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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
-------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-27189
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
------------------------------------------------
(Name of small business issuer in its charter)
NEVADA 88-0398103
- --------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.
incorporation or organization)
SUITE 420 - 6450 ROBERTS STREET
BURNABY, BRITISH COLUMBIA,
CANADA V5G 4E1
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (604) 320-7227
- --------------------------------------------
Securities registered under Section 12(b) of the Exchange Act:
Not applicable.
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $0.001
------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $0.00
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)
4,450,025 common shares @ $4.0625(1) = $18,078,226
- --------------------------------------------------------
(1) Average of bid and ask closing prices on March 31, 2000
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
4,450,025 common shares, without par value outstanding as of March 31, 2000
- --------------------------------------------------------------------------------
Transitional Small Business Disclosure Format (Check one): Yes [X] No [ ]
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Merlin Software Technologies International, Inc. (the "Company") operated as a
"blank check" company, and was originally organized to engage in any lawful
corporate business including, but not limited to, participating in mergers with
and acquisitions of other companies. The Company's executive offices were
located at 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada 89121. The
Company's executive offices are now located at Suite 420 - 6450 Roberts Street,
Burnaby, British Columbia, Canada (Telephone: (604) 320-7227; Facsimile (604)
320-7277). Other than as disclosed herein, the Company has not been involved in
any bankruptcy, receivership or similar proceedings, nor has it been a party to
any material reclassification, merger, consolidation, purchase or sale of a
significant amount of assets not in the ordinary course of its business.
The Company's financial statements are stated in United States Dollars (US$) and
are prepared in accordance with United States Generally Accepted Accounting
Principles.
In this Annual Report, unless otherwise specified, all dollar amounts are
expressed in United States Dollars. Herein, all references to "CDN$" refer to
Canadian Dollars and all references to "common shares" refer to common shares in
the capital stock of the Company.
Business Development of the Company During the Last Three Years
The Company is a Nevada corporation formed on August 30, 1995 under the name
"Austin Land & Development, Inc.". On January 7, 2000, the Company changed its
name to "Merlin Software Technologies International, Inc.". The Company was
originally organized and, until completion of the Acquisition (as discussed
below), operated as a "blank check" company, whose purpose is to engage in any
lawful corporate business, including but not limited to, participating in
mergers with and acquisitions of other companies.
On January 10, 2000, the Company's common stock underwent a forward stock split
on a 1.235:1 basis for all shareholders of record, increasing the then issued
and outstanding shares from 6,000,000 to 7,410,000 common shares. On January
12, 2000, the Company accepted the resignation of Eugene F. Koppenhaver as a
member of the Board of Directors; the vacancy left by Mr. Koppenhaver's
resignation was filled by Martin Holt, who was then appointed President,
Secretary and Treasurer of the Company. Also on January 12, 2000, the Company
accepted the resignations of Douglas Ansell and Bruce N. Barton as members of
the Board of Directors. In connection with the Acquisition, the former
directors of the Company approved the cancellation of 3,809,975 common shares
held by the former officers and directors. On January 19, 2000, Mr. Holt
elected Robert Heller and Gary Heller to fill the vacancies on the Board of
Directors, and expanded the Board of Directors by electing Shelley Montgomery.
Also on January 19, 2000, Mr. Holt resigned as President, Secretary and
Treasurer (remaining only as a director of the Company), effective immediately.
Robert Heller was then appointed as the President, Gary Heller as the Secretary
and Shelley Montgomery as the Treasurer.
Acquisition of Merlin Software Technologies, Inc.
On January 14, 2000, the Company signed a letter of intent (the "January Letter
of Intent"), pursuant to which it agreed to acquire (the "Acquisition") all the
issued and outstanding shares of Merlin Software Technologies Inc., a private
company incorporated on June 25, 1999 under the laws of the State of Nevada
("Merlin"). Merlin is a developer and marketer of computer software, and
specifically a provider of Linux and Unix based software utility programs.
Under the terms of the January Letter of Intent, the Company was required to
issue one common share in exchange for each issued and outstanding common share
of Merlin (the "Share Exchange"). All of Merlin's outstanding options and share
purchase warrants were also required to be exchanged for an equal number of
options and warrants of the Company, on the same terms and conditions.
The Company, Merlin and certain principal shareholders of Merlin entered into a
Share Exchange Agreement, dated April 3, 2000 (the "Share Exchange Agreement"),
providing for, among other matters, the following:
<PAGE>
- - On the effective date of the Share Exchange and without any further action
on the part of the shareholders of Merlin, all of the common shares of Merlin
(an aggregate of 7,986,665) will be exchanged for an equal number of common
shares of the Company (the "Exchange Shares") at the deemed price of US$0.01 per
common share.
- - The Exchange Shares will be issued from the treasury of the Company as
fully paid and non-assessable shares and shall be free and clear of all liens,
charges and encumbrances. After the Share Exchange, the Exchange Shares will be
"restricted shares" under Rule 144 of the Securities Act and subject to certain
hold periods of one (1) or more years unless such common shares are registered
under the Securities Act of 1933.
- - On the Effective Date by virtue of the Share Exchange, all outstanding
warrants (an aggregate of 86,665) and stock options (an aggregate of 781,000) of
Merlin will be exchanged for an equal number of warrants or stock options in the
Company, as applicable (one warrant or stock option of the Company for each
warrant or stock option of Merlin).
The exchange ratio of the Share Exchange was determined by the Company and
Merlin based on a variety of factors and does not bear any direct relationship
to the assets or results of operations of the Company and Merlin, or to any
other historically-based criteria of value. In determining such ratio,
consideration was given to, among other things, each of the Company's and
Merlin's prospects and earnings potential, its management and the risks
associated with an exchange of the common shares of Merlin. Additionally,
consideration was given to the general status of the economy, the history and
prospects of the e-commerce industry and other relevant factors.
Merlin has authorized 50,000,000 shares of common stock, par value US$0.001 per
common share, with 7,986,665 common shares issued and outstanding prior to the
Acquisition. Merlin has also authorized 1,000,000 preferred shares, par value
$0.01 per preferred share, none of which are issued and outstanding.
The Company has authorized 50,000,000 common shares with par value US$0.001 per
common share with 4,450,025 common shares issued and outstanding prior to the
Acquisition. Upon the effective date of the Share Exchange, the Company will
issue 7,986,665 common shares of the Company in exchange for all of the issued
and outstanding common shares of Merlin, and the Company will have an aggregate
of 12,436,690 common shares issued and outstanding. After the Share Exchange,
the former shareholders of Merlin will hold approximately 64% of the issued and
outstanding common shares of the Company.
Merlin has granted options to acquire up to 781,000 common shares of Merlin
pursuant to certain agreements with consultants and service providers (the
"Service Agreements"). Prior to the Acquisition, Merlin granted the following
options pursuant to such Service Agreements:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONEE OPTIONS EXERCISE PRICE
- ------------------ --------- --------------
<S> <C> <C>
William Negus. . . 40,000 US$1.00
--------- --------------
Patricia Negus . . 40,000 US$1.00
--------- --------------
Gary Heller. . . . 150,000 US$1.00
--------- --------------
Shelley Montgomery 150,000 US$1.00
--------- --------------
Robert Heller. . . 150,000 US$1.00
--------- --------------
Chang-Cheng Chao . 24,000 US$1.00
--------- --------------
<PAGE>
Dae Kyung Kim. . . 24,000 US$1.00
--------- --------------
Douglas West . . . 100,000 US$1.00
--------- --------------
William Heller . . 16,000 US$1.00
--------- --------------
Alastair King. . . 10,000 US$1.00
--------- --------------
Crystal Gross. . . 24,000 US$1.00
--------- --------------
Alireza Ahmadi . . 24,000 US$1.00
--------- --------------
Brandon Montgomery 8,000 US$1.00
--------- --------------
Haide-Anne James . 1,000 US$1.00
--------- --------------
Hank Barber. . . . 20,000 US$1.00
- ------------------ --------- --------------
</TABLE>
Pursuant to the Share Exchange Agreement, all outstanding stock options (an
aggregate of 781,000) of Merlin shall be exchanged for an equal number of stock
options of the Company (one (1) stock option of the Company for one (1) option
of Merlin). The options of the Company will have the terms and conditions set
forth in each of the stock option agreements entered into between Merlin and
each one of the individuals named above.
Merlin has granted share purchase warrants to acquire up to 86,665 common shares
of Merlin pursuant to certain agreements with subscribers (the "Subscription
Agreements"), in connection with a recent private placement. Prior to the
Acquisition, Merlin has granted the following share purchase warrants pursuant
to such Subscription Agreements:
<TABLE>
<CAPTION>
NUMBER OF SHARE PURCHASE
SUBSCRIBER WARRANTS EXERCISE PRICE
- ----------------- ------------------------ ---------------
<S> <C> <C>
David Fendick . . 3,333 $ 2.00
------------------------ ---------------
Henry Tai . . . . 3,333 $ 2.00
------------------------ ---------------
Gerry Wittenberg. 13,333 $ 2.00
------------------------ ---------------
Joseph Flatley. . 3,333 $ 2.00
------------------------ ---------------
Laiy Ltd. . . . . 6,667 $ 2.00
------------------------ ---------------
Marie Murdoch . . 3,333 $ 2.00
------------------------ ---------------
Catherine Shore . 3,333 $ 2.00
------------------------ ---------------
Gilbert Schneider 3,333 $ 2.00
------------------------ ---------------
Ted Maudsley. . . 6,667 $ 2.00
------------------------ ---------------
Mike Tapp . . . . 6,667 $ 2.00
------------------------ ---------------
Keith Tapp. . . . 33,333 $ 2.00
- ----------------- ------------------------ ---------------
</TABLE>
<PAGE>
Pursuant to the Share Exchange Agreement, the Company will issue up to 86,665
share purchase warrants, exercisable to acquire common shares of the Company at
a price of $2.00 per common share in exchange for all of the issued and
outstanding share purchase warrants of Merlin.
All shareholders of Merlin and the Board of Directors of each of Merlin and the
Company consented to the Acquisition and the Acquisition was completed on April
12, 2000, subject only to the Company and Merlin filing Articles of Share
Exchange with the Secretary of State of Nevada and the share certificates,
options and share purchase warrants of the Company being issued to the former
shareholders of Merlin. The effective date of the Share Exchange will be the
date the Articles of Share Exchange are filed with the Secretary of State of
Nevada. Upon the filing of the Articles of Share Exchange, Merlin will become a
wholly owned subsidiary of the Company.
Business of the Company
Prior to the Acquisition, the Company operated as a "blank check" company.
Since the Acquisition is now completed, the Company will continue the operations
of Merlin (see "Business of Merlin Software Technologies, Inc." below).
Business of Merlin Software Technologies, Inc.
The new information and technological age has created a significant demand for
computers. All computers require some form of software based operating system
to allow them to function. The dominant standard for these operating systems
has been Microsoft Windows (95, 98, NT, 2000), Apple's OS, IBM's OS/2 and Unix.
Recently, a new operating system named Linux has been gaining acceptance and is
being used as an operating system. Users of the Linux operating system state
that it is more stable, flexible and functional than present operating systems
and provides users with a reliable and low cost alternative to these other
operating systems.
The use of the Linux operating system has created a demand for packaged software
applications and utility programs designed to operate on Linux. Merlin provides
application and utility packaged software for the Linux operating system.
On July 13, 1999, Merlin entered into a letter of intent (the "Initial Letter of
Intent") with Gary Heller, Robert Heller and Shelley Montgomery, pursuant to
which Merlin acquired certain computer software, software technology and related
intellectual property rights in consideration of the issuance of an aggregate of
4,000,000 common shares in the capital of Merlin. Under the Initial Letter of
Intent:
(a) Gary Heller transferred to Merlin all rights, properties and software
technology related to Perfect Backup and Restore ("PerfectBACKUP+") and FleetPro
II systems in consideration for the issuance of 1,600,000 common shares in the
capital of Merlin;
(b) Robert Heller transferred to Merlin all rights, properties and software
technology related to the HotWire FAX ("HotWireFAX") and Internet Service
Provider account management systems in consideration for the issuance of
1,600,000 common shares in the capital of Merlin; and
(c) Shelley Montgomery transferred to Merlin all rights, properties and
software technology related to the BDI Virage and Internet Business Directory
Yellow Pages service in consideration for the issuance of 800,000 common shares
in the capital of Merlin.
INDUSTRY BACKGROUND
The most dynamic changes in the industry continue to be in the market consisting
of networked computer systems comprised of servers and workstations. These
computer systems have traditionally been based upon Unix and Windows operating
systems. In the last year the Linux operating system has moved in to compete
with the growth of these existing operating systems. At the same time many
companies are increasingly using their computers for more time sensitive or
<PAGE>
mission critical applications that are integral to the organization's day-to-day
operations. This trend is being accelerated by the increased use of the Internet
between businesses, between businesses and customers and within companies to
automate and communicate more efficiently. In more and more cases today, the
Internet and the web-based applications that companies build to exploit it are
the business itself.
The Linux operating system and the accelerated adoption of this platform are of
high interest to Merlin. Linux is an Open Source operating system meaning that
it is both free to download from the Internet and open to modification and
enhancement by users and other interested parties. Linux is interesting because,
according to International Data Corporation, it has a growth rate twice that of
traditional Unix and Windows operating systems despite it lacking the
sophisticated tools and utilities for management and instrumentation that
accompany traditional commercial products. Commercial adoption of the Linux
operating system is being promoted by companies such as Red Hat, SuSE,
TurboLinux, VA Linux, Linuxcare, Silicon Graphics, IBM and others.
These commercial providers of Linux take the freely available Linux operating
system and package it with enhancements that add commercial value and make it
easier to install and use. In the software industry this is called "bundling" of
software products.
PRODUCTS
Merlin currently owns the rights to two key software packages developed for the
Linux operating system. The primary utility package is the Linux based backup
program PerfectBACKUP+. The second utility package is HotWireFAX which is a
Linux based fax and fax server program.
Set forth below is a summary of the Company's principal product offerings.
PerfectBACKUP
All computer operating systems are subject to loss of valuable data and mission
critical information through hardware failure and other forms of computer
crashes. For users, the loss of data from such crashes can be catastrophic. As
a result, users demand software that "backs up" data and information.
PerfectBACKUP+ is a high performance backup software utility program for use on
systems utilizing Linux, Unix and Unix-like operating systems. PerfectBACKUP+
was originally developed for the Unix operating system and was sold under the
name "FastBACK Plus Unix". All versions of FastBACK Plus sold over two million
copies worldwide before the rights to FastBACK Plus Unix were sold to Symantec.
Because of Symantec's orientation towards the Microsoft operating system, it did
not pursue the Unix market and the Linux operating system did not exist at that
time. The rights to FastBACK Plus Unix were then re-acquired by Gary Heller.
In 1990, PerfectBACKUP+ underwent an extensive re-write to convert it for use on
the Linux operating system and incorporate the various utilities that had been
developed, and to upgrade PerfectBACKUP+ to a complete back-up and emergency
recovery tool. PerfectBACKUP+'s features include:
- - the ability to pre-configure back-up sets and schedule unattended
back-ups; and
- - the ability to enhance error recovery, device chaining and network
back-ups.
PerfectBACKUP+, a client server application, was one of the first Unix or Linux
backup program with:
- - a windowing interface;
- - a graphical interface;
- - a double-buffering server providing fast throughput;
- - client / server configuration;
- - on line help;
<PAGE>
- - 100% accurate bit-level verification;
- - automated, lights-out backups;
- - backup cataloging;
- - package backups;
- - high level security;
- - built in encryption;
- - built in compression; and
- - automatic crash recovery.
PerfectBACKUP+ is an economical and powerful network backup and crash recovery
tool, with both a graphical and character interface, which provides backup
scheduling and remote backup, recovery, encryption, robotics module and enhanced
security.
Merlin anticipates that it will aggressively market a free version of the
product for a six-month period (until April 30, 2000), while a commercial
upgrade is prepared for retail distribution. PerfectBACKUP+ Version 6.2
("Version 6.2") is currently available on the Merlin website at
www.merlinsoftech.com (the "Merlin Website') at a cost of $69.00 (download or
CD) or $89.00 (retail box and manual). The previously released version of
PerfectBACKUP+ is also available on the Merlin Website, and can currently be
downloaded free of charge.
At present, Version 6.2 will operate on Red Hat Intel Linux 6.0 and 6.1,
S.U.S.E. Intel Linux 2.2 and 2.3 and Caldera Open Linux 2.2, 2.3 and 2.4, Turbo
Linux 4.0 and 6.0 and Corel 1.0. At this time, in order to use PerfectBACKUP+
to backup Apple Macintosh computers, the user must build a Linux backup server
using one of the above-noted Linux distributions and install PerfectBACKUP+ onto
that server.
Merlin anticipates that it will be in a position to provide the PerfectBACKUP+
client server for Apple/Macintosh running Linux/PPC (the Apple/Macintosh version
of Linux) by 2001. In addition, Merlin anticipates that it will be able to
provide remote clients for the Macintosh and Windows environments with
PerfectBACKUP+, making it unnecessary to use AppleTalk or SAMBA, thereby
providing enhanced security and greatly improved performance. Users with
questions regarding PerfectBACKUP+ can access Merlin support through the Merlin
Website, where frequently encountered problems are posted and addressed by
Merlin support staff.
PerfectBACKUP+ (Version 6.0) was released at Comdex in Las Vegas in the fall of
1999, and is now fully tested on RedHat 6.0 and 6.1, Caldera Open Linux 2.3 and
eServer 2.3 and 2.4, S.U.S.E. 6.1, 6.2 and 6.3, Corel Linux 1.0 and Turbo Linux
4.0 and 6.0, Mandrake and Debian. PerfectBACKUP+ is now in use at Corel Labs,
Caldera, IBM, Tetley, Mitsubishi, AT&T and a wide range of educational
institutions around the world.
Merlin recently signed a number of agreements for distribution of PerfectBACKUP+
in North America, Europe and Asia. See "Sales and Marketing" (within this Item)
for further information with respect to Merlin's sales and marketing agreements.
HotWireFAX
HotWireFAX is a Linux based desktop fax and fax server application. HotWireFAX
is a desktop fax client and server application for Linux and Unix operating
systems, originally developed for Unix and converted for use on Linux operating
systems in 1994. HotWireFAX features fast fax creation, viewing, filtering,
scheduling and attachment conversions. HotWireFAX also provides the user with
the ability to create his/her own customized cover sheets and to print using
Postscript and PCL printing. Version 2 of HotWireFAX for the Linux operating
system has been available free on the Merlin Website since August 1, 1999, and
Merlin estimates that 30,000 copies have been downloaded by users since its
release.
<PAGE>
HotWireFAX version 3.0 Alpha for the Linux operating system ("Version 3.0") was
announced in January, 2000 and is currently undergoing testing as an Alpha
version. This latest version contains support for a much wider range of modems
and the user interface, originally written in C++, has been completely rewritten
in Java. A commercial version of this product is expected to be released in the
third quarter of 2000, and should retail for $69.00 (download or CD) or $89.00
(retail box and manual). The basic feature set of HotWireFAX includes:
- - built-in databases;
- - ability to view in x-windows (zoom, rotate, invert any image);
- - ability to support almost any Class 2 or 2.0 modem, such as MultiTech and
U.S. Robotics;
- - acceptance of user input in ASCII text;
- - ability to attach ASCII, POSTSCRIPT and inbound/outbound faxes to any fax;
- - ability to be configured to work as a printer drive to Star Office,
Applixware, WordPerfect and others;
- - call forward feature, allowing users to have faxes retransmitted upon
reception to another number;
- - online "Help" to assist users;
- - automatic spooler to "retry" faxes and to advise of results via email; and
- - immediate fax transmission.
HotWireFAX, a client server application, was one of the first Unix or Linux fax
utility program with:
- - the ability to provide fax viewing on graphical ASCII terminals (e.g. Wyse
50);
- - fax filtering and call screening;
- - easy configuration of multiple modems;
- - an integrated fax and voice mail server; and
- - both fax reception and data login on the same port.
HotWireFAX is an economical, fully featured, fax product available for the Unix
and Linux operating systems.
FleetPro II
FleetPro II is a management product which provides a complete suite of software
for the freight industry. Although the software was initially designed for
trucking companies, it was, prior to Merlin acquiring the rights to FleetPro,
marketed and sold to a diverse customer base including courier companies, taxi
companies and the U.S. Department of Defense. FleetPro II is a multi-user
system capable of serving a number of needs for companies which use fleets of
vehicles. The product includes modules that perform various functions for
companies operating vehicles and transporting goods, including:
<PAGE>
- - dispatching;
- - order processing;
- - route optimization;
- - vehicle tracking;
- - load optimization; and
- - maintenance scheduling.
In addition, FleetPro II performs functions related to tracking and analyzing
fuel consumption, and to calculating payroll, payables, receivables and general
ledgers.
Business Directories International
Merlin expects Business Directories International ("BDI") to be a new business
directory service that will be provided over the Internet and used in a manner
similar to that of the existing hard copy of the Yellow Pages directories. BDI
will initially be an enhanced, electronic version of the Yellow Pages with
additional components, including a Better Business Bureau directory, an
editorial department producing company profiles and a professional association
directory.
Merlin expects that BDI will provide consumers with the following advantages:
- - a means of locating business products and services through any search
combination of region and industry;
- - pre-created indexes and pages which are stored on the servers and which
are sorted by region and industry;
- - an alphabetical index organized so that the user can use its compute mouse
and hold the cursor over the desired industry description, which will then
provide the names and information with respect to those companies listed in the
region selected;
- - full free-form-searching by region and industry description; and
- - complete cross-reference of Yellow Pages descriptions.
Merlin expects that BDI will provide the following advantages to its business
users:
- - a free means of listing the company on the Internet;
- - an economical means of advertising on the Internet;
- - a cost-effective way to disseminate references from satisfied customers;
- - an alternative to the Better Business Bureau complaints and resolution
process;
- - a means by which to promote a company's web site to interested prospective
clients;
- - an alternative to listing a company's website on the generic search
engines; and
- - direct access to marketing feedback.
Merlin expects that its BDI software will be franchised in order to establish
service in North America because it believes that franchises offer the following
benefits:
<PAGE>
- - lower initial capital requirements, as anticipated corporate staff
requirements are lower for companies; and
- - an available, dedicated corporate representative in any particular region
with local connections to the business community, so that users will not have to
deal with the delays, legal costs and other requirements of local staff hiring
and training.
Merlin also expects that the franchisee will be able to sell additional web and
Internet related services to the local business. Merlin expects that it may
provide technical support and all of the server services required to support the
franchise for a monthly royalty in the region of 15% of gross revenues.
Additional services such as web design and development, advertisement and
graphic services, database reporting and marketing services are expected to be
provided on a per cost basis.
Open Source Project
Merlin has also implemented a concept of rewarding developers of code in the
Linux environment by announcing the Option Source Project. Through the Option
Source Project Merlin plans upon taking advantage of a modified form of the
existing model of open source code development in Linux. Currently, Linux is
"open source" which means the rights are held by the developer of the code but
this code is also available to the public to be modified as needed so long as
any modifications are also published. This has allowed programmers all over the
world to collaborate to develop the Linux operating system and the applications
which run on it. Through this method Linux has evolved to become a highly
reliable operating system. In particular, one special aspect is the stability
or "robustness" of the system as the Linux operating system is not prone to
"crashes". This feature alone has assisted in the growth and adoption of the
Linux operating system.
Merlin plans upon expanding and capitalizing upon this aspect of code
development. The Option Source project will reward programmers of approved
projects by providing a modest monthly income and access to a limited pool of
stock options. This will speed the development of new software applications for
the Linux operating system and provide Merlin with direct access to the most
promising programs and best programmers. The Option Source Project is a natural
evolution of the open source method currently in use. Merlin expects this
program to benefit programmers who have developed proprietary software packages
that have not realized their commercial potential. By placing their software
with Merlin under this program, they will receive an established company
providing a market for their product and the opportunity to benefit from share
ownership once the project is completed and Merlin begins to distribute and sell
the new packaged software.
STRATEGY, SALES AND MARKETING
The following discussion regarding Merlin's products for the Linux operating
system market and its product and marketing strategy contains forward-looking
statements and actual results may vary substantially depending upon a variety of
factors, including, but not limited to, the development of emerging markets for
utility and administration software, competition, technological change, changing
customer needs, evolving industry standards, any product development delays and
its ability to manage future growth and new distribution channels, if any. These
and other factors are more fully discussed under the caption "Factors That May
Affect Future Results" in "Item 6 - Management Discussion and Analysis or Plan
of Operation".
Merlin's objective is to become a market leader in software applications for
Linux and Unix based operating systems.
Merlin's current sales and marketing focus is to distribute its products through
resellers, distributors and other companies who bundle their products with
Merlin's products. Merlin has entered into distribution, bundling or reseller
agreements with TurboLinux Inc., Koch Media Ltd., LinuxLand, The LinuxStore.com,
Caldera Systems Inc., G.T. Enterprises, Impera Software Corp., Beyond 2000
Solutions, IU Software, Circadian Software, Hamni Information & Communications
Co. Ltd., Cosmos Engineering Co. Ltd., Italsel SRL and Programmers Paradise Inc.
Merlin's product design, price point and ease of use of the PerfectBACKUP+ and
HotWireFAX products allow it to be effectively integrated into a software
vendor's offering, or bundled with a distributor of the Linux operating system.
<PAGE>
These relationships are allowing Merlin to penetrate different markets by
proliferating its product and technology to different markets. Merlin intends to
continue to pursue additional partnering relationships in addition to continuing
to retail and distribute its products through the Merlin Website, where
customers can purchase or download Merlin's products. Commercial versions of its
software programs are purchased with, or without, a printed manual and come with
1 year support and maintenance service, including all updates and upgrades. For
subsequent years, clients can purchase a subscription which provides ongoing
service, support, updates and upgrades.
Merlin anticipates that in the next two fiscal years it will generate all of its
revenues, if any, from sales of PerfectBACKUP+ and HotWireFAX.
Merlin is currently investing, and intends to continue to invest, significant
resources to develop these distribution channels. Merlin's efforts to expand its
distribution party channels are intended to penetrate the market and achieve
widespread commercial acceptance of its products as a software utility
application. There can be no assurance that Merlin will be successful in its
efforts to generate any revenues from these distribution channels. Merlin
anticipates that it will be dependent upon its relationships with distributors,
resellers and other companies for a significant portion of its revenue for the
foreseeable future. There is no assurance that these distributors, resellers and
other companies will effectively distribute and exploit Merlin's products. The
inability to recruit additional third parties to distribute, market and support
its products could have a material adverse affect on Merlin's business,
operating results and financial condition. A more detailed discussion of these
and other risks associated with Merlin's business is set forth under the caption
"Factors That May Affect Future Results" in "Item 6 - Management Discussion and
Analysis or Plan of Operation".
Merlin will also attempt to capture market share for its products through the
utilization of a sales and marketing method already demonstrated by a number of
companies to be extremely successful. This method involves the distribution of
free versions of its software programs over the Internet, which has already
proven to be an excellent way to attract future paying customers. The Linux
operating system itself has achieved its current acceptance level primarily
because it has always been freely available over the Internet. Many other
companies have successfully used a similar model to establish market share
including Netscape, Winzip, Eudora, Pegasus and Microsoft.
Merlin recently entered into the following agreements with respect to the
distribution of its software programs (a copy of each of the agreements is
attached to this Annual Report as an exhibit):
Koch Distribution
On February 8, 2000, Merlin entered into a distribution agreement with Koch
Distribution, a division of Koch Media Ltd., a software distributor in the
United Kingdom and Ireland. Koch will sell PerfectBACKUP+ to its retail
customers in the United Kingdom and Ireland.
LinuxLand
On February 14, 2000, Merlin entered into a distribution agreement with
LinuxLand, a division of California based Circadian Software. Under the
agreement, Circadian will begin selling PerfectBACKUP+ to its international
customer base through its online retail outlet and will begin bundling
PerfectBACKUP+ with its Linux product Mandrake.
The LinuxStore.com
On February 15, 2000, Merlin entered into an agreement with The LinuxStore.com,
an online retail store which sells a variety of products, support and services
for the Linux operating system. Under the terms of the agreement The
LinuxStore.com will begin to sell Merlin's PerfectBACKUP+ through its online
retail outlet. The LinuxStore.com is a division of eBiz Enterprises Inc.
<PAGE>
Caldera Systems Inc.
On February 17, 2000, Merlin entered into an agreement with Caldera Systems
Inc., whereby Caldera will begin shipping PerfectBACKUP+ with Caldera's
OpenLinux line of software products.
G.T. Enterprises
On February 22, 2000, Merlin entered into an agreement with G.T. Enterprises,
pursuant to which G.T. Enterprises was granted a license to market, demonstrate,
distribute and sell PerfectBACKUP+ to G.T. Enterprises' chain of distributors,
resellers and retailers throughout India.
TurboLinux Inc.
On February 22, 2000, Merlin entered into an agreement with TurboLinux Inc.
whereby the companies will co-operate to begin worldwide distribution of their
products for the Linux operating system with Merlin's PerfectBACKUP+.
Cosmos Engineering Co. Ltd.
On March 1, 2000, Merlin entered into an agreement with Cosmos Engineering Co.,
pursuant to which Cosmos Engineering Co. Ltd. was granted a license to market,
demonstrate, distribute and sell PerfectBACKUP+ to other distributors, resellers
and end user customers in the United States.
Italsel SRI
On March 1, 2000, Merlin entered into an agreement with Italsel SRL, pursuant to
which Italsel SRL was granted a license to market, demonstrate, distribute and
sell PerfectBACKUP+ to other distributors, resellers and end user customers in
Italy.
Programmer's Paradise Inc.
On March 7, 2000, Merlin entered into an agreement with Programmer's Paradise,
Inc., pursuant to which Programmer's Paradise, Inc. was granted a license to
market, demonstrate, distribute and sell PerfectBACKUP+ to other distributors,
resellers and end user customers in the United States.
Linux Mall.com
On March 7, 2000, Merlin entered into an agreement with Linux Mall.com, pursuant
to which Linux Mall.com was granted a license to market, demonstrate, distribute
and sell PerfectBACKUP+ to other distributors, resellers and end user customers
worldwide, with the exception of direct sales in the UK and Southern Ireland.
Impera Software Corp.
On March 20, 2000, Merlin entered into an agreement with Impera Software Corp.,
pursuant to which Impera Software Corp. was granted a license to market,
demonstrate, distribute and sell PerfectBACKUP+ to other distributors, resellers
and end user customers worldwide, with the exception of direct sale in the UK
and Southern Ireland.
Hanmi Information & Communications Co., Ltd.
On March 23, 2000, Merlin entered into an agreement with Hanmi Information &
Communications Co., Ltd. ("Hanmi'), pursuant to which Hanmi was granted a
license to market, demonstrate, distribute and sell PerfectBACKUP+ to other
distributors, resellers and end user customers worldwide, with the exception of
direct sale in the UK and Southern Ireland.
<PAGE>
Beyond 2000 Solutions
On March 28, 2000, Merlin entered into an agreement with Beyond 2000 Solutions,
pursuant to which Beyond 2000 Solutions was granted a license to market,
demonstrate, distribute and sell PerfectBACKUP+ to other distributors, resellers
and end user customers worldwide, with the exception of direct sale in the UK
and Southern Ireland.
Linux Plaza
On March 28, 2000, Merlin entered into an agreement with Linux Plaza, pursuant
to which Linux Plaza was granted a license to market, demonstrate, distribute
and sell PerfectBACKUP+ to other distributors, resellers and end user customers
worldwide, with the exception of direct sale in the UK and Southern Ireland.
IU Software
On March 30, 2000, Merlin entered into an agreement with IU Software, pursuant
to which IU Software was granted a license to market, demonstrate, distribute
and sell PerfectBACKUP+ to other distributors, resellers and end user customers
worldwide, with the exception of direct sale in the UK and Southern Ireland.
eLinux.com (a division of Creative Computers Inc.)
On April 4, 2000, Merlin entered into an agreement with eLinux.com (a division
of Creative Computers Inc.), pursuant to which eLinux.com was granted the
non-exclusive right to purchase and resell all products produced and/or offered
by Merlin during the terms of the agreement.
RESEARCH AND DEVELOPMENT
The Company has not expended any funds to date on the research and development
of the Company. For the period ended December 31, 1999, Merlin estimates that
it has expended $98,329 on the development of its current software programs.
Following the Acquisition, the Company anticipates that it will require
$1,800,000 to fund the continued development and enhancement of PerfectBACKUP+,
HotWireFAX and the Option Source Project.
PRODUCT DEVELOPMENT
The computer software industry is characterized by rapid technological change
and is highly competitive in regard to timely product innovation. Accordingly,
Merlin believes that its future success depends on its ability to enhance
current products that meet a wide range of customer needs and to develop new
products rapidly to attract new customers and provide additional solutions to
existing customers. In particular, Merlin believes it must continue to respond
quickly to users' needs for broad functionality and ease of use.
Merlin's strategy is to continue to enhance PerfectBackup+'s and HotWireFAX's
functionality through new releases and new feature development to meet the
continually advancing requirements of its customers. At the same time, Merlin
may seek to acquire and develop new products to meet the needs of a broader
group of users.
There can be no assurance that Merlin will be successful in developing and
marketing new features or products that respond to technological change or
evolving industry standards, that it will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of any
new features or products, or that its new features or products will adequately
meet the requirements of the marketplace and achieve market acceptance.
Additionally, Merlin's product development staff will be under increased
pressure to offer its products that operate on different vendor's Linux and Unix
based operating systems. Due to the complexity of the product, it is extremely
difficult to fully test PerfectBACKUP+ and HotWireFAX in all possible
environments and, although Merlin employs a continual effort to assure a quality
product, there is no assurance that errors will not be found in the released
commercial product resulting in delays of new feature development. If Merlin is
unable, due to lack of resources or for technological or other reasons, to
develop and introduce new features and products in a timely manner in response
to changing market conditions or customer requirements, its business, operating
results and financial condition will be materially adversely affected. See
"Factors That May Affect Future Results" in "Item 6 - Management Discussion and
Analysis or Plan of Operation".
<PAGE>
INTELLECTUAL PROPERTY
Merlin has applied for or is in the process of applying for trademark protection
in the United States for "Merlin Software Technologies, Inc.", "Software That's
Pure Magic", "Linux for the Masses", "Merlin Softech" and "Option Source".
Merlin has also sought trademark protection in the United States for its
corporate symbol which is a penguin dressed in a magicians cape and hat with
wand in hand. Merlin has secured the registration of the domain name
"www.merlinsoftech.com" with Network Solutions, Inc. (Internet).
PRODUCT PROTECTION
Merlin relies on a combination of copyright, trade secret and trademark laws and
software security measures, along with employee and third-party nondisclosure
agreements, to protect its intellectual property rights, products and
technology. Merlin distributes its software under license agreements that are
signed by end-users. Despite its precautions taken to protect its software,
unauthorized parties may attempt to reverse engineer, copy, or obtain and use
information Merlin regards as proprietary. Policing unauthorized use of its
products is difficult and software piracy is expected to be a persistent
problem. Additionally, the laws of some foreign countries do not protect
Merlin's proprietary rights to the same extent as do the laws of the United
States.
Merlin is not aware that our products, trademarks, or other proprietary rights
infringe the proprietary rights of third parties. However, from time to time,
Merlin may receive notices from third parties asserting that Merlin has
infringed their patents or other intellectual property rights. In addition,
Merlin may initiate claims or litigation against third parties for infringement
of its proprietary rights or to establish the validity of its proprietary
rights. Any such claims could be time-consuming, result in costly litigation,
cause product shipment delays or lead Merlin to enter into royalty or licensing
agreements rather than disputing the merits of such claims. As the number of
software products in the industry increases and the functionality of such
products further overlap, Merlin believes that software developers may become
increasingly subject to infringement claims. Any such claims, with or without
merit, can be time consuming and expensive to defend. An adverse outcome in
litigation or similar proceedings could subject us to significant liabilities to
third parties, require expenditure of significant resources to develop
non-infringing technology, require disputed rights to be licensed from others,
or require Merlin to cease the marketing or use of certain products, any of
which could have a material adverse effect on its business, operating results
and financial condition. See "Factors That May Affect Future Results" in "Item 6
- - Management Discussion and Analysis or Plan of Operation".
EMPLOYEES
As of March 31, 2000, the Company had 3 full-time employees, including its
President and Chief Executive Officer (Robert Heller), its Secretary and Chief
Information Officer (Gary Heller) and its Treasurer and Vice President of Sales
(Shelley Montgomery). The Company will assume the employees of Merlin, which
include 4 full-time employees, 4 full-time programmers, 5 consultants and 2
administration staff.
The Company and Merlin believe its future success depends in large part upon the
continued service of its key technical and senior management personnel and our
ability to attract and retain highly qualified technical and managerial
personnel. Competition for such personnel is intense, as certain of these
personnel have significant prior industry experience and are in great demand.
There can be no assurance that the Company or Merlin can retain its key
technical and managerial employees or that it can attract, assimilate or retain
other highly qualified technical and managerial personnel in the future. None of
the Company's or Merlin's employees are subject to any collective bargaining
agreements. Each of the Company's and Merlin's employees have executed an
agreement not to disclose trade secrets or other confidential information.
COMPETITION
Merlin believes that PerfectBACKUP+ is priced at an extremely competitive level
at $69 (download or CD) or $89 (retail box and manual). When compared to other
products with similar features and price point, there are very few direct
competitors.
<PAGE>
Merlin's main competitors in the Linux based backup utility software include:
- - Enhanced Software Technologies which has a product called BRU. BRU sells
for $99 for a non-network, personal version and $289 for the product most
comparable to PerfectBACKUP+;
- - Lone-Tar, a backup program from Lone Star Software, has a retail price of
$236. For an additional $59 the customer can purchase the AIR-BAG product, a
crash recovery tool. Unlike PerfectBACKUP+, this software does not currently
have a graphical interface;
- - Microlite has a product called BackupEDGE which sells for $300 for Linux
but this product also does not have a graphical interface; and
- - Seagate Software has a backup product similar to PerfectBACKUP+ that sells
for $695.
Major competitors for HotWireFAX include:
- - VSI*Fax whose base product for Linux is priced at $1,434 and is limited to
5 users and four fax ports, or lines; and
- - Faximum, a company that has a client server and a "lite" product, sells
for $495 and more depending on configuration. As of this date, Faximum does not
appear to provide fax viewing for the X-Window environment used by Linux and
Unix.
There are a number of other products, each of which appears to start at $300 or
more. Almost all of these competitors charge per line and per seat. Per line
charges vary from $250 per additional line to $780 depending on the product.
There is some competition from the Windows products available at the client end,
but nothing at the server end. RightFax, an NT based fax server product, is
extremely expensive and does not provide the features or performance of the Unix
based fax servers.
There is, of course, competition from "free" products that have been developed
in the open source. In this category the primary contenders are hylafax and
sendfax. Sendfax is widely used and provides some voice facility but is not
very well supported and is very difficult to configure. It also does not
include an integrated desktop environment and the user is left to their own
devices to patch together different programs to provide a desktop solution.
Hylafax, the latest open source entry, is also a difficult product to configure
and suffers problems similar to sendfax for desktop use.
The market in which Merlin compete is intensely competitive, highly fragmented
and rapidly changing. In order to compete, it must enhance its current products,
enhance the interoperability of its products with other products and operating
systems, develop new products in a timely fashion and develop key strategic
partnerships with other hardware and software vendors. Many of Merlin's
competitors are larger and have greater financial, technical, marketing and
other resources than Merlin. Because there are relatively low barriers to entry
in the software market, Merlin expects additional competition from other
established and emerging companies. Increased competition is likely to result in
price reductions, reduced gross margins and increased difficulty in establishing
market share, any of which could have a material adverse affect on Merlin's
business, operating results and financial condition. See "Factors That May
Affect Future Results" in "Item 6 - Management Discussion and Analysis or Plan
of Operation".
ITEM 2. DESCRIPTION OF PROPERTY.
The Company had the use of a limited amount of office space at 3675
Pecos-McLeod, Suite 1400, Las Vegas, Nevada 89121 at no cost to the Company,
which continued until completion of the Acquisition. Upon completion of the
Acquisition, the Company assumed the office premises leased by Merlin, currently
located in Burnaby, British Columbia, Canada and Altamonte Springs, Florida.
<PAGE>
Altamonte Springs, Florida
Merlin leases approximately 971 square feet of office space located at Suite
1305 - 405 Douglas Avenue, Altamonte Springs, Florida under a lease which
expires on December 1, 2000 for an annual rent of $9,710.04, plus its
proportionate share of operating expenses.
Burnaby, British Columbia
Merlin leases approximately 1,250 square feet of office space located at Suite
420, 6450 Roberts Street, Sperling Plaza, Burnaby, British Columbia, Canada
under a lease which expires on August 31, 2000 for an annual rent of
approximately CDN$18,000.00, plus its proportionate share of operating expenses.
ITEM 3. LEGAL PROCEEDINGS.
The Company knows of no material, active or pending legal proceedings against
it, nor is the Company involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any director, officer or
affiliate of the Company, or any registered or beneficial shareholder is an
adverse party or has a material interest adverse to the Company.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common shares trade in the United States on the National
Association of Securities Dealers Over-the-Counter Bulletin Board (the "OTC
Bulletin Board") with the symbol "MLSW" and CUSIP# 59011Y-10-8.
The table set forth below lists the volume of trading and high and low bid
prices on the OTC Bulletin Board for the Company's common shares since January
13, 2000 (1). The closing price on March 31, 2000 was $4.250.
QUARTER ENDED VOLUME HIGH LOW
January 18, 2000 to March 31, 2000 7,319,900 $10.00 $2.969
======================================== ========= ====== ======
(1) The Company's common shares commenced trading on January 13, 2000 but
there was no trading activity until January 18, 2000. The quotations above
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
The Company's common shares are issued in registered form. Alpha Tech Stock
Transfer (929 East Spiers Lane, Draper, UT 84020 (telephone: (801) 571-5118,
facsimile (801) 571-6112) is the registrar and transfer agent for the Company's
common shares.
On March 31, 2000, the shareholders' list for the Company's common shares showed
11 registered shareholders and 4,450,025 common shares outstanding. After
completion of the Acquisition, there will be 12,436,690 common shares
outstanding.
The Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future. Although there are no
restrictions that limit the ability to pay dividends on the Company's common
shares, the intention of the Company is to retain future earnings for use in its
operations and the expansion of its business.
<PAGE>
Recent Sales of Unregistered Securities
The Company did not sell any of its common shares during the period between
October 1, 1999 and December 31, 1999.
Subsequent to the year ended December 31, 1999, on February 10, 2000, the
Company sold an aggregate of 850,000 units (the "Units") at a price of $1.50 per
Unit for proceeds of $1,275,000 in an offshore transaction relying on Regulation
S under the Securities Act of 1933. Each Unit consisted of one common share and
one share purchase warrant with each share purchase warrant entitling the holder
to purchase up to an aggregate of 850,000 common shares at the price of $2.00
per common share for a period of two (2) years. The common shares were sold to
the following three subscribers:
<TABLE>
<CAPTION>
NUMBER OF COMMON
SHARES AVAILABLE UPON
NAME OF SUBSCRIBER AMOUNT OF UNITS EXERCISE OF WARRANT
- ------------------------------- --------------------- -------------------
<S> <C> <C>
Big Plans Investments Ltd.. . . 250,000 250,000
--------------------- -------------------
Roberts & Scott Financial, Inc. 200,000 200,000
--------------------- -------------------
Mepol Management S.A. . . . . . 400,000 400,000
- ------------------------------- --------------------- -------------------
</TABLE>
An aggregate of 7,986,665 common shares of the Company will be issued to the
former shareholders of Merlin relying on Section 4(2), Regulation D and
Regulation S of the Securities Act of 1933, as applicable. The deemed price for
the common shares was $0.01. See "Description of Business" for further details
of the Share Exchange.
ITEM 6. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis should be read in conjunction with the
Company's and Merlin's financial statements and the notes thereto, included as
part of this Annual Report.
Certain statements contained in this Annual Report on Form 10-KSB, including,
without limitation, statements containing the words "believes", "anticipates",
"estimates", "intends", "expects" and words of similar import, constitute
forward-looking statements within the meaning of the Private Securities Reform
Act of 1995. Although management believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Actual results could vary
materially from those expressed in those statements. Readers are referred to
"Products", "Sales and Marketing", "Product Development", "Competition",
"Product Protection" and "Management's Discussion and Analysis or Plan of
Operation" sections contained in this Annual Report as well as the factors
described below in the section entitled "Factors That May Affect the Company's
Future Results", which identify some of the important factors or events that
could cause the Company's and Merlin's actual results or performance to differ
materially from those contained in the forward looking statements.
PLAN OF OPERATION
Sales and Marketing
As discussed, the Company wishes to achieve significant market share for its
products following the Acquisition through the utilization of methods already
demonstrated by a number of companies to be extremely successful. One method
involves distribution of free versions over the Internet, which has already
proven to be an excellent way to attract future paying customers. Indeed, Linux
itself has achieved its current market acceptance primarily because it has
always been freely available over the Internet. Many other successful companies
have used a similar model to establish market share including Netscape, Winzip,
Eudora, Pegasus and Microsoft.
Coupled with the free distribution of previous versions over the Internet, the
Company will continue to offer commercial versions of its products that can be
purchased directly off the Merlin Website at prices from $69 to $89, and is
aggressively pursuing contractual arrangements with distributors, resellers and
other companies which will bundle its products together with Merlin's products.
<PAGE>
Commercial versions of PerfectBACKUP+ and HotWireFAX are purchased with, or
without, a printed manual and come with 1 year support and maintenance service,
including all updates and upgrades. For subsequent years, clients can purchase
a subscription which provides ongoing service, support, updates and upgrades.
The Company's sales and marketing strategy is to allocate $1,200,000 over nine
months to position the major product, PerfectBACKUP+, in the industry and to
increase its market share in an expanding market. The promotion strategy is
quite comprehensive, and involves the hiring of nine direct sales personnel
augmented by the distribution of advertising and promotional materials. In
addition, trade shows and "show and tells" will be part of the strategy. Merlin
believes that the combination of the Merlin Website, advertising, trade shows
and a telemarketing campaign will be effective in gaining sales for its
products.
The Company's cash requirements for the 12 months ending December 31, 2001 are
estimated at $4,000,000. The Company anticipates that it will be able to meet
these cash requirements by raising additional equity funds through private
placements. The cash requirements of $4,000,000 are based on the Company's
estimates for operational costs in the 12 months ended December 31, 2001.
Research and Development
The Company has not expended any funds to date on the research and development
of the Company. Merlin estimates that it has expended $121,000 on the
development of its current software programs. Following the Acquisition, the
Company anticipates that it will require $1,800,000 to fund the continued
development and enhancement of PerfectBACKUP+, HotWireFAX and the Option Source
Project. The Company anticipates that it will expend $200,000 on the continued
development and enhancement of PerfectBACKUP+, $165,000 on the continued
development and enhancement of HotWireFAX and $1,435,000 on the development and
operation of the Open Source Project.
Product Development
The computer software industry is characterized by rapid technological change
and is highly competitive in regard to timely product innovation. Accordingly,
Merlin believes that its future success depends on its ability to enhance
current products that meet a wide range of customer needs and to develop new
products rapidly to attract new customers and provide additional solutions to
existing customers. In particular, Merlin believes it must continue to respond
quickly to users' needs for broad functionality and ease of use.
Merlin's strategy is to continue to enhance PerfectBackup+'s and HotWireFAX's
functionality through new releases and new feature development to meet the
continually advancing requirements of its customers. At the same time, Merlin
may seek to acquire and develop new products to meet the needs of a broader
group of users.
There can be no assurance that Merlin will be successful in developing and
marketing new features or products that respond to technological change or
evolving industry standards, that it will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of any
new features or products, or that its new features or products will adequately
meet the requirements of the marketplace and achieve market acceptance.
Additionally, Merlin's product development staff will be under increased
pressure to offer its products that operate on different vendor's Linux and Unix
based operating systems. Due to the complexity of the product, it is extremely
difficult to fully test PerfectBACKUP+ and HotWireFAX in all possible
environments and, although Merlin employs a continual effort to assure a quality
product, there is no assurance that errors will not be found in the released
commercial product resulting in delays of new feature development. If Merlin is
unable, due to lack of resources or for technological or other reasons, to
develop and introduce new features and products in a timely manner in response
to changing market conditions or customer requirements, its business, operating
results and financial condition will be materially adversely affected. See
"Factors That May Affect Future Results" in "Item 6 - Management Discussion and
Analysis or Plan of Operation".
<PAGE>
Employees
As of March 15, 2000, the Company had 4 full-time employees, including its
President and Chief Executive Officer (Robert Heller), its Secretary and Chief
Information Officer (Gary Heller) and its Treasurer and Vice President of Sales
(Shelley Montgomery). Following the Acquisition, the Company assumed all of
Merlin's employees, which included 4 full-time employees, 4 full-time
programmers, 5 consultants and 2 administration staff.
The Company plans on hiring a number of individuals in the next twelve months
including Chief Operating Officer, Chief Technology Officer, Vice President
Marketing, OEM Sales Manager, Channel Sales Manager, two account managers and
sales representatives and three office and executive assistants.
Purchase or Sale of Equipment
Following the Acquisition, the Company does not anticipate that it will expend
any significant amount on equipment for its operations. However, the Company
will have more ongoing purchases of computer hardware and software.
FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE RESULTS
Certain statements contained in this Annual Report on Form 10-KSB, including,
without limitation, statements containing the words "believes", "anticipates",
"estimates", "intends", "expects" and words of similar import, constitute
forward-looking statements within the meaning of the Private Securities Reform
Act of 1995. Although management believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Actual results could vary
materially from those expressed in those statements. Readers are referred to
"Products", "Sales and Marketing", "Product Development", "Competition",
"Product Protection" and "Management's Discussion and Analysis or Plan of
Operation" sections contained in this Annual Report as well as the factors
described below in the section entitled "Factors That May Affect the Company's
Future Results", which identify some of the important factors or events that
could cause the Company's and Merlin's actual results or performance to differ
materially from those contained in the forward looking statements. The
following discussion relates to the factors which may substantially affect the
business to be carried on by the Company and Merlin, since the Acquisition has
been completed.
THE COMPANY MAY NOT BE SUCCESSFUL IN THE OPEN SYSTEMS MARKET
The future success of the Company's business is substantially dependent on its
ability to generate revenues from its product offerings. In February and March
of 2000, Merlin entered into various distribution and reseller agreements to
distribute or bundle PerfectBackup+ in the United States, India and Europe.
While these agreements are significant, there can be no assurance that the
Company will be successful in their efforts to generate revenues from these
agreements. Additionally, the software application market is characterized by
rapid technological growth and intense competition. The Company may not have
the financial or personnel resources to effectively capitalize on, and continue
with, its early and limited success in this market.
THE COMPANY IS DEPENDENT ON RESELLERS AND IF THE COMPANY IS NOT SUCCESSFUL IN
EXPANDING ITS DISTRIBUTION CHANNELS, ITS ABILITY TO GENERATE REVENUES WILL BE
HARMED
The Company's growth will be dependent on its ability to expand its third-party
distribution channels to market, sell and distribute its software products. The
Company is currently investing, and intends to continue to invest, significant
resources to develop these distribution channels, which could materially
adversely affect the Company's ability to generate revenues. The Company has
only limited experience in marketing its products through distributors and
resellers. Additionally, the Company will have no control over its third-party
distributors. There can be no assurance that the Company will be successful in
its efforts to generate revenue from these distribution channels, nor can there
be any assurance that it will be successful in recruiting new organizations to
represent it and its products.
In February and March of 2000, Merlin entered into various distribution and
reseller agreements to distribute and/or bundle its software products in the
United States, India and Europe. While the Company believes that these
arrangements will be beneficial, there can be no assurance that the Company will
be able to deliver its products to these companies in a timely manner or that
these companies will license its products in volumes anticipated by the Company.
<PAGE>
Further, these agreements are the Company's only significant distribution
agreements to date. While the Company's strategy is to enter into additional
agreements with resellers and distributors, it may not be able to successfully
attract additional vendors to distribute its products. Any such failure would
result in the Company having expended significant resources with little or no
return on its investment, which would significantly harm its business.
These additional investments and responsibilities will require the Company to
expend substantial resources and may require it to divert employees from other
projects to provide the support services and development efforts required to
provide products and services to these third party vendors and other new third
parties, if any.
THE COMPANY'S MARKET IS SUBJECT TO INTENSE COMPETITION AND CONTINUED COMPETITION
IN ITS MARKET MAY LEAD TO A REDUCTION IN ITS PRICES, REVENUES AND MARKET SHARE
The Company may experience intense competition from other software development
companies and the market is rapidly changing. The Company believes that its
ability to compete successfully depends on a number of factors, including the
performance, price and functionality of its products relative to those of its
competitors. Most of the Company's competitors are larger and have greater
financial, technical, marketing, support and other resources. As a result, they
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements than the Company. In addition, the software industry is
characterized by low barriers to entry. There can be no assurance that the
Company's current competitors or any new market entrants will not develop
software products that offer significant performance, price, or other advantages
over the Company's products. In addition, operating system vendors could
introduce new or upgrade existing operating systems or environments that include
similar software programs to those offered by the Company, which could render
its products obsolete and unmarketable. The Company may not be able to
successfully compete against current or future competitors which could
significantly harm its business.
THE COMPANY ANTICIPATES THAT A SIGNIFICANT PORTION OF ITS REVENUES WILL BE
DERIVED FROM A SINGLE PRODUCT AND IF THAT PRODUCT FAILS TO ACHIEVE AND MAINTAIN
MARKET ACCEPTANCE, THE COMPANY'S BUSINESS MAY BE SIGNIFICANTLY HARMED
The Company expects that a substantial portion of its revenue in future periods
will be derived from its PerfectBACKUP+ software application. The Company
expects that the PerfectBACKUP+ product and its extensions and derivatives will
account for a substantial majority, if not all, of the Company's revenue for the
foreseeable future. Broad market acceptance of PerfectBACKUP+ is, therefore,
critical to its future success. Failure to achieve broad market acceptance of
PerfectBACKUP+, as a result of competition, technological change, or otherwise,
would significantly harm its business. The Company's future financial
performance will depend in significant part on the successful development,
introduction and market acceptance of PerfectBACKUP+ and its product
enhancements. There can be no assurance that the Company will be successful in
marketing PerfectBACKUP+ or any new products, applications or product
enhancements, and any failure to do so would significantly harm its business.
THE MARKET FOR THE COMPANY'S PRODUCTS IS CHARACTERIZED BY RAPID TECHNOLOGICAL
CHANGE AND THE COMPANY MAY NOT BE ABLE TO DEVELOP OR MARKET NEW PRODUCTS TO
RESPOND TO SUCH CHANGE
The market for the Company's products is characterized by rapid technological
developments, evolving industry standards and rapid changes in customer
requirements. The introduction of products embodying new technologies, the
emergence of new industry standards, or changes in customer requirements could
render the Company's existing products obsolete and unmarketable. As a result,
its success depends upon the Company's ability to continue to enhance existing
products, respond to changing customer requirements and rapidly develop and
introduce new products that keep pace with technological developments and
emerging industry standards.
Additionally, other operating systems, such as Windows NT, may significantly
affect deployment of Unix and Linux systems for business critical applications.
A significant portion of the Company's revenue will be derived from Unix and
Linux based computer systems for the foreseeable future. A significant decline
<PAGE>
in sales of Unix and Linux based systems would decrease the demand for the
Company's products and would significantly harm its business. Finally, the
Company may not be successful in developing and marketing, on a timely basis,
product enhancements or new products that respond to technological change or
evolving industry standards, the Company may experience difficulties that could
delay or prevent the successful development, introduction and sale of these
products, and any such new products or product enhancements may not adequately
meet the requirements of the marketplace and achieve market acceptance.
THE COMPANY HAS A HISTORY OF LOSSES AND ANTICIPATES FURTHER SIGNIFICANT LOSSES
AND CANNOT ASSURE THAT IT WILL ACHIEVE PROFITABILITY
The Company and Merlin have each incurred operating losses since inception and
cannot be certain that it will generate revenue sufficient to achieve
profitability. The Company expects to continue to incur significant losses for
the foreseeable future and these losses may be higher than its current losses.
The Company cannot be certain when or if it will achieve profitability. Failure
to become and remain profitable may adversely affect the market price or the
Company's common stock and its ability to raise capital and continue operations.
FURTHER CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
From inception, the Company and Merlin have financed its operations through
sales of equity securities. The Company's existing capital resources are
adequate to maintain its current operations through June, 2000. However, the
Company will require substantial additional financing to implement its current
plans to expand its operations and fund its long-term product development. The
Company has been actively seeking financing to expand its operations. If any
planned financing fails to close and the Company is are unable to obtain
alternative financing as needed, its long- term product development and
commercialization programs would be delayed or prevented and the Company may be
required to curtail its operations.
PENNY STOCK RULES
The Company's common shares are subject to rules promulgated by the SEC relating
to "penny stocks," which apply to companies whose shares are not traded on a
national stock exchange or on the NASDAQ system, trade at less than $5.00 per
share, or who do not meet certain other financial requirements specified by the
SEC. These rules require brokers who sell "penny stocks" to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors, and provide investors
with certain information concerning the risks of trading in the such penny
stocks. These rules may discourage or restrict the ability of brokers to sell
the Company's common shares and may affect the secondary market for the
Company's common shares. These rules could also hamper the Company's ability to
raise funds in the primary market for the Company's common shares.
NATURE OF THE COMPANY'S PRESENT OPERATIONS
The success of the Company's proposed plan of operation will depend to a great
extent on the operations, financial condition, and management of Merlin. Merlin
has a limited operating history, as it was incorporated on June 25, 1999. As a
result, the Company cannot ensure that it will be a commercially or economically
viable business operation. It will face all of the risks inherent in a new
business, the majority of which are beyond the control of the management of both
the Company and Merlin.
RECENT MARKET DEVELOPMENT
The markets for Merlin's products and services have only recently begun to
develop. Demand and market acceptance for software products developed under the
open source development model and services relating to these products are
subject to a high level of uncertainty and risk. Few open source software
products have gained widespread commercial acceptance. This is partly due to
the lack of viable open source industry participants to offer adequate service
and support on a long term basis. In addition, open source vendors are not able
to provide industry standard warranties and indemnities for their products,
<PAGE>
since these products have been developed largely by independent parties over
whom open source vendors exercise no control or supervision. Finally, there are
currently few widely available commercial applications built for use with open
source operating systems, such as those based on the Linux kernel. If open
source software should fail to gain widespread commercial acceptance, the
Company's business, operating results and financial condition would be
materially adversely affected.
INTERNET AVAILABILITY
Merlin's historical business has been based on the sale of the official versions
of PerfectBACKUP+. Using a standard telephone connection, a user can currently
download PerfectBACKUP+ from the Internet free of charge. Although the
distribution of free older versions over the Internet has proved to be an
excellent way in which to attract future paying customers, the Company would
prefer users to purchase the official versions. To avoid significant download
time, users can purchase the shrink-wrapped version of PerfectBACKUP+. If
hardware and data transmission technology advances in the future to the point
where increased bandwidth allows PerfectBACKUP+ to be more quickly downloaded
from the Internet, users may no longer choose to purchase the latest release of
PerfectBACKUP+. Any resulting decrease in product revenue as a result, if
significant, could have a material adverse effect on the Company's business,
operating results and financial condition.
DIFFICULTIES IN DEPLOYING THE COMPANY'S PRODUCTS
Deployment of the Company's products often involves a significant commitment of
resources, financial and otherwise, by its customers. The deployment process
can be lengthy due to the size and complexity of the Company's products and the
need to purchase and install new applications. If the Company fails to attract
and retain services personnel, the failure of companies with which Merlin has
relationships to commit sufficient resources towards deploying its products, or
a delay in deployment for any other reason could result in dissatisfied
customers. This could have a material adverse effect on the Company's
reputation and on the Merlin brand, which in turn could materially adversely
affect the Company's business, operating results and financial condition.
LIMITED OPERATING HISTORY/EARLY STAGE COMPANY
Merlin was incorporated on June 25, 1999, and accordingly, both the Company and
Merlin have a relatively limited operating history upon which potential
investors in the Company can evaluate its business and prospects. Investors
must consider the Company's prospects in light of the risks and difficulties
frequently encountered by early stage companies in new and rapidly evolving
markets.
FLUCTUATION OF QUARTERLY RESULTS/DIFFICULTY IN FORECASTING QUARTERLY RESULTS
Due to the Company's and Merlin's limited operating history and the
unpredictability of the software industry generally, the Company's predicted
revenue and net income (loss) may fluctuate significantly from quarter to
quarter and, as a result, are difficult to forecast. The Company bases its
current and projected future expense levels in part on its estimates of future
revenue. The Company's expenses are to a large extent fixed in the short term.
It may not be able to adjust its spending quickly if revenues fall short of the
Company's expectations. Accordingly, a revenue shortfall in a particular
quarter would have a disproportionate adverse effect on the Company's net income
(loss) for that quarter. Further, the Company may make pricing, purchasing,
service, marketing, acquisition or financing decisions that could adversely
affect its business, operating results and financial condition. The Company's
quarterly operating results will fluctuate for many reasons, including:
- - the Company's ability to retain existing customers, attract new customers
and satisfy its demand;
- - changes in gross margins of current and future products and services;
- - the timing of the release of upgraded versions of the Company's products;
- - introduction of new products and services by the Company or the its
competitors;
- - changes in the market acceptance of Linux and Unix-based operating systems
and software programs;
<PAGE>
- - changes in the usage of the Internet and online services;
- - timing of upgrades and developments in the Linux kernel and other open
source software products;
- - the effects of acquisitions and other business combinations, including
one-time charges, goodwill amortization and integration expenses or
difficulties; and
- - technical difficulties or system downtime affecting the Internet or the
Website.
For these reasons, investors should not rely on period-to-period comparisons of
the Company's financial results to forecast its future performance. The
Company's future operating results may fall below expectations of securities
analysts or investors, which would likely cause the trading price of the
Company's common stock to decline significantly.
STRAIN ON RESOURCES AS A RESULT OF RAPID GROWTH
Since Merlin's incorporation, it has experienced a period of rapid growth and
expansion which has placed, and continues to place, a significant strain on its
resources. The Company expects that its anticipated growth will further strain
management, operational and financial resources. The Company's management team
has had limited experience managing a rapidly growing company on either a public
or private basis. To accommodate its anticipated growth, the Company must:
- - improve existing and implement new operational and financial systems,
procedures and controls;
- - hire, train and manage additional qualified personnel, including sales and
marketing, professional services and software engineering and development
personnel; and
- - effectively manage multiple relationships with its customers, suppliers
and other third parties.
The Company may not be able to install and implement adequate operational and
financial systems, procedures and controls in an efficient and timely manner,
and the Company's current or planned systems, procedures and controls may not be
adequate to support its future operations. The difficulties associated with
installing and implementing these new systems, procedures and controls may place
a significant burden on management and internal resources. In addition, if the
Company grows internationally, as it intends, it will have to expand its
worldwide operations and enhance its communications infrastructure. Any delay
in the implementation of, or any disruption in the transition to, new or
enhanced systems, procedures or controls could adversely affect the Company's
ability to accurately forecast sales demand, manage our supply chain, and record
and report financial and management information on a timely and accurate basis.
The Company's inability to manage growth effectively could have a material
adverse effect on its business, operating results and financial condition.
KEY EMPLOYEES
The Company's future success depends on the continued services of its key
officers, including Robert Heller (President and CEO), Gary Heller (CIO and
Secretary) and Shelley Montgomery (Vice President of Sales and Treasurer). The
loss of the technical knowledge and industry expertise of any of these people
could seriously impede the Company's success. Moreover, the loss of one or a
group of the Company's key employees, particularly to a competitor, and any
resulting loss of customers to a competitor could materially adversely affect
the Company's business, operating results and financial condition.
COMPETITION - LINUX AND UNIX-BASED PRODUCTS AND TOOLS
The market for Linux and Unix-based products and tools is new, rapidly evolving
and intensely competitive. The Company expects competition to persist and
intensify in the future. The Company expects the number of suppliers of Linux
and Unix-based software applications to grow as Linux and Unix-based operating
systems gain increased market share from its competition. In addition, there
are a number of companies with large customer bases and greater financial
resources and name recognition, such as Sun Microsystems, Corel and Cygnus
<PAGE>
Solutions, that have indicated a growing interest in the market for Linux and
Unix-based products and tools. These companies may be able to undertake more
extensive promotional activities, adopt more aggressive pricing policies, and
offer more attractive terms to their customers than the Company. Barriers to
entry are minimal and accordingly, it is possible that new competitors or
relationships among competitors may emerge and rapidly acquire significant
market share. These companies may be able to leverage their existing service
organizations and provide higher levels of support on a more cost-effective
basis than the Company. If the Company is not able to compete successfully with
current or future competitors, its business, operating results and financial
condition will be materially adversely affected.
ESTABLISHMENT AND MAINTENANCE OF BUSINESS RELATIONSHIPS
The Company's success depends on its ability to continue to establish and
maintain distribution, reseller and other collaborative relationships with
industry-leading hardware manufacturers, distributors, software vendors and
enterprise solutions providers in order to offer products and services to a
larger customer base than the Company could otherwise reach through direct sales
and marketing efforts. The Company must develop and expand its distribution
channels through relationships with original equipment manufacturers (OEMs) and
value-added resellers (VARs). If the Company is unable to maintain its existing
relationships or enter into additional relationships, it will have to devote
substantially more resources to the distribution, sale and marketing of its
products than it otherwise intends to, and the Company's business, operating
results and financial condition would be materially adversely affected.
The Company's existing relationships do not, and any future relationships may
not, afford the Company any exclusive marketing or distribution rights. The
companies with which Merlin currently has such relationships are free to pursue
alternative technologies and to develop alternative products in addition to or
in lieu of its products, either on their own or in collaboration with others,
including the Company's competitors. The Company cannot guarantee that its
resellers and distributors will market the Company's products effectively or
continue to devote the resources necessary to provide effective sales, marketing
and technical support. In order to support and develop leads for the Company's
distribution channels, it plans to expand its field sales and support staff
significantly. The Company cannot guarantee that it will be able to
successfully complete this internal expansion, that the revenue generated from
this expansion will exceed its cost or that the Company's expanded sales and
support staff will be able to compete successfully against the significantly
more extensive and better-funded sales and marketing operations of many of our
current or potential competitors. The Company's inability to effectively manage
the expansion of its sales and support staff, or its programming staff, would
materially adversely affect the Company's business, operating results and
financial condition.
INTERNATIONAL EXPANSION
The Company plans to expand its presence in foreign markets, and indeed has done
so through agreements with such companies as Italsel SRI (Italy), G.T.
Enterprises (India) and Hanmi Information & Communications Co. Ltd. (Korea).
The Company has little experience in marketing and distributing products or
services for these markets and there can be no assurance that any revenues will
be generated as a result of such agreements. As the Company expands its
international operations, it will face a number of additional risks associated
with the conduct of business overseas, including:
- - difficulties relating to the management and administration of a globally-
dispersed business;
- - fluctuations in exchange rates;
- - the burdens of complying with a wide variety of foreign laws;
- - the uncertainty of laws and enforcement in certain countries relating to
the protection of intellectual property rights;
- - reductions in business activity during the summer months in Europe and
certain other parts of the world;
<PAGE>
- - export controls;
- - multiple and possibly overlapping tax structures;
- - changes in import/export duties and quotas; and
- - economic or political instability in some international markets.
NEW BUSINESS COMBINATIONS/ALLIANCES
The Company may expand its operations or market presence by entering into
business combinations, investments, joint ventures or other strategic alliances
with other companies. These transactions create risks such as:
- - difficulty assimilating the operations, technology and personnel of the
combined companies;
- - disruption of the Company's ongoing business;
- - problems retaining key technical and managerial personnel;
- - one-time in-process research and development charges and ongoing expenses
associated with amortization of goodwill and other purchased intangible assets;
- - potential dilution to the Company's stockholders;
- - additional operating losses and expenses of acquired businesses; and
- - impairment of relationships with existing employees, customers and
business partners.
The Company's inability to address these risks could have a material adverse
effect on its business, operating results and financial condition.
COMPETITION FOR SKILLED PERSONNEL
The Company's future performance also depends upon its ability to attract and
retain highly qualified programming, technical, sales, marketing and managerial
personnel. There is intense competition for skilled personnel, particularly in
the field of software engineering. If the Company does not succeed in retaining
its personnel or in attracting new employees, its business could suffer
significantly.
NEED FOR CONTINUED DEVELOPMENT AND MAINTENANCE OF THE INTERNET'S INFRASTRUCTURE
The success of the Company's Internet strategy will depend in large part on the
continued development and maintenance of the infrastructure of the Internet.
Because global commerce and the online exchange of information is new and
evolving. the Company cannot predict with any certainty that the Internet will
be a viable commercial marketplace in the long term. The Internet has
experienced, and it may continue to experience, significant growth in number of
users and amount of traffic. To the extent that the Internet continues to
experience an increased number of users, frequency of use or increased bandwidth
requirements of users, it may not be able to support the demands placed upon it
by such growth, and its performance and reliability may suffer. Furthermore, the
Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and could face similar outages and
delays in the future. Any outage or delay could affect the level of Internet
usage, as well as the level of traffic on the Website. In addition, the
Internet could lose its viability due to delays in the development or adoption
of new standards and protocols to handle increased levels of activity or due to
increased governmental regulation. If the necessary infrastructure, standards
or protocols or complementary products, services or facilities are not
developed, or if the Internet does not become a viable commercial marketplace,
the Company's business, operating results and financial condition could be
materially adversely affected.
<PAGE>
Fire, floods, hurricanes, tornadoes, earthquakes, power loss, telecommunications
failures, break-ins and similar events could damage Merlin's computer hardware
systems. In addition, although Merlin has implemented network security
measures, its servers are vulnerable to computer viruses, electronic break-ins,
human error and other similar disruptive problems which could adversely affect
its systems and the Website. Although Merlin has tried to prevent unauthorized
access to its systems, it cannot eliminate this risk entirely. The Company's
business could be adversely affected if Merlin's systems were affected by any of
these occurrences. The Company's insurance policies may not adequately
compensate it for any losses that may occur due to failures or interruptions in
the Company's systems. It does not presently have any secondary "off-site"
systems or a formal disaster recovery plan. The Website must accommodate a high
volume of traffic and deliver frequently updated information. The Website has
in the past experienced slower response times or decreased traffic for a variety
of reasons. These occurrences have not had a material impact on Merlin's
business. These types of occurrences in the future, however, could materially
adversely affect its reputation and brand name and could cause users to perceive
the Website as not functioning properly. Under these circumstances, the
Company's customers could choose another website or other methods to obtain
Linux or Unix-related information.
POSSIBILITY OF PRODUCT DEFECTS
Despite testing, errors may be found in the Company's products after
commencement of commercial shipments. If errors are discovered, the Company may
not be able to successfully correct them in a timely manner or at all. Errors
and failures in the Company's products could result in a loss of, or delay in,
market acceptance of its products and could damage its reputation and ability to
convince commercial users of the benefits of Linux or Unix-based operating
systems and other open source software products. In addition, the Company may
need to make significant expenditures of capital resources in order to eliminate
errors and failures. Although the license agreements with the Company's
customers typically contain provisions designed to limit the Company's exposure
to potential product liability claims, it is possible that these provisions may
not be effective or enforceable under the laws of some jurisdictions. In
addition, the Company's insurance policies may not adequately limit its exposure
with respect to this type of claim. A product liability claim, even if
unsuccessful, could be costly and time consuming. Claims related to the
occurrence or discovery of these types of errors or failures could have a
material adverse effect on the Company's business, operating results and
financial condition.
INFRINGEMENT CLAIMS
The Company may be subject to future litigation based on claims that its
products infringe the intellectual property rights of others. Claims of
infringement could require that the Company reengineer its products or seek to
obtain licenses from third parties in order to continue offering its products.
In addition, an adverse legal decision affecting the Company's intellectual
property, or the use of significant resources to defend against this type of
claim, could materially adversely affect the Company's business, operating
results and financial condition.
TRADEMARK PROTECTION
There is no assurance that patent, copyright and trademark registration or
protection for Merlin's intellectual property will be available, and therefore
the Company may have little or no protection for its intellectual property
assets, comprising the main business assets of the Company.
Merlin's software technology, business tools, consumer products and its other
intellectual property are important to the Company's continued operations and
success. The Company's efforts to protect this intellectual property may not be
adequate. Unauthorized parties may infringe upon or misappropriate its software
technology, business tools and consumer products or other proprietary
information. In the future, litigation may be necessary to protect and enforce
the Company's intellectual property rights or to determine the validity and
scope of its intellectual property, which could be time consuming and costly.
The Company could also be subjected to intellectual property infringement claims
as the numbers of competitors grows. These claims, even if not meritorious,
could be expensive and divert the Company's attention from its continued
operations. If the Company becomes liable to any third parties for such claims,
it could be required to pay a substantial damage award or to develop comparable
non-infringing intellectual property and systems.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
The Company's financial statements are stated in United States Dollars (US$) and
are prepared in accordance with United States Generally Accepted Accounting
Principles.
The financial statements are attached hereto and are found immediately following
the text of this Annual Report. The Report of Independent Accountants of BDO
Dunwoody LLP, Chartered Accountants, on the audited financial statements for the
fiscal years ended December 31, 1999 and 1998 is included herein immediately
preceding the audited financial statements.
The Company's Audited Financial Statements include:
Report of Independent Accountants, dated March 24, 2000.
Balance Sheet at December 31, 1999.
Statement of Operations for the Years Ended December 31, 1999 and 1998, and
for the period from August 30, 1995 (inception) to December 31, 1999.
Statement of Changes in Capital Deficit for the Years Ended December 31,
1999 and 1998, and for the period from August 30, 1995 (inception) to December
31, 1999.
Statement of Cash Flows for the Years Ended December 31, 1999 and 1998, and
for the period from August 30,1995 (inception) to December 31, 1999.
Summary of Significant Accounting Policies.
Notes to the Financial Statements.
Merlin's Audited Financial Statements include:
Auditor's Report of BDO Dunwoody LLP, dated February 18, 2000.
Comments by Auditors for U.S. Readers on Canada - U.S. Reporting
Differences, dated February 18, 2000.
Balance Sheet at December 31, 1999.
Statement of Changes in Capital Deficit for the period from June 25, 1999
(inception) to December 31, 1999.
Statement of Operations for the period from June 25, 1999 (inception) to
December 31, 1999.
Statement of Cash Flows for the period from June 25, 1999 (inception) to
December 31, 1999.
Summary of Significant Accounting Policies.
Notes to the Financial Statements.
Prior to the Acquisition, the Company was not operating, and had no assets and
no revenue during 1999. Pro-forma financial statements, which serve to state
the results of 1999 as if Merlin and the Company had combined operations during
1999, therefore, will not differ in any material way from the audited financial
statements of Merlin; therefore, the Company has not included separate pro-forma
financial statements.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
CONTENTS
--------
REPORT OF INDEPENDENT ACCOUNTANTS
FINANCIAL STATEMENTS
Balance Sheet
Statements of Operations
Statements of Changes in Capital Deficit
Statements of Cash Flows
Summary of Significant Accounting Policies
Notes to the Financial Statements
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE DIRECTORS AND STOCKHOLDERS OF
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
We have audited the Balance Sheet of Merlin Software Technologies International,
Inc. (formerly Austin Land & Development, Inc.) (a development stage company) as
at December 31, 1999, the Statements of Operations, Changes in Capital Deficit
and Cash Flows for the years ended December 31, 1999 and 1998 and for the period
from August 30, 1995 (inception) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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, these financial statements present fairly, in all material
respects, the financial position of Merlin Software Technologies International,
Inc. (formerly Austin Land & Development) (a development stage company) as at
December 31, 1999 and the related statements of Operations, Changes in Capital
Deficit and Cash Flows for the years ended December 31, 1999 and 1998 and for
the period from August 30, 1995 (inception) to December 31, 1999 in conformity
with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations and has no
established source of revenue. This raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are described in Note 1. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ BDO Dunwoody LLP
Chartered Accountants
Vancouver, Canada
March 24, 2000
<PAGE>
<TABLE>
<CAPTION>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31 1999
- --------------------------------------------------------------
<S> <C>
ASSETS
DUE FROM MERLIN SOFTWARE TECHNOLOGIES INC. (Note 3) $675,000
- --------------------------------------------------------------
LIABILITIES AND CAPITAL DEFICIT
LIABILITIES
CURRENT
Accounts payable and accrued liabilities. . . . . . $ 15,000
ADVANCES FOR STOCK SUBSCRIPTIONS (Note 3) . . . . . 675,000
-----------
690,000
-----------
CAPITAL DEFICIT
Share capital
Authorized
50,000,000 common shares, $.001 par value
Issued
7,410,000 common shares . . . . . . . . . . . . 7,410
Deficit accumulated during the development stage. . (22,410)
-----------
(15,000)
-----------
$675,000
===========
</TABLE>
The accompanying summary of significant accounting policies
and notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
August 30
1995
Years Ended (Inception) to
December 31 December 31
- -------------------------------------------------------------------------------------
1999 1998 1999
<S> <C> <C> <C>
EXPENSES
Professional fees . . . . . . . . . . . . . . . . $ 14,210 $ 825 $20,640
Amortization. . . . . . . . . . . . . . . . . . . - 72 360
NET LOSS FOR THE PERIOD . . . . . . . . . . . . . $ 14,210 $ 897 $21,000
------------------------------------
LOSS PER SHARE. . . . . . . . . . . . . . . . . . $ - $ -
---------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING . . . . . . . 7,410,000 7,410,000
---------------------------
</TABLE>
The accompanying summary of significant accounting policies
and notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN CAPITAL DEFICIT
Deficit
Accumulated
Common Stock in the Total
------------ Development Capital
Shares Amount Stage Deficit
---------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of common shares for
cash at $0.001 on August 30, 1995
(incorporation) . . . . . . . . . . . . . . . . 6,000,000 $ 6,000 $ - $ 6,000
Retroactive adjustment for January
2000 stock split 1,410,000 1,410 (1,410) -
---------------------------------------------------
(Note 4) 7,410,000 7,410 (1,410) 6,000
Net loss for the period from August
30, 1995 (incorporation) to December
31,1997 - - (5,893) (5,893)
---------------------------------------------------
BALANCE, January 1, 1998. . . . . . . . . . . . . 7,410,000 7,410 (7,303) 107
Net loss for the year ended December
31, 1998 - - (897) (897)
---------------------------------------------------
BALANCE, December 31, 1998. . . . . . . . . . . . 7,410,000 7,410 (8,200) (790)
Net loss for the year ended December
31, 1999 - - (14,210) (14,210)
---------------------------------------------------
BALANCE, December 31, 1999. . . . . . . . . . . . 7,410,000 $ 7,410 $(22,410) $(15,000)
---------------------------------------------------
</TABLE>
The accompanying summary of significant accounting policies
and notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
August 30
1995
Years Ended (Inception) to
December 31 December 31
----------------- --------------
1999 1998 1999
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the period . . . . . . . . . . . . . $ (14,210) $(897) $ (21,000)
Adjustment to reconcile net loss
to net cash used in operating activities
Amortization of incorporation costs . . . . . . . 120 72 360
Increase in accounts payable and accrued
liabilities . . . . . . . . . . . . . . . . . . 14,090 825 15,000
-------------------------------------
- - (5,640)
-------------------------------------
FINANCING ACTIVITIES
Issuance of common stock. . . . . . . . . . . . . - - 6,000
Advances for stock subscriptions. . . . . . . . . 675,000 - 675,000
-------------------------------------
675,000 - 681,000
-------------------------------------
INVESTING ACTIVITIES
Advances to Merlin Software
Technologies Inc. . . . . . . . . . . . . . . . (675,000) - (675,000)
Incorporation costs . . . . . . . . . . . . . . . - - (360)
-------------------------------------
(675,000) - (675,360)
-------------------------------------
CASH, beginning and end of period . . . . . . . . $ - $ - $ -
-------------------------------------
</TABLE>
<PAGE>
The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 1999 AND 1998
- ------------------------------
BASIS OF PRESENTATION These financial statements are expressed in US dollars
and are prepared in accordance with accounting principles generally accepted in
the United States.
The Company has selected December 31 as its fiscal year end.
FINANCIAL INSTRUMENTS The Company's financial instruments consist of amounts
advanced to Merlin Software Technologies Inc. and accounts payable and accrued
liabilities. 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 values of these financial
instruments approximate carrying values since they are short-term in nature.
INCOME TAXES The Company follows the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
requires the Company to recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns using the liability method. Under
this method, deferred tax liabilities and assets are determined based on the
temporary differences between the financial statement carrying amounts and tax
bases of assets and liabilities using the enacted rates in effect in the years
in which the differences are expected to reverse.
LOSS PER SHARE Loss per share is computed in accordance with SFAS No. 128,
"Earnings Per Share". Basic loss per share is calculated by dividing the net
loss available to common stockholders by the weighted average number of common
shares outstanding for the period.
All share amounts contained in these financial statements retroactively
reflect the effect of the stock split completed in January 2000 (Note 4).
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
COMPREHENSIVE INCOME SFAS No. 130, "Reporting Comprehensive Income",
establishes standards for reporting and presentation of comprehensive income
(loss). This standard defines comprehensive income as the changes in equity of
an enterprise except those resulting from stockholder transactions.
Comprehensive loss for the years ended December 31, 1999 and 1998 equalled the
net loss for the years.
NEW ACCOUNTING
PRONOUNCEMENTS In June 1998, SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", was issued. SFAS No. 133 required
companies to recognize all derivatives contracts as either assets or liabilities
on the balance sheet and to measure them at fair value. If certain conditions
are met, a derivative may be specifically designated as a hedge, the objective
of which is to match the timing of gain or loss recognition on the hedging
derivative with the recognition of (i) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standards on January 1, 2001 to affect its
financial statements.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
- ------------------------------
1. NATURE OF BUSINESS AND CONTINUED OPERATIONS
The Company was organized August 30, 1995, under the laws of the State of Nevada
as Austin Land & Development, Inc. The Company currently has no operations and
in accordance with SFAS 7, is considered a development stage company. On
January 7, 2000, the Company changed its legal name to Merlin Software
Technologies International, Inc. in contemplation of closing a share exchange
agreement (Note 2).
These accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. As at December
31, 1999, the Company has recognized no revenue and has accumulated operating
losses of $21,000 since its inception. The continuation of the Company is
dependent upon the conclusion of the acquisition of Merlin Software Technologies
Inc. (Note 2) as well as the continuing financial support of creditors and
stockholders and obtaining long-term financing. Management plans to raise
equity capital to finance the operations and capital requirements of the
Company. It is management's intention to raise new equity financing of
approximately $25 million within the upcoming year. Amounts raised will be used
to further development of the target company's product, to provide financing for
the marketing and promotion of its products, to secure products and for other
working capital purposes including hardware and software upgrades. While the
Company is expending its best efforts to achieve the above plans, there is no
assurance that any such activity will generate funds that will be available for
operations.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. These financial statements do not include any adjustments
that might arise from this uncertainty.
2. ACQUISITION OF MERLIN SOFTWARE TECHNOLOGIES INC.
On January 14, 2000, the Company signed a letter of intent with the principal
stockholders of Merlin Software Technologies Inc. ("Merlin Private Co."), a
Nevada company incorporated on June 25, 1999 for the purpose of the development
of Linux-based software utilities and other business management software. The
letter of intent will form the basis for a share exchange agreement subject to
the satisfaction of certain specified conditions. Terms of the agreement have
the Company acquiring all the issued and outstanding shares of Merlin Private
Co. at the closing date on a one-for-one basis in exchange for its common
shares. At December 31, 1999, Merlin Private Co. had 7,900,000 issued shares of
common stock. Subsequent to December 31, 1999, Merlin Private Co. entered into
agreements to issue a further 86,665 units of its common stock. Each unit
consists of one share of common stock and a warrant to purchase one share of
common stock at a price of $2 per share until expiry in March 2002. The Company
will also exchange stock options (Note 5) and warrants outstanding in Merlin
Private Co. for commitments to issue its stock under similar terms to those
existing in Merlin Private Co.
The transaction will be accounted for as a recapitalization of the Company using
accounting principles applicable to reverse acquisitions. Following reverse
acquisition accounting, financial statements subsequent to the closing date will
be presented as a continuation of Merlin Private Co. The value assigned to
common stock issued by the Company on acquisition will be determined based on
the fair value of the net assets of the Company at the date of acquisition.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
3. DUE FROM MERLIN SOFTWARE TECHNOLOGIES INC.
In December 1999, the Company advanced $675,000 to Merlin Private Co. out of the
proceeds of a $1.275 million private placement expected to be completed in 2000.
The amounts were advanced on an unsecured, non-interest bearing basis with no
specific terms of repayment. The remaining $600,000 from this private placement
was advanced to Merlin Private Co. by the Company in January 2000 under similar
terms.
The private placement will result in the issuance of 850,000 units at $1.50 per
unit with each unit consisting of one share of common stock and one warrant to
purchase common stock for two years at $2 per share. $675,000 of the proceeds
were received in December 31, 1999 with the remaining $600,000 received in
January 2000.
4. SHARE CAPITAL
On January 10, 2000, the Company forward split its issued and outstanding common
stock on a 1.235:1 basis. On January 18, 2000, the Company redeemed and
cancelled 3,809,975 shares of common stock for no consideration.
5. STOCK OPTIONS
On November 1, 1999, Merlin Private Co.'s Board of Directors approved a 1999
Stock Option Plan. The Plan provides for the granting of stock options to key
employees and consultants to purchase up to 3,000,000 common shares of Merlin
Private Co. Under the Plan, the granting of incentive and non-qualified stock
options, exercise prices and terms are determined by the Board of Directors.
For incentive options, the exercise price shall not be less than the fair market
value of the Merlin Private Co.'s common stock on the grant date. (In the case
of options issued to an employee who owns stock possessing more than 10% of the
voting power of all classes of the Merlin Private Co.'s stock on the date of
grant, the option price must not be less than 110% of the fair market value of
common stock on the grant date.). Options granted are not to exceed terms
beyond ten years (5 years in the case of an incentive stock option granted to a
holder of 10 percent of the Merlin Private Co.'s common stock). Unless
otherwise specified by the Board of Directors, stock-options shall vest at the
rate of 25% per year starting one year following the granting of options.
In 1999, Merlin Private Co.'s Board of Directors approved the granting of
931,000 stock options with an exercise price of $1 per share and expiring in
2001. The options granted vest over periods from the date of grant to 12 months
subsequent to commencement of services. At December 31, 1999, 761,000 stock
options were granted and remained outstanding of which 387,800 were exercisable
on that date. Subsequent to December 31, 1999, Merlin Private Co. granted a
further 20,000 options under the same terms and entered into an employment
agreement committing to grant 150,000 options under the same terms.
Pursuant to the Plan, such options are transferrable to the Company under
similar terms should the share exchange close.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
(FORMERLY AUSTIN LAND & DEVELOPMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
6. INCOME TAXES
The tax effects of temporary differences that give rise to the Company's
deferred tax asset are as follows:
1999 1998
Tax loss carryforwards $ 7,100 $ 2,300
Valuation allowance (7,100) (2,300)
$ - $ -
===============================
The provision for income taxes differs from the amount estimated using
the federal statutory income tax rate as follows:
1999 1998
Provision (benefit) at federal statutory
rate $ (4,800) $ (300)
Increase in valuation allowance 4,800 300
------------------------------
$ - $ -
==============================
The Company evaluates its valuation allowance requirements based on projected
future operations. When circumstances change and this causes a change in
management's judgement about the recoverability of deferred tax assets, the
impact of the change on the valuation allowance is reflected in current income.
At December 31, 1999, the Company had losses available for income tax purposes
of approximately $21,000 which will expire between 2015 and 2019.
7. COMMITMENTS
In March 2000, the Company entered into management agreements with its officers.
Amongst other matters, terms of the management agreements require that the
Company pay to the officers amounts aggregating $672,000 plus 1.9 million shares
of common stock in the event of a change of control of the Company.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 25, 1999
(INCORPORATION) TO DECEMBER 31, 1999
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 25, 1999
(INCORPORATION) TO DECEMBER 31, 1999
CONTENTS
- --------
AUDITORS' REPORT
COMMENTS BY AUDITORS FOR U.S. READERS
ON CANADA-U.S. REPORTING DIFFERENCE
FINANCIAL STATEMENTS
Balance Sheet
Statement of Changes in Capital Deficit
Statement of Operations
Statement of Cash Flows
Summary of Significant Accounting Policies
Notes to the Financial Statements
<PAGE>
AUDITORS' REPORT
TO THE DIRECTORS AND STOCKHOLDERS OF
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
We have audited the Balance Sheet of Merlin Software Technologies Inc. (a
development stage company) as at December 31, 1999, the Statements of Changes in
Capital Deficit, Operations and Cash Flows for the period from June 25, 1999
(incorporation) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in Canada. 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1999 and the
results of its operations and its cash flows for the period from June 25, 1999
(incorporation) to December 31, 1999 in accordance with accounting principles
generally accepted in the United States.
/S/ BDO DUNWOODY LLP
Chartered Accountants
Vancouver, Canada
February 18, 2000
<PAGE>
<PAGE>
COMMENTS BY AUDITORS FOR U.S. READERS
ON CANADA-U.S. REPORTING DIFFERENCES
TO THE DIRECTORS AND STOCKHOLDERS OF
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
Note 1 to the financial statements. Our report to the stockholders dated
February 18, 2000 is expressed in accordance with Canadian reporting standards
which do not permit a reference to such events and conditions in the auditors'
report when these are adequately disclosed in the financial statements.
/S/ BDO DUNWOODY LLP
Chartered Accountants
Vancouver, Canada
February 18, 2000
<PAGE>
<TABLE>
<CAPTION>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31 1999
- -----------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 717,195
Sales taxes recoverable. . . . . . . . . . . . . . . . . . . . . 18,667
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . 8,948
----------
744,810
FIXED ASSETS (Note 3). . . . . . . . . . . . . . . . . . . . . . 86,564
----------
$ 831,374
- -----------------------------------------------------------------------------
LIABILITIES AND CAPITAL DEFICIT
LIABILITIES
CURRENT
Accounts payable and accrued liabilities . . . . . . . . . . . . $ 136,980
Demand loans payable (Note 4). . . . . . . . . . . . . . . . . . 210,000
----------
346,980
DUE TO MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC. (Note 5) 675,000
LOANS PAYABLE (Note 6) . . . . . . . . . . . . . . . . . . . . . 130,000
---------
1,151,980
---------
CAPITAL DEFICIT
Share capital
Authorized
1,000,000 Preferred shares, par value $0.01
50,000,000 Common shares, par value $0.001
Issued
7,900,000 Common shares . . . . . . . . . . . . . . . . . . . 7,900
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 292,122
Deficit accumulated during the development stage . . . . . . . . (616,628)
Reduction for initial contribution of intellectual property. . . (4,000)
--------
(320,606)
-----------
$ 831,374
----------
</TABLE>
The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN CAPITAL DEFICIT
FOR THE PERIOD FROM JUNE 25, 1999 (INCORPORATION) TO DECEMBER 31, 1999
Reduction Deficit
for Initial Accumulated
Additional Contribution of During the Total
Common Stock Paid-in Intellectual Development Capital
Shares Amount Capital Property Stage Deficit
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Initial contribution
of intellectual property
in July 1999. . . . . . . . . . . . 4,000,000 $ 4,000 $ - $ (4,000) $ - $ -
Private placement
for cash in July 1999
at $0.01 per share. . . . . . 3,400,000 3,400 30,600 - - 34,000
Private placement
for cash in August
1999 at $0.50 per
share . . . . . . . . . . . . . . . . 500,000 500 249,500 - - 250,000
Stock option
compensation
(Note 7) - - 12,022 - - 12,022
Net loss for the
period. . . . . . . . . . . . . - - - - (616,628) (616,628)
------------------------------------------------------------------------------------------
BALANCE, end of
period. . . . . . . . . . . . . 7,900,000 $ 7,900 $292,122 $ (4,000) $(616,628) $(320,606)
------------------------------------------------------------------------------------------
</TABLE>
The accompanying summary of significant accounting policies
and notes are an integral part of these financial statements
<TABLE>
<CAPTION>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JUNE 25, 1999 (INCORPORATION) TO DECEMBER 31 1999
- ------------------------------------------------------------------------------
<S> <C>
EXPENSES
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,964
General and administration. . . . . . . . . . . . . . . . . . . . 268,042
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . 64,907
Promotion and advertising . . . . . . . . . . . . . . . . . . . . 180,312
Research and development. . . . . . . . . . . . . . . . . . . . . 98,329
- ------------------------------------------------------------------------------
619,554
INTEREST AND OTHER INCOME . . . . . . . . . . . . . . . . . . . . (2,926)
-----------
NET LOSS FOR THE PERIOD . . . . . . . . . . . . . . . . . . . . . $ 616,628
- ------------------------------------------------------------------------------
LOSS PER SHARE - basic and diluted. . . . . . . . . . . . . . . . $ 0.09
- ------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING . . . . . . . . . . . . . . . 7,166,666
- ------------------------------------------------------------------------------
</TABLE>
The accompanying summary of significant accounting policies
and notes are an integral part of these financial statements
<TABLE>
<CAPTION>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 25, 1999 (INCORPORATION) TO DECEMBER 31 1999
- -----------------------------------------------------------------------------
<S> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the period . . . . . . . . . . . . . . . . . . . . . $ (616,628)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 7,964
(Increase) decrease in assets
Sales taxes recoverable . . . . . . . . . . . . . . . . . . . . (18,667)
Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . (8,948)
Increase (decrease) in liabilities
Accounts payable and accrued liabilities. . . . . . . . . . . . . 136,980
- -----------------------------------------------------------------------------
(487,277)
- -----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds on demand loans. . . . . . . . . . . . . . . . . . . . . 210,000
Issuance of common stock. . . . . . . . . . . . . . . . . . . . . 284,000
Advances from Merlin Software Technologies International, Inc.. . 675,000
Proceeds on loans payable . . . . . . . . . . . . . . . . . . . . 130,000
- -----------------------------------------------------------------------------
1,299,000
- -----------------------------------------------------------------------------
INVESTING ACTIVITY
Purchase of fixed assets. . . . . . . . . . . . . . . . . . . . . (94,528)
- -----------------------------------------------------------------------------
INCREASE IN CASH DURING THE PERIOD AND CASH, end of period. . . . $ 717,195
- -----------------------------------------------------------------------------
</TABLE>
The accompanying summary of significant accounting policies
and notes are an integral part of these financial statements
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
BASIS OF PRESENTATION These financial statements are expressed in US dollars
and are prepared in accordance with accounting principles generally accepted in
the United States.
The Company has selected December 31 as its fiscal year end.
FIXED ASSETS Fixed assets are carried at cost less accumulated depreciation.
Computers are depreciated using the straight-line method over their estimated
useful life of three years. Furniture and fixtures and trademarks are
depreciated over their estimated useful lives of five years. Acquired internal
use software is capitalized and depreciated over its estimated useful life of
one year.
One half period's depreciation is taken in the period of acquisition.
FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash,
sales taxes recoverable, accounts payable and accrued liabilities and loans
payable. 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 cash, sales taxes recoverable and
accounts payable and accrued liabilities approximates their carrying value,
unless otherwise noted, since they are short-term in nature or they are
receivable or payable on demand.
It is not practicable to determine the fair value of amounts advanced by
Merlin Software Technologies International, Inc. and other long-term loans.
INCOME TAXES The Company follows the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
requires the Company to recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns using the liability method. Under
this method, deferred tax liabilities and assets are determined based on the
temporary differences between the financial statement carrying amounts and tax
bases of assets and liabilities using enacted rates in effect in the years in
which the differences are expected to reverse.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSACTIONS Transactions undertaken in currencies other
than the US dollar are translated to US dollars using the exchange rate in
effect as of the transaction date. Monetary assets and liabilities denominated
in foreign currencies are then translated to US dollars using the period end
rate. Any exchange gains and losses are included in the Statement of
Operations.
LOSS PER SHARE Loss per share is computed in accordance with SFAS No. 128,
"Earnings Per Share". Basic loss per share is calculated by dividing the net
loss available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in earnings of an entity. In
loss periods, dilutive common equivalent shares are excluded as the effect would
be anti-dilutive. Basic and diluted earnings per share are the same for the
periods presented.
For the period from June 25, 1999 (incorporation) to December 31, 1999,
total stock options of 761,000 were not included in the computation of diluted
earnings per share because the effect was anti-dilutive.
STOCK BASED COMPENSATION The Company applies Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations in accounting for stock option plans. Under APB 25,
compensation cost is recognized for stock options granted at prices below the
market price of the underlying common stock on the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation", requires the
Company to provide pro-forma information regarding net income as if compensation
cost for the Company's stock option plan had been determined in accordance with
the fair value based method prescribed in SFAS No. 123.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
SOFTWARE DEVELOPMENT
COSTS In accordance with SFAS No. 86, "Accounting for the Cost of Computer
Software to be Sold, Leased, or Otherwise Marketed", development costs incurred
in the research and development of new software products are expensed as
incurred until technological feasibility in the form of a working model has been
established. To December 31, 1999, the Company's software development is in
progress and commercial feasibility had not yet been established. Accordingly,
all software development costs (consisting of amounts paid or payable to
consultants) have been charged to the accompanying statement of operations.
REVENUE RECOGNITION Product revenues from the sale of Linux-based software
is to be recognized upon shipment, except that an amount representing the value
of future services including upgrades and customer support will be deferred and
recognized on a pro-rata basis over the terms of the contracts. In absence of
revenue history providing information as to the extent of services provided
beyond the point of sale, the Company will defer half of sales proceeds on such
arrangements and recognize the revenue over the term of the contracts.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
COMPREHENSIVE INCOME SFAS No. 130, "Reporting Comprehensive Income",
establishes standards for reporting and presentation of comprehensive income
(loss). This standard defines comprehensive income as the changes in equity of
an enterprise except those resulting from stockholder transactions.
Comprehensive loss for the period from June 25, 1999 (incorporation) to December
31, 1999 equalled the net loss for the period.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
NEW ACCOUNTING
PRONOUNCEMENTS In June 1998, SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", was issued. SFAS No. 133 required
companies to recognize all derivatives contracts as either assets or liabilities
on the balance sheet and to measure them at fair value. If certain conditions
are met, a derivative may be specifically designated as a hedge, the objective
of which is to match the timing of gain or loss recognition on the hedging
derivative with the recognition of (i) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standards on January 1, 2001 to affect its
financial statements.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND CONTINUED OPERATIONS
The Company was incorporated in the state of Nevada on June 25, 1999 for the
purpose of the development of Linux-based software utilities and other business
management software. In January 2000, the Company's principal stockholders
entered into a letter of intent with Merlin Software Technologies International,
Inc. ("Merlin Pubco", formerly Austin Land & Development, Inc.) (Note 2), an
inactive Nevada company, which would result in the Company becoming a
wholly-owned subsidiary of Merlin Pubco. The common stock of Merlin Pubco is
traded on the National Association of Securities Dealers Over-the-Counter
Bulletin Board ("NASD OTC:BB") and was registered with the Securities and
Exchange Commission in the United States.
These accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. As at December
31, 1999, the Company has recognized no revenue and has accumulated operating
losses of $616,628 since incorporation. The continuation of the Company is
dependent upon the conclusion of the share exchange with Merlin Pubco and the
continuing financial support of creditors and stockholders and obtaining
long-term financing as well as the successful development of the Company's
software and achieving a profitable level of operations. Management plans to
raise equity capital to finance the operations and capital requirements of the
Company. It is management's intention to raise new equity financing of
approximately $25 million within the upcoming year. Amounts raised will be used
to further development of the Company's product, to provide financing for the
marketing and promotion of its products, to secure products and for other
working capital purposes including hardware and software upgrades. While the
Company is expending its best efforts to achieve the above plans, there is no
assurance that any such activity will generate funds that will be available for
operations.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. These financial statements do not include any adjustments
that might arise from this uncertainty.
2. REVERSE ACQUISITION OF MERLIN PUBCO
On January 14, 2000, the Company's principal stockholders signed a letter of
intent with Merlin Pubco, an inactive Nevada company whose common stock trades
on the NASD OTC:BB. The letter of intent will form the basis for a share
exchange agreement with the parties subject to the satisfaction of certain
specified conditions. Terms of the agreement have Merlin Pubco acquiring all of
the issued and outstanding shares of the Company at the closing date in exchange
for an equal number of shares in Merlin Pubco. Merlin Pubco will also exchange
stock options and warrants outstanding in the Company for commitments to issue
its stock under similar terms to those existing in the Company.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
2. REVERSE ACQUISITION OF MERLIN PUBCO - CONTINUED
The transaction will be accounted for as a recapitalization of the Company using
accounting principles applicable to reverse acquisitions. Following reverse
acquisition accounting, financial statements subsequent to the closing date will
be presented as a continuation of the Company. The net book value of the net
assets of Merlin Pubco at December 31, 1999 was $Nil as Merlin Pubco has been
inactive since its incorporation in 1995. Accordingly, the value assigned to
common stock issued by Merlin Pubco for the acquisition of the Company is
expected to be $Nil.
3. FIXED ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
<S> <C> <C> <C>
Computer hardware. . . $ 46,567 $ 3,880 $42,687
Furniture and fixtures 36,516 1,826 34,690
Computer software. . . 8,428 2,107 6,321
Trademarks . . . . . . 3,017 151 2,866
------------------------------------
$ 94,528 $ 7,964 $86,564
------------------------------------
</TABLE>
4. DEMAND LOANS PAYABLE
To December 31, 1999, the Company received unsecured, non-interest bearing
demand bridge loans totalling $210,000 from subscribers to a private placement
in Merlin Pubco. On January 5, 2000, a further $80,000 was advanced to the
Company by these subscribers. The demand loans were repaid later in January
2000.
5. DUE TO MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
In December 1999, the Company received $675,000 from Merlin Pubco out of the
proceeds of a $1.275 million private placement expected to be completed in 2000.
The amounts were advanced on an unsecured, non-interest bearing basis with no
specific terms of repayment. The remaining $600,000 from this private placement
was advanced to the Company by Merlin Pubco in January 2000 under similar terms.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
6. LOANS PAYABLE
Additional amounts advanced to the Company were loaned on a non-interest bearing
basis without security and with no specific terms of repayment. The Company has
agreed with the lenders to settle the indebtedness with the issuance of 86,667
units of the Company. Each unit consists of one share of common stock and a
warrant to purchase one share of common stock at a price of $2 per share until
expiry in March 2002.
7. STOCK OPTIONS
On November 1, 1999, the Company's Board of Directors approved the Company's
1999 Stock Option Plan. The Plan provides for the granting of stock options to
key employees and consultants to purchase up to 3,000,000 common shares of the
Company. Under the Plan, the granting of incentive and non-qualified stock
options, exercise prices and terms are determined by the Company's Board of
Directors. For incentive options, the exercise price shall not be less than the
fair market value of the Company's common stock on the grant date. (In the case
of options issued to an employee who owns stock possessing more than 10% of the
voting power of all classes of the Company's stock on the date of grant, the
option price must not be less than 110% of the fair market value of common stock
on the grant date.). Options granted are not to exceed terms beyond ten years
(5 years in the case of an incentive stock option granted to a holder of 10
percent of the Company's common stock). Unless otherwise specified by the Board
of Directors, stock-options shall vest at the rate of 25% per year starting one
year following the granting of options.
In 1999, the Company's Board of Directors approved the granting of 931,000 stock
options with an exercise price of $1 per share and expiring in 2001. At
December 31, 1999, 761,000 stock options were granted and remained outstanding
of which 387,800 were exercisable on that date. Subsequent to December 31,
1999, the Company granted a further 20,000 options under the same terms and
entered into an employment agreement committing to grant 150,000 options under
the same terms. The options granted vest over periods from the date of grant to
12 months subsequent to commencement of services.
Pro-forma information regarding Net Loss and Loss per Share is required under
SFAS No. 123, and has been determined as if the Company had accounted for its
stock options under the fair value method of SFAS No. 123. The fair value of
options granted in the period ended December 31, 1999 was $0.08. The fair value
of these options was estimated at the date of the grant using a Black-Scholes
option pricing model with the following assumptions: no dividends, a risk-free
interest rate of 5.45%, volatility factor of the expected market price of the
Company's common stock of 0.001 and a weighted average expected life of the
options of 18 months.
Under the accounting provisions of SFAS No. 123, the Company recorded in general
and administration expense for 1999 an amount of $12,022 representing the value
of options granted to consultants during the period. Additionally, the
Company's Net Loss and Loss per Share on a pro-forma basis would be
approximately $659,000 and $0.09 for the period from June 25, 1999
(incorporation) to December 31, 1999.
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
8. INCOME TAXES
The tax effects of temporary differences that give rise to the Company's
deferred tax asset are as follows:
1999
Tax loss carryforwards $ 210,000
Valuation allowance (210,000)
------------
$ -
------------
The provision for income taxes differs from the amount estimated using
the federal statutory income tax rate as follows:
1999
Provision (benefit) at federal statutory rate $ (210,000)
Increase in valuation allowance 210,000
------------
$ -
------------
The Company evaluates its valuation allowance requirements based on projected
future operations. When circumstances change and this causes a change in
management's judgement about the recoverability of deferred tax assets, the
impact of the change on the valuation allowance is reflected in current income.
At December 31, 1999, the Company had losses available for income tax purposes
of approximately $610,000 which will expire in 2019.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
On March 20, 2000, the Company engaged BDO Dunwoody LLP, Chartered Accountants,
to audit its financial statements for the fiscal years ended December 31, 1999
and 1998. During the Company's two most recent fiscal years, and any subsequent
interim periods preceding the change in accountants, there were no disagreements
with Barry Friedman P.C., CPA on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope procedure. Mr.
Friedman provided the Company with a letter, dated April 4, 2000, confirming
that it agreed with the Company's disclosure on Form 8-K in connection with the
change of accountants. The decision to change accountants was based on the
appointment of new directors to the Company's Board of Directors.
The Company did not consult BDO Dunwoody LLP, Chartered Accountants, regarding
the application of accounting principles to any specific completed or
contemplated transaction or the type of audit opinion that might be rendered on
the Company's financial statements.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following table and text sets forth the names and ages of all directors,
executive officers and significant employees of the Company as of March 31,
2000. All of the directors serve until the next Annual General Meeting of
shareholders and until their successors are elected and qualified, or until the
earlier of death, retirement, resignation or removal. Subject to any applicable
employment agreement, executive officers serve at the discretion of the Board of
Directors, and are appointed to serve until the first Board of Directors meeting
following the annual meeting of shareholders. Also provided is a brief
description of the business experience of each director, executive officer and
significant employee during the past five years and an indication of
directorships held by each director in other companies subject to the reporting
requirements under the federal securities laws.
Directors, executive officers and other significant employees:
<TABLE>
<CAPTION>
DATE FIRST ELECTED OR
NAME POSITION HELD WITH THE COMPANY AGE APPOINTED
- ------------------ ------------------------------------------------- --- ----------------
<S> <C> <C> <C>
Robert Heller. . . Director, CEO, and President 45 January 19, 2000
------------------------------------------------- --- ----------------
Gary Heller. . . . Director, Chief Information Officer and Secretary 44 January 19, 2000
------------------------------------------------- --- ----------------
Shelley Montgomery Director, Vice President of Sales and Treasurer 43 January 19, 2000
------------------------------------------------- --- ----------------
Martin Holt. . . . Director 55 January 12, 2000
================== ================================================= === ================
</TABLE>
The backgrounds and experience of the Company's directors, executive officers
and other significant employees are as follows:
<PAGE>
Robet Heller, President and Chief Executive Officer
Robert Heller has been the President of Merlin since its inception in June,
1999. He has been involved in the computer and software industries since 1978
and in the Internet business since 1990. He has owned his own software
consulting business for over seventeen years, providing design development and
management to key corporate accounts throughout the country. He is also the
President of B.O.S.S. Systems Inc., a software development and consulting firm,
having served in that capacity since 1986. He was the President of Express Lane
Communications Corporation, an Internet service provider, for two years from
1995 until 1997. For the six years prior to 1986, Mr. Heller held various
managerial positions at Radio Shack, Canada, and Tandy Corporation, U.K. where
he spent six years.
Mr. Heller was educated in South Africa and England, graduating from Cauldon
College of further education in the UK in 1976. Mr. Heller has completed a
number of post secondary education courses through private and professional
institutions. Mr. Heller has over eighteen years of experience with UNIX based
software application and development. He has designed, developed and
implemented systems including health care management systems, financial
management software for automotive dealerships and UNIX based voice and faxmail
server systems for InstaFax. Mr. Heller has also provided consulting services
to N.C.R. Corporation, Xerox, Data Processing Managers Association and Unisys,
and specializes in the analysis of business needs and procedures.
Gary Heller, Chief Information Officer and Secretary
Gary Heller is also the Vice President of Engineering of Merlin (since its
inception in June, 1999), and has been involved in the computer and software
industries since the late 1970s. Since 1985, he has been the President, CEO and
sole shareholder for a software consulting and development company known as
Unisource Systems Inc. (a Nevada corporation). From 1982 until 1985, he was the
Vice President of the Boss Computer Group. Some of the major companies for whom
Mr. Heller has provided services include Cylink Corporation, U.S. Department of
Justice, Swiss Bank and Hewlett Packard. He has been recognized for "Excellence
in Industry" for the creation of FastBack Plus Unix. Mr. Heller specializes in
the creation of innovative new products resulting in state of the art
technologies.
Mr. Heller was educated in South Africa and received initial training in
computers from the armed forces where he was involved in cartography.
Shelley Montgomery, Vice President Sales and Treasurer
Shelley Montgomery is also the Vice President of Marketing of Merlin (since its
inception in June, 1999), and has been involved in marketing since the early
1970s. Between 1998 and January, 1999, Ms. Montgomery was the Vice President of
Marketing and a director of Agenta Systems Inc. From 1996 to 1997, she was the
Vice President of Marketing and a director for Express Lane Communications Inc.,
an Internet service provider. From 1986 until 1996, Ms. Montgomery was
President and owner of Medpro Billing Inc., a medical billing service provider
and franchisor. Ms. Montgomery sold the company in 1996, and successfully
undertook the development of an Internet service provider's marketing program,
an on-line directory franchise marketing plan, and a franchise program for an
international software company. Prior to starting Medpro Ms. Montgomery was a
licensed realtor and fund administrator with Royal Trust, a division of the
Royal Bank of Canada.
Martin Holt
Martin Holt is currently employed as the President of Captain Consulting Corp.,
a consulting company specializing in consulting services for venture capital
based companies. Between 1989 and 1998, Mr. Holt was employed as the Vice
President - Administration of Britton Capital Corp., a venture capital company
involved in management consulting, due diligence, marketing, promotion and
initial public offering structuring services.
Robert Heller (President/CEO and Director of the Company) and Gary Heller
(Secretary/Chief Information Officer and Director) are brothers. There are no
other family relationships between any of the other Director or Executive
Officers.
<PAGE>
There are no arrangements or understandings between any two or more directors or
executive officers, pursuant to which he/she was selected to be a director or
executive officer.
None of the Company's directors, executive officers, promoters or control
persons have been involved in any of the following events during the past five
years:
1. any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
3. being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's executive officers and directors and persons who own more than 10% of
a registered class of the Company's equity securities to file with the
Securities and Exchange Commission initial statements of beneficial ownership,
reports of changes in ownership and annual reports concerning their ownership of
common stock and other equity securities of the Company, on Forms 3, 4 and 5
respectively. Executive officers, directors and greater than 10% shareholders
are required by Commission regulations to furnish the Company with copies of all
Section 16(a) reports they file. To the best of the Company's knowledge (based
solely upon a review of the Form 3, 4 and 5 filed), no officer, director or 10%
beneficial shareholder failed to file on a timely basis any reports required by
Section 16(a) of the Securities Exchange Act of 1934, as amended.
ITEM 10. EXECUTIVE COMPENSATION.
The Company's chief executive officer did not receive any cash or other
compensation during the fiscal years ended December 31, 1999, 1998 and 1997. No
other executive officer of the Company received annual salary and bonus in
excess of $100,000.
There were no grants of stock options or stock appreciation rights made during
the fiscal year ended December 31, 1999 to the Company's executive officers and
directors. There were no stock options outstanding as at December 31, 1999.
The Company has no formal plan for compensating its directors for their service
in their capacity as directors although such directors are expected to receive
in the future options to purchase common shares as awarded by the Board of
Directors or (as to future options) a Compensation Committee which may be
established. Directors are entitled to reimbursement for reasonable travel and
other out-of-pocket expenses incurred in connection with attendance at meetings
of the Board of Directors. The Board of Directors may award special
remuneration to any director undertaking any special services on behalf of the
Company other than services ordinarily required of a director. Other than
indicated below, no director received and/or accrued any compensation for his
services as a director, including committee participation and/or special
assignments.
On March 6, 2000, the Company entered into a management agreement with Shelley
Montgomery, pursuant to which Ms. Montgomery was appointed Treasurer and Vice
President of Sales of the Company. Ms. Montgomery's annual salary is $96,000,
together with any annual bonuses as may be determined by the Board of Directors
<PAGE>
of the Company. Ms. Montgomery's management agreement was effective January 19,
2000 and continues until terminated in accordance with its provisions. The
Company is entitled to terminate Ms. Montgomery's employment at any time for
cause and on three months written notice (or ten months salary in lieu of such
written notice) without cause. Pursuant to the terms of the management
agreement, Ms. Montgomery is entitled to a severance payment of $192,000 or two
years salary, whichever is greater, plus 500,000 common shares should there be a
change of control of the Company (as that term is defined in the management
agreement).
On March 8, 2000, the Company entered into a management agreement with Robert
Heller, pursuant to which Mr. Heller was appointed President and Chief Executive
Officer of the Company. Mr. Heller's annual salary is $120,000, together with
any annual bonuses as may be determined by the Board of Directors of the
Company. Mr. Heller's management agreement was effective January 19, 2000 and
continues until terminated in accordance with its provisions. The Company is
entitled to terminate Mr. Heller's employment at any time for cause and on three
months written notice (or twelve months salary in lieu of such written notice)
without cause. Pursuant to the terms of the management agreement, Mr. Heller is
entitled to a severance payment of $240,000 or two years salary, whichever is
greater, plus 700,000 common shares should there be a change of control of the
Company (as that term is defined in the management agreement).
On March 8, 2000, the Company entered into a management agreement with Gary
Heller, pursuant to which Mr. Heller was appointed Secretary and Chief
Information Officer of the Company. Mr. Heller's annual salary is $120,000,
together with any annual bonuses as may be determined by the Board of Directors
of the Company. Mr. Heller's management agreement was effective January 19, 2000
and continues until terminated in accordance with its provisions. The Company
is entitled to terminate Mr. Heller's employment at any time for cause and on
three months written notice (or twelve months salary in lieu of such written
notice) without cause. Pursuant to the terms of the management agreement, Mr.
Heller is entitled to a severance payment of $240,000 or two years salary,
whichever is greater, plus 700,000 common shares should there be a change of
control of the Company (as that term is defined in the management agreement).
Other than as discussed above, the Company has no plans or arrangements in
respect of remuneration received or that may be received by executive officers
of the Company to compensate such officers in the event of termination of
employment (as a result of resignation, retirement, change of control) or a
change of responsibilities following a change of control, where the value of
such compensation exceeds $100,000 per executive officer.
There are no arrangements or plans in which the Company provides pension,
retirement or similar benefits for directors or executive officers. Other than
the management agreements discussed herein, the Company has no material bonus or
profit sharing plans pursuant to which cash or non-cash compensation is or may
be paid to the Company's directors or executive officers, except that stock
options may be granted at the discretion of the Board of Directors or a
committee thereof.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Beneficial Ownership
As used in this section, the term "beneficial ownership" with respect to a
security is defined by Regulation 228.403 under the Securities Exchange Act of
1934, as amended, as consisting of: (1) any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise has
or shares voting power (which includes the power to vote, or to direct the
voting of such security) or investment power (which includes the power to
dispose, or to direct the disposition of, such security); and (2) any person
who, directly or indirectly, creates or uses a trust, proxy, power of attorney,
pooling arrangement or any other contract, arrangement or device with the
purpose or effect of divesting such person of beneficial ownership of a security
or preventing the vesting of such beneficial ownership.
Each person has sole voting and investment power with respect to the common
shares, except as otherwise indicated. Beneficial ownership consists of a
direct interest in the common shares, except as otherwise indicated.
<PAGE>
As of March 31, 2000, the Company had a total of 4,450,025 common shares ($0.001
par value per common share) issued and outstanding. After completion of the
Acquisition, there will be 12,436,690 common shares issued and outstanding. On
January 10, 2000, the Company's common stock underwent a forward stock split on
a 1.235:1 basis for all record shareholders, increasing the then issued and
outstanding shares from 6,000,000 to 7,410,000 common shares. In connection
with the Acquisition, the former directors of the Company approved the
cancellation of 3,809,975 common shares which were held by the then officers and
directors.
As of March 31, 2000, no person known to the Company was the beneficial owner of
more than five percent (5%) of the outstanding common shares of the Company
except the following:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS(1)
- ------------------------------------ ----------------------- ----------------------
<S> <C> <C>
Cede & Co.
P.O. Box 222, Bowling Green Station
New York, NY V5S 3T9. . . . . . . . 3,096,425 common shares 69.6%
----------------------- ----------------------
Big Plans Investments Ltd.
Offshore Incorporations Limited
Box 957 Offshore Inc. Centre
Roadtown, Tortola, BVI . . . . . . . 250,000 common shares 5.6%
----------------------- ----------------------
Mepol Management S.A.
Akara Bldng., 24
De Castro Street, Wickhams Cay
Roadtown, Tortola, BVI . . . . . . . 400,000 common shares 9.0%
----------------------- ----------------------
Dan Maarsman
733 East 12th Avenue
Vancouver, BC, Canada V5T 2T1 . . . 265,000 common shares 6.0%
==================================== ======================= ======================
<FN>
(1) Based on 4,450,025 common shares outstanding as of March 31, 2000.
</TABLE>
As of March 31, 2000, no individual director, nor the directors and executive
officers as a group, owned any common shares (beneficially or otherwise), in the
capital of the Company. In addition, no shares are issuable pursuant to the
conversion or exercise, as the case may be, of currently exercisable or
convertible debentures, share purchase warrants and stock options to any of the
directors or executive officers of the Company. No options have been granted to
directors of the Company to date.
Director's Share Ownership Following the Acquisition
Following the Acquisition and the Share Exchange, the directors of the Company
will beneficially own the following common shares:
<TABLE>
<CAPTION>
<PAGE>
NAME OF DIRECTOR NUMBER OF COMMON SHARES PERCENTAGE OF CLASS(1)
----------------------- ----------------------
<S> <C> <C>
Robert Heller. . . . 2,350,000 common shares 18.9%
----------------------- ----------------------
Gary Heller. . . . . 2,500,000 common shares 20.1%
----------------------- ----------------------
<PAGE>
Shelley Montgomery . 1,040,000 common shares 8.4%
----------------------- ----------------------
Martin Holt. . . . . 0 common shares 0.0%
----------------------- ----------------------
Directors as a Group 5,890,000 common shares 47.4%
==================== ======================= ======================
<FN>
(1) Based on 12,436,690 common shares outstanding on completion of the Share
Exchange.
</TABLE>
Changes in Control
The Company is unaware of any contract or other arrangement, other than January
Letter of Intent (see "Item 1: Business Development of the Company During the
Last Three Years"), the operation of which may at a subsequent date result in a
change of control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Other than as described below, there have been no transactions, or proposed
transactions, which have materially affected or will materially affect the
Company in which any director, executive officer, or beneficial holder of more
than 10% of the outstanding common stock, or any of their respective relatives,
spouses, associates or affiliates, has had or will have any direct or material
indirect interest.
Present directors of the Company, Robert Heller, Gary Heller and Shelley
Montgomery are also directors of Merlin and are accordingly interested in the
January Letter of Intent, the Share Exchange and Acquisition (see "Item 1:
Business Development of the Company During the Last Three Years" for more
details).
Captain Consulting Corp., the principal of which is Martin Holt, received a
consulting fee of $40,000 from Merlin for consulting services.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Reports of Form 8-K
There were no reports on Form 8-K filed during the Company's last fiscal
quarterly period ended December 31, 1999.
On February 1, 1999, the Company filed a current report on Form 8-K announcing
the January Letter of Intent, the Company's name change from "Austin Land &
Development, Inc." to "Merlin Software Technologies International Inc.", the
forward split of its common shares, the resignation of Eugene Koppenhaver,
Douglas Ansell and Bruce N. Barton from and the appointment of Martin Holt,
Robert Heller, Gary Heller and Shelley Montgomery to the Company's Board of
Directors. On March 30, 2000, the Company filed an amendment to this Form 8-K
to include audited financial statements for Merlin in connection with the
Acquisition. Prior to the Acquisition, the Company was not operating, and had
no assets and no revenue during 1999. The pro-forma financial statements, which
serve to state the results of 1999 as if Merlin and the Company had combined
operations during 1999, therefore, will not differ in any material way from the
audited financial statements of Merlin; therefore, the Company did not include
separate pro-forma financial statements.
On March 28, 2000, the Company filed a current report on Form 8-K announcing
that it had engaged BDO Dunwoody LLP as its independent accountants to audit its
financial statements.
<PAGE>
Financial Statements Filed as Part of the Annual Report:
The Company's Audited Financial Statements include:
Report of Independent Accountants, dated March 24, 2000.
Balance Sheet at December 31, 1999.
Statement of Operations for the Years Ended December 31, 1999 and 1998, and
for the period from August 30, 1995 (inception) to December 31, 1999.
Statement of Changes in Capital Deficit for the Years Ended December 31,
1999 and 1998, and for the period from August 30, 1995 (inception) to December
31, 1999.
Statement of Cash Flows for the Years Ended December 31, 1999 and 1998 and
for the period from August 30, 1995 (inception) to December 31, 1999.
Summary of Significant Accounting Policies.
Notes to the Financial Statements.
Merlin's Audited Financial Statements include:
Auditor's Report of BDO Dunwoody LLP, dated February 18, 2000.
Comments by Auditors for U.S. Readers on Canada - U.S. Reporting
Differences, dated February 18, 2000.
Balance Sheet at December 31, 1999.
Statement of Changes in Capital Deficit for the period from June 25, 1995
(inception) to December 31, 1999.
Statement of Operations for the period from June 25, 1995 (inception) to
December 31, 1999.
Statement of Cash Flows for the period from June 25, 1995 (inception) to
December 31, 1999.
Summary of Significant Accounting Policies.
Notes to the Financial Statements.
Exhibits Required by Item 601 of Regulation S-B
(3) Articles of Incorporation and By-laws:
3.1 Articles of Incorporation of the Company (incorporated by reference
from the Company's Form 10-SB Registration Statement, filed August 31, 1999)
3.2 Bylaws of the Company (incorporated by reference from the Company's
Form 10-SB Registration Statement, filed August 31, 1999)
3.3 Certificate of Amendment to Articles of Incorporation of the
Company, dated January 7, 2000
3.4 Corporate Charter of the Company, dated March 27, 2000
3.5 Articles of Incorporation of Merlin, dated June 25, 1999
3.6 Bylaws of Merlin, dated June 25, 1999
3.7 Corporate Charter of Merlin, dated June 25, 1999
(10) Material Contracts
Merlin Software Technologies International, Inc.
10.1 Letter of Intent, dated January 14, 2000, between the Company,
Merlin, Robert Heller, Gary Heller and Shelley Montgomery
10.2 Management Agreement, dated March 6, 2000, between Shelley
Montgomery and the Company
10.3 Management Agreement, dated March 8, 2000, between Robert Heller
and the Company
10.4 Management Agreement, dated March 8, 2000, between Gary Heller and
the Company
10.5 Share Exchange Agreement, dated April 3, 2000, between the
Company, Merlin, Robert Heller, Gary Heller and Shelley Montgomery
Merlin Software Technologies Inc.
10.6 Stock Option Agreement, dated November 1, 1999, between Haide-Anne
James and Merlin
10.7 Stock Option Agreement, dated November 1, 1999, between Brandon
Montgomery and Merlin
10.8 Stock Option Agreement, dated November 1, 1999, between William
Heller and Merlin
10.9 Stock Option Agreement, dated November 1, 1999, between Dae Kyung
Kim and Merlin
10.10 Stock Option Agreement, dated November 1, 1999, between
Chang-Cheng Chao and Merlin
10.11 Stock Option Agreement, dated November 1, 1999, between Gary
Heller and Merlin
10.12 Stock Option Agreement, dated November 1, 1999, between Shelley
Montgomery and Merlin
10.13 Stock Option Agreement, dated November 1, 1999, between Robert
Heller and Merlin
10.14 Stock Option Agreement, dated November 1, 1999, between Douglas
West and Merlin
10.15 Stock Option Agreement, dated November 1, 1999, between Patricia
Negus and Merlin
10.16 Stock Option Agreement, dated November 1, 1999, between William
Negus and Merlin
10.17 Stock Option Agreement, dated November 1, 1999, between Hank Inc.
and Merlin
10.18 Stock Option Agreement, dated November 1, 1999, between Alastair
King and Merlin
10.19 Stock Option Agreement, dated November 1, 1999, between Crystal
Gross and Merlin
10.20 Stock Option Agreement, dated November 1, 1999, between Alireza
Admadi and Merlin
10.21 Merlin Software Technologies Inc. 1999 Stock Option Plan,
approved November 1, 1999
10.22 Consulting Agreement, dated December 1, 1999, between Alastair
King and Merlin
10.23 Consulting Agreement, dated February 5, 2000, between Hank Inc.
and Merlin
<PAGE>
10.24 Consulting Agreement, dated March 2, 2000, between Douglas West
and Merlin
10.25 Consulting Agreement, dated March 3, 2000, between William Heller
and Merlin
10.26 Consulting Agreement, dated March 5, 2000, between Negus
Communications Inc. and Merlin
10.27 Reseller Agreement, dated March 7, 2000, between Merlin and
LinuxMall.com
10.28 Reseller Agreement, dated March 20, 2000, between Merlin and
Impera SoftwareCorp.
10.29 Reseller Agreement, dated March 23, 2000, between Merlin and
Hanmi Information & Communications Co. Ltd.
10.30 Reseller Agreement, dated March 28, 2000, between Merlin and
Beyond 2000 Solutions
10.31 Reseller Agreement, dated March 28, 2000, between Merlin and
LinuxPlaza
10.32 Reseller Agreement, dated March 28, 2000, between Merlin and IU
Sotfware
10.33 Distribution Agreement, dated February 15, 2000, between Merlin
and Ebiz Enterprises Inc. (dba TheLinusStore.com)
10.34 Business Partner Agreement, dated February 17, 2000, between
Merlin and Caldera Systems, Inc.
10.35 Distribution Agreement, dated February 8, 2000, between Merlin
and Koch Media Ltd. (dba Koch Distribution)
10.36 Reseller Agreement, dated February 22, 2000, between Merlin and
G.T. Enterprises
10.37 Software License, OEM and Distribution Agreement, dated February
22, 2000, between Merlin and TurboLinux, Inc.
10.38 Reseller Agreement, dated March 7, 2000, between Merlin and
Programmers Paradise Inc.
10.39 Reseller Agreement, dated March 1, 2000, between Merlin and
Cosmos Engineering Co.
10.40 Reseller Agreement, dated March 1, 2000, between Merlin and
Italsel SRL
10.42 Reseller Agreement, dated February 4, 2000, between Merlin and
Circadian Software
10.43 Reseller Agreement, dated April 4, 2000, between Merlin and
eLinux.com
(27) Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: April 13, 2000
MERLIN SOFTWARE TECHNOLOGIES
INTERNATIONAL, INC.
By: /s/ Robert Heller
Robert Heller, President, CEO and Director
By: /s/ Gary Heller
Gary Heller, Secretary, Chief Information Officer
and Director
By: /s/ Shelley Montgomery
Shelley Montgomery, Treasurer, Vice President
of Sales and Director
By: /s Martin Holt
Martin Holt, Director
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
Austin Land & Development, Inc.
(the "Corporation")
Douglas Ansell, certifies that:
1. The original articles were filed with the Office of the Secretary of
State on August 30, 1995.
2. As of the date of this certificate, 6,000,000 shares of stock of the
corporation have been issued.
3. Pursuant to the authorization given to the board of directors to change
the name of the Corporation, at the Annual Shareholders Meeting, held on
September 5, 1997, at which, 3,125,000 votes, representing 52% of the
outstanding voting shares, the company hereby adopts the following amendment to
the Articles of Incorporation of this Corporation:
First: Name of Corporation.
The name of the corporation is Merlin Software Technologies International, Inc.
(the "Corporation")
[Eugene F. Koppenhaver]
------------------------
Eugene F. Koppenhaver, President
[Douglas Ansell]
-----------------
Douglas Ansell, Secretary
State of Nevada )
)
County of Clark )
On [Jan. 7, 2000], personally appeared before me, a Notary public, Eugene F.
Koppenhaver and Douglas Ansell, who acknowledged that they executed the above
instrument.
[Bridgete Richards_]
------------------
A Notary Public in and for said County and State
RECEIVED
JAN 07 2000
---------------------
SECRETARY OF STATE
<PAGE>
WRITTEN CONSENT AND APPROVAL
OF
Merlin Software Technologies (Holdings), Inc.
(the "Corporation")
I, Martin Holt, as the sole Director and President of the Corporation, consent
to the action taken by Austin Land & Development, Inc., to change its name to
Merlin Software Technologies International, Inc. Our corporation is in the
process of changing its name to Optiks Investments Company, Inc. so there will
be no confusion between the two companies' names.
[MARTIN HOLT]
-------------
Martin Holt, sole Director/President
Date: January 7 2000
SECRETARY OF STATE
[THE GREAT SEAL OF THE STATE OF NEVADA]
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL INC, (FORMERLY:
AUSTIN LAND & DEVELOPMENT, INC.) did on AUGUST 30 1995, file in this office the
original Articles of Incorporation; that said Articles are now on file and of
record in the office of the Secretary of State of the State of Nevada, and
further, that said Articles contain all the provisions required by the law of
said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great Seal
of State, at my office, in Carson City, Nevada, on March 27, 2000.
[DEAN HELLER]
SECRETARY OF STATE
By [------------------]
Certification Clerk
FILED# C1580799
JUN 25 1999 ARTICLES OF INCORPORATION
IN THE OFFICE OF OF
DEAN HELLER MERLIN SOFTWARE TECHNOLOGIES INC.
DEAN HELLER
SECRETARY OF STATE
ARTICLE I
The name of the corporation is Merlin Software Technologies Inc. (the
"Corporation").
ARTICLE 11
The amount of total authorized capital stock which the Corporation shall
have authority to Issue is 50,000,000 shares of common stock, each with $0.001
par value, and 1,000,000 shares of preferred stock, each with $0.01 par value.
To the fullest extent permitted by the laws of the State of Nevada (currently
set forth in NRS 78.1 95), as the same now exists or may hereafter be amended or
supplemented, the Board of Directors may fix and determine the designations,
rights, preferences or other variations of each class or series within each
class of capital stock of the Corporation.
ARTICLE III
The business and affairs of the Corporation shall be managed by a Board of
Directors which shall exercise all the powers of the Corporation except as
otherwise provided in the Bylaws, these Articles of Incorporation or by the laws
of the State of Nevada. The number of members of the Board of Directors shall
be set in accordance with the Company's Bylaws; however, the initial Board of
Directors shall consist of three members. The names and addresses of the
persons who shall serve as the directors until the first annual meeting of
stockholders and until their successors are duly elected and qualified are as
follows:
Name Address
- ------------ -------
Robert Heller 1912 Ironwood Court
Vancouver, B.C. V3H 4C3
Canada
Gary C. Heller 1409 N. Cove Blvd.
Longwood, FL 32750
Shelley Montgomery 101 Esplanade Ave.
West Vancouver, B.C. V7T 1G2
Canada
<PAGE>
ARTICLE IV
The name and address of the incorporator of the Corporation is Lori Ann Y.
Fujioka, 3333 Quebec Street, Suite 9000, Denver, Colorado 80207.
ARTICLE V
To the fullest extent permitted by the laws of the State of Nevada
(currently set forth in NRS 78.037), as the same now exists or may hereafter be
amended or supplemented, no director or officer of the Corporation shall be
liable to the Corporation or to its stockholders for damages for breach of
fiduciary duty as a director or officer.
ARTICLE VI
The Corporation shall indemnify, to the fullest extent permitted by
applicable law in effect from time to time, any person against all liability and
expense (including attorneys' fees) incurred by reason of the fact that he is or
was a director or officer of the Corporation, he is or was serving at the
request of the Corporation as a director, officer, employee, or agent of, on in
any similar managerial or fiduciary position of, another corporation,
partnership, joint venture, trust or other enterprise. The Corporation shall
also indemnify any person who is serving or has served the Corporation as a
director, officer, employee, or agent of the Corporation to the extent and in
the manner provided in any bylaw, resolution of the shareholders or directors,
contract, or otherwise, so long as such provision is legally permissible.
ARTICLE VII
The owners of shares of stock of the Corporation shall not have a
preemptive right to acquire unissued shares, treasury shares or securities
convertible into such shares.
ARTICLE VIII
Only the shares of capital stock of the Corporation designated at issuance
as having voting rights shall be entitled to vote at meetings of stockholders of
the Corporation, and only stockholders of record of shares having voting rights
shall be entitled to notice of and to vote at meetings of stockholders of the
Corporation.
ARTICLE IX
The initial resident agent of the Corporation shall be the Corporation
Trust Company of Nevada, whose street address is 1 East 1st Street, Reno, Nevada
89501.
ARTICLE X
The provisions of NRS 78.378 to 78.3793 inclusive, shall not apply to the
Corporation.
<PAGE>
ARTICLE XI
The purposes for which the Corporation is organized and its powers are as
follows:
To engage in all lawful business-, and
To have, enjoy, and exercise all of the rights, powers, and
To have, enjoy, and exercise all of the rights, powers, and privileges
conferred upon corporations incorporated pursuant to Nevada law, whether now or
hereafter in effect, and whether or not herein specifically mentioned.
ARTICLE XII
One-third of the votes entitled to be cast on any matter by each
shareholder voting group entitled to vote on a matter shall constitute a quorum
of that voting group for action on that matter by shareholders.
ARTICLE XIII
The holder of a bond, debenture or other obligation of the Corporation may
have any of the rights of a stockholder in the Corporation to the extent
determined appropriate by the Board of Directors at the time of issuance of such
bond, debenture or other obligation.
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 23rd day of June, 1999.
By: [LORI ANN Y. FUJIOKA]
------------------------
Lori Ann Y. Fujioka, Incorporator
STATE OF HAWAII )
CITY AND ) ss.
COUNTY OF HONOLULU )
Personally appeared before me this 23rd day of June, 1999, Lori Ann Y.
Fujioka, who, being first duly sworn, declared that se executed the foregoing
Articles of Incorporation and that the statements therein are true and correct
to the best of her knowledge and belief.
Witness my hand and official seal.
[RAYNETTE J. HAMAMOTO
- -----------------------
Notary Public. [State of Hi]
My commission expires: Address:
03-26-2003 Waralua, FCU
- -- ------- -------------
P.O. Box 800
--------------
Waralua, Hi 96791
-------------------
<PAGE>
FILED# C1580799
JUN 25 1999
IN THE OFFICE OF
DEAN HELLER
DEAN HELLER
SECRETARY OF STATE
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT
BY RESIDENT AGENT
In the matter of Merlin Software Technologies Inc., 1, Corporation Trust
Company of Nevada, hereby state that on June 1 1999, 1 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, Town of Reno, County of Washoe, State of Nevada,
89501 .
- -----
CORPORATION TRUST
COMPANY OF NEVADA
[Marcia J. Sunahara]
---------------------
Signature
MARCIA J. SUNAHARA
- --------------------
Print Name
[Special Assistant Secretary]
- -------------------------------
Title
<PAGE>
NAME: MERLIN SOFTWARE TECHNOLOGIES INC.
FILE TYPE/NR C 15807-1999 ST NEVADA INC ON JUN 2S, 1999 FOR
PERPETUAL
STATUS: ARTICLES FILED 06-25-99 NUMBER OF PAGES FILED:4 KRD
TYPE: REGULAR
PURPOSE: ALL LEGAL ACTIVITIES
FILING FEE $175.00/FEDX/2CC CAPITAL: $60,000
PAR SHRS: 51,000,000 PAR VAL: $.000 NR NO PAR SHRS:
RA NBR: 5482
NO OFFICERS LISTED ARTICLES F
RA CORPORATION TRUST CO. OF NEVADA ACCEPTED 062599
ONE EAST FIRST STREET RENO NV 89501
FILER VADEN & EVANS, LLC
68-393 CROZIER DR WALALUA HI 96791
CMD?
PA1=MENU PF2=NEXT CORP PF5=END INQ
PF7=LOOKUP
BYLAWS
OF
MERLIN SOFTWARE TECHNOLOGIES INC.
Adopted As Of June 25, 1999
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
BYLAWS
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
ARTICLE I
OFFICES
1.1 Registered Office 1
1.2 Principal Office 1
ARTICLE 11
STOCKHOLDERS
2.1 Annual Meeting 1
2.2 Special Meetings 1
2.3 Place of Meeting 2
2.4 Notice of Meeting 2
2.5 Adjournment 2
2.6 Organization 2
2.7 Closing of Transfer Books or Fixing of Record Date 2
2.8 Quorum 2
2.9 Proxies 3
2.10 Voting of Shares 3
2.11 Action Taken Without a Meeting 3
2.12 Meetings by Telephone 4
<PAGE>
SECTION PAGE
- ------- ----
ARTICLE III
DIRECTORS
3.1 Board of Directors; Number- Qualifications- Election 4
3.2 Powers of the Board of Directors: Generally 4
3.3 Committees of the Board of Directors 4
3.4 Resignation 4
3.5 Removal 5
3.6 Vacancies 5
3.7 Regular Meetings 5
3.8 Special Meetings 5
3.9 Notice 5
3.10 Quorum 5
3.11 Manner of Acting 5
3.12 Compensation 5
3.13 Action Taken Without a Meeting 6
3.14 Meetings by Telephone 6
ARTICLE IV
OFFICERS AND AGENTS
4.1 Officers of the Corporation 6
4.2 Election and Term of Office 6
4.3 Removal 6
4.4 Vacancies 7
4.5 President 7
4.6 Vice Presidents 7
4.7 Secretary 7
4.8 Treasurer 8
4.9 Salaries 8
4.10 Bonds 8
<PAGE>
SECTION
ARTICLE V
STOCK
5.1 Certificates 8
5.2 Record 9
5.3 Consideration for Shares 9
5.4 Cancellation of Certificates 9
5.5 Lost Certificates 10
5.6 Transfer of Shares 10
5.7 Transfer Agents, Registrars, and Paying Agents 10
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
6.1 Indemnification; Advancement of Expenses 10
6.2 Insurance and Other Financial Arrangements Against
Liability of Directors, Officers, Employees, and
Agents 10
ARTICLE VII
ACQUISITION OF CONTROLLING INTEREST
7.1 Acquisition of Controlling Interest 11
ARTICLE VIII
EXECUTION OF INSTRUMENTS; LOANS, CHECKS AND ENDORSEMENTS;
DEPOSITS; PROXIES
8.1 Execution of Instruments 11
8.2 Loans 11
8.3 Checks and Endorsements 11
8.4 Deposits 12
8.5 Proxies 12
8.6 Contracts 12
<PAGE>
SECTION PAGE
- ------- ----
ARTICLE IX
MISCELLANEOUS
9.1 Waivers of Notice 12
9.2 Corporate Seal 12
9.3 Fiscal Year 13
9.4 Amendment of Bylaws 13
9.5 Uniformity of Interpretation and Severability 13
9.6 Emergency Bylaws 13
Secretary's Certification 13
<PAGE>
BYLAWS
OF
MERLIN SOFTWARE TECHNOLOGIES INC.
ARTICLE I
OFFICES
1.1 REGISTERED OFFICE. The registered office of the Corporation
required by the General Corporation Law of Nevada, Nevada Revised Statutes, 195
7 ("NRS "), Chapter 78, to be maintained in Nevada may be, but need not be,
identical with the principal office if in Nevada, and the address of the
registered office may be changed from time to time by the Board of Directors.
1.2 PRINCIPAL OFFICE. The Corporation may have such other office or
offices either within or outside of the State of Nevada as the business of the
Corporation may require from time to time if so designated by the Board of
Directors.
ARTICLE II
STOCKHOLDERS
2.1 ANNUAL MEETING. Unless otherwise designated by the Board of
Directors, the annual meeting shall be held on the date and at the time and
place fixed by the Board of Directors; provided, however, that the first annual
meeting shall be held on a date that is within 18 months after the date on which
the Corporation first has stockholders, and each successive annual meeting shall
be held on a date that is within 18 months after the preceding annual meeting.
2.2 SPECIAL MEETINGS. Special meetings of stockholders of the
Corporation, for any purpose, may be called by the Chairman of the Board, the
president, any vice president, any two members of the Board of Directors, or the
holders of at least 10% of all of the shares entitled to vote at such meeting.
Any holder or holders of not less than 10% of all the outstanding shares of the
Corporation who desire to call a special meeting pursuant to this Section 2 of
Article II shall notify the president that a special meeting of the stockholders
shall be called. Within 30 days after notice to the president, the president
shall set the date, time, and location of a stockholders' meeting. The date set
by the president shall be not less than 30 nor more than 120 days after the date
of notice to the president. If the president fails to set the date, time, and
location of special meeting within the 30-day time period described above, the
stockholder or stockholders calling the meeting shall set the date, time, and
location of the special meeting. At a special meeting no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting.
2.3 PLACE OF MEETING. The Board of Directors may designate any place,
either within or outside the State of Nevada, as the place for any annual
meeting or special meeting called by the Board of Directors. If no designation
is made, or if a meeting shall be called otherwise than by the Board, the place
of meeting shall be the Company's principal offices, whether within or outside
the State of Nevada.
<PAGE>
2.4 NOTICE OF MEETING. Written notice signed by an officer designated
by the Board of Directors, stating the place, day, and hour of the meeting and
the purpose for which the meeting is called, shall be delivered personally or
mailed postage prepaid to each stockholder of record entitled to vote at the
meeting not less than 10 nor more than 60 days before the meeting. If mailed,
such notice shall be directed to the stockholder at his address as it appears
upon the records of the Corporation, and notice shall be deemed to have been
given upon the mailing of any such notice, and the time of the notice shall
begin to run from the date upon which the notice is deposited in the mail for
transmission to the stockholder. Personal delivery of any such notice to any
officer of a corporation or association, or to any member of a partnership,
constitutes delivery of the notice to the corporation, association or
partnership. Any stockholder may waive notice of any meeting by a writing
signed by him, or his duly authorized attorney, either before or after the
meeting.
2.5 ADJOURNMENT. When a meeting is for any reason adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
2.6 ORGANIZATION. The president or any vice president shall call
meetings of stockholders to order and act as chairman of such meetings. In the
absence of said officers, any stockholder entitled to vote at that meeting, or
any proxy of any such stockholder, may call the meeting to order and a chairman
shall be elected by a majority of the stockholders entitled to vote at that
meeting. In the absence of the secretary or any assistant secretary of the
Corporation, any person appointed by the chairman shall act as secretary of such
meeting. An appropriate number of inspectors for any meeting of stockholders
may be appointed by the chairman of such meeting. Inspectors so appointed will
open and close the polls, will receive and take charge of proxies and ballots,
and will decide all questions as to the qualifications of voters, validity of
proxies and ballots, and the number of votes properly cast.
2.7 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The directors
may prescribe a period not exceeding 60 days before any meeting of the
stockholders during which no transfer of stock on the books of the
Co--p,,)ration may be made, or may fix a day not more than 60 days before the
holding of any such meeting as the day as of which stockholders entitled to
notice of and to vote at such meetings must be determined. Only stockholders of
record on that day are entitled to notice or to vote at such meeting.
2.8 QUORUM. Unless otherwise provided by the Articles of
Incorporation, one-third of the outstanding shares of the Corporation entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of stockholders. If fewer than one-third of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting without further notice for a period not to exceed 60 days at any one
adjournment. 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. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of stockholders so that less than a quorum
remains.
<PAGE>
If a quorum is present, the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the stockholders, unless the vote of a greater number or voting by
classes is required by law or the Articles of Incorporation.
2.9 PROXIES. At all meetings of stockholders, a stockholder may vote
by proxy, as prescribed by law. Such proxy shall be filed with the secretary of
the Corporation before or at the time of the meeting. No proxy shall be valid
after 6 months from the date of its creation, unless it is coupled with an
interest, or unless the stockholder specifies in it the length of time for which
it is to continue in force, which may not exceed 7 years from the date of its
creation.
2.10 VOTING OF SHARES. Each outstanding share, regardless of class,
shall be entitled to one vote, and each fractional share shall be entitled to a
corresponding fractional vote on each matter submitted to a vote at a
meeting of stockholders, except as may be otherwise provided in the Articles of
Incorporation or in the resolution providing for the issuance of the stock
adopted by the Board of Directors pursuant to authority expressly vested in it
by the provisions of the Articles of Incorporation. If the Articles of
Incorporation or any such resolution provide for more or less than one vote per
share for any class or series of shares on any matter, every reference in the
Articles of Incorporation, these Bylaws and the General Corporation Law of
Nevada to a majority or other proportion or number of shares shall be deemed to
refer to a majority or other proportion of the voting power of all of the shares
or those classes or series of shares, as may be required by the Articles of
Incorporation, or in the resolution providing for the issuance of the stock
adopted by the Board of Directors pursuant to authority expressly vested in it
by the Articles of Incorporation, or the General Corporation Law of Nevada.
Cumulative voting shall not be allowed. Unless the General Corporation Law of
Nevada, the Articles of Incorporation, or these Bylaws provide for different
proportions, an act of stockholders who hold at least a majority of the voting
power and are present at a meeting at which a quorum is present is the act of
the stockholders.
2.11 ACTION TAKEN WITHOUT A MEETING. Unless otherwise provided in the
Articles of Incorporation or these Bylaws, any action required or permitted to
be taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by stockholders holding at least a majority of
the voting power, except that if a different proportion of voting power is
required for such an action e, a meeting, then that proportion of written
consents is required. In no instance where action is authorized by written
consent need a meeting of stockholders be called or notice given. The written
consent must be filed with the minutes of the proceedings of the stockholders.
2.12 MEETINGS BY TELEPHONE. Unless other restricted by the Articles
of Incorporation or these Bylaws, stockholders may participate in a meeting of
stockholders by means of a telephone conference or similar method of
communication by which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section constitutes presence
in person at the meeting.
<PAGE>
ARTICLE III
DIRECTORS
3.1 BOARD OF DIRECTORS; NUMBER; QUALIFICATIONS; ELECTION. The
Corporation shall be managed by a Board of Directors, all of whom must be
natural persons at least 18 years of age. Directors need not be residents of
the State of Nevada or stockholders of the Corporation. The number of directors
of the Corporation shall be not less than one nor more than twelve. Subject to
such limitations, the number of directors may be increased or decreased by
resolution of the Board of Directors, but no decrease shall have the effect of
shortening the term of any incumbent director. Subject to the provisions of
Article III of the Corporation's Articles of Incorporation, each director shall
hold office until the next annual meeting of shareholders or until his successor
has been elected and qualified.
3.2 POWERS OF THE BOARD OF DIRECTORS: GENERALLY. Subject only to such
limitations as may be provided by the General Corporation Law of Nevada or the
Articles of Incorporation, the Board of Directors shall have full control over
the affairs of the Corporation.
3.3 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors may,
by resolution or resolutions passed by a majority of the whole Board, designate
one or more committees, each committee to consist of one or more directors,
which, to the extent provided in the resolution or resolutions or in these
Bylaws, 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 on which the
Corporation desires to place on a seal. 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. Unless the Articles of Incorporation or these Bylaws
provide otherwise, the Board of Directors may appoint natural persons who are
not directors to serve on committees.
3.4 RESIGNATION. Any director of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors, the
president, any vice president, or the secretary of the Corporation. Such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
When one or more directors shall resign from the Board, effective at a future
date, a majority of the directors then in office.
3.5 REMOVAL. Except as otherwise provided in the Articles of
Incorporation, any director may be removed, either with or without cause, at any
time by the vote of the stockholders representing not less than two-thirds of
the voting power of the issued and outstanding stock entitled to voting power.
3.6 VACANCIES. All 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, unless it is otherwise provided in the
Articles of Incorporation. A director elected to fill a vacancy shall be
elected for the unexpired term his predecessor in office. A director elected to
fill a vacancy caused by an increase in the number of directors shall hold
office until the next annual meeting of stockholders and until his successor has
been elected and has qualified.
<PAGE>
3.7 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after and at the
same place as the annual meeting of stockholders. The Board of Directors may
provide by resolution the time and place, either within or outside the State of
Nevada, for the holding of additional regular meetings without other notice than
such resolution.
3.8 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the president or a one-third of the
directors then in office. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or outside
Nevada, as the place for holding any special meeting of the Board of directors
called by them.
3.9 NOTICE. Notice of any special meeting shall be given at least two
days previously thereto by written notice delivered personally or mailed to each
director at his business address. Any director may waive notice of any meeting.
A director's presence at a meeting shall constitute a waiver of notice of such
meeting if the director's oral consent is entered on the minutes or by taking
part in the deliberations at such meeting without objecting. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
3.10 QUORUM. A majority of the number of directors elected and
qualified at the time of the meeting shall constitute a quorum for the
transaction of business at any such meeting of the Board of Directors, but if
less than such majority is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice.
3.11 MANNER OF ACTING. If a quorum is present, the affirmative vote
of a majority of the directors present at the meeting and entitled to vote on
that particular matter shall be the act of the Board, unless the vote of a
greater number is required by law or the Articles of Incorporation.
3.12 COMPENSATION. By resolution of the Board of Directors, any
director may be paid any one or more of the following: his expenses, if any,
of attendance at meetings; a fixed sum for attendance at such meeting; 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.
3.13 ACTION TAKEN WITHOUT A MEETING. Unless otherwise provided in the
Articles of Incorporation or these Bylaws, any action required or permitted to
be taken at a meeting of the Board of Directors or a committee thereof may be
taken without a meeting if, before or after the action, a written consent
thereto is signed by all the members of the Board or of the committee. The
written consent must be filed with the minutes of the proceedings of the Board
or committee.
3.14 MEETINGS BY TELEPHONE. Unless other restricted by the Articles
of Incorporation or these Bylaws, members of the Board of Directors or of any
committee designated by the Board, may participate in a meeting of the Board or
committee by means of a telephone conference or similar method of communication
by which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section constitutes presence in
person at the meeting.
<PAGE>
ARTICLE IV
OFFICERS AND AGENTS
4.1 OFFICERS OF THE CORPORATION. The Corporation shall have a
president, a secretary, and a treasurer, each of whom shall be elected by the
Board of Directors. The Board of Directors may appoint one or more vice
presidents and such other officers, assistant officers, committees, and agents,
including a chairman of the board, assistant secretaries, and assistant
treasurers, as they may consider necessary, who shall be chosen in such manner
and hold their offices for such terms and have such authority and duties as from
time to time may be determined by the Board of Directors. One person may hold
any two or more offices. The officers of the Corporation shall be natural
persons 18 years of age or older. In all cases where the duties of any officer,
agent, or employee are not prescribed by the Bylaws or by the Board of
Directors, such officer, agent, or employee shall follow the orders and
instructions of (a) the president, and if a chairman of the board has been
elected, then (b) the chairman of the board.
4.2 ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected by the Board of Directors annually at the first meeting of the
Board held after each annual meeting of the stockholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Each officer shall hold office until the first
of the following occurs: until his successor shall have been duly elected and
shall have qualified; or until his death; or until he shall resign; or until he
shall have been removed in the manner hereinafter provided.
4.3 REMOVAL, Any officer or agent may be removed by the Board of
Directors or by the executive committee, if any, whenever in its judgment the
best interests of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
4.4 VACANCIES. A vacancy in any office, however occurring, may be
filled by the Board of Directors for the unexpired portion of the term.
4.5 PRESIDENT. The president shall, subject to the direction and
supervision of the Board of Directors, be the chief executive officer of the
Corporation and shall have general and active control of its affairs and
business and general supervision of its officers, agents, and employees. He
shall, unless otherwise directed by the Board of Directors, attend in person or
by substitute appointed by him, or shall execute, on behalf of the Corporation,
written instruments appointing a proxy or proxies to represent the Corporation,
at all meetings of the stockholders of any other corporation in which the
Corporation shall hold any stock. He may, on behalf of the Corporation, in
person or by substitute or by proxy, execute written waivers of notice and
consents with respect to any such meetings. At all such meetings and otherwise,
the president, in person or by substitute or proxy as aforesaid, may vote the
stock so held by the Corporation and may execute written consents and other
instruments with respect to such stock and may exercise any and all rights and
powers incident to the ownership of said stock, subject however to the
instructions, if any, of the Board of Directors. The president shall have
custody of the treasurer's bond, if any. If a chairman of the board has been
elected, the chairman of the board shall have, subject to the direction and
modification of the Board of Directors, all the same responsibilities, fights,
and obligations as described in these Bylaws for the president.
<PAGE>
4.6 VICE PRESIDENTS. The vice presidents, if any, shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the Board of Directors. In the absence of the president, the
vice president designated by the Board of Directors or (if there be no such
designation) the vice president designated in writing by the president shall
have the powers and perform the duties of the president. If no such designation
shall be made, all vice presidents may exercise such powers and perform such
duties.
4.7 SECRETARY. The secretary shall perform the following: (a) keep
the minutes of the proceedings of the stockholders, executive committee, and the
Board of Directors; (b) see that all notices are duly given in accordance with
the provisions of these Bylaws or as required by law- (c) be custodian of the
corporate records and of the seal of the Corporation and affix the seal to all
documents when authorized by the Board of directors; (d) keep, at the
Corporation's registered office or principal place of business within or outside
Nevada, a record containing the names and addresses of all stockholders and the
number and class of shares held by each, unless such a record shall be kept at
the office of the Corporation's transfer agent or registrar; (e) sign with the
president or a vice president, certificates for shares of the Corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
Corporation, unless the Corporation has a transfer agent; and (g) in general,
perform all duties incident to the office of secretary and such other duties as
from time to time may be assigned to him by the president or by the Board of
Directors. Assistant secretaries, if any, shall have the same duties and
powers, subject to supervision by the secretary.
4.8 TREASURER. The treasurer shall be the principal financial officer
of the Corporation and shall have the care and custody of all funds, securities,
evidences of indebtedness, and other personal property of the Corporation, and
shall deposit the same in accordance with the instructions of the Board of
Directors. He shall receive and give receipts and acquittances for monies paid
in or on account of the Corporation, and shall pay out of the funds on hand all
bills, payrolls, and other just debts of the Corporation of whatever nature upon
maturity. He shall perform all other duties incident to the office of the
treasurer and, upon request of the Board, shall make such reports to it as may
be required at any time. He shall, if required by the Board, give the
Corporation a bond in such sums and with such sureties as shall be satisfactory
to the Board, conditioned upon the faithful performance of his duties and for
the restoration to the Corporation of all books, papers, vouchers, money, and
other property of whatever kind in his possession or under his control belonging
to the Corporation. He shall have such other powers and perform such other
duties as may be from time to time prescribed by the Board of Directors or the
president. The assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
Corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account, prepare
and file all local, state, and federal tax returns, prescribe and maintain an
adequate system of internal audit, and prepare and furnish to the president and
the Board of Directors statements of account showing the financial position of
the Corporation and the results of its operations.
<PAGE>
4.9 SALARIES. Officers of the Corporation shall be entitled to such
salaries, emoluments, compensation, or reimbursement as shall be fixed or
allowed from time to time by the Board of Directors.
4.10 BONDS. If the Board of Directors by resolution shall so require,
any officer or agent of the Corporation shall give bond to the Corporation in
such amount and with such surety as the Board of Directors may deem sufficient,
conditioned upon the faithful performance of that officer's or agent's duties
and offices.
ARTICLE V
STOCK
5.1 CERTIFICATES. The shares of stock shall be represented by
consecutively numbered certificates signed in the name of the Corporation by its
president or a vice president and by the treasurer or an assistant treasurer or
by the secretary or an assistant secretary, and shall be sealed with the seal of
the Corporation, or with a facsimile thereof.
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, the transfer agent or transfer clerk or
the registrar of the Corporation may be printed or lithographed upon the
certificate in lieu of the actual signatures. If the Corporation uses facsimile
signatures of its officers and agents on its stock certificates, it cannot act
as the registrar of its own stock, but its transfer agent and registrar may be
identical if the institution acting in those dual capacities countersigns or
otherwise authenticates any stock certificates in both capacities. In case any
officer who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such certificate is
delivered by the Corporation, the certificate or certificates may nevertheless
be adopted by the Corporation and be issued and delivered as though the person
or persons who signed the certificates, or whose facsimile signature has been
used thereon, had not ceased to be an officer of the Corporation. If the
Corporation is authorized to issue shares of more than one class or more than
one series of any class, each certificate shall set forth upon the face or back
of the certificate or shall state that the Corporation will furnish to any
stockholder upon request and without charge a full statement of the
designations, preferences, limitations, and relative rights of the shares of
each class authorized to be issued and, if the Corporation is authorized to
issue any preferred or special class in series, the variations in the relative
rights and preferences between the shares of each such series, so far as the
same have been fixed and determined, and the authority of the Board of Directors
to fix and determine the relative rights and preferences of subsequent series.
Each certificate representing shares shall state the following upon the
face thereof-. the name of the state of the Corporation's organization; the name
of the person to whom issued; the number and class of shares and the designation
of the series, if any, which such certificate represents, the par value of each
share represented by such certificate or a statement that the shares are without
par value. Certificates of stock shall be in such form consistent with law as
shall be prescribed by the Board of Directors. No certificate shall be issued
until the shares represented thereby are fully paid.
<PAGE>
5.2 RECORD. A record shall be kept of the name of each person or
other entity holding the stock represented by each certificate for shares of the
Corporation issued, the number of shares represented by each such certificate,
the date thereof and, in the case of cancellation, the date of cancellation.
The person or other entity in whose name shares of stock stand on the books of
the Corporation shall be deemed the owner thereof, and thus a holder of record
of such shares of stock, for all purposes as regards the Corporation.
5.3 CONSIDERATION FOR SHARES. Shares shall be issued for such
consideration, expressed in dollars (but not less than the par value thereof) as
shall be fixed from time to time by the Board of Directors. That part of the
surplus of a corporation which is transferred to stated capital upon the
issuance of shares as a share dividend shall be deemed the consideration for the
issuance of such dividend shares. Such consideration may consist, in whole or
in part, of money, promissory notes, other property, tangible or intangible, or
in labor or services actually performed for the Corporation, contracts for
services to be performed or other securities of the Corporation.
5.4 CANCELLATION OF CERTIFICATES. All certificates surrendered to the
Corporation for transfer shall be cancelled and no new certificates shall be
issued in lieu thereof until the former certificate for a like number of shares
shall have been surrendered and cancelled, except as herein provided with
respect to lost, stolen, or destroyed certificates.
5.5 LOST CERTIFICATES. In case of the alleged loss, destruction, or
mutilation of a certificate of stock, the Board of Directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as it may prescribe. The Board of Directors may in its
discretion require a bond, in such form and amount and with such surety as it
may determine, before issuing a new certificate.
5.6 TRANSFER OF SHARES. Upon surrender to the Corporation or to a
transfer agent of the Corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment, or authority to
transfer, and such documentary stamps as may be required by law, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate. Every such transfer of stock shall be
entered on the stock book of the Corporation which shall be kept at its
principal office or by its registrar duly appointed,
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof, and accordingly shall not be bound
to recognize any equitable or other claim to or interest in such share on the
part of any other person whether or not it shall have express or other notice
thereof, except as may be required by the laws of Nevada.
5.7 TRANSFER AGENTS, REGISTRARS, AND PAYING AGENTS. The Board may at
its discretion appoint one or more transfer agents, registrars, and agents for
making payment upon any class of stock, bond, debenture, or other security of
the Corporation. Such agents and registrars may be located either within or
outside Nevada. They shall have such rights and duties and shall be entitled to
such compensation as may be agreed.
<PAGE>
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
6.1 INDEMNIFICATION; ADVANCEMENT OF EXPENSES. To the fullest extent
permitted by the laws of the State of Nevada (currently set forth in NRS 78.75
1), as the same now exists or may hereafter be amended or supplemented, the
Corporation shall indemnify its directors and officers, including payment of
expenses as they are incurred and in advance of the final disposition of any
action, suit, or proceeding. Employees, agents, and other persons may be
similarly indemnified by the Corporation, including advancement of expenses, in
such case or cases and to the extent set forth in a resolution or resolutions
adopted by the Board of Directors. No amendment of this Section shall have any
effect on indemnification or advancement of expenses relating to any event
arising prior to the date of such amendment.
6.2 INSURANCE AND OTHER FINANCIAL ARRANGEMENTS AGAINST LIABILITY OF
DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS. To the fullest extent permitted by
the laws of the State of Nevada (currently set forth in NRS 78.752), as the same
now exists or may hereafter be amended or supplemented, the Corporation may
purchase and maintain insurance and make other financial arrangements 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 such
person and liability and expense incurred by such person in its capacity as a
director, officer, employee, or agent, or arising out of such person's status as
such, whether or not the Corporation has the authority to indemnify such person
against such liability and expenses.
ARTICLE VII
ACQUISITION OF CONTROLLING INTEREST
7.1 ACQUISITION OF CONTROLLING INTEREST. The provisions of the
General Corporation Law of Nevada pertaining to the acquisition of a controlling
interest (currently set forth NRS 78.378 to 78.3793, inclusive), as the same now
exists or may hereafter be amended or supplemented, shall not apply to the
Corporation.
ARTICLE VIII
EXECUTION OF INSTRUMENTS; LOANS, CHECKS AND ENDORSEMENTS;
DEPOSITS; PROXIES
8.1 EXECUTION OF INSTRUMENTS. The president or any vice president
shall have the power to execute and deliver on behalf of and in the name of the
Corporation any instrument requiring the signature of an officer of the
Corporation, except as otherwise provided in these Bylaws or where the execution
and delivery thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the Corporation. Unless authorized to do so by
these Bylaws or by the Board of Directors, no officer, agent, or employee shall
have any power or authority to bind the Corporation in any way, to pledge its
credit, or to render it liable pecuniarily for any purpose or in any amount.
<PAGE>
8.2 LOANS. The Corporation may lend money to, guarantee the
obligations of, and otherwise assist directors, officers, and employees of the
Corporation, or directors of another corporation of which the Corporation owns a
majority of the voting stock, only upon compliance with the requirements of the
General Corporation Law of Nevada.
No loans shall be contracted on behalf of the Corporation and no evidence
of indebtedness shall be issued in its name unless authorized by a resolution of
the Board of directors. Such authority may be general or confined to specific
instances.
8.3 CHECKS AND ENDORSEMENTS. All checks, drafts, or other orders for
the payment of money, obligations, notes, or other evidences of indebtedness,
bills of lading, warehouse receipts, trade acceptances, and other such
instruments shall be signed or endorsed by such officers or agents of the
Corporation as shall from time to time be determined by resolution of the Board
of Directors, which resolution may provide for the use of facsimile signatures.
8.4 DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the Corporation's credit in such banks
or other depositories as shall from time to time be determined by resolution of
the Board of Directors, which resolution may specify the officers or agents of
the Corporation who shall have the power, and the manner in which such power
shall be exercised, to make such deposits and to endorse, assign, and deliver
for collection and deposit checks, drafts, and other orders for the payment of
money payable to the Corporation or its order.
8.5 PROXIES. Unless otherwise provided by resolution adopted by the
Board of Directors, the president or any vice president may from time to time
appoint one or more agents or attorneys-in fact of the Corporation, in the name
and on behalf of the Corporation, to cast the votes which the Corporation may be
entitled to cast as the holder of stock or other securities in any other
corporation, association, or other entity any of whose stock or other securities
may be held by the Corporation, at meetings of the holders of the stock or other
securities of such other corporation, association, or other entity or to consent
in writing, in the name of the Corporation as such holder, to any action by such
other corporation, association, or other entity, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
8.6 CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1 WAIVERS OF NOTICE. Whenever notice is required by the General
Corporation Law of Nevada, by the Articles of Incorporation, or by these Bylaws,
a waiver thereof in writing signed by the director, stockholder, or other person
entitled to said notice, whether before, at, or after the time stated therein,
or his appearance at such meeting in person or (in the case of a stockholders'
meeting) by proxy, shall be equivalent to such notice.
9.2 CORPORATE SEAL. The Board of Directors may adopt a seal circular in
form and bearing the name of the Corporation, the state of its incorporation,
and the word "Seal" which, when adopted, shall constitute the seal of the
Corporation. The seal may be used by causing it or a facsimile of it to be
impressed, affixed, manually reproduced, or rubber stamped with indelible ink.
9.3 FISCAL YEAR. The Board of Directors may, by resolution, adopt a
fiscal year for the Corporation.
9.4 AMENDMENT OF BYLAWS. The provisions of these Bylaws may at any
time, and from time to time, be amended, supplemented or repealed by the Board
of Directors.
9.5 UNIFORMITY OF INTERPRETATION AND SEVERABILITY. These Bylaws shall
be so interpreted and construed as to conform to the Articles of Incorporation
and the laws of the State of Nevada or of any other state in which conformity
may become necessary by reason of the qualification of the Corporation to do
business in such state, and where conflict between these Bylaws, the Articles of
Incorporation or the laws of such a state has arisen or shall arise, these
Bylaws shall be considered to be modified to the extent, but only to the extent,
conformity shall require. If any provision hereof or the application thereof
shall be deemed to be invalid by reason of the foregoing sentence, such
invalidity shall not affect the validity of the remainder of these Bylaws
without the invalid provision or the application thereof, and the provisions of
these Bylaws are declared to be severable.
9.6 EMERGENCY BYLAWS. Subject to repeal or change by action of the
stockholders, the Board of Directors may adopt emergency bylaws in accordance
with and pursuant to the provisions of the laws of the State of Nevada.
SECRETARY'S CERTIFICATION
The undersigned Secretary of MERLIN SOFTWARE TECHNOLOGIES INC. (the
"Corporation") hereby certifies that the foregoing Bylaws are the Bylaws of the
Corporation adopted by the Board of Directors as of the 25th day of June, 1999.
By:------------------------------
Gary C. Heller, Secretary
SECRETARY OF STATE
[THE GREAT SEAL OF THE STATE OF NEVADA]
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that MERLIN SOFTWARE TECHNOLOGIES INC. did on JUNE 25, 1999 file
in this office the original Articles of Incorporation; that said Articles are
now on file and of record in the office of the Secretary of State of the State
of Nevada, and further, that said Articles contain all the provisions required
by the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great Seal
of State, at my office, in Carson City, Nevada, on JUNE 25, 1999.
[DEAN HELLER]
SECRETARY OF STATE
By [Kelly R. Davenport]
Certification Clerk
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL INC.
(formerly AUSTIN LAND & DEVELOPMENT, INC.)
c/o 3675 Pecos-McLeod, Suite 1400
Las Vegas, NV 89121
January 14, 2000
The Undersigned Shareholders of
Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, B.C.
V5G 4B1
Dear Sirs:
Re: Purchase by Merlin Software Technologies International Inc. (formerly
Austin Land & Development, Inc.)(the "Purchaser") of 7,900,000 common shares
(the "Shares") in the capital of Merlin Software Technologies Inc. (the
"Company"), being all of the issued and outstanding common shares of the
Company, carrying on the business of computer software development from the
Vendors listed below (the "Principal Vendors") and other Shareholders of the
Company (collectively with the Principal Vendors, the "Vendors")
- --------------------------------------------------------------------------------
We are writing to confirm the terms and conditions upon which the
Vendors will sell, transfer and assign to the Purchaser and the Purchaser agrees
to purchase from the Vendors, free and clear from all liens, charges and
encumbrances, the Shares.
The basic terms and conditions of such purchase and sale are as
follows:
1. The Vendors will sell, transfer and assign to the Purchaser and the
Purchaser will purchase from the Principal Vendors and all other Vendors, free
and clear from all liens, charges and encumbrances (other than as approved in
writing by the Purchaser), the Shares.
2. The closing of the purchase and sale of the Shares between the Vendors
and the Purchaser will take place on February 28, 2000 or such other date as may
be agreed to by the parties hereto (the "Closing Date"). The closing may take
place by exchange of the appropriate solicitor's undertakings, which will
involve each party's solicitors delivering to his or her counterpart all
required consideration and documentation, to be held in trust and not released
until all required closing deliveries have been made and all conditions to
closing have been satisfied or waived by the party which has the benefit of such
conditions.
<PAGE>
3. The Purchase price ("Purchase Price") for the Shares will be the payment
on the Closing Date of 7,900,000 shares in the capital of the Purchaser at a
deemed price of $----- (U.S.) per share (the "Purchase Shares") (one Purchase
Share for each Share). The Vendors acknowledges that the Purchase Shares will
have such hold periods as are required under applicable securities laws, which
to the knowledge of the Purchaser is one (1) year in the United States, unless
any of the Vendors is an "affiliate" of the Purchaser, as that term is defined
under U.S. securities laws. Affiliates have additional restrictions. Canadian
residents may require an exemption order to resell their Purchase Shares. The
Purchase Shares will be issued from treasury as fully paid and non-assessable
shares in the capital of the Purchaser and shall be free and clear of all liens,
charges and encumbrances. The Purchase Shares will be exchanged for the Shares.
4. The Purchaser will co-operate with the Vendors resident in the U.S. and
Canada to file such elections under U.S. and Canadian tax laws so that the sale
of the Shares can be made on a tax deferred roll-over basis, if reasonably
available.
5. The Purchaser's obligation to complete the purchase and sale of the
Shares is subject to the following conditions precedent which are to be
satisfied, as applicable, on or before the Closing Date:
(a) the Purchaser obtaining the consent from any parties from whom consent
to the exchange of the Shares is required;
(b) the Purchaser having reviewed and approved every material contract which
is or will be in force respecting the Company or related companies;
(c) the Purchaser and its solicitors having had a reasonable opportunity to
approve of all documentation in connection with the sale of the Shares from the
Vendors;
(d) the Vendors executing a share for share exchange agreement (the "Share
Exchange Agreement") as presented by the Vendors' solicitors and agreed to by
the Purchaser, and tendering their Shares in exchange for their pro rata portion
of the Purchase Shares; and
(e) the Company's Board of Directors approving the Share Exchange Agreement
and obtaining the approval of the necessary majority of the Vendors.
6. The conditions set forth in Clause 5 of this Agreement are for the
exclusive benefit of the Purchaser and may be unilaterally waived by the
Purchaser in whole or in part at any time.
7. The Vendors' obligation to complete the purchase and sale of the Shares
is subject to the following conditions precedent which are to be satisfied, as
applicable, on or before the Closing Date:
<PAGE>
(a) the Vendors and their solicitors having had a reasonable opportunity to
approve of all documentation in connection with the transactions contemplated
herein;
(b) the Vendors and their solicitors having had a reasonable opportunity to
perform searches and other due diligence reasonable or customary in a
transaction of a similar nature to that contemplated herein and that both the
Vendors and their solicitors are satisfied with the results of such due
diligence;
(c) the representations and warranties of the Purchaser shall have been true
at the time made and shall be true as at the Closing Date;
(d) the Purchaser delivering statutory declarations, as at the Closing Date,
in a form satisfactory to the Company, the Principal Vendors and their
respective solicitors; and
(e) there shall have been no adverse material change in the business,
operations or affairs, financial or otherwise, of the Purchaser since the date
of this Agreement.
8. The conditions set forth in Clause 7 of this Agreement are for the
exclusive benefit of the Vendors and may be unilaterally waived by the Vendors
in whole or in part at any time.
9. On or before the Closing Date, the Purchaser will adopt a stock option
plan ("Plan") and issue, pursuant to the Plan, 2,000,000 stock options (the
"Options") to acquire common shares in the capital of the Purchaser at an
exercise price of not less than $1.00 per common share. The Options will be
available for current and new employees and will be issued to an administrator
of the Plan as determined by the Company's directors. The Options will be
distributed at the discretion of the board of directors of the Purchaser.
10. Before the Closing Date, the parties will prepare and execute formal and
comprehensive agreements containing representations and warranties and other
terms reasonable and customary in transactions of a similar nature to those
contemplated herein as prepared by the Vendors' and the Company's solicitors.
11. Provided that the conditions precedent to this Agreement have been
fulfilled, the following will take place on the Closing Date:
(a) the Principal Vendors will indemnify and hold the Purchaser harmless
from any liabilities relating to the Shares and the Company accruing up to and
including the day before the Closing Date and in particular, will ensure that
the Company has paid all wages, holiday pay, income tax, Pension Plan,
Unemployment Insurance and other compensation payable to or related to the
employees; and
(b) the Purchaser will indemnify and hold the Principal Vendors harmless
from all liabilities relating to the Shares and the Company from and after the
Closing Date and in particular, will ensure that the Company has paid all wages,
holiday pay, income tax, Pension Plan, Unemployment Insurance and other
compensation payable to or related to the employees.
<PAGE>
12. At the Closing Date, the Vendors will transfer the Shares to the
Purchaser free from any outstanding liens, charges, claims or encumbrances
(except as approved by the Purchaser) and execute all such documents as the
Purchaser's solicitors may require in order to effect such transfer. At the
Closing Date, the Purchaser shall issue the Purchase Shares to the Vendors and
all other shareholders of the Company pro rata in proportion to the number of
shares each such shareholder held in the capital of the Company, as fully-paid
and non-assessable shares free and clear of all liens, charges, claims or
encumbrances.
13. Each party will exercise all reasonable efforts and diligence and will
act honestly and in good faith to cause the conditions specified herein to be
met as soon as practicable.
14. The Principal Vendors represent and warrant to the Purchaser as of the
date hereof and on the Closing Date that:
(a) the Principal Vendors have good and marketable title to their Shares,
free from any encumbrances or claims, except as may be listed and approved by
the Purchaser;
(b) the Principal Vendors own an aggregate of 4,000,000 common shares in the
capital of the Company;
(c) as at January 1, 2000, the authorized capital of the Company consists of
50,000,000 common shares with par value of $0.001 per common share and 1,000,000
preferred shares with a par value of $0.01 per preferred share;
(d) as at January 1, 2000, 7,900,000 common shares and no preferred shares
were issued and outstanding;
(e) the Board of Directors of the Company has approved this Agreement, and
the Principal Vendors have the authority to execute this Agreement on behalf of
the Company, and to bind the Company by their signatures;
(f) no person, firm, corporation or other entity has any right, agreement or
option, present or future, contingent or absolute, or any right capable of
becoming a right, agreement or option to purchase or otherwise acquire any of
the Shares, or any other common or preferred shares in the capital of the
Company;
(g) the Principal Vendors have disclosed to the Purchaser all liabilities
and potential liabilities of the Company of which they are aware;
(h) all of the assets of the Company are in good working order and to the
best of the Principal Vendors' knowledge contain no latent defects;
(i) the Principal Vendors are not aware of and have not failed to disclose
to the Purchaser any change, event or circumstance which would adversely affect
the Shares or assets of the Company or the prospects, operation or condition of
the Company or which would reasonably be considered to reduce the value of the
Shares to the Purchaser;
<PAGE>
(j) the Principal Vendors have not made any untrue statement to the
Purchaser and have not failed to state a material fact that is required to be
stated or that is necessary to prevent a statement that is made from being false
or misleading in the circumstances in which it was made;
(k) the Principal Vendors have disclosed all contracts, engagements and
commitments, whether oral or written, relating to the Company;
(l) all licences, permits, approvals, consents, certificates, registrations
and authorizations required in the ordinary course of the Company's business or
in the use of the assets of the Company have been obtained and are in good
standing and are not terminable on the basis of a transfer in ownership of the
Shares; and
(m) the Principal Vendors will us their best efforts to have all of the
Vendors agree to the transaction contemplated in this Agreement and to tender
their Shares in exchange for their pro rata portion of the Purchase Shares;
15. The Purchaser represents and warrants to the Vendors as of the date
hereof and on the Closing Date that:
(a) the Purchaser has filed with all applicable securities and regulatory
authorities (including exchanges and markets) all information and documents
required to be filed with such authorities (the "Public Record") and the
statements set forth in the Public Record are true, correct and complete and do
not contain any misrepresentation as of the date made and the Purchaser has not
filed any confidential material change reports or similar reports;
(b) all alterations, if any, to the Articles of Incorporation of the
Purchaser (or its predecessors) have been duly approved by the shareholders of
the Purchaser;
(c) the corporate records of the Purchaser, as required to be maintained by
it under its statute of incorporation and constating documents, are accurate,
complete and current in all material respects and all material transactions of
the Purchaser have been properly and promptly recorded on its books or filed
with its records;
(d) the last audited financial statements of the Purchaser for the period
ended September 30, 1999 (the "Financial Statements") are true and correct in
every material respect and have been prepared in accordance with generally
accepted accounting principles and fairly reflect the financial position of the
Purchaser as at the date of such Financial Statements;
(e) there has not been any adverse material change in the business,
operations or affairs, financial or otherwise, of the Purchaser since September
30, 1999, being the date of the Financial Statements of the Purchaser;
<PAGE>
(f) the Purchaser does not have any liability, due or accruing, contingent
or absolute, and is not directly or indirectly subject to any guarantee,
indemnity or other contingent or indirect obligation with respect to the
obligation of any other person or company not shown or reflected in the
Financial Statements;
(g) after the date of the Financial Statements, the Purchaser has not
engaged in any transaction or made any disbursement or assumed or incurred any
liability or obligation or made any commitment, including without limitation,
any forward purchase commitment or similar obligation, to make any expenditure
which would materially affect its financial condition;
(h) the Purchaser has disclosed to the Principal Vendors all liabilities and
potential liabilities of the Purchaser;
(i) the Purchase Shares when issued will be issued as fully paid and
non-assessable shares free and clear of all liens, charges, claims or
encumbrances;
(j) the Purchaser has been approved for, is currently and will be, as of the
Closing Date, trading on the National Association of Securities Dealers Inc.
Over-the-Counter Bulletin Board;
(k) as at January 1, 2000, the authorized capital of the Purchaser consists
of 50,000,000 common shares with par value of $0.001 per common share;
(l) as at January 1, 2000, 6,000,000 common shares in the capital of the
Purchaser were issued and outstanding;
(m) no person, firm, corporation or other entity has any right, agreement or
option, present or future, contingent or absolute, or any right capable of
becoming a right, agreement or option to purchase or otherwise acquire any of
the common shares in the capital of the Purchaser;
(n) the Purchaser is not aware of and has not failed to disclose to the
Principal Vendors any change, event or circumstance which would adversely affect
the Purchaser's common shares or the prospects, operation or condition of the
Purchaser or which would reasonably be considered to reduce the value of the
Purchaser's common shares;
(o) the Purchaser has not made any untrue statement to the Principal Vendors
and has not failed to state a material fact that is required to be stated or
that is necessary to prevent a statement that is made from being false or
misleading in the circumstances in which it was made;
(p) the Purchaser has disclosed all contracts, engagements and commitments,
whether oral or written, relating to the Purchaser;
<PAGE>
(q) all licences, permits, approvals, consents, certificates, registrations
and authorizations required for the Purchaser have been obtained and are in good
standing; and
(r) the Purchaser may terminate its current business obligations with no
liability or obligations accruing.
16. The Vendors acknowledge that the Purchaser is a company with no
substantive business operations, other than as described in the Purchaser's Form
10-SB filed with the Securities and Exchange Commission.
17. Each party will execute all other documents and perform and do all such
other acts and deeds as and when the same may be required to carry out the terms
and intent of this letter.
18. This Agreement will enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and permitted assigns. This Agreement may not be assigned by any party without
the prior written consent of the others.
19. This Agreement may be executed in several counterparts, each of which
will be deemed to be an original and all of which will together constitute one
and the same instrument.
20. Each party will be responsible for its own legal and other professional
fees in connection with the purchase and sale of the Shares.
21. This Agreement is intended to be a binding agreement between the parties
subject to the terms and conditions hereof.
22. This Agreement shall be governed by and construed in accordance with the
laws of the State of Nevada and the laws of the United States applicable
therein.
Enclosed is our cheque in the amount of $10.00. If you agree to the
above terms, kindly retain the cheque, sign two copies of this letter signifying
your approval and acceptance and return one fully executed letter to us at your
earliest convenience. This offer is open for acceptance until January 15, 2000.
Yours truly,
Merlin Software Technologies International Inc. (formerly Austin Land &
Development, Inc.)
Per: /s/ Martin Holt
Authorized Signatory
The undersigned hereby agree to the foregoing terms of purchase and sale this
day of January, 2000.
/s/ Robert Heller
Robert Heller
/s/ Gary Heller
Gary Heller
/s/ Shelley Montgomery
Shelley Montgomery
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
3675 Pecos-McLeod, Suite 1400
Las Vegas, Nevada 89121
Ms. Shelley Montgomery
1011 Esplanade Avenue
West Vancouver, BC V7G 1T2
Dear Ms. Montgomery:
We wish to confirm the terms and conditions concerning your (the
"Executive") employment by Merlin Software Technologies International, Inc.
and/or its successors (the "Company"). The terms and conditions of the
Executive's employment with the Company are set forth below.
1. Position and Responsibilities
(a) The Executive shall have executive responsibility for the management and
development of the Company and its affiliates (collectively referred to as the
"Merlin Software Group"). The Executive acknowledges that the Company has
entered into arrangements whereby it has agreed to procure management services,
including those of the Executive, to the Merlin Software Group and the Executive
therefore agrees to provide her services to such affiliates of the Company as
may be directed by the board of directors of the Company (the "Board of
Directors") from time to time. In order to carry out such responsibilities, the
Executive shall hold the office of the Treasurer and Vice President of Sales of
the Company and shall be a director of the Company and its affiliates.
(b) The Executive shall fully and faithfully perform such duties and fulfil
such obligations commensurate with the office of Treasurer and Vice President of
Sales, as shall be directed by the Board of Directors from time to time. The
Executive shall devote her full time and attention using her best efforts to
apply her skill and experience to perform her duties hereunder and to promote
the interests of the businesses and projects of the Merlin Software Group
provided that the Executive shall not be precluded from pursuing other business
interests or holding positions in other companies which do not interfere with
the Executive's ability to carry out her responsibilities hereunder, and do not
otherwise contravene the requirements of this Agreement.
(c) The Executive's business offices shall be located in Vancouver, British
Columbia or Phoenix, Arizona, as applicable, or in such other place or places as
may be directed by the Board of Directors from time to time in order to
effectively carry out the business of the Merlin Software Group, subject to the
Executive's agreement, acting reasonably, with respect to any changes in such
locations determined by the Board of Directors following the date hereof.
<PAGE>
2. Term
(a) The term of the Executive's employment pursuant to this Agreement (the
"Term") shall begin on January 19, 2000 (the "Commencement Date") and shall
continue until otherwise terminated in accordance with the provisions of this
Agreement.
3. Compensation
(a) For services rendered by the Executive during the Term of this
Agreement, the Executive shall be paid a salary, payable in equal monthly
instalments on the 25th of the month, at an annual rate of US$96,000, together
with any annual bonuses (payable in cash and/or common shares in the capital of
the Company) as may be determined and awarded by the Board of Directors. Such
salary shall be reviewed annually and may be increased at the sole discretion of
the Board of Directors taking into account, among other things, individual
performance and general business conditions.
(b) All payments made to the Executive in connection with her services
hereunder shall be subject to, without limitation, all applicable income and
withholding taxes, if any, and other applicable deductions and taxes. If for
any reason any amount required to be withheld is not so withheld at the
Executive's request, the Executive agrees to reimburse and indemnify the Company
for any taxes, fines or costs arising therefrom.
4. Benefits, Perquisites and Business Expenses
(a) The Executive shall be entitled to participate in the Stock Option Plan
of the Company on such terms as may be determined by the Board of Directors and
in addition, shall be entitled to those perquisites as mutually agreed upon,
from time to time, by the Company and the Executive. The Executive shall also
participate in all employee benefit programs made generally available to
employees of the Merlin Software Group from time to time.
(b) The Executive will be reimbursed for all reasonable expenses incurred by
him in connection with the conduct of the business of the Merlin Software Group.
Such expenses shall be reimbursed within 15 days following presentation of
sufficient evidence of such expenditures, provided that the expenditures are
consistent with the policies and directives of the Board of Directors from time
to time. Presentation of expense reports will be accepted on the 15th and 30th
of each month.
5. Vacation and Holidays
(a) The Executive shall be entitled to seven (7) days as deemed public
holidays and, in addition, to ten (10) business days paid vacation, three (3)
sick days unless otherwise necessary and five (5) personal days during each year
of the Executive's employment hereunder. The paid vacation days will increase
to fifteen (15) days for the second and subsequent years. Such vacation shall
be utilized by the Executive at such time or times as do not materially
interfere with the ongoing conduct of the Company's business and operations.
6. Termination of Employment
(a) The Company shall be entitled to terminate the Executive's employment at
any time without cause, and at the Company's sole discretion, by giving the
Executive three (3) months' prior written notice of the termination of the
Executive's employment or in lieu of such notice either by (i) payment to the
Executive, within ten (10) days of the date of termination of the Executive's
employment, an amount equal to ten (10) months of the Executive's monthly salary
payments or (ii) continuing the Executive's monthly salary payments, for a
<PAGE>
period of ten (10) months from the date of termination of the Executive's
employment. In the event of termination of the Executive's employment hereunder
without cause, the Executive shall be immediately relieved of all of her
responsibilities and authorities as an officer, director and employee of the
Company and the Merlin Software Group effective as of the date of termination of
the Executive's employment fixed by the Company. In the event of termination of
the Executive's employment without cause or notice, the rights and benefits of
the Executive under employee benefit plans and programs of the Merlin Software
Group (other than rights under the Stock Option Plan of the Company) shall,
unless prohibited by the relevant plan, be continued for the three (3) month
period following the date of termination of the Executive's employment. If any
such benefit or program cannot be continued for such three (3) month period, the
Executive shall be entitled to receive a cash payment equal to the value of such
benefits for such period. The Executive's rights under the Stock Option Plan of
the Company shall be determined in accordance with the terms of such plan and
any options granted to the Executive.
(b) The Company shall be entitled to terminate the Executive's employment at
any time for cause without notice and without any payment in lieu of notice. In
the event of a termination of the Executive's employment for cause, the
Company's obligations hereunder shall immediately cease and terminate and the
Executive shall be immediately relieved of all of her responsibilities and
authorities as an officer, director and employee of the Merlin Software Group,
and in such an event there will be no continued salary payments by the Company
to the Executive and any rights and benefits of the Executive under employee
benefit plans and programs of the Company will immediately terminate in
accordance with the terms of such plans and programs. For purposes of this
paragraph 6(b) and of the Executive's employment with the Company, "cause" shall
include, without limitation, the following circumstances:
(i) the Executive has committed a criminal offence involving moral turpitude
or has improperly enriched himself at the expense of the Company;
(ii) the Executive, in carrying out her duties hereunder, (i) has been
wilfully and grossly negligent, or (ii) has committed wilful or gross misconduct
or, (iii) has failed to comply with an instruction or directive from the Board
of Directors (and which is not otherwise cured within thirty (30) days);
(iii) the Executive has breached a material term of this Agreement (and
which is not otherwise cured within thirty (30) days);
(iv) the Executive becomes bankrupt or in the event a receiving order (or
any analogous order under any applicable law) is made against the Executive or
in the event the Executive makes any general disposition or assignment for the
benefit of her creditors; or
(v) the Executive shall be diagnosed as being afflicted by chronic
alcoholism or drug addiction.
<PAGE>
(c) Termination of the Executive's employment for cause shall be effective
upon the date of the notice of termination given to the Executive and the lapse
of any applicable cure period without remedy of the matters set out in such
notice.
(d) The Executive's employment shall terminate automatically upon written
notice from the Company in the event of the Executive's absence or inability to
render the services required hereunder due to disability, illness, incapacity or
otherwise for an aggregate of one hundred eighty (180) days during any twelve
(12) month period of the Term, provided that such disability, illness,
incapacity or other cause has not occurred during the execution of the business
of the Merlin Software Group by the Executive. In the event of any such absence
or inability, the Executive shall be entitled to receive the compensation
provided for herein for the first ninety (90) days thereof, whereafter the
Executive shall only be entitled to receive such compensation, if any, as may be
determined by the Board of Directors.
(e) In the event of the death of the Executive during the Term of this
Agreement, the Executive's salary will be paid to the Executive's spouse through
the end of the third month following the month in which the Executive's death
occurs. Rights and benefits of the Executive under employee benefit plans and
programs of the Company, including life insurance, will be determined in
accordance with the terms and conditions of such plans and programs.
(f) The Executive agrees that, upon termination of her employment for any
reason whatsoever, the Executive shall thereupon be deemed to have immediately
resigned any position the Executive may have as an officer, director or employee
of the Company together with any other office, position or directorship which
the Executive may hold with any of the Company's affiliates or related entities
in the Merlin Software Group, including without limitation, the Company. In
such event, the Executive shall, at the request of the Company, forthwith
execute any and all documents appropriate to evidence such resignations. The
Executive shall not be entitled to any payments in respect of such resignations
in addition to those provided herein.
(g) It is expressly agreed that notwithstanding termination of the
Executive's employment Company for any reason or cause or in any circumstances
whatsoever, such termination shall be without prejudice to the rights and
obligations of the Executive and the Company respectively in relation to the
time up to and including the date of termination and the provisions of
paragraphs 3(b), 6, 7, 8 and 9 of this Agreement, all of which shall remain and
continue in full force and effect.
7. Change of Control
(a) As used in this paragraph 7, a "Change of Control" shall have occurred
when:
(i) any person, corporation, company or other entity or combination of any
such persons, corporations, companies or other entities acquires or becomes the
beneficial owner of, directly or indirectly, whether through the acquisition of
previously issued and outstanding voting securities or of voting securities
which have not been previously issued, or any combination thereof or any other
transaction having a similar effect, a sufficient number of securities of the
Company to affect materially the control of the Company or 20% or more of the
voting securities of the Company;
<PAGE>
(ii) any resolution is passed or any action or proceeding is taken with
respect to the liquidation, dissolution or winding-up of the Company;
(iii) 20% or more of the issued and outstanding voting securities of the
Company become subject to a voting trust;
(iv) the Company consolidates or merges with or into, amalgamates or enters
into a statutory arrangement with any other corporation, company or other entity
(other than a wholly-owned or majority controlled subsidiary of the Company);
(v) the Company sells, leases or otherwise disposes of property or assets
aggregating more than 50% of the consolidated assets of the Company measured by
book or fair market value, whether pursuant to one or more transactions;
(vi) any person, corporation, company or other entity not part of existing
management of the Company or any person, corporation, company or other entity
not controlled by the Company or any affiliate of the Company, enters into any
arrangement to provide all or substantially all the management services to the
Company;
(vii) there shall be a change in a majority of the board of directors of the
Company whether as a result of a shareholders meeting or as a result of
appointments made in filling vacancies caused by resignations of members of the
board of directors; or
(viii) the Company enters into any transaction or arrangement which would
have the same or similar effect as the transactions referred to in paragraph
6(a)(ii), (iii), (iv), (v) or (vi) above.
(b) If a Change in Control occurs:
(i) for a period of six (6) months following the date of the Change of
Control, the Executive shall have the right to elect that the Change of Control
is a termination of her employment by the Company which shall be deemed to be
termination of the Executive's employment without cause by the Company. If the
Executive notifies the Company of this election in writing, or in the event that
the Company shall terminate the Executive's employment without cause during such
period of six (6) months following the date of the Change of Control, the
Executive shall be entitled to receive and the Company shall pay to the
Executive an additional severance payment of US$192,000 or two (2) years salary,
whichever is greater, plus 500,000 common shares of the Company. The payments
set out in this paragraph 7 are in addition to any other rights provided
hereunder with respect to termination of the Executive's employment without
cause. If the Executive does not elect termination, this Agreement will
continue in full force and effect in accordance with its terms.
<PAGE>
8. Non-Competition and Non-Solicitation
(a) The Executive agrees that during the period of the Executive's
employment with the Company and for a period of twelve (12) months from the last
payment of compensation to the Executive by the Company, the Executive shall not
engage in or participate in any business activity that competes, directly or
indirectly, with the businesses of the Merlin Software Group, in North America
or Europe or any other geographical location that Merlin Software Group carries
on business.
(b) Notwithstanding anything to the contrary contained herein the Executive
may, without being deemed to compete, directly or indirectly, with the
businesses of the Merlin Software Group own not more than twenty percent (20%)
of any class of the outstanding securities of any corporation listed on a
securities exchange or traded in the over-the-counter market.
(c) The Executive agrees that for a period of twelve (12) months following
the termination of the Executive's employment for any reason whatsoever, the
Executive will not, whether as principal, agent, employee, employer, director,
officer, shareholder or in any other individual or representative capacity,
solicit or attempt to retain in any way whatsoever any of the employees of the
Company or the Merlin Software Group, provided however, that the Executive shall
not be precluded from soliciting or retaining employees of the Company or the
Merlin Software Group in the event of a termination of the Executive's
employment as a result of a material breach by the Company of the provisions of
this Agreement, or in the event that the Executive's employment is terminated or
deemed to be terminated by the Company without cause (including without
limitation, pursuant to paragraph 6 hereof).
(d) It is the desire and the intent of the parties that the provisions of
this paragraph 8 shall be enforceable to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular portion of this paragraph 8 is
adjudicated unenforceable in any jurisdiction such adjudication shall apply only
in that particular jurisdiction in which such adjudication is made.
9. Confidential Information
(a) The Executive agrees not to disclose, either while in the Company's
employ or at any time thereafter to any person not employed by the Merlin
Software Group or not engaged to render services to the Merlin Software Group,
any trade secrets or confidential information of or relating to the Merlin
Software Group or its businesses obtained by the Executive while in the employ
of the Company; provided, however, that this provision shall not preclude the
Executive from these or disclosure of information known generally to the public
(other than that which the Executive may have disclosed in breach of this
Agreement) or of information required to be disclosed by law or court order
applicable to the Executive or information authorized to be disclosed by the
Board of Directors.
(b) The Executive also agrees that upon leaving the Company's employ, the
Executive will not, without the prior written consent of the Board of Directors
of the Company, take originals or copies of any drawing, blueprint,
specification, report, shareholder list, or other document belonging or relating
to the Merlin Software Group.
10. Independent Advice
(a) This Agreement was prepared by the Company. The Executive has been
asked to obtain independent legal advice before signing this Agreement and the
Executive represents by signing this Agreement that he has either obtained such
advice or waived such advice.
<PAGE>
11. Counterparts and by Facsimile
(a) This Agreement may be executed in one or more counterparts, any
counterpart delivered via facsimile shall be deemed an original, and all such
counterparts, taken together, shall constitute one and the same instrument.
12. Further Assurances
(a) Each of the Company and the Executive agrees to make, do and execute or
cause to be made, done and executed all such further and other things, acts,
deeds, documents, assignments and assurances as may be necessary or reasonably
required to carry out the intent and purpose of this Agreement fully and
effectually. Without limiting the generality of the foregoing, the Company
shall take all reasonable steps in order to structure the payment or payments
provided for in this Agreement in the manner most advantageous to the Executive
with respect to the provisions of the Income Tax Act (Canada) or similar
legislation in place in the jurisdiction of residence of the Executive.
13. Severability
(a) Any provision of this Agreement which contravenes any applicable law or
which is found to be unenforceable shall, to the extent of such contravention or
unenforceability, be deemed severable and shall not cause this Agreement to be
held invalid or unenforceable or affect any other provision or provisions of
this Agreement.
14. Notices
(a) Any notices, requests, demands or other communications provided for by
this Agreement shall be in writing and shall be sufficiently given when and if
mailed by registered or certified mail, return receipt requested, postage
prepaid, or sent by personal delivery, overnight courier or by facsimile to the
party entitled thereto at the address stated at the beginning of this Agreement
or at such other address as the parties may have specified by similar notice.
(b) Any such notice shall be deemed delivered on the fifth business day
following the mailing thereof if delivered by prepaid post or if given by means
of personal delivery on the day of delivery thereof or if given by means of
overnight courier or facsimile transmission on the first business day following
the dispatch thereof.
15. Entire Agreement
(a) This Agreement contains the entire agreement between the parties hereto
with respect to matters herein and supersedes all prior agreement and
understandings, oral or written, between the parties hereto relating to such
matters.
<PAGE>
16. Assignment
(a) Except as herein expressly provided, the respective rights and
obligations of the Executive and the Company under this Agreement shall not be
assignable by either party without the written consent of the other party and
shall, subject to the foregoing, enure to the benefit of and be binding upon the
Executive and the Company and their permitted successors or assigns. Nothing
herein expressed or implied is intended to confer on any person other than the
parties hereto any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
17. Applicable Law
(a) This Agreement shall be deemed a contract under, and for all purposes
shall be governed by and construed in accordance with, the laws of the State of
Nevada. Each of the parties hereto hereby irrevocably submit and attorn to the
non-exclusive jurisdiction of the courts of Nevada with respect to any
proceedings brought in respect of this Agreement or the subject matter hereof.
18. Amendment or Modification; Waiver
(a) No provision of this Agreement may be amended or waived unless such
amendment or waiver is authorized by the Company (including any authorized
officer or committee of the Board of Directors) and is in a writing signed by
the Executive and by a duly authorized officer of the Company. Except as
otherwise specifically provided in this Agreement, no waiver by either party
hereto of any breach by the other party of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar breach, condition or provision at the same time or at any
prior or subsequent time.
19. Currency
(a) Unless otherwise provided, all dollar amounts referred to in this
Agreement are in lawful money of the United States.
If you are in agreement with the foregoing terms and conditions,
please confirm your acceptance by signing and returning the enclosed duplicate
copy of this correspondence.
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
Accepted and agreed as of the 6th day of March, 2000.
Per: /s/ Shelley Montgomery
------------------------
Shelley Montgomery
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
3675 Pecos-McLeod, Suite 1400
Las Vegas, Nevada 89121
Mr. Robert Heller
1912 Ironwood Court
Port Moody, BC V3H 4C3
Dear Mr. Heller:
We wish to confirm the terms and conditions concerning your (the
"Executive") employment by Merlin Software Technologies International, Inc.
and/or its successors (the "Company"). The terms and conditions of the
Executive's employment with the Company are set forth below.
1. Position and Responsibilities
(a) The Executive shall have executive responsibility for the management and
development of the Company and its affiliates (collectively referred to as the
"Merlin Software Group"). The Executive acknowledges that the Company has
entered into arrangements whereby it has agreed to procure management services,
including those of the Executive, to the Merlin Software Group and the Executive
therefore agrees to provide his services to such affiliates of the Company as
may be directed by the board of directors of the Company (the "Board of
Directors") from time to time. In order to carry out such responsibilities, the
Executive shall hold the office of the President and the Chief Executive Officer
of the Company and shall be a director of the Company and its affiliates.
(b) The Executive shall fully and faithfully perform such duties and fulfil
such obligations commensurate with the office of President and the Chief
Executive Officer, as shall be directed by the Board of Directors from time to
time. The Executive shall devote his full time and attention using his best
efforts to apply his skill and experience to perform his duties hereunder and to
promote the interests of the businesses and projects of the Merlin Software
Group provided that the Executive shall not be precluded from pursuing other
business interests or holding positions in other companies which do not
interfere with the Executive's ability to carry out his responsibilities
hereunder, and do not otherwise contravene the requirements of this Agreement.
(c) The Executive's business offices shall be located in Vancouver, British
Columbia or Phoenix, Arizona, as applicable, or in such other place or places as
may be directed by the Board of Directors from time to time in order to
effectively carry out the business of the Merlin Software Group, subject to the
Executive's agreement, acting reasonably, with respect to any changes in such
locations determined by the Board of Directors following the date hereof.
<PAGE>
2. Term
(a) The term of the Executive's employment pursuant to this Agreement (the
"Term") shall begin on January 19, 2000 (the "Commencement Date") and shall
continue until otherwise terminated in accordance with the provisions of this
Agreement.
3. Compensation
(a) For services rendered by the Executive during the Term of this
Agreement, the Executive shall be paid a salary, payable in equal monthly
instalments on the 25th of the month, at an annual rate of US$120,000, together
with any annual bonuses (payable in cash and/or common shares in the capital of
the Company) as may be determined and awarded by the Board of Directors. Such
salary shall be reviewed annually and may be increased at the sole discretion of
the Board of Directors taking into account, among other things, individual
performance and general business conditions.
(b) All payments made to the Executive in connection with his services
hereunder shall be subject to, without limitation, all applicable income and
withholding taxes, if any, and other applicable deductions and taxes. If for
any reason any amount required to be withheld is not so withheld at the
Executive's request, the Executive agrees to reimburse and indemnify the Company
for any taxes, fines or costs arising therefrom.
4. Benefits, Perquisites and Business Expenses
(a) The Executive shall be entitled to participate in the Stock Option Plan
of the Company on such terms as may be determined by the Board of Directors and
in addition, shall be entitled to those perquisites as mutually agreed upon,
from time to time, by the Company and the Executive. The Executive shall also
participate in all employee benefit programs made generally available to
employees of the Merlin Software Group from time to time.
(b) The Executive will be reimbursed for all reasonable expenses incurred by
him in connection with the conduct of the business of the Merlin Software Group.
Such expenses shall be reimbursed within 15 days following presentation of
sufficient evidence of such expenditures, provided that the expenditures are
consistent with the policies and directives of the Board of Directors from time
to time. Presentation of expense reports will be accepted on the 15th and 30th
of each month.
5. Vacation and Holidays
(a) The Executive shall be entitled to seven (7) days as deemed public
holidays and, in addition, to ten (10) business days paid vacation, three (3)
sick days unless otherwise necessary and five (5) personal days during each year
of the Executive's employment hereunder. The paid vacation will increase to
<PAGE>
fifteen (15) days for the second and subsequent years. Such vacation shall be
utilized by the Executive at such time or times as do not materially interfere
with the ongoing conduct of the Company's business and operations.
6. Termination of Employment
(a) The Company shall be entitled to terminate the Executive's employment at
any time without cause, and at the Company's sole discretion, by giving the
Executive three (3) months' prior written notice of the termination of the
Executive's employment or in lieu of such notice either by (i) payment to the
Executive, within ten (10) days of the date of termination of the Executive's
employment, an amount equal to twelve (12) months of the Executive's monthly
salary payments or (ii) continuing the Executive's monthly salary payments, for
a period of twelve (12) months from the date of termination of the Executive's
employment. In the event of termination of the Executive's employment hereunder
without cause, the Executive shall be immediately relieved of all of his
responsibilities and authorities as an officer, director and employee of the
Company and the Merlin Software Group effective as of the date of termination of
the Executive's employment fixed by the Company. In the event of termination of
the Executive's employment without cause or notice, the rights and benefits of
the Executive under employee benefit plans and programs of the Merlin Software
Group (other than rights under the Stock Option Plan of the Company) shall,
unless prohibited by the relevant plan, be continued for the three (3) month
period following the date of termination of the Executive's employment. If any
such benefit or program cannot be continued for such three (3) month period, the
Executive shall be entitled to receive a cash payment equal to the value of such
benefits for such period. The Executive's rights under the Stock Option Plan of
the Company shall be determined in accordance with the terms of such plan and
any options granted to the Executive.
(b) The Company shall be entitled to terminate the Executive's employment at
any time for cause without notice and without any payment in lieu of notice. In
the event of a termination of the Executive's employment for cause, the
Company's obligations hereunder shall immediately cease and terminate and the
Executive shall be immediately relieved of all of his responsibilities and
authorities as an officer, director and employee of the Merlin Software Group,
and in such an event there will be no continued salary payments by the Company
to the Executive and any rights and benefits of the Executive under employee
benefit plans and programs of the Company will immediately terminate in
accordance with the terms of such plans and programs. For purposes of this
paragraph 6(b) and of the Executive's employment with the Company, "cause" shall
include, without limitation, the following circumstances:
(i) the Executive has committed a criminal offence involving moral turpitude
or has improperly enriched himself at the expense of the Company;
<PAGE>
(ii) the Executive, in carrying out his duties hereunder, (i) has been
wilfully and grossly negligent, or (ii) has committed wilful or gross misconduct
or, (iii) has failed to comply with an instruction or directive from the Board
of Directors (and which is not otherwise cured within thirty (30) days);
(iii) the Executive has breached a material term of this Agreement (and
which is not otherwise cured within thirty (30) days);
(iv) the Executive becomes bankrupt or in the event a receiving order (or
any analogous order under any applicable law) is made against the Executive or
in the event the Executive makes any general disposition or assignment for the
benefit of his creditors; or
(v) the Executive shall be diagnosed as being afflicted by chronic
alcoholism or drug addiction.
(c) Termination of the Executive's employment for cause shall be effective
upon the date of the notice of termination given to the Executive and the lapse
of any applicable cure period without remedy of the matters set out in such
notice.
(d) The Executive's employment shall terminate automatically upon written
notice from the Company in the event of the Executive's absence or inability to
render the services required hereunder due to disability, illness, incapacity or
otherwise for an aggregate of one hundred eighty (180) days during any twelve
(12) month period of the Term, provided that such disability, illness,
incapacity or other cause has not occurred during the execution of the business
of the Merlin Software Group by the Executive. In the event of any such absence
or inability, the Executive shall be entitled to receive the compensation
provided for herein for the first ninety (90) days thereof, whereafter the
Executive shall only be entitled to receive such compensation, if any, as may be
determined by the Board of Directors.
(e) In the event of the death of the Executive during the Term of this
Agreement, the Executive's salary will be paid to the Executive's spouse through
the end of the third month following the month in which the Executive's death
occurs. Rights and benefits of the Executive under employee benefit plans and
programs of the Company, including life insurance, will be determined in
accordance with the terms and conditions of such plans and programs.
(f) The Executive agrees that, upon termination of his employment for any
reason whatsoever, the Executive shall thereupon be deemed to have immediately
resigned any position the Executive may have as an officer, director or employee
of the Company together with any other office, position or directorship which
the Executive may hold with any of the Company's affiliates or related entities
in the Merlin Software Group, including without limitation, the Company. In
such event, the Executive shall, at the request of the Company, forthwith
execute any and all documents appropriate to evidence such resignations. The
Executive shall not be entitled to any payments in respect of such resignations
in addition to those provided herein.
<PAGE>
(g) It is expressly agreed that notwithstanding termination of the
Executive's employment Company for any reason or cause or in any circumstances
whatsoever, such termination shall be without prejudice to the rights and
obligations of the Executive and the Company respectively in relation to the
time up to and including the date of termination and the provisions of
paragraphs 3(b), 6, 7, 8 and 9 of this Agreement, all of which shall remain and
continue in full force and effect.
7. Change of Control
(a) As used in this paragraph 7, a "Change of Control" shall have occurred
when:
(i) any person, corporation, company or other entity or combination of any
such persons, corporations, companies or other entities acquires or becomes the
beneficial owner of, directly or indirectly, whether through the acquisition of
previously issued and outstanding voting securities or of voting securities
which have not been previously issued, or any combination thereof or any other
transaction having a similar effect, a sufficient number of securities of the
Company to affect materially the control of the Company or 20% or more of the
voting securities of the Company;
(ii) any resolution is passed or any action or proceeding is taken with
respect to the liquidation, dissolution or winding-up of the Company;
(iii) 20% or more of the issued and outstanding voting securities of the
Company become subject to a voting trust;
(iv) the Company consolidates or merges with or into, amalgamates or enters
into a statutory arrangement with any other corporation, company or other entity
(other than a wholly-owned or majority controlled subsidiary of the Company);
(v) the Company sells, leases or otherwise disposes of property or assets
aggregating more than 50% of the consolidated assets of the Company measured by
book or fair market value, whether pursuant to one or more transactions;
(vi) any person, corporation, company or other entity not part of existing
management of the Company or any person, corporation, company or other entity
not controlled by the Company or any affiliate of the Company, enters into any
arrangement to provide all or substantially all the management services to the
Company;
<PAGE>
(vii) there shall be a change in a majority of the board of directors of the
Company whether as a result of a shareholders meeting or as a result of
appointments made in filling vacancies caused by resignations of members of the
board of directors; or
(viii) the Company enters into any transaction or arrangement which would
have the same or similar effect as the transactions referred to in paragraph
6(a)(ii), (iii), (iv), (v) or (vi) above.
(b) If a Change in Control occurs:
(i) for a period of six (6) months following the date of the Change of
Control, the Executive shall have the right to elect that the Change of Control
is a termination of his employment by the Company which shall be deemed to be
termination of the Executive's employment without cause by the Company. If the
Executive notifies the Company of this election in writing, or in the event that
the Company shall terminate the Executive's employment without cause during such
period of six (6) months following the date of the Change of Control, the
Executive shall be entitled to receive and the Company shall pay to the
Executive an additional severance payment of US$240,000 or two (2) years'
salary, whichever is greater, plus 700,000 common shares of the Company. The
payments set out in this paragraph 7 are in addition to any other rights
provided hereunder with respect to termination of the Executive's employment
without cause. If the Executive does not elect termination, this Agreement will
continue in full force and effect in accordance with its terms.
8. Non-Competition and Non-Solicitation
(a) The Executive agrees that during the period of the Executive's
employment with the Company and for a period of twelve (12) months from the last
payment of compensation to the Executive by the Company, the Executive shall not
engage in or participate in any business activity that competes, directly or
indirectly, with the businesses of the Merlin Software Group, in North America
and Europe or any other geographical location in which the Merlin Software Group
carries on business.
(b) Notwithstanding anything to the contrary contained herein the Executive
may, without being deemed to compete, directly or indirectly, with the
businesses of the Merlin Software Group own not more than twenty percent (20%)
of any class of the outstanding securities of any corporation listed on a
securities exchange or traded in the over-the-counter market.
(c) The Executive agrees that for a period of twelve (12) months following
the termination of the Executive's employment for any reason whatsoever, the
Executive will not, whether as principal, agent, employee, employer, director,
officer, shareholder or in any other individual or representative capacity,
solicit or attempt to retain in any way whatsoever any of the employees of the
Company or the Merlin Software Group, provided however, that the Executive shall
<PAGE>
not be precluded from soliciting or retaining employees of the Company or the
Merlin Software Group in the event of a termination of the Executive's
employment as a result of a material breach by the Company of the provisions of
this Agreement, or in the event that the Executive's employment is terminated or
deemed to be terminated by the Company without cause (including without
limitation, pursuant to paragraph 6 hereof).
(d) It is the desire and the intent of the parties that the provisions of
this paragraph 8 shall be enforceable to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular portion of this paragraph 8 is
adjudicated unenforceable in any jurisdiction such adjudication shall apply only
in that particular jurisdiction in which such adjudication is made.
9. Confidential Information
(a) The Executive agrees not to disclose, either while in the Company's
employ or at any time thereafter to any person not employed by the Merlin
Software Group or not engaged to render services to the Merlin Software Group,
any trade secrets or confidential information of or relating to the Merlin
Software Group or its businesses obtained by the Executive while in the employ
of the Company; provided, however, that this provision shall not preclude the
Executive from these or disclosure of information known generally to the public
(other than that which the Executive may have disclosed in breach of this
Agreement) or of information required to be disclosed by law or court order
applicable to the Executive or information authorized to be disclosed by the
Board of Directors.
(b) The Executive also agrees that upon leaving the Company's employ, the
Executive will not, without the prior written consent of the Board of Directors
of the Company, take originals or copies of any drawing, blueprint,
specification, report, shareholder list, or other document belonging or relating
to the Merlin Software Group.
10. Independent Advice
(a) This Agreement was prepared by the Company. The Executive has been
asked to obtain independent legal advice before signing this Agreement and the
Executive represents by signing this Agreement that he has either obtained such
advice or waived such advice.
11. Counterparts and by Facsimile
(a) This Agreement may be executed in one or more counterparts, any
counterpart delivered via facsimile shall be deemed an original, and all such
counterparts, taken together, shall constitute one and the same instrument.
<PAGE>
12. Further Assurances
(a) Each of the Company and the Executive agrees to make, do and execute or
cause to be made, done and executed all such further and other things, acts,
deeds, documents, assignments and assurances as may be necessary or reasonably
required to carry out the intent and purpose of this Agreement fully and
effectually. Without limiting the generality of the foregoing, the Company
shall take all reasonable steps in order to structure the payment or payments
provided for in this Agreement in the manner most advantageous to the Executive
with respect to the provisions of the Income Tax Act (Canada) or similar
legislation in place in the jurisdiction of residence of the Executive.
13. Severability
(a) Any provision of this Agreement which contravenes any applicable law or
which is found to be unenforceable shall, to the extent of such contravention or
unenforceability, be deemed severable and shall not cause this Agreement to be
held invalid or unenforceable or affect any other provision or provisions of
this Agreement.
14. Notices
(a) Any notices, requests, demands or other communications provided for by
this Agreement shall be in writing and shall be sufficiently given when and if
mailed by registered or certified mail, return receipt requested, postage
prepaid, or sent by personal delivery, overnight courier or by facsimile to the
party entitled thereto at the address stated at the beginning of this Agreement
or at such other address as the parties may have specified by similar notice.
(b) Any such notice shall be deemed delivered on the fifth business day
following the mailing thereof if delivered by prepaid post or if given by means
of personal delivery on the day of delivery thereof or if given by means of
overnight courier or facsimile transmission on the first business day following
the dispatch thereof.
15. Entire Agreement
(a) This Agreement contains the entire agreement between the parties hereto
with respect to matters herein and supersedes all prior agreement and
understandings, oral or written, between the parties hereto relating to such
matters.
16. Assignment
(a) Except as herein expressly provided, the respective rights and
obligations of the Executive and the Company under this Agreement shall not be
assignable by either party without the written consent of the other party and
shall, subject to the foregoing, enure to the benefit of and be binding upon the
Executive and the Company and their permitted successors or assigns. Nothing
herein expressed or implied is intended to confer on any person other than the
parties hereto any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
<PAGE>
17. Applicable Law
(a) This Agreement shall be deemed a contract under, and for all purposes
shall be governed by and construed in accordance with, the laws of the State of
Nevada. Each of the parties hereto hereby irrevocably submit and attorn to the
non-exclusive jurisdiction of the courts of Nevada with respect to any
proceedings brought in respect of this Agreement or the subject matter hereof.
18. Amendment or Modification; Waiver
(a) No provision of this Agreement may be amended or waived unless such
amendment or waiver is authorized by the Company (including any authorized
officer or committee of the Board of Directors) and is in a writing signed by
the Executive and by a duly authorized officer of the Company. Except as
otherwise specifically provided in this Agreement, no waiver by either party
hereto of any breach by the other party of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar breach, condition or provision at the same time or at any
prior or subsequent time.
19. Currency
(a) Unless otherwise provided, all dollar amounts referred to in this
Agreement are in lawful money of the United States.
If you are in agreement with the foregoing terms and conditions,
please confirm your acceptance by signing and returning the enclosed duplicate
copy of this correspondence.
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
Per: /s/ Shelley Montgomery
------------------------
Authorized Signatory
Accepted and agreed as of the 8th day of March, 2000.
Per: /s/ Robert Heller
-------------------
Robert Heller
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
3675 Pecos-McLeod, Suite 1400
Las Vegas, Nevada 89121
Mr. Gary Heller
1409 North Cove Blvd.
Longwood, FL 32750
Dear Mr. Heller:
We wish to confirm the terms and conditions concerning your (the
"Executive") employment by Merlin Software Technologies International, Inc.
and/or its successors (the "Company"). The terms and conditions of the
Executive's employment with the Company are set forth below.
1. Position and Responsibilities
(a) The Executive shall have executive responsibility for the management and
development of the Company and its affiliates (collectively referred to as the
"Merlin Software Group"). The Executive acknowledges that the Company has
entered into arrangements whereby it has agreed to procure management services,
including those of the Executive, to the Merlin Software Group and the Executive
therefore agrees to provide his services to such affiliates of the Company as
may be directed by the board of directors of the Company (the "Board of
Directors") from time to time. In order to carry out such responsibilities, the
Executive shall hold the office of the Secretary and Chief Information Officer
of the Company and shall be a director of the Company and its affiliates.
(b) The Executive shall fully and faithfully perform such duties and fulfil
such obligations commensurate with the office of Secretary and Chief Information
Officer, as shall be directed by the Board of Directors from time to time. The
Executive shall devote his full time and attention using his best efforts to
apply his skill and experience to perform his duties hereunder and to promote
the interests of the businesses and projects of the Merlin Software Group
provided that the Executive shall not be precluded from pursuing other business
interests or holding positions in other companies which do not interfere with
the Executive's ability to carry out his responsibilities hereunder, and do not
otherwise contravene the requirements of this Agreement.
(c) The Executive's business offices shall be located in Vancouver, British
Columbia or Phoenix, Arizona, as applicable, or in such other place or places as
may be directed by the Board of Directors from time to time in order to
effectively carry out the business of the Merlin Software Group, subject to the
Executive's agreement, acting reasonably, with respect to any changes in such
locations determined by the Board of Directors following the date hereof.
<PAGE>
2. Term
(a) The term of the Executive's employment pursuant to this Agreement (the
"Term") shall begin on January 19, 2000 (the "Commencement Date") and shall
continue until otherwise terminated in accordance with the provisions of this
Agreement.
3. Compensation
(a) For services rendered by the Executive during the Term of this
Agreement, the Executive shall be paid a salary, payable in equal monthly
instalments on the 25th of the month, at an annual rate of US$120,000, together
with any annual bonuses (payable in cash and/or common shares in the capital of
the Company) as may be determined and awarded by the Board of Directors. Such
salary shall be reviewed annually and may be increased at the sole discretion of
the Board of Directors taking into account, among other things, individual
performance and general business conditions.
(b) All payments made to the Executive in connection with his services
hereunder shall be subject to, without limitation, all applicable income and
withholding taxes, if any, and other applicable deductions and taxes. If for
any reason any amount required to be withheld is not so withheld at the
Executive's request, the Executive agrees to reimburse and indemnify the Company
for any taxes, fines or costs arising therefrom.
4. Benefits, Perquisites and Business Expenses
(a) The Executive shall be entitled to participate in the Stock Option Plan
of the Company on such terms as may be determined by the Board of Directors and
in addition, shall be entitled to those perquisites as mutually agreed upon,
from time to time, by the Company and the Executive. The Executive shall also
participate in all employee benefit programs made generally available to
employees of the Merlin Software Group from time to time.
(b) The Executive will be reimbursed for all reasonable expenses incurred by
him in connection with the conduct of the business of the Merlin Software Group.
Such expenses shall be reimbursed within 15 days following presentation of
sufficient evidence of such expenditures, provided that the expenditures are
consistent with the policies and directives of the Board of Directors from time
to time. Presentation of expense reports will be accepted on the 15th and 30th
of each month.
5. Vacation and Holidays
(a) The Executive shall be entitled to seven (7) days as deemed public
holidays and, in addition, to ten (10) business days paid vacation, three (3)
sick days unless otherwise necessary and five (5) personal days during each year
of the Executive's employment hereunder. The paid vacation will increase to
fifteen (15) days for the second and subsequent years. Such vacation shall be
utilized by the Executive at such time or times as do not materially interfere
with the ongoing conduct of the Company's business and operations.
6. Termination of Employment
(a) The Company shall be entitled to terminate the Executive's employment at
any time without cause, and at the Company's sole discretion, by giving the
Executive three (3) months prior written notice of the termination of the
<PAGE>
Executive's employment or in lieu of such notice either by (i) payment to the
Executive, within ten (10) days of the date of termination of the Executive's
employment, an amount equal to twelve (12) months of the Executive's monthly
salary payments or (ii) continuing the Executive's monthly salary payments, for
a period of twelve (12) months from the date of termination of the Executive's
employment. In the event of termination of the Executive's employment hereunder
without cause, the Executive shall be immediately relieved of all of his
responsibilities and authorities as an officer, director and employee of the
Company and the Merlin Software Group effective as of the date of termination of
the Executive's employment fixed by the Company. In the event of termination of
the Executive's employment without cause or notice, the rights and benefits of
the Executive under employee benefit plans and programs of the Merlin Software
Group (other than rights under the Stock Option Plan of the Company) shall,
unless prohibited by the relevant plan, be continued for the three (3) month
period following the date of termination of the Executive's employment. If any
such benefit or program cannot be continued for such three (3) month period, the
Executive shall be entitled to receive a cash payment equal to the value of such
benefits for such period. The Executive's rights under the Stock Option Plan of
the Company shall be determined in accordance with the terms of such plan and
any options granted to the Executive.
(b) The Company shall be entitled to terminate the Executive's employment at
any time for cause without notice and without any payment in lieu of notice. In
the event of a termination of the Executive's employment for cause, the
Company's obligations hereunder shall immediately cease and terminate and the
Executive shall be immediately relieved of all of his responsibilities and
authorities as an officer, director and employee of the Merlin Software Group,
and in such an event there will be no continued salary payments by the Company
to the Executive and any rights and benefits of the Executive under employee
benefit plans and programs of the Company will immediately terminate in
accordance with the terms of such plans and programs. For purposes of this
paragraph 6(b) and of the Executive's employment with the Company, "cause" shall
include, without limitation, the following circumstances:
(i) the Executive has committed a criminal offence involving moral turpitude
or has improperly enriched himself at the expense of the Company;
(ii) the Executive, in carrying out his duties hereunder, (i) has been
wilfully and grossly negligent, or (ii) has committed wilful or gross misconduct
or, (iii) has failed to comply with an instruction or directive from the Board
of Directors (and which is not otherwise cured within thirty (30) days);
(iii) the Executive has breached a material term of this Agreement (and
which is not otherwise cured within thirty (30) days);
(iv) the Executive becomes bankrupt or in the event a receiving order (or
any analogous order under any applicable law) is made against the Executive or
in the event the Executive makes any general disposition or assignment for the
benefit of his creditors; or
<PAGE>
(v) the Executive shall be diagnosed as being afflicted by chronic
alcoholism or drug addiction.
(c) Termination of the Executive's employment for cause shall be effective
upon the date of the notice of termination given to the Executive and the lapse
of any applicable cure period without remedy of the matters set out in such
notice.
(d) The Executive's employment shall terminate automatically upon written
notice from the Company in the event of the Executive's absence or inability to
render the services required hereunder due to disability, illness, incapacity or
otherwise for an aggregate of one hundred eighty (180) days during any twelve
(12) month period of the Term, provided that such disability, illness,
incapacity or other cause has not occurred during the execution of the business
of the Merlin Software Group by the Executive. In the event of any such absence
or inability, the Executive shall be entitled to receive the compensation
provided for herein for the first ninety (90) days thereof, whereafter the
Executive shall only be entitled to receive such compensation, if any, as may be
determined by the Board of Directors.
(e) In the event of the death of the Executive during the Term of this
Agreement, the Executive's salary will be paid to the Executive's spouse through
the end of the third month following the month in which the Executive's death
occurs. Rights and benefits of the Executive under employee benefit plans and
programs of the Company, including life insurance, will be determined in
accordance with the terms and conditions of such plans and programs.
(f) The Executive agrees that, upon termination of his employment for any
reason whatsoever, the Executive shall thereupon be deemed to have immediately
resigned any position the Executive may have as an officer, director or employee
of the Company together with any other office, position or directorship which
the Executive may hold with any of the Company's affiliates or related entities
in the Merlin Software Group, including without limitation, the Company. In
such event, the Executive shall, at the request of the Company, forthwith
execute any and all documents appropriate to evidence such resignations. The
Executive shall not be entitled to any payments in respect of such resignations
in addition to those provided herein.
(g) It is expressly agreed that notwithstanding termination of the
Executive's employment Company for any reason or cause or in any circumstances
whatsoever, such termination shall be without prejudice to the rights and
obligations of the Executive and the Company respectively in relation to the
time up to and including the date of termination and the provisions of
paragraphs 3(b), 6, 7, 8 and 9 of this Agreement, all of which shall remain and
continue in full force and effect.
7. Change of Control
(a) As used in this paragraph 7, a "Change of Control" shall have occurred
when:
(i) any person, corporation, company or other entity or combination of any
such persons, corporations, companies or other entities acquires or becomes the
beneficial owner of, directly or indirectly, whether through the acquisition of
previously issued and outstanding voting securities or of voting securities
which have not been previously issued, or any combination thereof or any other
transaction having a similar effect, a sufficient number of securities of the
Company to affect materially the control of the Company or 20% or more of the
voting securities of the Company;
<PAGE>
(ii) any resolution is passed or any action or proceeding is taken with
respect to the liquidation, dissolution or winding-up of the Company;
(iii) 20% or more of the issued and outstanding voting securities of the
Company become subject to a voting trust;
(iv) the Company consolidates or merges with or into, amalgamates or enters
into a statutory arrangement with any other corporation, company or other entity
(other than a wholly-owned or majority controlled subsidiary of the Company);
(v) the Company sells, leases or otherwise disposes of property or assets
aggregating more than 50% of the consolidated assets of the Company measured by
book or fair market value, whether pursuant to one or more transactions;
(vi) any person, corporation, company or other entity not part of existing
management of the Company or any person, corporation, company or other entity
not controlled by the Company or any affiliate of the Company, enters into any
arrangement to provide all or substantially all the management services to the
Company;
(vii) there shall be a change in a majority of the board of directors of the
Company whether as a result of a shareholders meeting or as a result of
appointments made in filling vacancies caused by resignations of members of the
board of directors; or
(viii) the Company enters into any transaction or arrangement which would
have the same or similar effect as the transactions referred to in paragraph
6(a)(ii), (iii), (iv), (v) or (vi) above.
(b) If a Change in Control occurs:
(i) for a period of six (6) months following the date of the Change of
Control, the Executive shall have the right to elect that the Change of Control
is a termination of his employment by the Company which shall be deemed to be
termination of the Executive's employment without cause by the Company. If the
Executive notifies the Company of this election in writing, or in the event that
the Company shall terminate the Executive's employment without cause during such
period of six (6) months following the date of the Change of Control, the
Executive shall be entitled to receive and the Company shall pay to the
Executive an additional severance payment of US$240,000 or two (2) years salary,
whichever is greater, plus 700,000 common shares of the Company. The payments
set out in this paragraph 7 are in addition to any other rights provided
hereunder with respect to termination of the Executive's employment without
cause. If the Executive does not elect termination, this Agreement will
continue in full force and effect in accordance with its terms.
8. Non-Competition and Non-Solicitation
(a) The Executive agrees that during the period of the Executive's
employment with the Company and for a period of twelve (12) months from the last
payment of compensation to the Executive by the Company, the Executive shall not
engage in or participate in any business activity that competes, directly or
indirectly, with the businesses of the Merlin Software Group, in North America
and Europe or any other geographical location in which the Merlin Software Group
carries on business.
<PAGE>
(b) Notwithstanding anything to the contrary contained herein the Executive
may, without being deemed to compete, directly or indirectly, with the
businesses of the Merlin Software Group own not more than twenty percent (20%)
of any class of the outstanding securities of any corporation listed on a
securities exchange or traded in the over-the-counter market.
(c) The Executive agrees that for a period of twelve (12) months following
the termination of the Executive's employment for any reason whatsoever, the
Executive will not, whether as principal, agent, employee, employer, director,
officer, shareholder or in any other individual or representative capacity,
solicit or attempt to retain in any way whatsoever any of the employees of the
Company or the Merlin Software Group, provided however, that the Executive shall
not be precluded from soliciting or retaining employees of the Company or the
Merlin Software Group in the event of a termination of the Executive's
employment as a result of a material breach by the Company of the provisions of
this Agreement, or in the event that the Executive's employment is terminated or
deemed to be terminated by the Company without cause (including without
limitation, pursuant to paragraph 6 hereof).
(d) It is the desire and the intent of the parties that the provisions of
this paragraph 8 shall be enforceable to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular portion of this paragraph 8 is
adjudicated unenforceable in any jurisdiction such adjudication shall apply only
in that particular jurisdiction in which such adjudication is made.
9. Confidential Information
(a) The Executive agrees not to disclose, either while in the Company's
employ or at any time thereafter to any person not employed by the Merlin
Software Group or not engaged to render services to the Merlin Software Group,
any trade secrets or confidential information of or relating to the Merlin
Software Group or its businesses obtained by the Executive while in the employ
of the Company; provided, however, that this provision shall not preclude the
Executive from these or disclosure of information known generally to the public
(other than that which the Executive may have disclosed in breach of this
Agreement) or of information required to be disclosed by law or court order
applicable to the Executive or information authorized to be disclosed by the
Board of Directors.
(b) The Executive also agrees that upon leaving the Company's employ, the
Executive will not, without the prior written consent of the Board of Directors
of the Company, take originals or copies of any drawing, blueprint,
specification, report, shareholder list, or other document belonging or relating
to the Merlin Software Group.
<PAGE>
10. Independent Advice
(a) This Agreement was prepared by the Company. The Executive has been
asked to obtain independent legal advice before signing this Agreement and the
Executive represents by signing this Agreement that he has either obtained such
advice or waived such advice.
11. Counterparts and by Facsimile
(a) This Agreement may be executed in one or more counterparts, any
counterpart delivered via facsimile shall be deemed an original, and all such
counterparts, taken together, shall constitute one and the same instrument.
12. Further Assurances
(a) Each of the Company and the Executive agrees to make, do and execute or
cause to be made, done and executed all such further and other things, acts,
deeds, documents, assignments and assurances as may be necessary or reasonably
required to carry out the intent and purpose of this Agreement fully and
effectually. Without limiting the generality of the foregoing, the Company
shall take all reasonable steps in order to structure the payment or payments
provided for in this Agreement in the manner most advantageous to the Executive
with respect to the provisions of the Income Tax Act (Canada) or similar
legislation in place in the jurisdiction of residence of the Executive.
13. Severability
(a) Any provision of this Agreement which contravenes any applicable law or
which is found to be unenforceable shall, to the extent of such contravention or
unenforceability, be deemed severable and shall not cause this Agreement to be
held invalid or unenforceable or affect any other provision or provisions of
this Agreement.
14. Notices
(a) Any notices, requests, demands or other communications provided for by
this Agreement shall be in writing and shall be sufficiently given when and if
mailed by registered or certified mail, return receipt requested, postage
prepaid, or sent by personal delivery, overnight courier or by facsimile to the
party entitled thereto at the address stated at the beginning of this Agreement
or at such other address as the parties may have specified by similar notice.
(b) Any such notice shall be deemed delivered on the fifth business day
following the mailing thereof if delivered by prepaid post or if given by means
of personal delivery on the day of delivery thereof or if given by means of
overnight courier or facsimile transmission on the first business day following
the dispatch thereof.
15. Entire Agreement
(a) This Agreement contains the entire agreement between the parties hereto
with respect to matters herein and supersedes all prior agreement and
understandings, oral or written, between the parties hereto relating to such
matters.
<PAGE>
16. Assignment
(a) Except as herein expressly provided, the respective rights and
obligations of the Executive and the Company under this Agreement shall not be
assignable by either party without the written consent of the other party and
shall, subject to the foregoing, enure to the benefit of and be binding upon the
Executive and the Company and their permitted successors or assigns. Nothing
herein expressed or implied is intended to confer on any person other than the
parties hereto any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
17. Applicable Law
(a) This Agreement shall be deemed a contract under, and for all purposes
shall be governed by and construed in accordance with, the laws of the State of
Nevada. Each of the parties hereto hereby irrevocably submit and attorn to the
non-exclusive jurisdiction of the courts of Nevada with respect to any
proceedings brought in respect of this Agreement or the subject matter hereof.
18. Amendment or Modification; Waiver
(a) No provision of this Agreement may be amended or waived unless such
amendment or waiver is authorized by the Company (including any authorized
officer or committee of the Board of Directors) and is in a writing signed by
the Executive and by a duly authorized officer of the Company. Except as
otherwise specifically provided in this Agreement, no waiver by either party
hereto of any breach by the other party of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar breach, condition or provision at the same time or at any
prior or subsequent time.
19. Currency
(a) Unless otherwise provided, all dollar amounts referred to in this
Agreement are in lawful money of the United States.
If you are in agreement with the foregoing terms and conditions,
please confirm your acceptance by signing and returning the enclosed duplicate
copy of this correspondence.
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
Accepted and agreed as of the 8th day of March, 2000.
Per: /s/ Gary Heller
-----------------
Gary Heller
AGREEMENT AND PLAN OF SHARE EXCHANGE
------------------------------------
This AGREEMENT AND PLAN OF SHARE EXCHANGE is made as of the 3rd day of
April, 2000
AMONG:
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC., a Nevada corporation
("Merlin International")
AND:
MERLIN SOFTWARE TECHNOLOGIES INC., a Nevada corporation
("Merlin")
(Merlin International and Merlin are collectively referred to as the
"Constituent Corporations")
AND:
CERTAIN SHAREHOLDERS OF MERLIN, whose names are set forth on Exhibit A to this
Agreement
( "Principal Vendors")
A. Merlin is engaged in the business of the development and sale of
Linux based software applications and intends to conduct its business pursuant
to the Business Plan (the "Merlin Business") as set forth in Exhibit A attached
to the Information Circular, dated April 3, 2000;
B. Merlin International wishes to acquire all the issued and
outstanding common shares (an aggregate of 7,986,665), warrants (an aggregate of
86,665) and stock options (an aggregate of 781,000) of Merlin in exchange for
common shares, warrants and stock options of Merlin International, and Merlin
wishes to become the wholly owned subsidiary of Merlin International;
C. Merlin and Merlin International have entered into a letter
agreement, dated January 14, 2000, pursuant to which Merlin International has
agreed to acquire all of the issued and outstanding common shares, warrants and
stock options of Merlin, subject to the approval of all the shareholders of
Merlin (the "Merlin Shareholders"), in exchange for an equal number of common
shares, warrants and stock options of Merlin International;
<PAGE>
D. Each of the Constituent Corporations has, subject to the approval of
the Merlin Shareholders, adopted the statutory plan of share exchange embodied
in this Agreement (the "Share Exchange");
E. The parties intend to make certain representations, warranties,
covenants, and agreements in connection with the Share Exchange; and
F. The Share Exchange is intended to qualify as a reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code (the "Code").
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the Constituent Corporations and the Principal Vendors do
hereby agree to the Share Exchange, on the terms and conditions herein provided,
as follows:
1. THE SHARE EXCHANGE.
1.1 Share Exchange between Merlin International and Merlin. On the
Effective Date (as defined herein), by virtue of the Share Exchange and without
any action on the part of the Merlin Shareholders, all of the then outstanding
common shares and warrants of Merlin as set forth on Exhibit B (collectively,
the "Merlin Shares") shall be exchanged as follows:
(a) all of the Merlin Shares (an aggregate of 7,986,665) shall be exchanged
for an equal number of common shares of Merlin International (the "Exchange
Shares") (one (1) Exchange Share for each Merlin Share at the deemed value of
$0.01 per Exchange Share);
(b) all outstanding warrants (an aggregate of 86,665) of Merlin shall be
exchanged for an equal number of warrants of Merlin International (one (1)
warrant for each warrant or stock option of Merlin);
(c) all outstanding stock options (an aggregate of 781,000) of Merlin shall
be exchanged for an equal number of stock options of Merlin International (one
(1) stock option of Merlin International for one (1) option of Merlin). The
options of Merlin International will have the terms and conditions set forth in
each of the stock option agreements entered into between Merlin and each one of
the individuals listed in Exhibit D;
(d) each common share held by Merlin as treasury stock immediately prior to
the Effective Time (as defined herein) shall be cancelled and no payment shall
be made with respect to such common shares;
(e) this Agreement, once executed, shall act without more, as evidence of
the transfer of the Merlin Shares to Merlin International, subject to the terms
and conditions set forth in this Agreement; and
(f) prior to the Effective Time, Merlin International shall appoint an agent
(the "Exchange Agent") for the purpose of exchanging certificates representing
the Merlin Shares for the Exchange Shares. Promptly after the Effective Time,
<PAGE>
Merlin International will send, or will cause the Exchange Agent to send, to
each Merlin Shareholder at the Effective Time, a letter of transmittal for use
in such exchange, which shall specify that the delivery shall be effected, and
risk of loss and title shall pass, only upon proper delivery of the certificates
representing Merlin Shares to the Exchange Agent.
1.2 Shares Not Registered. The Merlin Shareholders and the Principal
Vendors each acknowledge that the Exchange Shares to be issued pursuant to the
Share Exchange have not been registered pursuant to the securities laws of any
jurisdiction and are being issued pursuant to exemptions from registration
contained in the Securities Act (British Columbia)(the "B.C. Securities Act")
and the United States Securities Act of 1933, as amended (the "1933 Act"), and
the Exchange Shares may only be sold in a jurisdiction in accordance with the
restrictions on resale prescribed under the laws of the jurisdiction in which
such shares are sold, all of which may vary depending on the jurisdiction.
Each of the Merlin Shareholders is aware that Merlin International is
not a "reporting issuer" as defined in the B.C. Securities Act and as a
consequence the Exchange Shares are restricted from transfer within the province
of British Columbia indefinitely or for a period of twelve (12) months after
Merlin International becomes a "reporting issuer." Further, each of the
shareholders of Merlin is aware that Merlin International has no obligation or
present intention of becoming a "reporting issuer" in the Province of British
Columbia and as a result, any shareholders of Merlin who are British Columbia
residents may require an exemption order from the British Columbia Securities
Commission in order to resell their Exchange Shares.
1.3 Exchange Shares Fully Paid and Non-assessable. The Exchange Shares will
be issued from the treasury of Merlin International as fully paid and
non-assessable shares and shall be free and clear of all liens, charges and
encumbrances, except as set forth herein.
2. EFFECTIVE DATE.
2.1 Articles of Share Exchange. As soon as practicable after satisfaction
or, to the extent permitted hereunder, waiver of all conditions to the Share
Exchange, Merlin International and Merlin will file Articles of Share Exchange
in substantially the form attached hereto as Exhibit C (the "Articles of Share
Exchange") with the Secretary of State of Nevada and make all other filings or
recordings required by Nevada law in connection with the Share Exchange.
2.2 Effective Date of Share Exchange. The "Effective Date" of the Share
Exchange shall be, and such term as used herein shall mean, 5:00 p.m., Pacific
Standard Time (the "Effective Time"), on the day on which the Articles of Share
Exchange are filed in the office of the Secretary of State of Nevada, after
satisfaction of the requirements of applicable laws of the state's prerequisites
to such filings.
2.3 Effect of Share Exchange. From and after the Effective Time, Merlin
International shall possess all the rights, privileges, powers and franchises
and be subject to all of the restrictions, disabilities and duties of Merlin,
all as provided under Nevada and other applicable law.
<PAGE>
3. DELIVERIES ON OR BEFORE THE EFFECTIVE DATE.
3.1 Deliveries by the Merlin Shareholders. On or before the Effective Date,
the Principal Vendors and Merlin will deliver to Merlin International:
(a) a certificate in the form attached hereto as Exhibit E that the form of
written consent has been sent to all of the Merlin Shareholders;
(b) satisfactory proof that the issued and outstanding Merlin Shares on the
Effective Date have been duly issued and registered to the Merlin Shareholders;
(c) certified copies of resolutions of the directors of Merlin authorizing
the transfer of the Merlin Shares subject to the relevant stock transfer forms
being duly stamped and the registration of the Merlin Shares in the name of
Merlin International and authorizing the issue of new share certificates
representing such common shares in the name of Merlin International;
(d) all books, records and accounts of Merlin and any other information
necessary for Merlin International to operate and manage the business of and the
assets owned by Merlin;
(e) the common seal(s) of Merlin, if any;
(f) satisfactory evidence that the directors of Merlin and the Merlin
Shareholders have approved the transfer of the Merlin Shares to Merlin
International;
(g) necessary approvals from Merlin and any third parties as may be required
have been obtained and are in full force and effect with respect to the transfer
of all the Merlin Shares to Merlin International as contemplated herein; and
(h) such other documents and instruments as counsel for Merlin International
may reasonably require to effectuate or evidence the transactions contemplated
hereby.
3.2 Deliveries by Merlin International. On or before the Effective Date,
Merlin International will deliver to Merlin:
(a) satisfactory evidence that the directors of Merlin International have
approved the transactions contemplated herein;
(b) satisfactory proof that the issued and outstanding shares of Merlin
International on the Effective Date have been duly issued and registered to the
shareholders set forth on Exhibit B attached hereto;
(c) certified copies of resolutions of the directors of Merlin International
authorizing the issue of new share certificates representing the Exchange Shares
in the name of each Merlin Shareholder;
<PAGE>
(d) all necessary approvals from Merlin International and any third parties
as may be required have been obtained and are in full force and effect with
respect to the issuance of all the Exchange Shares or Merlin International to
the Merlin Shareholders as contemplated herein; and
(e) such other documents and instruments as counsel for Merlin may
reasonably require to effectuate or evidence the transactions contemplated
hereby.
4. MERLIN AND PRINCIPAL VENDORS' REPRESENTATIONS AND WARRANTIES
4.1 Merlin and the Principal Vendors represent and warrant to Merlin
International as of the date hereof and on the Effective Date that:
(a) Merlin is a corporation validly existing and in good standing under the
laws of the State of Nevada. Merlin has the power and authority to carry on the
Merlin Business as it is now conducted and to own the assets it now owns;
(b) the Merlin Shareholders set forth on Exhibit B own the number of Merlin
Shares indicated, free and clear of any claim, security interest, mortgage,
pledge, or other lien or encumbrance of any kind whatsoever. Except as set
forth on Exhibit B or otherwise described in this Agreement, there are no
outstanding options, agreements, contracts, calls or commitments of any
character which would require the issuance by Merlin of any additional common
shares in the capital of Merlin;
(c) the execution, delivery and performance of this Agreement have been duly
and validly authorized and approved by Merlin's board of directors, and Merlin
has the corporate power and authority to execute, deliver and perform this
Agreement and such other instruments as appropriate to consummate the
transactions herein contemplated, to perform and comply with all of the terms,
covenants and conditions to be performed and complied with by Merlin hereunder
and thereunder, and to consummate the transactions contemplated hereby and
thereby. This Agreement constitutes the valid and binding obligation of Merlin,
and is enforceable against Merlin in accordance with its terms, except as the
enforceability may be affected by bankruptcy, insolvency or similar laws
affecting creditor's rights generally or court applied equitable remedies.
Merlin's execution, delivery and performance of this Agreement do not (i)
conflict with or result in a breach of any of the terms, conditions or
provisions of the articles of incorporation or bylaws of Merlin or any judgment,
order, injunction, decree, regulation or ruling of any court or other
governmental authority to which Merlin is subject or of any agreement or
contract listed on any schedule delivered pursuant hereto or any other material
agreement or contract to which Merlin is a party or is subject, or constitute a
default thereunder, or (ii) give to others any rights of termination or
cancellation of any agreement or contract listed on any schedule delivered
pursuant hereto or any other material agreement or contract to which Merlin is a
party or is subject, or (iii) create any lien or encumbrance upon the assets of
Merlin, or (iv) require the consent, authorization or approval of any
governmental agency, body, official or authority;
<PAGE>
(d) neither Merlin nor the Principal Vendors are aware of nor has either
failed to disclosed to Merlin International any change, event or circumstance
which would adversely affect the Merlin Business or the assets of Merlin or
prospects, operation or condition of Merlin or which would reasonably be
considered to reduce the value of the Merlin Business or the value of Merlin
Shares to Merlin International;
(e) neither Merlin nor the Principal Vendors have made any untrue statement
to Merlin International nor has either failed to state a material fact that is
required to be stated or that is necessary to prevent a statement that is made
from being materially false or misleading in the circumstances in which it was
made;
(f) the Merlin financial statements for the year ended December 31, 1999
(the "Financial Statements") are true and correct in every material respect and
present fairly the financial position of Merlin as of the dates of such
statements, and the results of its operations for the periods then ended and are
prepared in accordance with generally accepted accounting principles applied on
a consistent basis except as specifically provided therein;
(g) all of the assets of Merlin are in good working order and to the best of
the Principal Vendors' knowledge contain no latent defects;
(h) the Principal Vendors have disclosed all contracts, engagements and
commitments, whether oral or written, relating to Merlin;
(i) all licenses, permits, approvals, consents, certificates, registrations
and authorizations required in the ordinary course of the Merlin Business or in
the use of the assets of Merlin have been obtained and are in good standing and
are not terminable on the basis of a transfer in ownership of the Merlin Shares;
(j) each Principal Vendor has the full and absolute right, power and
authority to enter into this Agreement on the terms and subject to the
conditions herein set forth, to carry out the transactions contemplated hereby
and to transfer on the Effective Date, legal and beneficial title and ownership
of his or her portion of the Merlin Shares to Merlin International;
(k) the authorized capital of Merlin consists of 50,000,000 common shares
with a par value of $0.001, of which a total of 7,986,665 common shares have
been validly issued, are outstanding and are fully paid and non-assessable;
(l) all alterations, if any, to the Articles of Incorporation of Merlin
since its incorporation have been duly approved by the shareholders of Merlin;
<PAGE>
(m) the corporate records of Merlin, as required to be maintained by it
under its statute of incorporation and constating documents, are accurate,
complete and up-to-date in all material respects and reflect all material
transactions of Merlin;
(n) Merlin has good and marketable title to all of its assets, and such
asses are free and clear of any financial encumbrances not disclosed in the
Financial Statements of Merlin;
(o) Merlin has filed all necessary tax returns in all jurisdictions required
to be filed by it, all returns affecting workers compensation with the
appropriate agency, corporation capital tax returns, if required, and any other
material reports and information required to be filed by Merlin with any
governmental authority; Merlin has withheld and remitted to tax collection
authorities such taxes as are required by law to be withheld and remitted as and
when due; Merlin has paid all income, sales and capital taxes payable by it as
and when due; Merlin has paid all installments of corporate taxes due and
payable, and there is not presently outstanding nor does Merlin expect to
receive any notice of re-assessment from any applicable tax collecting
authority;
(p) Merlin has not declared or paid any dividends of any kind or declared or
made any other distributions of any kind whatsoever including, without
limitation, by way of redemption, repurchase or reduction of its authorized
capital;
(q) there has been no material adverse change in the financial condition and
position of Merlin and no damage, loss destruction or other change in
circumstances materially affecting the business, property or assets of Merlin or
its right or capacity to carry on business since the date of the Financial
Statements of Merlin;
(r) after the date of the Financial Statements of Merlin, Merlin has not
engaged in any transaction or made any disbursement or assumed or incurred any
liability or obligation or made any commitment, including, without limitation,
any forward purchase commitment or similar obligation, to make any expenditure
which would materially affect its operations, property, assets or financial
condition;
(s) Merlin has not waived or surrendered any right of substantial value and
has not made any gift of money or of any of its property or assets. Merlin has
carried on business in the normal course;
(t) Merlin is not in default under or in breach of, or would, after notice
or lapse of time or both, be in default under any contract, agreement, indenture
or other instrument to which it is a party or by which it is bound;
(u) there are no claims threatened or against or affecting Merlin nor are
there any actions, suits, judgments, proceedings or investigations pending or,
threatened against or affecting Merlin, at law or in equity, before or by any
court, administrative agency or other tribunal or any governmental authority;
and
<PAGE>
(v) neither Merlin nor any of the Principal Vendors are aware of any
infringement by Merlin of any registered patent, trademark or copyright.
5. MERLIN INTERNATIONAL REPRESENTATIONS AND WARRANTIES
5.1 Merlin International represents and warrants to Merlin and the Merlin
Shareholders as of the date hereof and on the Effective Date that:
(a) Merlin International is a corporation validly existing and in good
standing under the laws of the State of Nevada. Merlin International has the
power and authority to carry on the Merlin International business as it is now
conducted;
(b) the execution, delivery and performance of this Agreement have been duly
and validly authorized and approved by Merlin International board of directors,
and Merlin International has the corporate power and authority to execute,
deliver and perform this Agreement and such other instruments as appropriate to
consummate the transactions herein contemplated, to perform and comply with all
of the terms, covenants and conditions to be performed and complied with by
Merlin International hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. This Agreement constitutes the
valid and binding obligation of Merlin International, and is enforceable against
Merlin International in accordance with its terms, except as the enforceability
may be affected by bankruptcy, insolvency or similar laws affecting creditor's
rights generally or court applied equitable remedies. Merlin International's
execution, delivery and performance of this Agreement do not (i) conflict with
or result in a breach of any of the terms, conditions or provisions of the
articles of incorporation or bylaws of Merlin International or any judgment,
order, injunction, decree, regulation or ruling of any court or other
governmental authority to which Merlin International is subject or of any
agreement or contract listed on any schedule delivered pursuant hereto or any
other material agreement or contract to which Merlin International is a party or
is subject, or constitute a default thereunder, or (ii) give to others any
rights of termination or cancellation of any agreement or contract listed on any
schedule delivered pursuant hereto or any other material agreement or contract
to which Merlin International is a party or is subject, or (iii) create any lien
or encumbrance upon the assets of Merlin International, or (iv) require the
consent, authorization or approval of any governmental agency, body, official or
authority;
(c) Merlin International has filed with all applicable securities and
regulatory authorities (including exchanges and markets) all information and
documents required to be filed with such authorities (the "Public Record") and
the statements set forth in the Public Record are true, correct and complete and
do not contain any misrepresentation as of the date made and Merlin
International has not filed any confidential material change reports or similar
reports;
<PAGE>
(d) there has not been any adverse material change in the business,
operations or affairs, financial or otherwise, of Merlin International since
December 31, 1999, being the date of the last audited financial statements of
Merlin International;
(e) the Exchange Shares when issued will be issued as fully paid and
non-assessable shares free and clear of all liens, charges, claims or
encumbrances;
(f) Merlin International has been approved for trading on the National
Association of Securities Dealers Over-the-Counter Bulletin Board (the "OTC BB")
and is eligible for quotation on the OTC BB as of the Effective Date;
(g) as of the Effective Date, the authorized capital of Merlin International
consists of 50,000,000 common shares with par value of $0.001 per common share;
(h) as of the Effective Date, 4,450,025 common shares were issued and
outstanding and have been validly issued and are fully paid and non-assessable;
(i) Merlin International is not aware nor has it failed to disclose to
Merlin and the Merlin Shareholders any change, event or circumstance which would
adversely affect the Exchange Shares or the prospects, operation or condition of
Merlin International or which would reasonably be considered to reduce the value
of the Exchange Shares;
(j) Merlin International has not made any untrue statement to the Principal
Vendors nor has it failed to state a material fact that is required to be stated
or that is necessary to prevent a statement that is made from being false or
misleading in the circumstances in which it was made;
(k) the Merlin International audited financial statement for the year ended
December 31, 1999 (the "Merlin International Financial Statements"), are true
and correct in every material respect and present fairly the financial position
of Merlin International as of the dates of such statements, and the results of
its operations for the periods then ended and are prepared in accordance with
generally accepted accounting principles applied on a consistent basis with that
of the previous year except as specifically provided therein;
(l) Merlin International has disclosed all contracts, engagements and
commitments, whether oral or written, relating to Merlin International;
(m) all licenses, permits, approvals, consents, certificates, registrations
and authorizations required in the ordinary course of Merlin International's
business or in the use of the assets of Merlin International have been obtained
and are in good standing and are not terminable on the basis of the transactions
contemplated herein;
(n) Merlin International has the full and absolute right, power and
authority to enter into this Agreement on the terms and subject to the
conditions herein set forth, to carry out the transactions contemplated hereby;
<PAGE>
(o) all alterations, if any, to the Articles of Incorporation of Merlin
International since its incorporation have been duly approved by the
shareholders of Merlin International;
(p) the corporate records of Merlin International, as required to be
maintained by it under its statute of incorporation and constating documents,
are accurate, complete and up-to-date in all material respects and reflect all
material transactions of Merlin International;
(q) Merlin International has good and marketable title to all of its assets,
and such assets are free and clear of any financial encumbrances not disclosed
in the Merlin International Financial Statements;
(r) Merlin International has filed all necessary tax returns in all
jurisdictions required to be filed by it, all returns affecting workers
compensation with the appropriate agency, corporation capital tax returns, if
required, and any other material reports and information required to be filed by
Merlin International with any governmental authority; Merlin International has
paid all income, sales and capital taxes payable by it as and when due; Merlin
International has withheld and remitted to tax collection authorities such taxes
as are required by law to be withheld and remitted as and when due; Merlin
International has paid all installments of corporate taxes due and payable, and
there is not presently outstanding nor does Merlin International expect to
receive any notice of re-assessment from any applicable tax collecting
authority;
(s) Merlin International has not declared or paid any dividends of any kind
or declared or made any other distributions of any kind whatsoever including,
without limitation, by way of redemption, repurchase or reduction of its
authorized capital, except as has been described to the Principal Vendors and
Merlin;
(t) there has been no material adverse change in the financial condition and
position of Merlin International and no damage, loss destruction or other change
in circumstances materially affecting the business, property or assets of Merlin
International or its right or capacity to carry on business since the date of
the Merlin International Financial Statements;
(u) after the date of the Merlin International Financial Statements, Merlin
International has not engaged in any transaction or made any disbursement or
assumed or incurred any liability or obligation or made any commitment,
including, without limitation, any forward purchase commitment or similar
obligation, to make any expenditure which would materially affect its
operations, property, assets or financial condition;
(v) Merlin International has not waived or surrendered any right of
substantial value and has not made any gift of money or any of its property or
assets. Merlin International has carried on business in the normal course;
<PAGE>
(w) Merlin International is not in default under or in breach of, or would,
after notice or lapse of time or both, be in default under any contract,
agreement indenture or other instrument to which it is a party or by which it is
bound;
(x) there are no claims threatened or against or affecting Merlin
International nor are there any actions, suits, judgments, proceedings or
investigations pending or, threatened against or affecting Merlin International,
at law or in equity, before or by any court, administrative agency or other
tribunal or any governmental authority; and
(y) there are no outstanding options, agreements, contracts, calls or
commitments of any character which would require the issuance by Merlin
International of any common shares in the capital of Merlin International.
6. CONDITIONS PRECEDENT AND TERMINATION.
6.1 Merlin Conditions Precedent. The obligations of Merlin to close
hereunder are subject to satisfaction of the following conditions on or before
the Effective Date:
(a) all agreements, obligations, covenants and conditions, required by this
Agreement to be performed or complied with by Merlin International prior to or
at the Effective Date hereunder, shall have been so performed or complied with
by Merlin International;
(b) the representations and warranties of Merlin International shall have
been true at the time made and shall be true as at the Effective Date;
(c) there shall have been no adverse material change in the business,
operations or affairs, financial or otherwise, of Merlin International since the
date of this Agreement;
(d) all of the transactions contemplated by this Agreement shall have been
approved, as required, by the shareholders and the directors of Merlin
International; and
(e) on or before Effective Date, Merlin International shall have delivered
to Merlin a Statutory Declaration of an officer or director of Merlin
International certifying the truth, accuracy and correctness of the Merlin
International representations and warranties contained in this Agreement.
6.2 Merlin International Conditions Precedent. The obligations of Merlin
International to close hereunder are subject to satisfaction of the following
conditions on or before the Effective Date:
(a) Merlin and the Principal Vendors shareholders shall have satisfied all
of their respective covenants as contemplated herein;
(b) the representations and warranties of Merlin and the Principal Vendors
shall be true and correct on and as of the Effective Date;
<PAGE>
(c) all agreements, obligations, covenants and conditions required by this
Agreement to be performed or complied with by Merlin and the Principal Vendors
prior to or at the Effective Date hereunder shall have been so performed or
complied with by them;
(d) all parties whose consents are necessary to the assignment of any of the
contracts, lease or other agreements to Merlin International shall have granted
their consents thereto, including without limitation, the landlord under any
lease of the business premises of Merlin;
(e) no event shall have occurred, which materially and adversely affects the
value of the Merlin assets or the ability of Merlin to carry on the Merlin
Business as presently conducted or contemplated, and which, in the good faith
and judgment of Merlin International, renders it unadvisable to proceed with the
filing of the Articles of Share Exchange;
(f) all of the transactions contemplated by this Agreement shall have been
approved, as required, by the Merlin Shareholders and the directors of Merlin;
and
(g) on or before the Effective Date, Merlin shall have delivered to Merlin
International a Statutory Declaration of an officer or director of Merlin
certifying the truth, accuracy and correctness of the Merlin representations and
warranties contained in this Agreement.
6.3 Termination. Notwithstanding anything contained in this Agreement to
the contrary, this Agreement may be terminated and the Share Exchange abandoned:
(a) upon written notice at any time prior to the Effective Date by mutual
consent of the Constituent Corporations;
(b) if holders of all of the Merlin Shareholders shall not vote in favor of,
or consent to, the Share Exchange; or
(c) if there exists a suit, action, or other proceeding commenced, pending
or threatened, before any court or other governmental agency of the federal or
state government, in which it is sought to restrain, prohibit or otherwise
adversely affect the consummation of the Share Exchange contemplated hereby.
In exercising their rights under this Section 6.3, each of the Constituent
Corporations may act by its Board of Directors, and such rights may be so
exercised, notwithstanding the prior approval of this Agreement by the Merlin
Shareholders.
7. MODIFICATION
7.1 Notwithstanding anything contained in this Agreement, this Agreement may
be amended or modified in writing at any time prior to the Effective Date;
provided that, an amendment made subsequent to the adoption of this Agreement by
the Merlin Shareholders shall not: (1) alter or change the amount or kind of
shares, securities, cash, property and/or rights to be received in exchange for
or on conversion of all or any of the shares of any class or series thereof of
the Constituent Corporations; (2) alter or change any term of the Articles of
<PAGE>
Incorporation of a Constituent Corporation; or (3) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series thereof of the Constituent
Corporations; provided, however, the Constituent Corporations may by agreement
in writing extend the time for performance of, or waive compliance with, the
conditions or agreements set forth herein.
7.2 In exercising their rights under this Section 7, each of the Constituent
Corporations may act by its Board of Directors, and such rights may be so
exercised, notwithstanding the prior approval of this Agreement by the Merlin
Shareholders.
8. TAX COMPLIANCE
8.1 Each of the Constituent Corporations shall:
(a) keep its records and file in connection with its federal and state
income tax returns all such information as may be required by Treas. Reg.
Section 1.368-3;
(b) for federal and state income tax purposes report the share exchange as
qualifying as a reorganization under Section 368(a)(1)(B) of the Code;
(c) refrain from taking any position in connection with its federal or any
state income tax liability that would be inconsistent with such qualification;
and
(d) comply with all the requirements of Section 368(a)(1)(B) applicable to
such corporation.
9. INDEMNIFICATION
9.1 Indemnification by Principal Vendors. The Principal Vendors will
indemnify and hold harmless Merlin International from any liabilities relating
to the Merlin Shares and Merlin accruing up to and including the day before the
Effective Date and in particular, will ensure that Merlin has paid all wages,
holiday pay, income tax, Pension Plan, Unemployment Insurance and other
compensation payable to or related to the employees.
9.2 Indemnification by Merlin International. Merlin International will
indemnify and hold the Principal Vendors and the Merlin Shareholders harmless
from any liabilities relating to the Exchange Shares and Merlin International
accruing up to and including the day before the Effective Date and in
particular, will ensure that Merlin International has paid all wages, holiday
pay, income tax, Pension Plan, Unemployment Insurance and other compensation
payable to or related to the employees; and
10. MISCELLANEOUS
10.1 Share Exchange. This Agreement supersedes all prior agreements,
written and oral, concerning the matters contained herein.
<PAGE>
10.2 Successors. This Agreement shall be binding upon and inure to the
benefit of the heirs and successors of each of the parties. None of the party
may assign this Agreement without the prior written consent of the other party.
10.3 Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada. Each of Merlin International
and Merlin acknowledge that it was represented by competent legal counsel or
advised to seek legal counsel in the review of the terms and conditions set
forth in this Agreement and the other documents relating to this transaction,
including, but not limited to, the documents attached as exhibits to this
Agreement, and, therefore, neither this Agreement nor any of the other documents
shall be construed against any party as the drafter.
10.4 Counterparts. This Agreement may be executed in multiple counterparts,
including facsimile counterparts, that when taken together shall constitute a
single instrument; provided that original signed counterpart copies are
delivered to each party.
10.5 Public Announcements. No party hereto shall make any public
announcement or disclosure of the terms or conditions of this Agreement without
the prior written consent of the other parties, except that any parties'
approval shall not be required as to any statements or other information which
may be required to make pursuant to any rule or regulation of the any competent
securities commissions or otherwise required by law.
10.6 Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any or the terms or provisions of this
Agreement.
10.7 Severability. Any provision of this Agreement which is found to be
contrary to Nevada law or otherwise unenforceable shall not affect the remaining
terms of this Agreement, which shall be construed in such event as if the
unenforceable provision were absent from this Agreement.
10.8 Notices. All notices, requests and other communications from any of
the parties hereto to the other shall be in writing and shall be considered to
have been duly given or served when (i) personally delivered, (ii) when received
if delivered by confirmed facsimile transmission, air courier or other
comparable delivery service, or (iii) on the third day after deposit in the
United States mail, certified or registered, return receipt requested, postage
prepaid, addressed to the party at their address set forth on the signature page
below, or to such other address as such party may hereafter designate by written
notice.
10.9 Attorneys' Fees. In the event of any dispute hereunder between the
parties hereto, the party prevailing in any litigation instituted hereunder
shall be entitled to recover from the other its costs and expenses thereof
including, specifically, its reasonable attorneys' fees.
<PAGE>
10.10 Jurisdiction and Venue. Any litigation instituted hereunder shall be
venue in the appropriate state or federal courts in Las Vegas, Nevada, as to
which jurisdiction Merlin International and Merlin hereby consent.
The parties have executed this Agreement as of the day and year first above
written.
MERLIN SOFTWARE TECHNOLOGIES
INTERNATIONAL, INC.
By: /s/ Martin Holt
Its: Director
Address: 3675 Pecos-McLeod, Suite 1400
Las Vegas, NV 89121
MERLIN SOFTWARE TECHNOLOGIES INC.
By: /s/ Robert Heller
Its: President and Chief Executive Officer
Address: Suite 420 - 6450 Roberts Street
Burnaby, B.C. V5G 4B1
PRINCIPAL VENDORS
/s/ Robert Heller /s/ Gary Heller
ROBERT HELLER GARY HELLER
/s/ Shelley Montgomery
SHELLEY MONTGOMERY
<PAGE>
EXHIBIT A
---------
LIST OF PRINCIPAL VENDORS
-------------------------
Robert Heller
Gary Heller
Shelley Montgomery
<PAGE>
EXHIBIT B
---------
LIST OF MERLIN SHAREHOLDERS AND WARRANT HOLDERS
-----------------------------------------------
<TABLE>
<CAPTION>
NAME SHARES WARRANTS
- ------------------ --------- --------
<S> <C> <C>
Anita Chan . . . . 40,000
---------
Jean Chao. . . . . 10,000
---------
Wayne Cooper . . . 20,000
---------
Alan Debou . . . . 400,000
---------
Ronnie Doman . . . 100,000
---------
Kwok Fong. . . . . 10,000
---------
John Foster. . . . 25,000
---------
Patrick Fung . . . 10,000
---------
Rangit Gill. . . . 10,000
---------
Eric Gilstead. . . 250,000
---------
Gregory Greatrex . 3,000
---------
Andrew Heller. . . 2,500
---------
Darcy Heller . . . 2,500
---------
Gary Heller. . . . 2,500,000
---------
Robert Heller. . . 2,350,000
---------
Sidney Heller. . . 3,000
---------
Yan Hsiao. . . . . 10,000
---------
Allan Johnson. . . 10,000
---------
Shayda Kassam. . . 20,000
---------
Austin Kay . . . . 20,000
---------
Janet Lim. . . . . 20,000
---------
Daniel Maarsman. . 310,000
---------
Larry Madore . . . 2,000
---------
Jon Martin . . . . 101,000
---------
Shelley Montgomery 1,040,000
---------
Christopher Mybung 1,000
---------
William Nigus. . . 4,000
---------
Paolo Rubino . . . 10,000
---------
Chrissie Simpson . 5,000
---------
Jim Simpson. . . . 2,500
---------
Margaret Simpson . 2,500
---------
Rory Stowell . . . 30,000
---------
Chin Chong Tai . . 30,000
---------
Keith Tapp . . . . 400,000
---------
Chester Thorton. . 50,000
---------
Malek Vnani. . . . 10,000
---------
Tasneem Virani . . 36,000
---------
Wade Willis. . . . 40,000
---------
Chen Tao Wu. . . . 10,000
---------
David Fendick. . . 3,333 3,333
--------- --------
Henry Tai. . . . . 3,333 3,333
--------- --------
Gerry Wittenberg . 13,333 13,333
--------- --------
Joseph Kathy . . . 3,333 3,333
--------- --------
Larry Ltd. . . . . 6,667 6,667
--------- --------
Marie Murdoch. . . 3,333 3,333
--------- --------
Catherine Shore. . 3,333 3,333
--------- --------
Gilbert Schneider. 3,333 3,333
--------- --------
Ted Maudsley . . . 6,667 6,667
--------- --------
Mike Tapp. . . . . 6,667 6,667
--------- --------
Keith Tapp . . . . 33,333 33,333
- ------------------ --------- --------
</TABLE>
<PAGE>
EXHIBIT C
---------
ARTICLES OF SHARE EXCHANGE
--------------------------
(Attached)
<PAGE>
EXHIBIT D
---------
OPTIONS GRANTED BY MERLIN
-------------------------
<TABLE>
<CAPTION>
NUMBER OF
OPTIONEE OPTIONS EXERCISE PRICE
- ------------------ --------- --------------
<S> <C> <C>
William Negus. . . 40,000 US$1.00
--------- --------------
Patricia Negus . . 40,000 US$1.00
--------- --------------
Gary Heller. . . . 150,000 US$1.00
--------- --------------
Shelley Montgomery 150,000 US$1.00
--------- --------------
Robert Heller. . . 150,000 US$1.00
--------- --------------
Chang-Cheng Chao . 24,000 US$1.00
--------- --------------
Dae Kyung Kim. . . 24,000 US$1.00
--------- --------------
Douglas West . . . 100,000 US$1.00
--------- --------------
William Heller . . 16,000 US$1.00
--------- --------------
Alastair King. . . 10,000 US$1.00
--------- --------------
Crystal Gross. . . 24,000 US$1.00
--------- --------------
Alireza Ahmadi . . 24,000 US$1.00
--------- --------------
Brandon Montgomery 8,000 US$1.00
--------- --------------
Haide-Anne James . 1,000 US$1.00
--------- --------------
Hank Barber. . . . 20,000 US$1.00
- ------------------ --------- --------------
</TABLE>
<PAGE>
EXHIBIT E
---------
CERTIFICATE OF CONSENT OF MERLIN SHAREHOLDERS
---------------------------------------------
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
HAIDE-ANNE JAMES of 9147 Queen Street, Box 866, Fort Langley, BC V1M 2S2
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 1,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
1,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 100% of the Options (1,000) may be exercised immediately upon execution
of the Stock Option Agreement
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
<PAGE>
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
<PAGE>
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, and nothing contained in this Plan shall be construed as giving
<PAGE>
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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Haide-Anne James
9147 Queen Street, Box 866
Fort Langley, BC V1M 2S2
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
BRANDON MONTGOMERY of 1011 Esplanade Avenue, West Vancouver, BC V7G 1T2
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 8,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
8,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 20% of the Options (1,600) may be exercised ninety (90) days after the
date of the Consulting Agreement between the Company and the Optionee
(b) 20% of the Options (1,600) may be exercised one hundred eighty (180)
days after the date of the Consulting Agreement between the Company and the
Optionee
(c) 60% of the Options (4,800) may be exercised one (1) year after the date
of the Consulting Agreement between the Company and the Optionee
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
<PAGE>
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
<PAGE>
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
<PAGE>
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Brandon Montgomery
1011 Esplanade Avenue
West Vancouver, BC V7G 1T2
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
WILLIAM HELLER of 1912 Ironwood Court, Port Moody, BC
V3H 4C3
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 16,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
16,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 20% of the Options (3,200) may be exercised ninety (90) days after the
date of the Consulting Agreement between the Company and the Optionee
(b) 20% of the Options (3,200) may be exercised one hundred eighty (180)
days after the date of the Consulting Agreement between the Company and the
Optionee
(c) 60% of the Options (9,600) may be exercised one (1) year after the date
of the Consulting Agreement between the Company and the Optionee
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
<PAGE>
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock to be purchased and accompanied by payment
<PAGE>
in cash by certified check or cashier's check in the amount of the full exercise
price for the Common Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
<PAGE>
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: William Heller
1912 Ironwood Court
Port Moody, BC V3H 4C3
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
DAE KYUNG KIM of #22 - 7500 Cumberland Street, Burnaby, BC V3N 4Z9
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 24,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
24,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 20% of the Options (4,800) may be exercised ninety (90) days after the
date of the Consulting Agreement between the Company and the Optionee
(b) 20% of the Options (4,800) may be exercised one hundred eighty (180)
days after the date of the Consulting Agreement between the Company and the
Optionee
(c) 60% of the Options (14,400) may be exercised one (1) year after the date
of the Consulting Agreement between the Company and the Optionee
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
<PAGE>
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
<PAGE>
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
<PAGE>
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Dae Kyung Kim
#22 - 7500 Cumberland Street
Burnaby, BC V3N 4Z9
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
CHANG-CHENG CHAO of 811 Blue Mountain Street, Coquitlam, BC V3J 4S6
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 24,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
24,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 20% of the Options (4,800) may be exercised ninety (90) days after the
date of the Consulting Agreement between the Company and the Optionee
(b) 20% of the Options (4,800) may be exercised one hundred eighty (180)
days after the date of the Consulting Agreement between the Company and the
Optionee
(c) 60% of the Options (14,400) may be exercised one (1) year after the date
of the Consulting Agreement between the Company and the Optionee
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
<PAGE>
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
<PAGE>
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Chang-Cheng Chao
811 Blue Mountain Street
Coquitlam, BC V3J 4S6
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
GARY HELLER of 1409 North Cove Blvd., Longwood, Florida 32750
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 150,000 shares of Common Stock (the "Options"), which
Options are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
150,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 50% of the Options (75,000) may be exercised upon the execution of the
Management Agreement
(b) 16.66% of the Options (25,000) may be exercised upon the relocation of
the Optionee to the Company's Head Office
(c) 33.33% of the Options (50,000) may be exercised 12 months from the date
of execution of the Management Agreement
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
(b) Termination for Cause. 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).
<PAGE>
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
<PAGE>
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
<PAGE>
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Gary Heller
1409 North Cove Blvd.
Longwood, Florida 32750
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
SHELLEY MONTGOMERY of 1011 Esplanade Avenue, West Vancouver, British Columbia,
V7G 1T2
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 150,000 shares of Common Stock (the "Options"), which
Options are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
150,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 50% of the Options (75,000) may be exercised upon the execution of the
Management Agreement
(b) 16.66% of the Options (25,000) may be exercised upon the relocation of
the Optionee to the Company's Head Office
(c) 33.33% of the Options (50,000) may be exercised 12 months from the date
of execution of the Management Agreement
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
<PAGE>
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock to be purchased and accompanied by payment
<PAGE>
in cash by certified check or cashier's check in the amount of the full exercise
price for the Common Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
<PAGE>
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Shelley Montgomery
1011 Esplanade Avenue
West Vancouver, BC V7G 1T2
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
ROBERT HELLER of 1912 Ironwood Court, Port Moody, British Columbia, V3H 4C3
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 150,000 shares of Common Stock (the "Options"), which
Options are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
150,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 50% of the Options (75,000) may be exercised upon the execution of the
Management Agreement
(b) 16.66% of the Options (25,000) may be exercised upon the relocation of
the Optionee to the Company's Head Office
(c) 33.33% of the Options (50,000) may be exercised 12 months from the date
of execution of the Management Agreement
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
<PAGE>
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
<PAGE>
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
<PAGE>
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Robert Heller
1912 Ironwood Court
Port Moody, BC V3H 4C3
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Shelley Montgomery
------------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
DOUGLAS WEST of 98 Strong Road, Anmore, BC V3H 3C8
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 100,000 shares of Common Stock (the "Options"), which
Options are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
100,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 100% of the Options (100,000) may be exercised upon the execution of the
Consulting Agreement between the Company and the Optionee
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
<PAGE>
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person or by the Company withholding shares of Common Stock otherwise
<PAGE>
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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
<PAGE>
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Douglas West
98 Strong Road
Anmore, BC V3H 3C8
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
PATRICIA NEGUS of 3362 Point Grey Road, Vancouver, BC
V6R 1A3
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 40,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
40,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 50% of the Options (20,000) may be exercised upon the execution of the
Consulting Agreement between the Company and Negus Communications Inc.
(b) 50% of the Options (20,000) may be exercised 12 months from the date of
execution of the Consulting Agreement between the Company and Negus
Communications Inc.
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
(b) Termination for Cause. 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).
<PAGE>
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
<PAGE>
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
<PAGE>
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Patricia Negus
3362 Point Grey Road
Vancouver, BC V6R 1A3
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
WILLIAM NEGUS of 3362 Point Grey Road, Vancouver, BC V6R 1A3
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 40,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
40,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 50% of the Options (20,000) may be exercised upon the execution of the
Consulting Agreement between the Company and Negus Communications Inc.
(b) 50% of the Options (20,000) may be exercised 12 months from the date of
execution of the Consulting Agreement between the Company and Negus
Communications Inc.
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
<PAGE>
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
<PAGE>
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
<PAGE>
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: William Negus
3362 Point Grey Road
Vancouver, BC V6R 1A3
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
HANK INC. of 9202 - 27th North West, Seattle, Washington 98117
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 20,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
20,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 3,400 per month may be exercised, commencing 30 days from February 5,
2000, and every 30 days thereafter, for a period of five (5) months
(b) 3,000 may be exercised on August 3, 2000
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
<PAGE>
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
<PAGE>
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
<PAGE>
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Hank Inc.
9202 - 27th North West
Seattle, Washington 98117 U.S.A.
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
ALASTAIR KING of Suite 755 - 1130 West Pender Street, Vancouver, British
Columbia V6E 4A4
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 10,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
10,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 100% of the Options (10,000) may be exercised upon the execution of the
Consulting Agreement between the Company and the Optionee
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
<PAGE>
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
<PAGE>
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
<PAGE>
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Alastair King
Suite 755 - 1130 West Pender Street
Vancouver, BC V6E 4A4
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
CRYSTAL GROSS of 3674 Derbyshire Road, Casselberry, Florida 32707
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 24,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
24,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 20% of the Options (4,800) may be exercised ninety (90) days after the
date of the Consulting Agreement between the Company and the Optionee
(b) 20% of the Options (4,800) may be exercised one hundred eighty (180)
days after the date of the Consulting Agreement between the Company and the
Optionee
(c) 60% of the Options (14,400) may be exercised one (1) year after the date
of the Consulting Agreement between the Company and the Optionee
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
<PAGE>
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
<PAGE>
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock issued pursuant to the exercise of Options may have consequences
under federal and state tax and securities laws which may vary depending upon
<PAGE>
the individual circumstances of the Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Crystal Gross
3674 Derbyshire Road
Casselberry, Florida 32707
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
STOCK OPTION AGREEMENT
----------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS is entered into as of the 1st day of November, 1999 ("Date of Grant")
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
( "Company")
AND:
ALIREZA AHMADI of 209 - 7060 Elwell Street, Burnaby, BC
V5E 1K6
( "Optionee")
A. The Board of Directors of the Company (the "Board") has approved and
adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
B. The Plan provides for the granting of stock options that either (i)
are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options"); and
C. The Board has authorized the grant to Optionee of options to
purchase a total of 24,000 shares of Common Stock (the "Options"), which Options
are intended to be (select one):
[X] Incentive Stock Options
[ ] Non-Qualified Stock Options;
NOW THEREFORE, the Company agrees to offer to the Optionee the option
to purchase, upon the terms and conditions set forth herein and in the Plan,
24,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
<PAGE>
1. Exercise Price. The exercise price of the options shall be US$1.00 per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 20% of the Options (4,800) may be exercised ninety (90) days after the
date of the Consulting Agreement between the Company and the Optionee
(b) 20% of the Options (4,800) may be exercised one hundred eighty (180)
days after the date of the Consulting Agreement between the Company and the
Optionee
(c) 60% of the Options (14,400) may be exercised one (1) year after the date
of the Consulting Agreement between the Company and the Optionee
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking or agreement, in such a
form as the Company shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(a) Expiration. Ten (10) years; except, that the expiration date of any
Incentive Stock Option granted to a greater than ten percent (10%) shareholder
of the Company shall not be later than five (5) years from the Date of Grant.
<PAGE>
(b) Termination for Cause. 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).
(c) Termination Due to Death or Disability. The expiration of one (1) year
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of disability (as defined in
Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option 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.
(d) Termination Due to Cessation of Service as a Director. The expiration
of ninety (90) days from the date an Optionee, if a director of the Company,
ceases to serve as a director of the Company.
(e) Termination for Any Other Reason. 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 in Section 5(g) of
the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan)
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.
<PAGE>
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 Secretary of the Company at its principal executive office, specifying
the number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(a) by delivering to the Company shares of Common Stock previously held by
such person 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 purchase price to
be paid by the Optionee upon such exercise;
(b) 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
(c) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of shares prior to
the above determined date to the Company within one (1) business day after such
sale is concluded. The Optionee also agrees to pay to the Company, within five
(5) business days after such sale is concluded, the amount necessary for the
Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(1)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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.
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller, President
The Optionee: Alireza Ahmadi
209 - 7060 Elwell Street
Burnaby, BC V5E 1K6
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
<PAGE>
EXHIBIT A
---------
NOTICE OF ELECTION TO EXERCISE
------------------------------
This Notice of Election to Exercise shall constitute proper notice
pursuant to Section 5(h) of the Merlin Software Technologies Inc. 1999 Stock
Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement
(the "Agreement") dated as of the 1st day of November, 1999, between Merlin
Software Technologies Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to
purchase shares of the common stock of the Company at a price of US$1.00 per
share, for aggregate consideration of $, on the terms and conditions set forth
in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this day of , .
Signature
Name (typed or printed)
MERLIN SOFTWARE TECHNOLOGIES, INC.
1999 STOCK OPTION PLAN
This 1999 Stock Option Plan (the "Plan") provides for the grant of options
to acquire common shares (the "Common Shares") in the capital of Merlin Software
Technologies, Inc., a corporation formed under the laws of the State of Nevada
(the "Corporation"). 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. PURPOSE
1.1 The purpose of this Plan is to retain the services of valued key
employees and consultants of the Corporation and such other persons as the Plan
Administrator shall select in accordance with Section 3 below, and to encourage
such persons to acquire a greater proprietary interest in the Corporation,
thereby strengthening their incentive to achieve the objectives of the
shareholders of the Corporation, 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.
1.2 This Plan shall at all times be subject to all legal requirements
relating to the administration of stock option plans, if any, under applicable
corporate laws, applicable United States federal and state securities laws, the
Code, the rules of any applicable stock exchange or stock quotation system, and
the rules of any foreign jurisdiction applicable to Options granted to residents
therein (collectively, the "Applicable Laws").
2. ADMINISTRATION
2.1 This Plan shall be administered initially by the Board of Directors of
the Corporation (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 Board or, if
applicable, the Committee is referred to herein as the "Plan Administrator".
2.2 If and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the Board shall consider in selecting the Plan Administrator and the membership
of any Committee, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code, and (b) "Non-Employee
Directors" as contemplated by Rule 16b-3 under the Exchange Act.
2.3 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.
<PAGE>
2.4 Subject to the provisions of this Plan and any Applicable Laws, and with
a view to effecting its purpose, the Plan Administrator shall have sole
authority, in its absolute discretion, to:
(a) construe and interpret this Plan;
(b) define the terms used in the Plan;
(c) prescribe, amend and rescind the rules and regulations relating to this
Plan;
(d) correct any defect, supply any omission or reconcile any inconsistency
in this Plan;
(e) grant Options under this Plan;
(f) 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;
(g) determine the time or times at which Options shall be granted under this
Plan;
(h) determine the number of Common Shares 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;
(i) determine all other terms and conditions of the Options; and
(j) make all other determinations and interpretations necessary and
advisable for the administration of the Plan.
2.5 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.
3. ELIGIBILITY
3.1 Incentive Stock Options may be granted to any individual who, at the
time the Option is granted, is an employee of the Corporation or any Related
Corporation (as defined below) ("Employees").
3.2 Non-Qualified Stock Options may be granted to Employees and to such
other persons, including directors and officers of the Corporation or any
Related Corporation, who are not Employees as the Plan Administrator shall
select, subject to any Applicable Laws.
<PAGE>
3.3 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
Corporation or any subsidiary of the Corporation. Options also may be granted
in exchange for outstanding Options.
3.4 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".
3.5 As used in this Plan, the term "Related Corporation" shall mean any
corporation (other than the Corporation) that is a "Parent Corporation" of the
Corporation or "Subsidiary Corporation" of the Corporation, 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
4.1 The Plan Administrator is authorized to grant Options to acquire up to a
total of 3,000,000 Common Shares. The number of Common Shares with respect to
which Options may be granted hereunder is subject to adjustment as set forth in
Section 5.1(m) hereof. In the event that any outstanding Option expires or is
terminated for any reason, the Common Shares 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;
provided however, that any cancelled Options will be counted against the maximum
number of shares with respect to which Options may be granted to any particular
person as set forth in Section 3 hereof.
5. TERMS AND CONDITIONS OF OPTIONS
5.1 Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Plan Administrator (each, an "Agreement"). Agreements
may contain such provisions, not inconsistent with this Plan or any Applicable
Laws, as the 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 Common Shares to which it pertains and
whether the Option is intended to be an Incentive Stock Option or a
Non-Qualified Stock Option; provided that:
(i) the number of Common Shares that may be reserved pursuant to the
exercise of Options granted to any person shall not exceed 5% of the issued and
outstanding Common Shares of the Corporation;
(ii) 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;
<PAGE>
(iii) the aggregate fair market value (determined at the Date of Grant, as
defined below) of the Common Shares 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
Corporation, a Related Corporation or a predecessor corporation) shall not
exceed U.S.$100,000, or such other limit as may be prescribed by the Code as it
may be amended from time to time (the "Annual Limit"); and
(iv) 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 Common Share at which it is
exercisable. The Plan Administrator shall act in good faith to establish the
exercise price in accordance with Applicable Laws; provided that:
(i) 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 shall not be less than the fair market value per Common Share
at the Date of Grant as determined by the Plan Administrator in good faith;
(ii) with respect to Incentive Stock Options granted to greater-than-ten
percent (10%) shareholders of the Corporation (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 Common Share at the
Date of Grant as determined by the Plan Administrator in good faith; and
(iii) 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 Corporation or any subsidiary of the Corporation 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 Section 5.1(g) below, the expiration date of the Option, which date
shall not be later than ten (10) years from the Date of Grant; provided, that
the expiration date of any Incentive Stock Option granted to a greater-than-ten
percent (10%) shareholder of the Corporation (as determined with reference to
<PAGE>
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:
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 objective criteria, including but not limited to, 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 Corporation's performance
relative to its internal business plan. Performance objectives may be in
respect of the performance of the Corporation 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 Corporation by the Plan
Administrator that the performance objective has been achieved.
<PAGE>
(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.
(g) Term of Option
(i) Vested Options shall terminate, to the extent not previously exercised,
upon the occurrence of the first of the following events:
A. the expiration of the Option, as designated by the Plan Administrator in
accordance with Section 5.1(d) above;
B. the date of an Optionee's termination of employment or contractual
relationship with the Corporation or any Related Corporation for cause (as
determined by the Plan Administrator, acting reasonably);
C. the expiration of three (3) months from the date of an Optionee's
termination of employment or contractual relationship with the Corporation 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
D. the expiration of one year (1) 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.
(ii) Notwithstanding Section 5.1(g)(i) above, any vested Options which have
been granted to the Optionee in the Optionee's capacity as a director of the
Corporation or any Related Corporation shall terminate upon the occurrence of
the first of the following events:
A. the event specified in Section 5.1(g)(i)A above;
B. the event specified in Section 5.1(g)(i)D above; and
C. the expiration of three (3) months from the date the Optionee ceases to
serve as a director of the Corporation or Related Corporation, as the case may
be.
<PAGE>
(iii) 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 Optionee's domicile at the time of death and
only until such Options terminate as provided above.
(iv) 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.
(v) Unless accelerated in accordance with Section 5.1(f) above, unvested
Options shall terminate immediately upon termination of employment of the
Optionee by the Corporation for any reason whatsoever, including death or
Disability.
(vi) For purposes of this Plan, transfer of employment between or among the
Corporation and/or any Related Corporation shall not be deemed to constitute a
termination of employment with the Corporation or any Related Corporation.
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
(i) 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. 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.
(ii) Options or portions thereof may be exercised by giving written notice
to the Corporation, 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 Shares so purchased, which payment shall be in the form
specified in Section 5.1(i) below. The Corporation shall not be obligated to
issue, transfer or deliver a certificate representing Common Shares to the
Holder of any Option, until provision has been made by the Holder, to the
<PAGE>
satisfaction of the Corporation, 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.
(i) Payment upon Exercise of Option
Upon the exercise of any Option, the aggregate exercise price shall be paid to
the Corporation in cash or by certified or cashier's check. In addition, if
pre-approved in writing by the Plan Administrator who may arbitrarily withhold
consent, the Holder may pay for all or any portion of the aggregate exercise
price by complying with one or more of the following alternatives:
(i) by delivering to the Corporation Common Shares previously held by such
Holder, or by the Corporation withholding Common Shares otherwise deliverable
pursuant to exercise of the Option, which Common Shares 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;
(ii) 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 Corporation the amount of sale
or margin loan proceeds to pay the exercise price; or
(iii) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
(j) No 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 5.1(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 Shares for which the record date is prior
to the date the Holder becomes a record holder of the Common Shares covered by
the Option, irrespective of whether such Holder has given notice of exercise.
(k) Non-transferability of Options
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, and shall not be subject to execution,
attachment or similar process. 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.
<PAGE>
(l) Securities Regulation and Tax Withholding
(i) 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 Applicable Laws, and such issuance shall be further subject to the approval
of counsel for the Corporation with respect to such compliance, including the
availability of an exemption from prospectus and registration requirements for
the issuance and sale of such shares. The inability of the Corporation to
obtain from any regulatory body the authority deemed by the Corporation to be
necessary for the lawful issuance and sale of any shares under this Plan, or the
unavailability of an exemption from prospectus and registration requirements for
the issuance and sale of any shares under this Plan, shall relieve the
Corporation of any liability with respect to the non-issuance or sale of such
shares.
(ii) 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. If necessary under
Applicable Laws, the Plan Administrator may cause a stop-transfer order against
such shares to be placed on the stock books and records of the Corporation, 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 Laws, 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 applicable securities laws. THE CORPORATION
HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE COMMON SHARES
ISSUABLE UPON THE EXERCISE OF OPTIONS.
(iii) The Holder shall pay to the Corporation 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 Common Shares acquired upon exercise of an Option or
otherwise related to an Option or Common Shares 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:
<PAGE>
A. by delivering to the Corporation Common Shares previously held by such
Holder or by the Corporation withholding Common Shares otherwise deliverable
pursuant to the exercise of the Option, which Common Shares 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;
B. by executing appropriate loan documents approved by the Plan
Administrator by which the Holder borrows funds from the Corporation to pay any
withholding taxes due under this Section 5.1(l)(iii), 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.
(iv) The issuance, transfer or delivery of certificates representing Common
Shares 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 all Applicable 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 Section 5.1(l)(iii) above.
(m) Adjustments Upon Changes In Capitalization
(i) The aggregate number and class of shares for which Options may be
granted under this Plan, the number and class of shares covered by each
outstanding Option, and the exercise price per share thereof (but not the total
price), and each such Option, shall all be proportionately adjusted for any
increase or decrease in the number of issued Common Shares of the Corporation
resulting from:
A. a subdivision or consolidation of shares or any like capital adjustment,
or
B. the issuance of any Common Shares, or securities exchangeable for or
convertible into Common Shares, to the holders of all or substantially all of
the outstanding Common Shares by way of a stock dividend (other than the issue
of Common Shares, or securities exchangeable for or convertible into Common
Shares, to holders of Common Shares pursuant to their exercise of options to
receive dividends in the form of Common Shares, or securities convertible into
Common Shares, in lieu of dividends paid in the ordinary course on the Common
Shares).
<PAGE>
(ii) Except as provided in Section 5.1(m)(iii) hereof, upon a merger (other
than a merger of the Corporation in which the holders of Common Shares
immediately prior to the merger have the same proportionate ownership of common
shares in the surviving corporation immediately after the merger),
consolidation, acquisition of property or stock, separation, reorganization
(other than a mere re-incorporation or the creation of a holding Corporation) or
liquidation of the Corporation, as a result of which the shareholders of the
Corporation, receive cash, shares or other property in exchange for or in
connection with their Common Shares, any Option granted hereunder shall
terminate, but the Holder shall have the right to exercise such Holder's Option
immediately prior to any such merger, consolidation, acquisition of property or
shares, separation, reorganization or liquidation, and to be treated as a
shareholder of record for the purposes thereof, to the extent the vesting
requirements set forth in the Option agreement have been satisfied.
(iii) If the shareholders of the Corporation receive shares in the capital
of another corporation ("Exchange Shares") in exchange for their Common Shares
in any transaction involving a merger (other than a merger of the Corporation in
which the holders of Common Shares immediately prior to the merger have the same
proportionate ownership of Common Shares in the surviving corporation
immediately after the merger), consolidation, acquisition of property or shares,
separation or reorganization (other than a mere re-incorporation or the creation
of a holding Corporation), all Options granted hereunder shall be converted into
options to purchase Exchange Shares unless the Corporation and the corporation
issuing the Exchange Shares, in their sole discretion, determine that any or all
such Options granted hereunder shall not be converted into options to purchase
Exchange Shares but instead shall terminate in accordance with, and subject to
the Holder's right to exercise the Holder's Options pursuant to, the provisions
of Section 5.1(m)(ii). The amount and price of converted options shall be
determined by adjusting the amount and price of the Options granted hereunder in
the same proportion as used for determining the number of Exchange Shares the
holders of the Common Shares receive in such merger, consolidation, acquisition
or property or stock, separation or reorganization. Unless accelerated by the
Board, the vesting schedule set forth in the option agreement shall continue to
apply to the options granted for the Exchange Shares.
(iv) In the event of any adjustment in the number of Common Shares covered
by any Option, any fractional shares resulting from such adjustment shall be
disregarded and each such Option shall cover only the number of full shares
resulting from such adjustment.
(v) All adjustments pursuant to Section 5.1(m) shall be made by the Plan
Administrator, and its determination as to what adjustments shall be made, and
the extent thereof, shall be final, binding and conclusive.
<PAGE>
(vi) The grant of an Option shall not affect in any way the right or power
of the Corporation 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.
6. EFFECTIVE DATE; AMENDMENT; SHAREHOLDER APPROVAL
6.1 Options may be granted by the Plan Administrator from time to time on or
after the date on which this Plan is adopted by the Board (the "Effective
Date").
6.2 Unless sooner terminated by the Board, this Plan shall terminate on the
tenth anniversary of the Effective Date. No Option may be granted after such
termination or during any suspension of this Plan.
6.3 Any Options granted by the Plan Administrator prior to the ratification
of this Plan by the shareholders of the Corporation shall be granted subject to
approval of this Plan by the holders of a majority of the Corporation's
outstanding voting shares, voting either in person or by proxy at a duly held
shareholders' meeting within twelve (12) months before or after the Effective
Date. If such shareholder approval 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 Corporation of certain compensation.
7. NO OBLIGATIONS TO EXERCISE OPTION
7.1 The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT
8.1 Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, 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 Corporation or any Related
Corporation, express or implied, that the Corporation or any Related Corporation
will employ or contract with an Optionee for any length of time, nor shall it
interfere in any way with the Corporation's or, where applicable, a Related
Corporation's right to terminate Optionee's employment at any time, which right
is hereby reserved.
9. APPLICATION OF FUNDS
9.1 The proceeds received by the Corporation from the sale of Common Shares
issued upon the exercise of Options shall be used for general corporate
purposes, unless otherwise directed by the Board.
<PAGE>
10. INDEMNIFICATION OF PLAN ADMINISTRATOR
10.1 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 Corporation 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 Corporation), 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 Corporation of such action, suit or proceeding, so that the
Corporation may have the opportunity to make appropriate arrangements to
prosecute or defend the same.
11. AMENDMENT OF PLAN
11.1 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 the Applicable Laws. 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 Corporation to comply with or to avail the Corporation and/or the
Optionees of the benefits of any securities, tax, market listing or other
administrative or regulatory requirements.
Effective Date: November 1, 1999
THIS is made effective as of the 1st day of December, 1999.
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
(the "Company")
OF THE FIRST PART
AND:
ALASTAIR KING of Suite 755 - 1130 West Pender Street, Vancouver, British
Columbia V6E 4A4
(the "Contractor")
OF THE SECOND PART
A. The Company desires to retain the Contractor to provide the Company
with the services detailed in Schedule "A" hereto (the "Services"), and the
Contractor has agreed to provide the Services to the Company on the terms and
conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and promises set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT AND AUTHORITY OF CONTRACTOR
1.1 Appointment of Contractor
The Company hereby appoints the Contractor to perform the Services for
the benefit of the Company as hereinafter set forth, and the Company hereby
authorizes the Contractor to exercise such powers as provided under this
Agreement. The Contractor accepts such appointment on the terms and conditions
herein set forth.
1.2 Authority of Contractor
The Contractor shall have no right or authority, express or implied,
to commit or otherwise obligate the Company in any manner whatsoever except to
the extent specifically provided herein or specifically authorized in writing by
the Company.
<PAGE>
1.3 Independent Contractor
In performing the Services, the Contractor shall be an independent
contractor and not an employee or agent of the Company, except that the
Contractor shall be the agent of the Company solely in circumstances where the
Contractor must be the agent to carry out his obligations as set forth in this
Agreement. Nothing in this Agreement shall be deemed to require the Contractor
to provide the Services exclusively to the Company and the Contractor hereby
acknowledges that the Company is not required and shall not be required to make
any remittances and payments required of employers by statute on the
Contractor's behalf and the Contractor or any of his agents shall not be
entitled to the fringe benefits provided by the Company to its employees.
ARTICLE 2
CONTRACTOR'S AGREEMENTS
2.1 Expense Statements
The Contractor shall on or before the 15th day of each calendar month
during the term hereof, or if a Saturday, Sunday or holiday the next following
business day, render to the Company an itemized statement and accounting for the
previous calendar month, together with such supporting documents as and when the
Company may reasonably require, of all expenses which the Company is obligated
by this Agreement to reimburse.
The Contractor may incur expenses in the name of the Company up to an
amount per month as agreed in advance by the Company, such expenses to relate
solely to the carrying out of the Services. The Contractor will immediately
forward all invoices for expenses incurred on behalf of and in the name of the
Company and the Company agrees to pay said invoices directly on a timely basis.
ARTICLE 3
COMPANY'S AGREEMENTS
3.1 Compensation of Contractor
As compensation for the Services rendered by the Contractor pursuant
to this Agreement, the Company shall pay to the Contractor monthly in arrears,
on or before the last day of each month or if a Saturday, Sunday or holiday the
next following business day a fee of US$5,000 per month during the term hereof.
3.2 Incentive Options
As an incentive to the Contractor to continue to provide bona fide,
ongoing valuable services to the Company, the Company shall grant to the
Contractor options (the "Options") to acquire 10,000 common shares of the
Company, said Options being for a term of two (2) years, having an exercise
price of US$1.00 per share and vesting as to 10,000 common shares immediately
upon execution of this Agreement. The Company will grant the options to the
Contractor upon the execution of all necessary documents, including a stock
option agreement.
<PAGE>
ARTICLE 4
DURATION, TERMINATION AND DEFAULT
4.1 Effective Date
This Agreement shall become effective as of the 1st day of December,
1999 (the "Effective Date"), and shall continue for a period of four (4) months
from the Effective Date or until terminated pursuant to the terms of this
Agreement.
4.2 Termination
This Agreement may be terminated by either party by giving the other
30 days written notice of such termination provided that in circumstances where
the Contractor would otherwise have been entitled to receive a payment pursuant
to Section 3.1 herein within 30 days following termination of this Agreement the
Company shall make such payment to the Contractor as if the Agreement had not
been terminated.
4.3 Duties Upon Termination
Upon termination of this Agreement for any reason, the Contractor
shall upon receipt of all sums due and owing, promptly deliver the following in
accordance with the directions of the Company:
(a) a final accounting, reflecting the balance of expenses incurred on
behalf of the Company as of the date of termination; and
(b) all documents pertaining to the Company or this Agreement, including but
not limited to, all books of account, correspondence and contracts, provided
that the Contractor shall be entitled thereafter to inspect, examine and copy
all of the documents which it delivers in accordance with this provision at all
reasonable times upon three (3) days' notice to the Company.
4.4 Compensation of Contractor on Termination
Upon termination of this Agreement, the Contractor shall be entitled
to receive as his full and sole compensation in discharge of obligations of the
Company to the Contractor under this Agreement all sums due and payable under
this Agreement to the date of termination and the Contractor shall have no right
to receive any further payments; provided, however, that the Company shall have
the right to offset against any payment owing to the Contractor under this
Agreement any damages, liabilities, costs or expenses suffered by the Company by
reason of the fraud, negligence or wilful act of the Contractor, to the extent
such right has not been waived by the Company.
<PAGE>
ARTICLE 5
CONFIDENTIALITY
5.1 Ownership of Work Product
All reports, documents, concepts, products and processes together with
any marketing schemes, business or sales contracts, or any business
opportunities prepared, produced, developed, or acquired, by or at the direction
of the Contractor, directly or indirectly, in connection with or otherwise
developed or first reduced to practice by the Contractor performing the services
(collectively, the "Work Product") shall belong exclusively to the Company which
shall be entitled to all right, interest, profits or benefits in respect
thereof. No copies, summaries or other reproductions of any Work Product shall
be made by the Contractor or any of his agents without the express permission of
the Company, provided that the Contractor is hereby given permission to maintain
one copy of the Work Product for his own use.
5.2 Confidentiality
The Contractor shall not, except as authorized or required by his
duties, reveal or divulge to any person or companies any of the trade secrets,
secret or confidential operations, processes or dealings or any information
concerning the organization, business, finances, transactions or other affairs
of the Company, which may come to his knowledge during the term of this
Agreement and shall keep in complete secrecy all confidential information
entrusted to him and shall not use or attempt to use any such information in any
manner which may injure or cause loss, either directly or indirectly, to the
Company's business or may be likely so to do. This restriction shall continue
to apply after the termination of this Agreement without limit in point of time
but shall cease to apply to information or knowledge which may come into the
public domain.
The Contractor shall comply, and shall cause his agents to comply,
with such directions as the Company shall make to ensure the safeguarding or
confidentiality of all such information. The Company may require that any agent
of the Contractor execute an agreement with the Company regarding the
confidentiality of all such information.
5.3 Devotion to Contract
During the term of this Agreement, the Contractor shall devote
sufficient time, attention, and ability to the business of the Company, and to
any associated company, as is reasonably necessary for the proper performance of
the Services pursuant to this Agreement. Nothing contained herein shall be
deemed to require the Contractor to devote his exclusive time, attention and
ability to the business of the Company. During the term of this Agreement, the
Contractor shall, and shall cause each of his agents assigned to performance of
the Services on behalf of the Contractor, to:
(a) at all times perform the Services faithfully, diligently, to the best of
his abilities and in the best interests of the Company;
(b) devote such of his time, labour and attention to the business of the
Company as is necessary for the proper performance of the Services hereunder;
and
<PAGE>
(c) refrain from acting in any manner contrary to the best interests of the
Company or contrary to the duties of the Contractor as contemplated herein.
5.4 Other Activities
The Contractor shall not be precluded from acting in a function
similar to that contemplated under this Agreement for any other person, firm or
company.
ARTICLE 6
MISCELLANEOUS
6.1 Waiver; Consents
No consent, approval or waiver, express or implied, by either party
hereto, to or of any breach of default by the other party in the performance by
the other party of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance by
such other party of the same or any other obligations of such other party or to
declare the other party in default, irrespective of how long such failure
continues, shall not constitute a general waiver by such party of its rights
under this Agreement, and the granting of any consent or approval in any one
instance by or on behalf of the Company shall not be construed to waiver or
limit the need for such consent in any other or subsequent instance.
6.2 Governing Law
This Agreement and all matters arising thereunder shall be governed by
the laws of the Province of British Columbia.
6.3 Successors, etc.
This Agreement shall enure to the benefit of and be binding upon each
of the parties hereto and their respective heirs, successors and permitted
assigns.
6.4 Assignment
This Agreement may not be assigned by any party except with the
written consent of the other party hereto.
6.5 Entire Agreement and Modification
This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements and undertakings, whether oral or
written, relative to the subject matter hereof. To be effective any
modification of this Agreement must be in writing and signed by the party to be
charged thereby.
<PAGE>
6.6 Headings
The headings of the Sections and Articles of this Agreement are
inserted for convenience of reference only and shall not in any manner affect
the construction or meaning of anything herein contained or govern the rights or
liabilities of the parties hereto.
6.7 Notices
All notices, requests and communications required or permitted
hereunder shall be in writing and shall be sufficiently given and deemed to have
been received upon personal delivery or, if mailed, upon the first to occur of
actual receipt or forty-eight (48) hours after being placed in the mail, postage
prepaid, registered or certified mail, return receipt requested, respectively
addressed to the Company or the Contractor as follows:
The Company:
Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller
The Contractor:
Alastair King
Suite 755 - 1130 West Pender Street
Vancouver, BC V6E 4A4
or such other address as may be specified in writing to the other party, but
notice of a change of address shall be effective only upon the actual receipt.
6.8 Time of the Essence
Time is of the essence of this Agreement.
6.9 Further Assurances
The parties hereto agree from time to time after the execution hereof
to make, do, execute or cause or permit to be made, done or executed all such
further and other lawful acts, deeds, things, devices and assurances in law
whatsoever as may be required to carry out the true intention and to give full
force and effect to this Agreement.
6.10 Counterparts
This Agreement may be executed in several counter-parts, each of which
will be deemed to be an original and all of which will together constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
)
SIGNED, SEALED and DELIVERED )
in the presence of: )
)
/s/ Haide James )
- --------------------------- )
Signature )
Haide James )
- --------------------------- )
Print Name )
Fort Langley, BC )
- --------------------------- )
Address )
)
)
Office Manager ) /s/ Alastair King
- --------------- ) -------------------
Occupation ) ALASTAIR KING
<PAGE>
SCHEDULE "A"
Pursuant to the Agreement, Alastair King will provide project management
consulting and services to the Company.
THIS is made effective as of the 5th day of February, 2000.
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
(the "Company")
OF THE FIRST PART
AND:
HANK INC. of 9202 - 27th North West, Seattle, Washington 98117
(the "Contractor")
OF THE SECOND PART
WHEREAS:
A. The Company desires to retain the Contractor to provide the Company
with the services detailed in Schedule "A" hereto (the "Services"), and the
Contractor has agreed to provide the Services to the Company on the terms and
conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and promises set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT AND AUTHORITY OF CONTRACTOR
1.1 Appointment of Contractor
The Company hereby appoints the Contractor to perform the Services for
the benefit of the Company as hereinafter set forth, and the Company hereby
authorizes the Contractor to exercise such powers as provided under this
Agreement. The Contractor accepts such appointment on the terms and conditions
herein set forth.
1.2 Authority of Contractor
The Contractor shall have no right or authority, express or implied,
to commit or otherwise obligate the Company in any manner whatsoever except to
the extent specifically provided herein or specifically authorized in writing by
the Company.
<PAGE>
1.3 Independent Contractor
In performing the Services, the Contractor shall be an independent
contractor and not an employee or agent of the Company, except that the
Contractor shall be the agent of the Company solely in circumstances where the
Contractor must be the agent to carry out his obligations as set forth in this
Agreement. Nothing in this Agreement shall be deemed to require the Contractor
to provide the Services exclusively to the Company and the Contractor hereby
acknowledges that the Company is not required and shall not be required to make
any remittances and payments required of employers by statute on the
Contractor's behalf and the Contractor or any of his agents shall not be
entitled to the fringe benefits provided by the Company to its employees.
ARTICLE 2
CONTRACTOR'S AGREEMENTS
2.1 Expense Statements
The Contractor shall on or before the 15th day of each calendar month
during the term hereof, or if a Saturday, Sunday or holiday the next following
business day, render to the Company an itemized statement and accounting for the
previous calendar month, together with such supporting documents as and when the
Company may reasonably require, of all expenses which the Company is obligated
by this Agreement to reimburse.
The Contractor may incur expenses in the name of the Company up to an
amount per month as agreed in advance by the Company, such expenses to relate
solely to the carrying out of the Services. The Contractor will immediately
forward all invoices for expenses incurred on behalf of and in the name of the
Company and the Company agrees to pay said invoices directly on a timely basis.
ARTICLE 3
COMPANY'S AGREEMENTS
3.1 Compensation of Contractor
As compensation for the Services rendered by the Contractor pursuant
to this Agreement, the Company shall grant to the Contractor options (the
"Options") to acquire 20,000 common shares of the Company, said Options being
for a term of two (2) years, having an exercise price of US$1.00 per share and
vesting as to 3,400 common shares on each of March 6, April 5, May 5, June 4 and
July 4, 2000, and as to 3,000 common shares on August 3, 2000. The Company will
grant the options to the Contractor upon the execution of all necessary
documents, including a stock option agreement.
<PAGE>
ARTICLE 4
DURATION, TERMINATION AND DEFAULT
4.1 Effective Date
This Agreement shall become effective as of the 5th day of February,
2000 (the "Effective Date"), and shall continue for a period of six (6) months
from the Effective Date or until terminated pursuant to the terms of this
Agreement.
4.2 Termination
This Agreement may be terminated by either party by giving the other
30 days written notice of such termination provided that in circumstances where
the Contractor would otherwise have been entitled to receive a payment pursuant
to Section 3.1 herein within 30 days following termination of this Agreement the
Company shall make such payment to the Contractor as if the Agreement had not
been terminated.
4.3 Duties Upon Termination
Upon termination of this Agreement for any reason, the Contractor
shall upon receipt of all sums due and owing, promptly deliver the following in
accordance with the directions of the Company:
(a) a final accounting, reflecting the balance of expenses incurred on
behalf of the Company as of the date of termination; and
(b) all documents pertaining to the Company or this Agreement, including but
not limited to, all books of account, correspondence and contracts, provided
that the Contractor shall be entitled thereafter to inspect, examine and copy
all of the documents which it delivers in accordance with this provision at all
reasonable times upon three (3) days' notice to the Company.
4.4 Compensation of Contractor on Termination
Upon termination of this Agreement, the Contractor shall be entitled
to receive as his full and sole compensation in discharge of obligations of the
Company to the Contractor under this Agreement all sums due and payable under
this Agreement to the date of termination and the Contractor shall have no right
to receive any further payments; provided, however, that the Company shall have
the right to offset against any payment owing to the Contractor under this
Agreement any damages, liabilities, costs or expenses suffered by the Company by
reason of the fraud, negligence or wilful act of the Contractor, to the extent
such right has not been waived by the Company.
<PAGE>
ARTICLE 5
CONFIDENTIALITY
5.1 Ownership of Work Product
All reports, documents, concepts, products and processes together with
any marketing schemes, business or sales contracts, or any business
opportunities prepared, produced, developed, or acquired, by or at the direction
of the Contractor, directly or indirectly, in connection with or otherwise
developed or first reduced to practice by the Contractor performing the services
(collectively, the "Work Product") shall belong exclusively to the Company which
shall be entitled to all right, interest, profits or benefits in respect
thereof. No copies, summaries or other reproductions of any Work Product shall
be made by the Contractor or any of his agents without the express permission of
the Company, provided that the Contractor is hereby given permission to maintain
one copy of the Work Product for his own use.
5.2 Confidentiality
The Contractor shall not, except as authorized or required by his
duties, reveal or divulge to any person or companies any of the trade secrets,
secret or confidential operations, processes or dealings or any information
concerning the organization, business, finances, transactions or other affairs
of the Company, which may come to his knowledge during the term of this
Agreement and shall keep in complete secrecy all confidential information
entrusted to him and shall not use or attempt to use any such information in any
manner which may injure or cause loss, either directly or indirectly, to the
Company's business or may be likely so to do. This restriction shall continue
to apply after the termination of this Agreement without limit in point of time
but shall cease to apply to information or knowledge which may come into the
public domain.
The Contractor shall comply, and shall cause his agents to comply,
with such directions as the Company shall make to ensure the safeguarding or
confidentiality of all such information. The Company may require that any agent
of the Contractor execute an agreement with the Company regarding the
confidentiality of all such information.
5.3 Devotion to Contract
During the term of this Agreement, the Contractor shall devote
sufficient time, attention, and ability to the business of the Company, and to
any associated company, as is reasonably necessary for the proper performance of
the Services pursuant to this Agreement. Nothing contained herein shall be
deemed to require the Contractor to devote his exclusive time, attention and
ability to the business of the Company. During the term of this Agreement, the
Contractor shall, and shall cause each of his agents assigned to performance of
the Services on behalf of the Contractor, to:
(a) at all times perform the Services faithfully, diligently, to the best of
his abilities and in the best interests of the Company;
(b) devote such of his time, labour and attention to the business of the
Company as is necessary for the proper performance of the Services hereunder;
and
<PAGE>
(c) refrain from acting in any manner contrary to the best interests of the
Company or contrary to the duties of the Contractor as contemplated herein.
5.4 Other Activities
The Contractor shall not be precluded from acting in a function
similar to that contemplated under this Agreement for any other person, firm or
company.
ARTICLE 6
MISCELLANEOUS
6.1 Waiver; Consents
No consent, approval or waiver, express or implied, by either party
hereto, to or of any breach of default by the other party in the performance by
the other party of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance by
such other party of the same or any other obligations of such other party or to
declare the other party in default, irrespective of how long such failure
continues, shall not constitute a general waiver by such party of its rights
under this Agreement, and the granting of any consent or approval in any one
instance by or on behalf of the Company shall not be construed to waiver or
limit the need for such consent in any other or subsequent instance.
6.2 Governing Law
This Agreement and all matters arising thereunder shall be governed by
the laws of the Province of British Columbia.
6.3 Successors, etc.
This Agreement shall enure to the benefit of and be binding upon each
of the parties hereto and their respective heirs, successors and permitted
assigns.
6.4 Assignment
This Agreement may not be assigned by any party except with the
written consent of the other party hereto.
6.5 Entire Agreement and Modification
This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements and undertakings, whether oral or
written, relative to the subject matter hereof. To be effective any
modification of this Agreement must be in writing and signed by the party to be
charged thereby.
<PAGE>
6.6 Headings
The headings of the Sections and Articles of this Agreement are
inserted for convenience of reference only and shall not in any manner affect
the construction or meaning of anything herein contained or govern the rights or
liabilities of the parties hereto.
6.7 Notices
All notices, requests and communications required or permitted
hereunder shall be in writing and shall be sufficiently given and deemed to have
been received upon personal delivery or, if mailed, upon the first to occur of
actual receipt or forty-eight (48) hours after being placed in the mail, postage
prepaid, registered or certified mail, return receipt requested, respectively
addressed to the Company or the Contractor as follows:
The Company:
Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller
The Contractor:
Hank Barber/Hank Inc.
9202 - 27th North West
Seattle, Washington 98117
or such other address as may be specified in writing to the other party, but
notice of a change of address shall be effective only upon the actual receipt.
6.8 Time of the Essence
Time is of the essence of this Agreement.
6.9 Further Assurances
The parties hereto agree from time to time after the execution hereof
to make, do, execute or cause or permit to be made, done or executed all such
further and other lawful acts, deeds, things, devices and assurances in law
whatsoever as may be required to carry out the true intention and to give full
force and effect to this Agreement.
<PAGE>
6.10 Counterparts
This Agreement may be executed in several counter-parts, each of which
will be deemed to be an original and all of which will together constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
SIGNED, SEALED and DELIVERED in )
the presence of: )
)
/s/ Ferrol Williams )
- --------------------- )
Signature )
Ferrol Williams )
- ---------------- )
Print Name )
2400 NW 80th Street )
- ---------------------- )
Address )
Seattle, WA 98817 )
- ------------------- )
)
Notary ) /s/ Hank Barber
- ------ ) -----------------
Occupation ) HANK BARBER/HANK INC.
<PAGE>
SCHEDULE "A"
Pursuant to the Agreement, Hank Barber will provide research and strategic
planning services to the Company.
THIS is dated for reference the 2nd day of March, 2000
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
(the "Company")
OF THE FIRST PART
AND:
DOUGLAS WEST of 98 Strong Road, Anmore, BC V3H 3C8
(the "Contractor")
OF THE SECOND PART
WHEREAS:
A. The Company desires to retain the Contractor to provide the Company
with the services detailed in Schedule "A" hereto (the "Services"), and the
Contractor has agreed to provide the Services to the Company on the terms and
conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and promises set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT AND AUTHORITY OF CONTRACTOR
1.1 Appointment of Contractor
The Company hereby appoints the Contractor to perform the Services for
the benefit of the Company as hereinafter set forth, and the Company hereby
authorizes the Contractor to exercise such powers as provided under this
Agreement. The Contractor accepts such appointment on the terms and conditions
herein set forth.
1.2 Authority of Contractor
The Contractor shall have no right or authority, express or implied,
to commit or otherwise obligate the Company in any manner whatsoever except to
the extent specifically provided herein or specifically authorized in writing by
the Company.
<PAGE>
1.3 Independent Contractor
In performing the Services, the Contractor shall be an independent
contractor and not an employee or agent of the Company, except that the
Contractor shall be the agent of the Company solely in circumstances where the
Contractor must be the agent to carry out his obligations as set forth in this
Agreement. Nothing in this Agreement shall be deemed to require the Contractor
to provide the Services exclusively to the Company and the Contractor hereby
acknowledges that the Company is not required and shall not be required to make
any remittances and payments required of employers by statute on the
Contractor's behalf and the Contractor or any of his agents shall not be
entitled to the fringe benefits provided by the Company to its employees.
ARTICLE 2
CONTRACTOR'S AGREEMENTS
2.1 Expense Statements
The Contractor shall on or before the 15th day of each calendar month
during the term hereof, or if a Saturday, Sunday or holiday the next following
business day, render to the Company an itemized statement and accounting for the
previous calendar month, together with such supporting documents as and when the
Company may reasonably require, of all expenses which the Company is obligated
by this Agreement to reimburse.
The Contractor may incur expenses in the name of the Company up to an
amount per month as agreed in advance by the Company, such expenses to relate
solely to the carrying out of the Services. The Contractor will immediately
forward all invoices for expenses incurred on behalf of and in the name of the
Company and the Company agrees to pay said invoices directly on a timely basis.
ARTICLE 3
COMPANY'S AGREEMENTS
3.1 Compensation of Contractor
As compensation for the Services rendered by the Contractor pursuant
to this Agreement, the Company shall grant to the Contractor options (the
"Options") to acquire 100,000 common shares of the Company, said Options being
for a term of two (2) years, having an exercise price of US$1.00 per share and
vesting as of the date of this Agreement. The Company will grant the options to
the Contractor upon the execution of all necessary documents, including a stock
option agreement.
<PAGE>
ARTICLE 4
DURATION, TERMINATION AND DEFAULT
4.1 Effective Date
This Agreement shall become effective as of the 1st day of December,
1999 (the "Effective Date"), and shall continue for a period of two (2) years
from the Effective Date or until terminated pursuant to the terms of this
Agreement.
4.2 Termination
This Agreement may be terminated by either party by giving the other
30 days written notice of such termination provided that in circumstances where
the Contractor would otherwise have been entitled to receive a payment pursuant
to Section 3.1 herein within 30 days following termination of this Agreement the
Company shall make such payment to the Contractor as if the Agreement had not
been terminated.
4.3 Duties Upon Termination
Upon termination of this Agreement for any reason, the Contractor
shall upon receipt of all sums due and owing, promptly deliver the following in
accordance with the directions of the Company:
(a) a final accounting, reflecting the balance of expenses incurred on
behalf of the Company as of the date of termination; and
(b) all documents pertaining to the Company or this Agreement, including but
not limited to, all books of account, correspondence and contracts, provided
that the Contractor shall be entitled thereafter to inspect, examine and copy
all of the documents which it delivers in accordance with this provision at all
reasonable times upon three (3) days' notice to the Company.
4.4 Compensation of Contractor on Termination
Upon termination of this Agreement, the Contractor shall be entitled
to receive as his full and sole compensation in discharge of obligations of the
Company to the Contractor under this Agreement all sums due and payable under
this Agreement to the date of termination and the Contractor shall have no right
to receive any further payments; provided, however, that the Company shall have
the right to offset against any payment owing to the Contractor under this
Agreement any damages, liabilities, costs or expenses suffered by the Company by
reason of the fraud, negligence or wilful act of the Contractor, to the extent
such right has not been waived by the Company.
<PAGE>
ARTICLE 5
CONFIDENTIALITY
5.1 Ownership of Work Product
All reports, documents, concepts, products and processes together with
any marketing schemes, business or sales contracts, or any business
opportunities prepared, produced, developed, or acquired, by or at the direction
of the Contractor, directly or indirectly, in connection with or otherwise
developed or first reduced to practice by the Contractor performing the services
(collectively, the "Work Product") shall belong exclusively to the Company which
shall be entitled to all right, interest, profits or benefits in respect
thereof. No copies, summaries or other reproductions of any Work Product shall
be made by the Contractor or any of his agents without the express permission of
the Company, provided that the Contractor is hereby given permission to maintain
one copy of the Work Product for his own use.
5.2 Confidentiality
The Contractor shall not, except as authorized or required by his
duties, reveal or divulge to any person or companies any of the trade secrets,
secret or confidential operations, processes or dealings or any information
concerning the organization, business, finances, transactions or other affairs
of the Company, which may come to his knowledge during the term of this
Agreement and shall keep in complete secrecy all confidential information
entrusted to him and shall not use or attempt to use any such information in any
manner which may injure or cause loss, either directly or indirectly, to the
Company's business or may be likely so to do. This restriction shall continue
to apply after the termination of this Agreement without limit in point of time
but shall cease to apply to information or knowledge which may come into the
public domain.
The Contractor shall comply, and shall cause his agents to comply,
with such directions as the Company shall make to ensure the safeguarding or
confidentiality of all such information. The Company may require that any agent
of the Contractor execute an agreement with the Company regarding the
confidentiality of all such information.
5.3 Devotion to Contract
During the term of this Agreement, the Contractor shall devote
sufficient time, attention, and ability to the business of the Company, and to
any associated company, as is reasonably necessary for the proper performance of
the Services pursuant to this Agreement. Nothing contained herein shall be
deemed to require the Contractor to devote his exclusive time, attention and
ability to the business of the Company. During the term of this Agreement, the
Contractor shall, and shall cause each of his agents assigned to performance of
the Services on behalf of the Contractor, to:
(a) at all times perform the Services faithfully, diligently, to the best of
his abilities and in the best interests of the Company;
(b) devote such of his time, labour and attention to the business of the
Company as is necessary for the proper performance of the Services hereunder;
and
<PAGE>
(c) refrain from acting in any manner contrary to the best interests of the
Company or contrary to the duties of the Contractor as contemplated herein.
5.4 Other Activities
The Contractor shall not be precluded from acting in a function
similar to that contemplated under this Agreement for any other person, firm or
company.
ARTICLE 6
MISCELLANEOUS
6.1 Waiver; Consents
No consent, approval or waiver, express or implied, by either party
hereto, to or of any breach of default by the other party in the performance by
the other party of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance by
such other party of the same or any other obligations of such other party or to
declare the other party in default, irrespective of how long such failure
continues, shall not constitute a general waiver by such party of its rights
under this Agreement, and the granting of any consent or approval in any one
instance by or on behalf of the Company shall not be construed to waiver or
limit the need for such consent in any other or subsequent instance.
6.2 Governing Law
This Agreement and all matters arising thereunder shall be governed by
the laws of the Province of British Columbia.
6.3 Successors, etc.
This Agreement shall enure to the benefit of and be binding upon each
of the parties hereto and their respective heirs, successors and permitted
assigns.
6.4 Assignment
This Agreement may not be assigned by any party except with the
written consent of the other party hereto.
6.5 Entire Agreement and Modification
This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements and undertakings, whether oral or
written, relative to the subject matter hereof. To be effective any
modification of this Agreement must be in writing and signed by the party to be
charged thereby.
<PAGE>
6.6 Headings
The headings of the Sections and Articles of this Agreement are
inserted for convenience of reference only and shall not in any manner affect
the construction or meaning of anything herein contained or govern the rights or
liabilities of the parties hereto.
6.7 Notices
All notices, requests and communications required or permitted
hereunder shall be in writing and shall be sufficiently given and deemed to have
been received upon personal delivery or, if mailed, upon the first to occur of
actual receipt or forty-eight (48) hours after being placed in the mail, postage
prepaid, registered or certified mail, return receipt requested, respectively
addressed to the Company or the Contractor as follows:
The Company:
Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller
The Contractor:
Douglas West
98 Strong Road
Anmore, BC V3H 3C8
or such other address as may be specified in writing to the other party, but
notice of a change of address shall be effective only upon the actual receipt.
6.8 Time of the Essence
Time is of the essence of this Agreement.
6.9 Further Assurances
The parties hereto agree from time to time after the execution hereof
to make, do, execute or cause or permit to be made, done or executed all such
further and other lawful acts, deeds, things, devices and assurances in law
whatsoever as may be required to carry out the true intention and to give full
force and effect to this Agreement.
<PAGE>
6.10 Counterparts
This Agreement may be executed in several counter-parts, each of which
will be deemed to be an original and all of which will together constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
SIGNED, SEALED and DELIVERED in )
the presence of: )
)
/s/ Lidia Spring )
- ------------------ )
Signature )
Lidia Spring )
- ------------- )
Print Name )
180 Strong Road )
- ----------------- )
Address )
Anmore, BC )
- ----------- )
)
Homemaker ) /s/ Douglas West
- --------- ) ------------------
Occupation ) DOUGLAS WEST
<PAGE>
SCHEDULE "A"
Pursuant to the Agreement, Douglas West will provide management consulting
services to the Company.
THIS is dated for reference the 3rd day of March, 2000
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
(the "Company")
OF THE FIRST PART
AND:
WILLIAM HELLER of 1912 Ironwood Court, Port Moody, BC V3H 4C3
(the "Contractor")
OF THE SECOND PART
A. The Company desires to retain the Contractor to provide the Company
with the services detailed in Schedule "A" hereto (the "Services"), and the
Contractor has agreed to provide the Services to the Company on the terms and
conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and promises set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT AND AUTHORITY OF CONTRACTOR
1.1 Appointment of Contractor
The Company hereby appoints the Contractor to perform the Services for
the benefit of the Company as hereinafter set forth, and the Company hereby
authorizes the Contractor to exercise such powers as provided under this
Agreement. The Contractor accepts such appointment on the terms and conditions
herein set forth.
1.2 Authority of Contractor
The Contractor shall have no right or authority, express or implied,
to commit or otherwise obligate the Company in any manner whatsoever except to
the extent specifically provided herein or specifically authorized in writing by
the Company.
<PAGE>
1.3 Independent Contractor
In performing the Services, the Contractor shall be an independent
contractor and not an employee or agent of the Company, except that the
Contractor shall be the agent of the Company solely in circumstances where the
Contractor must be the agent to carry out his obligations as set forth in this
Agreement. Nothing in this Agreement shall be deemed to require the Contractor
to provide the Services exclusively to the Company and the Contractor hereby
acknowledges that the Company is not required and shall not be required to make
any remittances and payments required of employers by statute on the
Contractor's behalf and the Contractor or any of his agents shall not be
entitled to the fringe benefits provided by the Company to its employees.
ARTICLE 2
CONTRACTOR'S AGREEMENTS
2.1 Expense Statements
The Contractor shall on or before the 15th day of each calendar month
during the term hereof, or if a Saturday, Sunday or holiday the next following
business day, render to the Company an itemized statement and accounting for the
previous calendar month, together with such supporting documents as and when the
Company may reasonably require, of all expenses which the Company is obligated
by this Agreement to reimburse.
The Contractor may incur expenses in the name of the Company up to an
amount per month as agreed in advance by the Company, such expenses to relate
solely to the carrying out of the Services. The Contractor will immediately
forward all invoices for expenses incurred on behalf of and in the name of the
Company and the Company agrees to pay said invoices directly on a timely basis.
ARTICLE 3
COMPANY'S AGREEMENTS
3.1 Compensation of Contractor
As compensation for the Services rendered by the Contractor pursuant
to this Agreement, the Company shall grant to the Contractor options (the
"Options") to acquire 16,000 common shares of the Company, said Options being
for a term of two (2) years, having an exercise price of US$1.00 per share and
vesting as to 3,200 common shares ninety (90) days from the date of this
Agreement, 3,200 common shares one hundred eighty (180) days from the date of
this Agreement and 9,600 common shares one (1) year from the date of this
Agreement. The Company will grant the options to the Contractor upon the
execution of all necessary documents, including a stock option agreement.
<PAGE>
ARTICLE 4
DURATION, TERMINATION AND DEFAULT
4.1 Effective Date
This Agreement shall become effective as of the day of February,
2000, and shall continue on subject to termination as provided for herein.
4.2 Termination
This Agreement may be terminated by either party by giving the other
30 days written notice of such termination provided that in circumstances where
the Contractor would otherwise have been entitled to receive a payment pursuant
to Section 3.1 herein within 30 days following termination of this Agreement the
Company shall make such payment to the Contractor as if the Agreement had not
been terminated.
4.3 Duties Upon Termination
Upon termination of this Agreement for any reason, the Contractor
shall upon receipt of all sums due and owing, promptly deliver the following in
accordance with the directions of the Company:
(a) a final accounting, reflecting the balance of expenses incurred on
behalf of the Company as of the date of termination; and
(b) all documents pertaining to the Company or this Agreement, including but
not limited to, all books of account, correspondence and contracts, provided
that the Contractor shall be entitled thereafter to inspect, examine and copy
all of the documents which it delivers in accordance with this provision at all
reasonable times upon three (3) days' notice to the Company.
4.4 Compensation of Contractor on Termination
Upon termination of this Agreement, the Contractor shall be entitled
to receive as his full and sole compensation in discharge of obligations of the
Company to the Contractor under this Agreement all sums due and payable under
this Agreement to the date of termination and the Contractor shall have no right
to receive any further payments; provided, however, that the Company shall have
the right to offset against any payment owing to the Contractor under this
Agreement any damages, liabilities, costs or expenses suffered by the Company by
reason of the fraud, negligence or wilful act of the Contractor, to the extent
such right has not been waived by the Company.
<PAGE>
ARTICLE 5
CONFIDENTIALITY
5.1 Ownership of Work Product
All reports, documents, concepts, products and processes together with
any marketing schemes, business or sales contracts, or any business
opportunities prepared, produced, developed, or acquired, by or at the direction
of the Contractor, directly or indirectly, in connection with or otherwise
developed or first reduced to practice by the Contractor performing the services
(collectively, the "Work Product") shall belong exclusively to the Company which
shall be entitled to all right, interest, profits or benefits in respect
thereof. No copies, summaries or other reproductions of any Work Product shall
be made by the Contractor or any of his agents without the express permission of
the Company, provided that the Contractor is hereby given permission to maintain
one copy of the Work Product for his own use.
5.2 Confidentiality
The Contractor shall not, except as authorized or required by his
duties, reveal or divulge to any person or companies any of the trade secrets,
secret or confidential operations, processes or dealings or any information
concerning the organization, business, finances, transactions or other affairs
of the Company, which may come to his knowledge during the term of this
Agreement and shall keep in complete secrecy all confidential information
entrusted to him and shall not use or attempt to use any such information in any
manner which may injure or cause loss, either directly or indirectly, to the
Company's business or may be likely so to do. This restriction shall continue
to apply after the termination of this Agreement without limit in point of time
but shall cease to apply to information or knowledge which may come into the
public domain.
The Contractor shall comply, and shall cause his agents to comply,
with such directions as the Company shall make to ensure the safeguarding or
confidentiality of all such information. The Company may require that any agent
of the Contractor execute an agreement with the Company regarding the
confidentiality of all such information.
5.3 Devotion to Contract
During the term of this Agreement, the Contractor shall devote
sufficient time, attention, and ability to the business of the Company, and to
any associated company, as is reasonably necessary for the proper performance of
the Services pursuant to this Agreement. Nothing contained herein shall be
deemed to require the Contractor to devote his exclusive time, attention and
ability to the business of the Company. During the term of this Agreement, the
Contractor shall, and shall cause each of his agents assigned to performance of
the Services on behalf of the Contractor, to:
(a) at all times perform the Services faithfully, diligently, to the best of
his abilities and in the best interests of the Company;
(b) devote such of his time, labour and attention to the business of the
Company as is necessary for the proper performance of the Services hereunder;
and
<PAGE>
(c) refrain from acting in any manner contrary to the best interests of the
Company or contrary to the duties of the Contractor as contemplated herein.
5.4 Other Activities
The Contractor shall not be precluded from acting in a function
similar to that contemplated under this Agreement for any other person, firm or
company.
ARTICLE 6
MISCELLANEOUS
6.1 Waiver; Consents
No consent, approval or waiver, express or implied, by either party
hereto, to or of any breach of default by the other party in the performance by
the other party of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance by
such other party of the same or any other obligations of such other party or to
declare the other party in default, irrespective of how long such failure
continues, shall not constitute a general waiver by such party of its rights
under this Agreement, and the granting of any consent or approval in any one
instance by or on behalf of the Company shall not be construed to waiver or
limit the need for such consent in any other or subsequent instance.
6.2 Governing Law
This Agreement and all matters arising thereunder shall be governed by
the laws of the Province of British Columbia.
6.3 Successors, etc.
This Agreement shall enure to the benefit of and be binding upon each
of the parties hereto and their respective heirs, successors and permitted
assigns.
6.4 Assignment
This Agreement may not be assigned by any party except with the
written consent of the other party hereto.
6.5 Entire Agreement and Modification
This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements and undertakings, whether oral or
written, relative to the subject matter hereof. To be effective any
modification of this Agreement must be in writing and signed by the party to be
charged thereby.
<PAGE>
6.6 Headings
The headings of the Sections and Articles of this Agreement are
inserted for convenience of reference only and shall not in any manner affect
the construction or meaning of anything herein contained or govern the rights or
liabilities of the parties hereto.
6.7 Notices
All notices, requests and communications required or permitted
hereunder shall be in writing and shall be sufficiently given and deemed to have
been received upon personal delivery or, if mailed, upon the first to occur of
actual receipt or forty-eight (48) hours after being placed in the mail, postage
prepaid, registered or certified mail, return receipt requested, respectively
addressed to the Company or the Contractor as follows:
The Company:
Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller
The Contractor:
William Heller
1912 Ironwood Court
Port Moody, BC V3H 4C3
or such other address as may be specified in writing to the other party, but
notice of a change of address shall be effective only upon the actual receipt.
6.8 Time of the Essence
Time is of the essence of this Agreement.
6.9 Further Assurances
The parties hereto agree from time to time after the execution hereof
to make, do, execute or cause or permit to be made, done or executed all such
further and other lawful acts, deeds, things, devices and assurances in law
whatsoever as may be required to carry out the true intention and to give full
force and effect to this Agreement.
<PAGE>
6.10 Counterparts
This Agreement may be executed in several counter-parts, each of which
will be deemed to be an original and all of which will together constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
SIGNED, SEALED and DELIVERED in )
the presence of: )
)
/s/ Shelley Montgomery )
- ------------------------ )
Signature )
Shelley Montgomery )
- ------------------- )
Print Name )
1011 Esplanade Avenue )
- ----------------------- )
Address )
West Vancouver, BC )
- -------------------- )
)
VP Sales ) /s/ William Heller
- --------- ) --------------------
Occupation ) WILLIAM HELLER
<PAGE>
SCHEDULE "A"
Pursuant to the Agreement, William Heller will provide maintenance of the yellow
pages style Internet directory acquired by the Company from BOSS. Mr. Heller
will also establish a Java Internationalization tool for use with all of the
Company's products.
THIS is dated for reference the 5th day of March, 2000.
BETWEEN:
MERLIN SOFTWARE TECHNOLOGIES INC., a company incorporated pursuant to the laws
of the State of Nevada, of 3675 Pecos-McLeod, Suite 1400, Las Vegas, Nevada
89121
(the "Company")
OF THE FIRST PART
AND:
NEGUS COMMUNICATIONS INC., a company incorporated pursuant to the laws of the
Province of British Columbia, with a registered and records office at 203 - 2403
Marine Drive, West Vancouver, BC V7V 1L3
(the "Contractor")
OF THE SECOND PART
WHEREAS:
A. The Company desires to retain the Contractor to provide the Company
with the services detailed in Schedule "A" hereto (the "Services"), and the
Contractor has agreed to provide the Services to the Company on the terms and
conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and promises set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT AND AUTHORITY OF CONTRACTOR
1.1 Appointment of Contractor
The Company hereby appoints the Contractor to perform the Services for
the benefit of the Company as hereinafter set forth, and the Company hereby
authorizes the Contractor to exercise such powers as provided under this
Agreement. The Contractor accepts such appointment on the terms and conditions
herein set forth.
<PAGE>
1.2 Authority of Contractor
The Contractor shall have no right or authority, express or implied,
to commit or otherwise obligate the Company in any manner whatsoever except to
the extent specifically provided herein or specifically authorized in writing by
the Company.
1.3 Independent Contractor
In performing the Services hereunder, the Contractor shall be an
independent contractor and not an employee or agent of the Company, except that
the Contractor shall be the agent of the Company solely in circumstances where
the Contractor must be the agent to carry out his obligations as set forth in
this Agreement. Nothing in this Agreement shall be deemed to require the
Contractor to provide the Services exclusively to the Company and the Contractor
hereby acknowledges that the Company is not required and shall not be required
to make any remittances and payments required of employers by statute on the
Contractor's behalf and the Contractor or any of his agents shall not be
entitled to the fringe benefits provided by the Company to its employees.
ARTICLE 2
CONTRACTOR'S AGREEMENTS
2.1 Expense Statements
The Contractor shall on or before the 15th day of each calendar month
during the term hereof, or if a Saturday, Sunday or holiday the next following
business day, render to the Company an itemized statement and accounting for the
previous calendar month, together with such supporting documents as and when the
Company may reasonably require, of all expenses which the Company is obligated
by this Agreement to reimburse.
The Contractor may incur expenses in the name of the Company up to an
amount per month as agreed in advance by the Company, such expenses to relate
solely to the carrying out of the Services. The Contractor will immediately
forward all invoices for expenses incurred on behalf of and in the name of the
Company and the Company agrees to pay said invoices directly on a timely basis.
ARTICLE 3
COMPANY'S AGREEMENTS
3.1 Compensation of Contractor
As compensation for the Services rendered by the Contractor pursuant
to this Agreement, the Company shall grant options (the "Options") to acquire
80,000 common shares of the Company (as to 40,000 common shares to each of the
principals of the Contractor, William Negus and Patricia Negus (the "Principals
of the Contractor")), said Options being for a term of two (2) years, having an
exercise price of US$1.00 per share and vesting as to 20,000 common shares to
each of the Principals of the Contractor upon the execution of this Agreement
and 20,000 common shares to each of the Principals of the Contractor one (1)
year from the date of this Agreement. The Company will grant the options to the
Contractor upon the execution of all necessary documentation, including stock
option agreements.
<PAGE>
ARTICLE 4
DURATION, TERMINATION AND DEFAULT
4.1 Effective Date
This Agreement shall become effective as of the 30th day of October,
1999 (the "Effective Date"), and shall continue on for a period of two (2) years
from the Effective Date or until terminated pursuant to the terms of this
Agreement.
4.2 Termination
This Agreement may be terminated by either party by giving the other
30 days written notice of such termination provided that in circumstances where
the Contractor would otherwise have been entitled to receive a payment pursuant
to Section 3.1 herein within 30 days following termination of this Agreement the
Company shall make such payment to the Contractor as if the Agreement had not
been terminated.
4.3 Duties Upon Termination
Upon termination of this Agreement for any reason, the Contractor
shall upon receipt of all sums due and owing, promptly deliver the following in
accordance with the directions of the Company:
(a) a final accounting, reflecting the balance of expenses incurred on
behalf of the Company as of the date of termination; and
(b) all documents pertaining to the Company or this Agreement, including but
not limited to, all books of account, correspondence and contracts, provided
that the Contractor shall be entitled thereafter to inspect, examine and copy
all of the documents which it delivers in accordance with this provision at all
reasonable times upon three (3) days' notice to the Company.
4.4 Compensation of Contractor on Termination
Upon termination of this Agreement, the Contractor shall be entitled
to receive as his full and sole compensation in discharge of obligations of the
Company to the Contractor under this Agreement all sums due and payable under
this Agreement to the date of termination and the Contractor shall have no right
to receive any further payments; provided, however, that the Company shall have
the right to offset against any payment owing to the Contractor under this
Agreement any damages, liabilities, costs or expenses suffered by the Company by
reason of the fraud, negligence or wilful act of the Contractor, to the extent
such right has not been waived by the Company.
<PAGE>
ARTICLE 5
CONFIDENTIALITY
5.1 Ownership of Work Product
All reports, documents, concepts, products and processes together with
any marketing schemes, business or sales contracts, or any business
opportunities prepared, produced, developed, or acquired, by or at the direction
of the Contractor, directly or indirectly, in connection with or otherwise
developed or first reduced to practice by the Contractor performing the services
(collectively, the "Work Product") shall belong exclusively to the Company which
shall be entitled to all right, interest, profits or benefits in respect
thereof. No copies, summaries or other reproductions of any Work Product shall
be made by the Contractor or any of his agents without the express permission of
the Company, provided that the Contractor is hereby given permission to maintain
one copy of the Work Product for his own use.
5.2 Confidentiality
The Contractor shall not, except as authorized or required by his
duties, reveal or divulge to any person or companies any of the trade secrets,
secret or confidential operations, processes or dealings or any information
concerning the organization, business, finances, transactions or other affairs
of the Company, which may come to his knowledge during the term of this
Agreement and shall keep in complete secrecy all confidential information
entrusted to him and shall not use or attempt to use any such information in any
manner which may injure or cause loss, either directly or indirectly, to the
Company's business or may be likely so to do. This restriction shall continue
to apply after the termination of this Agreement without limit in point of time
but shall cease to apply to information or knowledge which may come into the
public domain.
The Contractor shall comply, and shall cause his agents to comply,
with such directions as the Company shall make to ensure the safeguarding or
confidentiality of all such information. The Company may require that any agent
of the Contractor execute an agreement with the Company regarding the
confidentiality of all such information.
5.3 Devotion to Contract
During the term of this Agreement, the Contractor shall devote
sufficient time, attention, and ability to the business of the Company, and to
any associated company, as is reasonably necessary for the proper performance of
the Services pursuant to this Agreement. Nothing contained herein shall be
deemed to require the Contractor to devote his exclusive time, attention and
ability to the business of the Company. During the term of this Agreement, the
Contractor shall, and shall cause each of his agents assigned to performance of
the Services on behalf of the Contractor, to:
(a) at all times perform the Services faithfully, diligently, to the best of
its abilities and in the best interests of the Company;
(b) devote such time, labour and attention to the business of the Company as
is necessary for the proper performance of the Services hereunder; and
<PAGE>
(c) refrain from acting in any manner contrary to the best interests of the
Company or contrary to the duties of the Contractor as contemplated herein.
5.4 Other Activities
The Contractor shall not be precluded from acting in a function
similar to that contemplated under this Agreement for any other person, firm or
company.
ARTICLE 6
MISCELLANEOUS
6.1 Waiver; Consents
No consent, approval or waiver, express or implied, by either party
hereto, to or of any breach of default by the other party in the performance by
the other party of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance by
such other party of the same or any other obligations of such other party or to
declare the other party in default, irrespective of how long such failure
continues, shall not constitute a general waiver by such party of its rights
under this Agreement, and the granting of any consent or approval in any one
instance by or on behalf of the Company shall not be construed to waiver or
limit the need for such consent in any other or subsequent instance.
6.2 Governing Law
This Agreement and all matters arising thereunder shall be governed by
the laws of the Province of British Columbia.
6.3 Successors, etc.
This Agreement shall enure to the benefit of and be binding upon each
of the parties hereto and their respective heirs, successors and permitted
assigns.
6.4 Assignment
This Agreement may not be assigned by any party except with the
written consent of the other party hereto.
6.5 Entire Agreement and Modification
This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements and undertakings, whether oral or
written, relative to the subject matter hereof. To be effective any
modification of this Agreement must be in writing and signed by the party to be
charged thereby.
<PAGE>
6.6 Headings
The headings of the Sections and Articles of this Agreement are
inserted for convenience of reference only and shall not in any manner affect
the construction or meaning of anything herein contained or govern the rights or
liabilities of the parties hereto.
6.7 Notices
All notices, requests and communications required or permitted
hereunder shall be in writing and shall be sufficiently given and deemed to have
been received upon personal delivery or, if mailed, upon the first to occur of
actual receipt or forty-eight (48) hours after being placed in the mail, postage
prepaid, registered or certified mail, return receipt requested, respectively
addressed to the Company or the Contractor as follows:
The Company:
Merlin Software Technologies Inc.
Suite 420 - 6450 Roberts Street
Burnaby, BC V5G 4E1
Attention: Robert Heller
The Contractor:
Negus Communications Inc.
203 - 2403 Marine Drive
West Vancouver, BC V7V 1L3
or such other address as may be specified in writing to the other party, but
notice of a change of address shall be effective only upon the actual receipt.
6.8 Time of the Essence
Time is of the essence of this Agreement.
6.9 Further Assurances
The parties hereto agree from time to time after the execution hereof
to make, do, execute or cause or permit to be made, done or executed all such
further and other lawful acts, deeds, things, devices and assurances in law
whatsoever as may be required to carry out the true intention and to give full
force and effect to this Agreement.
<PAGE>
6.10 Counterparts
This Agreement may be executed in several counter-parts, each of which
will be deemed to be an original and all of which will together constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
MERLIN SOFTWARE TECHNOLOGIES INC.
Per: /s/ Robert Heller
-------------------
Authorized Signatory
NEGUS COMMUNICATIONS INC.
Per: /s/ William Negus
-------------------
Authorized Signatory
<PAGE>
SCHEDULE "A"
Pursuant to the Agreement, Negus Communications Inc. will provide advertising
services to the Company, including without limitation, the following:
(a)
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
2. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
3. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
4. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
[5. deleted]
6. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
[7. deleted]
8. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
9. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
10. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
11. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
12. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that it
shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
13. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
14. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
15. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
16. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
17. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the 7th day of March, 2000 (the "Effective Date")
LINUX MALL.COM
P.O. Box 460190
Aurora, CA 80046-0190
(herein referred to as "RESELLER")
/s/ Meg Nesbitt
- -------------------------------------
Signature
Print Name: Meg Nesbitt
- -------------------------------------
Title: Buyer
- -------------------------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------------------------
Signature
Print Name: Shelley Montgomery
- -------------------------------------
Title: V.P. Sales
- -------------------------------------
"*Except for points 5 and 6"
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED MARCH 7, 2000
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price in U.S. dollars for each copy
of the Software ordered for distribution by RESELLER [less a discount of fifty
percent (50%).] MERLIN shall be responsible for all shipping and insurance
charges associated with delivery of the Software to RESELLER's address specified
on the Agreement and the terms of each sale shall be DDP (Delivered Duty Paid,
as that term is defined in the publication "Incoterms 2000" published by the
International Chamber of Commerce) RESELLER's address specified on the
Agreement. The full responsibility for credit risk of and collections from
RESELLER's customers rests with RESELLER. All credits and returns in respect of
the Software shall be according to MERLIN's policies then in effect. Unless
otherwise agreed by MERLIN, RESELLER shall be responsible all shipping,
insurance and related costs for all returns of unsold and old versions of the
Software. RESELLER shall pay MERLIN 10% of MERLIN's retail price per copy of
the Software returned to MERLIN as a restocking charge if RESELLER wishes to
replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 7 day of March, 2000.
LINUX MALL.COM
P.O. Box 460190
Aurora, CA 80046-0190
(herein referred to as "RESELLER")
/s/ Meg Nesbitt
- -------------------------------------
Signature
Print Name: Meg Nesbitt
- -------------------------------------
Title: Buyer
- -------------------------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------------------------
Signature
Print Name: Shelley Montgomery
- -------------------------------------
Title: V.P. Sales
- -------------------------------------
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
2. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
3. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
4. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
5. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
6. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
7. RESELLER shall provide MERLIN with a written report on a quarterly basis
setting forth: (a) detailed information about each customer that has acquired
the Software including company name, address (including e-mail address) and
contact name and the quantity of the Software acquired; and (b) three month
forecast of expected sales.
8. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
9. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
10. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
11. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
12. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that
it shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
13. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
14. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
15. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
16. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
17. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the 20th day of March, 2000 (the "Effective Date")
IMPERA SOFTWARE CORP. MERLIN SOFTWARE TECHNOLOGIES INC.
(Linux Components.com) Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "RESELLER") (herein referred to as "MERLIN")
/s/ D. Shlesberg /s/ S. Montgomery
- ------------------ -------------------
Signature Signature
Print Name: D. Shlesberg Print Name: Shelley Montgomery
------------- -------------------
Title: C.E.O. Title: V.P. Marketing
------ ---------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED 3/20, 2000
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price in U.S. dollars for each copy
of the Software ordered for distribution by RESELLER [less a discount of
thirty-five percent (35%).] MERLIN shall be responsible for all shipping and
insurance charges associated with delivery of the Software to RESELLER's address
specified on the Agreement and the terms of each sale shall be DDP (Delivered
Duty Paid, as that term is defined in the publication "Incoterms 2000" published
by the International Chamber of Commerce) RESELLER's address specified on the
Agreement. The full responsibility for credit risk of and collections from
RESELLER's customers rests with RESELLER. All credits and returns in respect of
the Software shall be according to MERLIN's policies then in effect. Unless
otherwise agreed by MERLIN, RESELLER shall be responsible all shipping,
insurance and related costs for all returns of unsold and old versions of the
Software. RESELLER shall pay MERLIN 10% of MERLIN's retail price per copy of
the Software returned to MERLIN as a restocking charge if RESELLER wishes to
replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this ------ day of -------------, 200---.
IMPERA SOFTWARE COPR. MERLIN SOFTWARE TECHNOLOGIES INC.
(Linux Components.com) Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "RESELLER") (herein referred to as "MERLIN")
/s/ D. Shlesberg /s/ S. Montgomery
- ------------------ -------------------
Signature Signature
Print Name: D. Shlesberg Print Name: Shelley Montgomery
------------- -------------------
Title: C.E.O. Title: V.P. Marketing
------ ---------------
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide, with the exception of the United Kingdom and
Southern Ireland.
2. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
3. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
4. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
5. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
6. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
7. RESELLER shall provide MERLIN with a written report on a monthly basis
setting forth: (a) detailed information about each customer that has acquired
the Software including company name, address (including e-mail address) and
contact name and the quantity of the Software acquired; and (b) three month
forecast of expected sales.
8. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
9. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
10. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
11. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
12. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that
it shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
13. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
14. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
15. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
16. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
17. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the _____ day of ___________, 200___ (the "Effective
Date")
HANMI INFORMATION & COMMUNICATIONS CO., LTD.
Chungaan B/D4F #1-48, Shingye-dong Yongsan-gu SEOUL
KOREA 140-090
(herein referred to as "RESELLER")
/s/ Hyun-Min Kang
- -------------------
Signature
Print Name: Hyun-Min Kang
- --------------
Title: General Manager
----------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
- ----------------------------------
Title: V.P. Sales
- ---------------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED -------------, 200---
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price in U.S. dollars for each copy
of the Software ordered for distribution by RESELLER [less a discount of
thirty-five percent (35%).]. RESELLER shall reimburse MERLIN for all shipping
and insurance charges associated with delivery of the Software and the terms of
each sale shall be POB MERLIN's Vancouver office. The full responsibility for
credit risk of and collections from RESELLER's customers rests with RESELLER.
All credits and returns in respect of the Software shall be according to
MERLIN's policies then in effect.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 23 day of March, 2000.
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
---------------------
Title: V.P. Sales
-----------
HANMI INFORMATION & COMMUNICATIONS CO., LTD.
Chungaan B/D4F, #1-48, Shingye-dong Yongsan-gu
SEOUL, KOREA 140-090
(herein referred to as "RESELLER")
/s/ Hyun-Min Kang
- -------------------
Signature
Print Name: Hyun-Min Kang
-------------------
Title: General Manager
----------------
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
2. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
3. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
4. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
5. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
6. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
7. RESELLER shall provide MERLIN with a written report on a quarterly basis
setting forth: (a) detailed information about each customer that has acquired
the Software including company name, address (including e-mail address) and
contact name and the quantity of the Software acquired; and (b) three month
forecast of expected sales.
8. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
9. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
10. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
11. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
12. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that
it shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
13. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
14. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
15. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
16. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
17. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the 28 day of March, 2000 (the "Effective Date")
BEYOND 2000 SOLUTIONS
(herein referred to as "RESELLER")
/s/Asem Abusir
- -----------------
Signature
Print Name: Asem Abusir
------------
Title: Manager
-------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
- ----------------------------------
Title: V.P. Sales
- ---------------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED MARCH 29, 2000
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price, currently $89 in U.S.
dollars for each copy of the Software ordered for distribution by RESELLER [less
a discount of thirty percent (30%).] MERLIN shall give RESELLER an additional
discount of ten percent 10% for orders of 50 copies placed within ten (10) days
from the signing of this Agreement. MERLIN shall be responsible for all
shipping and insurance charges associated with delivery of the Software to
RESELLER's address specified on the Agreement and the terms of each sale shall
be DDP (Delivered Duty Paid, as that term is defined in the publication
"Incoterms 2000" published by the International Chamber of Commerce) RESELLER's
address specified on the Agreement. The full responsibility for credit risk of
and collections from RESELLER's customers rests with RESELLER. All credits and
returns in respect of the Software shall be according to MERLIN's policies then
in effect. Unless otherwise agreed by MERLIN, RESELLER shall be responsible all
shipping, insurance and related costs for all returns of unsold and old versions
of the Software. RESELLER shall pay MERLIN 15% of MERLIN's retail price per
copy of the Software returned to MERLIN as a restocking charge if RESELLER
wishes to replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 28 day of March, 2000.
BEYOND 2000 SOLUTIONS
(herein referred to as "RESELLER")
/s/ Asem Abusir
- -------------------
Signature
Print Name: Asem Abusir
- --------------------------
Title: Manager
-----------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
- ----------------------------------
Title: V.P. Sales
- ---------------------
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
2. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
3. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
4. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
5. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
6. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
7. RESELLER shall provide MERLIN with a written report on a quarterly basis
setting forth: (a) detailed information about each customer that has acquired
the Software including company name, address (including e-mail address) and
contact name and the quantity of the Software acquired; and (b) three month
forecast of expected sales.
8. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
9. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
10. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
11. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
12. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that
it shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
13. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
14. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
15. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
16. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
17. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the _______ day of ____________, 200___ (the
"Effective Date")
LINUX PLAZA
(herein referred to as "RESELLER")
/s/ E. Lenta
- --------------
Signature
Print Name: E. Lenta
- -----------------------
Title: Director
--------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
- ----------------------------------
Title: V.P. Sales
- ---------------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED 28/3, 2000
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required. RESELLER agrees
to order a minimum of fourteen copies of the Software per order.
RESELLER shall pay MERLIN its U.S. list price, currently $89 in U.S.
dollars for each copy of the Software ordered for distribution by RESELLER [less
a discount of thirty percent (30%).] MERLIN shall give RESELLER an additional
discount of ten percent 10% for orders of 50 copies placed within ten (10) days
from the signing of this Agreement. MERLIN shall be responsible for all
shipping and insurance charges associated with delivery of the Software to
RESELLER's address specified on the Agreement and the terms of each sale shall
be DDP (Delivered Duty Paid, as that term is defined in the publication
"Incoterms 2000" published by the International Chamber of Commerce) RESELLER's
address specified on the Agreement. The full responsibility for credit risk of
and collections from RESELLER's customers rests with RESELLER. All credits and
returns in respect of the Software shall be according to MERLIN's policies then
in effect. Unless otherwise agreed by MERLIN, RESELLER shall be responsible all
shipping, insurance and related costs for all returns of unsold and old versions
of the Software. RESELLER shall pay MERLIN 10% of MERLIN's retail price per
copy of the Software returned to MERLIN as a restocking charge if RESELLER
wishes to replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 28 day of March, 2000.
LINUX PLAZA
(herein referred to as "RESELLER")
/s/ E. Lenta
- --------------
Signature
Print Name: E. Lenta
- -----------------------
Title: Director
--------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
- ----------------------------------
Title: V.P. Sales
- ---------------------
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
0. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
1. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
2. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
3. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
4. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
5. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
6. RESELLER shall provide MERLIN with a written report on a quarterly basis
setting forth: (a) detailed information about each customer that has acquired
the Software including company name, address (including e-mail address) and
contact name and the quantity of the Software acquired; and (b) three month
forecast of expected sales.
7. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
8. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
9. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
10. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
11. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that
it shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
12. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
13. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
14. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
15. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
16. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the 30th day of March, 2000 (the "Effective Date")
IU SOFTWARE
(herein referred to as "RESELLER")
/s/ Marcelo B. Sgiaposginiy
- ------------------------------
Signature
Print Name: Marcelo B. Sgiaposginiy
- --------------------------------------
Title: Titular
- -----------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
- ----------------------------------
Title: V.P. Sales
- ---------------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED MARCH 30, 2000
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price, currently $89 in U.S.
dollars for each copy of the Software ordered for distribution by RESELLER [less
a discount of thirty percent (30%).] MERLIN shall give RESELLE an additional
discount of ten percent 10% for orders of 50 copies placed within ten (10) days
from the signing of this Agreement. MERLIN shall be responsible for all
shipping and insurance charges associated with delivery of the Software to
RESELLER's address specified on the Agreement and the terms of each sale shall
be DDP (Delivered Duty Paid, as that term is defined in the publication
"Incoterms 2000" published by the International Chamber of Commerce) RESELLER's
address specified on the Agreement. The full responsibility for credit risk of
and collections from RESELLER's customers rests with RESELLER. All credits and
returns in respect of the Software shall be according to MERLIN's policies then
in effect. Unless otherwise agreed by MERLIN, RESELLER shall be responsible all
shipping, insurance and related costs for all returns of unsold and old versions
of the Software. RESELLER shall pay MERLIN 10% of MERLIN's retail price per
copy of the Software returned to MERLIN as a restocking charge if RESELLER
wishes to replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 28 day of March, 2000.
IU SOFTWARE
(herein referred to as "RESELLER")
/s/ Marcelo B. Sgiaposginiy
- ------------------------------
Signature
Print Name: Marcelo B. Sgiaposginiy
- --------------------------------------
Title: Titular
- -----------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
- ----------------------------------
Title: V.P. Sales
- ---------------------
Agreement
This AGREEMENT, made as of the 15th day of February, 2000 by and between a
---- -------- ----
Merlin Software corporation with principal offices at ("VENDOR") and Ebiz
Enterprizes, Inc. ("Ebiz") DBA "TheLinuxStore.com".
WITNESSETH
WHEREAS, Ebiz desires to purchase certain Products from VENDOR from time to
time; and
WHEREAS, VENDOR desires to sell certain Products to Ebiz in accordance with the
terms and conditions set forth in this Agreement; and
WHEREAS, VENDOR desires to appoint Ebiz as its distributor to market, sell and
distribute the Products via the internet and direct sales force;
NOW, THEREFORE, by reason of the premises and in consideration of the mutual
covenants hereinafter set forth, and other good and valuable consideration, the
parties hereby agree as follows:
1. APPOINTMENT AND AUTHORITY OF DISTRIBUTOR
(a) Appointment. Subject to the terms and conditions set forth herein,
VENDOR hereby appoints Ebiz as an authorized (exclusive/non-exclusive)
Distributor for the Products, and Ebiz hereby accepts such appointment.
(b) Independent Contractors. The relationship of VENDOR and Ebiz
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (I) give either party the
power to direct and control the day-to-day activities of the other, or (ii)
allow either party to create or assume any obligation on behalf of the other for
any purpose whatsoever.
2. TERMS OF PURCHASE OF PRODUCTS BY DISTRIBUTOR
(a) Terms and Conditions. All purchases of Products by Ebiz from
VENDOR during the term of this Agreement shall be subject to the terms and
conditions of this agreement, except as otherwise agreed to in writing signed by
the party against whom the enforcement thereof is sought.
(b) Prices. The purchase price to Ebiz for each of the Products
("Purchase Price") shall be as set forth in Exhibit "A" attached hereto or as
otherwise agreed upon by the parties, and may be confirmed at the time of order.
Ebiz shall not be bound by any of VENDOR's suggested prices.
(c) Most Favoured Pricing and Terms. VENDOR represents that the
pricing, terms and conditions set forth in Manufacturer's current price
represents VENDOR's most favorable pricing offered to any other parties
purchasing similar quantities of the Product.
<PAGE>
VENDOR has the right at any time to revise the prices in Exhibit "A" with thirty
(30) days advance written notice to Ebiz; provided, however, that such adjusted
pricing will continue to represent the most favorable pricing available from
VENDOR for similar distributors. VENDOR further guarantees that Ebiz shall be
entitled to the best available net pricing of any VENDOR-sponsored price
discounts, promotional discounts or other special prices and programs for
similar distributors.
(d) Price Protection. VENDOR shall grant to Ebiz a retroactive price
credit for the full amount of any VENDOR price decrease on all Products
purchased within sixty (60) days of shipment, on order, in transit on the
effective date of such price decrease. Ebiz shall, within sixty (60) days after
receiving written notice of the effective date of the price decrease, provide a
list of all Products for which it claims a credit. VENDOR shall have the right
to a reasonable audit at VENDOR's expense unless such audit discloses a
discrepancy in Ebiz's favor, in which case Ebiz pays for the audit. All orders
scheduled for shipment or in transit to Ebiz at the time of notice of the price
decrease shall be adjusted to the decreased price.
(e) Price Increase. VENDOR shall have the right to increase prices from
time to time, upon written notice to Ebiz not less than sixty (60) days prior to
the effective date of such increase.
Payment. Except as otherwise set forth herein, any undisputed sum due to Vendor
pursuant to this Agreement shall be payable as follows: net thirty (30) days
after the invoice receipt. Interest will be charged at 18% per annum on
late payments. VENDOR shall invoice Ebiz no earlier than the applicable
shipping date for the Products covered by such invoice. The due date for
payment shall be extended during any time the parties have a bona fide dispute
concerning such payment. Notwithstanding anything herein to the contrary, for
the initial order only, payment terms shall be net 90 days and Ebiz may return
any of the initial order for full credit.
(g) Cancellation and/or Reschedule of Orders. Ebiz may cancel and/or
reschedule any shipment of Product upon payment of Vendor's then standard
charges for such cancellation or rescheduling charge. Notwithstanding the
foregoing sentence, Ebiz may not after or cancel any Purchase Order for
Customized Products after such time as the Products have been altered to a point
where such Products are no longer capable of resale by VENDOR after reasonable
efforts.
(h) Product Allocation. VENDOR reserves the right to allocate its
inventory of Products in such a manner as it may determine, provided, however,
VENDOR agrees that it will use reasonable commercial efforts to provide Ebiz
with Product on a percentage equal to the same percentage as VENDOR's like
customers purchasing like volume of same Products.
3. DELIVERY AND ACCEPTANCE OF PRODUCTS
(a) Delivery. VENDOR shall use reasonable commercial efforts to deliver the
Products to Ebiz at the location shown and on the delivery date set forth in the
applicable
<PAGE>
Purchase Order or as otherwise agreed upon by the patties. Charges for
transportation of the Products shall be paid by VENDOR.
(b) Title and Risk of Loss. FOB, Ebiz dock to include state and country
Title to Products shall pass to Ebiz at the time that the Products are delivered
to a Ebiz warehouse. All risk of loss or damage to the Products shall be borne
by VENDOR until delivery of such Products to the Ebiz warehouse. Title to the
Products remains with VENDOR until purchase price paid in full. Ebiz grants a
security interest in the Products and all proceeds to VENDOR to secure
fulfillment of Ebiz's obligations.
(c) Acceptance. Ebiz shall, within three business days of delivery,
accept each Product on the date (the "Acceptance Date") when such Products and
all necessary documentation are delivered to Ebiz in accordance with the
Purchase Order and the Product specifications. Any Products not ordered or not
otherwise in accordance with the Purchase Order, mis-shipments or over shipments
will be returned to VENDOR at VENDOR's expense (including without limitation
costs of shipment or storage) and shall promptly refund to Ebiz all monies
received by VENDOR in respect to such Products. Failure to advise VENDOR of any
such returns within such three day period, will be deemed to be accepted.
(d) Promotion and Advertising. Ebiz will participate in the
advertising and promotion of VENDOR's Products. Ebiz shall take all reasonable
and necessary action to satisfy the demand for Products and attempt to increase
the demand for Products by servicing customer accounts with reasonable
frequency, soliciting new customer accounts and cooperating in VENDOR's
advertising and sales promotional programs.
4. ADDITIONAL OBLIGATIONS OF VENDOR
(a) Materials. Upon the execution of this Agreement, at VENDOR's
expense, VENDOR shall provide Ebiz with up to 500 copies of its brochures,
instructional material, advertising literature, and other data for the Products.
A like quantity of said materials shall be provided to Ebiz, at VENDOR's
expense, for any new products added to the Products over the term of this
Agreement. Additional reasonable quantities of said materials shall be
available to Ebiz upon request.
(b) Training. VENDOR will not provide training but will provide
initial support to Ebiz and annual support to the end user.
(c) Market Development Funds/Cooperative Advertising. To assist Ebiz
in advertising and promoting the Products, VENDOR will accrue into a special
co-op advertising fund two (2%) percent of the net sales dollars received by
VENDOR from Ebiz each month. Amounts in such fund may be used by Ebiz in
connection with advertising and other promotional efforts approved b3, both
VENDOR and Ebiz.
Trade Shows. In the event of any national or regional trade show, VENDOR
shall allow reasonable access to Ebiz to VENDOR's trade booths and demonstration
stands for the purpose of promoting Ebiz's status as an authorized distributor
of VENDOR's Products. In addition, Ebiz shall have the tight to distribute, in
VENDOR's trade booths and demonstration stands at such trade shows, brochures,
pamphlets and like literature
<PAGE>
identifying Ebiz as an authorized distributor of VENDOR's Products. Such
literature shall be submitted to VENDOR for prior approval.
5. REPLACEMENTS AND RETURNS
(b) Discontinued or Obsolete Products. VENDOR reserves the tight to
discontinue the manufacture or sale of or otherwise tender or treat as obsolete
any or all of the Products coveted by this Agreement upon at least thirty (30)
days prior notice. Ebiz may, in its discretion, within twenty (20) business
days following receipt of such notice, notify VENDOR in writing of its intention
to return any or all Products so discontinued or rendered obsolete which remain
in Ebiz's inventory, and shall receive a credit for such Products equal to the
purchase price paid by Ebiz for the same less an amount equal to 15% of the
original price paid as VENDOR's restocking charge, provided that said Products
are returned within sixty (60) days of the date of Ebiz's receipt of VENDOR's
Return Material Authorization. Ebiz shall pay all freight, shipping and
insurance charges for all such returns.
(c) Introduction of New Products. VENDOR shall give Ebiz at least
ninety (90) days prior notice of the introduction of any new Products including,
but not limited to replacement Products, new releases, enhancements or versions
of existing Products that preclude or materially limit Ebiz from selling any
Products in its inventory. VENDOR shall make such Product available to Ebiz for
distribution no later than the date it is first introduced in the marketplace to
its similar distributors.
(d) Defective Product- In the event any Products are received in a
defective condition or not in accordance with VENDOR's published specifications
or the documentation relating to such Products, Ebiz may return the Products for
full Credit. Product shall be deemed defective if the Product, or any portion
of the Product, fails to operate properly on initial "burn in", boot, or use as
applicable. Ebiz shall have the tight to return any such Products that are
returned to Ebiz from its Customers or End-Users within sixty (60) days from the
Product's initial delivery date to the End User.
Return Material Authorization/Credit Memorandums. A return material
authorization shall be issued by VENDOR within forty-eight (48) hours of any
request for the same by Ebiz when required in connection with any return under
this Agreement. VENDOR shall issue credit memos to Ebiz within thirty (30) days
upon receipt of documentation evidencing DOA/RMA returns, defective Product
returns, price protection, advertising credits or other charges due Ebiz. Ebiz
reserves the tight to set-off or charge VENDOR for the full amount due in the
event VENDOR fails to issue the credit memo within such thirty (30) day period.
6. WARRANTY
(a) Warranty. VENDOR hereby represents and warrants that the Products
conform in all respects to the express product warranties provided to the end
user. VENDOR shall extend to Ebiz and each Customer of Ebiz the same warranties
and indemnifications with respect to Products purchased and resold hereunder as
VENDOR extends to its own end
<PAGE>
user customers. The term of warranties and indemnities extended by VENDOR to an
End User shall commence upon delivery of the Product to the End User.
(b) No Other Warranty. VENDOR has made expressed warranties in this
Agreement and in documentation, promotional and advertising materials. EXCEPT
AS SET FORTH HEREIN OR THEREIN, VENDOR DISCLAIMS ALL EXPRESS OR IMPLIED
WARRANTIES AND CONDITIONS WITH REGARD TO THE PRODUCTS, INCLUDING, WITHOUT
LIMITATION ALL IMPLIED WARRANTIES AND CONDITIONS OF DURABILITY, MERCHANTABILITY
AND FITNESS FOR PURPOSE.
7. INTELLECRUAL PROPERTY INDEMNITY
VENDOR agrees, TO INDEMNIFY Ebiz for any damage and costs awarded by a
competent court with appropriate jurisdiction in a final, non-appealable
judgement as a result of a successful claim that the software, under normal use,
infringes a valid patent issued prior to the date of this Agreement, or
infringes a valid copyright, trademark, or trade secret obligation of VENDOR,
provided that VENDOR is promptly notified of any such claim, given reasonable
assistance from Ebiz and permitted the exclusive control of the defense. VENDOR
shall have no liability for settlements incurred without its consent. Should
Ebiz's use of any such Products or any part thereof as contemplated herein be
enjoined, or in the event that VENDOR desires to minimize its liability
hereunder, VENDOR will, at its option and expense, either (i) substitute
equivalent non-infringing Products for the infringing item, (ii) modify the
infringing item so that it no longer infringes but remains equivalent, or (iii)
obtain for Ebiz the tight to continue using such item. If none of the foregoing
is feasible, VENDOR will refund to Ebiz the purchase price, plus shipping costs
paid by Ebiz for the infringing Products. The foregoing indemnity shall not
apply if and to the extent that an alleged infringement arises from the
combination of any Product with products or equipment not supplied by VENDOR, or
the alteration or modification of the Product is made by other than VENDOR.
8. PROPRIETARY RIGHTS
(a) Confidential Information. VENDOR and Ebiz each agree with the
other that it shall not use in any way or disclose to any other person or entity
any information relating to the business, customers, financial affairs or
condition of business methods of the other which shall become discernible or
available to it in any way by virtue of the dealings between the parties whether
or not specifically identified as being secret or confidential. All information
about the Products that is not in the public domain is confidential information
of VENDOR. Neither patty shall use or disclose such information during the term
of this Agreement other than in the performance of its duties Hereunder and
shall not make any use of or disclose such information after termination of this
Agreement. Each party shall have the right, without the necessity of posting a
bond, to have injunctive relief against any actual or threatened breach by
either party of this Section 12. During the term of this Agreement, VENDOR
agrees not to solicit or hire any of Ebiz's employees within one (1) year after
the employee has left the employ of Ebiz and, Ebiz agrees not to solicit or
<PAGE>
hire any of the VENDOR's employees within one (1) year after the employee has
left the employ of the VENDOR. On termination, all confidential information
will be returned.
9. TERM AND TERMINATION
(a) Term. This Agreement shall be deemed effective upon the date
hereof and shall continue for a period of one (1) year. Thereafter, this
Agreement shall renew automatically for successive one year additional terms
unless either party elects, by written notice to the other no less than ninety
(90) days prior to the expiration date of the then current term, to permit this
Agreement to expire.
**Section (b) is contradictory. I have underlined and used italics the
contradictions, and request that you explain this section.
(b) Termination for Convenience. Anything to the contrary in this
Agreement notwithstanding, this Agreement may be canceled without penalty by
either party for any reason or no reason, by giving the other party prior
written notice thirty (30) days in advance. Any such written notice shall
specifically detail the "material breach of any provision of this Agreement and
allow the defaulting party to cure such breach within thirty (30) days of
receipt-of said written notice.
(c) Termination for Insolvency or Bankruptcy. Either party may
immediately terminate this Agreement and any purchase order by giving written
notice to the other party in the event of (i) the liquidation or insolvency of
the other patty, (ii) the appointment of a receiver or similar officer for the
other patty, (iii) an assignment by the other party for the benefit of an or
substantially all of its credits, (iv) entry by the other party into an
agreement for the composition, extension, or readjustment of all or
substantially all of its obligations, or (v) the filing of a meritorious
petition in bankruptcy by or against the other party 'Under any bankruptcy or
debtor's law for its relief or reorganization.
(d) Return of Materials. All trademarks, trade names, patents,
copyrights, designs, drawings, formulas or other data, photographs, samples,
literature and sales aids of every kind shall remain the property of VENDOR,
within thirty (30) days after the termination of the Agreement, Ebiz shall
prepare all such items in its possession for shipment, as VENDOR may direct, at
VENDOR's expense. Effective upon the termination of this Agreement, Ebiz shall
cease to use all trademarks, marks, and trade-names of VENDOR; provided,
however, that Ebiz shall have the tight to use all trademarks, marks and trade
names of the VENDOR in connection with those Products in Ebiz's inventory on the
effective date of termination and which VENDOR has not repurchased pursuant to
the provisions of Section 9(e) below.
(e) Return of Inventory/Refund of MDF/Cooperative Advertising Funds
(i) Upon termination or expiration of this Agreement, by either patty,
VENDOR may, at option, repurchase from Ebiz within thirty (30) days after the
effective date of termination all Products in Ebiz's inventory at Ebiz's
original purchase price. VENDOR shall pay all freight and shipping charges in
connection with such repurchases.
<PAGE>
(ii) Notwithstanding the foregoing, VENDOR shall be required to accept. only
those Products displayed for Purposes of demonstration, Product with a return
merchandise authorization number issued by VENDOR and those Products which are
in their original factory sealed packages.
(iii) Payment of the repurchase price as hereinabove provided shall be made
by VENDOR to Ebiz either by: (a) issuance to the Ebiz of a credit corresponding
to the repurchase price to be applied to the reduction of any indebtedness of
the Ebiz to VENDOR or (b) if the repurchase price and refund shall exceed the
then current indebtedness of the Ebiz to VENDOR, by Payment of such excess to
the Ebiz within ten (10) days after the delivery of said Products to VENDOR.
Special order or Customized Products shall not be eligible for repurchase
pursuant to this section.
10. GENERAL PROVISIONS
(a) Governing Law and Jurisdiction. This Agreement shall be governed
by and construed under the laws of the State of Arizona and the Courts of
Arizona shall have nonexclusive jurisdiction and venue to adjudicate any dispute
arising out of this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter herein and
merges all prior discussions between them. No modification of or amendment to
this Agreement, nor any waiver of any rights under this Agreement, shall be
effective unless in writing signed by the party to be charged.
(c) Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be sent by prepaid registered or certified mail, return
receipt requested, and receipt thereof shall be deemed to be two (2) days from
date postmarked.
(d) Force Majeure. Non-performance of either party shall be excused to the
extent that performance is rendered impossible by strike, fire, flood, or any
other reason excluding the lack of financial resources of the non-performing
parties where failure to perform is beyond the reasonable control of and is not
caused by the negligence of the non-performing party.
(e) Assignment. Neither party may transfer or assign their rights or
obligations under this Agreement without the prior written consent of the other
party. Such consent shall not be unreasonably withheld. Subject to the
foregoing restrictions, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns.
(f) Severability. If any provision of this Agreement is held invalid
by any law, sale, order or regulation of any government, or by the final
determination of any state or federal court, such invalidity shall not affect
the enforceability of any other provisions not held to be invalid.
<PAGE>
(g) Legal/Expenses. The prevailing party in any legal action brought
by one party against the other and arising out of the remedies it may have, to
reimbursement for its expenses, including court costs and reasonable attorneys'
fees.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument. This Agreement may be executed and
forwarded via telefacsimile.
(i) Remedies. All remedies set forth in this Agreement shall be cumulative
and in addition to an not in lieu of any other remedies available to either
party at law in equity or otherwise, and may be enforced concurrently or from
time to time.
(j) Time of Performance. Time is hereby expressly made of the essence
with respect to each and every term and provision of this Agreement.
(k) Survival of Terms. Termination or expiration of this Agreement for
any reason shall not release either party from any liabilities or obligations
set forth in this Agreement which (i) the parties have expressly agreed shall
survive any such termination or expiration, or (ii) remain to be performed or by
their nature would be intended to be applicable following any such termination
or expiration.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be signed and
delivered by its duly authorized officer or representative as of the Effective
Date.
The Linux Store EBIZ ENTERPRISES, INC
- -------------------
(VENDOR)
By: /s/ Stephen C. Herman By:
- --------------------------
Stephen C. Herman
---------------------
(Print Name) (Print Name)
Title: President Title:
-----------
Date: 2/14/2000 Date:
-----------
<PAGE>
Schedule A
Software PerfectBACKUP+ 6.2 and the following versions released during the
term of this Agreement.
Term 12 months with automatic renewal
Ebiz cost per Product 50% from Vendor's retail price. Vendor's current
retail price is $89US + $15 shipping & handling
Training Fees N/A
Technical Support Vendor will provide Support to all purchasers of the
Product
CALDERA SYSTEMS IBV BUSINESS PARTNER AGREEMENT
This is a software development and marketing agreement. Caldera Systems, Inc.,
a Utah corporation ("Caldera"), and Merlin Softech, a Nevada corporation
("ISV"), enter into this Agreement effective as of the last date following the
signatures below.
<PAGE>
1. Definitions
-----------
A. Product means the "Caldera means the "Caldera OpenLinux" product,
-------
version 2.1 and greater.
B. OpenLinux Solutions CD means the application CD which is a collection of
------------------------
software applications of third parties that is periodically distributions by
Caldera.
C. Confidential Information means any Information identified as being
-------------------------
Confidential Information, by either party, either orally or in writing at the
time it is disclosed, or designated as confidential in writing (either
electronically or by other means) within 30 days following such disclosure.
Confidential Information shall not include any information that the receiving
party can demonstrate (I) was already in the possession of the receiving party
without obligation of confidence prior to the disclosure, (ii) was independently
developed by the receiving party or (iii) becomes available to the general
public through no action by the receiving party.
2. Participation Fees
-------------------
A. ISV shall pay to Caldera an annual participation fee of $405.00. This
payment shall be non-refundable. Payment shall be in U.S. funds, and shall be
due at the time of execution of this Agreement. Caldera shall incur an
obligation pursuant to this Agreement unless and until Caldera receives payment
from ISV as set forth in this section.
3. Press Release
--------------
A. Caldera and ISV may desire to cooperate in the release of a press ????.
Neither party shall issue a press release related to this Agreement without
first obtaining the approval from the other party.
B. Caldera shall develop and maintain on its web site an index of software
application products available for Caldera OpenLinux and shall list the
applicable products of ISV on such list. The information to be provided on the
index shall be supplied by ISV via the attached Schedule A, and shall be
submitted to Caldera at the time of execution of this Agreement.
C. ISV grants to Caldera, and Caldera accepts the right and license to use and
display the name, corporate logo, and other trademarks of ISV on Caldera's web
site and in other promotional and marketing materials related to ISV and
Caldera's ISV Partner Program. Caldera shall comply with the reasonable logo
and trademark usage guidelines of ISV that it delivers to Caldera. All use of
the name, corporate logo, and other trademarks of ISV by Caldera under this
Agreement shall inure solely to the benefit of ISV.
4. Solutions CD
-------------
A. ISV shall have the option, but not the obligation, to apply for
participation in the OpenLinux Solutions CD program. The terms and conditions
for the OpenLinux Solutions CD Program are set forth in Exhibit A of this
Agreement. The submission to Caldera of Exhibit A signed by ISV shall be
described as to be an acceptance of the terms and conditions of Exhibit A and
shall be deemed to be ISV's application for participation in the OpenLinux
Solutions CD. Caldera reserves the right to determine in its ???? discretion
whether ISV is selected for participation in the OpenLinux Solutions CD.
<PAGE>
5. ISV Support
------------
A. Caldera shall establish and maintain during the term of this Agreement
on-line resources for ISV. Such resource shall be developed by Caldera in his
discretion, and may include paid-for technical support, a ???? forum for ISV,
technical ????? projects, documentation related to the development of software
application programs for OpenLinux and other technical resources.
6. Proprietary Right
------------------
A. Each party acknowledges and agrees that the other party may own certain
intellectual property rights, including, without limitation, patent, copyright,
trade secret and trade-mark rights. Other than as set forth in this Agreement,
each party retains all right, title and interest to its intellectual property.
This Agreement grants no implied license or other rights with respect to any
intellectual property insured of either party.
7. Term and Termination
----------------------
A. This Agreement shall be effective on the date that the payment of fees
as described in Section 2 of this Agreement is completed and the Agreement is
signed by both parties below. The initial terms shall be one year from the date
executed. The term of this Agreement shall automatically renew for one-year
increments thereafter until one party gives written notice of termination to the
other party.
B. Either party may terminate this Agreement for any reason by providing
30 days written notice to the other party. Either party may terminate this
Agreement immediately. In the event that the other party becomes insolvent,
makes a general assignment for the benefit of creditors, or avails itself of or
????? subject to any proceeding in bankruptcy or other proceeding relating to
insolvency or protection of creditors.
8. Limitation of Liability
-------------------------
A. Caldera's aggregate liability for damages claimed under this Agreement
and arising out of Caldera's performance of services hereunder shall be limited
to the total fees paid by ISV to Caldera. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, IN NO EVENT SHALL CALDERA BE LIABLE TO ISV OR TO ANY THIRD PARTY
FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, PUNITIVE
DAMAGES, OR ANY DAMAGES RESULTING FROM LOSS OF DATA, USE OF PROFITS, OR LOSS OF
CONTRACTS OR BUSINESS OPPORTUNITY, ARISING OUT OF THIS AGREEMENT OR THE USE OF
OR INABILITY TO USE THE PRODUCT OR ARISING OUT OF CALDERA'S PERFORMANCE OR
NON-PERFORMANCE HEREUNDER, WHETHER OR NOT REASONABLY FORESEEABLE AND EVEN IF
CALDERA HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF
THE FORM OF ACTION, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT
LIABILITY, ARISING UNDER STATUTE OR OTHERWISE.
9. Disclaimer of Warranty
------------------------
A. To the maximum extent allowable by applicable law, THE GOODS AND
SERVICES PROVIDED BY CALDERA PURSUANT TO THIS AGREEMENT ARE PROVIDED "AS IS" AND
CALDERA MAKES NO WARRANTY TO ANY PERSON OR ENTITY OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY CONDITIONS OF QUALITY AND ANY
IMPLIED WARRANTY OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
10. Confidentiality
---------------
A. Caldera and ISV agree that, during the term of this Agreement, each
party may disclose to the other certain Confidential Information. In the event
of such disclosure, each party agreed that it will not use the other party's
Confidential Information except to achieve the purpose of this Agreement, and
will not disclose such Confidential Information to any third party.
<PAGE>
The receiving party may disclose Confidential Information to its employees,
agents and contractors with a bona fide need to know such Confidential
Information, but only to the extent necessary to discharge their duties under
this Agreement, and only if such employees, contractors, agents, as the case may
be, are advised of the confidential nature of such Confidential Information and
are bound by a written agreement to protect the confidentiality of such
Confidential Information.
B. The obligation of this section shall survive for three years after the
termination of this Agreement.
11. Force Majeure
--------------
A. Neither party shall be liable for its failure to perform any of its
obligations hereunder, including, but not limited to, delivery obligations,
during any period in which such failure of performance is caused by an act of
God; act of any federal, state, or local governmental authority; fire or flood;
strike or labour unrest; degradation of telecommunications service; degradation
of computer services not under the direct control of such party; or unusually
severe weather conditions. Delays in delivery due to events beyond either
party's reasonable control shall automatically extend the delivery date for a
period equal to the duration of such events.
12. Miscellaneous
-------------
A. This Agreement is not an exclusive arrangement, and each party remains
free to enter into similar arrangements with other parties.
B. This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Utah, U.S.A., regardless of its choice
of law provisions. The parties each agree that they are subject to the personal
jurisdiction of the state and federal courts within the State of Utah, and each
waives the right to challenge the personal jurisdiction of those courts over it.
The United Nations Convention on Contracts for the International Sale of Goods
shall not apply to this Agreement.
C. Any notice under this Agreement shall be in English, in writing, and
shall be deemed to be given upon receipt. Notices to Caldera shall be delivered
to Caldera Systems, Inc., Attn: Legal Dept., 240 West Center Street, O????,
UT84057 USA
D. This Agreement, including all Schedules, constitutes the entire
understanding of the parties. This Agreement supersedes and terminates all
representations, warranties and agreements, written or oral, regarding the
subject matter of this Agreement. Any modifications to this Agreement must be
in writing signed by both parties.
E. All covenants and obligations of sections 6, 8, 9, 10 and 12 of this
Agreement shall survive the termination of this Agreement.
F. If one or more of the provisions contained in this Agreement is held
invalid, illegal or unenforceable in any respect by any court of competent
jurisdiction, such holding will not impair the validity, legality or
enforceability of the remaining provisions.
G. Headings in this Agreement are used for convenience of reference only
and do not affect the interpretation of the provisions.
H. Failure or delay on the part of any party to exercise any right,
remedy, power or privilege hereunder will not operate as a waiver. Any waiver
must be in writing and signed by the party granting such waiver in order to be
effective.
I. In the event that Caldera is merged with or consolidated into any other
entity, or in the event that substantially all of the assets of Caldera are sold
or otherwise transferred in any other entity, the provisions of this Agreement
will be binding upon, and inure to the benefit of, such other entity.
J. Nothing in this Agreement shall be construed to make the parties
partners, joint venturers, representatives, or agents of each other, nor shall
either party so represent itself.
To show their ???????, the duly authorized
representatives of the parties hereto have signed this Agreement.
CALDERA SYSTEMS INC. ("Caldera")
Name: [ ]
Signature: [ ]
Title: [VP, MARKETING]
Date: [2/17/00]
("ISV") [MERLIN SOFTWARE
TECHNOLOGIES INC.] <MERLIN SOFTECH>
Name: [SHELLEY MONTGOMERY]
Signature: [Shelley Montgomery]
Title: [V.P. MARKETING]
Date: [Feb. 10, 2000]
<PAGE>
SCHEDULE A - PARTNER & PRODUCT INFORMATION
ISV PARTNER INFORMATION
Contact Name: [Shelley Montgomery]
Company Name: [Merlin Softech]
Address: [Suite 420 - 6450 Roberts Street]
City: [Burnaby]
State/Province: [B.C.]
Country: [Canada]
Web site: [www.merlinsoftech.com]
PRODUCT INFORMATION
Product Name: [Perfect Backup +]
Version Number: [6.2]
Description (50 words or less): [Perfect backup + 6.2 is a Linux based crash
recovery and backup application suite. Users can backup and verify their
systems totally unattended. Perfect Backup+6.2 will backup Linux, Van, Windows
and Macintosh systems. It provides backup scheduling and remote backup,
recovery, encryption, robotics, module, enhanced security with both graphical
and character users interface.]
Product Web site: ---------------------------------------
Works with OpenLinux versions:
1.x
2.2
[X] 2.3
Retail price: [$69 US download]
[$89US + $15 shipping and handling (retail box w/manual)]
KOCH
DISTRIBUTION
------------
Terms Summary
General Distribution Terms and Conditions
Delivery Guidelines for our Basingstoke Warehouse
Cost Summary For Additional Warehouse Services
Product Information Leaflet for Distribution Partners
Who is Who at KOCH Distribution
Confirmation of Use of Intellectual Property
STRICTLY CONFIDENTIAL
<PAGE>
Terms Summary
Supplier:
Merlin Software Technology Inc.
Suite 420 - 6450 Roberts St
Burnaby BC
BC
Canada V5G 4E1
Contact Name Shelley Montgomery
Tel: 001 604 320 7227
001 604 320 7277
Product(s): CD-ROMs, DVDs, Peripherals as well as any of the Supplier's
CD-ROM, DVD or peripheral products which supplier releases during the terms of
this Agreement
Territory: United Kingdom and Southern Ireland
In addition, KOCH acquires non-exclusive export rights to all
other European countries
Distribution rights: EXCLUSIVE DISTRIBUTION RIGHTS
Distribution margin: KOCH settles with the supplier after deducting a
discount of 60% off the UK recommended retail price excluding VAT. With full
sale or return, KOCH will pay to the Supplier 40% of the UK RRP (exc VAT).
Supplier warrants that the prices charged to KOCH are equivalent to or more
favourable than the most favourable price terms available to any distributor to
whom Supplier sells.
Delivery: The merchandise shall be delivered free of charge to KOCH
Distribution, Thomas House, Hampshire International Business Park, Basingstoke,
Hampshire, England. If fees or expenses to KOCH should arise from the delivery
of the merchandise to the above address, they will be charged back to the
Supplier
Payment: 3/4 within 60 days net from the date of the sales account, or all
at KOCH's discretion with 3% discount if paid within 30 days
1/4 within 90 days net from the date of the sales account
Credit Insurance As this contract deals with products sold on sale or
return, whereby there is a risk to KOCH that the Supplier may be unable to repay
monies previously paid, KOCH will seek credit insurance on Supplier. If such
cover is not granted then another form of guarantee must be agreed. Supplier
may at anytime require KOCH to provide reasonable security for payment
hereunder.
Initial period: Until December 31st 2000
Subsequent period One year
In addition to above terms the parties agree that the General Distribution Terms
& Condition (enclosed shall apply:
Supplier confirms the receipt of the following documents:
- - Terms Summary
- - General Distribution Terms & Conditions
- - Delivery Guidelines for Delivering Merchandise to the Central Warehouse In
Basingstoke
- - Cost Summary for Services at the Central Warehouse In Basingstoke
- - Product Information Leaflet for Distribution Partners
- - Who Is Who at KOCH Distribution
- - Confirmation d Use of Intellectual Property
Burnaby, BC on 8/2/00 (Place/Date) Basingstoke on 25/1/00
- ---------------------------- ------------- --------
MERLIN SOFTWARE (Supplier's company) KOCH Media Ltd Va KOCH
Distribution
represented by represented by
/s/ S. Montgomery (Signature)
- ----------------
(Name and title of person signing) /s/ Craig McNicol
----------------
V.P. MARKETING Craig McNicol,
Managing Director
<PAGE>
General Distribution Terms and Conditions
The General Distribution Terms and Conditions apply to the business relationship
between "Supplier" (Name and Address if which as in the attached Terms Summary)
and KOCH Media Ltd (Trading As KOCH Distribution), Hampshire International
Business Park Basingstoke, Hampshire, RG24 8WH hereinafter referred to as
"KOCH".
1. Object of Contract
This contract refers to all of the Supplier's products that are described in
greater detail in the Terms Summary under "Product(s)". This range of products
shall be referred to hereinafter as the PRODUCTION. For the duration of this
contract, the Supplier entrusts KOCH with distribution rights as defined in
greater detail under "Distribution Rights" in Clause 2 and in the Terms Summary.
KOCH undertakes to publicise and to market the PRODUCTION within the framework
of this distribution contract, or let it be publicised and marketed through its
distribution companies and incorporate it into the distribution program in the
territory covered by the contract that has been agreed.
In the event that there should be definite indications, or that such should turn
up in the course of KOCH's distribution, to the effect that the publicising
and/or the distribution of a product offends morals, laws or the rights of third
parties. KOCH retains the right not to publicise the product and/or to
discontinue the distribution thereof. The same may apply if KOCH after thorough
evaluation of a product finds that it does not warrant a release due to its
limited commercial potential. In any such event this Agreement will immediately
terminate.
2. Relationship at Law
The Supplier nominates KOCH as his distribution partner for the duration of this
contract in the territory covered by the contract as laid out in the Terms
Summary. The territory shall be hereinafter referred to as the "Territory".
The distribution rights conferred here include in particular the right to the
sale of data media, the right of public offering for the purpose of sale, the
right of advertising the data media in all the media (TV, radio, press etc.) as
well as the right to non-commercial public demonstration. KOCH will cease any
advertising that is reasonably objected to by Supplier.
If the Supplier grants KOCH full or limited exclusivity in the territory covered
by the contract, he guarantees at the same time, within the framework of the
exclusivity granted, not to offer any third party the aforementioned PRODUCTION
for sale, distribution or on any other commercial basis that would infringe on
the distribution rights conferred on KOCH and/or could lessen the sales
potential of the PRODUCTION.
If nothing is stipulated to the contrary in the Terms Summary, the distribution
rights bestowed herewith on KOCH shall extend to the computer trade, music/video
retail, the book trade, department stores, chains, superstores, markets,
wholesalers, mail order houses, on-line networks, lender and the dub and end
user businesses in the Territory.
3. Obligations of the Supplier
The Supplier shall inform KOCH without delay and fully in each case regarding
new releases, new versions, price changes, sell-offs, deletions and provide all
product data that is necessary to keep KOCH's product database up to date.
Supplier shall provide such data in the format as laid down in the Product
Information Leaflet.
The Supplier undertakes to remain constantly in a position to deliver the
PRODUCTION so long as the contract relationship is in force, and to deliver each
order without delay, in any event within ten working days at the latest.
If the parties in a particular case do not agree otherwise, the Supplier
undertakes to deliver the products in sealed cellophane or plastic foil. If
this is not done and KOCH has to carry out the shrink-wrapping, then the
Supplier shall bear the resultant expense (of the enclosed cost summary).
If the parties have not agreed otherwise in the Terms Summary, KOCH may use free
copies to a reasonable extent for sales-promotion/sample and marketing purposes.
KOCH will provide the Supplier with Information regarding the use of free copies
on request.
For the period of this contract, the Supplier undertakes to maintain a technical
support service for all the products being marked by KOCH. This service shall
deal with queries In writing and by telephone from end users during normal
office hours and reply to them promptly.
For the period of this contract, the Supplier undertakes to maintain a technical
support service for all the products being marked by KOCH. This service shall
deal with queries in writing and by telephone from end users during normal
office hours and reply to them promptly.
For the period of this contract, Supplier may not directly supply any customer
that KOCH has supplied the Suppliers products to.
<PAGE>
4. Prices and Transport
KOCH takes the PRODUCTION on a Consignment basis. The merchandise remains the
property of the Supplier until KOCH has sold the merchandise and invoiced its
customers. KOCH is entitled to assign the PRODUCTION to its on a consignment
basis, whereby the property Supplier to right ?????? Supplier to the consignment
merchandise remain unaffected. KOCH can also buy the merchandise without any
customer order. Furthermore, ???? may sell the merchandise to its customers on
a full sale or return basis, whereby KOCH shall debit from the Supplier any
returns that are made on the PRODUCTION for whatever reason during the Term of
this Agreement.
KOCH may at any time, during or after Termination of the contract return for
full credit all stocks that have either not been sold, or that have been
returned by its customers for any reason.
KOCH is responsible for insuring the merchandise as soon as it is delivered to
the warehouse for damage or destruction by water or fire, while in the
possession or control of KOCH. Upon occurrence of the event insured against,
KOCH shall reimburse the manufacturing costs of the merchandise in question
(without author royalties, licences etc.). The latter must be documented by the
Supplier by means of invoices from his suppliers (pressing plant, printing
office).
The distribution margin at which KOCH shall buy the Production, is set out in
the Terms Summary. If supplier reduces its suggested end user prices he has to
advise this immediately in writing. Supplier shall give to KOCH's customers and
KOCH's then current stock, full price protection.
The merchandise shall be delivered by the Supplier as agreed in the Terms
Summary. Supplier undertakes to abide by the Delivery Guidelines for the
delivery of merchandise to the KOCH central warehouse. The current terms are
appended to this contract.
With respect to products that are delivered with cardboard packaging around
them, the Supplier undertakes to replace the same with replacements at no cost
if requested by KOCH to do so, in the event that the products are or become
unusable as a result of damage to the packaging. The costs accruing to KOCH for
repackaging the returned merchandise shall be charged to the Supplier in each
case in accordance with the outlay (of the current cost summary in the Terms
Summary).
KOCH Is responsible for stock managing the warehouse. Should there be excess
stock in regard to the merchandise covered by this contract with respect to the
sales volume made, then the warehouse management can send it back to the
Supplier at the latter's expense after giving advance ???????? fees (please
refer to Cost Summary for Services at the Central Warehouse in Basingstoke). If
the Supplier wants to have the merchandise destroyed by KOCH instead of being
sent back, the KOCH's relevant fees apply (please refer to Cost summary for
Services at the Central Warehouse in Basingstoke).
Discrepancies of the warehouse stock (calculated once a year on all adjustments
made up to 31 December) of up to + 3% shall be allowed and will not be charged
-
by one party to the other. Larger discrepancies shall be charged at the
Supplier's manufacturing costs of the relevant merchandise (not including author
royalties, licences etc). The latter must be documented by the Supplier by
means of invoices from his suppliers (pressing plant, printing office).
The foregoing shall only apply so long as Supplier has supplied to KOCH within 7
days of every month end, a report showing by product, quantities that have been
sent to KOCH for storage in that month. This used as the basis for agreeing the
stock and sales report that is issued by KOCH to Supplier (see Clause 5).
If the Supplier deletes certain products or demands that KOCH returns them, KOCH
shall take steps to do so immediately. In normal circumstances, a complete
recall shall take three to four months. Products that are being allowed to run
out according to the Supplier's notification will not be rendered resalable when
prepared for return, but will be booked to the Supplier's warehouse stocks
irrespective of their condition.
If a product is returned from the market (e.g. on account of legal or material
defects or slow sales etc), then KOCH will charge a standard fee (of the
enclosed cost summary), to cover freight costs and handling.
5. Conditions of payment
In each case, by the 15th of each month, KOCH shall send a sales account for the
net sales invoiced/credited in the previous calendar month. after deducting for
authorised, anticipated and/or received returns. supplier has to check the
sales account within one week of receipt and inform KOCH in writing of any
queries or errors. After this one-week period the sales account is deemed
correct and valid.
As soon as the Euro can be used in the business world, KOCH reserves the right
to convert the account and payment to the Supplier to Euros at any time after
giving written notice.
In the event of imminent liability to pay on the part of one of KOCH's
customers, KOCH will attempt to reclaim the merchandise as swiftly as possible.
If this should be unsuccessful in a particular case and the claim be
uncollectable in part or whole and no coverage (or only partial coverage)
provided by KOCH's credit insurance, then KOCH will settle with the Supplier
not at the accounting price agreed in the Terms Summary, but at the Supplier's
actual manufacturing and shipping price for the
<PAGE>
merchandise in question, or will adjust the already accounted price
subsequently. The manufacturing costs of the relevant merchandise are
understood to be without author royalties, licences etc., and must be documented
by the Supplier by means of invoices from his suppliers (pressing plant,
printing office).
6. Expiry and extension of contract
The duration of the initial period of this contract is given in the Terms
Summary. This contract is conducted first for the duration of the "initial
period". It shall be extended automatically on each occasion by the period of
time of the "subsequent period" that is given in the Terms Summary, unless one
of the contract parties shall give notice of termination of the contract by
registered letter 90 days or more before expiry of the contract.
If there are definite indications that the financial situation of one party has
deteriorated to the point that he can no longer meet his contractual
obligations, then in such a case the other party to the contract shall have the
opportunity of threatening termination by setting out his misgivings in writing
and setting a deadline of 30 days for response. The first party can either
refute the expressed misgivings within the set deadline in writing, or can
provide security. If this does not take place, the contract is deemed to have
been terminated with immediate effect.
If the Supplier repeatedly and over an extended period does not deliver, or does
not deliver on time a number of products, or if the Supplier has not offered any
new products for at least six months, KOCH has the right to threaten termination
by setting out the reasons in writing and setting a deadline of 30 days. The
Supplier can refute the grounds for termination within the set deadline or can
put the matter right. If this does not take place, KOCH can declare the
contract terminated with immediate effect.
In the event of termination of the contract, the parties shall reckon up their
accounts with one another. After final settlement of the accounts KOCH will
make the Supplier's remaining merchandise available for collection.
The supplier shall take back the merchandise at his own expense.
KOCH is entitled
KOCH Is entitled to accept returns following termination of the contract,
(clause 4) and to charge the Supplier for same at the accounting price.
The Supplier can recall the merchandise from KOCH at any time at his own
expense.
KOCH is entitled to retain 10% of the turnover of the last twelve months as a
reserve fund for such returns when the contract is terminated (taking into
account any other sums set aside for returns), whereby this reserve fund shall
be set against incoming returns, and the outstanding amount shall be dealt with
one-half at a time, six months and twelve months after termination of the
contract.
7. Defects in the product/liability of the Supplier
The Supplier hereby declares and guarantees (1) that the products and the
packaging thereof in each case (retail box, booklet, inlay card, etc.)
absolutely conform to the laws concerning fair trading and indeed do not violate
any legislation in the territory covered by the contract; (2) that he has
reimbursed or will reimburse the services of all the parties involved in the
PRODUCTION, and that there are no third party rights of any kind on the
PRODUCTION that can be lawfully pressed against KOCH; (3) that he has for the
duration of this Agreement all necessary rights to enter into this Agreement.
The sale price to be paid by KOCH includes all rights needful for the sale of
the products, in particular all copyrights and rights for use of film, picture,
audio, text, animation and interactive elements. The latter include in
particular any fees payable to copyright collection agencies and publishers.
The Supplier shall check out the copyrights carefully and assure or clear up all
transferred rights in writing.
KOCH reserves the right to require of the Supplier a copy of the
confirmation/release with regard to the utilisation of protected works by the
relevant copyright collection agencies. If the Supplier does not meet this
demand within 14 days, KOCH reserves the right to withhold payments from the
Supplier, irrespective of their being due, as a guarantee against possible
copyright fees or damage claims, until the written release/confirmation is
presented or the matter is resolved in some other manner.
The Supplier is liable for damages claims against KOCH in the event of the
PRODUCTION and the rights transferred in the present distribution contract being
defective. These damages include in particular any court costs, enforcement
costs and the cost of legal representation and/or advice for KOCH and KOCH's
customers.
For the case that KOCH, an affiliated KOCH distribution company or a customer
receives a formal letter of caution or a court injunction or a legal action,
KOCH will immediately inform the Supplier about it and Supplier allows KOCH, the
affiliated KOCH distribution company and the customer in order to avoid any
further legal disputes to submit a declaration of compliance to the third party.
This declaration may include an undertaking to provide the requested information
of products, to pay for damages (in principle), to pay reasonable costs of both
parties and to stop distribution of the product. KOCH may debit the
<PAGE>
referring costs (including but not limited to lawyers' and court fees or KOCH,
affiliated KOCH distribution companies and customers) to the Supplier.
In a particular case the parties shall have agreed a definite delivery deadline
(e.g. because of advertising on the part of the customer) and the Supplier does
not meet same, then KOCH shall charge back to the Supplier all the direct and
indirect expenses incurred.
The Supplier hereby declares and guarantees:
- - that all products of the PRODUCTION have been tested several times on
Windows 95 and all subsequent Windows operating systems and run and that
products will operate in accordance with accompanying manuals;
- - that all products of the PRODUCTION are compatible with the year 2000 and
that this property has been exhaustively tested in each case;
- - that all products of the PRODUCTION are dispatched to KOCH only after
thorough technical testing. The testing must test in particular for freedom
from viruses (including macro-viruses);
- - that each product packaging contains a reference to the Supplier's
technical service.
- - that the products and the packaging thereof in each case (booklet, inlay
card, etc.) absolutely conform to the laws concerning fair trading and indeed do
not violate any legislation in the territory covered by the contract;
- - that he has reimbursed or will reimburse the services of all the parties
involved in the PRODUCTION, and that there are no third party rights of any kind
on the PRODUCTION that can be lawfully pressed against KOCH;
- - that should the PRODUCTION need to be classified by the ELSPA or VSC trade
bodies then Supplier should ensure the relevant classification is printed on all
necessary materials (including box work, posters, etc.).
In certain a particular retailer may desire to destroy the faulty stock at store
level. If this is done then KOCH will credit the retailer directly, debiting in
turn our purchase price from our account with you.
8. Confidentiality
The parties undertake to remain silent about all business and operational
matters that become known to them within the framework of this contract, in
particular stock or sales reports, statistics, customer lists, etc. This
applies irrespective of whether the matter in question is explicitly designated
as confidential ??????. The obligation to confidentiality also applies with
respect to associated concerns and remains in force for a year beyond the end of
the confidential relationship.
This does not apply to such characteristics and details, (1) as were already in
the possession of the other party in written form before entry into the
contractual negotiations for the present contract; or (2) as have been made
public without the illicit commission or omission of the other party; or (3) as
a party is obligated by legal regulations to communicate to the authorities or
other third parties.
9. Miscellaneous
Claims against KOCH arising from this contract cannot be assigned without prior
written consent. KOCH is entitled to set off outstanding claims, which are owed
to enterprises, subsidiaries, branch offices or other companies in which the
KOCH Company or Franz KOCH himself has a direct or indirect participation. This
also applies even if the dates on which the payments become due are different.
This contract, in accordance with the intentions of the parties, shall have
validity also for the legal assigns on both sides. The Appendicies and
enclosures attached to this contract are integral components thereof.
Amendments and additions to this contract and/or to the enclosures and
Appendicies must be executed in writing, and signed by both parties respective
responsible person, in KOCH's case this will be a Board Director. This applies
also to a renunciation of the requirement for the written form. No verbal
agreements have been made. Both parties expressly rule out the use of the
General Business Conditions. If one of the terms of the contract should turn
out to be wholly or partially invalid, the remaining terms shall not be affected
thereby. The invalid term shall be interpreted according to its sense and
replaced by a new regulation that achieves the commercial purpose of the invalid
term as much as possible. English Law applies to this contract. The place of
jurisdiction for any possible disputes is agreed to be the court that has
competence for KOCH. Interim legal protection can likewise be requested only at
the court named, even when the claim is directed against a distribution company
of the KOCH concern.
<PAGE>
Delivery Guidelines for Delivering Merchandise to the Central Warehouse in
Basingstoke
Contents
Introduction
Orders
Delivery deadlines
Delivery slip and invoice
Acceptance of merchandise
Packaging and marking of the merchandise
a. Individual products
b. Packaging units
c. Outer packaging/palettes
New products, new versions/updates of products and discontinuation of products
Discrepancies upon arrival of merchandise
Defective merchandise and returns
Transport guidelines
Contact persons
Enclosure (label of packaging unit etc.)
1. Introduction
The continuous increase in the number of items as well in the variety of
products (audio and data media) has meant a greatly increased workload. In
order to continue to carry out our business efficiently it has been necessary to
simplify and standardise the various processes and the interfaces. As a
consequence of this we have extended and modernised our Warehouse and dispatch
departments. For this to operate effectively, it is imperative to standardise
the interface to suppliers. Only with a clear and uniform relationship between
our customers and suppliers can we succeed in an increasingly competitive
environment.
Our main aim is to conduct our business with you in such a way that the best
possible customer service and optimal delivery time are achieved. To this end,
it is necessary.
- - To have to pick up each product only once
- - To move each packaging unit only once
- - To clear out every palette immediately
- - To avoid inventory deficiencies
- - To cut down on checks through mutual trust
The measures defined in these Delivery Guidelines are already standard practice
for the majority of our suppliers.
2. Orders
Normally orders are generated by our staff in the central Warehouse via our
merchandise-management system. The following information must be given upon
delivery and when issuing delivery slips and in some cases invoices.
1) Address of recipient: KOCH Distribution (per above quoted
address)
2) Invoicing address: KOCH Distribution (per above quoted
address)
3) Order number: KP
4) Our & Your VAT.-ID Number: GB 675 7474 84
5) KOCH purchase price per item
7) Order quantity:
8) Number of items per packaging unit:
9) Barcode of the article (13-digit, with a leading zero if 12-digit):
10) Article number:
11) Description of article:
In the case of an initial order, the regulations defined under the heading of
packaging unit prescribe the number of items per bulk packaging unit and must be
checked with the Administration Department (Tanya Barter) if anything is unclear
or if there are possible variations of item numbers per packaging unit.
3. Delivery deadlines
Each of our purchase orders has a delivery deadline for delivery to the place of
performance. If we are not notified of a change within two working days, KOCH
shall regard this delivery deadline as binding. If a later deadline is thus
agreed, then we regard
<PAGE>
the latter as binding. KOCH will charge any damages arising from claims made by
a customer on account of delayed delivery in full to the Supplier that is due
solely to Suppliers delay.
4. Delivery slip and invoice
Delivery slips must be delivered with the merchandise in duplicate. They must
include the article number, the description of the article, the number of items
ordered and delivered, and the number of packages.
Invoices (for non consignment stock) must always be sent under separate cover by
mail to the invoicing address indicated in the order.
In the case of deliveries from the other European Union countries, the invoice
must be made out giving the corresponding VAT.-ID number, without VAT.
In the case of deliveries from the EU and EFTA, we assume that KOCH is not
charged for any customs duties or other fees. Any duties and/or fees will be
charged back to the Supplier unless written agreements to the contrary are
already in hand.
The delivery slip and the invoice have to be made out with item and article
precisely indicated (no combination documents) for only one delivery at a time.
The following information (among other things) must be given on the papers:
- - Name of contact person at KOCH
- - KOCH-order number (KP )
- - Date of order
- - KOCH article number
- - Supplier Account Number
This information must also be given for overdue deliveries and/or when several
orders are mixed together in one delivery.
5. Acceptance of merchandise
Our times of acceptance, without exception, are from:
Monday to Friday (except on public holidays)
From 8:00 - 12:00 a.m. and 1:00 - 4:00 p.m.
Any other times must be agreed with Goods In Supervisor or the Warehouse
Manager, on + 44 1256 707767 ext 206. Deliveries of merchandise outside the
prescribed times cannot be accepted or unloaded except by previous arrangement.
6. Packaging and marking of merchandise
a. Individual products
The packaging of the individual products must correspond precisely to the
requirements laid down by the person placing the order. Modifications without
written consent are not permitted.
Every product must bear the article barcode and number used in the Warehouse,
clearly legible for hand scanners. If the article version number has changed
then so to should the barcode and article sticker.
If the article barcode is pasted over by KOCH because it does not conform to
KOCH regulations, the outlay involved shall be invoiced in accordance with the
enclosed guideline for charges. (cf. the current cost summary in the appendix).
In the CD-ROM market, our customers demand exclusively shrink-wrapped
merchandise. Therefore only shrink-wrapped merchandise (without unrelated
stickers) may be delivered.
b. Packaging units
Only the packaging units customary in the trade:
- - Jewel case = 25 items, bottom surface 267 x 129 mm, Height 142 mm
may be used for CD formats. Every packaging unit must contain the same number
of items. The product designated, KOCH article number, sale price/number of
items, the product barcode and number must be clearly visible on the front side
of every packaging unit (see enclosed sample). The size of ????????? and
symbols should be based on the enclosed sample. The label with the above data
may not be smaller than 50 x 100 mm.
<PAGE>
For merchandise in special cardboard packaging (e.g. CD-ROM etc.), one packaging
unit must contain at least 5 items; no loose inner packaging may be used, and
the products must be held in a fixed position. When the cartons of the
packaging unit are open at the top, the carton must not be higher than the
product.
The box size of the packaging unit may exceed the measurements of 600 x 400 x
300 mm (length x width x height) only if agreed with Goods In. The standard
measurement used in our Warehouse for packaging units of boxed products (CD-ROM)
is 340 x 225 x 200 mm.
Follow-up deliveries must always have the same packaging unit, number of items
per packaging unit and outer packaging as the initial order.
c. Outer packaging/palettes:
If the merchandise is not delivered in shipping boxes (packaging units) weighing
at most 25 kg. then the merchandise must be stacked securely (at least with the
help of wrapping foil) onto Euro palettes. The number of packed goods must be
indicated on the delivery slip and/or the accompanying papers.
Loose inner packaging should be avoided if possible. All outer packaging and
any inner packaging should be of the same material for environmental reasons;
inner packaging should not be made of plastic, Styrofoam or shredded paper.
Only EURO palettes (120 x 80 cm) may be used as palettes. As a rule, the
overall height must not exceed 1500 mm. Anything protruding out of palettes
more than 5 cm is not permitted. In principle, palettes which are delivered
should all be of the same sort, and the packaging units must be piled onto the
palettes in such a way that the labels are clearly visible from the front (the
80-cm side). Up to two articles can be delivered per palette if the articles
can be split into 2 halves (each 40 x 120) is possible and the above
requirements are met.
Any departure from the above regulations will result in a charge for repackaging
or loss of palette space.
7. New products, new versions/updates of products and discontinuation of
products
Not only modifications of content but also packaging alterations, changes of the
length, height of width by + 1 mm, as well as weight changes greater than + 2 g
- -
per piece constitute new versions of products. Under no circumstances may new
versions carry an EAN code and an article number that are already used, and the
new version must never be delivered in response to an order for the old or
obsolescent version.
KOCH must be notified about discontinuations and/or the appearance of a new
version at least 6 weeks in advance. KOCH will return the Warehouse inventory
of the discontinued product to the supplier within three months without further
notice without be repackaged. All returns still reaching KOCH after the 3
months will be returned to the Supplier immediately unless arrangement to the
contrary have been made.
8. Discrepancies upon arrival of merchandise
If KOCH reports discrepancies when merchandise arrives, we will request you to
verify this at once. We consider discrepancies reported to you as accepted
unless contradicted immediately (i.e. within two working days).
Incorrect deliveries will be reported and set aside to await collection. If you
do not have them collected within 14 days, KOCH will return the incorrect
deliveries at your expense.
9. Defective merchandise and returns
If merchandise is delivered in damaged cardboard packaging, the Supplier is
obliged to provide the necessary packing free of charge and without delay within
5 working days at KOCH's request. In the case of damaged jewel cases (standard
packaging), these will be provided by KOCH in advance.
Returns due to defective or faulty merchandise will be received by KOCH, tested
and destroyed.
In principle, merchandise returned by the customer will be tested for
cleanliness and quality and again introduced into the dispatch cycle. This
procedure applies only to products that can very likely (depending on stocks and
product-life cycle) be delivered out again.
Consignment products that no longer meet the internally defined specifications
for being put back into the dispatch cycle will not be repackaged and sent back
to the Supplier. If so agreed with the Supplier, KOCH is also prepared to
destroy this merchandise.
<PAGE>
10. Transport guidelines
If exceptionally KOCH meets the delivery freight costs, the merchandise must
only be sent via the carrier nominated by KOCH. If the Supplier delivers the
merchandise to KOCH using a different transport firm, then these costs must be
borne wholly by the Supplier.
11. Contact persons
Person Function Telephone number Fax
Warehousing Distribution
Mr Danny Richards Warehouse Manager +44 1256 707767 +44 1256 707277
Purchasing and Stock Control
Ms Tanya Barter Administration Manager +44 1256 707767 +44 1256
707277
Ms Sharon Nolan Administration Assistant +44 1256 707767
Finance
Mrs Vikki Taylor Accounts Payable +44 1256 707767 +44 1256 707277
12. Label on packaging unit
PRODUCT ARTICLE NUMBER
Supplier
Title
Artist (If Applicable)
Release Date
- -------------
EAN128 Representation of the
Barcode, followed by the Qty of stock in the unit
- ----------------------------------------------------------
<PAGE>
Cost Summary for Services at the Central Warehouse in Basingstoke (valid from
1.1.1998)
Reworking per unit
Affixing an EAN-barcode sticker for new products that are
not equipped with an EAN code 0.07
Incorrect packaging units, incorrect number of items
in packaging unit (service charge applies per
packaging unit) 1.00 per packing unit
Failure to adhere to the marking regulation for
packaging units (service charge
applies per packaging unit) 0.15 per pckgng unit
Unloading of merchandise that is not delivered
in accordance with KOCH's
Delivery Guidelines, in particular in the case of
merchandise not delivered on
Euro palettes 0.07
Replacement of jewel box shrink-wrapping
on account of customer having stuck
something on it or damaged it, or when delivered
without shrink-wrapping by the
Supplier 0.10
Replacement of jewel boxes and shrink-wrapping
on account of customer having
damaged jewel-boxes or stuck something on them 0.20
Replacement of sierra box on account of customer having
damaged boxes or stuck
something on them 0.20
Destruction and disposal
of products in jewel box or similar
(without cardboard outer packaging) 0.25
of products in cardboard outer packaging 0.50
Storage or excess stocks:
Monthly storage fee per month or part thereof (applies only for excess stocks
that KOCH's Warehouse management has given notice of to the Supplier, placed
ready for collection, but which have not been collected within 10 days
of products in jewel box or similar
(without cardboard outer packaging) 0.02
of products in cardboard outer packaging 0.10
Picking and Packing Fees
If a product should be returned from our customers,
due to either legal, material, new version or slow sales
we shall charge a handling fee of 1.00 per unit
and per customer delivery for the recall,
to cover freight costs. 4.00 per delivery
If the Supplier wishes a quantity of product delivered
on their behalf from KOCH consignment stocks then
a fee will be charged of 0.30 per unit
Plus actual freight costs
The above fees are exclusive of VAT. The account is done on an ad hoc basis or
together with the monthly sales account, in each case in the accounting currency
agreed otherwise between the parties.
The list of costs is valid until further notice. KOCH may adjust the
costs/prices from time to time in accordance with any variation of our expenses
at the central Warehouse. Price adjustments will be notified to the Suppliers
in writing 30 days before taking effect in each case.
In normal circumstances all products returned by customers are reconditioned so
as to be re-saleable by the return department of the central Warehouse before
being sent back, unless the Supplier has given written instructions not to do
so.
Recommendation:
If there are products that the Supplier wants to discontinue, and which are thus
not to be reconditioned, he should inform KOCH's Warehouse management in
writing. If this is done, returns from KOCH's customers need no longer be
reconditioned for resale and this expense will be avoided.
<PAGE>
Product Information Leaflet for Distribution Partners
A flow of information between manufacturer and distributor is essential for
success in joint business ventures. Therefore we request you as Supplier to
discuss the following leaflet in detail internally with all the staff involved.
We go to great lengths to offer our customers a first class service and in order
to do so, we place our trust in the reliability of our Suppliers. Therefore
please adhere strictly to the procedure given below.
Prompt transmission of complete information on new products is an absolute
prerequisite for them to be presented in distribution meetings. Delays and
partial information just mean postponement of release.
A. Prior information
We request quarterly transmission of release plans, if possible for the
following six months in every case. These plans should contain:
- - Name of product and brief description
- - Recommended sale price
- - Target group, marketing
- - Target release date
B. Data and information on the new items
If all the data pertaining to a new product reaches our Basingstoke office NO
LATER THAN 7 DAYS before the monthly distribution meeting, we will include it in
the next meeting (cf. the annual schedule of our distribution meetings). We
regret that incomplete data or anything that arrives late cannot be included.
B.1 Data for preparation of publication
- - Name of product
- - Catalogue number (if any)
- - EAN-Barcode-Number
- - ISBN-Number (if any)
- - Recommended sale price in UK
- - Date of release (please give a realistic estimate)
For each and every product, we compile a product sheet (A4) that contains the
above data and the booklet, as well as 3 or 4 key selling points and a brief
description of the product in telegram style in 4 or 5 sentences.
B.2 Documentation for the distribution meeting
- - 30 Booklets
- - 30 Promotional samples (if any)
- - Product sheets (as many as 4000, if there are any)
<PAGE>
Who is Who at KOCH Distribution
In alphabetical order:
Shirley Andrews Warehouse Supervisor - Goods In and Returns
Tanya Barter Administration Manager
Kerri Davies Marketing Manager
Emily Griffiths Assistant Marketing Manager
Craig McNicol Managing Director
Paul Nicholls UK Sales Manager
Sharonne Nolan Administration Assistant
Danny Richards Warehouse Manager
Victoria Taylor Finance Supervisor
In topical order:
Contracts, strategic issues Craig McNicol
As well Director responsible for:
Accounts Payable, and Stock and Sales Queries Victoria Taylor
Product Database, Purchase and Sales Order Entry Tanya Barter
Warehouse and Shipping Danny Richards
Sales Paul Nicholls
Marketing & Product Management Kerri Davies
Offices:
Office England: Thomas House, Hampshire Intnl Business Park, Basingstoke
RG24 8WH, Tel 01256 707 767, Fax 01256 707 377
Office Germany: Lochhamer Str. 9, D-82152 Planegg/Munchen, Tel 089 857
95-120, Fax 089 857 95-160
Office Austria: Tivoligasse 25, A-1120 Wien, Tel 01 815 0626-0 Fax 01 815
0626-16
Office Switzerland: Poststra e 10, CH-9201 Gossau Tel -071 388 6868 Fax 071
388 6888
Head Office: Gewerbegebiet, A-6600 Hofen, Osterreich, Tel 05672 606 Fax
05672 65581
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
2. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
3. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
4. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
5. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
6. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
7. RESELLER shall provide MERLIN with a written report on a monthly basis
setting forth: (a) detailed information about each customer that has acquired
the Software including company name, address (including e-mail address) and
contact name and the quantity of the Software acquired; and (b) three month
forecast of expected sales.
8. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
9. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
10. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
11. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
12. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that
it shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
13. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
14. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
15. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
16. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
17. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the 22nd day of February, 2000 (the "Effective
Date")
G.T. ENTERPRISES
912, 14 Main, 4 Cross Maruthi Circile,
Hanumantha Nagar,
Bangazorb - S60019
India
(herein referred to as "RESELLER")
/s/ Geetha Taranath
- --------------------
Signature
Print Name: Mrs. Geetha Taranath
- ------------------------------------
Title: Proprietrix
- ---------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
- ----------------------------------
Title: V.P. Marketing
- -------------------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED February 22, 2000
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price in U.S. dollars for each copy
of the Software ordered for distribution by RESELLER [less a discount of thirty
percent (30%).] MERLIN shall be responsible for all shipping and insurance
charges associated with delivery of the Software to RESELLER's address specified
on the Agreement and the terms of each sale shall be DDP (Delivered Duty Paid,
as that term is defined in the publication "Incoterms 2000" published by the
International Chamber of Commerce) RESELLER's address specified on the
Agreement. The full responsibility for credit risk of and collections from
RESELLER's customers rests with RESELLER. All credits and returns in respect of
the Software shall be according to MERLIN's policies then in effect. Unless
otherwise agreed by MERLIN, RESELLER shall be responsible all shipping,
insurance and related costs for all returns of unsold and old versions of the
Software. RESELLER shall pay MERLIN 10% of MERLIN's retail price per copy of
the Software returned to MERLIN as a restocking charge if RESELLER wishes to
replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 21 day of February, 2000.
G.T. ENTERPRISES
912, 14 Main, 4 Cross Maruthi Circile,
Hanumantha Nagar,
Bangazorb - S60019
India
(herein referred to as "RESELLER")
/s/ Geetha Taranath
- --------------------
Signature
Print Name: Mrs. Geetha Taranath
- ------------------------------------
Title: Proprietrix
- ---------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: Shelley Montgomery
- ----------------------------------
Title: V.P. Marketing
- -------------------------
SOFTWARE LICENSE, OEM AND DISTRIBUTION AGREEMENT
This Software License, OEM and Distribution Agreement ("Agreement") is made as
of February 22, 2000 (the "Effective Date") between TurboLinux, Inc. , a
Delaware corporation ("TurboLinux"), having its principal place of business at
2000 Sierra Point Parkway, Suite 401, Brisbane, CA 94005, USA, and Merlin
Software Technologies, Inc. ("Merlin" or "Licensee"), having its principal place
of business at 6450 Roberts Street, Suite 420, Burnaby, British Columbia, V53
4E1, CANADA.
1.0 DEFINITIONS.
1.1 "Program" shall mean a binary-based copy of the TurboLinux Workstation
Lite product version 6.0 or later, and any additional TurboLinux products
licensed by TurboLinux to Merlin pursuant to this Agreement.
1.2 "Bundling" shall mean the act of shipping the Product with the latest
version of the Merlin Product.
1.3 "Confidential Information" shall mean all confidential information of a
party (including without limitation technical, marketing, financial, planning or
other confidential or proprietary information, as more particularly described in
section B of Exhibit C). Any information disclosed' by the party disclosing
Confidential Information to the other party under this Agreement (the
"Discloser") will be considered Confidential Information by the other party only
if such information is marked as confidential at the time of disclosure, or if
provided orally, is identified as confidential at the time of disclosure and
confirmed in writing within thirty (30) days of disclosure. Confidential
Information will be subject to the limitations set forth in Section 6 below.
1.4 "Documentation" shall mean non-confidential documentation provided with
the software' licensed by TurboLinux to Licensee hereunder (including user
manuals and technical information, as more particularly described in section A
of Exhibit C).
1.5 "Enhancements" shall mean all modifications to the Program made solely
on behalf of Licensee but do not include separate add-on products which contain
no Program code.
1.6 "Infringement Action" shall mean any claim, suit or proceeding brought
for infringement of any U.S. patent, copyright, trademark, or trade secret, of a
third party.
1.7 "Infringement Product" shall mean a product whose use is restricted as
the result of an injunction issued in an Infringement Action.
1.8 "Intellectual Property Rights" shall mean the following rights that
pertain to the Program and the Documentation:
(a) Rights in all U.S. and foreign patents and any related applications,
renewals, continuations, continuations-in-part, divisionals and other derivative
rights;
<PAGE>
(b) Rights in the trademarks including, but not limited to, those listed in
Exhibit B that are enforceable under common law, state law, federal law, or the
laws of foreign countries;
(c) Rights in copyrights and rights of authorship arising under any
jurisdiction; and
(d) Rights in trade secrets under common law, state law, federal law, and
laws of foreign countries.
1.9 "Object Code" shall mean any machine executable code.
1.10 "Release" shall mean a release of the Program that ma be either a new
Version or a
1.11 "Version" shall mean the binary release of the Program that TurboLinux
makes available to the Licensee under the terms of the Agreement. A Version is
designated by a numeric identification of the form "N.M" where "N" designates
the Version identification.
1.12 "Revision" shall mean a release of the Program incorporating
corrections and minor enhancements to the prior Version that TurboLinux makes
generally available to the public. A Revision is designated by a numeric
identification of the form "N.M" where the "M" designates the Revision.
1.13 "Merlin Customers" shall mean Licensee end-users who have purchased
copies of the Merlin Product.
1.14 "Merlin Product" shall mean the Merlin software products set forth in
Exhibit A (as such exhibit may be modified from time to time by written
agreement of the pat-tics), and any subsequent versions or releases of such
products, including any user manuals provided with such software.
1.15 "TurboLinux OS" shall mean the TurboLinux version of the Linux
Operating System.
2.0 LICENSE GRANI.
2.1 Subject to the terms and conditions of this Agreement, TurboLinux hereby
grants to Licensee, under TurboLinux's Intellectual Property Rights, a
royalty-bearing, worldwide, non-exclusive, non-transferable (except in
accordance with this section and section 10.3 below) license to use (for
internal and demonstration purposes only, and not to provide services to any
third party or analogous use) and distribute the Program, via a sublicense,
bundled with a version of Merlin Product, directly and indirectly to end-users,
as provided in Exhibit D, in accordance with the terms of Section 4.1.3 below.
2.2 Sublicensing.
2.2.1 Licensee may not sublicense the rights to use, reproduce, and
distribute the Program without the, written permission of TurboLinux.
2.2.2 All end-user sublicenses granted under this Agreement shall be
consistent with the, terms of this Agreement (including without limitation the
terms of Exhibit D) and no less
<PAGE>
protective of TurboLinux's Intellectual Property Rights than as set forth
herein or in TurboLinux's standard end-user software license agreement, a
copy of which has been provided to Merlin as of the Effective Date.
2.3 Except as set forth herein, TurboLinux retains all right, title, and
interest in the Program and Documentation. Although Licensee is not required to
pursue any enforcement measures with respect to the Program or Documentation,
Licensee agrees to take commercially reasonable measures at TurboLinux's sole
cost to protect TurboLinux's proprietary rights ill the Program and
Documentation; in the event that Licensee seeks to pursue enforcement measures
with respect to the Program or Documentation, Licensee will obtain TurboLinux's
prior written authorization before doing so. Except as set forth herein,
Licensee is not granted any other rights or license to patents, copyrights,
trade secrets, or trademarks with respect to the Program or Documentation or
other TurboLinux Confidential Information. Each party shall notify the other
party in writing upon its discovery of any unauthorized sue or claim or
infringement of the Program or Documentation or either party's patents,
copyrights, trade secrets, trademarks, or other intellectual property rights,
and use commercially reasonable efforts to assist the other party, at the other
party's expense in relation thereto.
3.0 PAYMENTS
3.1 Royalties.
3.1.1 No royalty shall be due for any copy used or distributed by
Licensee only for reasonable demonstration, training, or support purposes.
Licensee agrees that this Section 3.1.1 shall not be employed to defeat the
royalty obligations arising under Section 3.1.2.
3.1.2 Subject to the terms of Section 3.1.1 and Exhibit D, Licensee
shall pay TurboLinux a royalty in accordance with the schedule attached as
Exhibit D for each copy of the Program sold, directly or indirectly, either
internally or externally, by Licensee or its sublicensees, for the rights
granted in section 2.1 above.
3.2 General Terms of Payment.
3.2.1 Royalty payments due to TurboLinux for a given calendar quarter
(or portion thereon shall be made within thirty (30) days after the end or such
quarter, and payments which are not so paid will be subject to interest at the
rate of three percent (3%) per month or the maximum allowed by law until paid in
full. Payments shall be accompanied by a report detailing how such royalties
are calculated.
3.2.2 Licensee shall maintain true and accurate records, in accordance
with generally accepted accounting principals, for the calculation of royalties
during the term of this Agreement and for eighteen (I 8) months thereafter.
During the term of this Agreement, and for a period of one (1) year thereafter,
TurboLinux may, at its expense, engage an independent auditor reasonably
acceptable to Licensee to review such records (to a maximum of eighteen (18)
months prior) and verify royalty payments, provided that the auditors execute
Licensee's confidentiality agreement and provided that TurboLinux may not
conduct said audits more than once in any calendar year. In the event that the
audit reveals an underpayment of royalties that exceeds ten percent (10%) of the
total royalties due, Licensee shall pay TurboLinux 105% of any
<PAGE>
royalties due and any interest accrued thereon, and reimburse TurboLinux for the
reasonable cost of the audit.
3.2.3 Licensee shall be solely responsible for all taxes on royalties
and other fees required to be paid to TurboLinux under this Agreement, including
state and local use, sales, property, and other taxes, excluding only taxes
calculated solely on TurboLinux's income, including TurboLinux's income from
this Agreement.
3.2.4 Licensee shall pay TurboLinux $2,000 (Two Thousand Dollars) in
U.S. funds upon the execution of this Agreement as the prepayment of 20% of the
projected royalties for the 2000 calendar year.
4.0 MARKETING, DELIVERY, AND MANUFACTURING.
4.1 Licensee shall, at its own expense, use commercially reasonable efforts
to market the Program as Bundled with the Merlin Product. Licensee shall have
the right to customize the Documentation for its own marketing, distribution,
sales, and support efforts.
4.1.1 Bundling Requirement. Licensee agrees, for the term of this
Agreement, to Bundle the Program with all new Merlin Products. TurboLinux
agrees, for the term of this Agreement, to include the binary version of
PerfectBACKUP+ into the companion CD of TurboLinux Workstation and TurboLinux
Server products which are produced during the term of this Agreement, beginning
with TurboLinux Workstation Version 7.0 and TurboLinux Server Version 7.0.
4.1.2 Logo Requirement. Licensee agrees, for the term of this
Agreement, to include the TurboLinux logo on the CD media and outer box of the
Merlin Product.
4.1.3 Marketing Communications Requirement. TurboLinux and Merlin
agree to provide to each other their respective marketing communications
material including without limitation artwork, logo clip art, and executive
quotations for press releases.
4.2 This Agreement does not create any partnership, agency, or other
relationship other than that of licensee and licenser (independent contractors)
in accordance with the express provisions of this Agreement.
4.3 Merlin agrees to make the Merlin Product compatible and fully functional
with the TurboLinux OS.
5.0 SUPPORT.
5.1 As between Licensee and TurboLinux, TurboLinux shall, during the term of
this Agreement, provide fee-based technical support for the Program distributed
to end-users by Licensee, which fees will be collected directly from the
end-user by TurboLinux.
5.2 As between Licensee and TurboLinux, Merlin shall, during the term of
this Agreement, provide all technical support for the Merlin Program distributed
to end-users by Merlin.
<PAGE>
6.0 CONFIDENTIAL INFORMATION.
6.1 A recipient of Confidential Information shall protect the Information by
using the same degree of care, but no less than a reasonable degree of care, to
prevent any unauthorized use, dissemination, or publication as the recipient
uses to protect its own Confidential Information of a like nature. The
recipient shall restrict access to the Confidential Information to those of its
employees having a need to know. The recipient's obligations under this section
6.1 shall continue indefinitely, not withstanding the expiration or termination
of this Agreement.
6.2 A recipient of Confidential Information acknowledges and agrees that:
(a) The Discloser will be irreparably injured by the disclosure or
threatened disclosure of any Confidential Information in violation of this
Agreement; and
(b) In addition to any other remedies available at law or in equity, the
Discloser may obtain an injunction to prevent such disclosure or the
continuation of such disclosure.
6.3 Confidential Information does not include information that:
(a) Was rightfully in the recipient's possession before receipt from the
Discloser;
(b) Is or becomes a matter of public knowledge through no fault of the
recipient;
(c) Is rightfully received by the recipient from a third party without a
duty of confidentiality;
(d) Is disclosed by the Discloser to a third party without a duty of
confidentiality on the third party; or
(e) Is independently developed by the recipient without access to, or
knowledge of, the Disclosurer's Confidential Information.
6.4 Confidential Information may be disclosed under operation of law or
pursuant to a subpoena or other judicial or administrative order, provided the
recipient gives the Discloser prior notice of such required disclosure and
cooperates with the Discloser at the Discloser's expense, in any lawful action
to contest or limit the scope of disclosure.
7.0 PROPRIETARY NOTICES.
7.1 TurboLinux shall include within the Program any trademark and copyright
notices as applicable. Licensee shall reproduce such notices when marketing and
distributing the Program.
Licensee shall include within the Program any trademark and copyright
notices as applicable, TurboLinux shall reproduce such notices when marketing
and distributing the Program.
7.2 Documentation distributed by Licensee shall include the following
notice:
"Copyright 1997, 1998, 1999, 2000 by TurboLinux, IncAll Rights Reserved."
<PAGE>
Documentation distributed by TurboLinux shall include the following notice:
"Copyright 1999, 2000 by Merlin Software Technologies Inc. , All Rights
Reserved."
8.0 ENHANCEMENTS.
TurboLinux shall own all right, title, and interest to any Enhancements and
derivative works of the Program created by either party.
9.0 TERM AND TERMINATION.
9.1 This Agreement shall commence on the Effective Date and shall expire one
(1) year thereafter, unless earlier terminated for cause. This Agreement will
automatically renew for successive one (1) year terms unless one party gives the
other party sixty (60) days' written notice of its intent not to renew.
9.2 Either party may terminate this Agreement if the other party materially
breaches any provision of this Agreement and if such breach is not cured within
thirty (30) days of written notice from the non-breaching party advising of such
breach. For purposes of this section 9.2, to the extent permitted by applicable
law, a party will be deemed to be in material breach of this Agreement if the
party:
(a) Is the subject of a petition in bankruptcy, whether voluntary or
involuntary;
(b) Is or becomes insolvent; or
(c) Ceases to do business in the normal course.
9.3 Upon the termination of this Agreement, (i) if TurboLinux has terminated
this Agreement for Licensee's breach of Sections 2.2, 2.3, 6, 7, or 9, Licensee
shall immediately cease reproducing or distributing the Program and
Documentation, and will return to TurboLinux (or, at TurboLinux's direction,
destroy) all copies of the Program and Documentation in its possession; (ii) if
the Agreement has expired or has terminated for any reason other than as set
forth in the foregoing subsection (i), Licensee shall cease reproducing the
Program and Documentation to be Bundled with Merlin Product as of the effective
date of the termination of this Agreement, and shall have ninety (90) days after
the effective date of the termination to distribute any remaining inventory, and
thereafter will return to TurboLinux (or, at TurboLinux's direction, destroy)
all copies of the Program and Documentation in its possession; and (iii) each
party will return to the other party (or destroy at the other party's direction)
all Confidential Information of the other party.
9.4 Notwithstanding any expiration or termination of this Agreement, the
following provisions expressly survive: Section-,; 2.3 (as to ownership of the
Program and Documentation by TurboLinux), 3, 6, 8, 9.3, 9.4, and 10. Further,
the expiration or termination shall not affect any sublicense agreements validly
granted by Licensee as of the date of expiration or termination.
<PAGE>
10.0 MISCELLANEOUS PROVISIONS.
10.1 Notices. All notices required under this Agreement shall be in writing
and shall be considered given upon personal delivery or delivery by electronic
means (e.g. fax or electronic mail, if a confirmation hard copy is sent as
provided in section 10.1), two business days after sending by air courier,
addressed to the appropriate Account Manager as specified below:
Licensee: Merlin Software Technologies, Inc.
6450 Roberts Street
Suite 420
Vancouver, BC, V5G 4El
CANADA
Attention: Legal
Phone Number: (604) 320-7227
Fax Number: (604) 320-7277
TurboLinux: TurboLinux, Inc.
2000 Sierra Point Parkway
Suite 401
Brisbane, CA 94005
USA
Attention: Legal
Phone Number: (650) 244-7777
Fax Number: (650) 244-7766
10.2 Confidentiality of Agreement. Neither party shall disclose to any
third party the terms of this Agreement other than its existence in general;
provided, however, that either party may disclose the terms of this Agreement to
its attorneys, accountants, bankers, advisors, and investors, and to potential
Investors and their attorneys, accountants, bankers, and advisors.
10.3 Assignment. Neither party may assign nor transfer its rights or
responsibilities set forth in this Agreement without prior written consent of
the other party, which shall not be unreasonably withheld, except in the case of
merger or acquisition of all or substantially all of the stock or assets of a
party, in which case consent will not be required.
10.4 Waiver. A party's failure to exercise any of its rights under this
agreement shall not constitute a waiver or forfeiture of any such rights nor of
any other rights.
10.5 Export. The parties acknowledge that the export of the Program,
Documentation, and TurboLinux Confidential Information may be subject to
regulations which may prohibit the export of such information to certain foreign
countries or the disclosure of such information to certain foreign nationals,
and Licensee agrees to obtain any such approval or equivalent document in
relation thereto, with the reasonable assistance of TurboLinux. The parties,
therefore, agree to comply strictly with all applicable export laws,
regulations, executive orders and the like.
<PAGE>
10.5 Exhibits. In the event of any conflict between an Exhibit and the main
body of this Agreement, the latter shall control. The following Exhibits are
incorporated in full into this Agreement by the first reference to each such
Exhibit:
(a) Exhibit A, Program Description;
(b) Exhibit B, TurboLinux Trademarks;
(c) Exhibit C, Documentation;
(e) Exhibit D, Royalty Schedule and Payment Terms; and
10.7 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of California, U.S.A., without giving
effect to the principles of conflict of law. The United Nations Convention on
Contracts for the International Sales of Goods is specifically excluded from
application to this Agreement.
10.8 Injunctive Relief. Unauthorized use of the Program, any information
contained herein, or other Confidential Information will diminish the value of
either party of the trade secrets and proprietary information that are the
subject of this Agreement. Therefore, if either Party breaches any or its
obligations hereunder, the affected party shall be entitled to equitable relief
to protect its interests therein, including but not limited to injunctive
relief, as well as monetary damages.
10.9 Entire Agreement. This Agreement and the Exhibits represent the entire
agreement between the parties as to the matters set forth and integrates all
prior or contemporaneous discussions and understanding between them. This
Agreement may only be modified by a written' instrument signed by an authorized
representative of both Licensee and TurboLinux.
MERLIN SOFTWARE TECHNOLOGIES, INC. TURBOLINUX, INC.
By: "S. Montgomery" By: "Toni Marie Sutliff"
---------------- ---------------------------
Name: Shelley Montgomery Name: Toni Marie Sutliff
------------------- ----------------------------
Title: V.P. Marketing Title: Sr. Dir. Of Admin.
- -------------------------- -----------------------------
<PAGE>
EXHIBIT A
Product Descriptions
1. Program
The Program is fully described as the binary-based copy of the TurboLinux
Workstation Lite product version 6.0 or later. The Program does not include the
Source Code CD or Companion CD as packaged in the retail version of TurboLinux
Workstation.
The Program will consist of the following elements:
- - the Linux operating system,
- - EnlightenDSM 3.2.0, and
- - royalty free utilities.
2. Merlin Product
The Merlin Product is described as PerfectBACKUP+ version 6.2 or higher.
<PAGE>
EXHIBIT B
TurboLinux Rights
Licensee shall include a trademark acknowledgment in all copies of the Program
and any documentation derived from Documentation. Such acknowledgment shall
specify that the Program and Documentation are based on TurboLinux's Program and
shall be worded as follows:
TurboLinux is a registered trademark of TurboLinux, Inc. TurboLinux Workstation
Lite, TurboLinux Workstation, TurboLinux Server Lite, TurboLinux Server,
TurboCluster Server are trademarks of TurboLinux, Inc. All information
contained in the manual for TurboLinux Workstation Lite is proprietary to
TurboLinux, Inc., and all rights are reserved.
Licensee Rights
TurboLinux shall include a trademark acknowledgement in all copies of the
Program and any documentation derived from Documentation. Such acknowledgment
shall specify that the Program and Documentation are based on Licensee's Program
and shall be worded as follows:
Merlin Software Technologies Inc., Merlin Softech, Merlin, PerfectBACKUP+,
Merlin skateboarder are all Trademarks of Merlin Software Technologies Inc.
<PAGE>
EXHIBIT C
Documentation
Section A - Sublicensable Documentation
TurboLinux will provide an electronic form of the end-user Documentation
currently delivered with the Program when purchased by TurboLinux customer,
including, but not limited to:
(1) TurboLinux Workstation 6.0 User Guide
Section B - Confidential Documentation
This shall include any technical and business information relating to inventions
or products, research and development, product planning methodologies,
manufacturing and engineering processes, costs, profit, or margin information,
employee skills and salaries, finances, customers, marketing and production and
Future business plans of the Discloser. Confidential Documentation may also
include confidential proprietary and/or trade secret information that is owned
by third parties who may have disclosed such information to either party in the
course of such party's business.
<PAGE>
EXHIBIT D
Royalty Schedule and Payment Terms
Subject to Section 3. 1.1 of the Agreement, for each copy of the Program
reproduced by Licensee for distribution via sublicense as authorized in the
Agreement, Licensee shall pay to TurboLinux the following amounts:
- - $ 1.00 for less than or equal to 10,000 units shipped per calendar year.
- - $0.95 for less than or equal to 15,000 units shipped, but more than 10,000
units shipped per calendar year.
- - $0.80 for less than or equal to 25,000 units shipped, but more than 15,000
units shipped per calendar year.
- - $0.60 for more than 25,000 units shipped per year.
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
1. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
2. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
3. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
4. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
5. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
6. RESELLER shall provide MERLIN with a standard zip-sort product sell-thru
report upon request setting forth: (a) detailed information about each customer
that has acquired the Software including company name, address (including e-mail
address) and contact name and the quantity of the Software acquired; and (b)
three month forecast of expected sales.
7. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
8. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
9. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER. MERLIN will provide
RESELLER with completed training forms on their products to assist RESELLER'S
sales force in effectively selling the MERLIN software line.
10. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
11. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that
it shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
12. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
Indemnity:
Publisher shall defend, indemnify, and hold harmless Programmer's Paradise
from and against any claims, demands, liabilities, or expenses, (including
attorney's fees and costs) for any injury or damage, including, but not limited
to any personal or bodily injury or property damage, arising out of or resulting
in any way from any defect in Merchandise. This duty to indemnify shall be in
addition to Publisher's warranty obligations.
Publisher shall defend, indemnify and hold Programmer's Paradise harmless
from and against all damages and costs included by Programmer's Paradise due to
claims of infringement of any patents, copyrights, trademarks, trade secrets, or
other proprietary rights in the manufacture or marketing of Merchandise;
provided that, Programmer's Paradise promptly notifies Publisher of the
infringement claim. Upon claim of infringement, Publisher may, at its expense
and option, either procure the right to continue using any part of Merchandise,
replace same with non-infringing Merchandise, or modify Merchandise to make it
non-infringing; should Publisher be unable or unwilling to replace, modify, or
procure right to continued use of Merchandise within ninety (90) days of claim
notification, Programmer's Paradise may, subject to the limitations in the
following paragraphs, return Merchandise for a full credit or a cash refund, at
Programmer's Paradise's option.
Notwithstanding the foregoing, MERLIN shall in no event be liable to
RESELLER for any special, indirect, incidental, consequential, punitive or
exemplary damages, including loss of profits, loss of data, loss of business,
failure to realize anticipated savings and shall not be liable to RESELLER for
any legal fees and disbursements incurred by RESELLER, in connection with any
claim under this Agreement and/or the Software. MERLIN's total aggregate
liability to RESELLER for any and all claims under this Agreement and/or in
connection with the Software, including any claim under contract (including
fundamental breach), tort (including negligence) or for infringement of
intellectual property rights, shall be limited to direct damages and shall not
exceed the sum of twenty thousand dollars CDN (CDN $20,000).
The term of this Agreement shall commence on the Effective Date and shall
continue in force for one (1) year from such date. Thereafter the Agreement
shall automatically renew for additional one (1) year periods, provided that
during any such renewal period either party may terminate this Agreement for
convenience upon giving thirty (30) days' prior written notice to the other.
Either party may immediately terminate this Agreement or suspend any rights
granted hereunder upon notice to the other in the event that the other party
fails to perform any obligation under this Agreement within fifteen (15) days
after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
RESELLER is an independent contractor and the parties are not agents or legal
representatives of each other and have no power of attorney to represent, act
for, bind or commit each other except as described in this Agreement. Neither
execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
This Agreement, including the attached Schedule "A", constitutes the full and
entire understanding and agreement between RESELLER and MERLIN with respect to
the marketing, demonstration and distribution of the Software and supersedes all
negotiations, commitments and understandings, both verbal and written, with
respect thereto. No modifications, additions, or amendments to the terms of
this Agreement shall be effective unless in writing and signed by the duly
authorized representatives of RESELLER and MERLIN. RESELLER shall fully comply
with the applicable export restriction laws of Canada and the United States in
its distribution of the Software as permitted hereunder. All notices required
or permitted to be given hereunder shall be given by personal delivery and shall
be deemed received at the time of delivery. Time is of the essence in this
Agreement. Any waiver by one party of a breach by the other party hereunder
shall not operate as a waiver of any subsequent or similar breach.
This Agreement is effective the 7 day of March, 2000 (the "Effective Date")
PROGRAMMER'S PARADISE, INC.
1157 Shrewsbury Avenue
Shrewsbury, MJ 97702
(herein referred to as "RESELLER")
/s/ Ronald Gutman
- ---------------------
Signature
Print Name: Ronald Gutman
- ---------------------------
Title: Dir Product Marketing
- ---------------------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
- -------------------
Signature
Print Name:
- ----------------------------------
Title:
- -------------------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED , 200----
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price in U.S. dollars for each copy
of the Software ordered for distribution by RESELLER [less a discount of thirty
five percent (35%).] MERLIN shall be responsible for all shipping and insurance
charges associated with delivery of the Software to RESELLER's address specified
on the Agreement and the terms of each sale shall be DDP (Delivered Duty Paid,
as that term is defined in the publication "Incoterms 2000" published by the
International Chamber of Commerce) RESELLER's address specified on the
Agreement. The full responsibility for credit risk of and collections from
RESELLER's customers rests with RESELLER. All credits and returns in respect of
the Software shall be according to MERLIN's policies then in effect. Unless
otherwise agreed by MERLIN, RESELLER shall be responsible all shipping,
insurance and related costs for all returns of unsold and old versions of the
Software. RESELLER shall pay MERLIN 15% of MERLIN's retail price per copy of
the Software returned to MERLIN as a restocking charge if RESELLER wishes to
replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 7 day of March, 2000.
PROGRAMMER'S PARADISE, INC.
1157 Shrewsbury Avenue
Shrewsbury, MJ 97702
(herein referred to as "RESELLER")
/s/ Ronald Gutman
- ---------------------
Signature
Print Name: Ronald Gutman
- ---------------------------
Title: Dir Product Marketing
- ---------------------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
- -------------------
Signature
Print Name:
- ----------------------------------
Title:
- -------------------------
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
1. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
2. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
3. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
4. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
5. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
6. RESELLER shall provide MERLIN with a written report on a quarterly basis
setting forth: (a) detailed information about each customer that has acquired
the Software including company name, address (including e-mail address) and
contact name and the quantity of the Software acquired; and (b) three month
forecast of expected sales.
7. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
8. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
9. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
10. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
11. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that
it shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
12. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
13. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
14. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
15. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
16. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the 1 day of March, 2000 (the "Effective Date")
COSMOS ENGINEERING CO.
1550 S. Dunsmuir Avenue
Los Angeles, CA 90019
(herein referred to as "RESELLER")
/s/ Clay Claiborne
- --------------------
Signature
Print Name: Clay Claiborne
---------------
Title: President
- -------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: S. Montgomery
- ----------------------------------
Title:
- -------------------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED , 200
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price in U.S. dollars for each copy
of the Software ordered for distribution by RESELLER [less a discount of
thirty-five percent (35%).] MERLIN shall be responsible for all shipping and
insurance charges associated with delivery of the Software to RESELLER's address
specified on the Agreement and the terms of each sale shall be DDP (Delivered
Duty Paid, as that term is defined in the publication "Incoterms 2000" published
by the International Chamber of Commerce) RESELLER's address specified on the
Agreement. The full responsibility for credit risk of and collections from
RESELLER's customers rests with RESELLER. All credits and returns in respect of
the Software shall be according to MERLIN's policies then in effect. Unless
otherwise agreed by MERLIN, RESELLER shall be responsible all shipping,
insurance and related costs for all returns of unsold and old versions of the
Software. RESELLER shall pay MERLIN 10% of MERLIN's retail price per copy of
the Software returned to MERLIN as a restocking charge if RESELLER wishes to
replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 1 day of March, 2000.
COSMOS ENGINEERING CO.
1550 S. Dunsmuir Avenue
Los Angeles, CA 90019
(herein referred to as "RESELLER")
/s/ Clay Claiborne
- --------------------
Signature
Print Name: Clay Claiborne
---------------
Title: President
- -------------------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: S. Montgomery
- ----------------------------------
Title:
- -------------------------
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
1. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
2. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
3. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
4. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
5. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
6. RESELLER shall provide MERLIN with a written report on a quarterly basis
setting forth: (a) detailed information about each customer that has acquired
the Software including company name, address (including e-mail address) and
contact name and the quantity of the Software acquired; and (b) three month
forecast of expected sales.
7. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
8. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
9. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
10. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
11. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that it
shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
12. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
13. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
14. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
15. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
16. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the 1st day of March, 2000 (the "Effective Date")
ITALSEL SRL
(herein referred to as "RESELLER")
/s/ Pierangelo Rossi"
- -------------------------
Signature
Print Name: Pierangelo Rossi
-----------------
Title: President
---------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: S. Montgomery
- ----------------------------------
Title:
- -------------------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED MARCH 1st, 2000
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price in U.S. dollars for each copy
of the Software ordered for distribution by RESELLER [less a discount of forty
five percent (45%).] MERLIN shall be responsible for all shipping and insurance
charges associated with delivery of the Software to RESELLER's address specified
on the Agreement and the terms of each sale shall be DDP (Delivered Duty Paid,
as that term is defined in the publication "Incoterms 2000" published by the
International Chamber of Commerce) RESELLER's address specified on the
Agreement. The full responsibility for credit risk of and collections from
RESELLER's customers rests with RESELLER. All credits and returns in respect of
the Software shall be according to MERLIN's policies then in effect. Unless
otherwise agreed by MERLIN, RESELLER shall be responsible all shipping,
insurance and related costs for all returns of unsold and old versions of the
Software. RESELLER shall pay MERLIN 10% of MERLIN's retail price per copy of
the Software returned to MERLIN as a restocking charge if RESELLER wishes to
replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 1st day of March, 2000.
ITALSEL SRL
(herein referred to as "RESELLER")
/s/ Pierangelo Rossi"
- -------------------------
Signature
Print Name: Pierangelo Rossi
-----------------
Title: President
---------
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: S. Montgomery
- ----------------------------------
Title:
- -------------------------
MERLIN SOFTWARE TECHNOLOGIES INC. ("MERLIN")
RESELLER AGREEMENT
The Parties noted below agree as follows:
1. For the purpose of this Agreement:
"Effective Date" means the date specified below:
"Software" means the computer software programs, in object code form only,
stored on some medium and associated user manuals and other documentation
("Related Documentation") included in the sealed package, developed by MERLIN
and marketed under the trade-mark PerfectBACKUP+.
"Shrink Wrap License" means a document included in the sealed package on
delivery of the Software authorizing an end user to use the Software and Related
Documentation.
"Territory" means worldwide with the exception of Direct Sales in the U.K. and
Southern Ireland.
2. MERLIN hereby grants to RESELLER subject to the terms and conditions
contained in this Agreement, including the attached Schedule "A", a
non-exclusive, non-transferable right to market, demonstrate, distribute and
sell the Software to other distributors, resellers and end user customers in the
Territory for use on computers located in the Territory. RESELLER shall order
all copies of the Software from MERLIN or a MERLIN Authorized Distributor
("SAD") on terms agreed to between RESELLER and MERLIN or SAD and shall use its
best efforts to market, demonstrate and distribute the Software to customers in
the Territory.
3. RESELLER acknowledges that the Software contains confidential and
proprietary information and trade secrets belonging to MERLIN and its licensors,
that title and ownership rights to the Software and the Related Documentation,
including all worldwide intellectual property rights, shall remain exclusively
with MERLIN and its licensors, and that RESELLER's rights to the Software and
the Related Documentation are strictly limited to those specifically granted in
this Agreement. Except as expressly permitted herein, RESELLER shall not make
any copies of the Software or the Related Documentation without the express
written consent of MERLIN.
4. RESELLER shall not make, without the prior written consent of MERLIN, any
claim, representation or warranty about MERLIN or the Software other than
presenting current information that has been published by MERLIN.
5. On all matters relating to the use of MERLIN's trade name, logo and
trade-marks, including without limitation, use in advertising and marketing
materials, RESELLER shall obtain prior written approval of MERLIN in order to
assure proper use and shall follow all written guidelines provided by MERLIN as
to proper use.
6. RESELLER shall alert customers and potential customers to the technical
support options which are available from MERLIN, as advised by MERLIN from time
to time.
7. RESELLER shall provide MERLIN with a written report on a quarterly basis
setting forth: (a) detailed information about each customer that has acquired
the Software including company name, address (including e-mail address) and
contact name and the quantity of the Software acquired; and (b) three month
forecast of expected sales.
8. MERLIN may periodically revise MERLIN's suggested retail price for the
Software in which case RESELLER will be given at least thirty (30) days written
notice.
9. MERLIN shall supply to RESELLER in a timely and efficient manner all
MERLIN promotional material ordered by RESELLER with respect to the Software,
subject to MERLIN's then current charges for such materials.
10. MERLIN shall not be required to make training in the marketing, sale,
operation or use of the Software available to RESELLER.
11. In order for RESELLER and MERLIN to effectively carry out their
respective obligations hereunder, each party may from time to time disclose to
the other party confidential information. Confidential information shall be
clearly designated in writing as confidential, or if verbally disclosed,
identified as being confidential. Without limiting the foregoing, confidential
information of MERLIN includes all information about the Software (subject as
set out below) and any proposed enhancements, new functions, new versions or
other improvements thereto. Confidential information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient without access to
the discloser's confidential information; or
(d) information lawfully disclosed by a third party.
<PAGE>
12. Each party acknowledges a relationship of trust and confidence with
respect to the confidential information of the other. Each party agrees that
it shall not disclose confidential information of the other to any third party
without the express written consent of the other party, that it shall not
reproduce such confidential information or make use of any such confidential
information other than for performance of its obligations under this Agreement,
and that it shall use at least the same degree of care to avoid disclosure of
such information as it uses with respect to its own confidential information.
This obligation shall survive termination of this Agreement and does not
supersede or replace any prior non-disclosure covenants in place between the
parties.
13. OTHER THAN THE WARRANTY PROVIDED TO THE END USER AS SET FORTH IN
MERLIN'S SHRINK WRAP LICENSE, MERLIN DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, INCLUDING, BUT NOT
LIMITED TO, THOSE OF MERCHANTABLE QUALITY, DURABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
14. MERLIN shall in no event be liable to RESELLER for any special,
indirect, incidental, consequential, punitive or exemplary damages, including
loss of profits, loss of data, loss of business, failure to realize anticipated
savings and shall not be liable to RESELLER for any legal fees and disbursements
incurred by RESELLER, in connection with any claim under this Agreement and/or
the Software. MERLIN's total aggregate liability to RESELLER for any and all
claims under this Agreement and/or in connection with the Software, including
any claim under contract (including fundamental breach), tort (including
negligence) or for infringement of intellectual property rights, shall be
limited to direct damages and shall not exceed the sum of twenty thousand
dollars CDN (CDN $20,000).
15. The term of this Agreement shall commence on the Effective Date and
shall continue in force for one (1) year from such date. Thereafter the
Agreement shall automatically renew for additional one (1) year periods,
provided that during any such renewal period either party may terminate this
Agreement for convenience upon giving thirty (30) days' prior written notice to
the other. Either party may immediately terminate this Agreement or suspend any
rights granted hereunder upon notice to the other in the event that the other
party fails to perform any obligation under this Agreement within fifteen (15)
days after receiving notice from the terminating party. On expiration or
termination, each party shall promptly remit to the other all unpaid monies due
under this Agreement and shall return to the other party all confidential
information of the other party in its possession or control. This Section 15
and Sections 3, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement.
16. RESELLER is an independent contractor and the parties are not agents or
legal representatives of each other and have no power of attorney to represent,
act for, bind or commit each other except as described in this Agreement.
Neither execution nor performance of this Agreement shall be construed to have
established any joint venture or partnership between MERLIN and RESELLER. In
the event that any provision of this Agreement shall not be enforceable, the
remainder of this Agreement shall remain in full force and effect. This
Agreement is not assignable. This Agreement and any matters relating thereto
shall be governed, construed and interpreted in accordance with the laws of the
Province of British Columbia, Canada, without regard to its conflicts of laws
rules. The provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. In the event of
any dispute hereunder, the parties hereby irrevocably submit to the jurisdiction
of the courts of the Province of British Columbia.
17. This Agreement, including the attached Schedule "A", constitutes the
full and entire understanding and agreement between RESELLER and MERLIN with
respect to the marketing, demonstration and distribution of the Software and
supersedes all negotiations, commitments and understandings, both verbal and
written, with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and signed by
the duly authorized representatives of RESELLER and MERLIN. RESELLER shall
fully comply with the applicable export restriction laws of Canada and the
United States in its distribution of the Software as permitted hereunder. All
notices required or permitted to be given hereunder shall be given by personal
delivery and shall be deemed received at the time of delivery. Time is of the
essence in this Agreement. Any waiver by one party of a breach by the other
party hereunder shall not operate as a waiver of any subsequent or similar
breach.
This Agreement is effective the ----- day of -----------, 200--- (the "Effective
Date")
CIRCADIAN SOFTWARE
8185 Pillow Rd.
Sebastepol, CA 95472
(herein referred to as "RESELLER")
/s/ Bryan Kennedy
- -------------------
Signature
Print Name: Bryan Kennedy
--------------
Title: Owner
-----
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: S. Montgomery
- ----------------------------------
Title: V.P. Sales
- -------------------------
<PAGE>
MERLIN SOFTWARE TECHNOLOGIES INC.
SCHEDULE "A" TO RESELLER AGREEMENT
BETWEEN THE PARTIES DATED 2/4, 2000
(the "Agreement")
Until such time as MERLIN has advised RESELLER of the name of a MERLIN
Authorized Distributor from which RESELLER can order the Software, RESELLER
shall order all copies of the Software from MERLIN by providing MERLIN with an
order form referencing this Agreement, requesting a delivery date, stating the
ship-to-address and specifying the number of copies required.
RESELLER shall pay MERLIN its U.S. list price in U.S. dollars for each copy
of the Software ordered for distribution by RESELLER [less a discount of forty
percent (40%).] MERLIN shall be responsible for all shipping and insurance
charges associated with delivery of the Software to RESELLER's address specified
on the Agreement and the terms of each sale shall be DDP (Delivered Duty Paid,
as that term is defined in the publication "Incoterms 2000" published by the
International Chamber of Commerce) RESELLER's address specified on the
Agreement. The full responsibility for credit risk of and collections from
RESELLER's customers rests with RESELLER. All credits and returns in respect of
the Software shall be according to MERLIN's policies then in effect. Unless
otherwise agreed by MERLIN, RESELLER shall be responsible all shipping,
insurance and related costs for all returns of unsold and old versions of the
Software. RESELLER shall pay MERLIN 10% of MERLIN's retail price per copy of
the Software returned to MERLIN as a restocking charge if RESELLER wishes to
replace older versions of the Software with the then current version.
All monies are due and payable under this Agreement upon receipt of
invoice. RESELLER shall pay interest on accounts overdue by more than thirty
(30) days at a rate of one and one half percent (1.5%) per month (18% per annum)
or the maximum legal interest rate, whichever is less. MERLIN reserves the
right to require security for payment from RESELLER for any particular or all
orders. Title to all copies of the Software included with each order shipped to
RESELLER shall remain with MERLIN until payment in full is received by MERLIN
for such order. RESELLER hereby grants to MERLIN a purchase money security
interest in all copies of the Software delivered to RESELLER and all proceeds
thereof, as security for payment. MERLIN is entitled to file, in any
jurisdiction where the Software delivered to RESELLER is located, a financing
statement in order to perfect its purchase money security interest granted
herein. RESELLER acknowledges receipt of a copy of the Agreement and this
Addendum and waives its right to receive a copy of any financing statement or
financing change statement filed by MERLIN.
Dated this 14th day of February, 2000.
CIRCADIAN SOFTWARE
8185 Pillow Rd.
Sebastepol, CA 95472
(herein referred to as "RESELLER")
/s/ Bryan Kennedy
- -------------------
Signature
Print Name: Bryan Kennedy
--------------
Title: Owner
-----
MERLIN SOFTWARE TECHNOLOGIES INC.
Ste. 420-6450 Roberts Street
Vancouver, B.C.
Canada V5G 4E1
(herein referred to as "MERLIN")
/s/ S. Montgomery
- -------------------
Signature
Print Name: S. Montgomery
- ----------------------------------
Title: V.P. Sales
- -------------------------
ELinux, Vendor Agreement
- --------------------------
2555 W. 190th Street
Torrence, CA 90504
(877)-38-LINUX
www.eLinux.com
- --------------
This agreement is by and between Merlin Software located at "Vancouver, B.C."
(herein called "Vendor") and eLinux.com, and its affiliates located at 2555 W.
19th St. in Torrence, CA 90504 (herein collectively called "Reseller").
1.0 APPOINTMENT OF RESELLER
1.1 Vendor grants to Reseller and Reseller accepts the non-exclusive right
to purchase and resell all products produced and/or offered by Vendor during the
term of this Agreement.
1.2 Pricing to Reseller. Vendor shall sell to Reseller at the lowest price
and/or best discount at which Vendor makes the Product available to any other
similar purchaser of equivalent volumes of the products. Reseller shall not be
required to purchase any minimum amount or quantity of the product. If Vendor
offers price discounts, promotional discounts or other special prices to its
other similar customers. Reseller shall also be entitled to participate in and
receive notice of the same no later than Vendor's other similar customers of
equivalent volumes of products.
1.3 Payment Terms. The terms on Reseller's initial order from Vendor shall
be net ninety (90) days. Subsequent order payment terms shall be net sixty (60)
days from the date of receipt of Product or the date of the payment postmark
date.
1.4 Price Adjustments. If Vendor reduces any Product price, or offers
increased discounts to any customer, Vendor will promptly credit Reseller for
the difference between the original product price and the reduced Product price
for any Product in transit to Reseller on the price reduction or increased
discount offer date and any unshipped orders, within thirty (30) days from the
effective date of the reduced price. If the credit owed exceeds Reseller's
account balance owing to Vendor, then Vendor will send a check. In the event
that Vendor shall raise the list price of a Product, all orders for such Product
placed prior to the effective date of the price increase shall be invoiced at
the lower price. Vendor shall provide Reseller with sixty (60) days advance
notice in writing of any price increases.
1.5 Participation in Pricing and Promotions. Vendor shall offer to Reseller
the opportunity to participate in any promotions, advertising funds or market
development fund program now in effect for any other similar Reseller or
distributor of equivalent volumes of the products, or in the future offered to
any other similar Reseller or distributor of equivalent volumes of the products,
at the same time and on the same terms and conditions.
2.0 PRODUCT RETURN
2.1 Stock Balancing. Reseller may return to Vendor at any time defective
products purchased from the vendor for full credit or cash in the amount of the
product's purchase price. Vendor will pay all freight charges for returned
defective products.
2.2 Product Discontinuation. Vendor shall give Reseller thirty (30) days
advance written notice of Product discontinuation. Reseller may return all such
product for full credit of Product purchases price plus all reasonable freight
charges incurred by Reseller in returning the Products.
2.3 Return Merchandise Guarantee. Vendor understands and agrees that from
time to time, Reseller will accept merchandise return for customer satisfaction
within one month from the data of sale to each customer. Such returns will be
considered defective returns. Vendor agrees to accept all such returned
merchandise for full credit to further orders only. RMS numbers will be issued
for product up to from the date of retail sale to the end user. Vendor will
pay the cost of freight on all defective returns.
3.0 VENDOR SUPPORT OBLIGATIONS
3.1 Evaluation Units. Vendor agrees to provide Reseller, free of charge, up
to five fully working units of each product, for the purpose of demonstration
and evaluation.
3.2 Support. At no charge to Reseller, Vendor shall support Product to the
end-user. Vendor shall also supply to Reseller, its employees, and its
customers reasonable amounts of sales literature, advertising materials, and
training and support in Product sales. vendor shall, at a minimum: Initially
provide to Reseller and subsequently timely update, free of charge, price
schedules, data sheets, brochures, point-of-sale aids, technical information,
instructional and other materials, online reviews, and relevant online
information in regards to the product line; Keep Reseller timely informed of
changes in product including upgrades, defects, incompatibilities, and other
relevant matters; Provide Reseller, and its End Users, where appropriate,
reasonable Product support by email or with phone assistance to the technical
staff at eLinux.com as needed.
3.3 New Product. Vendor shall endeavor to notify Reseller at least thirty
(30) days before the date any new product is introduced. Vendor shall make such
Product available for resale by Reseller no later than the date it is first
offered for sale in the marketplace.
<PAGE>
3.4 Compatibility. Reseller shall not be held accountable for any customers
system failure issues associated with the installation of the Vendor's product.
Any issues that arise to this nature that cannot be resolved with technical
support provided by the Reseller acting reasonably, shall be referred to the
Vendor.
4.0 SHIPPING, FREIGHT AND DELIVERY
4.1 Shipping and Freight. Vendor shall ship Product pursuant to Reseller
purchase order(s) ("P.O.") PO's shall be shipped F.O.B. Reseller's designated
warehouse with risk of loss or damage to pass to Reseller upon delivery to the
U.S. based warehouse specified in Reseller's P.O. Vendor is responsible for all
costs of freight including insurance, duties, and COD charges. All shortages
shall be deducted from the invoice.
4.2 Delivery. All shipments shall arrive at Reseller's designated warehouse
within 24 hours of the promised delivery time on the P.O. or Reseller shall
receive a 2% discount on the invoice price. Reseller reserves the right to
cancel any purchase order, in whole or in part, prior to shipment.
4.3 Product Information. Vendor shall provide Reseller and subsequent
timely update, all relevant information with regard to product shipping weight,
exact dimensions, and case quantity and size.
4.4 Packaging. Vendor agrees to provide to Reseller, at no cost,
replacement packaging for all items damaged in shipping to reseller's U.S. based
warehouse. In addition, Vendor will ship product in compliance with the
following applications: Only one type, model and configuration of product shall
be shipped on a single pallet; Each unique part number will be shipped with the
same unique UPC code (i.e. the same part number will not be shipped bearing two
or more different UPC codes). Each product shall be clearly marked on the
outside of the box with its configuration and serial number. All boxes in which
product is shipped shall be constructed of at least 200 burst cardboard box
material. Vendor shall provide a packing list for each shipment showing each
purchase order and invoice included in that shipment.
5.0 ADDITIONAL TERMS
5.1 General Indemnity. Vendor shall defend, indemnify and hold harmless the
reseller from and against any loss, damage or expense, including without
limitation reasonable attorney's fees, arising from any claim, suit, judgment or
proceeding brought or asserted any third party, or any nature, arising in any
manner from, relative to or in conjunction with Vendor's acts of failure to act.
FCC Compliance - In addition to any other warranties, express or implied, Vendor
also warrants that all of its Products provided to Reseller are in full
compliance with all applicable Federal Communication Commission requirements.
Reseller shall defend, indemnify and hold harmless the reseller from and against
any loss, damage or expense, including without limitation reasonable attorney's
fees, arising from any claim, suit, judgment or proceeding brought or asserted
any third party, or any nature, arising in any manner from, relative to or in
conjunction with Reseller's acts or failure to act. FCC Compliance - In
addition to any other warranties, express or implied.
5.2 Intellectual Property Warranty, Indemnity and Authorization. Vendor
represents and warrants that it owns or is the authorized licensee of all right,
title and interest in and to any trademarks, service marks, trade , trade names,
logos, designs, copyright, patents and any other proprietary rights (the "IP
Rights") that appear on Vendor's Products, are used in connection with the
advertising or function of Vendor's Products or otherwise are associated with
Vendor's Products. Vendor shall defend, indemnify and hold harmless Reseller
from final judgments for damages by courts of competent jurisdiction, arising in
any manner from, relative to or in connection with Vendor's IP Rights. Reseller
shall have the right to participate in the defense of any claim or suit brought
against Reseller and/or Vendor related to Vendor's IP right at Reseller's sole
expense and through counsel of Reseller's choosing. Vendor hereby authorizes
Reseller to use Vendor's IP Right in Reseller's advertising, sale and
distribution of Vendor's products with Vendor's reasonable guidelines on such
use. Limitations on liability to valid U.S. patents issued as of the date of
this Agreement. Any indemnity is conditional to Reseller promptly advising
Vendor of any claim, cooperating or not, agreeing to settle or compromise the
claim without Vendor approval.
5.3 Termination. This Agreement will remain in effect until terminated by
either party without cause on 30 days notice in writing to the other party.
This Agreement may be terminated for cause within 24 hours notice in writing to
the other party. Any notice of cancellation of this Agreement shall be given in
person or via confirmed fed-ex notification.
5.4 Entire Agreement/Conflicts. This Agreement is the entire contract
between the parties, and supersedes all prior negotiation, understanding or
agreements, written or oral. The Creative computer Advertising Agreement may
supplement this Agreement, but this Agreement controls over any conflicting
terms in the Advertising Agreement, this Agreement controls. To the extent that
any term in a form or document used or prepared by Vendor differs or conflicts
with this Agreement, this Agreement controls.
5.5 Modifications. Any and all changes and additions to the above must be
agreed to in writing by both parties.
5.6 Governing Law, Jurisdiction and Venue. This Agreement is entered in
California and the substantive laws of the state of California (and not the law
regarding conflicts of law) shall govern any disputes. Any dispute arising from
this Agreement or the Advertising Agreement shall be resolved in state or
federal court in Los Angeles County, California and the parties hereby submit to
jurisdiction and venue in such courts.
<PAGE>
5.7 Statement on Y2K Compliancy. Vendor expressly warrants and represents
that all products sold to Reseller under this Agreement will not produce
operational, logical or arithmetic inconsistencies or otherwise fail to properly
function when dealing with dates beyond 1999, the so-called Year 2000 Bug.
Vendor understands that Reseller is relying upon this warranty and
representation in purchasing product from Vendor and that but for this warranty
and representation Reseller would not purchase and resell such products. Vendor
further agrees to defend and indemnify Reseller from and against all successful
claims, demands, suits or actions against Reseller or any of its affiliated or
subsidiary companies arising out of or related to the failure of products
purchased hereunder by Reseller to properly deal with the dates beyond 1999 as
described herein. Any indemnification is conditional upon Reseller promptly
notifying cooperating in the defence thereof and not compromising or agreeing to
settlement of such claim without Vendor's consent. No liability to the extent
that failure is due to interaction with third party products, or product
customized to Resellers or End-Users specifications, or if failure is due to
modifications to products by any party other than Vendor.
/s/S. Montgomery V.P. Sales April 4, 2000 /s/Komal Shah April 5th, 2000
- ------------------------------------------ ----------------------------
Vendor Representative Name/Title eLinux.com Representative Title
Vendor Representative Signature Date
Komal Shah, Director of Marketing
- -------------------------------------
eLinux.com Signature Date
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> DEC-31-1999
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0
0
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</TABLE>
