms of these consulting agreements.
We entered into a consulting agreement dated May 1, 1999, with Albert R. Timcke,
a director and the President and CEO of our company. Mr. Timcke agreed to
provide consulting services related to business and strategic development,
operations management, systems development, product research and development and
marketing functions. Mr. Timcke will provide such services on a full-time basis.
We agreed to pay Mr. Timcke a consulting fee in the amount of $5,000 per month
for up to 140 hours per month and $100 per hour thereafter. We also granted Mr.
Timcke options to acquire 1,100,000 shares of our common stock as follows (i)
options to acquire 500,000 shares of our common stock at $0.10 per share and
(ii) options to acquire 600,000 shares of our common stock at $0.25 per share.
These options expire on the earlier of May 15, 2005; thirty days after the
termination (except for death or disability) of Mr. Timcke as a consultant to
the company; or one year after termination due to death or disability.
We entered into a consulting agreement dated May 1, 1999, with Brian C. Doutaz,
a director and the Secretary and Treasurer of our company. Mr. Doutaz agreed to
provide consulting services related to business and strategic development,
operations management, systems development, product research and development and
marketing functions. Mr. Doutaz will provide such services on a part-time basis.
We agreed to pay Mr. Doutaz a consulting fee in the amount of $2,000 per month
for up to 80 hours per month and $100 per hour thereafter. We also granted Mr.
Doutaz options to acquire 800,000 shares of our common stock as follows (i)
options to acquire 800,000 shares
-24-
<PAGE>
of our common stock at $0.10 per share and (ii) options to acquire 800,000
shares of our common stock at $0.25 per share. These options expire on the
earlier of May 15, 2005; thirty days after the termination (except for death or
disability) of Mr. Doutaz as a consultant to the company; or one year after
termination due to death or disability.
We entered into a consulting agreement dated May 1, 1999, with Gerald W.
Williams. Mr. Williams agreed to provide consulting services related to business
and strategic development. Mr. Williams will provide such services on a
part-time basis. We agreed to pay Mr. Williams a consulting fee in the amount of
$2,000 per month for up to 40 hours per month and $100 per hour thereafter. We
also granted Mr. Williams options to acquire 100,000 shares of our common stock
at $0.10 per share. These options expire on the earlier of May 15, 2005; thirty
days after the termination (except for death or disability) of Mr. Williams as a
consultant to the company; or one year after termination due to death or
disability.
Compensation of Directors
As of April 30, 1999 we paid no compensation to our directors for their services
as directors. We have no standard arrangements to pay any such compensation to
our directors in their capacity as directors, other than reimbursement for
expenses incurred in connection with their services as directors.
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise disclosed herein, no director, senior officer, principal
shareholder, or any associate or affiliate thereof, had any material interest,
direct or indirect, in any transaction since our organization that had or is
anticipated to have a materially affect on us or our business, or any proposed
transaction that would materially affect us or our business, except for an
interest arising from the ownership of our shares where the member will receive
no extra or special benefit or advantage not shared on a pro rata basis by all
holders of shares in our capital.
We entered into indemnification agreements with our directors, Albert R. Timcke
and Brian C. Doutaz, pursuant to which we agreed to indemnify them for actions
taken in their capacity as officers and directors of our company. As previously
described, we also entered into consulting agreements with Mr. Timcke and Mr.
Doutaz.
ITEM 8 DESCRIPTION OF SECURITIES
Our authorized capital consists of 25,000,000 shares of common stock, $0.001 par
value. At May 31, 1999, there were 9,968,084 shares issued and outstanding and
we reserved for issuance an additional 1,000,000 shares at $0.10 per share and
1,000,000 shares at $0.25 per share pursuant to consulting agreements entered
into between us and Albert R. Timcke, Brian Doutaz and Gerald W. Williams,
respectively. We have also reserved for issuance 1,500,000 shares of common
stock pursuant to our incentive stock option plan.
All shares are of the same class and have the same rights, preferences and
limitations. The holders of the shares are entitled to dividends in cash,
property or shares as and when declared by the Board of Directors out of funds
legally available therefor, to one vote per Share at meetings of our security
holders and, upon liquidation, to receive such assets as are distributable to
the holders of the shares. Upon any liquidation, dissolution or winding up of
our business proceeds, if any, after payment or provision for payment of all our
debts, obligations or liabilities shall be distributed to the holders of shares.
There are no pre-emptive rights or conversion rights attached to the Shares.
There are also no redemption or purchase for cancellation or surrender
provisions, sinking or purchase fund provisions, or any provisions as to
modification, amendment or variation of any such rights or provisions attached
to our shares.
Incentive Stock Option Plan
On May 19, 1999, we adopted an incentive stock option plan for the purposes of
providing incentives designed to obtain and retain officers, directors, key
employees, and consultants. We reserved 1,500,000 shares of our common stock for
issuance under the plan. Our incentive stock option plan provides for vesting
pro rata over four years from the date of the grant unless we agree otherwise.
We have not granted any options under the plan. We may register our incentive
stock option plan with the Securities and Exchange Commission in the future.
-25-
<PAGE>
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER RELATED STOCKHOLDER MATTERS
We currently intend to seek a listing on the NASD OTC Bulletin Board in the
United States. Our shares are not and have not been listed or quoted on any
exchange or quotation system.
At May 31, 1999, there were 9,968,084 shares of our common stock issued and
outstanding. In addition, we have reserved an additional 1,000,000 shares at
$0.10 per share and 1,000,000 shares at $0.25 per share for issuance pursuant to
consulting agreements entered into between us and Albert R. Timcke, Brian Doutaz
and Gerald W. Williams. We have also reserved for issuance 1,500,000 shares of
common stock pursuant to our incentive stock option plan.
We have never paid dividends on our shares. We currently intend to retain
earnings for use in our business and do not anticipate paying any dividends in
the foreseeable future.
As of May 31, 1999, we had approximately 58 shareholders of record (including
nominees and brokers holding street accounts).
ITEM 2 LEGAL PROCEEDINGS
We are not a party to, and none of our property is subject to, any pending or
threatened legal proceeding.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
On March 9, 1999, we issued for cash 5,500,000 shares of our common stock to
Albert R. Timcke and 100,000 shares of our common stock to Brian C. Doutaz at a
price of $0.001 per share pursuant to Regulation S of the Securities Act of
1933, as amended. We issued these shares in connection with the initial seed
capital investment and the organization of our corporation. The aggregate
offering price was $ 5,600.
On April 5, 1999, we issued for cash 3,960,000 shares of our common stock at a
price of $0.01 per share pursuant to an exemption from registration under Rule
504 of Regulation D of the Securities Act. We issued these shares in connection
with the initial seed capital investment. The aggregate offering price was $
39,600.
On April 6, 1999, we issued for cash 408,084 shares of our common stock at a
price of $0.50 per share to 50 investors (the "Seed Shares") pursuant to an
exemption from registration under Rule 504 of Regulation D of the Securities
Act. The aggregate offering price was $ 204,042.
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
We entered into indemnification arrangements with our directors, Albert R.
Timcke and Brian C. Doutaz, pursuant to which we agreed to indemnify them for
actions taken in their capacity as officers and directors of our company. Our
Articles of Incorporation and Bylaws require us to indemnify our officers and
directors to the full extent permitted by Nevada law.
-26-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Kidstoysplus.com, Inc.
(A Development Stage Company)
We have audited the balance sheet of Kidstoysplus.com, Inc. as at April 30, 1999
and the statements of operations, changes in shareholders' equity and cash flows
for the period from incorporation on February 4, 1999 to April 30, 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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 audit provides 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 Kidstoysplus.com, Inc. as at
April 30, 1999 and the results of operations and cash flows for the period from
incorporation on February 4, 1999 to April 30, 1999 in accordance with generally
accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that
Kidstoysplus.com, Inc. will continue as a going concern. As discussed in Note 2
to the financial statements, unless the Company attains future profitable
operations and/or obtains additional financing, there is substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regards to these matters are discussed in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Vancouver, Canada Chartered Accountants
May 19, 1999
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
BALANCE SHEET
AS AT APRIL 30, 1999
================================================================================
<TABLE>
<S> <C>
ASSETS
Current
Cash $ 221,924
Prepaid expenses 8,312
Subscriptions receivable (Note 5) 5,500
--------------
$ 235,736
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 2,000
Due to related party (Note 6) 1,100
--------------
3,100
Shareholders' equity Capital stock (Note 7)
Authorized
25,000,000 common shares with a par value of $0.001
Issued and outstanding
9,968,084 common shares 249,242
Deficit, accumulated during the development stage (16,606)
232,636
$ 235,736
===================================================================================================================
</TABLE>
History and organization of the Company (Note 1)
Subsequent events (Note 9)
On behalf of the Board:
- - --------------------------, Director ------------------------, Director
The accompanying notes are an integral part of these financial statements.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
PERIOD FROM INCORPORATION ON FEBRUARY 4, 1999 TO APRIL 30, 1999
================================================================================
INTEREST INCOME $ 555
--------------
EXPENSES
Consulting fees 6,600
Legal and accounting 3,924
Management fees 2,800
Office and miscellaneous 3,070
Telephone 767
--------------
17,161
Loss for the period $ (16,606)
================================================================================
Loss per share $ (0.01)
================================================================================
Weighted average shares outstanding 4,767,001
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
PERIOD FROM INCORPORATION ON FEBRUARY 4, 1999 TO APRIL 30, 1999
<TABLE>
Deficit,
Common Shares Issued Accumulated
and Fully Paid Additional During the
-------------------------------
Paid in Development
Number Amount Capital Stage Total
- - ------------------------------------------- --------------- --------------- -- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, February 4, 1999 - $ - $ - $ - $ -
Shares issued for cash
at $0.001 per share 5,600,000 5,600 - - 5,600
at $0.01 per share 3,960,000 3,960 35,640 - 39,600
at $0.50 per share 408,084 408 203,634 - 204,042
Loss for the period - - - (16,606) (16,606)
-------------- -------------- -------------- ------------- --------------
Balance, April 30, 1999 9,968,084 $ 9,968 $ 239,274 $ (16,606) $ 232,636
=========================================== =============== =============== == =============== ============== ===============
</TABLE>
The accompanying notes are an integral part of thesefinancial statements.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
PERIOD FROM INCORPORATION ON FEBRUARY 4, 1999 TO APRIL 30, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (16,606)
Changes in other operating assets and liabilities
Increase in subscriptions receivable (5,500)
Increase in prepaid expenses (8,312)
Increase in accounts payable and accrued liabilities 2,000
Increase in due to related party 1,100
-------------
Net cash used in operating activities (27,318)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital stock issued for cash 249,242
Cash position, end of period $ 221,924
============================================================================ ==============
Cash paid during the period for interest $ -
============================================================================ ==============
Cash paid during the period for income taxes $ -
============================================================================ ==============
</TABLE>
The accompanying notes are an integral part of thesefinancial statements.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 1999
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated on February 4, 1999 under the laws of the
state of Nevada. The Company currently has no operations and, in accordance
with SFAS #7, is considered a development stage company.
These financial statements have been prepared on a going concern basis
which assumes that the Company will be able to realize its assets and
discharge its liabilities in the normal course of business for the
foreseeable future. The continuing operations of the Company are dependent
upon its ability to raise adequate financing and achieve profitable
operations in the future.
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan to
seek additional capital through a private placement upon listing on the OTC
Bulletin Board.
1999
----
Deficit accumulated during the development stage $ (16,606)
Working capital surplus 232,636
3. SIGNIFICANT ACCOUNTING POLICIES
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting standards Board issued Statements of
Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") which establishes
accounting an reporting standards for derivative instruments and for
hedging activities. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Company does not anticipate that
the adoption of the statement will have a significant impact on its
financial statements.
Reporting on costs of start-up activities
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle. The Company does not anticipate that the adoption of the
statement will have a significant impact on its financial statements.
Foreign currency translation
Transaction amounts denominated in foreign currencies are translated into
United States currency at exchange rates prevailing at transactions dates.
Carrying values of monetary assets and liabilities are adjusted at each
balance sheet date to reflect the exchange rate at that date. Gains and
losses from restatement of foreign currency monetary assets and liabilities
are included in income, except for those gains and losses related to
long-term monetary assets or liabilities which are deferred and amortized
over the life of the respective asset or liability.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 1999
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Loss per share
Loss per share is based on the weighted average number of common shares
outstanding during the period.
4. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, subscriptions
receivable, accounts payable and accrued liabilities and due to related
party. Unless otherwise noted, it is management's opinion that the Company
is not exposed to significant interest, currency or credit risks arising
from these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
5. SUBSCRIPTIONS RECEIVABLE
Pursuant to a Stock Subscription Agreement dated March 9, 1999, the Company
issued 5,600,000 shares for proceeds of $5,600. As at April 30, 1999, $100
of the proceeds have been received. The remaining $5,500 is due from a
director of the Company.
6. DUE TO RELATED PARTY
Amounts due to a director of the Company are non-interest bearing and have
no fixed terms of repayment.
7. CAPITAL STOCK
<TABLE>
Number
of Shares Amount
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Authorized
25,000,000 number of common shares with a par value of $0.001
Common shares issued
At April 30, 1999 9,968,084 $ 249,242
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Additional paid in capital
The excess of proceeds received for common shares over their par value of
$0.001, less share issue costs, is credited to additional paid in capital.
8. RELATED PARTY TRANSACTION
The Company paid or accrued management fees of $2,800 a director of the
Company during the period.
<PAGE>
KIDSTOYSPLUS.COM, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 1999
================================================================================
9. SUBSEQUENT EVENTS
The following transactions occurred subsequent to year end:
a) The Company entered into Consulting Agreements with directors and
employees of the Company, effective May 1, 1999, for terms of five
years. The agreements call for fees totalling $9,000 per month for
advisory and consulting services.
The Consulting Agreements also grant options to the directors and
employees to acquire up to 1,000,000 common shares at an exercise
price of $0.10 per share and up to 1,000,000 common shares at an
exercise price of $0.25 per share. The options expire the earlier of:
i) May 15, 2005.
ii) thirty days after the termination of the consultant (except for
death or disability).
iii)one year after termination of the consultant due to death or
disability.
b) Effective May 19, 1999, the Company approved a Stock Option Plan for
officers, directors, key employees and consultants of the Company. The
Company has reserved 1,500,000 common shares of its unissued share
capital for this plan. No options have been granted under the plan.
10. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may incorrectly
recognize the year 2000 as some other date, resulting in errors. The
effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000 and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems
failure which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit Number Description
Exhibit 2.1 Articles of Incorporation of Kidstoysplus.com, Inc. filed on
February 4, 1999.
Exhibit 2.2 Bylaws of Kidstoysplus.com, Inc.
Exhibit 6.1 Independent Contractor Agreement by and between Rick Timcke,
Kidstoysplus.com, Inc. and Trish Reader, Reticular
Consulting dated June 9, 1999, related to website
development.
Exhibit 6.2 Consulting Agreement by and Between Kidstoysplus.com, Inc.
and Albert R. Timcke dated May 1, 1999.
Exhibit 6.3 Consulting Agreement by and between Kidstoysplus.com, Inc.
and Brian C. Doutaz dated May 1, 1999.
Exhibit 6.4 Consulting Agreement by and between Kidstoysplus.com, Inc.
and Gerald Wayne Williams dated May 1, 1999.
Exhibit 6.5 Form of Indemnification Agreement by and between
Kidstoysplus.com, Inc. and certain officers and directors of
Kidstoysplus.com, Inc.
Exhibit 6.6 Form of Founder Subscription Agreement dated March 9, 1999.
Exhibit 6.7 Form of Private Placement Subscription Agreement by and
between KIDSTOYSPLUS.COM, INC. and various subscribers.
Exhibit 6.8 Kidstoysplus.com, Inc. 1999 Stock Option Plan.
-1-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 10-SB and has duly caused this Registration Statement to be signed on
our behalf by the undersigned, thereunto duly authorized.
KIDSTOYSPLUS.COM, INC.
Date: June __, 1999 By: -----------------------------------
Albert R. Timcke, President
<PAGE>
INDEX TO EXHIBITS
<TABLE>
Sequentially
Exhibit Number Description Numbered Page
- - -------------- ----------- -------------
<S> <C> <C>
Exhibit 2.1 Articles of Incorporation of Kidstoysplus.com, Inc. filed on
February 4, 1999.
Exhibit 2.2 Bylaws of Kidstoysplus.com, Inc.
Exhibit 6.1 Independent Contractor Agreement by and between Rick Timcke,
Kidstoysplus.com, Inc. and Trish Reader, Reticular Consulting
dated June 9, 1999, related to website development.
Exhibit 6.2 Consulting Agreement by and Between Kidstoysplus.com, Inc. and
Albert R. Timcke dated May 1, 1999.
Exhibit 6.3 Consulting Agreement by and between Kidstoysplus.com, Inc. and
Brian C. Doutaz dated May 1, 1999.
Exhibit 6.4 Consulting Agreement by and between Kidstoysplus.com, Inc. and
Gerald Wayne Williams dated May 1, 1999.
Exhibit 6.5 Form of Indemnification Agreement by and between
Kidstoysplus.com, Inc. and certain officers and directors of
Kidstoysplus.com, Inc.
Exhibit 6.6 Form of Founder Subscription Agreement dated March 9, 1999.
Exhibit 6.7 Form of Private Placement Subscription Agreement by and between
KIDSTOYSPLUS.COM, INC. and various subscribers.
Exhibit 6.8 Kidstoysplus.com, Inc. 1999 Stock Option Plan.
</TABLE>
Exhibit 2.1
ARTICLES OF INCORPORATION
OF
KIDSTOYSPLUS.COM, INC.
ARTICLE I
Name
The name of the corporation is KIDSTOYSPLUS.COM, INC. (the "Corporation").
ARTICLE II
Principal Office
The Corporation's principal office in the State of Nevada is located at c/o
The Corporation Trust Company of Nevada, One East First Street, Reno, Nevada,
89501, Washoe County, Nevada. The name and address of its resident agent at such
address is The Corporation Trust Company of Nevada.
ARTICLE III
Nature of Business
The nature of the business, or objects or purposes proposed to be
transacted, promoted or carried on are: to engage in any and all lawful business
for which corporations may be incorporated under Chapter 78 of the Nevada
Revised Statutes.
ARTICLE IV
Authorized Capital Stock
The amount of the total authorized capital stock of the Corporation is
twenty-five million shares (25,000,000) of stock with a par value of $.001.
ARTICLE V
Directors
The governing board of the Corporation shall be known as directors, and the
number of directors may from time to time be increased or decreased in such
manner as shall be provided by the bylaws of the Corporation.
1
<PAGE>
The names and post office addresses of the first board of directors, which
shall be two (2) in number, are as follows:
Albert R. Timeke 10300 Second Avenue
Richmond, BC V7E 1V7
CANADA
Brian Doutaz Unit 35
12880 Railway Avenue
Richmond, BC V7E 6G4
CANADA
ARTICLE VI
Paid-in Capital
The capital stock, after the amount of the subscription price, or par value
has been paid in shall not be subject to assessment to pay the debts of the
Corporation.
ARTICLE VII
Incorporator
The name and post office addresses of the incorporator signing the Articles
of Incorporation is as follows:
Kenneth G. Sam Two Union Square
601 Union Street
Seattle, Washington 98101-2346
ARTICLE VIII
Duration
The Corporation is to have perpetual existence.
ARTICLE IX
Limitation on Liability of Directors
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for his or her conduct as a
director on or after this Article becomes effective, except for (i) acts or
omissions that involve
2
<PAGE>
intentional misconduct, fraud or a knowing violation of law, or (ii) the payment
of dividends in violation of NRS 78.300.
ARTICLE X
Amendment of Articles
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in the Articles of Incorporation, in the manner now or
hereafter prescribed by statute, or by the articles of incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE XI
Shareholders' Preemptive Rights
No shareholder shall be entitled as a matter of right to subscribe for or
receive additional shares of any class of stock of the Corporation, whether now
or hereafter authorized, or any bonds, debentures or other securities
convertible into stock may be issued or disposed of by the board of directors to
such persons and on such terms as in its discretion it shall deem advisable.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein, stated are true, and accordingly
do hereunto set my hands this 3rd day of February, 1999.
---------------------------------------------
Kenneth G. Sam, Incorporator
Bogle & Gates, PLLC
3
<PAGE>
DEAN HELLER Telephone (702) 687-6203
Secretary of State Fax (702) 687-3471
STATE OF NEVADA
OFFICE OF THE SECRETARY OF STATE
State Capital Complex
Carson City, Nevada 89710
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT
BY
RESIDENT AGENT
KIDSTOYSPLUS, COM., INC.
In the matter of ---------------------------------------------------------------
(name of business entity)
I, THE CORPORATION TRUST COMPANY OF NEVADA hereby state that on 2/4/99
I accepted the appointment as resident agent for the above named business
entity.
The street address of the resident agent in this state is as follows:
ONE EAST FIRST STREET
- - ---------------------------- --------------------------------
(street address) (suite number)
RENO , Nevada 89501
- - --------------------------- --------------------------------
(city) (zip code)
THE CORPORATION TRUST COMPANY OF NEVADA
2/4/99
By: ---------------------------------- -------------------
(signature of resident agent) (date)
-4-
Exhibit 2.2
BYLAWS
OF
KIDTOYSPLUS.COM INC.
ARTICLE I
Offices
(1) Principal Office: The principal office shall be in the City of
Vancouver, Province of British Columbia, Canada.
(2) Other Offices: The corporation may also have offices at such other
places both within and without the State of Nevada as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
Meetings of Stockholders
(1) Meeting Place: All annual meetings of the stockholders shall be held at
the corporation's principal office in the City of Vancouver, Province of British
Columbia. Special meetings of the stockholders may be held at such time and
place within or without the State of Nevada as shall be stated in the notice of
the meeting, or in a duly executed waiver of notice thereof.
(2) Annual Meeting Time: Annual meetings of stockholders, commencing with
the year 2000, shall be held on the second Tuesday of February, if not a legal
holiday, at 11:00 a.m., at which they shall elect by a plurality vote a board of
directors, and transact such other business as may properly be brought before
the meeting.
(3) Special Meetings: Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
(4) Notices: Notices of meetings shall be in writing and signed by the
president or a vice president, or the secretary, or an assistant secretary, or
by such other person or persons as the directors shall designate. Such notice
shall state the purpose or purposes for which the meeting is called and the time
when, and the place, which may be within or without this state, where it is to
be held. A copy of such notice shall be either delivered personally to or
-1-
<PAGE>
shall be mailed, postage prepaid, to each stockholder of record entitled to vote
at such meeting not less than ten nor more than sixty days before such meeting.
If mailed, it shall be directed to a stockholder at his address as it appears
upon the records of the corporation and upon such mailing of any such notice,
the service thereof shall be complete, and the time of the notice shall begin to
run from the date upon which such notice is deposited in the mail for
transmission to such stockholder. Personal delivery of any such notice to any
officer of a corporation or association, or to any member of a partnership shall
constitute delivery of such notice to such corporation, association or
partnership. In the event of the transfer of stock after delivery or mailing of
the notice of and prior to the holding of the meeting it shall not be necessary
to deliver or mail notice of the meeting to the transferee.
(5) Quorum:
(a) The holders of ten percent (10%) of the stock issued and
outstanding and entitled to vote there at, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
articles of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
(b) When a quorum is present or represented at any meeting, the vote
of the holders of ten percent (10%) of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the articles of incorporation a different vote is required in
which case such express provision shall govern and control the decision of such
question.
(6) Voting of Shares: Every stockholder of record of the corporation shall
be entitled at each meeting of stockholders to one vote for each share of stock
standing in his name on the books of the corporation.
(7) Proxies: At any meeting of the stockholders, any stockholder may be
represented and vote by a proxy or proxies appointed by an instrument in
writing. In the event that any such instrument in writing shall designate two or
more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such written instrument upon all of the
persons so designated unless the instrument shall otherwise provide. No such
proxy shall be valid after the expiration of six months from the date of its
execution, unless coupled with an interest, or unless the person executing it
specifies therein the length of time for which it is to continue in force, which
in no case shall exceed one year from the date of its execution. Subject to the
above, any proxy duly executed is not revoked and continues in full force and
effect until
-2-
<PAGE>
an instrument revoking it or a duly executed proxy bearing a later date is filed
with the secretary of the corporation.
(8) Action by Shareholders without a Meeting: Any action, except election
of directors, which may be taken by the vote of the stockholders at a meeting,
may be taken without a meeting if authorized by the written consent of
stockholders holding at least a majority of the voting power, unless the
provisions of the statutes or of the articles of incorporation require a greater
proportion of voting power to authorize such action in which case such greater
proportion of written consents shall be required.
ARTICLE III
Directors
(1) Number and Powers: The management of all the affairs, property and
interest of the corporation shall be vested in a Board of Directors. The initial
number of directors which shall constitute the whole board shall be two to five
(2-5) who shall be elected for a term of one year and shall hold office until
the annual meeting of stockholders and until their successors are elected and
qualified. Directors need not be stockholders. The board of directors may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the articles of incorporation or by these
bylaws directed or required to be exercised or done by the stockholders.
(2) Change of Number: The number of directors may at any time be increased
or decreased by the shareholders or directors at any annual or special meeting
provided that no decrease shall have the effect of shortening the term of any
incumbent director except as provided in paragraphs (3) and (4) hereunder.
(3) Vacancies: Vacancies, including those caused by an increase in the
number of directors, may be filled by a majority of the remaining directors
though less than a quorum. When one or more directors shall give notice of his
or their resignation to the board, effective at a future date, the board shall
have power to fill such vacancy or vacancies to take effect when such
resignation or resignations shall become effective, each director so appointed
to hold office during the remainder of the term of office of the resigning
director or directors.
(4) Removal: At a meeting of stockholders called expressly for that
purpose, the entire board of directors, or any member thereof, may be removed by
a vote of the holders of a majority of shares then entitled to vote at an
election of such directors.
(5) Meeting Place: Except as provided in paragraph (6) hereunder, the board
of directors of the corporation may hold meetings, both regular and special,
either within or without the State of Nevada.
-3-
<PAGE>
(6) First Meeting of each Newly Elected Board: The first meeting of each
newly elected board of directors shall be held at such time and place as shall
be fixed by the vote of the stockholders at the annual meeting and no notice of
such meeting shall be necessary to the newly elected directors in order legally
to constitute the meeting, provided a quorum shall be present. In the event of
the failure of the stockholders to fix the time or place of such first meeting
of the newly elected board of directors, or in the event such meeting is not
held at the time and place so fixed by the stockholders, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
(7) Regular meetings: Regular meetings of the board of directors may be
held without notice at such time and place as shall from time to time be
determined by the board.
(8) Special Meetings: Special meetings of the board of directors may be
called by the president or secretary on the written request of any director.
Written notice of special meetings of the board of directors shall be given to
each director at least two (2) days before the date of the meeting.
(9) Quorum: A majority of the board of directors, at a meeting duly
assembled, shall be necessary to constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the articles of
incorporation. Any action required or permitted to be taken at a meeting of the
directors may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the directors entitled to vote
with respect to the subject matter thereof.
(10) Committees: The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the management of the business and affairs of the corporation,
and may have power to authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors. The committees shall keep regular minutes of their
proceedings and report the same to the board when required.
(11) Compensation of Directors: The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
-4-
<PAGE>
ARTICLE IV
Notices
(1) Delivery of Notice: Notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice by mail shall
be deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram or telephone facsmilie.
(2) Consent to Action without Notice: Whenever all parties entitled to vote
at any meeting, whether of directors or stockholders, consent, either by a
writing on the records of the meeting or filed with the secretary, or by
presence at such meeting and oral consent entered on the minutes, or by taking
part in the deliberations at such meeting without objection, the doings of such
meeting shall be as valid as if had at a meeting regularly called and noticed,
and at such meeting any business may be transacted which is not excepted from
the written consent or to the consideration of which no objection for want of
notice is made at the time, and if any meeting be irregular for want of notice
or of such consent, provided a quorum was present at such meeting, the
proceedings of said meeting may be ratified and approved and rendered likewise
valid and the irregularity or defect therein waived by a writing signed by all
parties having the right to vote at such meetings; and such consent or approval
of stockholders may be by proxy or attorney, but all such proxies and powers of
attorney must be in writing.
(3) Waiver of Notice: Whenever any notice whatever is required to be given
under the provisions of the statutes, of the articles of incorporation or of
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
Officers
(1) Designations and Election: The officers of the corporation shall be
chosen by the board of directors and shall be a president, a secretary and a
treasurer. Any person may hold two or more offices. Officers shall be elected by
the board of directors at its first meeting after each annual meeting of
stockholders and shall hold office until the next annual meeting of the board of
directors and until their successors are elected and qualified. An officer need
not be a member of the board.
(2) Additional Officers and Agents: The board of directors may appoint vice
presidents, and assistant secretaries and assistant treasurers and such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
-5-
<PAGE>
(3) Compensation of Officers and Agents: The salaries of all officers and
agents of the corporation shall be fixed by the board of directors.
(4) Removal of Officers: Any officer elected or appointed by the board of
directors may be removed at any time by the affirmative vote of a majority of
the board of directors.
(5) Vacancies: Any vacancy occurring in any office of the corporation by
death, resignation, removal or otherwise shall be filled by the board of
directors.
(6) The President: The president shall be the chief executive officer of
the corporation, shall preside at all meetings of the stockholders and the board
of directors, shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the board of
directors are carried into effect. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
(7) The Vice President: The vice president shall, in the absence or
disability of the president, perform the duties and exercise the powers of the
president and shall perform such other duties as the board of directors may from
time to time prescribe.
(8) The Secretary: The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the board of directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of the treasurer or an assistant
secretary.
(9) The Treasurer: The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors. He shall
disburse the funds of the corporation as may be ordered by the board of
directors taking proper vouchers for such disbursements, and shall render to the
president and the board of directors, at the regular meetings of the board, or
when the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation. If required by the
board of directors, he shall give the corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case
-6-
<PAGE>
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
ARTICLE VI
Certificates of Stock
(1) Certificated Shares: Every stockholder shall be entitled to have a
certificate, signed by the president or a vice president and the secretary or an
assistant secretary, of the corporation, certifying the number of shares owned
by him in the corporation.
(2) Statement of Designation and Rights of Multiple Classes of Stock: When
the corporation is authorized to issue shares of more than one class or more
than one series of any class, there shall be set forth upon the face or back of
the certificate, or the certificate shall have a statement that the corporation
will furnish to any stockholders upon request and without charge, a full or
summary statement of the designations, preferences and relative, participating,
optional or other special rights of the various classes of stock or series
thereof and the qualifications, limitations or restrictions of such rights, and,
if the corporation shall be authorized to issue only special stock, such
certificate shall set forth in full or summarize the rights of the holders of
such stock.
(3) Facsimile Signatures: Whenever any certificate is countersigned or
otherwise authenticated by a transfer agent or transfer clerk, and by a
registrar, then a facsimile of the signatures of the officers or agents of the
corporation may be printed or lithographed upon such certificate in lieu of the
actual signatures. In case any officer or officers who shall have signed, or
whose facsimile signature or signatures shall have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the corporation, such
certificate or certificates may nevertheless be adopted by the corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates, or whose facsimile signature or signatures shall
have been used thereon, had not ceased to be the officer or officers of such
corporation.
(4) Lost Certificates: The board of directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
-7-
<PAGE>
(5) Transfer of Stock: Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
(6) Closing of Transfer Books: The directors may prescribe a period not
exceeding sixty days prior to any meeting of the stockholders during which no
transfer of stock on the books of the corporation may be made, or may fix a day
not more than sixty days prior to the holding of any such meeting as the day as
of which stockholders entitled to notice of and to vote at such meeting shall be
determined; and only stockholders of record on such day shall be entitled to
notice or to vote at such meeting.
(7) Registered Stockholders: The corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Nevada.
ARTICLE VII
Indemnification of Officers, Directors, Employees and Agents;
Advancement of Expenses; Insurance and Other
Financial Arrangements
(1) The corporation may 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 investigative,
except 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 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 expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which 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, has 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 contendere, or its equivalent, does 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
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
(2) The corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a
-8-
<PAGE>
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 expenses, including amounts paid in settlement and attorneys' fees
actually and reasonably incurred by him in connection with a defense or
settlement of the action or suit if he acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
(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 subsections (1) and (2), or in defense
of any claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
(4) Any indemnification under subsections (1) and (2), unless ordered by a
court, must be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the director, officer, employee
or agent is proper in the circumstances. The determination must be made:
(a) By the stockholders; or
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding; or
(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
(5) The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the certificate
or articles of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection (2), may not
be made to or on behalf of any director or officer if a final adjudication
establishes
-9-
<PAGE>
that his acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
(6) The corporation may purchase and maintain insurance or make other
financial arrangements, pursuant to Section 78.752 of the Nevada Revised
Statutes, 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 for any liability asserted against him
and liability and expenses incurred by him in his capacity as a director,
officer, employee or agent, or arising out of his status as such, whether or not
the corporation has the authority to indemnify him against such liability and
expenses.
ARTICLE VIII
General Provisions
(1) Dividends: Dividends upon the capital stock of the corporation, subject
to the provisions of the articles of incorporation, if any, may be declared by
the board of directors at any regular or special meeting pursuant to law.
Dividends may be paid in cash, in property, or in shares. of the capital stock,
subject to the provisions of the articles of incorporation.
(2) Reserves: Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserves in the
manner in which it was created.
(3) Checks: All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
(4) Fiscal Year: The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
ARTICLE IX
Amendments
These bylaws may be altered or repealed at any regular meeting of the
stockholders or of the board of directors or at any special meeting of the
stockholders or of the
-10-
<PAGE>
board of directors if notice of such alteration or repeal be contained in the
notice of such special meeting.
DATED: February -----, 1999.
----------------------------------------
Brian C. Doutaz, Secretary
-11-
Exhibit 6.1
INDEPENDENT CONTRACTOR AGREEMENT
This Agreement is entered into as of the ____ day of June, 1999, between Rick
Timcke, kidstoysplus.com.Inc. ("the Company"), and Trish Reader, Reticular
Consulting ("the Contractor").
1. Independent Contractor. Subject to the terms and conditions of this
Agreement, the Company hereby engages the Contractor to perform the
services set forth herein, and the Contractor hereby accepts such
engagement.
2. Duties, Term, and Compensation. The Contractor's duties, term or
engagement, compensation and provisions for payment thereof shall be set
forth in an estimate provided by the Contractor and which is attached as
Exhibit A, which may be amended in writing from time to time, or
supplemented with subsequent estimates for services to be rendered by the
Contractor and agreed to by the Company, and which collectively are hereby
incorporated by reference.
3. Expenses. During the term of this Agreement, the Contractor shall bill and
the Company shall reimburse her for all reasonable and approved
out-of-pocket expenses which are incurred in connection with the
performance of the duties hereunder.
4. Written Reports. The Company may request that project plans, progress
reports and a final results report be provided by Consultant. A final
results report shall be due at the conclusion of the project and shall be
submitted to the Company in a confidential written report at such time. The
results report shall be in such form setting forth such information and
data as is reasonably requested by the Company.
5. Right of Approval. The Company will act reasonably with respect to
approving all work performed by the Contractor and will pay the Contractor
even if the work is rejected.
6. Copyright. Any and all moral rights to the design, technical discoveries,
developments and innovations conceived by the Contractor within the term of
this Agreement and utilized by her in rendering duties to the Company are
hereby licensed to the Company for use in its operations and for an
infinite duration. This license is exclusive, and may not be assigned to
any other party without the Contractor's prior written permission.
7. Termination. The Company may terminate this Agreement at any time by 5
working days' written notice to the Contractor.
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day
and year first written above.
Rick Timcke, kidstoysplus.com.Inc. Trish Reader, Reticular Consulting
By: -------------------------------- By: --------------------------------
1
<PAGE>
SCHEDULE A
DUTIES, TERM, AND COMPENSATION
DUTIES: The Contractor will
o Research, secure and manage an artist and web designer
to create a visual design prototype for
kidstoysplus.com web site;
o Design, create and organize, for access on the
Internet, a "beta" or prototype the web site for
corporate purposes;
o Research and write a specification document and an
implementation plan for the structural design of the
future web site; and
o Research and provide quotes from contractors for the
technical web development work of the future web site
project.
She will report directly to Rick Timcke in connection with
the performance of the duties under this Agreement and shall
fulfill any other duties reasonably requested by the Company
and agreed to by the Contractor. The Company will ensure
that key people will be made available throughout the term
of this Agreement to reasonably guarantee the success of the
work undertaken.
TERM: This engagement shall commence upon execution of this
Agreement and shall continue in full force and effect
through June 20, 1999, or earlier upon completion of the
Contractor's duties under this Agreement.
COMPENSATION: As full compensation for the services rendered pursuant to
this Agreement, the Company shall pay the Contractor at the
per diem rate of $200. Such compensation shall be paid with
an advance of $1,500, and the balance payable within 30 days
of receipt of Contractor's invoice for services rendered,
plus expenses, supported by reasonable documentation.
EXTENSION: The Agreement may only be extended beyond the term by mutual
agreement, at the rate of $200 per diem, plus expenses, with
50% paid in advance of commencement of such extension.
-2-
Exhibit 6.2
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement") dated as of __ day of May between
Kidstoysplus.com, Inc. (the "Company"), a Nevada corporation, and Albert R.
Timcke (Consultant), a British Columbia resident.
WHEREAS, the Company desires to retain Consultant to render consulting and
advisory services for the Company on the terms and conditions set forth in this
Agreement, and Consultant desires to be retained by the Company on such terms
and conditions.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein set forth and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Engagement of Consultant; Services to be Performed.
1.1. The Company hereby retains Consultant to render such consulting and
advisory services as the Company may request. Consultant hereby
accepts such engagement and agrees to perform such services for the
Company upon the terms and conditions set forth in this Agreement.
1.2. During the Term (as defined in Section 2), Consultant shall devote
such time, attention, skill and energy to the business of the Company
as may be reasonably required to perform the services required by this
Agreement up to a maximum time commitment of 100 hours in any calendar
month, and shall assume and perform to the best of his ability such
reasonable responsibilities and duties as the Company shall assign to
Consultant from time to time.
1.3. Consultant shall perform the services hereunder primarily at the
Company's principal office but he shall, at the Company's expense,
also be required to render the services at such other locations as the
Company may specify from time to time.
1.4. In rendering services hereunder, Consultant shall be acting as an
independent contractor and not as a employee or agent of the Company.
As an independent contractor, Consultant shall have no authority,
express or implied, to commit or obligate the Company in any manner
whatsoever, except as specifically authorized from time to time in
writing by an authorized representative of the Company, which
authorization may be general or specific. Nothing contained in this
Agreement shall be construed or applied to create a partnership.
Consultant shall be responsible for the payment of all federal, state,
provincial or local taxes payable with respect to all amounts paid to
Consultant under this Agreement; provided, however, that if the
Company is determined to be liable for collection and/or remittance of
any such taxes, Consultant shall immediately reimburse the Company for
all such payments made by the Company.
-1-
<PAGE>
2. Term. Unless terminated at an earlier date in accordance with Section 4,
this Agreement shall commence as of the date first written above and shall
continue for a continuous period of sixty (60) months (the "Term").
3. Compensation.
3.1 Compensation As compensation in full for Consultant's services
hereunder, the Company shall pay to Consultant a consulting fee at the
rate of $1,000 per month. Should Consultant incur greater than 100
hours per month providing consulting services to the Company under
this Agreement, the Company shall pay Consultant at the rate of $50
per hour plus applicable taxes in excess of 100 hours upon receipt of
a satisfactory invoice therefor. The consulting fee shall be payable
to Consultant in arrears at the end of each calendar month during the
Term and a prorated portion of such fee shall be payable upon
termination of this Agreement if such termination occurs other than at
the end of a month.
3.2 Stock Options. The Company also agrees to offer to the Consultant the
option to purchase, upon the terms and conditions set forth in this Section
3, one million one hundred thousand (1,100,000) common shares (the
"Options").
3.3. Exercise Price. The exercise price of the Options shall be as follows:
Number of Options Exercise Price
----------------- --------------
500,000 $0.10
600,000 $0.25
3.4. Vesting. The Options shall be fully vested and exercisable as of the date
of this Agreement.
3.5. Options not Transferable. Unless otherwise specified in this Agreement or
by the Board of Directors of the Company (the "Board"), this Option and the
rights and privileges conferred by this Agreement may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of
law or otherwise) other than by will or by applicable laws of descent and
distribution and shall not be subject to execution, attachment or similar
process. Upon any attempt to transfer, pledge, hypothecate or otherwise
dispose of any Option or of any right or privilege conferred by this
Agreement contrary to the provisions hereof, or upon the sale, levy or
attachment or similar process upon the rights and privileges conferred by
this Agreement, such Option shall thereupon terminate and become null and
void.
3.6. Expiration and Termination: Options shall expire on the earlier of:
-2-
<PAGE>
(a) May 15, 2005.
(b) Termination of Service as Consultant: The expiration of thirty
(30) days from the date of the Consultant's removal (with or without
cause) pursuant to Section 4 of this Agreement, resignation or other
termination as consultant.
(c) Termination Due to Death or Disability: The expiration of one (1)
year from the date of the death or Disability (as defined below) of
the Consultant, assuming that Consultant was serving as consultant at
the time of such death or Disability.
Notwithstanding the occurrence of one of the above events, the exercise
period may be extended in the sole discretion of the Board until a date not
later than the expiration date of the Options. If Consultant's term as
advisory member is terminated by death, any Options held by the Consultant
shall be exercisable only by the person or persons to whom such
Consultant's rights under such Options shall pass by the Consultant's will
or by the laws of descent and distribution of the state or county of the
Consultant's domicile at the time of death.
3.7. Distributions, Reorganization or Liquidation. In the case of any share
distribution, share split, liquidation or like change in the nature of
common shares covered by this Agreement, the number of common shares
and exercise price shall be proportionately adjusted as set forth
below.
(a) If (i) the Company shall at any time be involved in a transaction
described in Section 424(a) of the Code (or any successor provision)
or any "corporate transaction" described in the regulations
thereunder; (ii) the Company shall declare a distribution payable in,
or shall subdivide or combine, its common shares or (iii) any other
event with substantially the same effect shall occur, the Board shall,
with respect to each outstanding Option, proportionately adjust the
number of shares of common shares and/or the exercise price per common
shares so as to preserve the rights of the Consultant substantially
proportionate to the rights of the Consultant prior to such event, and
to the extent such action shall include an increase or decrease in the
number of common shares subject to outstanding options, the number of
Common Shares available under this Agreement shall automatically be
increased or decreased, as the case may be, proportionately, without
further action on the part of the Board, the Company or the Company's
shareholders.
(b) If the Company is liquidated or dissolved, the Options may be
exercised prior to the effective date of such liquidation or
dissolution. If the Consultant does not exercise his Options prior to
such effective date, each outstanding option shall terminate as of the
effective date of the liquidation or dissolution.
3.8. Exercise of Options. The Options shall be exercisable, in whole or in
part, until termination; provided, however, if the Consultant is
subject to the reporting and
-3-
<PAGE>
liability provisions of Section 16 of the Securities Exchange Act of
1934 (the "Exchange Act") with respect to the common shares, he shall
be precluded from selling or transferring any common shares or other
security underlying an Option during the six (6) months immediately
following the grant of that Option. If less than all of the Common
Shares included in the Options are purchased, the remainder may be
purchased at any subsequent time prior to the expiration of the Option
term. Only whole Common Shares may be issued pursuant to the Options,
and to the extent that the Options cover less than one (1) Common
Share, they are unexercisable.
Each exercise of the Option shall be by means of delivery of a notice
of election to exercise (which may be in the form attached hereto as
Exhibit A) to the Company at its principal executive office,
specifying the number of common shares to be purchased and accompanied
by payment in cash by certified check or cashier's check in the amount
of the full exercise price for the Common Shares to be purchased.
During the lifetime of the Consultant, the Options are exercisable
only by the Consultant.
3.9. Professional Advice. The acceptance of the Options and the sale of
Common Shares issued pursuant to the exercise of Options may have
consequences under federal and state tax and securities laws, which
may vary depending upon the individual circumstances of the
Consultant. Accordingly, the Consultant acknowledges that he has been
advised to consult his personal legal and tax advisor in connection
with this Agreement and his dealings with respect to the Options for
the Common Shares. Without limiting other matters to be considered,
the Consultant should consider whether upon the exercise of Options,
the Consultant will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
4. Termination By the Company.
4.1 For Cause. Company will have the right to immediately terminate
Consultant's services and this Agreement for cause. "Cause" means: any
material breach of this Agreement by Consultant, including, without
limitation, breach of Consultant's covenants in Sections 6 and 7; any
failure to perform assigned job responsibilities that continues
unremedied for a period of ten (10) days after written notice to
Consultant by Company; conviction of a felony or failure to contest
prosecution for a felony; violation of any statute, rule or
regulation, any of which in the judgment of Company is harmful to the
business of the Company or to Company's reputation; unethical
practices; dishonesty; disloyalty; or any reason that would constitute
cause under the laws of Nevada. Upon termination of Consultant's
engagement hereunder for cause or upon the death or disability of
Consultant, Consultant will have no rights to any unvested benefits or
any other compensation or payments after the termination date or the
last day of the month in which Consultant's death or disability
occurred.
-4-
<PAGE>
For purposes of this Agreement, "disability" means the incapacity or
inability of Consultant, whether due to accident, sickness or
otherwise, as determined by a medical doctor acceptable to the Board
of Directors of Company and confirmed in writing by such doctor, to
perform the essential functions of Consultant's position under this
Agreement, with or without reasonable accommodation (provided that no
accommodation that imposes undue hardship on Company will be required)
for an aggregate of ninety (90) days during any period of one hundred
eighty (180) consecutive days.
4.2 Without Cause. Company may terminate Consultant's engagement under
this Agreement without cause and without advance notice; provided,
however, that Company will continue to pay, as severance pay,
Consultant's Base Salary at the rate in effect on the termination date
for a period of ten (10) days; provided, further, that Company will be
entitled to offset any severance pay otherwise payable to Consultant
by the amount of any compensation or consulting fees being paid to
Consultant by another party while severance pay would otherwise be
payable. Such payments will be at usual and customary pay intervals of
Company and will be subject to all appropriate deductions and
withholdings. Upon termination, Consultant will have no rights to any
unvested benefits or any other compensation or payments except as
stated in this paragraph.
4.3 Termination By Consultant. Consultant may terminate Consultant's
engagement under this Agreement for any reason provided that
Consultant gives Company at least thirty (30) days' notice in writing.
Company may, at its option, accelerate such termination date to any
date at least two weeks after Consultant's notice of termination.
Company may, at its option, relieve Consultant of all duties and
authority after notice of termination has been provided. All
compensation, payments and unvested benefits will cease on the
termination date.
5. Expenses. In addition to the payment of consulting fees set forth above,
the Company shall reimburse Consultant all actual out-of-pocket costs for
long-distance telephone services, facsimile transmissions, photocopying,
courier services and postage, and all reasonable travel, lodging and per
diem expenses, that he shall incur in connection with the rendering of
Consultant's services; provided that the Company shall have no obligation
to reimburse any of such expenses except upon provision by Consultant of
adequate documentation thereof in such form as the Company shall reasonably
request; and provided further, that the Company shall have no such
obligation in respect of any travel, lodging or per diem expenses unless
the travel to which such expenses relate shall have been authorized in
advance by the Company.
6. Ownership of Intellectual Property.
6.1 Background Technology. Exhibit B hereto lists any and all technology
that (i) Consultant intends to use in performing the services
hereunder, (ii) is either owned solely by Consultant or licensed to
Consultant with a right to sublicense
-5-
<PAGE>
and (iii) is in existence in the form of a writing or working
prototype prior to the date of this Agreement ("Background
Technology").
6.2 Notification and Disclosure. Consultant shall promptly notify the
Company in writing of the existence and nature of, and shall promptly
and fully disclose to the Company, any and all ideas, designs,
practices, processes, apparatus, improvements and inventions (all of
which are hereinafter referred to as "Inventions") that Consultant has
conceived or first actually reduced to practice and/or may conceive or
first actually reduce to practice during the Term or which Consultant
may conceive or reduce to practice within six months after the Term,
if such inventions relate to a product or process upon which
Consultant worked during the Term or during the period of his/her
engagement.
6.3 Ownership of Inventions. All such inventions shall be the sole and
exclusive property of the Company or its nominee during the Term and
thereafter, and, except for Consultant's rights in any Background
Technology, Consultant hereby assigns to the Company all its right,
title and interest in and to any and all such inventions.
Whenever the Company so requests, Consultant shall execute and assign
any and all applications, assignments and other instruments that the
Company shall deem necessary or convenient in order to apply for and
obtain Letters Patent of the United States and/or of any foreign
countries for such inventions and in order to assign and convey to the
Company or its nominee the sole and exclusive right, title and
interest in and to all such inventions.
Consultant shall aid and assist the Company in any interference or
litigation pertaining to such inventions, and the Company shall bear
all expenses reasonably incurred by Consultant at the request of the
Company. In this connection, if any such aid or assistance requires
any expenditure of Consultant's time after the Term, Consultant shall
be entitled to compensation for the time requested by the Company at a
rate equal to the pro rata rate at which Consultant was being paid for
a normal pay period immediately prior to the end of the Term.
6.4 Limitation. Sections 6.2 and 6.3shall not apply to any invention
meeting the following conditions:
(i) such invention was developed entirely on Consultant's own time;
(ii) such invention was made without the use of any of the equipment,
supplies, facility or trade secret information of the Company;
(iii)such invention does not relate (i) directly to the business of
the Company or (ii) to the Company's actual or demonstrably
anticipated research or development; and
-6-
<PAGE>
(iv) such invention does not result from any service performed by
Consultant for the Company.
6.5 Copyrightable Material. All right, title, and interest in all
copyrightable material which Consultant shall conceive or originate,
either individually or jointly with others, and which arise out of the
performance of this Agreement, will be the property of the Company and
are hereby assigned to the Company along with ownership of any and all
copyrights in the copyrightable material. Consultant agrees to execute
all papers and perform all other acts necessary to assist the Company
to obtain and register copyrights on such materials in any and all
countries. Where applicable, works of authorship created by Consultant
for the Company in performing the services hereunder shall be
considered "works made for hire" as defined in the U.S. Copyright Act.
6.6 Survival. This Section 6 shall survive the Term.
7. Protection of Trade Secrets, Know-How and/or Other Confidential Information
of the Company.
7.1 Confidential Information. Except as permitted or directed by the Company,
during the Term or at any time thereafter Consultant shall not divulge,
furnish or make accessible to anyone or use in any way (other than in the
ordinary course of the business of the Company) any confidential or secret
knowledge or information of the Company that Consultant has acquired or
become acquainted with or will acquire or become acquainted with during the
Term or during engagement by the Company prior to the Term, whether
developed by Consultant or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae, products or future
products, plans, devices or material (whether or not patented or
patentable) directly or indirectly useful in any aspect of the business of
the Company, any customer or supplier lists of the Company, any
confidential or secret development or research work of the Company, or any
other confidential information or secret aspects of the business of the
Company. Consultant acknowledges that the above-described knowledge or
information constitutes a unique and valuable asset of the Company acquired
at great time and expense by the Company and its predecessors, and that any
disclosure or other use of such knowledge or information other than for the
sole benefit of the Company would be wrongful and would cause irreparable
harm to the Company. Both during and after the Term, Consultant will
refrain from any acts or omissions that would reduce the value of such
knowledge or information to the Company. The foregoing obligations of
confidentiality, however, shall not apply to any knowledge or information
which is now published or which subsequently becomes generally publicly
known in the form in which it was obtained from the Company, other than as
a direct or indirect result of the breach of this Agreement by Consultant.
-7-
<PAGE>
7.2 Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by Consultant which arises out of the
performance of the services hereunder or any related material or
information shall be the property of the Company, and all rights
therein are hereby assigned to the Company.
7.3 Return of Records. Upon termination of this Agreement, Consultant
shall deliver to the Company all property that is in his possession
and that is the Company's property or relates to the Company's
business, including, but not limited to records, notes, data,
memoranda, software, electronic information, models, equipment, and
any copies of the same.
8. Miscellaneous.
8.1. Entire Agreement. This Agreement (including any exhibits, schedules
and other documents referred to herein) contains the entire
understanding between the parties hereto with respect to the subject
matter hereof and supersedes any prior understandings, agreements or
representations, written or oral, relating to the subject matter
hereof.
8.2. Counterparts. This Agreement may be executed in separate counterparts,
each of which will be an original and all of which taken together
shall constitute one and the same agreement, and any party hereto may
execute this Agreement by signing any such counterpart.
8.3. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid
under applicable law but if any provision of this Agreement is held to
be invalid, illegal or unenforceable under any applicable law or rule,
the validity, legality and enforceability of the other provision of
this Agreement will not be affected or impaired thereby.
8.4. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
personal representatives and, to the extent permitted by subsection
(e), successors and assigns.
8.5. Assignment. This Agreement and the rights and obligations of the
parties hereunder shall not be assignable, in whole or in part, by
either party without the prior written consent of the other party.
8.6. Modification, Amendment, Waiver or Termination. No provision of this
Agreement may be modified, amended, waived or terminated except by an
instrument in writing signed by the parties to this Agreement. No
course of dealing between the parties will modify, amend, waive or
terminate any provision of this Agreement or any rights or obligations
of any party under or by reason of this Agreement.
-8-
<PAGE>
8.7. Notices. All notices, consents, requests, instructions, approvals or
other communications provided for herein shall be in writing and
delivered by personal delivery, overnight courier, mail, electronic
facsimile or e-mail addressed to the receiving party at the address
set forth herein. All such communications shall be effective when
received.
Albert R. Timcke
-------------------------------
-------------------------------
Any party may change the address set forth above by notice to each
other party given as provided herein.
8.8. Headings. The headings and any table of contents contained in this
Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
8.9. Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEVADA, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF.
8.10.Third-Party Benefit. Nothing in this Agreement, express or implied,
is intended to confer upon any other person any rights, remedies,
obligations or liabilities of any nature whatsoever.
8.11.No Waiver. No delay on the part of the Company in exercising any
right hereunder shall operate as a waiver of such right. No waiver,
express or implied, by the Company of any right or any breach by
Consultant shall constitute a waiver of any other right or breach by
Consultant.
8.12.Jurisdiction and Venue. THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL
COURT OR STATE COURT SITTING IN NEVADA, AND EACH PARTY CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUM IS NOT CONVENIENT. IF ANY PARTY COMMENCES ANY
ACTION UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT IN ANOTHER
JURISDICTION OR VENUE, ANY OTHER PARTY TO THIS AGREEMENT SHALL HAVE
THE OPTION OF TRANSFERRING THE CASE TO THE ABOVE-DESCRIBED VENUE OR
JURISDICTION OR, IF SUCH TRANSFER CANNOT BE ACCOMPLISHED, TO HAVE SUCH
CASE DISMISSED WITHOUT PREJUDICE.
-9-
<PAGE>
8.13.Remedies. The parties agree that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any
party may, in its discretion, apply to any court of law or equity of
competent jurisdiction for specific performance and injunctive relief
in order to enforce or prevent any violations this Agreement, and any
party against whom such proceeding is brought hereby waives the claim
or defense that such party has an adequate remedy at law and agrees
not to raise the defense that the other party has an adequate remedy
at law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth in the first paragraph.
Kidstoysplus.com, Inc.
By ----------------------------------------
Its ----------------------------------------
CONSULTANT
By ----------------------------------------
Albert R. Timcke
-10-
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement") dated as of __ day of May between
Kidstoysplus.com, Inc. (the "Company"), a Nevada corporation, and Brian C.
Doutaz (Consultant), a British Columbia resident.
WHEREAS, the Company desires to retain Consultant to render consulting and
advisory services for the Company on the terms and conditions set forth in this
Agreement, and Consultant desires to be retained by the Company on such terms
and conditions.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein set forth and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Engagement of Consultant; Services to be Performed.
1.1. The Company hereby retains Consultant to render such consulting and
advisory services as the Company may request. Consultant hereby
accepts such engagement and agrees to perform such services for the
Company upon the terms and conditions set forth in this Agreement.
1.2. During the Term (as defined in Section 2), Consultant shall devote
such time, attention, skill and energy to the business of the Company
as may be reasonably required to perform the services required by this
Agreement up to a maximum time commitment of 100 hours in any calendar
month, and shall assume and perform to the best of his ability such
reasonable responsibilities and duties as the Company shall assign to
Consultant from time to time.
1.3. Consultant shall perform the services hereunder primarily at the
Company's principal office but he shall, at the Company's expense,
also be required to render the services at such other locations as the
Company may specify from time to time.
1.4. In rendering services hereunder, Consultant shall be acting as an
independent contractor and not as a employee or agent of the Company.
As an independent contractor, Consultant shall have no authority,
express or implied, to commit or obligate the Company in any manner
whatsoever, except as specifically authorized from time to time in
writing by an authorized representative of the Company, which
authorization may be general or specific. Nothing contained in this
Agreement shall be construed or applied to create a partnership.
Consultant shall be responsible for the payment of all federal, state,
provincial or local taxes payable with respect to all amounts paid to
Consultant under this Agreement; provided, however, that if the
Company is determined to be liable for collection and/or remittance of
any such taxes, Consultant shall immediately reimburse the Company for
all such payments made by the Company.
-1-
<PAGE>
2. Term. Unless terminated at an earlier date in accordance with Section 4,
this Agreement shall commence as of the date first written above and shall
continue for a continuous period of sixty (60) months (the "Term").
3. Compensation.
3.1 Compensation As compensation in full for Consultant's services
hereunder, the Company shall pay to Consultant a consulting fee at the
rate of $1,000 per month. Should Consultant incur greater than 100
hours per month providing consulting services to the Company under
this Agreement, the Company shall pay Consultant at the rate of $50
per hour plus applicable taxes in excess of 100 hours upon receipt of
a satisfactory invoice therefor. The consulting fee shall be payable
to Consultant in arrears at the end of each calendar month during the
Term and a prorated portion of such fee shall be payable upon
termination of this Agreement if such termination occurs other than at
the end of a month.
3.2 Stock Options. The Company also agrees to offer to the Consultant the
option to purchase, upon the terms and conditions set forth in this
Section 3, eight hundred thousand (800,000) common shares (the
"Options").
3.3. Exercise Price. The exercise price of the Options shall be as follows:
Number of Options Exercise Price
----------------- --------------
400,000 $0.10
400,000 $0.25
3.4. Vesting. The Options shall be fully vested and exercisable as of the
date of this Agreement.
3.5. Options not Transferable. Unless otherwise specified in this Agreement
or by the Board of Directors of the Company (the "Board"), this Option
and the rights and privileges conferred by this Agreement may not be
transferred, assigned, pledged or hypothecated in any manner (whether
by operation of law or otherwise) other than by will or by applicable
laws of descent and distribution and shall not be subject to
execution, attachment or similar process. Upon any attempt to
transfer, pledge, hypothecate or otherwise dispose of any Option or of
any right or privilege conferred by this Agreement contrary to the
provisions hereof, or upon the sale, levy or attachment or similar
process upon the rights and privileges conferred by this Agreement,
such Option shall thereupon terminate and become null and void.
-2-
<PAGE>
3.6. Expiration and Termination: Options shall expire on the earlier of:
(a) May 15, 2005.
(b) Termination of Service as Consultant: The expiration of thirty
(30) days from the date of the Consultant's removal (with or without
cause) pursuant to Section 4 of this Agreement, resignation or other
termination as consultant.
(c) Termination Due to Death or Disability: The expiration of one (1)
year from the date of the death or Disability (as defined below) of
the Consultant, assuming that Consultant was serving as consultant at
the time of such death or Disability.
Notwithstanding the occurrence of one of the above events, the exercise
period may be extended in the sole discretion of the Board until a date not
later than the expiration date of the Options. If Consultant's term as
advisory member is terminated by death, any Options held by the Consultant
shall be exercisable only by the person or persons to whom such
Consultant's rights under such Options shall pass by the Consultant's will
or by the laws of descent and distribution of the state or county of the
Consultant's domicile at the time of death.
3.7. Distributions, Reorganization or Liquidation. In the case of any share
distribution, share split, liquidation or like change in the nature of
common shares covered by this Agreement, the number of common shares
and exercise price shall be proportionately adjusted as set forth
below.
(a) If (i) the Company shall at any time be involved in a transaction
described in Section 424(a) of the Code (or any successor provision)
or any "corporate transaction" described in the regulations
thereunder; (ii) the Company shall declare a distribution payable in,
or shall subdivide or combine, its common shares or (iii) any other
event with substantially the same effect shall occur, the Board shall,
with respect to each outstanding Option, proportionately adjust the
number of shares of common shares and/or the exercise price per common
shares so as to preserve the rights of the Consultant substantially
proportionate to the rights of the Consultant prior to such event, and
to the extent such action shall include an increase or decrease in the
number of common shares subject to outstanding options, the number of
Common Shares available under this Agreement shall automatically be
increased or decreased, as the case may be, proportionately, without
further action on the part of the Board, the Company or the Company's
shareholders.
(b) If the Company is liquidated or dissolved, the Options may be
exercised prior to the effective date of such liquidation or
dissolution. If the Consultant does not exercise his Options prior to
such effective date, each outstanding option shall terminate as of the
effective date of the liquidation or dissolution.
-3-
<PAGE>
3.8. Exercise of Options. The Options shall be exercisable, in whole or in
part, until termination; provided, however, if the Consultant is
subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") with respect to
the common shares, he shall be precluded from selling or transferring
any common shares or other security underlying an Option during the
six (6) months immediately following the grant of that Option. If less
than all of the Common Shares included in the Options are purchased,
the remainder may be purchased at any subsequent time prior to the
expiration of the Option term. Only whole Common Shares may be issued
pursuant to the Options, and to the extent that the Options cover less
than one (1) Common Share, they are unexercisable.
Each exercise of the Option shall be by means of delivery of a notice
of election to exercise (which may be in the form attached hereto as
Exhibit A) to the Company at its principal executive office,
specifying the number of common shares to be purchased and accompanied
by payment in cash by certified check or cashier's check in the amount
of the full exercise price for the Common Shares to be purchased.
During the lifetime of the Consultant, the Options are exercisable
only by the Consultant.
3.9. Professional Advice. The acceptance of the Options and the sale of
Common Shares issued pursuant to the exercise of Options may have
consequences under federal and state tax and securities laws, which
may vary depending upon the individual circumstances of the
Consultant. Accordingly, the Consultant acknowledges that he has been
advised to consult his personal legal and tax advisor in connection
with this Agreement and his dealings with respect to the Options for
the Common Shares. Without limiting other matters to be considered,
the Consultant should consider whether upon the exercise of Options,
the Consultant will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
4. Termination By the Company.
4.1 For Cause. Company will have the right to immediately terminate
Consultant's services and this Agreement for cause. "Cause" means: any
material breach of this Agreement by Consultant, including, without
limitation, breach of Consultant's covenants in Sections 6 and 7; any
failure to perform assigned job responsibilities that continues
unremedied for a period of ten (10) days after written notice to
Consultant by Company; conviction of a felony or failure to contest
prosecution for a felony; violation of any statute, rule or
regulation, any of which in the judgment of Company is harmful to the
business of the Company or to Company's reputation; unethical
practices; dishonesty; disloyalty; or any reason that would constitute
cause under the laws of Nevada. Upon termination of Consultant's
engagement hereunder for cause or upon the death or disability of
Consultant, Consultant will have no rights to any unvested benefits or
any other compensation or payments after the termination date or the
last day of the month
-4-
<PAGE>
in which Consultant's death or disability occurred.
For purposes of this Agreement, "disability" means the incapacity or
inability of Consultant, whether due to accident, sickness or
otherwise, as determined by a medical doctor acceptable to the Board
of Directors of Company and confirmed in writing by such doctor, to
perform the essential functions of Consultant's position under this
Agreement, with or without reasonable accommodation (provided that no
accommodation that imposes undue hardship on Company will be required)
for an aggregate of ninety (90) days during any period of one hundred
eighty (180) consecutive days.
4.2 Without Cause. Company may terminate Consultant's engagement under
this Agreement without cause and without advance notice; provided,
however, that Company will continue to pay, as severance pay,
Consultant's Base Salary at the rate in effect on the termination date
for a period of ten (10) days; provided, further, that Company will be
entitled to offset any severance pay otherwise payable to Consultant
by the amount of any compensation or consulting fees being paid to
Consultant by another party while severance pay would otherwise be
payable. Such payments will be at usual and customary pay intervals of
Company and will be subject to all appropriate deductions and
withholdings. Upon termination, Consultant will have no rights to any
unvested benefits or any other compensation or payments except as
stated in this paragraph.
4.3 Termination By Consultant. Consultant may terminate Consultant's
engagement under this Agreement for any reason provided that
Consultant gives Company at least thirty (30) days' notice in writing.
Company may, at its option, accelerate such termination date to any
date at least two weeks after Consultant's notice of termination.
Company may, at its option, relieve Consultant of all duties and
authority after notice of termination has been provided. All
compensation, payments and unvested benefits will cease on the
termination date.
5. Expenses. In addition to the payment of consulting fees set forth above,
the Company shall reimburse Consultant all actual out-of-pocket costs for
long-distance telephone services, facsimile transmissions, photocopying,
courier services and postage, and all reasonable travel, lodging and per
diem expenses, that he shall incur in connection with the rendering of
Consultant's services; provided that the Company shall have no obligation
to reimburse any of such expenses except upon provision by Consultant of
adequate documentation thereof in such form as the Company shall reasonably
request; and provided further, that the Company shall have no such
obligation in respect of any travel, lodging or per diem expenses unless
the travel to which such expenses relate shall have been authorized in
advance by the Company.
6. Ownership of Intellectual Property.
6.1 Background Technology. Exhibit B hereto lists any and all technology
that (i) Consultant intends to use in performing the services
hereunder, (ii) is either
-5-
<PAGE>
owned solely by Consultant or licensed to Consultant with a right to
sublicense and (iii) is in existence in the form of a writing or
working prototype prior to the date of this Agreement ("Background
Technology").
6.2 Notification and Disclosure. Consultant shall promptly notify the
Company in writing of the existence and nature of, and shall promptly
and fully disclose to the Company, any and all ideas, designs,
practices, processes, apparatus, improvements and inventions (all of
which are hereinafter referred to as "Inventions") that Consultant has
conceived or first actually reduced to practice and/or may conceive or
first actually reduce to practice during the Term or which Consultant
may conceive or reduce to practice within six months after the Term,
if such inventions relate to a product or process upon which
Consultant worked during the Term or during the period of his/her
engagement.
6.3 Ownership of Inventions. All such inventions shall be the sole and
exclusive property of the Company or its nominee during the Term and
thereafter, and, except for Consultant's rights in any Background
Technology, Consultant hereby assigns to the Company all its right,
title and interest in and to any and all such inventions.
Whenever the Company so requests, Consultant shall execute and assign
any and all applications, assignments and other instruments that the
Company shall deem necessary or convenient in order to apply for and
obtain Letters Patent of the United States and/or of any foreign
countries for such inventions and in order to assign and convey to the
Company or its nominee the sole and exclusive right, title and
interest in and to all such inventions.
Consultant shall aid and assist the Company in any interference or
litigation pertaining to such inventions, and the Company shall bear
all expenses reasonably incurred by Consultant at the request of the
Company. In this connection, if any such aid or assistance requires
any expenditure of Consultant's time after the Term, Consultant shall
be entitled to compensation for the time requested by the Company at a
rate equal to the pro rata rate at which Consultant was being paid for
a normal pay period immediately prior to the end of the Term.
6.4 Limitation. Sections 6.2 and 6.3shall not apply to any invention
meeting the following conditions:
(i) such invention was developed entirely on Consultant's own time;
(ii) such invention was made without the use of any of the equipment,
supplies, facility or trade secret information of the Company;
(iii)such invention does not relate (i) directly to the business of
the Company or (ii) to the Company's actual or demonstrably
anticipated research or development; and
-6-
<PAGE>
(iv) such invention does not result from any service performed by
Consultant for the Company.
6.5 Copyrightable Material. All right, title, and interest in all
copyrightable material which Consultant shall conceive or originate,
either individually or jointly with others, and which arise out of the
performance of this Agreement, will be the property of the Company and
are hereby assigned to the Company along with ownership of any and all
copyrights in the copyrightable material. Consultant agrees to execute
all papers and perform all other acts necessary to assist the Company
to obtain and register copyrights on such materials in any and all
countries. Where applicable, works of authorship created by Consultant
for the Company in performing the services hereunder shall be
considered "works made for hire" as defined in the U.S. Copyright Act.
6.6 Survival. This Section 6 shall survive the Term.
7. Protection of Trade Secrets, Know-How and/or Other Confidential Information
of the Company.
7.1 Confidential Information. Except as permitted or directed by the
Company, during the Term or at any time thereafter Consultant shall
not divulge, furnish or make accessible to anyone or use in any way
(other than in the ordinary course of the business of the Company) any
confidential or secret knowledge or information of the Company that
Consultant has acquired or become acquainted with or will acquire or
become acquainted with during the Term or during engagement by the
Company prior to the Term, whether developed by Consultant or by
others, concerning any trade secrets, confidential or secret designs,
processes, formulae, products or future products, plans, devices or
material (whether or not patented or patentable) directly or
indirectly useful in any aspect of the business of the Company, any
customer or supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other confidential
information or secret aspects of the business of the Company.
Consultant acknowledges that the above-described knowledge or
information constitutes a unique and valuable asset of the Company
acquired at great time and expense by the Company and its
predecessors, and that any disclosure or other use of such knowledge
or information other than for the sole benefit of the Company would be
wrongful and would cause irreparable harm to the Company. Both during
and after the Term, Consultant will refrain from any acts or omissions
that would reduce the value of such knowledge or information to the
Company. The foregoing obligations of confidentiality, however, shall
not apply to any knowledge or information which is now published or
which subsequently becomes generally publicly known in the form in
which it was obtained from the Company, other than as a direct or
indirect result of the breach of this Agreement by Consultant.
-7-
<PAGE>
7.2 Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by Consultant which arises out of the
performance of the services hereunder or any related material or
information shall be the property of the Company, and all rights
therein are hereby assigned to the Company.
7.3 Return of Records. Upon termination of this Agreement, Consultant
shall deliver to the Company all property that is in his possession
and that is the Company's property or relates to the Company's
business, including, but not limited to records, notes, data,
memoranda, software, electronic information, models, equipment, and
any copies of the same.
8. Miscellaneous.
8.1. Entire Agreement. This Agreement (including any exhibits, schedules
and other documents referred to herein) contains the entire
understanding between the parties hereto with respect to the subject
matter hereof and supersedes any prior understandings, agreements or
representations, written or oral, relating to the subject matter
hereof.
8.2. Counterparts. This Agreement may be executed in separate counterparts,
each of which will be an original and all of which taken together
shall constitute one and the same agreement, and any party hereto may
execute this Agreement by signing any such counterpart.
8.3. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid
under applicable law but if any provision of this Agreement is held to
be invalid, illegal or unenforceable under any applicable law or rule,
the validity, legality and enforceability of the other provision of
this Agreement will not be affected or impaired thereby.
8.4. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
personal representatives and, to the extent permitted by subsection
(e), successors and assigns.
8.5. Assignment. This Agreement and the rights and obligations of the
parties hereunder shall not be assignable, in whole or in part, by
either party without the prior written consent of the other party.
8.6. Modification, Amendment, Waiver or Termination. No provision of this
Agreement may be modified, amended, waived or terminated except by an
instrument in writing signed by the parties to this Agreement. No
course of dealing between the parties will modify, amend, waive or
terminate any provision of this Agreement or any rights or obligations
of any party under or by reason of this Agreement.
-8-
<PAGE>
8.7. Notices. All notices, consents, requests, instructions, approvals or
other communications provided for herein shall be in writing and
delivered by personal delivery, overnight courier, mail, electronic
facsimile or e-mail addressed to the receiving party at the address
set forth herein. All such communications shall be effective when
received.
Brian C. Doutaz
-------------------------------
-------------------------------
Any party may change the address set forth above by notice to each
other party given as provided herein.
8.8. Headings. The headings and any table of contents contained in this
Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
8.9. Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEVADA, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF.
8.10.Third-Party Benefit. Nothing in this Agreement, express or implied,
is intended to confer upon any other person any rights, remedies,
obligations or liabilities of any nature whatsoever.
8.11.No Waiver. No delay on the part of the Company in exercising any
right hereunder shall operate as a waiver of such right. No waiver,
express or implied, by the Company of any right or any breach by
Consultant shall constitute a waiver of any other right or breach by
Consultant.
8.12.Jurisdiction and Venue. THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL
COURT OR STATE COURT SITTING IN NEVADA, AND EACH PARTY CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUM IS NOT CONVENIENT. IF ANY PARTY COMMENCES ANY
ACTION UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT IN ANOTHER
JURISDICTION OR VENUE, ANY OTHER PARTY TO THIS AGREEMENT SHALL HAVE
THE OPTION OF TRANSFERRING THE CASE TO THE ABOVE-DESCRIBED VENUE OR
JURISDICTION OR, IF SUCH TRANSFER CANNOT BE ACCOMPLISHED, TO HAVE SUCH
CASE DISMISSED WITHOUT PREJUDICE.
-9-
<PAGE>
8.13.Remedies. The parties agree that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any
party may, in its discretion, apply to any court of law or equity of
competent jurisdiction for specific performance and injunctive relief
in order to enforce or prevent any violations this Agreement, and any
party against whom such proceeding is brought hereby waives the claim
or defense that such party has an adequate remedy at law and agrees
not to raise the defense that the other party has an adequate remedy
at law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth in the first paragraph.
Kidstoysplus.com, Inc.
By ----------------------------------------
Its ----------------------------------------
CONSULTANT
By ----------------------------------------
Brian C. Doutaz
-10-
Exhibit 6.4
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement") dated as of __ day of May between
Kidstoysplus.com, Inc. (the "Company"), a Nevada corporation, and Gerald Wayne
Williams (Consultant), a British Columbia resident.
WHEREAS, the Company desires to retain Consultant to render consulting and
advisory services for the Company on the terms and conditions set forth in this
Agreement, and Consultant desires to be retained by the Company on such terms
and conditions.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein set forth and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Engagement of Consultant; Services to be Performed.
1.1. The Company hereby retains Consultant to render such consulting and
advisory services as the Company may request. Consultant hereby
accepts such engagement and agrees to perform such services for the
Company upon the terms and conditions set forth in this Agreement.
1.2. During the Term (as defined in Section 2), Consultant shall devote
such time, attention, skill and energy to the business of the Company
as may be reasonably required to perform the services required by this
Agreement up to a maximum time commitment of 80 hours in any calendar
month, and shall assume and perform to the best of his ability such
reasonable responsibilities and duties as the Company shall assign to
Consultant from time to time.
1.3. Consultant shall perform the services hereunder primarily at the
Company's principal office but he shall, at the Company's expense,
also be required to render the services at such other locations as the
Company may specify from time to time.
1.4. In rendering services hereunder, Consultant shall be acting as an
independent contractor and not as a employee or agent of the Company.
As an independent contractor, Consultant shall have no authority,
express or implied, to commit or obligate the Company in any manner
whatsoever, except as specifically authorized from time to time in
writing by an authorized representative of the Company, which
authorization may be general or specific. Nothing contained in this
Agreement shall be construed or applied to create a partnership.
Consultant shall be responsible for the payment of all federal, state,
provincial or local taxes payable with respect to all amounts paid to
Consultant under this Agreement; provided, however, that if the
Company is determined to be liable for collection and/or remittance of
any such taxes, Consultant shall immediately reimburse the Company for
all such payments made by the Company.
-1-
<PAGE>
2. Term. Unless terminated at an earlier date in accordance with Section 4,
this Agreement shall commence as of the date first written above and shall
continue for a continuous period of sixty (60) months (the "Term").
3. Compensation.
3.1 Compensation As compensation in full for Consultant's services
hereunder, the Company shall pay to Consultant a consulting fee at the
rate of $500 per month. Should Consultant incur greater than 80 hours
per month providing consulting services to the Company under this
Agreement, the Company shall pay Consultant at the rate of $50 per
hour plus applicable taxes in excess of 80 hours upon receipt of a
satisfactory invoice therefor. The consulting fee shall be payable to
Consultant in arrears at the end of each calendar month during the
Term and a prorated portion of such fee shall be payable upon
termination of this Agreement if such termination occurs other than at
the end of a month.
3.2 Stock Options. The Company also agrees to offer to the Consultant the
option to purchase, upon the terms and conditions set forth in this
Section 3, one hundred thousand (100,000) common shares (the
"Options").
3.3. Exercise Price. The exercise price of the Options shall be as follows:
Number of Options Exercise Price
----------------- --------------
100,000 $0.10
3.4. Vesting. The Options shall be fully vested and exercisable as of the
date of this Agreement.
3.5. Options not Transferable. Unless otherwise specified in this Agreement
or by the Board of Directors of the Company (the "Board"), this Option
and the rights and privileges conferred by this Agreement may not be
transferred, assigned, pledged or hypothecated in any manner (whether
by operation of law or otherwise) other than by will or by applicable
laws of descent and distribution and shall not be subject to
execution, attachment or similar process. Upon any attempt to
transfer, pledge, hypothecate or otherwise dispose of any Option or of
any right or privilege conferred by this Agreement contrary to the
provisions hereof, or upon the sale, levy or attachment or similar
process upon the rights and privileges conferred by this Agreement,
such Option shall thereupon terminate and become null and void.
3.6. Expiration and Termination: Options shall expire on the earlier of:
(a) May 15, 2005.
-2-
<PAGE>
(b) Termination of Service as Consultant: The expiration of thirty
(30) days from the date of the Consultant's removal (with or
without cause) pursuant to Section 4 of this Agreement,
resignation or other termination as consultant.
(c) Termination Due to Death or Disability: The expiration of one (1)
year from the date of the death or Disability (as defined below)
of the Consultant, assuming that Consultant was serving as
consultant at the time of such death or Disability.
Notwithstanding the occurrence of one of the above events, the
exercise period may be extended in the sole discretion of the Board
until a date not later than the expiration date of the Options. If
Consultant's term as advisory member is terminated by death, any
Options held by the Consultant shall be exercisable only by the person
or persons to whom such Consultant's rights under such Options shall
pass by the Consultant's will or by the laws of descent and
distribution of the state or county of the Consultant's domicile at
the time of death.
3.7. Distributions, Reorganization or Liquidation. In the case of any share
distribution, share split, liquidation or like change in the nature of
common shares covered by this Agreement, the number of common shares
and exercise price shall be proportionately adjusted as set forth
below.
(a) If (i) the Company shall at any time be involved in a transaction
described in Section 424(a) of the Code (or any successor provision)
or any "corporate transaction" described in the regulations
thereunder; (ii) the Company shall declare a distribution payable in,
or shall subdivide or combine, its common shares or (iii) any other
event with substantially the same effect shall occur, the Board shall,
with respect to each outstanding Option, proportionately adjust the
number of shares of common shares and/or the exercise price per common
shares so as to preserve the rights of the Consultant substantially
proportionate to the rights of the Consultant prior to such event, and
to the extent such action shall include an increase or decrease in the
number of common shares subject to outstanding options, the number of
Common Shares available under this Agreement shall automatically be
increased or decreased, as the case may be, proportionately, without
further action on the part of the Board, the Company or the Company's
shareholders.
(b) If the Company is liquidated or dissolved, the Options may be
exercised prior to the effective date of such liquidation or
dissolution. If the Consultant does not exercise his Options prior to
such effective date, each outstanding option shall terminate as of the
effective date of the liquidation or dissolution.
3.8. Exercise of Options. The Options shall be exercisable, in whole or in
part, until termination; provided, however, if the Consultant is
subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") with respect to
the common shares, he shall be precluded from
-3-
<PAGE>
selling or transferring any common shares or other security underlying
an Option during the six (6) months immediately following the grant of
that Option. If less than all of the Common Shares included in the
Options are purchased, the remainder may be purchased at any
subsequent time prior to the expiration of the Option term. Only whole
Common Shares may be issued pursuant to the Options, and to the extent
that the Options cover less than one (1) Common Share, they are
unexercisable.
Each exercise of the Option shall be by means of delivery of a notice
of election to exercise (which may be in the form attached hereto as
Exhibit A) to the Company at its principal executive office,
specifying the number of common shares to be purchased and accompanied
by payment in cash by certified check or cashier's check in the amount
of the full exercise price for the Common Shares to be purchased.
During the lifetime of the Consultant, the Options are exercisable
only by the Consultant.
3.9. Professional Advice. The acceptance of the Options and the sale of
Common Shares issued pursuant to the exercise of Options may have
consequences under federal and state tax and securities laws, which
may vary depending upon the individual circumstances of the
Consultant. Accordingly, the Consultant acknowledges that he has been
advised to consult his personal legal and tax advisor in connection
with this Agreement and his dealings with respect to the Options for
the Common Shares. Without limiting other matters to be considered,
the Consultant should consider whether upon the exercise of Options,
the Consultant will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
4. Termination By the Company.
4.1 For Cause. Company will have the right to immediately terminate
Consultant's services and this Agreement for cause. "Cause" means: any
material breach of this Agreement by Consultant, including, without
limitation, breach of Consultant's covenants in Sections 6 and 7; any
failure to perform assigned job responsibilities that continues
unremedied for a period of ten (10) days after written notice to
Consultant by Company; conviction of a felony or failure to contest
prosecution for a felony; violation of any statute, rule or
regulation, any of which in the judgment of Company is harmful to the
business of the Company or to Company's reputation; unethical
practices; dishonesty; disloyalty; or any reason that would constitute
cause under the laws of Nevada. Upon termination of Consultant's
engagement hereunder for cause or upon the death or disability of
Consultant, Consultant will have no rights to any unvested benefits or
any other compensation or payments after the termination date or the
last day of the month in which Consultant's death or disability
occurred.
For purposes of this Agreement, "disability" means the incapacity or
inability of Consultant, whether due to accident, sickness or
otherwise, as determined by a
-4-
<PAGE>
medical doctor acceptable to the Board of Directors of Company and
confirmed in writing by such doctor, to perform the essential
functions of Consultant's position under this Agreement, with or
without reasonable accommodation (provided that no accommodation that
imposes undue hardship on Company will be required) for an aggregate
of ninety (90) days during any period of one hundred eighty (180)
consecutive days.
4.2 Without Cause. Company may terminate Consultant's engagement under
this Agreement without cause and without advance notice; provided,
however, that Company will continue to pay, as severance pay,
Consultant's Base Salary at the rate in effect on the termination date
for a period of ten (10) days; provided, further, that Company will be
entitled to offset any severance pay otherwise payable to Consultant
by the amount of any compensation or consulting fees being paid to
Consultant by another party while severance pay would otherwise be
payable. Such payments will be at usual and customary pay intervals of
Company and will be subject to all appropriate deductions and
withholdings. Upon termination, Consultant will have no rights to any
unvested benefits or any other compensation or payments except as
stated in this paragraph.
4.3 Termination By Consultant. Consultant may terminate Consultant's
engagement under this Agreement for any reason provided that
Consultant gives Company at least thirty (30) days' notice in writing.
Company may, at its option, accelerate such termination date to any
date at least two weeks after Consultant's notice of termination.
Company may, at its option, relieve Consultant of all duties and
authority after notice of termination has been provided. All
compensation, payments and unvested benefits will cease on the
termination date.
5. Expenses. In addition to the payment of consulting fees set forth above,
the Company shall reimburse Consultant all actual out-of-pocket costs for
long-distance telephone services, facsimile transmissions, photocopying,
courier services and postage, and all reasonable travel, lodging and per
diem expenses, that he shall incur in connection with the rendering of
Consultant's services; provided that the Company shall have no obligation
to reimburse any of such expenses except upon provision by Consultant of
adequate documentation thereof in such form as the Company shall reasonably
request; and provided further, that the Company shall have no such
obligation in respect of any travel, lodging or per diem expenses unless
the travel to which such expenses relate shall have been authorized in
advance by the Company.
6. Ownership of Intellectual Property.
6.1 Background Technology. Exhibit B hereto lists any and all technology
that (i) Consultant intends to use in performing the services
hereunder, (ii) is either owned solely by Consultant or licensed to
Consultant with a right to sublicense and (iii) is in existence in the
form of a writing or working prototype prior to the date of this
Agreement ("Background Technology").
-5-
<PAGE>
6.2 Notification and Disclosure. Consultant shall promptly notify the
Company in writing of the existence and nature of, and shall promptly
and fully disclose to the Company, any and all ideas, designs,
practices, processes, apparatus, improvements and inventions (all of
which are hereinafter referred to as "Inventions") that Consultant has
conceived or first actually reduced to practice and/or may conceive or
first actually reduce to practice during the Term or which Consultant
may conceive or reduce to practice within six months after the Term,
if such inventions relate to a product or process upon which
Consultant worked during the Term or during the period of his/her
engagement.
6.3 Ownership of Inventions. All such inventions shall be the sole and
exclusive property of the Company or its nominee during the Term and
thereafter, and, except for Consultant's rights in any Background
Technology, Consultant hereby assigns to the Company all its right,
title and interest in and to any and all such inventions.
Whenever the Company so requests, Consultant shall execute and assign
any and all applications, assignments and other instruments that the
Company shall deem necessary or convenient in order to apply for and
obtain Letters Patent of the United States and/or of any foreign
countries for such inventions and in order to assign and convey to the
Company or its nominee the sole and exclusive right, title and
interest in and to all such inventions.
Consultant shall aid and assist the Company in any interference or
litigation pertaining to such inventions, and the Company shall bear
all expenses reasonably incurred by Consultant at the request of the
Company. In this connection, if any such aid or assistance requires
any expenditure of Consultant's time after the Term, Consultant shall
be entitled to compensation for the time requested by the Company at a
rate equal to the pro rata rate at which Consultant was being paid for
a normal pay period immediately prior to the end of the Term.
6.4 Limitation. Sections 6.2 and 6.3shall not apply to any invention
meeting the following conditions:
(i) such invention was developed entirely on Consultant's own time;
(ii) such invention was made without the use of any of the equipment,
supplies, facility or trade secret information of the Company;
(iii)such invention does not relate (i) directly to the business of
the Company or (ii) to the Company's actual or demonstrably
anticipated research or development; and
(iv) such invention does not result from any service performed by
Consultant for the Company.
-6-
<PAGE>
6.5 Copyrightable Material. All right, title, and interest in all
copyrightable material which Consultant shall conceive or originate,
either individually or jointly with others, and which arise out of the
performance of this Agreement, will be the property of the Company and
are hereby assigned to the Company along with ownership of any and all
copyrights in the copyrightable material. Consultant agrees to execute
all papers and perform all other acts necessary to assist the Company
to obtain and register copyrights on such materials in any and all
countries. Where applicable, works of authorship created by Consultant
for the Company in performing the services hereunder shall be
considered "works made for hire" as defined in the U.S. Copyright Act.
6.6 Survival. This Section 6 shall survive the Term.
7. Protection of Trade Secrets, Know-How and/or Other Confidential Information
of the Company.
7.1 Confidential Information. Except as permitted or directed by the
Company, during the Term or at any time thereafter Consultant shall
not divulge, furnish or make accessible to anyone or use in any way
(other than in the ordinary course of the business of the Company) any
confidential or secret knowledge or information of the Company that
Consultant has acquired or become acquainted with or will acquire or
become acquainted with during the Term or during engagement by the
Company prior to the Term, whether developed by Consultant or by
others, concerning any trade secrets, confidential or secret designs,
processes, formulae, products or future products, plans, devices or
material (whether or not patented or patentable) directly or
indirectly useful in any aspect of the business of the Company, any
customer or supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other confidential
information or secret aspects of the business of the Company.
Consultant acknowledges that the above-described knowledge or
information constitutes a unique and valuable asset of the Company
acquired at great time and expense by the Company and its
predecessors, and that any disclosure or other use of such knowledge
or information other than for the sole benefit of the Company would be
wrongful and would cause irreparable harm to the Company. Both during
and after the Term, Consultant will refrain from any acts or omissions
that would reduce the value of such knowledge or information to the
Company. The foregoing obligations of confidentiality, however, shall
not apply to any knowledge or information which is now published or
which subsequently becomes generally publicly known in the form in
which it was obtained from the Company, other than as a direct or
indirect result of the breach of this Agreement by Consultant.
7.2 Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by Consultant which arises out of the
performance of the services hereunder or any related material or
information shall be the property of the Company, and all rights
therein are hereby assigned to the Company.
-7-
<PAGE>
7.3 Return of Records. Upon termination of this Agreement, Consultant
shall deliver to the Company all property that is in his possession
and that is the Company's property or relates to the Company's
business, including, but not limited to records, notes, data,
memoranda, software, electronic information, models, equipment, and
any copies of the same.
8. Miscellaneous.
8.1. Entire Agreement. This Agreement (including any exhibits, schedules
and other documents referred to herein) contains the entire
understanding between the parties hereto with respect to the subject
matter hereof and supersedes any prior understandings, agreements or
representations, written or oral, relating to the subject matter
hereof.
8.2. Counterparts. This Agreement may be executed in separate counterparts,
each of which will be an original and all of which taken together
shall constitute one and the same agreement, and any party hereto may
execute this Agreement by signing any such counterpart.
8.3. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid
under applicable law but if any provision of this Agreement is held to
be invalid, illegal or unenforceable under any applicable law or rule,
the validity, legality and enforceability of the other provision of
this Agreement will not be affected or impaired thereby.
8.4. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
personal representatives and, to the extent permitted by subsection
(e), successors and assigns.
8.5. Assignment. This Agreement and the rights and obligations of the
parties hereunder shall not be assignable, in whole or in part, by
either party without the prior written consent of the other party.
8.6. Modification, Amendment, Waiver or Termination. No provision of this
Agreement may be modified, amended, waived or terminated except by an
instrument in writing signed by the parties to this Agreement. No
course of dealing between the parties will modify, amend, waive or
terminate any provision of this Agreement or any rights or obligations
of any party under or by reason of this Agreement.
8.7. Notices. All notices, consents, requests, instructions, approvals or
other communications provided for herein shall be in writing and
delivered by personal delivery, overnight courier, mail, electronic
facsimile or e-mail addressed to the receiving party at the address
set forth herein. All such communications shall be effective when
received.
-8-
<PAGE>
Gerald W. Williams
-------------------------------
-------------------------------
Any party may change the address set forth above by notice to each
other party given as provided herein.
8.8. Headings. The headings and any table of contents contained in this
Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
8.9. Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEVADA, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF.
8.10.Third-Party Benefit. Nothing in this Agreement, express or implied,
is intended to confer upon any other person any rights, remedies,
obligations or liabilities of any nature whatsoever.
8.11.No Waiver. No delay on the part of the Company in exercising any
right hereunder shall operate as a waiver of such right. No waiver,
express or implied, by the Company of any right or any breach by
Consultant shall constitute a waiver of any other right or breach by
Consultant.
8.12.Jurisdiction and Venue. THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL
COURT OR STATE COURT SITTING IN NEVADA, AND EACH PARTY CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUM IS NOT CONVENIENT. IF ANY PARTY COMMENCES ANY
ACTION UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT IN ANOTHER
JURISDICTION OR VENUE, ANY OTHER PARTY TO THIS AGREEMENT SHALL HAVE
THE OPTION OF TRANSFERRING THE CASE TO THE ABOVE-DESCRIBED VENUE OR
JURISDICTION OR, IF SUCH TRANSFER CANNOT BE ACCOMPLISHED, TO HAVE SUCH
CASE DISMISSED WITHOUT PREJUDICE.
8.13.Remedies. The parties agree that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any
party may, in its discretion, apply to any court of law or equity of
competent jurisdiction for specific performance and injunctive relief
in order to enforce or prevent any violations this Agreement, and any
party against whom such proceeding is brought hereby waives the claim
or defense that such party has an adequate
-9-
<PAGE>
remedy at law and agrees not to raise the defense that the other party
has an adequate remedy at law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth in the first paragraph.
Kidstoysplus.com, Inc.
By ----------------------------------------
Its ----------------------------------------
CONSULTANT
By ----------------------------------------
Gerald W. Williams
-10-
Exhibit 6.5
INDEMNIFICATION AGREEMENT
This Agreement is made as of the ____ day of __________, 1999, by and
between KIDSTOYSPLUS.COM, INC., a Nevada corporation, (the "Corporation") and
________________ (the "Indemnitee") with reference to the following facts:
RECITALS
A. The Indemnitee is currently serving as a Director and/or Officer of the
Corporation and the Corporation wishes the Indemnitee to continue in such
capacity. The Indemnitee is willing, under certain circumstances, to continue in
such capacity.
B. In order to induce and encourage experienced and capable persons such as
the Indemnitee to continue to serve as a Director and/or Officer of the
Corporation, the Board of Directors has determined, after due consideration and
investigation of the terms and provisions of this Agreement and the various
other options available to the Corporation and the Indemnitee in lieu hereof,
that this Agreement is not only reasonable and prudent but necessary to promote
and ensure the best interests of the Corporation and its shareholders.
AGREEMENT
NOW, THEREFORE, in consideration of the continued services of the
Indemnitee and in order to induce the Indemnitee to continue to serve as a
Director and/or Officer of the Corporation, the Corporation and the Indemnitee
agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Corporation" includes any domestic or foreign predecessor entity
of the Corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director or officer
of the Corporation or an individual who, while a director or officer of the
Corporation, is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise. A director is considered to be serving an employee benefit plan at
the Corporation's request if the director's duties to the Corporation also
impose duties on, or otherwise involve services by, the director to the plan or
to participants in or beneficiaries of the plan. "Director" includes, unless the
context requires otherwise, the estate or personal representative of a director.
(c) "Expenses" include counsel fees.
-1-
<PAGE>
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding.
(e) "Official capacity" means the office of director in the
Corporation: "Official capacity" does not include service for any other foreign
or domestic corporation or any partnership, joint venture, trust, employee
benefit plan, or other enterprise.
(f) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal.
2. Indemnification by the Corporation.
(a) The Corporation shall indemnify the Indemnitee in the defense of
any proceeding, whether or not brought by or in the right of the Corporation, to
which the Indemnitee was a party because of being a director of the Corporation
against all reasonable expenses incurred by the Indemnitee in connection with
the proceeding.
(b) Except as provided in subsection (e) of this Section 2, the
Corporation shall indemnify the Indemnitee made a party to a proceeding, because
the Indemnitee is or was a director of the Corporation, against liability
incurred in the proceeding if:
(i) The Indemnitee acted in good faith; and
(ii) The Indemnitee reasonably believed:
(A) In the case of conduct in the Indemnitee's official
capacity with the Corporation, that the Indemnitee's conduct was in the
Corporation's best interests; and
(B) In all other cases, that the Indemnitee's conduct was at
least not opposed to the Corporation's best interests; and
(iii)In the case of any criminal proceeding, the Indemnitee had
no reasonable cause to believe the Indemnitee's conduct was unlawful.
(c) The Indemnitee's conduct with respect to an employee benefit plan
for a purpose the Indemnitee reasonably believed to be in the interests of the
participants in and
-2-
<PAGE>
beneficiaries of the plan is conduct that satisfies the requirement of
subsection (b)(ii) of this Section 2.
(d) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the Indemnitee did not meet the standard of conduct
described in this Section.
(e) The Corporation shall not indemnify the Indemnitee under Section 2
of this Agreement:
(i) In connection with a proceeding by or in the right of the
Corporation in which the Indemnitee was adjudged liable to the Corporation; or
(ii) In connection with any other proceeding charging improper
personal benefit to the Indemnitee whether or not involving action in the
Indemnitee's official capacity, in which the Indemnitee was adjudged liable on
the basis that personal benefit was improperly received by the Indemnitee.
(f) Indemnification under this Agreement in connection with a
proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with the proceeding.
(g) A request for indemnification under this Section 2 shall be in
substantially the form of Exhibit A attached hereto.
3. Advance for Expenses.
(a) The Corporation shall pay for or reimburse the reasonable expenses
incurred by the Indemnitee who is a party to a proceeding in advance of final
disposition of the proceeding and in advance of any determination and
authorization of indemnification pursuant to Section 4 of this Agreement if:
(i) The Indemnitee furnishes the Corporation a written
affirmation of the Indemnitee's good faith belief that the Indemnitee has met
the standard of conduct described in Section 2 of this Agreement; and
(ii) The Indemnitee furnishes the Corporation a written
undertaking, executed personally or on the Indemnitee's behalf, to repay the
advance if it is ultimately determined that the Indemnitee did not meet the
standard of conduct.
(b) The undertaking required by subsection (a)(i) of this Section 3
must be an unlimited general obligation of the Indemnitee but need not be
secured and may be accepted without reference to financial ability to make
repayment.
-3-
<PAGE>
(c) A request for an advance of expenses, including the affirmation
and undertaking under this Section 3 shall be in substantially the form of
Exhibit B attached hereto.
4. Determination and Authorization of Indemnification.
(a) The Corporation shall not indemnify the Indemnitee under this
Agreement unless authorized in the specific case after a determination has been
made that indemnification of the Indemnitee is permissible in the circumstances
because the Indemnitee has met the standard of conduct set forth in Section 2(b)
of this Agreement.
(b) The determination shall be made:
(i) By the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding; or
(ii) If a quorum cannot be obtained under (i) of this subsection,
by majority vote of a committee duly designated by the Board of Directors, in
which designation directors who are parties may participate, consisting solely
of two or more directors not at the time parties to the proceeding; or
(iii) By special legal counsel:
(A) Selected by the Board of Directors or its committee in
the manner prescribed in (i) or (ii) of this subsection; or
(B) If a quorum of the Board of Directors cannot be obtained
under (i) of this subsection and a committee cannot be designated under (ii) of
this subsection, selected by majority vote of the full Board of Directors, in
which selection directors who are parties may participate; or
(iv) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not be
voted on the determination.
(c) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection (b)
(iii) of this Section to select counsel.
-4-
<PAGE>
5. Right of the Indemnitee to Bring Suit: If a claim under this Agreement
is not paid in full by the Corporation within 60 days after a written claim has
been received by the Corporation, except in the case of a claim for expenses
incurred in defending a proceeding in advance of its final disposition, in which
case the applicable period shall be 20 days, the Indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, to the extent successful in whole or in part, the Indemnitee
shall be entitled to be paid also the expense of prosecuting such claim. Neither
the failure of the Corporation (including its Board of Directors, its
shareholders or special legal counsel) to have made a determination prior to the
commencement of such action that indemnification of or reimbursement or
advancement of expenses to the claimant is proper in the circumstances, nor an
actual determination by the Corporation (including its Board of Directors, its
shareholders or special legal counsel) that the Indemnitee is not entitled to
indemnification or to the reimbursement or advancement of expenses, shall be a
defense to the action or create a presumption that the Indemnitee is not so
entitled.
6. Nonexclusivity of Rights: The right to indemnification under this
Agreement shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Articles of Incorporation,
Bylaws, other agreement, vote of shareholders or disinterested directors,
insurance policy, principles of common law or equity, or otherwise.
7. Continuation of Rights: Rights of indemnification under this Agreement
shall continue as to an Indemnitee who has ceased to be a Director or Officer
and shall inure to the benefit of his heirs, executors and administrators.
8. Savings Clause: If any provision of this Agreement or any portion
thereof shall be invalidated on any ground by any court of competent
jurisdiction, the Corporation shall nevertheless indemnify each director as to
reasonable expenses and liabilities with respect to any proceeding, whether or
not brought by or in the right of the Corporation, to the full extent permitted
by any applicable portion of this Agreement that shall not have been
invalidated, or by any other applicable law.
9. Gender: Whenever the context requires, the gender of all words used
herein shall include the masculine, feminine and neuter.
10. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
KIDSTOYSPLUS.COM, INC. INDEMNITEE
By ------------------------------ -------------------------------------
------------------------------ [Type in Name of Indemnitee]
Its -----------------------------
-6-
<PAGE>
EXHIBIT A
STATEMENT OF REQUEST FOR INDEMNIFICATION
STATE/PROVINCE OF ---------------)
) ss.
COUNTY/CITY OF ------------------)
I, ---------------------- , being first duly sworn, do depose and say as
follows:
1. This Statement is submitted pursuant to the Indemnification Agreement
(the "Agreement") dated __________________, 19__, between KIDSTOYSPLUS.COM,
INC., a Nevada corporation, (the "Corporation") and the undersigned.
2. I am requesting indemnification against expenses (including attorneys'
and others' fees and expenses), judgments, fines and amounts paid in settlement,
all of which (collectively, "Liabilities") have been or will be actually and
reasonably incurred by me in connection with the defense of a proceeding to
which I was or am a party.
3. With respect to all matters related to any such action or proceeding, I
am entitled to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have arisen or may arise
out of --------------------------------------------------------------.
Dated:-------------, 19--.
------------------------------------------
[Type in Name of Indemnitee]
Subscribed and sworn to before me this ---- day of ---------------, 19--.
------------------------------------------
(Seal) Notary Public in and for the State of
------------, residing at ----------------
Commission expires:-----------------------
-7-
<PAGE>
EXHIBIT B
STATEMENT OF UNDERTAKING
STATE/PROVINCE OF ---------------)
) ss.
COUNTY/CITY OF ------------------)
I, ---------------------- , being first duly sworn, do depose and say as
follows:
1. This Statement of Undertaking is submitted pursuant to the
Indemnification Agreement dated ---------------, 19-, between KIDSTOYSPLUS.COM,
INC., a Nevada corporation, (the "Corporation") and the undersigned.
2. I am requesting advancement of certain expenses (including attorneys'
and others' fees and expenses) which I have incurred or will incur in defending
a civil or criminal action or proceeding.
3. It is my good faith belief that I have met the standard of conduct
necessary for indemnification by the Corporation under the terms of the
aforesaid Indemnification Agreement.
4. I hereby undertake to repay this advancement of expenses if it shall be
ultimately determined that I am not entitled to be indemnified by the
Corporation under the aforesaid Indemnification Agreement or otherwise.
5. The expenses for which advancement is requested are, in general, all
expenses related to ------------------------------------.
Dated:-------------, 1999.
------------------------------------------
[Type in Name of Indemnitee]
Subscribed and sworn to before me this ---- day of ---------------, 19--.
------------------------------------------
(Seal) Notary Public in and for the State of
------------, residing at ----------------
Commission expires:-----------------------
-8-
Exhibit 6.6
STOCK SUBSCRIPTION AGREEMENT
The undersigned hereby subscribes for one hundred thousand (______) share
of the common stock of KIDSTOYSPLUS.COM, INC., a Nevada corporation (the
"corporation"), in consideration of cash or property for a total value of
________ ($_____) to be transferred to the corporation.
The undersigned agrees that upon the issuance of the shares, he will
execute an investment letter in the form attached hereto as Exhibit A to reflect
his acquisition of such shares for investment purposes and not with a view
toward their resale or distribution. Delivery of an executed counterpart of a
signature page to this agreement via telephone facsimile transmission will be
effective as delivery of a manually executed counterpart of this agreement.
DATED: March __, 1999.
-------------------------------------------
ACCEPTANCE
The foregoing subscription agreement and the consideration reflected
therein are hereby accepted.
DATED: March __, 1999.
KIDSTOYSPLUS.COM, INC.
-------------------------------------------
<PAGE>
KIDSTOYSPLUS.COM INC.
Suit 1000, 355 Burrard Street
Vancouver, BC V6C 2H5
Gentlemen:
I acknowledge receipt of ( ) share(s) of common stock of KIDSTOYSPLUS.COM
INC., a Nevada corporation (the "Company"), (the "Securities"). In connection
with my acquisition of these Securities, I understand as follows:
These Securities are not registered under the Securities Act of 1933 (the
"Act") as the transaction in which they are being acquired is exempt under
Section 4(2) of the Act as not involving any public offering. Reliance of the
Company and others upon this exemption is predicated in part upon my
representation (which I hereby confirm) that I am acquiring these Securities for
my own account with no present intention of selling or otherwise distributing
the same to the public. I understand that in the view of the Securities and
Exchange Commission (the "SEC") the statutory and administrative basis for
exemption would not be present if, notwithstanding my representation, I have in
mind merely acquiring these Securities for sale upon the occurrence or
nonoccurrence of some predetermined event such as, for example, holding the
Securities for a market rise, or for sale if the market does not rise, or for a
fixed or determinable period in the future.
These Securities must be held by me indefinitely unless they are
subsequently registered under the Act or an exemption from registration is
available. Any routine sales of these Securities made in reliance upon the
exemption afforded by Rule 144 of the SEC can be made only in limited amounts in
accordance with the terms and conditions of that rule, and, in the event this
rule is for some reason inapplicable, compliance with Regulation A of the SEC or
some other disclosure exemption will be required. The Company will supply to me
such information in its possession as may be necessary to enable me to make
routine sales of the Securities under Rule 144, if that Rule is available.
However, the Company is under no obligation to make such information "publicly
available," to otherwise comply with any such exemption, or to register the
Securities.
In accordance with the policies of the SEC, the Company is placing the
following legend upon the certificates representing the Securities and is
placing upon the Company's stock transfer records a stop-transfer order
preventing transfer of the Securities pending compliance with the conditions set
forth in the legend:
-1-
<PAGE>
These Securities are not registered under state or federal Securities laws
and may not be offered, or sold, pledged (except a pledge pursuant to the
terms of which any offer or sale upon foreclosure would be made in a manner
that would not violate the registration provisions of federal or state
Securities laws) or otherwise distributed for value, nor may these
Securities be transferred on the books of the company, without opinion of
counsel, concurred in by counsel for the company, that no violation of said
registration provisions would result therefrom.
This letter may be executed or acknowledged by counterpart of this
signature page via telephone facsimile transmission and will be effective as
delivery of a manually executed counterpart of this letter.
I HAVE CAREFULLY READ THE FOREGOING AND UNDERSTAND THAT IT RELATES TO
RESTRICTIONS UPON MY ABILITY TO SELL AND/OR TRANSFER MY SECURITIES.
DATED: ----------------------------
---------------------------------------
Brian C. Doutaz
I certify that a copy of the
above letter has been retained
by the above securityholder.
KIDSTOYSPLUS.COM INC.
- - -----------------------------------
Albert R. Timcke, President
Exhibit 6.7
SUBSCRIPTION AGREEMENT
KIDSTOYSPLUS.COM, INC.
Suite 1000 - 355 Burrard Street
Vancouver, British Columbia V6C 2H5
I. SUBSCRIPTION
The undersigned (the "Subscriber") hereby irrevocably subscribes for that
number of Shares set forth below, upon and subject to the terms and conditions
set forth on Schedule I attached hereto and the provisions of the Offering
Memorandum described in Schedule I, both of which the Subscriber acknowledges
that the Subscriber has carefully read. The Subscriber has also completed the
Investor Questionnaire attached hereto as Schedule II.
Total Number of Shares to be Acquired: ---------------------------
Amount to be Paid (price of $0.50 per Share; minimum of $1,000): ---------------
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this ----- of ---------------------------,1999.
- - -----------------------------
Signature Subscriber's Social Security or Tax
Print Name: ---------------------- Identification Number ----------------
Print Title:---------------------- Signature of Co-owners
Address: ------------------------- if applicable: -----------------------
Number and Street
-------------------------
City, State, Zip
Name as it should appear on the Note: ----------------------------
If Joint Ownership, check one (all parties must sign above):
[ ] Joint Tenants with [ ] Tenants in Common [ ] Community Property
Right of Survivorship
If Fiduciary or Business Organization, check one:
[ ] Trust [ ] Estate [ ] Power of Attorney
[ ] Name and Type of Business Organization: -----------------------------------
ACCEPTANCE OF SUBSCRIPTION
The foregoing Subscription is hereby accepted for and on behalf of
KIDSTOYSPLUS.COM, INC. this ---- day of ----------------------, 1999.
KIDSTOYSPLUS.COM, INC.
By ------------------------------------
Albert R. Timcke, President
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 1 - March 22, 1999
<PAGE>
KIDSTOYSPLUS.COM, INC.
Suite 1000 - 355 Burrard Street
Vancouver, British Columbia V6C 2H5
Schedule I to Subscription Agreement
1. General. The Subscriber understands that KIDSTOYSPLUS.COM, INC., a
Nevada corporation (the "Company"), is offering for sale up to $150,000 in the
Company's common stock (the "Shares"). The Subscriber also understands that the
President of the Company may, in his sole discretion, increase the amount of
Shares offered. This offering is made pursuant to a Offering Memorandum dated
March 22, 1999 (the "Offering Memorandum"), all as more particularly described
and set forth in the Offering Memorandum. The Subscriber further understands
that the offering is being made without registration of the Shares under the
Securities Act of 1933, as amended (the "Securities Act") of the securities laws
of any state of the United States, and is being made in reliance upon the
exemption from registration provided by Rule 504 of Regulation D under the
Securities Act. The Subscriber has been advised that the Shares will be issued
by the Company in connection with a transaction that is exempt from registration
under Section 3(b) of the Securities Act and that it does not involve any public
offering within the meaning of Section 4(2) of the Securities Act or Section
25102(f) of the Uniform Securities Act of Nevada, or under the respective rules
and regulations of the Securities Exchange Commission and the Nevada
Commissioner of Corporations. Further, the Subscriber understands that the
Offering is being made only to investors who meet certain suitability
requirements under the Securities Act and applicable state securities laws. The
Subscriber acknowledges that the Shares will be subject to restrictions on
transfer as set forth in this Agreement.
2. Acceptance of Subscription and Issuance of Shares. It is understood and
agreed that the Company shall have the sole right, at its complete discretion,
to accept or reject this subscription, in whole or in part, for any reason and
that the same shall be deemed to be accepted by the Company only when it is
signed by a duly authorized officer of the Company and delivered to the
Subscriber as provided in Section 3 hereof. Subscriptions need not be accepted
in the order received, and the Shares may be allocated among subscribers.
Notwithstanding anything in this Agreement to the contrary, the Company shall
have no obligation to issue any of the Shares to any person who is a resident of
a jurisdiction in which the issuance of Shares to him would constitute a
violation of federal or state securities or "blue sky" or other similar laws
(collectively referred to as the "Securities Laws").
3. Closing. Closing of the purchase and sale of the Shares (the "Closing")
shall take place at the offices of the Company or at such other place as the
Company shall designate by notice to the Subscriber on the earlier of April 7,
1999 or such date as the Company shall specify by written notice to subscribers,
unless the Company extends the offering period, in which case Closing may occur
on such other date as the Manager may determine in its sole discretion. The
Company may provide for one or more Closings of sales of Shares pursuant to
subscriptions received, while continuing to offer the Shares that constitute the
unsold portion of the Offering.
4. Payment for Shares. Payment for the Shares shall be received by the
Company from the Subscriber by certified or cashier's check, wire transfer of
immediately available funds or in such manner as may be approved by the Company
at or prior to the Closing, in an amount as set forth in this Agreement. The
Company shall deliver the Shares to the Subscriber at the Closing or promptly
thereafter as specified in the offering materials.
5. Representations and Warranties of the Company. As of the date of
acceptance of the subscription for the Shares, the Company represents and
warrants that:
(a) The Company is a corporation duly formed and duly authorized to
transact business in the State of Nevada, with full power and
authority to conduct its business as it is currently being
conducted and to own its assets; and has secured any other
authorizations, approvals, permits and orders required by law for
the conduct by the Company of its business as it is currently
being conducted. Prior to the date hereof, the Company has
conducted its business activity as described in the offering
materials, including the Offering Memorandum and the Business
Plan attached thereto.
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 2 - March 22, 1999
<PAGE>
(b) The Company has duly authorized the issuance and sale of the
Shares upon the terms of their offer by all requisite corporate
action. The Company has reserved for issuance such number of
shares of Common Stock as are contemplated for issuance in
connection with the Offering as described in the Offering
Memorandum.
(c) The Shares will represent validly authorized, duly issued and
fully paid and non-assessable shares of Common Stock of the
Company.
6. Representations, Warranties and Covenants of the Subscriber. The
Subscriber hereby represents and warrants to and covenants with the Company and
each officer, director, and agent of the Company that:
(a) General:
(i) The Subscriber has all requisite authority to enter into
this Agreement and to perform all the obligations required
to be performed by the Subscriber hereunder.
(ii) The Subscriber is purchasing the Shares for investment
purposes and for the Subscriber's own account and not for
the account or benefit of, or for resale to, any other
person.
(iii)The Subscriber is a resident of the state set forth on the
signature page hereto and is not acquiring the Shares as an
agent or otherwise for any other person.
(b) Information Concerning the Company:
(i) The Subscriber has received a copy of the Offering
Memorandum and each of the Exhibits thereto. The Subscriber
has not been furnished any offering literature other than
the Offering Memorandum and Exhibits thereto and has relied
only on the information contained therein.
(ii) The Subscriber is aware that the Company has a limited
operating history, as described in the Offering Memorandum,
and is familiar with the business and financial condition,
properties, operations and prospects of the Company, all as
generally described in the Offering Memorandum and the
Business Plan attached thereto. The Subscriber has been
given the opportunity to obtain any information necessary to
verify the accuracy of the information set forth in the
Offering Memorandum or the Business Plan and has been
furnished all such information so requested.
(iii)The Subscriber understands that all the Subscriber's
representations and warranties contained in this Agreement
will be deemed to have been reaffirmed and confirmed as of
the date of this Agreement, taking into account all
information received by the Subscriber.
(iv) The Subscriber understands that the purchase of the Shares
involves a high degree of risk, and is subject to a variety
of risk factors, including, without limitation, those
described under "Risk Factors" in the Offering Memorandum.
(v) The Subscriber understands that no federal or state agency
has passed upon the Shares or made any finding or
determination concerning the fairness or advisability of
this investment.
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 3 - March 22, 1999
<PAGE>
(vi) The Subscriber understands that estimates and projections
like those contained in the Offering Memorandum or the
Business Plan, by their nature, involve significant elements
of subjective judgment, estimates, assumptions and analysis
that may or may not be correct; that there can be no
assurance that such projections or goals will be attained;
and that the projections and estimates contained in the
Offering Memorandum or the Business Plan should not be
relied upon as a promise or representation of the future
performance of the Company.
(c) Status of Subscriber:
(i) The Subscriber has such knowledge, skill and experience in
business, financial and investment matters so that he is
capable of evaluating the merits and risks of an investment
in the Shares. To the extent necessary, the Subscriber has
retained, at his own expense, and relied upon, appropriate
professional advice regarding the investment, tax and legal
merits and consequences of this Agreement and owning Shares.
(ii) The amount of the Subscriber's investment in the Shares does
not exceed ten percent (10%) of the Subscriber's net worth.
The Subscriber agrees to furnish any additional information
requested to assure compliance with applicable federal and
state securities laws in connection with the purchase and
sale of the Shares.
(d) Restrictions on Transfer or Sale of Shares:
(i) The Subscriber is acquiring the Shares solely for his own
beneficial account, for investment purposes, and not with a
view to, or for resale in connection with, any distribution
of the Shares. The Subscriber understands that the Shares
have not been registered under the Securities Laws by reason
of specific exemptions under the provisions thereof which
depend in part upon the investment intent of the Subscriber
and of the other representations made by the Subscriber in
this Agreement. The Subscriber understands that the Company
is relying upon the representations and agreements contained
in this Agreement (and any supplemental information,
including the Questionnaire contained in Schedule II) for
the purpose of determining whether this transaction meets
the requirements for such exemptions.
(ii) The Subscriber understands that there is no public market
for the Shares at the present time and such a public market
may never develop.
(iii)The Subscriber agrees: (A) that he will not sell, assign,
pledge, give, transfer or otherwise dispose of the Shares or
any interest therein, or make any offer or attempt to do any
of the foregoing, except pursuant to a registration of the
Shares under the Securities Act and all applicable
Securities Laws or in a transaction which is exempt from the
registration provisions of the Securities Act and all
applicable Securities Laws; (B) that the certificate(s) for
the Shares will bear a legend making reference to the
foregoing restrictions; and (C) that the Company and any
transfer agent for the Shares shall not be required to give
effect to any purported transfer of such Shares except upon
compliance with the foregoing restrictions.
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 4 - March 22, 1999
<PAGE>
(iv) The Subscriber has not offered or sold any portion of his
Shares and has no present intention of dividing his Shares
with others or of reselling or otherwise disposing of any
portion of his Shares either currently or after the passage
of a fixed or determinable period of time or upon the
occurrence or nonoccurrence of any predetermined event or
circumstance.
(v) The Subscriber acknowledges that neither the Company nor any
other person offered to sell the Shares to it by means of
any form of general solicitation or advertising.
(vi) The Subscriber acknowledges that the Company has the right
in its sole and absolute discretion to abandon this Offering
at any time prior to the completion of the offering and to
return the previously paid subscription price of the Shares
without interest thereon, to any or all of the respective
subscribers.
7. Conditions to Obligations of the Subscriber and the Company. The
obligations of the Subscriber to purchase and pay for the number of Shares
specified herein and of the Company to sell the Shares are subject to the
satisfaction of the following conditions precedent: the representations and
warranties of the Company contained in Section 5 hereof and of the Subscriber
contained in Section 6 hereof shall be true and correct on and as of the date of
Closing in all respects with the same effect as though such representations and
warranties had been made on and as of the Closing.
8. Obligations Irrevocable. The obligations of the Subscriber hereunder
shall be irrevocable, except with the consent of the Company.
9. Legend. Each certificate for Shares sold pursuant to this Agreement will
be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR
IN THE OPINION OF COUNSEL, SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS IS NOT REQUIRED."
10. Brokers. The Subscriber has not entered into any agreement to pay any
broker's or finder's fee to any person with respect to this Agreement or the
transactions contemplated hereby.
11. Waiver, Amendment. Neither this Agreement nor any provisions hereof
shall be modified, changed, discharged or terminated except by an instrument in
writing, signed by the party against whom any waiver, change, discharge or
termination is sought.
12. Assignability. Neither this Agreement nor any right, remedy, obligation
or liability arising hereunder or by reason hereof shall be assignable by either
the Company or the Subscriber without the prior written consent of the other
party.
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada.
14. Section and Other Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 5 - March 22, 1999
<PAGE>
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
16. Notices. All notices and other communications provided for herein shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid or by facsimile or other electronic means indicating the date of
receipt and the signatures of the parties:
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 6 - March 22, 1999
<PAGE>
(a) If to the Company, at the following address:
KIDSTOYSPLUS.COM, INC.
Suite 1000 - 355 Burrard Street
Vancouver, British Columbia
V6C 2H5
Attention: Albert R. Timcke
(b) If to the Subscriber, at the address set forth on the signature
page hereto; or at such other address as either party shall have
specified by notice in writing to the other.
17. Binding Effect. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
18. Survival. All representations, warranties and covenants contained in
this Agreement shall survive (i) the acceptance of the subscription by the
Company, (ii) changes in the transactions, documents and instruments described
in the Offering Memorandum which are not material or which are to the benefit of
the Subscriber, and (iii) the death or disability of the Subscriber.
19. Notification of Changes. The Subscriber hereby covenants and agrees to
notify the Company upon the occurrence of any event prior to the closing of the
purchase of the Shares pursuant to this Agreement which would cause any
representation, warranty, or covenant of the Subscriber contained in this
Agreement to be false or incorrect.
IN WITNESS WHEREOF, the undersigned Subscriber has duly signed and
delivered this Schedule 1 and Schedule II to the Subscription Agreement as of
the following date.
Subscriber(s)
Date: ------------------ By: ------------------------------------
Address: ---------------------------
---------------------------
By: ----------------------------------
Address: ---------------------------
---------------------------
Witnessed: ----------------------- Date: -------------
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 7 - March 22, 1999
<PAGE>
KIDSTOYSPLUS.COM, INC.
Suite 1000 - 355 Burrard Street
Vancouver, British Columbia V6C 2H5
Schedule II to Subscription Agreement
Representations, Warranties and Covenants by Subscriber Related to Exemption
from Prospectus and Registration Requirements
The Subscriber represents, warrants, covenants and acknowledges to
Kidstoysplus.com, Inc. (the "Corporation") and its agents including its
officers, directors and promoters (collectively, the "Agent"), and acknowledge
that the Corporation, its Agent and their respective counsel, are relying
thereon that:
1. To the undersigned's satisfaction, (i) the undersigned has either had
access to or has been furnished with all the information regarding the
Corporation and the terms of this investment transaction to the
undersigned's satisfaction; (ii) the undersigned has discussed the entire
investment transaction and the information described in clause (i) above
with representatives of the Corporation; (iii) the undersigned has been
provided the opportunity to ask questions concerning this investment
transaction and the terms and conditions thereof and all such questions
have been answered to the undersigned's satisfaction; (iv) the undersigned
has obtained all additional information which the undersigned deems
necessary to verify the accuracy of the information previously disclosed or
provided to the undersigned; and (v) the undersigned has had ready access
to and opportunity to review any and all documents which the undersigned
deems relevant to this transaction, and no information, oral or written,
that the undersigned has requested has been withheld by the Corporation.
2. The address of the residence of the undersigned (if an individual) or the
undersigned's place of business (if an entity) is set forth herein.
3. The Securities are being purchased under an exemption from the prospectus
and registration requirements of the Securities Act or Securities Act Rules
(British Columbia) (respectively, the "B.C. Act" and the "Rules") set out
in:
(a) Section 128(a) of the Rules, that the Placee is purchasing the
securities as principal (for his or her own account and not on behalf
of any other person);
(b) the undersigned is purchasing shares as principal and no other person,
corporation, firm or other organization will have a beneficial
interest in the shares and that:
(i) a sophisticated purchaser, as that term is defined in the B.C.
Act; OR
(ii) a spouse, parent, brother, sister or child of a senior officer or
director of affiliate of the company; OR
(iii)a company, all the voting securities of which are beneficially
owned by one or more of a senior officer or director of the
company, or of an affiliate of the company, or a spouse, parent,
brother, sister or child of a senior officer or director of the
company, or of an affiliate of the company;
(c) the undersigned completes, executes and delivers to the company a Form
20A (IP) or Form 20A (NIP), whichever is applicable in the forms
attached hereto;
(d) the shares were not to the undersigned's knowledge, advertised in
media print, of general and regular paid circulation, radio or
television; and
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 8 - March 22, 1999
<PAGE>
(e) the undersigned has been provided with and has read and understood the
offering memorandum of the company dated _________________1999 in
connection with the sale of the shares.
(f) no prospectus has been filed by the company with the British Columbia
Securities Commission in connection with the issuance of the shares;
(g) the issuance and sale of the shares are exempt from the prospectus
requirements of the B.C. Act or the Rules:
(h) the undersigned is restricted from using most of the civil remedies
available under the B.C. Act and the Rules;
(i) the undersigned may not receive information that would otherwise be
required to be provided to it under the B.C. Act and the Rules; and
(j) the company is relieved from certain obligations that would otherwise
apply under the B.C. Act and the Rules.
2. The Securities are being purchased under the "private issuer" exemption
ss.46(j) of the B.C. Act:
(a) The undersigned acknowledges that he/she is acquainted with, and is a
personal friend, relative or business associate of Albert R. Timcke or
Brian C. Doutaz (circle one), a director of the company, and that the
company is a non-reporting company.
3. The Subscriber further represents, warrants and covenants to the
Corporation and the Agent (and acknowledges that the Corporation and its
agents (collectively, the "Agent"), and their respective counsel, are
relying thereon) that:
(a) it has been independently advised as to the restrictions applicable to
trading in the Common Shares being subscriber for under the
Subscription Agreement imposed by applicable securities legislation in
the jurisdiction in which it resides, confirms that no representation
has been made to it by or on behalf of the Corporation or the Agent
with respect thereto, acknowledges that it is aware of the
characteristics of the Common Shares, the risks relating to an
investment therein and of the fact that it may not be able to resell
the Common Shares except in accordance with limited exemptions under
applicable securities legislation and regulatory policy, until expiry
of all applicable hold periods and compliance with the other
requirements of applicable law and that the Corporation is not a
reporting issuer in any jurisdiction and thus the applicable "hold
period" will not commence to run until the Corporation becomes a
reporting issuer in the applicable province; and
(b) if it is purchasing the Common Shares as principal for its own
account, it is purchasing such Common Shares not for the benefit of
any other person, and not with a view to the resale or distribution of
all or any of the Common Shares, it is resident in the jurisdiction
set out as the "Subscriber's Address" herein and it fully complies
with the criteria set forth below in this paragraph 3(b):
(c) it is aware that the Common Shares have not been and will not be
registered under the United States Securities Act of 1933 (the "U.S.
Securities Act") and that these securities may not be offered or sold
in the United States without registration under the U.S. Securities
Act or compliance with requirements of an exemption from registration;
and
(d) it is not acquiring the Common Shares for the account or benefit of a
person in the United States; and
(e) the Common Shares have not been offered to the undersigned in the
United States, and the individuals making the order to purchase the
Common Shares and executing and delivering this Subscription
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 9 - March 22, 1999
<PAGE>
Agreement on behalf of the undersigned were not in the United States
when the order was placed and this Subscription Agreement was executed
and delivered; and
(f) it undertakes and agrees that it will not offer or sell the Common
Shares in the United States unless such securities are registered
under the U.S. Securities Act and the securities laws of all
applicable states of the United States or an exemption from such
registration requirements is available, and further that it will not
resell the Common Shares, except in accordance with the provisions of
applicable securities legislation, regulations, rules, policies and
orders and stock exchange rules; and
(g) it is an individual, it is of the full age of majority and is legally
competent to execute this Subscription Agreement and take all action
pursuant hereto; and
(h) the Subscription Agreement has been duly and validly authorized,
executed and delivered by and constitutes a legal, valid, binding and
enforceable obligation of the Subscriber; and
(i) it has such knowledge of financial and business affairs as to be
capable of evaluating the merits and risks of its investment and it,
or, where it is not purchasing as principal, each beneficial
purchaser, is able to bear the economic risk of loss of its
investment; and
(j) it understands that the sale and delivery of the Common Shares is
conditional upon such sale being exempt from the requirements as to
the filing of a prospectus or upon the issuance of such orders,
consents or approvals as may be required to permit such sale without
the requirement of filing a prospectus; and
(k) the undersigned will execute, deliver, file and otherwise assist the
Corporation in filing, such reports, undertakings and other documents
as may be required by applicable securities legislation, regulations,
rules, policies or orders or by any securities commission or other
regulatory authority, with respect to the distribution of the Common
Shares; and
(l) it is capable of assessing the proposed investment as a result of the
Subscriber's financial experience or as a result of advice received
from a registered dealer other than the Corporation or any affiliate
thereof
IN WITNESS WHEREOF, the undersigned has executed this Schedule as of
______________ , 1999.
SUBSCRIBER:
------------------------------------
(Signature)
------------------------------------
(Print Name)
------------------------------------
(Address)
------------------------------------
(City/State/Zip Code)
------------------------------------
(Area Code/Telephone Number)
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 10 - March 22, 1999
<PAGE>
Form 20A (IP)
Securities Act
Acknowledgment of Individual Purchaser
1. I have agreed to purchase from Kidstoysplus.com, Inc. ( the "Issuer")
_____________ common shares of the Issuer at a price of $_______ per share.
2. I am purchasing the securities as a principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
securities.
3. I have / have not received an offering memorandum describing the Issuer and
the securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has reviewed or
passed on the merits of the securities, AND
(b) there is no government or other insurance covering the securities AND
(c) I may loose all of my investment AND
(d) There are restrictions on my ability to resell the securities and it is my
responsibility to find out what those restrictions are and to comply with
them before selling the securities, AND
(e) I will not receive a prospectus that the Securities Act (the "Act") would
otherwise require be given to me because the Issuer has advised me that it
is relying on a prospectus exemption, AND
(f) Because I am not purchasing the Securities under a prospectus, I will not
have the civil remedies that would otherwise be available to me, AND
(g) The Issuer has advised me that it is using an exemption from the
requirement to sell through a dealer registered under the Act, except
purchases referred to in paragraph 5(g), and as a result I do not have the
benefit of any protection that might be available to me by having a dealer
act on my behalf.
5. I also acknowledge that: (CIRCLE ONE OF THE APPLICABLE STATEMENTS BELOW)
(a) I am purchasing securities that have an aggregate acquisition of $97,000 or
more, OR
(b) My net worth, or net worth jointly with my spouse at the date of the
agreement of purchase and sale of the security, is not less that $400,000
OR
(c) My annual net income before tax is not less than $75,000, or my annual net
income before tax jointly with my spouse is not less than $125,000 in each
of the two most recent calendar years, and I reasonably expect to have
annual net income before tax of not less than $75,000 or annual net income
before tax jointly with my spouse of not less than $125,000 in the current
calendar year, OR
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior officer or
director of the Issuer, or of an affiliate of the Issuer, OR
(f) I am a close personal friend of a senior officer or director of the Issuer,
or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c)( $25,000 - registrant
required ) of the Rules and I have spoken to a person
_______________________________( the "Registered Person") who has advised
me that the Registered Person is registered to trade or advise in the
securities and that the purchase of the securities is a suitable investment
for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5 (d), I
acknowledge that, on the basis of the information about the securities
furnished by the Issuer, I am able to evaluate the risks and
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 11 - March 22, 1999
<PAGE>
merits of the securities because: (circle one )
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person ____________________________________ (
the "Advisor" who has advised me that the Advisor is
(1) registered to advise, or exempted from the requirement to be
registered to advise in respect of the securities, AND
(2) not an insider of, or in a special relationship with the Issuer
The statements in this report are true.
DATED -------------------------------------
- - -------------------------------------------
Signature of Purchaser
- - -------------------------------------------
Name of Purchaser (Please Print)
- - -------------------------------------------
Street Address
- - -------------------------------------------
City, State, Province
- - -------------------------------------------
Zip Code
KIDSTOYSPLUS.COM, INC.
Subscription Package
Page 12 - March 22, 1999
Exhibit 6.9
KIDSTOYS PLUS.COM, INC.
1999 STOCK OPTION PLAN
This 1999 Stock Option Plan (the "Plan") provides for the grant of options
to acquire shares of common stock, (the "Common Stock"), of KIDSTOYSPLUS.COM,
INC., a Nevada corporation (the "Company"). Stock options granted under this
Plan that qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), are referred to in this Plan as "Incentive Stock Options."
Incentive Stock Options and stock options that do not qualify under Section 422
of the Code ("Non-Qualified Stock Options") granted under this Plan are referred
to collectively as "Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key
employees and consultants of the Company and such other persons as the Plan
Administrator shall select in accordance with Section 3 below, to encourage such
persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company, and to serve as an aid and inducement in the hiring of new
employees and to provide an equity incentive to consultants and other persons
selected by the Plan Administrator.
2. ADMINISTRATION.
This Plan shall be administered initially by the Board of Directors of the
Company (the "Board"), except that the Board may, in its discretion, establish a
committee composed of two (2) or more members of the Board or two (2) or more
other persons to administer the Plan, which committee (the "Committee") may be
an executive, compensation or other committee, including a separate committee
especially created for this purpose. The Committee shall have the powers and
authority vested in the Board hereunder (including the power and authority to
interpret any provision of the Plan or of any Option). The members of any such
Committee shall serve at the pleasure of the Board. A majority of the members of
the Committee shall constitute a quorum, and all actions of the Committee shall
be taken by a majority of the members present. Any action may be taken by a
written instrument signed by all of the members of the Committee and any action
so taken shall be fully effective as if it had been taken at a meeting. The
Board or, if applicable, the Committee is referred to herein as the "Plan
Administrator."
If and when the Company becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan
Administrator will be either the full Board of Directors or a committee composed
of two (2) or more members of the Board who are "Non-Employee Directors" as
defined under Rule 16b-3 (as amended from time to time) promulgated under the
Exchange Act or any successor rule or regulatory requirement. In addition, if
the Board decides to maintain eligibility for the benefits of Section 162(m) of
the Code, the Plan Administrator will be either the full Board of Directors if
each director is an "Outside Director," as defined under Section 162(m) of the
Code (as amended from time to time) and the regulations (or any successor
regulations) promulgated thereunder ("Section 162(m) of the Code" or the
Committee which will be composed of two (2) or more members of the Board who are
Outside Directors.
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (i) construe and interpret this Plan; (ii) define the terms used
in the Plan; (iii) prescribe, amend and rescind the rules and regulations
relating to this Plan; (iv) correct any defect, supply any omission or reconcile
any inconsistency in this Plan; (v) grant Options under this Plan; (vi)
determine the individuals to whom Options shall be granted under this Plan and
whether the Option is an Incentive Stock Option or a Non-Qualified Stock Option;
(vii) determine the time or times at which Options shall be granted under this
Plan; (viii) determine the number of shares of Common Stock subject to each
Option, the exercise price of each Option, the duration of each Option and the
times at which each Option shall become exercisable; (ix) determine all other
terms and conditions of the Options; and (x) make all other determinations and
interpretations necessary and
-1-
1999 - Stock Option Plan
Kidstoysplus.com, Inc.
<PAGE>
advisable for the administration of the Plan. All decisions, determinations and
interpretations made by the Plan Administrator shall be binding and conclusive
on all participants in the Plan and on their legal representatives, heirs and
beneficiaries.
The Board or, if applicable, the Committee may delegate to one or more
executive officers of the Company the authority to grant Options under this Plan
to employees of the Company who, on the Date of Grant, are not subject to
Section 16 of the Exchange Act with respect to the Common Stock ("Insiders"),
and are not "covered employees" as such term is defined for purposes of Section
162(m) of the Code ("Covered Employees"), and in connection therewith the
authority to determine: (i) the number of shares of Common Stock subject to such
Options; (ii) the duration of the Option; (iii) the vesting schedule for
determining the times at which such Option shall become exercisable; and (iv)
all other terms and conditions of such Options. The exercise price for any
Option granted by action of an executive officer or officers pursuant to such
delegation of authority shall not be less than the fair market value per share
of the Common Stock on the Date of Grant. Unless expressly approved in advance
by the Board or the Committee, such delegation of authority shall not include
the authority to accelerate vesting, extend the period for exercise or otherwise
alter the terms of outstanding Options. The term "Plan Administrator" when used
in any provision of this Plan other than Sections 2, 5(f), 5(m), and 11 shall be
deemed to refer to the Board or the Committee, as the case may be, and an
executive officer who has been authorized to grant Options pursuant thereto,
insofar as such provisions may be applied to persons that are not Insiders and
not Covered Employees and Options granted to such persons.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the time
the Option is granted, is an employee of the Company or any Related Corporation
(as defined below) ("Employees"). Non-Qualified Stock Options may be granted to
Employees and to such other persons other than directors who are not Employees
as the Plan Administrator shall select. Options may be granted in substitution
for outstanding Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization between
such other corporation and the Company or any subsidiary of the Company. Options
also may be granted in exchange for outstanding Options. No person shall be
eligible to receive in any fiscal year Options to purchase more than 100,000
shares of Common Stock (subject to adjustment as set forth in Section 5(m)
hereof). Any person to whom an Option is granted under this Plan is referred to
as an "Optionee." Any person who is the owner of an Option is referred to as a
"Holder."
As used in this Plan, the term "Related Corporation" shall mean any
corporation (other than the Company) that is a "Parent Corporation" of the
Company or "Subsidiary Corporation" of the Company, as those terms are defined
in Sections 424(e) and 424(f), respectively, of the Code (or any successor
provisions) and the regulations thereunder (as amended from time to time).
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a
total of 1,500,000 shares of the Company's authorized but unissued, or
reacquired, Common Stock. The number of shares with respect to which Options may
be granted hereunder is subject to adjustment as set forth in Section 5(m)
hereof. If any outstanding Option expires or is terminated for any reason, the
shares of Common Stock allocable to the unexercised portion of such Option may
again be subject to an Option granted to the same Optionee or to a different
person eligible under Section 3 of this Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Plan Administrator (the "Agreement"). Agreements may
contain such provisions, not inconsistent with this Plan, as the
-2-
1999 - Stock Option Plan
Kidstoysplus.com, Inc.
<PAGE>
Plan Administrator in its discretion may deem advisable. All Options also shall
comply with the following requirements:
(a) Number of Shares and Type of Option.
Each Agreement shall state the number of shares of Common Stock to
which it pertains and whether the Option is intended to be an Incentive Stock
Option or a Non-Qualified Stock Option. In the absence of action to the contrary
by the Plan Administrator in connection with the grant of an Option, all Options
shall be Non-Qualified Stock Options. The aggregate fair market value
(determined at the Date of Grant, as defined below) of the stock with respect to
which Incentive Stock Options are exercisable for the first time by the Optionee
during any calendar year (granted under this Plan and all other Incentive Stock
Option plans of the Company, a Related Corporation or a predecessor corporation)
shall not exceed $100,000, or such other limit as may be prescribed by the Code
as it may be amended from time to time. Any portion of an Option which exceeds
the annual limit shall not be void but rather shall be a Non-Qualified Stock
Option.
(b) Date of Grant.
Each Agreement shall state the date the Plan Administrator has deemed
to be the effective date of the Option for purposes of this Plan (the "Date of
Grant").
(c) Option Price.
Each Agreement shall state the price per share of Common Stock at
which it is exercisable. The exercise price shall be fixed by the Plan
Administrator at whatever price the Plan Administrator may determine in the
exercise of its sole discretion; provided that the per share exercise price for
an Incentive Stock Option or any Option granted to a "covered employee" as such
term is defined for purposes of Section 162(m) of the Code ("Covered Employee")
shall not be less than the fair market value per share of the Common Stock at
the Date of Grant as determined by the Plan Administrator in good faith;
provided further, that with respect to Incentive Stock Options granted to
greater-than-ten percent (> 10%) shareholders of the Company (as determined with
reference to Section 424(d) of the Code), the exercise price per share shall not
be less than one hundred ten percent (110%) of the fair market value per share
of the Common Stock at the Date of Grant as determined by the Plan Administrator
in good faith; and, provided further, that Options granted in substitution for
outstanding options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization
involving such other corporation and the Company or any subsidiary of the
Company may be granted with an exercise price equal to the exercise price for
the substituted option of the other corporation, subject to any adjustment
consistent with the terms of the transaction pursuant to which the substitution
is to occur.
(d) Duration of Options.
At the time of the grant of the Option, the Plan Administrator shall
designate, subject to paragraph 5(g) below, the expiration date of the Option,
which date shall not be later than ten (10) years from the Date of Grant in the
case of Incentive Stock Options; provided, that the expiration date of any
Incentive Stock Option granted to a greater-than-ten percent ( > 10%)
shareholder of the Company (as determined with reference to Section 424(d) of
the Code) shall not be later than five (5) years from the Date of Grant. In the
absence of action to the contrary by the Plan Administrator in connection with
the grant of a particular Option, and except in the case of Incentive Stock
Options as described above, all Options granted under this Section 5 shall
expire ten (10) years from the Date of Grant.
(e) Vesting Schedule.
No Option shall be exercisable until it has vested. The vesting
schedule for each Option shall be specified by the Plan Administrator at the
time of grant of the Option prior to the provision of services with respect to
which such Option is granted; provided, that if no vesting schedule is specified
at the time of grant, the Option shall vest according to the following schedule:
-3-
1999 - Stock Option Plan
Kidstoysplus.com, Inc.
<PAGE>
Number of Years Percentage of Total
Following Date of Grant Option Vested
- - ------------------------------------- ----------------------------------
One 25%
Two 50%
Three 75%
Four 100%
The Plan Administrator may specify a vesting schedule for all or any
portion of an Option based on the achievement of performance objectives
established in advance of the commencement by the Optionee of services related
to the achievement of the performance objectives. Performance objectives shall
be expressed in terms of one or more of the following: return on equity, return
on assets, share price, market share, sales, earnings per share, costs, net
earnings, net worth, inventories, cash and cash equivalents, gross margin or the
Company's performance relative to its internal business plan. Performance
objectives may be in respect of the performance of the Company as a whole
(whether on a consolidated or unconsolidated basis), a Related Corporation, or a
subdivision, operating unit, product or product line of either of the foregoing.
Performance objectives may be absolute or relative and may be expressed in terms
of a progression or a range. An Option that is exercisable (in full or in part)
upon the achievement of one or more performance objectives may be exercised only
following written notice to the Optionee and the Company by the Plan
Administrator that the performance objective has been achieved.
(f) Acceleration of Vesting.
The vesting of one or more outstanding Options may be accelerated by
the Plan Administrator at such times and in such amounts as it shall determine
in its sole discretion. The vesting of Options also shall be accelerated under
the circumstances described in Section 5(m) below.
(g) Term of Option.
Vested Options shall terminate, to the extent not previously
exercised, upon the occurrence of the first of the following events: (i) the
expiration of the Option, as designated by the Plan Administrator in accordance
with Section 5(d) above; (ii) the date of an Optionee's termination of
employment or contractual relationship with the Company or any Related
Corporation for cause (as determined in the sole discretion of the Plan
Administrator); (iii) the expiration of three (3) months from the date of an
Optionee's termination of employment or contractual relationship with the
Company or any Related Corporation for any reason whatsoever other than cause,
death or Disability (as defined below) unless, in the case of a Non-Qualified
Stock Option, the exercise period is extended by the Plan Administrator until a
date not later than the expiration date of the Option; or (iv) the expiration of
one year from termination of an Optionee's employment or contractual
relationship by reason of death or Disability (as defined below) unless, in the
case of a Non-Qualified Stock Option, the exercise period is extended by the
Plan Administrator until a date not later than the expiration date of the
Option. Upon the death of an Optionee, any vested Options held by the Optionee
shall be exercisable only by the person or persons to whom such Optionee's
rights under such Option shall pass by the Optionee's will or by the laws of
descent and distribution of the state or county of the Optionee's domicile at
the time of death and only until such Options terminate as provided above. For
purposes of the Plan, unless otherwise defined in the Agreement, "Disability"
shall mean medically determinable physical or mental impairment which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months or that can be expected to result in death. The Plan Administrator shall
determine whether an Optionee has incurred a Disability on the basis of medical
evidence acceptable to the Plan Administrator. Upon making a determination of
Disability, the Plan Administrator shall, for purposes of the Plan, determine
the date of an Optionee's termination of employment or contractual relationship.
Unless accelerated in accordance with Section 5(f) above, unvested
Options shall terminate immediately upon termination of employment of the
Optionee by the Company for any reason whatsoever, including death or
Disability. For purposes of this Plan, transfer of employment between or among
the Company
-4-
1999 - Stock Option Plan
Kidstoysplus.com, Inc.
<PAGE>
and/or any Related Corporation shall not be deemed to constitute a termination
of employment with the Company or any Related Corporation. For purposes of this
subsection, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first ninety (90) days of such leave, unless the
Optionee's re-employment rights are guaranteed by statute or by contract.
(h) Exercise of Options.
Options shall be exercisable, in full or in part, at any time after
vesting, until termination. If less than all of the shares included in the
vested portion of any Option are purchased, the remainder may be purchased at
any subsequent time prior to the expiration of the Option term. No portion of
any Option for less than fifty (50) shares (as adjusted pursuant to Section 5(m)
below) may be exercised; provided, that if the vested portion of any Option is
less than fifty (50) shares, it may be exercised with respect to all shares for
which it is vested. Only whole shares may be issued pursuant to an Option, and
to the extent that an Option covers less than one (1) share, it is
unexercisable.
Options or portions thereof may be exercised by giving written notice
to the Company, which notice shall specify the number of shares to be purchased,
and be accompanied by payment in the amount of the aggregate exercise price for
the Common Stock so purchased, which payment shall be in the form specified in
Section 5(i) below. The Company shall not be obligated to issue, transfer or
deliver a certificate of Common Stock to the Holder of any Option, until
provision has been made by the Holder, to the satisfaction of the Company, for
the payment of the aggregate exercise price for all shares for which the Option
shall have been exercised and for satisfaction of any tax withholding
obligations associated with such exercise. During the lifetime of an Optionee,
Options are exercisable only by the Optionee or in the case of a Non-Qualified
Stock Option, transferee who takes title to such Option in the manner permitted
by subsection 5(k) hereof. It shall be a condition precedent to the exercise of
any Option granted hereunder that the Holder shall enter into a Stock Transfer
Agreement with the Company.
(i) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate exercise price shall be
paid to the Company in cash or by certified or cashier's check. In addition, the
Holder may pay for all or any portion of the aggregate exercise price by
complying with one or more of the following alternatives:
(1) by delivering to the Company shares of Common Stock previously
held by such Holder, or by the Company withholding shares of Common Stock
otherwise deliverable pursuant to exercise of the Option, which shares of Common
Stock received or withheld shall have a fair market value at the date of
exercise (as determined by the Plan Administrator) equal to the aggregate
exercise price to be paid by the Optionee upon such exercise;
(2) by delivering a properly executed exercise notice together with
irrevocable instructions to a broker promptly to sell or margin a sufficient
portion of the shares and deliver directly to the Company the amount of sale or
margin loan proceeds to pay the exercise price; or
(3) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
(j) Rights as a Shareholder.
A Holder shall have no rights as a shareholder with respect to
any shares covered by an Option until such Holder becomes a record holder of
such shares, irrespective of whether such Holder has given notice of exercise.
Subject to the provisions of Section 5(m) hereof, no rights shall accrue to a
Holder and no adjustments shall be made on account of dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights declared on, or created in, the Common Stock for which the
record date is prior to the date the Holder becomes a record holder of the
shares of Common Stock covered by the Option, irrespective of whether such
Holder has given notice of exercise.
-5-
1999 - Stock Option Plan
Kidstoysplus.com, Inc.
<PAGE>
(k) Transfer of Option.
Options granted under this Plan and the rights and privileges
conferred by this Plan may not be transferred, assigned, pledged or hypothecated
in any manner (whether by operation of law or otherwise) other than by will, by
applicable laws of descent and distribution or (except in the case of an
Incentive Stock Option) pursuant to a qualified domestic relations order, and
shall not be subject to execution, attachment or similar process; provided
however, that any Agreement may provide or be amended to provide that a
Non-Qualified Stock Option to which it relates is transferable without payment
of consideration to immediate family members of the Optionee or to trusts or
partnerships or limited liability companies established exclusively for the
benefit of the Optionee and the Optionee's immediate family members. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
Option or of any right or privilege conferred by this Plan contrary to the
provisions hereof, or upon the sale, levy or any attachment or similar process
upon the rights and privileges conferred by this Plan, such Option shall
thereupon terminate and become null and void.
(l) Securities Regulation and Tax Withholding.
(1) Shares shall not be issued with respect to an Option
unless the exercise of such Option and the issuance and delivery of such shares
shall comply with all relevant provisions of law, including, without limitation,
Section 162(m) of the Code, any applicable state securities laws, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations thereunder
and the requirements of any stock exchange or automated inter-dealer quotation
system of a registered national securities association upon which such shares
may then be listed, and such issuance shall be further subject to the approval
of counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of such
shares. The inability of the Company to obtain from any regulatory body the
authority deemed by the Company to be necessary for the lawful issuance and sale
of any shares under this Plan, or the unavailability of an exemption from
registration for the issuance and sale of any shares under this Plan, shall
relieve the Company of any liability with respect to the non-issuance or sale of
such shares.
As a condition to the exercise of an Option, the Plan
Administrator may require the Holder to represent and warrant in writing at the
time of such exercise that the shares are being purchased only for investment
and without any then-present intention to sell or distribute such shares. At the
option of the Plan Administrator, a stop-transfer order against such shares may
be placed on the stock books and records of the Company, and a legend indicating
that the stock may not be pledged, sold or otherwise transferred unless an
opinion of counsel is provided stating that such transfer is not in violation of
any applicable law or regulation, may be stamped on the certificates
representing such shares in order to assure an exemption from registration. The
Plan Administrator also may require such other documentation as may from time to
time be necessary to comply with federal and state securities laws. THE COMPANY
HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK
ISSUABLE UPON THE EXERCISE OF OPTIONS.
(2) The Holder must pay to the Company by certified or
cashier's check, promptly upon exercise of an Option or, if later, the date that
the amount of such obligations becomes determinable, all applicable federal,
state, local and foreign withholding taxes that the Plan Administrator, in its
discretion, determines to result upon exercise of an Option or from a transfer
or other disposition of shares of Common Stock acquired upon exercise of an
Option or otherwise related to an Option or shares of Common Stock acquired in
connection with an Option. Upon approval of the Plan Administrator, a Holder may
satisfy such obligation by complying with one or more of the following
alternatives selected by the Plan Administrator:
(A) by delivering to the Company shares of Common Stock
previously held by such Holder or by the Company withholding shares of
Common Stock otherwise deliverable pursuant to the exercise of the Option,
which shares of Common Stock received or withheld shall have a fair market
value at the date of exercise (as determined by the Plan Administrator)
equal to any withholding tax obligations arising as a result of such
exercise, transfer or other disposition;
-6-
1999 - Stock Option Plan
Kidstoysplus.com, Inc.
<PAGE>
(B) by executing appropriate loan documents approved by the
Plan Administrator by which the Holder borrows funds from the Company to
pay any withholding taxes due under this Paragraph 2, with such repayment
terms as the Plan Administrator shall select; or
(C) by complying with any other payment mechanism approved
by the Plan Administrator from time to time.
(3) The issuance, transfer or delivery of certificates of Common
Stock pursuant to the exercise of Options may be delayed, at the discretion of
the Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of the federal and state securities laws and the
withholding provisions of the Code have been met and that the Holder has paid or
otherwise satisfied any withholding tax obligation as described in (2) above.
(m) Stock Dividend or Reorganization.
(1) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor provision)
or any "corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock or (iii) any other event with substantially the same effect shall
occur, the Plan Administrator shall, subject to applicable law, with respect to
each outstanding Option, proportionately adjust the number of shares of Common
Stock subject to such Option and/or the exercise price per share so as to
preserve the rights of the Holder substantially proportionate to the rights of
the Holder prior to such event, and to the extent that such action shall include
an increase or decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under Section 4 of this Plan
shall automatically be increased or decreased, as the case may be,
proportionately, without further action on the part of the Plan Administrator,
the Company, the Company's shareholders, or any Holder.
(2) In the event that the presently authorized capital stock of
the Company is changed into the same number of shares with a different par
value, or without par value, the stock resulting from any such change shall be
deemed to be Common Stock within the meaning of the Plan, and each Option shall
apply to the same number of shares of such new stock as it applied to old shares
immediately prior to such change.
(3) If the Company shall at any time declare an extraordinary
dividend with respect to the Common Stock, whether payable in cash or other
property, the Plan Administrator may, subject to applicable law, in the exercise
of its sole discretion and with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock subject to such
Option and/or adjust the exercise price per share so as to preserve the rights
of the Holder substantially proportionate to the rights of the Holder prior to
such event, and to the extent that such action shall include an increase or
decrease in the number of shares of Common Stock subject to outstanding Options,
the number of shares available under Section 4 of this Plan shall automatically
be increased or decreased, as the case may be, proportionately, without further
action on the part of the Plan Administrator, the Company, the Company's
shareholders, or any Holder.
(4) The foregoing adjustments in the shares subject to Options
shall be made by the Plan Administrator, or by any successor administrator of
this Plan, or by the applicable terms of any assumption or substitution
document.
(5) The grant of an Option shall not affect in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure, to merge, consolidate or
dissolve, to liquidate or to sell or transfer all or any part of its business or
assets.
-7-
1999 - Stock Option Plan
Kidstoysplus.com, Inc.
<PAGE>
6. EFFECTIVE DATE; TERM.
Incentive Stock Options may be granted by the Plan Administrator from time
to time on or after the date on which this Plan is adopted (the "Effective
Date") through the day immediately preceding the tenth anniversary of the
Effective Date. Non-Qualified Stock Options may be granted by the Plan
Administrator on or after the Effective Date and until this Plan is terminated
by the Board in its sole discretion. Termination of this Plan shall not
terminate any Option granted prior to such termination. Any Incentive Stock
Options granted by the Plan Administrator prior to the approval of this Plan by
the shareholders of the Company in accordance with Section 422 of the Code shall
be granted subject to ratification of this Plan by the shareholders of the
Company within twelve (12) months before or after the Effective Date. If such
shareholder ratification is sought and not obtained, all Options granted prior
thereto and thereafter shall be considered Non-Qualified Stock Options and any
Options granted to Covered Employees will not be eligible for the exclusion set
forth in Section 162(m) of the Code with respect to the deductibility by the
Company of certain compensation.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
The Plan Administrator will determine whether or not any Options are to be
granted under this Plan in its sole discretion, and nothing contained in this
Plan shall be construed as giving any person any right to participate under this
Plan. The grant of an Option shall in no way constitute any form of agreement or
understanding binding on the Company or any Related Company, express or implied,
that the Company or any Related Company will employ or contract with an Optionee
for any length of time, nor shall it interfere in any way with the Company's or,
where applicable, a Related Company's right to terminate Optionee's employment
at any time, which right is hereby reserved.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock issued
upon the exercise of Options shall be used for general corporate purposes,
unless otherwise directed by the Board.
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as members
of the Board, members of the Plan Administrator shall be indemnified by the
Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is adjudged that such
Plan Administrator member is liable for willful misconduct; provided, that
within fifteen (15) days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall, in writing,
notify the Company of such action, suit or proceeding, so that the Company may
have the opportunity to make appropriate arrangements to prosecute or defend the
same.
-8-
1999 - Stock Option Plan
Kidstoysplus.com, Inc.
<PAGE>
11. AMENDMENT OF PLAN.
The Plan Administrator may, at any time, modify, amend or terminate this
Plan or modify or amend Options granted under this Plan, including, without
limitation, such modifications or amendments as are necessary to maintain
compliance with applicable statutes, rules or regulations; provided however, no
amendment with respect to an outstanding Option which has the effect of reducing
the benefits afforded to the Holder thereof shall be made over the objection of
such Holder; further provided, that the events triggering acceleration of
vesting of outstanding Options may be modified, expanded or eliminated without
the consent of Holders. The Plan Administrator may condition the effectiveness
of any such amendment on the receipt of shareholder approval at such time and in
such manner as the Plan Administrator may consider necessary for the Company to
comply with or to avail the Company and/or the Optionees of the benefits of any
securities, tax, market listing or other administrative or regulatory
requirement. Without limiting the generality of the foregoing, the Plan
Administrator may modify grants to persons who are eligible to receive Options
under this Plan who are foreign nationals or employed outside the United States
to recognize differences in local law, tax policy or custom.
Effective Date: ----------------------------.
-9-
1999 - Stock Option Plan
Kidstoysplus.com, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Apr-30-1999
<CASH> 221,924
<SECURITIES> 0
<RECEIVABLES> 5,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 235,736
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 235,736
<CURRENT-LIABILITIES> 3,100
<BONDS> 0
0
0
<COMMON> 249,242
<OTHER-SE> (16,606)
<TOTAL-LIABILITY-AND-EQUITY> 235,736
<SALES> 0
<TOTAL-REVENUES> 555
<CGS> 0
<TOTAL-COSTS> 17,161
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (16,606)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,606)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,606)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
