UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS Under Section 12(b) or (g) of the
Securities Exchange Act of 1934
EDUVERSE.COM
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(Name of Small Business Issuer in its charter)
Nevada 88-0277072
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1135 Terminal Way
Suite 209
Reno, Nevada 89502-2168
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (775) 332-3325
Securities to be registered under Section 12(b) of the Act:
None Not Applicable
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Title of each class to be so registered Name of each exchange on which
each class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 par value
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(Title of Class)
Not Applicable
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(Title of Class)
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TABLE OF CONTENTS
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Page
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NOTE REGARDING FORWARD LOOKING STATEMENTS.........................................................................2
ITEM 1 DESCRIPTION OF BUSINESS.............................................................................2
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............12
ITEM 3 DESCRIPTION OF PROPERTY............................................................................25
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....................................25
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.......................................26
ITEM 6 EXECUTIVE COMPENSATION.............................................................................28
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................30
ITEM 8 DESCRIPTION OF SECURITIES..........................................................................30
PART II 32
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS............................................................................................32
ITEM 2 LEGAL PROCEEDINGS..................................................................................32
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS......................................................32
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES............................................................33
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................................................35
PART III 59
ITEM 1 INDEX TO EXHIBITS..................................................................................59
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ITEM 1 DESCRIPTION OF BUSINESS
Note Regarding Forward Looking Statements
Except for statements of historical fact, certain information contained herein
constitutes "forward-looking statements," including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, as well as all projections of future results. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results or achievements of the Company
to be materially different from any future results or achievements of the
Company expressed or implied by such forward-looking statements. Such factors
include, but are not limited to the following: the Company's limited operating
history, competition, management of growth and integration, risks of
technological change, the Company's dependence on key personnel, marketing
relationships and third-party suppliers, the Company's ability to protect its
intellectual property rights and the other risks and uncertainties described
under "Description of Business - Risk Factors" in this Form 10-SB. Certain of
the forward looking statements contained in this registration statement are
identified with cross references to this section and/or to specific risks
identified under "Description of Business - Risk Factors."
Overview
The Company develops and markets software programs under several product
names to assist non-English speaking students in learning spoken English. In
addition to traditional "boxed" software available in retail stores, the Company
has been delivering its software products via the Internet since the launch of
its Internet-enabled product line in December 1998.
The Company was incorporated in Nevada in 1991 under the name Ward's Futura
Automotive, Ltd. The Company subsequently changed its name to Perfect Future,
Ltd. and amended its articles of incorporation to authorize 5,000,000 shares of
preferred stock, $0.001 par value. On December 22, 1997, the Company effected a
2.5:1 split of its issued and outstanding common stock. On June 16, 1998 the
Company changed its name to EDUVERSE Accelerated Learning Systems, Inc. and on
May 19, 1999, the Company changed its name to eduverse.com. The Company did not
engage in any business operations from its inception until May 1998, when it
acquired ESL PRO Systems, Inc., a Nevada corporation ("ESL PRO") and M&M
Information and Marketing Services, Inc., a Nevada corporation ("M&M").
On May 28, 1998, the Company purchased all the issued and outstanding
capital stock of ESL PRO in exchange for 2,000,000 shares of the Company's
common stock. ESL PRO presently owns a software license for some of the
Company's current English teaching systems incorporated in the Company's ENGLISH
PRO Version 6.2 software. On May 29, 1998, the Company purchased all the issued
and outstanding capital stock of M&M in exchange for 7,000,000 shares of the
Company's common stock. M&M presently owns to rights to certain technology
designs and methods for designing and delivering advanced learning systems via
the Internet. As a result of these acquisitions, the former shareholders of ESL
and M&M, as a group, owned more than 50% of the issued and outstanding voting
shares of the Company. Consequently, this business combination has been
accounted for as a reverse acquisition whereby ESL and M&M are deemed to have
been combined, on a continuity of interests basis, since their inception on May
5, 1998 and to have acquired the Company. Accordingly, the financial statements
of the Company reflect the historical accounts of ESL and M&M since their
inception at their historic net book values, and the accounts of the Company,
comprising nominal net assets, at their estimated fair value at the time of the
transaction
On July 20, 1998, the Company formed EDUVERSE Accelerated Learning Systems
(Canada), Inc., a British Columbia, Canada corporation ("EDUVERSE Canada").
EDUVERSE Canada operates the Company's development and marketing operations.
The Company's common stock currently trades on the NASD
Over-The-Counter-Market Bulletin Board ("OTCBB") under the symbol "EDUV." The
Company's registered office is located at Suite 209, 1135 Terminal Way, Reno,
Nevada 89502-2168 and its phone number at that address is (775) 332-3325.
EDUVERSE Canada's principal executive offices are located at 2nd Floor, 1235
West Pender Street, Vancouver, British Columbia V6E 2V1 and its phone number at
that address is (604) 623-4864.
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Industry Background
The market for educational software is relatively small, but growing. It is
often described in two market segments: consumers and educational institutions.
The Company competes in both of these segments. The factors driving the growth
in the market include increasing penetration of personal computers in homes,
expanding distribution channels for educational software, growth in consumer and
educational publications featuring educational software and increased awareness
of the potential of multimedia as an effective educational tool.
The distribution channels for consumer educational software products have
expanded significantly in recent years. Traditionally these products were sold
through specialty software stores. Today, these products are increasingly sold
through these and other distribution channels, including the Internet, computer
superstores, consumer electronic stores, mass merchants, office supply, discount
warehouse stores and bookstores. While the number of distribution outlets has
increased, competition for retail shelf space and customer awareness has also
increased due to growth in the numbers of products and publishers competing for
that shelf space and awareness. The Company believes that, with proliferation of
software titles and the corresponding decrease in the availability of retail
shelf space, it becomes increasingly important to find alternative methods of
offering educational software products to the public such as via the Internet or
in educational settings.
The market for educational software in educational institutions is also
expanding and changing rapidly. School sales of educational software are being
driven by growth in penetration of computers into schools, upgrades of the
installed base to new multimedia computers, increases in the number of teachers
trained to incorporate technology-based products into their curriculum and
changes in governmental funding authorizations to encourage the use of
technology-based instructional materials. In addition, educational institutions
are increasingly requiring students to use particular software applications as
part of their coursework requirements. The Company believes that distributors
and vendors marketing to the educational software market in schools choose
products on the basis of their educational content and the reputation of the
publisher and its products among teachers and other educational professionals.
The educational software industry has been characterized over the last few
years by a high degree of consolidation, which favors companies with greater
resources than the Company. This consolidation has provided certain of the
Company's competitors with increased financial resources, marketing power and
distribution capabilities. Larger companies that offer a wide range of products
also may find it easier to gain access to shelf space than smaller companies,
such as the Company, and they are more able to proliferate product offerings,
including bundles and suites for a single low price. This strategy is used to
dominate shelf space and may tend to reduce shelf lives and prices for
individual products. Additional consolidation may tend to result in increased
price competition for educational software products. In addition, in some cases,
these competitors have invested heavily in marketing and delivering their
products over the Internet.
eduverse.com
The Company develops and markets software programs under several product
names to assist non-English speaking students in learning spoken English. In
addition to traditional "boxed" software available in retail stores, the Company
has been delivering its software products via the Internet since the launch of
its Internet-enabled product line in December 1998.
The Company's core software products feature phonetic-based English
language tutorial systems, which use multimedia presentations to help
non-English speaking students learn English language pronunciation. The Company
produces a shrink-wrapped version of its software called ENGLISH PRO, which is
sold in retail stores at a suggested retail price of $29.99, an Internet-enabled
version of its software called ENGLISH PRO Web Edition, which is available for
free from the Company's web portal at http://www.freeENGLISH.com, and a
network-enabled version of its software called ENGLISH PRO Network Edition,
which is designed to be installed on private computer networks. Revenues are
currently generated only from the sale of CD-ROM software packages. For the year
ended December 31, 1998, 36% of the Company's software sales were derived from
one customer. The Company anticipates generating revenues from its ENGLISH PRO
Web Edition and ENGLISH PRO Network Edition products by charging fees for
advertising that is placed within the ENGLISH PRO Web Edition and ENGLISH PRO
Network Edition software. To date, the Company has not generated any revenues
from the ENGLISH PRO Web
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Edition and ENGLISH PRO Network Edition products. All of the Company's products
operate only on Windows computers.
The Company distributes ENGLISH PRO in retail computer stores and
bookstores. The Company distributes ENGLISH PRO Web Edition through its
freeENGLISH.com Internet Web site and through Internet Service Providers
("ISPs") and Web portals. The Company plans to distribute its ENGLISH PRO
Network Edition through corporate intranets and computer networks operated by
educational institutions. Currently, the Company has an agreement with the
Ministry of University Affairs in Thailand to offer its software products to
university students in Thailand via the University Network in Thailand (UniNet),
a proprietary computer network operated by the Ministry. The Company estimates
that upon implementation of ENGLISH PRO Network Edition on the UniNet,
approximately one million students in Thailand will have access to the Company's
English language teaching software.
The Company intends to further promote the sale and use of its educational
software products by:
o continuing to distribute its software products through traditional
retail channels;
o making its educational software products available free to Internet
users; and
o entering into agreements with foreign educational institutions and
other operators of private computer environments to distribute its
products on their proprietary networks.
Distribution Through Traditional Retail Channels. The Company currently
distributes its shrink-wrapped CD-ROM product, ENGLISH PRO, through traditional
retail outlets, such as retail computer stores and bookstores, through the
efforts of its in-house sales and marketing department and traditional
distributors. The Company's ENGLISH PRO product line is marketed in the United
States and Canada on an non-exclusive basis by Tri Synergy, Inc. and is also
distributed in other countries by a number of non-exclusive distributors. The
Company currently distributes its CD-ROM version of ENGLISH PRO through 500
retail outlets in North America and anticipates that over 1,000 retail outlets
in North America will carry its products before the end of 1999.
Free Distribution over the Internet. Since December 1998, the Company has
distributed its Internet-enabled software ENGLISH PRO Web Edition free of charge
from its Web portal at http://www.freeENGLISH.com. The Company plans to generate
revenues on this product by charging fees for advertising that is placed within
the ENGLISH PRO Web Edition software. In order to drive traffic to its
freeENGLISH.com Internet Web site, the Company has established a freeENGLISH
affiliate program pursuant to which ISPs, Web portals and other online sites
have agreed to place a link to the Company's freeENGLISH.com Internet Web site
on their Web sites in exchange for receiving a portion of the advertising
revenues generated. Typically, an affiliate program participant is entitled to
receive 10% - 15% of all revenue generated in this manner. In addition, under
the program agreements, the affiliate program participants are entitled to share
revenues generated from the sale of goods and services to the affiliate program
participants' users by third-party Web sites with which the Company has signed
an affiliate program agreement.
As of August 24. 1999, the Company has affiliate program agreements with
eight ISPs and five Web portals:
Internet Service Providers / Location
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Internet KCS -- Thailand
Freeinet -- United States
X-Steam -- United Kingdom
eHola -- Columbia, United States, Mexico, Argentina, Brazil, Chile,
Venezuela, Peru, Ecuador, Guatemala, El Salvador, Costa Rica
and Panama.
Xin Net Corp. -- China
MDI Corp. -- Canada, Hong Kong, China.
Infinet Group -- Canada
MIMOS BERHAD -- Malaysia
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Web Portals / Location
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African News Online -- United States
CompuCollege School of Business -- Canada
CIBT -- China
2dobiz.com -- Canada, China, United States, Hong Kong, Philippines,
Mexico, Japan, Switzerland.
Utusan Multimedia Sdn. Bhd. -- Malaysia
Where a freeENGLISH affiliate program participant targets a foreign market in
which the Company has not previously distributed its products, the Company
generally works with the affiliate program participant to translate the required
freeENGLISH.com Web pages and ENGLISH PRO Web Edition software program
information. Currently, the Company's freeENGLISH.com Web Site and software is
available in English, Chinese (simplified Chinese), Spanish and Portuguese. In
addition, to date, each of the ISPs with whom the Company has signed an
affiliate program agreement, has agreed to distribute ENGLISH PRO Web Edition on
any CD-ROM that it distributes to install the necessary software to browse the
Internet and connect to its services.
Foreign Educational Institutions and Private Online Networks. In addition
to retail software sales and distribution over the Internet, the Company plans
to provide its ENGLISH PRO Network Edition software to educational and other
institutions that operate private computer networks and collect advertising fees
for advertisements placed within the software. ENGLISH PRO Network Edition is a
multi-user version of ENGLISH PRO Web Edition. The Company's wholly-owned
subsidiary, EDUVERSE Canada, recently signed an agreement with the Ministry of
University Affairs in Thailand to provide ENGLISH PRO Network Edition to 24
Universities and 37 Information Technology campuses (a combined total of 70,000
workstations) on the University Network (UniNet) in Thailand. Under terms of the
agreement, the Company has agreed to provide installation, support and upgrades
necessary to provide ENGLISH PRO Network Edition to approximately one million
university students using the UniNet. Installation is comprised of the Company
placing approximately six ENGLISH PRO Network Edition servers (running Windows
NT, Microsoft SQL Server, Microsoft Internet Server and ENGLISH PRO Network
Edition server software) on the UniNet. These servers control the data flow
between the workstations and the Company's central server located in Canada. The
estimated cost for hardware, software and travel for installation of the
Company's servers on the UniNet is approximately $35,000. In addition, the
Company has agreed to provide support services comprised of a Web-based
installation and management system which controls the installation of ENGLISH
PRO Network Edition on the workstations and manages the connection to the
ENGLISH PRO Network Edition servers. The Company expects there will be no
significant additional costs incurred by the Company for providing this support
as the web-based installation and management system is a key component of the
ENGLISH PRO Network Edition software. Upgrades are provided immediately upon
their release by the Company, via the ENGLISH PRO Network Edition servers and
workstation software and the web-based installation and management system. Under
the terms of the agreement, the Ministry will receive a 15% commission on gross
revenues generated from advertising displayed on the Company's software that is
accessed through its private computer network. The Company is currently
installing the software and servers and expects to complete the installation of
ENGLISH PRO Network Edition on the UniNet network before November 30, 1999.
Additionally, EDUVERSE Canada has signed a Memorandum of Understanding to
jointly develop and deploy additional educational programs for the students of
Thailand.
The Company is currently meeting with other educational ministries in
Malaysia, Taiwan, and China and with private corporations in Asia which require
English language training. The Company's goal is to enter into similar
agreements with one of these ministries and with one or more private
corporations prior to December 31, 1999.
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Products
The Company's current product line consists of seven software titles:
o ENGLISH PRO Version 6.2 (single user)
o ENGLISH PRO Version 6.2 (multi-user)
o ENGLISH PRO Web Edition
o ENGLISH PRO Network Edition
o English as a Second/Foreign Language - Learn2.com, Inc.
o ENGLISH PRO Version 7.0 (single user) (under development)
o ENGLISH PRO Version 7.0 (multi-user) (under development)
ENGLISH PRO Version 6.2 (single user). ENGLISH PRO Version 6.2 (single
user) teaches English using phonics and uses an advanced instructional method
called Mental Mapping, a process which involves matching the sounds of the
English language to keys on an onscreen phonetic keyboard, thereby reinforcing
them in the student's mind. This version of ENGLISH PRO consists of over 2,000
commonly used words, a Picture Dictionary with over 1,700 definitions, an
animated pronunciation simulator, 260 lessons and 130 hours of private
instruction. The suggested retail price is $29.99.
ENGLISH PRO Version 6.2 (multi-user). This multi-user version of ENGLISH
PRO is designed for use in school, government and corporate computer
environments that operate a local area network (LAN). This multi-user product
has additional features required for academic, corporate and government use,
including the ability to reprint workbooks, a teacher's manual and course
curriculum outline. The multi-user product also comes with a student login and
monitoring system known as the Student Progress Monitor (SPM). Through the SPM
program, teachers and administrators can customize each student's course flow,
access individual achievement levels and monitor a student's progress through
the system. The suggested retail price of the multi-user version is $199 per
workstation.
ENGLISH PRO Web Edition. ENGLISH PRO Web Edition also teaches English using
phonics, however it incorporates proprietary onscreen phonetic keyboard, new
lesson content, dictionary definitions, studio recorded sounds, a visual
pronunciation assistant and contains embedded banner advertising, for which the
Company charges a fee to advertisers. ENGLISH PRO Web Edition uses the latest in
development technologies and teaching methodologies and was designed in
conjunction with Dr. E. Wyn Roberts, a professor of linguistics and a graduate
of Cambridge University, who is the head of the Company's Educational Advisory
Board. The product teaches English phonetically and in future releases is
anticipated to include whole language instruction, including conversational
English. ENGLISH PRO Web Edition is an Internet-enabled software program which
can be installed free from the Internet and which allows users to download
lesson materials from the Internet. In addition, ENGLISH PRO Web Edition
contains a feature called "Check for Updates," which reduces support problems
normally found in updating older versions of software by allowing users to
download program updates on demand.
ENGLISH PRO Network Edition. This multi-user version of ENGLISH PRO Web
Edition is designed for use in school, government and corporate computer
environments that operate local or wide area networks (LAN or WAN) and contains
embedded banner advertising, for which the Company charges a fee to advertisers.
This multi-user product has additional features required for multi-user login
from personal computer workstations on the network and includes special server
software that resides on the Company's computers placed on the LAN or WAN. It
takes advantage of emerging network technologies, allowing for a central
location containing all course curriculum and student records. Enhanced
reporting features for teachers, along with a course management system in
ENGLISH PRO Network Edition, allows flexibility in its implementation and
integration into existing curriculum. The Company is currently installing this
version of ENGLISH PRO within the Thailand Ministry of University Affairs'
private computer network.
English as a Second/Foreign Language. This Internet-deliverable English
tutorial program was developed in partnership with Learn2.com, Inc. using
Learn2.com's proprietary development tools. The course is available through
Learn2.com's Learning University at www.learninguniversity.com and its
resellers. Students subscribe to the course online and pay for it with their
credit cards. The Company's English as a Second/Foreign Language program is sold
at www.learninguniversity.com based on 3 pricing levels: $19.95 per month of
use, $39.95 per six months of use and $59.95 per twelve months of use. Every
three months, the Company is entitled to receive 30% of the revenue
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generated from the sale of its program by the Learn2.coms and its resellers. To
date, the Company has not received any funds from Learn2.com and the Company
does not expect that significant revenues will be generated from this program.
ENGLISH PRO Version 7.0 (single user). This product is ENGLISH PRO Web
Edition without embedded advertising that can be used on a personal computer.
The Company expects that this product will be released on CD-ROM by November 1,
1999 and will have a retail price of $29.99.
ENGLISH PRO Version 7.0 (multi-user). This product is ENGLISH PRO Network
Edition without embedded advertising and is designed for use in environments
that operate on local or wide area networks. The Company expects that this
product will be released on CD-ROM by the second quarter of 2000.
Markets
The Company has identified 30 countries that it believes have the largest
market potential for its products. The major geographical regions these
countries fall in to are: Asia Pacific, Latin America, North America, Western
Europe and the Middle East. Within these geographic regions, the Company has
identified the following market segments for its English language tutorial
products.
Foreign Educational Institutions. The Company intends to offer its ENGLISH
PRO Network Edition software free to educational institutions that allow
advertisements to be displayed to their students. For educational institutions
that do not allow advertisements, the Company plans to make ENGLISH PRO Network
Edition available under the product name ENGLISH PRO Version 7.0 (multi-user)
during the second quarter of 2000. The Company currently has an affiliate
program agreement with the Ministry of University Affairs in Thailand to
distribute its English language teaching software on its private computer
network. The Company is presenting the opportunity to use ENGLISH PRO Network
Edition on school networks to ministries of education in Malaysia, Taiwan and
China. Sales agents acting on behalf of the Company are presenting this same
opportunity to ministries in Hong Kong, India, Pakistan, Sri Lanka, South Korea
and Colombia. At present, the Company does not have any advertising agreements
for its installation in Thailand.
Internet Service Providers and Web Portals. In each country where the
Company has active English education initiatives, it intends to pursue
agreements with ISPs and Web portals to be affiliate program participants. In
Thailand, for example, the Company has entered into a freeENGLISH affiliate
program agreement with one of that country's largest ISPs, Internet Knowledge
Service Center Co., Ltd. ("IKSC"), allowing IKSC to hyperlink from their Web
site at www.ksc.net.th to www.freeENGLISH.com and to provide ENGLISH PRO Web
Edition on CD-ROMs they provide to their subscribers. As of August 24, 1999, the
Company currently has affiliate program agreements with eight ISPs and five Web
portals and expects to sign additional affiliate program agreements before the
end of 1999.
Personal Computer Manufacturers. The Company intends to negotiate
agreements with personal computer manufacturers in Taiwan, Singapore and China
for the pre-installation of ENGLISH PRO Web Edition software on their computers.
The Company believes this presents a unique opportunity for personal computer
manufacturers in Asia to deliver a quality educational product which addresses a
significant need of a large portion of their customers. In exchange for the
Company's software, the Company would share with the PC computer manufacturer
revenue generated from advertising imbedded within the software. The Company
anticipates signing an agreement with one personal computer manufacturer before
the end of 1999. In an instance where the personal computer manufacturer does
not want to provide ENGLISH PRO Web Edition they have an opportunity to provide
ENGLISH PRO Version 7.0 (single user) and pay the Company a nominal per-copy fee
in the range of $0.25 to $1.00. To date, no such agreements have been entered
into by the Company.
Retail Marketplace. The Company has addressed the retail marketplace
through agreements with non-exclusive distributors in North America, Australia,
Hong Kong and Macao. At present the Company does not advertise its products in
any trade publications or journals. The Company intends to continue to deliver
the ENGLISH PRO CD-ROM versions through these channels. Additionally, in markets
where Internet access is cost-prohibitive or weak, the Company is seeking
exclusive and non-exclusive distributors for its products.
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Product Development
The Company develops all of its products and Internet Web sites internally.
The Company's development team includes software programmers, Web site
developers, English course material developers and graphic artists.
Currently the Company is developing additional features and course
materials for ENGLISH PRO Web Edition, including whole language instruction;
interactive lesson breaks that provide information about an advertiser's
products and services; interactive chat services via the Internet and via the
local or wide area network; message boards via the Internet and via the local or
wide area network; user-generated design of the user interface; and support for
additional advertising models. The course materials include lessons specific to
"going shopping," "going to a restaurant," "meeting a friend," "having a job
interview" and other practical situations. Also in development are tools
providing better controls for targeting advertisements and reporting statistical
data to advertisers.
The Company intends to deliver the first release of ENGLISH PRO Version 7.0
(single user) on CD-ROM as early as November 1, 1999. ENGLISH PRO Version 7.0
(single user) is the CD-ROM version of ENGLISH PRO Web Edition and contains all
the features of ENGLISH PRO Web Edition, except advertising.
Competition
The educational software industry has been characterized over the last few
years by a high degree of consolidation, which favors companies with greater
resources than the Company. This consolidation has provided certain of the
Company's competitors with increased financial resources, marketing power and
distribution capabilities. Larger companies that offer a wide range of products
also may find it easier to gain access to shelf space than smaller companies,
such as the Company, and they are more able to proliferate product offerings,
including bundles and suites for a single low price. This strategy is used to
dominate shelf space and may tend to reduce shelf lives and prices for
individual products. Additional consolidation may tend to result in increased
price competition for educational software products. In addition, in some cases,
these competitors have invested heavily in marketing and delivering their
products over the Internet.
The English language instructional software market in which the Company
operates is also very competitive. Many competitors have substantially greater,
financial, technical, marketing and distribution resources than the Company. The
Company primarily competes in three major product areas:
o educational retail software;
o academic courseware developed for the school, corporate and
government markets; and
o education courses developed for the Internet.
In all its markets, the Company competes against a large number of
companies of varying sizes and resources. In the educational retail software
market, the Company's primary competitors are The Learning Company and
Broderbund divisions of Mattel, Inc., The Walt Disney Co. and SofSource, Inc. In
the academic courseware market, the Company's primary competitors are Berlitz
International, Inc., DynEd International, Inc. and LinguaTech International. In
the Internet education market, the Company's primary competitors are Scholastic,
Inc., Simon & Schuster, a division of Viacom, Inc. and The Lightspan
Partnership, Inc. There is an increasing number of competitive products offered
by a growing number of companies. Increased competition in any product area may
result in a loss of retail shelf space, reduction in sales or additional price
competition, any of which could have a material adverse effect on the Company's
operating results. In addition, existing competitors may continue to broaden
their product lines and potential competitors, including large computer or
software manufacturers, entertainment companies and educational publishers, may
enter or increase their focus on the English language education market,
resulting in greater competition for the Company.
Other Web Sites and software applications sell advertising. The Company
faces competition from these Web Sites and software developers for advertising
contracts as well as from a variety of other traditional media sources, such as
television, radio and print media. The Company does not currently have
agreements with any advertisers to advertise in its Web Site or within its
software products. If the Company fails to attract a sufficient amount of
advertising for its products or Web Site or software products, its business
could be adversely affected.
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Sales and Marketing
General. The Company anticipates that preliminary marketing of the CD-ROM
version of ENGLISH PRO will consist of securing exclusive and non-exclusive
distributors on a country-by-country basis. The Company plans to try to identify
a number of exclusive Master Distributors globally who are capable of supporting
a complete distribution channel in several countries.
When it is deemed advantageous, the Company plans to enter into
co-development agreements with third parties. A co-development opportunity often
arises when a third party would like to design a custom version of the Company's
products for a particular market or market segment. The Company anticipates that
most of these arrangements would center on additional course curriculum in a
particular field, and that the Company and the co-developer would share in the
revenue generated by a co-development effort.
Internet Marketing. The Company participates in Web-based discussion groups
centered on education, computers in education, distance education and related
topics through which it attempts to encourage and influence the purchase of its
products. The Company also markets ENGLISH PRO Web Edition and
www.freeENGLISH.com through relationships with ISPs and Web portals. These
affiliate program participants provide the marketing awareness to their end
users, which then create traffic to the www.freeENGLISH.com Web site. To
generate new affiliate program participants, the Company identifies ISPs and Web
portals in regions of the world that are of interest to the Company or are
interested in developing education-oriented Web portals. The Company actively
solicits these prospective ISPs and Web portals through initial email campaigns
followed by telemarketing efforts to bring its products to the attention of
these prospective affiliate program participants. To date, the Company has not
advertised any of its products on the Internet, however, it may do so in the
future. The Company also intends to continue developing relationships with ISPs
and Web portals to promote ENGLISH PRO Web Edition and www.freeENGLISH.com on
their Web sites.
Direct Sales. The Company currently has 4 people in its sales and marketing
department, all of whom are salaried sales people. The Company's direct sales
activities include: weekly facsimile distributions to potential distributors
from purchased mailing lists, follow up phone calls, direct mail campaigns to
distributors and Fortune 1000 companies that require English language training
for their staff and contacts with embassies of targeted countries to generate
qualified leads of potential distributors interested in distributing the
Company's product line. The Company also attends industry trade shows where
there is a large concentration of companies interested in educational products
and uses print media in target countries to increase product awareness. The
Company anticipates that, in the near term, two additional sales and marketing
personnel will be hired to concentrate on Internet product awareness and sales
globally.
Customer and Technical Support
The Company provides a variety of customer and technical support services
to purchasers of its software products and users of its online applications. End
users are able to consult with support personnel regarding software use,
hardware problems and peripheral needs via telephone, facsimile and a variety of
voice mail and online service options. In addition, the Company provides its
educational institution clients access to trained educational professionals and
a variety of preview, sample and demonstration options. The Company's English
language instruction products are sold with a variety of lesson plans,
recordkeeping tools and other materials to support English language teachers.
Intellectual Property Rights
The Company's success is dependent on its ability to protect its
intellectual property rights. The Company relies principally on a combination of
patent, copyright and trade secret laws, non-disclosure agreements and other
contractual provisions to establish and maintain its proprietary rights. The
Company currently licenses the source code for its current CD-ROM version of
ENGLISH PRO Version 6.2 from Boswell International Technologies Inc. and Boswell
Industries Inc. The Company does not include any mechanisms to prevent or
inhibit unauthorized copying, but relies on "shrink wrap" licenses that restrict
copying and use of its software products. The Company is aware that significant
copying occurs within the software industry, and if a significant amount of
unauthorized copying of the Company's products were to occur, the Company's
business, financial condition and operating results could be adversely affected.
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As part of its confidentiality procedures, the Company generally enters
into nondisclosure and confidentiality agreements with each of its key
employees, consultants and business partners and limits access to and
distribution of its technology, documentation and other proprietary information.
In particular, the Company has entered into non-disclosure agreements with each
of its employees and business partners. The terms of the employee non-disclosure
agreements include provisions requiring assignment to the Company of employee
inventions. Despite the Company's efforts to protect its intellectual property
rights, unauthorized third parties, including competitors, may from time to time
copy or reverse engineer certain portions of the Company's technology and use
such information to create competitive products.
Policing the unauthorized use of the Company's software is difficult, and,
while the Company is unable to determine the extent to which piracy of the
Company's software exists, such piracy can be expected to be a persistent
problem. In addition, the laws of certain countries in which the Company's
software is or may be licensed do not protect its products and intellectual
property rights to the same extent as do the laws of the United States. As a
result, sales of products based on the Company's software in such countries may
increase the likelihood that the Company's software might be infringed upon by
unauthorized third parties.
It is possible that the scope, validity and/or enforceability of the
Company's intellectual property rights could be challenged by competitors or
other parties. The results of such challenges before administrative bodies or
courts depend on many factors which cannot be accurately assessed at this time.
Unfavorable decisions by such administrative bodies or courts could have a
negative impact on the Company's intellectual property rights. Any such
challenges, whether with or without merit, could be time consuming, result in
costly litigation and diversion of resources, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all. In the event of a claim of infringement against the
Company and the Company's failure or inability to license the infringed or
similar software, the Company's business, operating results and financial
condition could be materially adversely affected.
The Company has not registered any patents or trademarks in the Canada, the
United States or elsewhere.
Government Regulation
The Company is not currently subject to direct federal, state or local
regulation in the United States other than regulations applicable to businesses
generally or directly applicable to electronic commerce. However, because the
Internet is becoming increasingly popular, it is possible that a number of laws
and regulations may be adopted in the United States with respect to the
Internet. These laws may cover issues such as user privacy, freedom of
expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. Furthermore,
the growth of electronic commerce may prompt calls for more stringent consumer
protection laws. Several states have proposed legislation to limit the use of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has indicated that it
may propose legislation on this issue to Congress in the near future and has
initiated action against at least one online service regarding the manner in
which personal information was collected from users and provided to third
parties. The adoption of such consumer protection laws could create uncertainty
in Internet usage and reduce the demand for all products and services. The
Company does not provide customer information to third parties and, therefore,
does not anticipate any current or proposed legislation relating to online
privacy to directly affect its activities to a material extent.
The Company is not certain how its business may be affected by the
application of existing laws governing issues such as property ownership,
copyrights, encryption and other intellectual property issues, taxation, libel,
obscenity and export or import matters. The vast majority of those laws were
adopted prior to the advent of the Internet. As a result, they do not
contemplate or address the unique issues of the Internet and related
technologies. Changes in laws intended to address such issues could create
uncertainty in the Internet marketplace. That uncertainty could reduce demand
for the Company's products or services or increase the cost of doing business as
a result of litigation costs or increased service delivery costs.
In addition, because the Company's products and services are available over
the Internet in multiple states and foreign countries, other jurisdictions may
claim that the Company is required to qualify to do business and pay
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taxes in each state or foreign country. The Company is qualified to do business
only in Nevada. The Company's failure to qualify in other jurisdictions when it
is required to do so could subject it to penalties. It could also hamper the
Company's ability to enforce contracts in those jurisdictions. The application
of laws or regulations from jurisdictions whose laws do not currently apply to
the Company's business could have a material adverse affect on its business,
results of operations and financial condition.
The European Union has adopted a policy directive which went into effect in
1998. Under this directive, business entities domiciled in member states of the
EU are limited in the transactions they may do with business entities domiciled
outside the EU unless they are domiciled in a jurisdiction with privacy laws
comparable to the EU privacy directive. The United States presently does not
have laws which satisfy the EU. Discussions between representatives of the EU
and the United States are ongoing and may lead to certain safe harbor provisions
which, if adhered to, would allow business entities in the EU and the United
States to continue to do business without limitation. If these negotiations are
not successful and the EU begins enforcement of the privacy directive, there
could be an adverse impact on international Internet business. If the Company
does business directly in the EU in the future the Company will be required to
comply with the privacy directive of the EU.
Plan of Operation
During the next twelve months, the Company plans to release the following
new software products and upgrades to existing products:
ENGLISH PRO Version 7.0 (single user), the CD-ROM version of the Company's
English tutorial software, is planned for release in fourth quarter 1999,
replacing the Company's current CD-ROM product, ENGLISH PRO Version 6.2 (single
user). The Company anticipates that ENGLISH PRO Version 7.0 (single user) will
be delivered to the retail market in time for the Christmas 1999 season.
ENGLISH PRO Web Edition is a continuously updated software program. Updates
to the program are made available over the Company's freeENGLISH.com Internet
Web site each month with additional course materials being made available each
week. The Company plans to continue this upgrade schedule for the foreseeable
future.
ENGLISH PRO Network Edition is also a continuously update software program
and updates are made available to institutional clients. Course materials for
ENGLISH PRO Web Edition are compatible with ENGLISH PRO Network Edition and as
such are made available to ENGLISH PRO Network Edition users shortly after being
made available to ENGLISH PRO Web Edition users.
New features are added to the Company's freeENGLISH.com Internet Web side
on average every three months. Under this schedule, the Company expects to
deliver approximately 20 new games and quizzes on its freeENGLISH.com Internet
Web site through the end of second quarter 2000. Additional features which the
Company plans to add to the freeENGLISH.com Internet Web site, include chat
rooms, message boards and an education-focused Internet search engine.
www.freeENGLISH.com is currently available in English, Chinese (simplified
Chinese), Spanish and Portuguese. The Company plans to add Thai, Bhasa, Chinese
(traditional Chinese), Japanese, German, French and Italian prior to the end of
second quarter 2000.
The Company plans to focus its marketing efforts for ENGLISH PRO Web
Edition and ENGLISH PRO Network Edition on current initiatives in Thailand,
Malaysia, Columbia, Taiwan, and China. The marketing focus is likely to be split
between signing new ISPs, Web portals and educational institutions in new
markets and increasing advertising revenues in countries where ENGLISH PRO Web
Edition and/or ENGLISH PRO Network Edition currently have a presence. The
Company expects a large portion of its of advertising marketing efforts will be
directed at Thailand, where the Company is currently implementing ENGLISH PRO
Network Edition on the private computer network operated by the Ministry of
University Affairs in Thailand. The Company expects that it will begin
generating revenues from these efforts in fourth quarter 1999.
Research and development of ENGLISH PRO Web Edition, Network Edition,
Version 7.0 (single user) and Version 7.0 (multi-user) is expected to continue
through the end of 2000. The primary focus on development will be the addition
of: additional phonetic English language modules; whole language English
conversation practice modules; reading comprehension practice modules; grammar
practice modules; vocabulary building
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exercise modules; support for interactive tests and quizzes. Additionally new
advertising models are continuously being developed for the products along with
the necessary Web-based management tools to deliver, manage and support the
advertisings.
Currently, the Company's working capital needs are approximately US$90,000
per month. The Company does not expect to significantly raise these levels until
advertising revenues have been generated. The Company is currently seeking
financing for its operations and expects that it may need additional financing
in the future.
Employees
As of June 30, 1999, the Company had 20 employees, including 11 in research
and development, four in marketing and sales and five in management, finance and
administration. The Company's success will depend in large part on its ability
to attract and retain skilled and experienced employees. None of the Company's
employees are covered by a collective bargaining agreement and the Company
believes that its relations with its employees is good. The Company does not
currently have any key man life insurance on any of its directors or executive
officers.
Risk Factors
The business of the Company involves a number of risks and uncertainties
that could cause actual results to differ materially from results projected in
any forward-looking statement in this report. These risks and uncertainties
include the risks set forth below. The Company's securities are speculative and
investment in the Company's securities involves a high degree of risk and the
possibility that the investor will suffer the loss of the entire amount
invested.
Limited Operating History; History of Losses; Increased Expenses
The Company was organized in 1991 and therefore has only a limited
operating history upon which an evaluation of its business and prospects can be
based. Prior to 1998, the Company had no operations or revenues. The Company
incurred a net loss of $322,021 in the six months ended June 30, 1999. The
Company has not had any significant revenue in recent years, it has never been
profitable and there can be no assurance that, in the future, the Company will
be profitable on a quarterly or annual basis. In addition, the Company plans to
increase its operating expenses to expand its sales and marketing operations,
fund greater levels of research and development, broaden its customer support
capabilities and increase its administration resources. In view of the rapidly
evolving nature of the Company's business and markets and limited operating
history, the Company believes that period-to-period comparisons of financial
results are not necessarily meaningful and should not be relied upon as an
indication of future performance.
Need for Additional Financing
Revenue from the Company's operations is not sufficient to finance the cost
of development and marketing of its software. Accordingly, the Company must
raise substantial additional funding. The Company expects to be able to meet its
financial obligations for approximately the next three months. There is no
assurance that, after such period, the Company will be able to secure financing
or that such financing will be obtained on terms favorable to the Company.
Failure to obtain adequate financing could result in significant delays in
development of new products and a substantial curtailment of operations. The
Company has accumulated losses of $738,737 since it began operations in May 1998
and will require additional working capital to complete its business development
activities and generate revenue adequate to cover operating and further
development expenses.
Unpredictability of Future Revenues; Potential Fluctuations in Quarterly Results
As a result of the Company's limited operating history and the emerging
nature of the market in which it competes, the Company is unable to forecast its
revenues accurately. The Company's current and future expense levels are based
largely on its investment plans and estimates of future revenue and are to a
large extent fixed. Sales and operating results generally depend on the volume
of, timing of and ability to fulfill orders received and advertising revenues
generated, which are difficult to forecast. The Company may be unable to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall.
Accordingly, any significant shortfall in
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revenue in relation to the Company's planned expenditures would have an
immediate adverse affect on the Company's business, financial condition and
results of operations. Further, in response to changes in the competitive
environment, the Company may from time to time make certain pricing, service or
marketing decisions that could have a material adverse effect on the Company's
business, financial condition, operating results and cash flows.
Developing Market; Unproven Acceptance of the Internet as a Medium for Learning
and Education
The Company's long-term viability is substantially dependent upon the
widespread acceptance and use of the Internet as a medium of learning and
education. The use of the Internet as a means of facilitating educational
processes is in a recent stage of development, and there can be no assurance
that a sufficiently large number of customers will begin to use the Internet as
a medium of learning and education. Demand and market acceptance for recently
introduced educational programs over the Internet are subject to a high level of
uncertainty and there exists few proven electronic learning business models. The
Internet may not prove to be a viable medium of instruction because of
inadequate development of the necessary infrastructure, such as a reliable
network backbone, or delayed development of enabling technologies, such as
high-speed modems and high-speed communication lines. The Internet has
experienced, and is expected to continue to experience, significant growth in
the number of users and amount of traffic. There can be no assurance that the
Internet infrastructure will continue to be able to support the demands placed
on it by this continued growth. In addition, delays in the development or
adoption of new standards and protocols to handle increased levels of Internet
activity or increased governmental regulation could slow or stop the growth of
the Internet as a viable medium for learning and education. Moreover, critical
issues concerning the commercial use of the Internet (including security,
reliability, accessibility and quality of service) remain unresolved and may
adversely affect the growth of Internet use or the attractiveness of subscribing
to online educational content. Because the exchange of information on the
Internet is new and evolving, there can be no assurance that the Internet will
prove to be a viable medium of learning and education. The failure to resolve
critical issues concerning the educational use of the Internet, the failure of
the necessary infrastructure to develop in a timely manner, or the failure of
the Internet to continue to develop rapidly as a viable medium of learning and
education would have a material adverse effect on the Company's business,
financial condition, operating results and cash flows.
Unproven Acceptance of the Company's Products
The Company has only recently begun marketing and selling its ENGLISH PRO
software products. As a result, it does not know that its products can
successfully teach English to non-English speakers or that its products will
attain market acceptance among persons seeking to learn the English language.
The Company began offering its Internet-enabled version in December 1998 and has
not yet installed its ENGLISH PRO Network Edition software product on any
private computer networks. If the Company's products prove to be unsuccessful in
assisting non-English speakers in learning the English language, or if they fail
to attain market acceptance, it could materially adversely affect the Company's
financial condition, operating results and cash flows.
Dependence on Key Personnel
The Company's performance and future operating results are substantially
dependent on the continued service and performance of its senior management and
key technical and sales personnel. The Company intends to hire a significant
number of additional technical and sales personnel in the next year. Competition
for such personnel is intense, and there can be no assurance that the Company
can retain its key technical, sales and managerial employees or that it will be
able to attract or retain highly-qualified technical and managerial personnel in
the future. The loss of the services of any of the Company's senior management
or other key employees or the inability to attract and retain the necessary
technical, sales and managerial personnel could have a material adverse effect
upon the Company's business, financial condition, operating results and cash
flows. The Company does not currently maintain "key man" insurance for any
senior management or other key employees.
Mark Crimeni, EDUVERSE Canada's Executive Vice President, has recently been
the subject to a disciplinary action by the British Columbia Securities
Commission and a criminal charge relating to illegal possession and storage of a
firearm. The criminal charges have been dropped. To the extent Mr. Crimeni, or
any
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other executive officers of the Company become involved in regulatory or
criminal proceedings in the future, it could materially, adversely affect the
Company.
Liability for Information Displayed on the Company's Internet Web Sites
The Company may be subjected to claims for defamation, negligence,
copyright or trademark infringement and various other claims relating to the
nature and content of materials it publishes on its Internet Web sites. These
types of claims have been brought, sometimes successfully, against online
businesses in the past. The Company could also face claims based on the content
that is accessible from its Internet Web sites through links to other Web sites.
Dependence on Continued Growth in Use of the Internet
The success of the Company's business depends, in part, on continued growth
in the use of the Internet and would suffer if Internet usage does not continue
to grow. Internet usage may be inhibited for a number of reasons, such as:
o Inadequate network infrastructure;
o Security concerns;
o Inconsistent quality of service;
o Disruptions resulting from the inability of computer systems to
recognize the year 2000;
o Lack of available cost-effective, high-speed service;
o The adoption of new standards or protocols for the Internet; and
o Changes or increases in government regulation.
Online companies have experienced interruptions in their services as a
result of outages and other delays occurring due to problems with the Internet
network infrastructure, disruptions in Internet access provided by third-party
providers or failure of third party providers to handle higher volumes of user
traffic. If Internet usage grows, the Internet infrastructure or third-party
service providers may be unable to support the increased demands which may
result in a decline of performance, reliability or ability to access the
Internet. If outages or delays frequently occur in the future, Internet usage,
as well as usage of the Company's Internet Web sites, could grow more slowly or
decline.
Security and Privacy Issues
The Company could be subject to litigation and liability if third parties
were able to penetrate the Company's network security or otherwise
misappropriate its customers' personal or other information. The Company uses a
third-party system for processing online Internet orders for its products and as
such keeps no personal information on its customers. The only information
required by a user downloading ENGLISH PRO Web Edition from the freeENGLISH.com
Web site is their birthdate, gender, city, state and country, however visitors
may enter their name, company, mailing address, telephone, fax information
voluntarily. No credit card information is required to be entered into any of
its freeENGLISH.com systems. Liability for misuse of customer information could
include impersonation or other similar fraud claims. It could also include
claims for other misuses of personal information, such as for unauthorized
marketing purposes. In addition, the Federal Trade Commission and some states
have been investigating various Internet companies regarding their use of
personal information. The Company could incur additional expenses and be
required to change its current practices if new regulations regarding the use of
personal information are adopted or should government agencies choose to
investigate its privacy practices.
Furthermore, the Company's computer servers may be vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions. The Company
may need to expend significant additional capital and other resources to protect
against a security breach or to alleviate problems caused by any breaches. There
can be no assurance that the Company can prevent or remedy all security
breaches. If any of these breaches occur, the Company could lose customers and
visitors to its Internet Web sites.
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Dependence on Certain Marketing and Licensing Relationships
The Company is dependent upon a number of marketing, and licensing
arrangements relating to the development and sale of its products. Of the
Company's current products, ENGLISH PRO Version 6.2 (single user) and ENGLISH
PRO Version 6.2 (multi-user) are based upon the technology licensed from
Boswell. Under the terms of the license, the Company must pay Boswell a 5%
royalty on gross revenues from the sale of all products that contain source code
from the licensed technology. The Company expects that the ENGLISH PRO Version
6.2 products will continue to have a market presence until the fourth quarter of
1999, at which time the newly-developed ENGLISH PRO Version 7.0 is anticipated
to become available in the retail market. In addition, the Company's software
products are currently the only English tutorial products available through Web
sites operated by Learn2.com, Inc. The agreement between the Company and
Learn2.com, Inc. is non-exclusive and the introduction of other English tutorial
software products by Learn2.com could reduce demand for the Company's products.
The Company has a number of agreements with ISPs and third party Web sites
pursuant to which such parties place links on their Web sites to the Company's
freeENGLISH.com Internet Web site in exchange for a portion of the revenues
generated from advertising in the Company's ENGLISH PRO Web Edition software. As
of August 24, 1999, the Company currently has affiliate program agreements with
eight ISPs and five third party Web portals. In addition, the Company has
recently completed an affiliate program agreement with the Ministry of
University Affairs in Thailand pursuant to which it is implementing its ENGLISH
PRO Network Edition on the private computer network operated by the Ministry.
The loss of one or more of these relationships could have a material adverse
effect on the Company's financial condition and results of operations.
Reliance on Other Third Parties
The Company's operations depend to a significant degree on a number of
other third parties, including telecommunication service providers. The Company
has no effective control over these third parties and no long-term contractual
relationships with any of them. From time to time, the Company could experience
temporary interruptions in its Internet Web sites connections and its
telecommunications access. Continuous or prolonged interruptions in the
Company's Internet Web sites' connections or in its telecommunications access
would have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's agreements with its Internet
service providers place certain limits on the Company's ability to obtain
damages from the service providers for failure to maintain the Company's
connection to the Internet.
Competition
The English language instructional software market in which the Company
operates is very competitive. Many competitors have substantially greater,
financial, technical, marketing and distribution resources than the Company. The
Company primarily competes in three major product areas:
o educational retail software;
o academic courseware developed for the school, corporate and
government markets; and
o distance education courses developed for the Internet.
In the all its markets, the Company competes against a large number of
companies of varying sizes and resources. In the educational retail software
market, the Company's primary competitors are The Learning Company and
Broderbund, divisions of Mattel, Inc., The Walt Disney Co. and SofSource, Inc.
In the academic courseware market, the Company's primary competitors are Berlitz
International, Inc., DynEd International, Inc. and LinguaTech International. In
the distance education market, the Company's primary competitors are Scholastic,
Inc., Simon & Schuster, a division of Viacom, Inc. and The Lightspan
Partnership, Inc. There are an increasing number of competitive products offered
by a growing number of companies. Increased competition in any product area may
result in a loss of retail shelf space, reduction in sales or additional price
competition, any of which could have a material adverse effect on the Company's
operating results. In addition, existing competitors may continue to broaden
their product lines and potential competitors, including large computer or
software manufacturers, entertainment companies and educational publishers, may
enter or increase their focus on the English language education market,
resulting in greater competition for the Company.
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Most of the Company's current and potential competitors have substantially
longer operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than the Company.
In addition, competitors may be acquired by, receive investments from or enter
into other commercial relationships with larger, well-established and
well-financed companies as the use of the Internet and other online services
increases. Many of the Company's competitors may be able to respond more quickly
to changes in customer preferences, devote greater resources to marketing and
promotional campaigns, develop more advanced educational systems, adopt more
aggressive pricing or inventory availability policies and devote substantially
more resources to Internet site and systems development than the Company.
It is possible that new competitors or alliances among competitors may
emerge and rapidly acquire market share. Increased competition may result in
reduced operating margins, loss of market share and a diminished brand
franchise, any one of which could materially adversely affect the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors or alliances of such competitors, or that competitive
pressures faced by the Company will not materially adversely affect its
business, financial condition, operating results and cash flows.
Need To Adapt To Business And Cultural Practices Of Other Countries
The Company plans to provide its English language educational programs in
many different countries throughout the world. There are enormous variations in
language, culture, religion, custom and business practices in the areas in which
the Company plans to do business. Even where people speak a common language
(such as Spanish), there are great variations from region to region and nation
to nation. To be successful, the Company will need to adapt its offerings and
method of operations to the locations in which it does business. Educational
methods and business practices that succeed in one nation or region may be
entirely inappropriate in others. To be successful, the Company must adapt its
educational offerings and business practices to each market it services, and its
ability to do so is uncertain.
Uncertainty Of Business Model
The Company expects to receive significant revenues from advertising on its
ENGLISH PRO Web Edition and ENGLISH PRO Network Edition products. The Company's
arrangements with the Ministry of Education of Thailand permit the Company to
sell banner advertisements to be included in material displayed to students
accessing the Company's software, and to share a portion of advertising revenue
with the Ministry. It is uncertain whether advertisers will find this an
attractive marketing medium or that the Company will be able to generate
significant advertising revenue in order to cover the cost of developing and
marketing its software.
Even if the Company is successful in its program with the Ministry of
Thailand, it is uncertain whether government agencies, universities and other
prospective business partners will find it appropriate to permit advertising to
be displayed to students or others who access course materials through networks
or facilities they operate or endorse.
Capacity Constraints; Reliance on Internally Developed Systems; System
Development Risks
The availability, reliability and satisfactory performance of the Company's
Internet Web sites, transaction processing systems and network infrastructure
are critical to the Company's reputation and its ability to attract and retain
online students and to provide adequate customer service. Because the Company
intends to place advertising within its Internet-enabled software, the Company
anticipates that a significant portion of its future revenues will depend on the
number of English language students who download its software from its
freeENGLISH.com Internet Web Site. Any network interruptions or system
shortcomings that result in the unavailability of the Company's Internet Web
sites would reduce the volume of software downloaded and the attractiveness of
the Company's product and service offerings. System delays or interruptions
could negatively impact a customer's experience and reduce the likelihood that
such customer would return to the Company's Internet Web sites in the future.
Substantial increases in the volume of traffic on the Company's Internet Web
sites or the number of downloads by prospective students through the Company's
Internet Web sites may require the Company to further expand and upgrade its
technology, transaction processing systems and network infrastructure and
increase costs. There can be no assurance that the Company will be able to
accurately project the rate or timing of increases, if any, in the use of its
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Internet Web sites, or that it will have the technical or financial resources to
expand and upgrade its systems and infrastructure to accommodate such increases
in a timely manner.
Risks of Potential Government Regulation and Other Legal Uncertainties Relating
to the Internet
The Company is not currently subject to direct federal, state or local
regulation in the United States other than regulations applicable to businesses
generally or directly applicable to electronic commerce. However, because the
Internet is becoming increasingly popular, it is possible that a number of laws
and regulations may be adopted in the United States with respect to the
Internet. These laws may cover issues such as user privacy, freedom of
expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. Furthermore,
the growth of electronic commerce may prompt calls for more stringent consumer
protection laws. The adoption of such consumer protection laws could create
uncertainty in Internet usage and reduce the demand for all products and
services.
In addition, the Company is not certain how its business may be affected by
the application of existing laws governing issues such as property ownership,
copyrights, encryption and other intellectual property issues, taxation, libel,
obscenity and export or import matters. It is possible that future applications
of these laws to the Company's business could reduce demand for its products and
services or increase the cost of doing business as a result of litigation costs
or increased service delivery costs.
Because the Company's services are available over the Internet in multiple
states and foreign countries, other jurisdictions may claim that the Company is
required to qualify to do business and pay taxes in each state or foreign
country. The Company is qualified to do business only in Nevada. The Company's
failure to qualify in other jurisdictions when it is required to do so could
subject the Company to penalties and could restrict the Company's ability to
enforce contracts in those jurisdictions. The application of laws or regulations
from jurisdictions whose laws do not currently apply to the Company's business
may have a material adverse affect on its business, results of operations and
financial condition.
The European Union recently adopted a directive addressing data privacy
that may result in limits on the collection and use of consumer information. See
"Business -- Government Regulation."
Intellectual Property Rights
The Company's success is dependent on its ability to protect its
intellectual property rights. The Company relies principally on a combination of
patent, copyright and trade secret laws, non-disclosure agreements and other
contractual provisions to establish and maintain its proprietary rights. The
Company currently licenses the source code for its current retail CD-ROM version
of ENGLISH PRO Version 6.2 from Boswell International Technologies Inc. and
Boswell Industries Inc. The Company does not include any mechanisms to prevent
or inhibit unauthorized copying, but instead relies on "shrink wrap" licenses
that restrict copying and use of its software products. The Company is aware
that significant copying occurs within the software industry, and if a
significant amount of unauthorized copying of the Company's products were to
occur, the Company's business, financial condition and operating results could
be adversely affected.
As part of its confidentiality procedures, the Company generally enters
into nondisclosure and confidentiality agreements with each of its key
employees, consultants and business partners and limits access to and
distribution of its technology, documentation and other proprietary information.
In particular, the Company has entered into non-disclosure agreements with each
of its employees and business partners. The terms of the employee non-disclosure
agreements include provisions requiring assignment to the Company of employee
inventions. Despite the Company's efforts to protect its intellectual property
rights, unauthorized third parties, including competitors, may from time to time
copy or reverse engineer certain portions of the Company's technology and use
such information to create competitive products.
Policing the unauthorized use of the Company's software is difficult, and,
while the Company is unable to determine the extent to which piracy of the
Company's software exists, such piracy can be expected to be a persistent
problem. In addition, the laws of certain countries in which the Company's
software is or may be licensed do not protect its products and intellectual
property rights to the same extent as do the laws of the United
-17-
<PAGE>
States. As a result, sales of products based on the Company's software in such
countries may increase the likelihood that the Company's software might be
infringed upon by unauthorized third parties.
It is possible that the scope, validity and/or enforceability of the
Company's intellectual property rights could be challenged by competitors or
other parties. The results of such challenges before administrative bodies or
courts depend on many factors which cannot be accurately assessed at this time.
Unfavorable decisions by such administrative bodies or courts could have a
negative impact on the Company's intellectual property rights. Any such
challenges, whether with or without merit, could be time consuming, result in
costly litigation and diversion of resources, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all. In the event of a claim of infringement against the
Company and the Company's failure or inability to license the infringed or
similar software, the Company's business, operating results and financial
condition could be materially adversely affected.
Uncertainties Relating to the Year 2000
Because many computer applications have been written using two digits
rather than four to define the applicable year, some date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
year 2000 problem could result in systems failures or miscalculations causing
disruptions of operations, including disruptions of the Company's Internet Web
site. The Company has obtained confirmation from all of its third-party vendors
that they have resolved their year 2000 issues and has completed its year 2000
compliance testing program. The systems and services provided by these vendors
may fail to be year 2000 compliant despite their representations to the
contrary. Failure of these systems or services to be year 2000 compliant could
result in a systemic failure beyond the Company's control and prevent the
Company from delivering its products to its customers, prevent users from
accessing the Company's Internet Web site and decrease the use of the Internet
generally. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Compliance."
-18-
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements that involve
risks and uncertainties. the Company's actual results could differ materially
from those discussed in these forward-looking statements as a result of various
factors, including those set forth in "risk factors" and elsewhere in this
registration statement. The following discussion should be read in conjunction
with the financial statements and notes thereto included elsewhere in this
registration statement. See "Forward-looking Statements" and "Business-Risk
Factors."
Overview
The Company develops and markets software programs under several product
names to assist non-English speaking students in learning spoken English. In
addition to traditional "boxed" software available in retail stores, the Company
has been delivering its software products via the Internet and private computer
networks since December 1998. The Company began operations on May 5, 1998.
On May 28, 1998 and May 29, 1998, the Company acquired all of the issued
and outstanding share capital of ESL PRO Systems Inc. ("ESL") and M&M
Information and Marketing Services, Inc. ("M&M"), respectively, which were both
Nevada corporations incorporated on May 5, 1998 and under common control. As a
result of these acquisitions, the former shareholders of ESL and M&M, as a
group, owned more than 50% of the issued and outstanding voting shares of the
Company. Consequently, this business combination has been accounted for as a
reverse acquisition whereby ESL and M&M are deemed to have been combined, on a
continuity of interests basis, since their inception on May 5, 1998 and to have
acquired the Company. Accordingly, the financial statements of the Company
reflect the historical accounts of ESL and M&M since their inception at their
historic net book values, and the accounts of the Company, comprising nominal
net assets, at their estimated fair value at the time of the transaction.
The reverse acquisition transaction resulted in the acquisition by the
Company of 2,000,000 shares of ESL common stock and 7,000,000 shares of M&M
common stock in exchange for the issuance of 9,000,000 shares of the Company's
common stock.
On June 20, 1998, the Company formed EDUVERSE Accelerated Learning Systems
(Canada) Inc. ("EDUVERSE Canada"). EDUVERSE Canada operates the Company's
development and marketing operations.
The Company licensed the core software application contained in ENGLISH PRO
Version 6.2 in May 1998 and began shipping ENGLISH PRO Version 6.2 to computer
retailers and bookstores in Canada in December 1998. In first quarter 1999 the
Company began offering its products in the United States. In order to direct
more of its internal resources to establishing awareness of its Internet-enabled
products, in March 1999, the Company appointed Tri Synergy, Inc. ("Tri Synergy")
as a non-exclusive North American retail marketer of its CD-ROM based products.
As of August 1999, ENGLISH PRO Version 6.2 is sold in over 500 retail outlets in
North America.
The Company began development of its Internet-enabled software product in
August 1998 and released the first version of ENGLISH PRO Web Edition on its
freeENGLISH.com Internet Web site in December 1998. Since that time, the Company
has upgraded the program and added additional course materials. The first
version of ENGLISH PRO Network Edition is currently being installed in Thailand
on the Ministry of University Affairs University Network, a private computer
network operated by the Ministry. ENGLISH PRO Web Edition and ENGLISH PRO
Network Edition are delivered free to consumers over the Internet, private
computer networks and local and wide area networks.
The Company derives revenues from the sale of CD-ROM products in the retail
marketplace and plans to derive its revenues from the sale of advertisements
embedded in the ENGLISH PRO Web Edition and ENGLISH PRO Network Edition software
and on its freeENGLISH.com Internet Web site. Revenues are recognized on its
CD-ROM products upon shipping to its retailers or distributors. Typically, the
Company enters into reseller and distribution arrangements with retailers and
distributors for the sale of its CD-ROM products. Resellers are normally offered
a 40% discount off of the manufacturer's suggested list price, which for ENGLISH
PRO Version 6.2 is $29.99. Distributors are normally offered an additional
discount up to 30%.
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<PAGE>
To date, the Company has not derived any revenues from the sales of
advertising embedded in its Internet- and network-enabled software. However, in
order to increase the number of users of its ENGLISH PRO Web Edition software
and its ENGLISH PRO Network Edition software, the Company has entered into
affiliate program agreements with ISPs, Web portals, private corporations and
governmental and educational institutions, pursuant to which the Company has
agreed to share gross revenues derived from advertising and from the sale of
products and services on a third party's Web site that result from traffic
directed from an affiliate program participant's Web site. The agreements
typically require the Company to share 15% of any gross revenues generated;
however, this percentage may be higher depending upon the nature of the
contributions by the third party. The Company has recently entered into an
agreement with the Ministry of University Affairs in Thailand to install its
ENGLISH PRO Network Edition software on a private computer network operated by
the Ministry. The Company estimates that upon implementation, approximately one
million students in Thailand will have access to the Company's English language
teaching software. The Company expects to begin generating advertising revenues
from this contract in the fourth quarter of 1999.
The Company has incurred losses since inception, and at June 30, 1999, had
an accumulated deficit of $738,737. The Company has recently increased its sales
and marketing and general and administrative expenses as it has focused the
entire efforts of its direct sales force to signing agreements with ISPs, Web
portals and foreign governmental and educational institutions. The Company has
also increased research and development expenses as its has focused almost
entirely on continued development of the ENGLISH PRO Web Edition and ENGLISH PRO
Network Edition software and its freeENGLISH.com Internet Web site. The Company
plans to continue increasing operating expenses to expand its sales operations,
fund greater levels of research and development for its Internet-based product
lines, improve its operational and financial systems and expand its
international operations. As a result, the Company is likely to continue to
incur losses, and if the Company's revenues do not continue to grow
significantly, the Company may not ever be profitable.
Results of Operations
The following table presents the Company's audited results of operations
for the nine-month period ended December 31, 1998 and unaudited results of
operations for the six-month period ended June 30, 1999. The unaudited
statements include data that has been derived from unaudited consolidated
financial statements that have been prepared on the same basis as the annual
audited consolidated financial statements and, in the opinion of the Company's
management, include all normal recurring adjustments necessary for the fair
presentation of such information. This data should be read in conjunction with
the Company's consolidated financial statements included in this registration
statement.
-20-
<PAGE>
<TABLE>
Six-Month Nine-Month
Period Ended Period Ended
Jun-30 Dec-31
1999 1998
-------- --------
Revenues:
<S> <C> <C>
Software.............................................................. $ 95,497 $ 14,824
Distribution Royalties................................................ 40,644
Other................................................................. 96,945
-------- --------
Total Revenues.................................................... 233,086 14,824
-------- --------
Cost of Revenues:
Total Cost of Revenues............................................ (35,923) (6,873)
-------- --------
Gross Profit............................................................... 197,163 7,951
-------- --------
Expenses:
Amortization of License............................................... 31,900 52,000
Depreciation.......................................................... 7,336 4,205
General and Administrative............................................ 216,185 207,644
Marketing............................................................. 127,797 57,485
Research and Development.............................................. 135,966 103,333
-------- --------
Total Expenses.................................................... 519,184 424,667
-------- --------
Net Loss................................................................... (322,021) (416,716)
Deficit Beginning of Period................................................ (416,716) 0
Deficit End of Period...................................................... (738,737) (416,716)
</TABLE>
Six-Month Period Ended June 30, 1999
Revenues. The Company derives its revenues from retail sales of its
software products, royalties received from distributors of its software products
and consulting fees from services performed by senior management of the Company.
Royalties are fees paid by third parties to obtain the exclusive right to sell
the Company's software products in a country or region for a fixed period of
time. Other revenue items include non-software related income, such as
consulting fees and bank interest. These consulting fees are determined on a
project-by-project basis taking into account the value of its input in the
project and the amount of hours required to complete the project. For the year
ended December 31, 1998, 36% of the Company's software sales were derived from
one customer. Revenues for the six-month period ended June 30, 1999 were
$233,086 compared with $14,824 for the nine-month period ended December 31,
1998. This increase is primarily due to the introduction of the Company's
ENGLISH PRO Version 6.2 product into the retail marketplace in Canada and the
United States in December 1998 and March 1999, respectively, and also due to
increased consulting fees paid to the Company's executive officers. The Company
anticipates that retail sales of its software products will continue during the
remainder of 1999 as a result of the planned introduction of ENGLISH PRO Version
7.0 (single user) in the fourth quarter of 1999. In addition, it is anticipated
that additional revenues from the sale of advertising embedded in the Company's
Internet-enabled software product will be generated beginning the fourth quarter
of 1999.
Cost of Revenues. Cost of revenues consists of expenses associated with the
physical production of the "boxed" software packages that are sold in the retail
market and the deployment of the Company's Internet Web sites, including
Internet connection charges. During the six-month period ended June 30, 1999,
cost of goods sold increased to $35,923 from $6,873 during the nine-month period
ended December 31, 1998. This increase is primarily due to increased costs
associated with the increase in the sales of software packages.
Amortization and Depreciation. Amortization and depreciation expenses
consist of depreciation on leased and owned computer equipment, software, office
equipment and furniture and amortization of a license fee for the use of
software. Capital assets such as computer equipment and furniture and office
equipment are depreciated on a straight-line basis over their estimated useful
lives, computer equipment over three years and furniture and office equipment
over five years. The license fee for use of software is amortized on a
strait-line basis over the three-year
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<PAGE>
minimum term of the license agreement with Boswell. The Company incurred
depreciation expenses of 7,336 during the six-month period ended June 30, 1999
and amortization expenses of $31,900 for the same period.
General and Administration Expenses. General and administrative expenses
primarily consist of management, financial and administrative personnel expenses
and related costs and professional service fees. General and administrative
expenses were $216,185 for the six-month period ended June 30, 1999, which
represents an increase of 4.1% over the 1998 fiscal year. This increase is due
primarily to an increase in expenses related to auditing the Company's financial
statements for the fiscal period ended December 31, 1998. The Company
anticipates that general and administrative expenses will increase in the third
quarter of 1999 as a result of increased legal fees relating to the registration
of its common stock under the United States Securities Exchange Act of 1934 and
compliance with related reporting requirements.
Marketing Expenses. Marketing expenses consist primarily of marketing and
promotional costs relating to the development of the Company's brands as well as
personnel, travel and other costs. Marketing expenses were $127,797 for the
six-month period ended June 30, 1999 which were 122% higher than those incurred
during the 1998 fiscal year. This increase was primarily attributable to
increased travel expenses incurred to promote the Company's Internet-enabled
software products. The Company anticipates marketing expenses will increase over
the next 12 months as a result of its current initiatives in Thailand and
throughout Asia and Latin America, which will require extensive travel for the
its marketing staff.
Research and Development Expenses. Research and development expenses
primarily include personnel costs relating to developing the Company's software
and maintaining and enhancing the features, content and functionality of the
Company's Internet Web site and related systems. Research and development
expenses were $135,966 for the six-month period ended June 30, 1999 which
represents an increase of 31.6% over the 1998 fiscal year. This increase was
primarily due to increased staffing in the research and development team. The
Company anticipates that its research and development staff will continue to
grow through the end of 1999 and into 2000 as the Company focuses on improving
and expanding the features and availability of its Internet-and network-enabled
software products.
Income Taxes. No provision for federal income taxes has been recorded for
the six-month period ended June 30, 1999 or the nine-month period ended December
31, 1998 as a result of losses. As of December 31,1998, the Company had
approximately $416,716 of federal net operating loss carryforwards available to
offset future taxable income; these carryforwards expire in various years
beginning in 2018, if not previously utilized.
Nine-Month Period Ended December 31, 1998
Revenues. Revenues were $14,824 for the nine-month period ended December
31, 1998. This amount primarily consists of retail sales of the Company's
ENGLISH PRO Version 6.2 CD-ROM software product which was introduced in Canada
in December 1998.
Cost of Revenues. Cost of revenues was $6,873 for the nine-month period
ended December 31, 1998 and primarily reflects costs associated with production
of the initial production of the Company's ENGLISH PRO Version 6.2 CD-ROM
software product.
Amortization and Depreciation. Depreciation expenses for the nine-month
period ended December 31, 1998 were $4,205 and amortization expenses were
$52,000 for the same period. Amortization expenses consist primarily of
amortization of a license fee for the use of software.
General and Administration Expenses. General and administrative expenses
were $207,644 for the nine-month period December 31, 1998, which consisted
primarily of management, financial and administrative personnel expenses and
related costs and professional service fees.
Marketing Expenses. Marketing expenses were $57,485 for the nine-month
period ended December 31, 1998 during which period the Company began preliminary
sales and marketing efforts related to the CD-ROM version of its software.
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<PAGE>
Research and Development Expenses. Research and development expenses were
$103,333 for the nine-month period ended December 31, 1998 during which period
the Company began assembling a research and development team necessary to
further the development of the Company's software products and Internet Web
sites.
Liquidity and Capital Resources
Since inception, the Company has financed operations and met its capital
expenditure requirements primarily through private sales of equity securities,
which have resulted in net proceeds of $985,731 through June 30, 1999. At June
30, 1999, the Company had $331,733 in cash and cash equivalents and $321,178 in
working capital.
The Company has not yet generated positive cash from operating activities.
Cash used in operating activities was $241,396 and $373,693 for the nine-month
period ended December 31, 1998 and the six-month period ended June 30, 1999,
respectively. The Company does not expect to generate positive cash from
operations for the year ending December 31, 1999.
To date, the Company's investing activities have consisted of capital
expenditures totaling $20,298 and $26,294 for the nine-month period ended
December 31, 1998 and the six-month period ended June 30, 1999, respectively.
The capital expenditures related primarily to the acquisition of computer
software and equipment as well as furniture and fixtures used to support its
growing employee base.
Net cash provided by financing activities was $297,778 and $697,662 for the
nine-month period ended December 31, 1998 and the six month period ended June
30, 1999, respectively. Net cash provided by financing activities resulted
primarily from issuance of capital stock, which was partially offset by
principal payments on capital leases and notes payable.
The Company does not foresee an immediate increase in operating expenses
until such time as revenues commence from the sale of advertisements in Thailand
and/or the Company is successful in raising equity or debt financing sufficient
enough to meet its current working capital requirements and support an increase
in operating expenses. The Company expects that revenues from advertising sales
will occur in the fourth quarter of 1999 and therefore projects increases in
development and marketing will coincide with these revenues.
The Company believes that available cash and cash equivalents combined with
anticipated operating revenues will be adequate to fund the Company's operations
over the next three months. Thereafter, the Company expects it will need to
raise additional capital to meet its long-term operating requirements. The
Company may encounter business initiatives that require significant cash
commitments or unanticipated problems or expenses that could result in a
requirement for additional cash before that time. If the Company raises
additional funds through the issuance of equity or convertible debt securities,
the percentage ownership of its shareholders would be reduced, and such
securities might have rights, preferences or privileges senior to its common
stock. Additional financing may not be available upon acceptable terms, or at
all. If adequate funds are not available or are not available on acceptable
terms, the Company's ability to fund its expansion, take advantage of business
opportunities, develop or enhance its products or otherwise respond to
competitive pressures would be significantly limited, and it may significantly
restrict the Company's operations.
Foreign Currency Translation and Hedging
The Company is exposed to foreign currency fluctuations through its
operations in Canada. Substantially all of its revenues to date and
corresponding receivables have been in United States dollars. However, all
research and development expenses, customer support costs and administrative
expenses are in Canadian dollars.
The Company recorded a foreign exchange gain (loss) of $1,673 and ($2,026)
for the nine-months ended December 31, 1998, the six-months ended June 30, 1999,
respectively. As the foreign exchange gains (losses) were not significant, the
Company does not, at this time, engage in forward exchange contracts for the
purpose of hedging against fluctuations in the exchange rate between United
States and Canadian dollars.
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<PAGE>
During the fourth quarter 1999 and the first two quarters of 2000, the
Company intends to engage in activities in foreign countries, namely Thailand,
Malaysia, Columbia, Taiwan and China. These activities will likely result in
development expenses related to the installation, support and maintenance of
ENGLISH PRO Network Edition on educational networks and sales and marketing
expenses related to generating advertising revenues in these regions. The
Company has no immediate plans for hedging against fluctuations in these
currencies.
Year 2000 Compliance
The Year 2000 ("Y2K") issue is the result of certain computer hardware,
operating system software and software application programs having been
developed using two digits rather than four to define a year. For example the
clock circuit in certain hardware may be incapable of holding a date beyond the
year 1999; some operating systems may recognize a date using "00" as the year
1900 rather than 2000 and certain applications may have limited date processing
capabilities. These problems could result in the failure of major systems or
miscalculations, which could have a material impact on companies through
business interruption or shutdown, financial loss, damage to reputation, and
legal liability to third parties.
Within the past twelve months, the Company has been assessing its exposure
to risks relating to the Y2K issue. These analysis and remediation issues are
addressed in a four-phase plan of action.
Phase I - Inventory and Risk Assessment. This Phase requires an inventory
and assessment of the business and information systems used by the Company,
including desktop hardware and software, network hardware and software, and
telephone systems. The Company uses Intel-based PC desktop products. In
connection with a review of this hardware the Company has determined that all
systems are Year 2000 compliant and contain four digit date codes. In addition
the Company uses "off the shelf" software for desktop applications. In
connection with a review of this software the Company has replaced its
accounting software. The Company's existing products are all Year 2000 compliant
and contain four digit date codes. As a result, the Company believes it has
completed this Phase. The Company's Internet Web sites are Y2K compliant. The
Company relies on Windows NT server software, Microsoft Internet Server software
and Microsoft SQL Server software, all of which, the Company has been informed,
are Y2K compliant. The Company does not have any contingency plans should the
Microsoft software not work on January 1, 2000.
Phase II - Remediation Cost Estimation. This Phase involves the analysis of
each Y2K compliance issue, determination of how such risks will be remediated
and the cost of such remediation. As indicated, the Company does not anticipate
needing to replace any additional hardware. It has upgraded some desktop
software with readily available prepackaged programs. Because of the Company's
limited operating history, it has not incurred significant time or expense in
connection with transferring data to any upgraded desktop software. The Company
believes it has completed this Phase.
Phase III - Remediation. This Phase includes the replacement or correction
of any necessary business or information systems. This Phase is complete for
both the information technology systems and the non-information technology
business systems.
Phase IV - Remediation Testing. This Phase includes the future date testing
of all remediation efforts made in Phase III to confirm that the changes made
bring the affected systems into compliance, no new problems have arisen as a
result of the remediation, and that all new systems which replaced non-compliant
systems are Y2K compliant regardless of whether vendors represent that such
systems are Y2K complaint. The Company believes it has completed this Phase and
is therefore Y2K compliant.
Third Party Relationships. Even if the internal systems of the Company are
not materially affected by the Year 2000 problem, the Company's business,
financial condition and results of operations could be materially adversely
affected by disruption in the operation of enterprises with which the Company
interacts. The Company currently relies or plans to rely on third party
companies in connection with the manufacture and distribution of its products.
The Company plans to rely on Pac Services Inc. ("PAC") for the assembly and
distribution of the Company's packaged CD-ROM software products. PAC has
reported that it has developed a comprehensive plan to achieve Year 2000
compliance of its sensitive systems by the fall of 1999. However, PAC cannot
guarantee its Year 2000 compliance or that of its suppliers. While another
company could be retained to assemble and distribute the Company's packaged
CD-ROM software products, any interruption in PAC's assembly or distribution of
the
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<PAGE>
Company's packaged CD-ROM software products could have a significant adverse
effect on the Company's business. The Company's servers in Thailand are Y2K
compliant, and the Company has been informed by the Ministry of University
Affairs that the Ministry is currently completing its Y2K readiness programs. If
the Ministry's UniNet network does not operate on January 1, 2000, the Company
will be unable to provide service on the UniNet until such time as the
Ministry's network is functional, which could have a material adverse effect on
the Company business and financial results.
Based on current information, the Company believes the Y2K issue will not
have a material adverse effect on the Company, its consolidated financial
position, results of operations or cash flows. However, there can be no
assurance that the Company's Y2K remediation efforts, or those of third parties
will be properly and timely completed, and the failure to do so could have a
material adverse effect on the Company, its business, results of operation, and
its financial condition. In particular, the Company has not yet completed its
assessment of the Y2K readiness of its significant third-party service
providers. Completion of this assessment may result in the identification of
additional issues, which could have a material adverse effect on the Company's
results of operations. In addition, important factors that could cause results
to differ materially include, but are not limited to, the ability of the Company
to successfully identify systems which have a Y2K issue, the nature and amount
of remediation effort required to fix the affected system, and the costs and
availability of labor and resources to successfully address the Y2K issues.
The worst-case scenario pertaining to the Y2K issue would be an overall
failure of the Internet, electronic and telecommunications infrastructure. In
addition, the systems and services provided by the Company's third-party vendors
may fail to be Y2K compliant despite their representations to the contrary. The
failure by these entities or systems to be Y2K compliant could result in a
systemic failure beyond the Company's control, which could also prevent users
from accessing the Company's freeENGLISH.com Internet Web site, which would have
a material adverse effect on the Company's business, results of operations and
financial condition.
The Company is continuing to formulate its Y2K contingency plans. The
Company views its dependence on critical suppliers and the Internet as its
primary exposure to potential Y2K concerns. The Company will continue to
evaluate potential alternatives to reduce its dependence on those suppliers, and
secure alternate supplies in the event that any supplier experiences significant
business interruption as a result of Y2K or other concerns. Development of the
Y2K contingency plans is expected to be substantially complete by the end of
September 1999.
ITEM 3 DESCRIPTION OF PROPERTY
EDUVERSE Accelerated Learning Systems (Canada) Inc., a wholly-owned
subsidiary of the Company, currently leases approximately 5,000 square feet of
office space on a month-to-month basis in Vancouver, British Columbia, Canada.
The monthly rent is approximately US$1,070. The Company's www.eduverse.com Web
site is located on a server operated by Interland, a web-hosting service
provider in the United States. The Company's www.freeENGLISH.com Web site is
located on a Company-owned and operated server housed at SMARTT.COM, a Canadian
server farm. The Company's servers operating the Ministry of University Affairs
ENGLISH PRO Network Edition software are currently located on servers owned and
operated by the Company and located in the offices of the Ministry of University
Affairs in Bangkok, Thailand.
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<PAGE>
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of
shares of Common Stock owned beneficially as of June 30, 1999 by: (i) each
person known to the Company to own more than five percent (5%) of any class of
the Company's voting securities; (ii) each director of the Company; and (iii)
all directors and officers as a group. Unless otherwise indicated, the
shareholders listed possess sole voting and investment power with respect to the
shares shown.
<TABLE>
Amount and Nature of Percent of
Title of Class Name and Address (7) of a Beneficial Owner Beneficial Owner Class(1)
- -------------- ------------------------------------------ -------------------- --------
<S> <C> <C> <C>
Common Stock Mark E. Bruk (2) 3,861,100 30.1%
Common Stock Marc Crimeni (3) 3,686,100 28.8%
Common Stock Robert Harris (4) 28,500 *
Common Stock Peter O'Donnell (5) 19,500 *
Common Stock All directors and officers of the Company as 3,909,100 30.4%
a group (3 persons) (6)
</TABLE>
* Represents less than 1% of the outstanding shares of common stock.
(1) Based on an aggregate 12,753,434 shares outstanding as of August 25, 1999
(2) Includes options to purchase 90,000 shares exercisable within 60 days of
August 25, 1999.
(3) Includes options to purchase 30,000 shares exercisable within 60 days of
August 25, 1999.
(4) Includes options to purchase 13,500 shares exercisable within 60 days of
August 25, 1999.
(5) Includes options to purchase 4,500 shares exercisable within 60 days of
August 25, 1999.
(6) Includes options to purchase 108,000 shares exercisable within 60 days of
August 25, 1999.
(7) Unless otherwise noted, the address of each beneficial owner is 2nd Floor,
1235 West Pender Street, Vancouver, British Columbia V6E 2V1.
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Executive Officers and Directors
The following table sets forth certain information concerning the certain
executive officers and directors of the Company and its subsidiaries as of
August 31, 1999.
Position with the Company or
Name Age Subsidiary
---- --- ----------------------------
Mark E. Bruk 40 President, Chief Executive Officer,
Treasurer and Chairman of the Board
and Director
Robert Harris 50 Manager of Creative Research,
EDUVERSE Accelerated Learning Systems
(Canada) Inc., Secretary and Director
Marc Crimeni 40 Executive Vice President, EDUVERSE
Accelerated Learning Systems (Canada)
Inc.
Jeffrey Mah 38 Chief Technology Officer, EDUVERSE
Accelerated Learning Systems (Canada)
Inc.
Lorne Reicher 42 Vice President, Operations, EDUVERSE
Accelerated Learning Systems (Canada)
Inc.
Peter O'Donnell 48 Director
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<PAGE>
Mark E. Bruk has served as the Company's President, Treasurer, CEO and
Chairman since May 28, 1998. He is also President, Treasurer, CEO and Chairman
of the Company's wholly-owned subsidiary EDUVERSE Accelerated Learning Systems
(Canada), Inc.; President, Secretary, Treasurer and sole Director of the
Company's wholly owned subsidiary ESL PRO Systems, Inc.; and President,
Secretary, Treasurer and sole Director of the Company's wholly owned subsidiary
M&M Information & Marketing Services, Inc. From July 1996 to August 1997, Mr.
Bruk served as Vice President of Applications and then Vice President of
Research & Development for InMedia Presentations, Inc., a multimedia and
software company ("InMedia"). From August 1995 to May 1996, Mr. Bruk served as
the Product Manager for Boswell International Technologies Ltd., a software
development company, where he supervised the redesign, development and
production of the Boswell ESL system which the Company has subsequently
licensed. From October 1994 to July 1995, Mr. Bruk founded and served as the
President of News4U, a information service for delivering news via alpha-numeric
and numeric pagers. From October 1993 to October 1994, Mr. Bruk served as
President of CanFuture Development Inc., a custom software development company.
Robert Harris has served as the Manager of Creative Research of the
Company's wholly owned subsidiary EDUVERSE Accelerated Learning Systems (Canada)
Inc. and as Secretary and Director of the Company since June 3, 1998. From 1996
to 1998, Mr. Harris served as executive assistant to the Investment Director of
a private investment corporation based in Vancouver and Riyadh, Saudi Arabia and
as the assistant to the President for Wayburn Resources Inc., a mineral
exploration company. From November 1990 to November 1995, Mr. Harris served as a
compliance officer and a director for SZL Sportsight Inc., a sports
entertainment technology company.
Marc Crimeni has served as the Executive Vice President of the Company's
wholly owned subsidiary EDUVERSE Accelerated Learning Systems (Canada), Inc.
since August 1, 1998. From November 1996 to July 1997, Mr. Crimeni served as
Vice President of Sales and Marketing at InMedia. From February 1994 to November
1996, he served as the International Sales Manager for Inetco Systems Inc., a
software company. From June 1992 to July 1993, Mr. Crimeni served as
International Sales Manager for Prologic Computer Corporation, a software
development company. On September 3, 1998, the British Columbia Securities
Commission fined Mr. Crimeni Cdn$10,000 for failing to disclose a pending
criminal proceeding involving the improper storage of a firearm in a regulatory
filing. As a result of this action, Mr. Crimeni agreed to resign any position he
held as a director or officer of a reporting issuer in British Columbia, to not
serve as a director or officer of any reporting issuer in British Columbia and
to not engage in any investor relations activities until December 4, 1999. Mr.
Crimeni also agreed to complete an educational program relating to securities
prior to resuming any position as a director or executive officer of a British
Columbia reporting issuer.
Jeffrey Mah has served as the Chief Technology Officer of the Company's
wholly-owned subsidiary EDUVERSE Accelerated Learning Systems (Canada), Inc.,
since August 1, 1998. From January 1998 to May 1998, Mr. Mah founded and was
President of e-werks Software, Inc., an educational software development firm.
From March 1997 to January 1998, he served as Senior Java Programer at InMedia.
From May 1996 to November 1996, Mr. Mah was a member of the Scientific and
Engineering Staff at MacDonald Dettwiler and Associates, an information
technology company. From May 1994 to May 1996, Mr. Mah founded and was President
of Stormchaser Productions, an information technology strategy and systems
development and integration company. Mr. Mah is also serving as an Instructor at
the British Columbia Institute of Technology, offering courses in object
oriented application design in Java and structured programming. He received his
Bachelor of Science Degree in Computer Science from the University of British
Columbia in 1985.
Lorne Reicher has served as the Vice President of Operations of the
Company's wholly owned subsidiary EDUVERSE Accelerated Learning Systems
(Canada), Inc., since January 1, 1999. From June 1991 to January 1998, Mr.
Reicher was the Director of Franchising, Western Region for Hartco Enterprises
Inc., a franchisor of systems integrators, computer resellers and computer
retailers. From June 1985 to Jun 1991, Mr. Reicher founded and was a partner and
General Manager of the Penny Group, a independent computer reseller association.
Peter O'Donnell has served as a Director of the Company since May 28, 1998.
Mr. O'Donnell is currently serving as the Vice-President, Marketing, of Intracom
Corporation, an Internet medical imaging company and as the Chief Operating
Officer of Personal Internet Assistants, Inc., an Internet research service.
From 1997 to 1998, Mr. O'Donnell served as the Chief Executive Officer of Soqual
Creative Marketing Services, a marketing company, and as the Executive
Vice-President, Marketing, of The Black Vodka Company. From 1994 to 1997,
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<PAGE>
Mr. O'Donnell served as the Executive Vice-President of Sales and Marketing for
OneVoice Corp., a multi-lingual Web content and translation/localization
service. Mr. O'Donnell currently serves on the Board of Advisors for VidBot.com,
a streaming video Internet directory company. He received his Bachelor's Degree
in Journalism in 1972 from the University of Florida.
Board of Directors
Each member of the Board of Directors is elected annually and holds office
until the next annual meeting of shareholders or until his successor has been
elected or appointed, unless his office is earlier vacated in accordance with
the Bylaws of the Company. Officers serve at the discretion of the Board and are
appointed annually. The Board currently has no committees.
None of the Company's directors or executive officers are parties to any
arrangement or understanding with any other person pursuant to which said
individual was elected as a director or officer of the Company. No director or
executive officer of the Company has any family relationship with any other
officer or director of the Company.
ITEM 6 EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table sets forth compensation information for the Company's
Chief Executive Officer during the fiscal year ended December 31, 1998:
<TABLE>
Summary Compensation Table
--------------------------
Compensation
Other Annual
Name and Salary Bonus Compensation
Principal Position Fiscal Year ($) ($) ($)
------------------ ----------- ----- ------ --------------
<S> <C> <C> <C> <C>
Mark E. Bruk 1998 60,000 -- --
President, CEO and Chairman
</TABLE>
Option/SAR Grants in Last Fiscal Year
The following table shows information regarding grants of stock options to
the Company's Chief Executive Officer during the year ended December 31, 1998.
<TABLE>
Individual Grants
-----------------------------------------------------------------------
Percent of
Number of Total Options
Shares Granted to
Underlying Employees in Exercise
Options Fiscal Price Expiration
Name Granted(#)(3) Year(%)(2) ($/Share)(1) Date
- --------------------------- ------------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Mark E. Bruk 300,000 23.7% $0.75 6/3/02
</TABLE>
- ----------------------------
(1) The exercise price per share of each option is equal to the fair market
value per share plus a premium of 10% of the fair market value per share of
the underlying common stock on the date of grant.
(2) Options to purchase 1,262,500 shares of common stock were granted by the
Company to its employees, consultants and directors.
(3) The options vest 2% per month for a period of 50 months from June 3, 1998.
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<PAGE>
Employment Agreements
Effective May 3, 1999, Marc Crimeni, Robert Harris, Jeffrey Mah and Lorne
Reicher have entered into employment agreements with EDUVERSE Accelerated
Learning Systems (Canada) Inc., the Company's wholly-owned subsidiary, providing
for annual salaries of Cdn$90,000, Cdn$36,000, Cdn$108,000 and Cdn$60,000,
respectively. The employment agreements may be terminated by the Company with 14
days written notice and by the employees with 30 days written notice. Each of
the above named employees have entered into confidentiality and non-competition
agreements with the Company.
Stock Option and Purchase Plans
1998 Stock Option Plan. The Board of Directors and shareholders of the
Company adopted the 1998 Stock Option Plan (the "1998 Plan") on June 3, 1998 and
amended it on May 30, 1999 and again on June 30, 1999. The 1998 Plan will
terminate on the earlier of June 3, 2008 or such other date as the Board of
Directors or committee thereof may determine. The 1998 Plan is administered by
the Board of Directors or by a committee thereof (the "Plan Administrator") and
provides that options may be granted to employees and officers of the Company or
any of its subsidiaries and to directors of the Company who are employees of the
Company or any of its subsidiaries, based on the eligibility criteria set out in
the 1998 Plan.
The 1998 Plan authorizes the grant of "incentive stock options" as defined
in Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"),
and "non-qualified" stock options. The options issued under the Stock Option
Plan are exercisable at a price fixed by the Plan Administrator, in its sole
discretion, subject to specific requirements relating to incentive stock options
under the Code. Non-qualified and incentive stock options generally expire ten
years from the grant date, except non-qualified and incentive stock options
which are granted to a person owning more than 10% of the combined voting power
of all classes of stock of the Company or any parent or subsidiary of the
Company expire after five years from the grant date.
The maximum number of the shares reserved for issuance under the 1998 Plan,
including options currently outstanding, is 2,500,000 shares. As of August 25,
1999, a total of 1,477,500 options are issued and unexercised.
1998 Director's Stock Option Plan. The Board of Directors and stockholders
of the Company adopted the 1998 Director's Stock Option Plan (the "1998
Directors Plan") on June 3, 1998. The 1998 Directors Plan will terminate on the
earlier of June 30, 2008 or such other date as the Board of Directors or
committee thereof may determine. The 1998 Directors Plan is administered by the
Board of Directors or by a committee thereof (the "Plan Administrator") and
provides that options may be granted to Directors of the Company who are not
employees of the Company.
Under the 1998 Directors Plan, options may be exercised at a price not less
than the fair market value of the Company's common stock on the date of grant,
which is deemed to be the closing price of the Company's shares on NASD
Over-The-Counter Bulletin Board Market on the date of grant. Options are granted
under the 1998 Directors Plan to eligible Directors in accordance with the
following formula:
1. Upon initial election or appointment to the Board of Directors each
director is entitled to receive an option to purchase up to 25,000
share of the Company's common stock.
2. Upon re-election to the Board of Directors each director is entitled
to receive and option to purchase up to 8,000 shares of the Company's
common stock.
In the event a Director serves only a partial term before re-election, the
number of options to purchase shares granted upon their re-election is prorated
to reflect the amount of time served as a Director. Options typically vest 2%
each month and expire 10 years from the date of grant.
At December 31, 1998 and June 30, 1999, the granting of 25,000 options at
an exercise price of $0.68 per share had been authorized by the Board of
Directors; however, no option agreements had been executed during 1998 or during
the six months ended June 30, 1999.
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<PAGE>
The maximum number of shares reserved for issuance under the 1998 Directors
Plan, including options currently outstanding, is 150,000 shares. As of August
25, 1999, a total of 25,000 options are issued and outstanding.
1998 Employee Stock Purchase Plan. The Company has established a share
compensation arrangement for its employees known as the 1998 Employee Stock
Purchase Plan (the "1998 Purchase Plan"). The 1998 Purchase Plan became
effective as of June 3, 1998 and will terminate on the earlier of June 3, 2008,
the date on which all authorized shares under the 1998 Purchase Plan are
distributed or on a date determined by the Board of Directors. The 1998 Purchase
Plan is administered by the Board of Directors or committee thereof (the "Plan
Administrator"). Under the terms of the 1998 Purchase Plan, the aggregate number
of shares that may be issued pursuant to the plan is 500,000.
The 1998 Purchase Plan provides that each full-time employee (subject to
certain limited exceptions) of the Company may purchase shares of the Company's
common stock by payroll deduction up to an amount equal to the lesser of (1) the
maximum number of shares set by the Plan Administrator, or (2) 200% of the
number of shares determined by dividing the dollar amount in such employee's
payroll deduction account by 85% of the closing bid price on the NASD OTC
Bulletin Board on the day previous to the purchase. The number of shares which
an employee may purchase during any given offering period is determined by
dividing the amount accumulated in such employee's payroll deduction account
during the offering period by the lower of (1) eighty-five percent of the fair
market value of a share of the Company's common stock on the first day of the
offering period, or (2) eighty-five percent of the fair market value of the
Company's common stock on the purchase date. At August 25, 1999, no employees
had yet been offered participation in the 1998 Purchase Plan.
Compensation of Directors
During the most recently completed financial year ended December 31, 1998,
there was no compensation paid by the Company to the directors for their
services as directors except as otherwise disclosed herein. There are no
standard arrangements for any such compensation to be paid other than
reimbursement for expenses incurred in connection with their services as
directors, although the Company from time to time may grant options to acquire
Common Shares for directors. As at the date hereof the Company has no
outstanding options to Directors that have been granted for their services as
such.
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise disclosed herein, no director, senior officer,
principal shareholder, or any associate or affiliate thereof, had any material
interest, direct or indirect, in any transaction since the beginning of the last
financial year of the Company that has materially affected the Company, or any
proposed transaction that would materially affect the Company, except for an
interest arising from the ownership of shares of the Company where the member
will receive no extra or special benefit or advantage not shared on a pro rata
basis by all holders of shares in the capital of the Company.
In May 1998, pursuant to an exchange offer, the Company acquired 100% of
the outstanding Common Stock of ESL PRO Systems, Inc. and M&M Information &
Marketing Services, Inc., corporations controlled by Mark E. Bruk, the Company's
Chief Executive Officer, Treasurer and Chairman, and Marc Crimeni, Executive
Vice President of the Company's wholly owned subsidiary EDUVERSE Accelerated
Learning Systems (Canada) Inc. In connection with the acquisitions, the Company
issued to the stockholders of ESL and M&M an aggregate of 9,000,000 shares of
common stock. Mr. Bruk and Mr. Crimeni received 3,746,100 and 3,686,100 shares
of the Company, respectively.
During 1998 and 1999, Mr. Bruk loaned an aggregate of $63,685 to the
Company, of which amount $45,000 represented deferred consulting fees payable to
Mr. Bruk. The loan was interest free and contained no repayment terms. As of
July 31, 1999, all amounts outstanding under the loan have been prepaid.
In May 1999, the Company entered into employment agreements with Marc
Crimeni, Robert Harris, Jeffrey Mah and Lorne Reicher. See "Executive
Compensation -- Employment Agreements."
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<PAGE>
ITEM 8 DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock,
$0.001 par value, of which 12,751,089 were outstanding at June 30, 1999. Holders
of Common Stock are entitled to dividends, pro rata, when, as and if declared by
the Board of Directors out of funds available therefor. Holders of Common Stock
are entitled to cast one vote for each share held at all stockholder meetings
for all purposes, including the election of directors. The holders of more than
50% of the Common Stock issued and outstanding and entitled to vote, present in
person or by proxy, constitute a quorum at all meetings of stockholders. The
vote of the holders of a majority of Common Stock present at such a meeting will
decide any question brought before such meeting, except for certain actions such
as amendments to the Company's Articles of Incorporation, mergers or
dissolutions which require the vote of the holders of a majority of the
outstanding Common Stock. Upon liquidation or dissolution, the holder of each
outstanding share of Common Stock will be entitled to share equally in the
assets of the Company legally available for distribution to such stockholder
after payment of all liabilities. Holders of Common Stock are not granted any
preemptive, subscription, redemption rights or registration rights. All
outstanding shares of Common Stock are fully paid and nonassessable.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of Preferred Stock,
$0.001 par value, of which no shares are currently outstanding. Holders of
Preferred Stock are not entitled to any voting rights. The Company does not
currently have any plans or arrangements to issue any Preferred Stock.
Anti-Takeover Provisions
Provisions of applicable Nevada law may affect potential changes in
control. The cumulative effect of these provisions may be to make it more
difficult to acquire and exercise control and to make changes in management.
Nevada law prohibits combinations between Nevada corporations and
interested stockholders for a period of three years after the interested
stockholder's date of acquiring shares unless the combination or the purchase of
the shares by the interested stockholder is approved by the board of directors.
Applicable Nevada law also prohibits business combinations between Nevada
corporations and interested stockholders following the expiration of three years
after the interested stockholder's date of acquiring shares unless the
combination meets the requirements specified in Section 78.439 for director and
stockholder approvals or Sections 78.441 to 78.444 inclusive with respect to the
consideration to be received in the combination by all stockholders other than
the interested stockholder. Applicable Nevada law defines "interested
stockholders" to include persons who, alone or together with affiliates,
beneficially own at least 10% of the outstanding stock of the corporation. A
Nevada corporation may opt out of the application of these provisions, but the
Company has not opted out.
Applicable Nevada law also denies voting rights to a stockholder who
acquires a controlling interest in a Nevada corporation, unless the voting
rights are approved by a majority of the voting powers of the corporations. A
Nevada corporation may opt out of the application of these provisions, but the
Company has not opted out.
Nevada law does not require a stockholder vote of the surviving corporation
of the merger if:
o the merger does not amend the existing articles of incorporation;
o each outstanding share of the surviving corporation before the merger
is unchanged; and
o the number of shares to be issued by the surviving corporation in the
merger does not exceed 20% of the shares outstanding immediately prior
to such issuance.
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<PAGE>
The effect of these provisions may be to make more difficult the
accomplishment of a merger or other takeover or change in control. To the extent
that these provisions have this effect, removal of the Company's incumbent Board
of Directors and management may be rendered more difficult. Further, these
provisions may make it more difficult for stockholders to participate in a
tender or exchange offer for common stock and in so doing may diminish the
market value of the common stock.
Transfer Agent and Registrar
The registrar and transfer agent of the Company is Holladay Stock Transfer,
Inc., 2939 North 67th Place, Scottsdale, Arizona, US 85251
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<PAGE>
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock has traded on the NASD Over-The-Counter Market
Bulletin Board ("OTCBB") since July 6, 1998 under the symbol "EDUV." The
following is a summary of trading, on a calendar quarter basis, in the shares on
the OTCBB during 1998 and 1999:
<TABLE>
1998 High Low Volume
---- ---- --- ------
<S> <C> <C> <C>
Third Quarter $1.80 $1.60 171,500
Fourth Quarter $1.70 $0.50 1,221,800
1999
----
First Quarter $1.60 $0.62 6,419,700
Second Quarter $2.00 $0.68 4,068,600
Third Quarter (through $1.43 $.90 632,900
July 31, 1999)
</TABLE>
The price for the Company's Shares on the OTCBB on July 31, 1999, was $1.18
(High) and $1.00 (Low), and the close price was $1.06.
Other than described above, the Company's shares are not and have not been
listed or quoted on any other exchange or quotation system.
As of June 30, 1999, the Company had approximately 800 shareholders of
record (including nominees and brokers holding street accounts) of shares the
Company's Common Stock.
The Company has never paid dividends on its Common Stock. The Company
currently intends to retain earnings for use in its business and does not
anticipate paying any dividends in the foreseeable future. As of August 31, 1999
there are outstanding options to purchase 1,477,500 shares of common stock.
ITEM 2 LEGAL PROCEEDINGS
The Company is not a party to, and none of the Company's property is
subject to, any material pending or threatened legal proceeding.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On May 28, 1998, upon recommendation by its Board of Directors, the Company
dismissed the accounting firm Barry L. Friedman, P.C., of 1582 Tulita Drive, Las
Vegas, Nevada, US 89123, as the auditors for the Company. On March 22, 1999, the
Company retained Ernst & Young LLP, of 700 West Georgia Street, Vancouver,
British Columbia, Canada V7Y1C7, as auditors for the Company.
In connection with the audits of the most recent fiscal years and any
interim period preceding dismissal, no disagreements exist with any former
accountant on any matter of accounting principles or procedure, which
disagreements if not resolved to the satisfaction of the former accountant would
have caused him to make reference in connection with his report to the subject
matter of the disagreement(s).
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<PAGE>
The principal accountant's report on the financial statements for any of
the past two years contained no adverse opinion or a disclaimer of opinion nor
was qualified as to uncertainty, audit scope or accounting principles.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
On May 28, 1999, the Company issued 2,000,000 shares of common stock in
connection with the acquisition of ESL Pro Systems, Inc. ("ESL") at a deemed
price of $0.001 per share for an aggregate purchase price of $2,000.00. The
shares were issued to the stockholders of ESL: Mark Bruk, Marc Crimeni, Boswell
International Technologies Ltd., Maggie Dodd, Al Hasley, Peter Apostoli, Wyn
Roberts and Colin Laine. The shares were issued to holders outside the United
States pursuant to an exemption from registration provided by Section 4(2) under
the Securities Act of 1933, as amended (the "Securities Act").
On May 28, 1999, the Company issued 7,000,000 shares of common stock in
connection with the acquisition of M&M Information & Marketing Service, Inc.
("M&M") at a deemed price of $0.001 per share for an aggregate purchase price of
$7,000.00. The shares were issued to the stockholders of M&M: Mark Bruk, Lil
Crimeni, John and Helen Bruk, Ian Bruk, Bruce Bruk, Steven and Karen Bruk, Emily
Bruk, Adele Paulsen, Nick Sereda, Ron Crimeni, Darrel Crimeni, Adrian Crimeni,
Zena Weston, Iris Hickey, Jeffrey Mah, Jeff Giddens, Jeff Day, Lorne Johnson,
Bonnie Mah, David and Florence Mazzucco, Marlene Derrah, Martin Mazzucco,
Deborah Joel, Marshall Farris, Christopher Brough, Dickson Wong, Carlos Ceberio,
Juraj Krajci, Robert Harris, Peter O'Donnell and Ron Balshine. The shares were
issued to holders outside the United States pursuant to an exemption from
registration provided by Section 4(2) under the Securities Act and an exclusion
from registration provided by Regulation S under the Securities Act.
On May 27, 1998, the Company issued and additional 2,250,000 shares of
common stock at a deemed price of $0.001 per share in connection with the
acquisition of ESL and M&M to the former stockholders of ESL and M&M. The shares
were issued pursuant to an exemption from registration provided by Section 4(2)
under the Securities Act and an exclusion from registration provided by
Regulation S under the Securities Act.
In June 1998, the Company issued 136,500 shares of common stock to Tantum
Ltd. at prices per share ranging from $0.675 to $0.80 for an aggregate purchase
price of $99,950. The shares were issued to a holder outside the United States
pursuant to an exclusion from registration under Regulation S under the
Securities Act.
On July 27, 1998, the Company issued 2,630 shares of common stock to Ryan
and Erin Sawatzky at a price of per share of $1.25 for an aggregate purchase
price of $3,288. The shares were issued to a holder outside the United States
pursuant to an exclusion from registration under Regulation S under the
Securities Act.
On August 28, 1998, the Company issued 66,666 shares of common stock to
Tantum Ltd. at a price of per share of $0.75 for an aggregate purchase price of
$50,000. The shares were issued to a holder outside the United States pursuant
to an exclusion from registration under Regulation S under the Securities Act.
On December 14, 1998, the Company issued 25,000 shares of common stock to
Lorne Reicher in exchange for cancellation of $8,750 in debt owed by the
Company. The deemed price of per share was $2.86. The shares were issued to a
holder outside the United States pursuant to an exclusion from registration
under Regulation S under the Securities Act.
In December 1998, the Company issued 123,880 shares of common stock to
Tantum Ltd. at prices per share ranging from $0.57 to $1.57 for an aggregate
purchase price of $54,937.10. The shares were issued to a holder outside the
United States pursuant to an exclusion from registration under Regulation S
under the Securities Act.
On December 29, 1998 and December 30, 1998, the Company issued an aggregate
of 93,500 shares of common stock to Jonathan Davies, Vaughn Barbon and Maggie
Dodd in exchange for cancellation of an aggregate of $62,900 in debt owed by the
Company. The deemed price per share of $0.672. The shares were issued to a
holder outside the United States pursuant to an exclusion from registration
under Regulation S under the Securities Act.
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<PAGE>
On January 12, 1999, the Company issued 35,211 shares of common stock to
Tantum Ltd. at a price per share of $0.71 for an aggregate purchase price of
$24,999.81. The shares were issued to a holder outside the United States
pursuant to an exclusion from registration under Regulation S under the
Securities Act.
On January 29, 1999, the Company issued 30,768 shares of common stock to
Tantum Ltd. and Bingo, Inc. at a price per share of $0.65 for an aggregate
purchase price of $19,999.20. The shares were issued to holders outside the
United States pursuant to an exclusion from registration under Regulation S
under the Securities Act.
On January 29, 1999, the Company issued 6,541 shares of common stock to
Marshall Farris at a price per share of $0.733 for an aggregate purchase price
of $4,794.55. The shares were issued to a holder outside the United States
pursuant to an exclusion from registration under Regulation S under the
Securities Act.
In February 1999 and March 1999, the Company issued an aggregate of 119,038
shares of common stock to Tantum Ltd. at prices per share ranging from $0.59 to
$1.00 for an aggregate purchase price of $85,998.98. The shares were issued to a
holder outside the United States pursuant to an exclusion from registration
under Regulation S under the Securities Act.
In March 1999, the Company issued an aggregate 700,000 shares of common
stock to Bona Vista West Ltd. at prices per share ranging from $0.83 to $1.00
for an aggregate purchase price of $575,000. The shares were issued pursuant to
an exemption from registration provided by Rule 504 under the Securities Act.
On March 15, 1999, the Company issued an aggregate of 49,999 shares of
common stock to Mark Bruk, Marshall Farris and Zina Weston at a price per share
of $0.60 for an aggregate purchase price of $29,999.40. The shares were issued
to a holder outside the United States pursuant to an exclusion from registration
under Regulation S under the Securities Act.
On March 31, 1999, the Company issued 5,294 shares of common stock to
Vaughn Barbon at a price per share of $0.567 for an aggregate purchase price of
$3,000.00. The shares were issued to a holder outside the United States pursuant
to an exclusion from registration under Regulation S under the Securities Act.
On March 31, 1999, the Company issued 3,393 shares of common stock to
Marshall Farris at a price per share of $0.507 for an aggregate purchase price
of $1,719.48. The shares were issued to a holder outside the United States
pursuant to an exclusion from registration under Regulation S under the
Securities Act.
On May 21, 1999, the Company issued 102,669 shares of common stock to
Re/Max Realty Investments Ltd. at a price per share of $$0.487 for an aggregate
purchase price of $49,999.80. The shares were issued to a holder outside the
United States pursuant to an exclusion from registration under Regulation S
under the Securities Act.
On July 19, 1999, the Company issued 2,345 shares of common stock to Vaughn
Barbon at a price per share of $0.853 for an aggregate purchase price of $2,700.
The shares were issued to a holder outside the United States pursuant to an
exclusion from registration under Regulation S under the Securities Act.
From October to November, 1999, the Company issued convertible notes in the
aggregate amount of $30,000 to Mark Bruk, Marshall Farris and Zina Weston. The
notes beared interest at 25% for the first 90 days and 10% thereafter. At the
option of the holder(s) the loan was convertible into common shares of the
Company at a conversion rate of (i) $0.60 per share for the accrued interest
protion only or (ii) $0.50 per share for the principal and accured interest. On
March 15,1999 49,999 shares of commons stock at $0.60 per share were issued to
Mark Bruk (25,000), Marshall Farris (16,666) and Zina Weston (8,333) in payment
of outstanding interest on these notes. The Notes were issued pursuant to an
exclusion from registration under Regulation S under the Securities Act. As of
August 27, 1999, the outstanding principal amount of the notes has been paid in
full.
From July 1998 to June, 1999, the Company issued non-interest bearing notes
with no specific terms of repayment in the aggregate amount of $95,000. The
notes were issued pursuant to an exclusion from registration under Regulation S
under the Securities Act. As of August 27, 1999, the outstanding principal
amount of the notes has been paid in full.
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<PAGE>
Since May 1998, the Company has issued an aggregate of 1,477,500 options to
purchase its common stock, with exercise prices ranging from $0.68 to $5.50 per
share, to employees, directors, advisors and service providers under its 1998
Stock Option Plan and its 1998 Directors Stock Option Plan. Of these options,
none have been cancelled without being exercised, options for no shares have
been exercised and all options remain outstanding. The issuance of these options
and the underlying shares were exempt from registration under Rule 701 under the
Securities Act.
ITEM 5 INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Nevada General Corporation Law (the "Nevada Act") authorizes Nevada
corporations to indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the corporation), by reason of the
fact that he or she 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 or other entity,
against liability incurred in connection with such proceeding, including any
appeal thereof, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or on behalf of a corporation, indemnification may not be made if the
person seeking indemnification is adjudged liable, unless the court in which
such action was brought determines such person is fairly and reasonably entitled
to indemnification. The indemnification provisions of the Nevada Act require
indemnification if a director or officer has been successful on the merits or
otherwise in defense of any action, suit, or proceeding to which he or she was a
party by reason of the fact that he or she is or was a director or officer of
the corporation. The indemnification authorized under Nevada law is not
exclusive and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or Bylaws of a corporation or any
agreement between officers and directors and a corporation. A corporation may
purchase and maintain insurance or furnish similar protection on behalf of any
officer or director against any liability asserted against the officer or
director and incurred by the officer or director in such capacity, or arising
out of the status, as an officer or director, whether or not the corporation
would have the power to indemnify him or her against such liability under the
Nevada Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, or persons controlling the Company
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
-36-
<PAGE>
PART F/S
The report and financial statements of the Company for the year ended
December 31, 1998 reported on by Ernst & Young, LLP, and the unaudited financial
statements for the period ended June 30, 1999 are attached hereto. The financial
statements were prepared in accordance with generally accepted accounting
principles in United States and are presented in United States dollars.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
EDUVERSE.COM
(formerly Perfect Future, Ltd.)
December 31, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Directors of
Eduverse.Com
We have audited the accompanying consolidated balance sheet of Eduverse.Com as
of December 31, 1998, and the related consolidated statement of operations and
deficit, stockholders' equity and cash flows for the period from the date of
incorporation on May 5, 1998 to December 31, 1998. 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 United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eduverse.Com as of
December 31, 1998 and the results of its operations and its cash flows for the
period from the date of incorporation on May 5, 1998 to December 31, 1998, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Vancouver, Canada,
May 25, 1999. Chartered Accountants
<PAGE>
Eduverse.Com
(formerly Perfect Future, Ltd.)
CONSOLIDATED BALANCE SHEET
(Expressed in U.S. dollars)
December 31, 1998
$
- --------------------------------------------------------------------------------
ASSETS
Current
Cash 37,757
Accounts receivable, less allowance of $nil [note 3] 18,477
Finished goods inventory 44,421
Prepaid expenses 5,651
- --------------------------------------------------------------------------------
Total current assets 106,306
Capital assets, net [note 4] 31,774
Deferred charge, net of accumulated amortization of
$52,000 [note 5] 159,800
- --------------------------------------------------------------------------------
297,880
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable [notes 6 and 11] 102,778
Capital lease obligations 7,041
Loans payable [note 8] 78,685
Current portion of royalty payable [note 5] 29,400
Unearned revenue 20,138
- --------------------------------------------------------------------------------
Total current liabilities 238,042
Royalty payable [note 5] 130,400
- --------------------------------------------------------------------------------
368,442
- --------------------------------------------------------------------------------
Commitment [note 5]
Stockholders' equity
Share capital [note 9]
Common stock - $0.001 par value
50,000,000 authorized, 11,607,046 issued and outstanding 11,607
Preferred stock - $0.001 par value
5,000,000 authorized, nil issued and outstanding -
Shares to be issued [note 11] 46,747
Additional paid in capital 286,127
Cumulative translation adjustment 1,673
Deficit (416,716)
- --------------------------------------------------------------------------------
Total stockholders' equity (70,562)
- --------------------------------------------------------------------------------
297,880
- --------------------------------------------------------------------------------
See accompanying notes
On behalf of the Board:
Director Director
<PAGE>
Eduverse.Com
(formerly Perfect Future, Ltd.)
CONSOLIDATED STATEMENT OF OPERATIONS
AND DEFICIT
(Expressed in U.S. dollars)
For the Period From Date of
Incorporation on May 5, 1998
to December 31, 1998
$
- --------------------------------------------------------------------------------
REVENUE [note 3]
Software sales 14,824
- --------------------------------------------------------------------------------
Cost of goods sold (6,873)
- --------------------------------------------------------------------------------
7,951
- --------------------------------------------------------------------------------
EXPENSES
Amortization of deferred charge 52,000
Depreciation 4,205
General and administration [note 7] 207,644
Marketing 57,485
Research and development 103,333
- --------------------------------------------------------------------------------
424,667
- --------------------------------------------------------------------------------
Net loss (416,716)
Deficit, beginning of period --
- --------------------------------------------------------------------------------
Deficit, end of period (416,716)
- --------------------------------------------------------------------------------
Comprehensive loss
Net loss (416,716)
Foreign currency translation 1,673
- --------------------------------------------------------------------------------
Comprehensive loss 415,043
- --------------------------------------------------------------------------------
Basic and fully diluted loss per share [note 9] (0.04)
- --------------------------------------------------------------------------------
Weighted average number of shares 9,512,400
- --------------------------------------------------------------------------------
See accompanying notes
<PAGE>
Eduverse.Com
(formerly Perfect Future, Ltd.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
For the period from date of incorporation on May 5, 1998 to December 31, 1998 (Expressed in U.S. dollars)
Common stock Cumulative
Number Shares to Additional translation Accumulated
of shares Amount be issued paid in capital adjustment deficit Total
# $ $ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued upon incorporation 9,000,000 9,000 -- 10,560 -- -- 19,560
Additional shares issued as a result
of the reverse acquisition [note 9] 2,250,000 2,250 -- (2,249) -- -- 1
Issuance of common stock 357,046 357 -- 229,816 -- -- 230,173
Common stock to be issued [note 11] 90,171 -- 46,747 -- -- -- 46,747
Stock based compensation -- -- -- 48,000 -- -- 48,000
Loss for year -- -- -- -- -- (416,716) (416,716)
Cumulative translation adjustment -- -- -- -- 1,673 -- 1,673
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 11,697,217 11,607 46,747 286,127 1,673 (416,716) (70,562)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Eduverse.Com
(formerly Perfect Future, Ltd.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in U.S. dollars)
Nine Month Period Ended
December 31, 1998
$
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss (416,716)
Adjustment to reconcile net loss to net cash used in
operating activities:
Common shares issued for services rendered 16,748
Amortization of deferred charge 52,000
Depreciation 4,205
Stock based compensation 48,000
Changes in non-cash working capital items:
Accounts receivable (18,477)
Finished goods inventory (44,421)
Prepaid expenses (5,651)
Accounts payable 102,778
Unearned revenue 20,138
- --------------------------------------------------------------------------------
Net cash used in operating activities (241,396)
- --------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in loans payable 78,685
Payments under capital lease obligations (8,640)
Issuance of common stock 197,733
Cash received on common stock to be issued 30,000
- --------------------------------------------------------------------------------
Net cash provided by financing activities 297,778
- --------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (20,298)
- --------------------------------------------------------------------------------
Net cash used in investing activities (20,298)
- --------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash 1,673
Net increase in cash 37,757
Cash, beginning of period --
- --------------------------------------------------------------------------------
Cash, end of period 37,757
- --------------------------------------------------------------------------------
See accompanying notes
<PAGE>
1. NATURE OF BUSINESS AND REVERSE ACQUISITION
Eduverse.Com. (the "Company") was incorporated on October 22, 1991, under the
laws of the State of Nevada, as Ward's Futura Automotive, Ltd. The Company's
name was subsequently changed to Perfect Future, Ltd. On June 11, 1998 its name
was changed to Eduverse Accelerated Learning Systems, Inc. and on May 19, 1999
to Eduverse.Com.
Pursuant to a series of transactions on May 28, 1998 and May 29, 1998, the
Company acquired all of the issued and outstanding share capital of ESL Pro
Systems Inc. ("ESL") and M&M Information and Marketing Services Inc. ("M&M"),
both Nevada companies incorporated on May 5, 1998 and under common control. As a
result of these acquisitions, the previous shareholders of ESL and M&M, as a
group, owned more than 50% of the issued and outstanding voting shares of the
Company. Consequently, this business combination has been accounted for as a
reverse acquisition whereby ESL and M&M are deemed to have been combined, on a
continuity of interests basis (book value), since their inception on May 5, 1998
and to have acquired the Company. Accordingly, these consolidated financial
statements reflect the accounts of ESL & M&M since their inception at their
historic net book values, and the accounts of the Company, comprising nominal
net assets, at their estimated fair value at the time of the transaction.
The reverse acquisition transaction resulted in the acquisition of 2,000,000
common shares of ESL and 7,000,000 common shares of M&M for the issuance of
9,000,000 of the Company's common shares. The fair value of the net assets of
the Company deemed acquired as a result of the reverse acquisition were ascribed
a nominal value.
The Company is a technology-based company focused on developing and marketing
interactive multimedia educational software products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries: Eduverse Accelerated Learning Systems (Canada)
Inc. (British Columbia, Canada), incorporated July 9, 1998, ESL Pro Systems Inc.
(Nevada) and M&M Information and Marketing Services Inc. (Nevada). All
significant intercompany accounts and transactions have been eliminated.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
Finished goods inventory
Finished goods inventory is valued at the lower of weighted average cost and net
realizable value.
Capital assets
Capital assets are recorded at cost and are being depreciated on a straight-line
basis over their estimated useful lives as follows:
Computer equipment 3 years
Furniture and office equipment 5 years
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
Leases
Leases which transfer substantially all the benefits and risks of ownership of
the leased property are accounted for as capital leases whereby the property is
recorded as an asset and the obligation incurred is recorded as a liability.
Under this method of accounting for leases, the asset is depreciated over its
estimated useful life and the obligation, including interest thereon, is
amortized over the life of the lease.
Financial instruments
The fair values of the financial instruments consisting of cash, accounts
receivable, accounts payable, capital lease obligations, loans and royalties
payable, approximates their carrying values in the financial statements unless
otherwise indicated.
Advertising costs
Advertising costs are expensed as incurred.
Deferred charge
The deferred charge represents a license fee for the use of software and is
being amortized on a straight-line basis over the three year minimum term of the
license agreement.
Income taxes
The Company uses the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on the
difference between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance in respect of amounts considered by management
to be less likely than not of realization in future periods.
Research and development
Research and development costs are expensed in the period incurred.
Stock-based compensation
The Company accounts for stock-based compensation based on the provision of
Accounting Principles Board Opinion No. 25 whereby the intrinsic value of
options granted is recorded at the measurement date. The Company has elected to
only disclose the effects of the fair value method of accounting for stock
options prescribed by Statement of Financial Accounting Standards ("SFAS") No.
123.
Computation of loss per share
Basic loss per share is computed by dividing the loss attributable to common
stockholders by the weighted average number of common shares outstanding for
that period. Diluted loss per share is computed giving effect to all dilutive
potential common shares that were outstanding during the period. As at December
31, 1998, the diluted loss per share is equivalent to the basic loss per share
since the Company is in a loss position.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
Foreign currency translation
The functional currency of the Company is the Canadian dollar, while the
reporting currency is the U.S. dollar. Under this method assets and liabilities,
expressed in foreign currencies, are translated at the rate of exchange
prevailing at the balance sheet date. Revenue and expense accounts are
translated at the average exchange rate for the year.
Gains and losses arising on foreign currency translation are recorded in
stockholders' equity as an adjustment to the cumulative translation account.
Revenue recognition and unearned revenue
Revenue from the sale of software products is recognized at the time products
are shipped to customers.
Recent pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). SFAS 133 will be effective for the Company's December
31, 2001 year end. The Company has not determined the impact, if any, of these
pronouncements on its consolidated financial statements.
3. MAJOR CUSTOMERS
For the year ended December 31, 1998, the majority of software sales were
derived from one customer representing 36% of software sales. As at December 31,
1998 the aggregate accounts receivable balance relating to this customer was
$5,715.
4. CAPITAL ASSETS
<TABLE>
Accumulated Net book
Cost depreciation value
$ $ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998
Computer equipment 28,230 3,430 24,800
Furniture and office equipment 7,749 775 6,974
- --------------------------------------------------------------------------------------------------
35,979 4,205 31,774
- --------------------------------------------------------------------------------------------------
</TABLE>
Computer equipment under capital leases have a cost of $15,681 and related
accumulated depreciation of $2,348.
5. DEFERRED CHARGE
On May 7, 1998, the Company, entered into a license agreement with Boswell
International Technologies Ltd. to acquire certain rights to developed software.
Pursuant to the license agreement, the Company is required to make certain
minimum annual royalty payments and may be required to pay additional amounts
based on sales levels for a minimum period of 3 years. Accordingly, the Company
has recorded a liability and deferred charge equal to the minimum royalty
payable of $211,800 (Cdn $325,000).
<PAGE>
5. DEFERRED CHARGE (cont'd.)
The minimum amounts repayable over the next three years are as follows:
$
----------------------------------------------------------------------------
1999 29,400
2000 81,500
2001 48,900
----------------------------------------------------------------------------
159,800
----------------------------------------------------------------------------
During the year, the Company issued 80,000 common shares to settle $52,000 of
royalties due.
6. ACCOUNTS PAYABLE
1998
$
- ----------------------------------------------------------------------------
Trade accounts 83,055
Employee compensation 19,723
- ----------------------------------------------------------------------------
102,778
- ----------------------------------------------------------------------------
7. RELATED PARTY TRANSACTIONS
General and administration expenses includes consulting fees of $57,467 paid to
officers of the Company during the period.
8. LOANS PAYABLE
1998
$
- ------------------------------------------------------------------------------
Stockholder Loan 48,685
Inventory Loan 15,000
Third Party Loan 15,000
- ------------------------------------------------------------------------------
78,685
- ------------------------------------------------------------------------------
The Stockholder Loan, due to a stockholder who is also an officer of the
Company, and the Third Party Loan are non-interest bearing and have no specific
terms of repayment.
The Inventory Loan bears interest at 25% for the first 90 days and 10%
thereafter. At the option of the holder the loan may be converted into common
shares of the Company at a conversion rate of (i) $0.60 per share for the
accrued interest portion only or (ii) $0.50 per share for the principal and
accrued interest.
<PAGE>
9. SHARE CAPITAL
[a] Authorized
The authorized capital of the Company consists of 50,000,000 common shares with
$0.001 par value and 5,000,000 preferred shares with $0.001 par value.
[b] Issued and outstanding
<TABLE>
Number
of Shares Amount
# $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares of ESL and M&M issued on incorporation May 5, 1998
(2,000,000 and 7,000,000 respectively) 9,000,000 9,000
Additional shares issued as a result of the reverse 2,250,000 2,250
acquisition
Shares issued for cash pursuant to subscription agreements 277,046 277
Shares issued for settlement of royalty
payable [note 5] 80,000 80
- --------------------------------------------------------------------------------------------------
Balance, December 31, 1998 11,607,046 11,607
- --------------------------------------------------------------------------------------------------
</TABLE>
During the period, the Company issued 277,046 common shares pursuant to
subscription agreements at prices ranging from $0.35 to $1.25 per share for cash
of $178,173.
During the period, the Company issued common shares for consideration greater
than the par value of $0.001 per share. The excess of the consideration received
over the par value of the shares issued in the amount of $229,816 has been
allocated to additional paid in capital.
[c] Stock options
During the period ended December 31, 1998, the stockholders approved the
creation of an employee stock option plan (the "1998 Stock Option Plan") and a
director stock option plan (the "1998 Directors' Stock Option Plan") pursuant to
which the Company has reserved 1,500,000 and 150,000 common shares,
respectively, for issuance.
Stock option transactions for the respective periods and the number of stock
options outstanding are summarized below:
Number of
Optioned
Common Price
Shares Range
# $
---------------------------------------------------------------- --------------
Options granted 1,262,500 $0.68 - 0.75
Options cancelled and expired -- --
---------------------------------------------------------------- --------------
Balance, December 31, 1998 1,262,500 $0.68 - 0.75
---------------------------------------------------------------- --------------
The outstanding options at December 31, 1998 of 1,262,500 expire after 50 months
from the date the option is granted, at various dates beginning August 3, 2002
and ending February 21, 2003.
During the period ended December 31, 1998 the Company repriced 400,000 and
362,500 stock options with exercise prices of $1.50 and $1.65 respectively, to
$0.68 and $0.75 respectively.
Options granted vest in equal amounts at 2% per month. At December 31, 1998,
84,250 options were exercisable.
[d] The exercise price of certain stock options granted to employees and a
consultant in the year were less than the market price of the underlying
stock on the date of grant. Compensation expense of $48,000 related to the
options has been reflected in 1998. Had compensation expense been
determined based on the fair value at the
<PAGE>
9. SHARE CAPITAL (cont'd.)
grant dates for those options issued to employees and the consultant,
consistent with the method described in SFAS No. 123, the Company's loss
and loss per common share would have been increased to the pro forma
amounts indicated below:
1998
$
---------------------------------------------------------------------------
Loss As reported (416,716)
Pro forma (457,716)
Basic and diluted loss per common share As reported (0.04)
Pro forma (0.05)
---------------------------------------------------------------------------
The fair value of each option granted in 1998 was estimated at the date of
grant using a Black-Scholes pricing model with the following weighted
average assumptions: risk free interest rates of 5%; dividend yields of 0%;
volatility factors of the expected market price of the Company's common
stock of 1.1 and a weighted average expected life of the option of 3.7
years. The weighted-average fair value of options granted during the year
was $0.81.
[e] Stock purchase plan
During the period ended December 31, 1998, the stockholders approved the
creation of an employee stock purchase plan pursuant to which the Company has
reserved 500,000 common shares for issuance. The Plan allows participating
employees, as defined in the Plan, to purchase common shares of the Company
through payroll deductions up to a maximum as determined by a formula described
in the Plan. At December 31, 1998, no common shares have been purchased pursuant
to the Plan.
10. INCOME TAXES
At December 31, 1998, the Company has a net operating loss for United States
income tax purposes of approximately $100,000 which will expire in 2018 if not
utilized.
In addition, the Company has non-capital losses for Canadian income tax purposes
of approximately $210,000 which will expire in 2005.
Deferred income taxes reflect the net effects of temporary differences between
the carrying value of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The Company has recognized a
valuation allowance of $153,000 equal to the deferred tax assets due to the
uncertainty of realizing the benefits of the assets.
11. SUBSEQUENT EVENTS
The following events have occurred subsequent to December 31, 1998:
[a] The Company issued 52,630 common shares for which proceeds of $30,000 were
received prior to December 31, 1998, and 37,541 for services rendered prior
to December 31, 1998 at a deemed value of $16,748. The $16,748 was recorded
as an expense at December 31, 1998.
[b] Pursuant to subscription agreements, the Company issued 987,686 common
shares for gross proceeds of $756,000.
[c] The Company issued 66,186 common shares for services rendered at a deemed
value of $39,195. Of this amount, $4,875 was for services rendered prior to
December 31, 1998 and is included in accounts payable.
[d] The Company granted 215,000 stock options at various exercise prices
ranging from $1.06 to $5.50. These options expire up to July 9, 2003.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
eduverse.com
June 30, 1999
(unaudited)
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
The following historical financial data provided as of and for the six months
ended June 30, 1999 have been derived from the Company's unaudited internal
consolidated interim financial statements and have been prepared in accordance
with United States generally accepted accounting principles. In the opinion of
the Company's management, contained within the financial statements are all
adjustments, which are necessary for a fair representation of the information
pertaining to the Company's financial position as of June 30, 1999.
<PAGE>
eduverse.com
(formerly Perfect Future Ltd.)
<TABLE>
CONSOLIDATED BALANCE SHEET
As at June 30, 1999 (unaudited) (Expressed in U.S. dollars)
30-Jun
1999
$
(unaudited)
- -----------------------------------------------------------------------------------------
<S> <C>
ASSETS
Current
Cash 331,733
Accounts receivable, less allowance of $nil 120,702
Finished goods inventory 15,464
- -----------------------------------------------------------------------------------------
Total currents assets 467,899
Capital assets, net [note 3] 50,732
Deferred charge, net of accumulated amortization of
$83,900 127,900
- -----------------------------------------------------------------------------------------
646,531
- -----------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilites 57,331
Loans payable [note 5] 27,390
Current portion of royalty payable [note 6] 62,000
- -----------------------------------------------------------------------------------------
Total current liabilities 146,721
Royalty payable [note 6] 97,800
- -----------------------------------------------------------------------------------------
244,521
- -----------------------------------------------------------------------------------------
Commitment [note 6]
Stockholders' equity
Share capital [note 7]
Common Stock - $0.001 par value
50,000,000 authorized, 12,751,089 issued and outstanding 12,751
Preferred stock - $0.001 par value
5,000,000 authorized, nil issued and outstanding 0
Additional paid in capital 1,130,022
Cumulative translation adjustment (2,026)
Deficit (738,737)
- -----------------------------------------------------------------------------------------
Total stockholders' equity 402,010
- -----------------------------------------------------------------------------------------
646,531
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
eduverse.com
(formerly Perfect Future Ltd.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
(Expressed in U.S. dollars)
5-May-98
Six Months (date of
Ended incorporation) to
30-Jun 31-Dec
1999 1998
$ $
(unaudited) (audited)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE
Software Sales [note 4] 95,497 14,824
Distribution royalties 40,644 0
Other Income [note 4] 96,945 0
- -----------------------------------------------------------------------------------------------------
233,086 14,824
Cost of goods sold (35,923) 6,873
- -----------------------------------------------------------------------------------------------------
197,163 7,951
- -----------------------------------------------------------------------------------------------------
EXPENSES
Amortization of deferred charge 31,900 52,000
Depreciation 7,336 4,205
General and administration 216,185 207,644
Marketing 127,797 57,485
Research and development 135,966 103,333
- -----------------------------------------------------------------------------------------------------
519,184 424,667
- -----------------------------------------------------------------------------------------------------
Loss for the period (322,021) (416,716)
Deficit beginning of period (416,716) 0
- -----------------------------------------------------------------------------------------------------
Deficit end of period (738,737) (416,716)
- -----------------------------------------------------------------------------------------------------
Comprehensive loss
Net loss (738,737) (416,716)
Foreign currency translation (3,699) 1,673
- -----------------------------------------------------------------------------------------------------
Comprehensive loss (740,436) (415,043)
- -----------------------------------------------------------------------------------------------------
Basic and fully diluted loss per share (0.06) (0.04)
- -----------------------------------------------------------------------------------------------------
Weighted average number of shares 12,333,400 9,512,400
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
eduverse.com
(formerly Perfect Future Ltd.)
CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
(Expressed in U.S. dollars)
5-May-98
Six months (date of
Ended Incorporation) to
30-Jun Dec. 31
1999 1998
$ $
(unaudited) (audited)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the period (322,021) (416,716)
Adjustment to reconcile net loss to net cash used in
operating activities:
Common shares issued for services rendered 42,294 16,748
Amortization of deferred charge 31,900 52,000
Depreciation 7,336 4,205
Stock based compensation 0 48,000
Changes in non-cash working capital items:
Accounts receivable (102,225) (18,477)
Finished goods inventory 28,957 (44,421)
Prepaid expenses 5,651 (5,651)
Accounts payable (45,447) 102,778
Unearned revenue (20,138) 20,138
- -------------------------------------------------------------------------------------------------
Net cash used in operating activities (374,053) (241,396)
- -------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Advances (repayments) of loans (51,295) 78,685
Payments under capital lease obligations (7,041) (8,640)
Issuance of common stock 755,998 197,733
Cash received on common stock to be issued 0 30,000
- -------------------------------------------------------------------------------------------------
Net cash provided by financing activities 697,662 297,778
- -------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (26,294) (20,298)
- -------------------------------------------------------------------------------------------------
Net cash used in investing activities (26,294) (20,298)
- -------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash (3,699) 1,673
Net increase in cash 293,976 37,757
Cash, beginning of year 37,757 0
- -------------------------------------------------------------------------------------------------
Cash, end of the period 331,733 37,757
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
1. BASIS OF PRESENTATION
The Company's consolidated financial statements for the period ended June
30, 1999 have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in
the normal course of business for the foreseeable future. The Company
incurred a loss of $322,021 and cash outflows from operations of $342,713
for the period ended June 30, 1999 and has incurred significant operating
losses and cash outflows from operations in the period ended December 31,
1998. The ability of the Company to continue as a going concern is
dependent upon achieving profitable operations and upon obtaining
additional financing. The outcome of these matters cannot be predicted at
this time. No assurances can be given that the Company will be successful
in raising sufficient additional capital. Further, there can be no
assurance, assuming the Company successfully raises additional funds, that
the Company will achieve positive cash flow. If the Company is unable to
obtain adequate additional financing, management will be required to
sharply curtail the Company's operating expenses. These financial
statements do not include any adjustments to the specific amounts and
classifications of assets and liabilities, which might be necessary should
the Company be unable to continue business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries: Eduverse Accelerated Learning Systems
(Canada) Inc. (British Columbia, Canada), ESL Pro Systems Inc. (Nevada) and
M&M Information and Marketing Services Inc. (Nevada). All significant
intercompany accounts and transactions have been eliminated.
Revenue recognition
Revenue from the sale of software products is recognized at the time
products are shipped to customers. Distribution royalty revenue is
recognized when the terms of the distribution agreement have been met.
Consulting revenue is recognized at the time the consulting services have
been rendered.
<PAGE>
3. CAPITAL ASSETS
<TABLE>
Accumulated Net book
Cost depreciation value
$ $ $
-----------------------------------------------------------------------------------------
June 30, 1998
<S> <C> <C> <C>
Computer equipment 49,304 9,723 39,581
Furniture and office equipment 12,969 1,818 11,151
-----------------------------------------------------------------------------------------
62,273 11,541 50,732
-----------------------------------------------------------------------------------------
</TABLE>
4. MAJOR CUSTOMERS
For the six-month period ended June 30, 1999, major customers represented
the following percentage of software sales and other income.
(a) One customer represented 52% of software sales.
(b) One customer represented 95% of other income.
5. LOANS PAYABLE
1998
$
- --------------------------------------------------------------------------------
Stockholder Loan 15,000
Third Party Loan 12,390
- --------------------------------------------------------------------------------
27,390
- --------------------------------------------------------------------------------
These loans were non-interest bearing and have no specific terms of repayment.
These loans were repaid by August 20, 1999.
6. DEFERRED CHARGE
On May 7, 1998, the Company, entered into a license agreement with Boswell
International Technologies Ltd. to acquire certain rights to developed
software. Pursuant to the license agreement, the Company is required to
make certain minimum annual royalty payments and may be required to pay
additional amounts based on sales levels for a minimum period of 3 years.
Accordingly, the Company has recorded a liability and deferred charge equal
to the minimum royalty payable of $211,800 (Cdn $325,000).
<PAGE>
The minimum amounts repayable over the next three years to June 30 are as
follows:
$
- --------------------------------------------------------------------------------
2000 62,000
2001 97,800
- --------------------------------------------------------------------------------
159,800
- --------------------------------------------------------------------------------
7. SHARE CAPITAL
(a) Authorized
The authorized capital of the Company consists of 50,000,000 common shares
with $0.001 par value, and 5,000,000 preferred shares with a par value of
$0.001.
(b) Issued and outstanding
Number
of Shares Amount
Common Shares # $
- --------------------------------------------------------------------------------
Balance, December 31, 1998 11,607,046 11,607
Issued for cash pursuant to subscription
agreements 1,071,316 1,071
Issued for services rendered 72,727 73
- --------------------------------------------------------------------------------
Balance, June 30, 1999 12,751,089 12,751
- --------------------------------------------------------------------------------
During the period, the Company issued 1,071,316 common shares pursuant to
subscription agreements at prices ranging from $0.48 to $1.00 per share for
cash of $755,998.
The Company also issued 72,727 common shares for services rendered at a
deemed value of $42,294. These shares were issued at prices between $0.50
to $0.73 per share.
(c) Stock Options
The Board of Directors and shareholders amended the Stock Option Plan on
May 30, 1999 and again on June 30, 1999. The maximum number of shares
reserved for issuance pursuant to the Stock Option Plan has increased from
1,500,000 common shares to 2,500,000 common shares. As of June 30, 1999 a
total of 1,477,500 options are issued and unexercised.
<PAGE>
Stock option transactions for the period ended June 30, 1999 and the number
of stock options outstanding are summarized below:
<TABLE>
Number of
Optioned
Common Price
Shares Range
# $
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Options granted as of December 31, 1998 1,262,500 $0.68 - $0.75
Options granted between January 1, 1999 -June 30, 1999 215,000 $1.00 - $5.50
- -----------------------------------------------------------------------------------------------------
Balance, June 30, 1999 1,477,500 $0.68 - $5.50
- -----------------------------------------------------------------------------------------------------
</TABLE>
The outstanding options expire at various dates beginning August 3, 2002
and ending May 12, 2003.
<PAGE>
PART III
ITEM 1 INDEX TO EXHIBITS
(a) Financial Statements
The following financial statements and related schedules are included in
this Item:
Auditors' Report;
Balance Sheets as at December 31, 1998 and June 30, 1999;
Combined Statements of Operation and Deficit for the nine-month period
ended December 31, 1998, and six months ended June 30, 1999; and
Notes to Financial Statements.
(b) Exhibits
Exhibit
Number Description
------ -----------
2.1 Articles of Incorporation of the Registrant, as amended
2.2 Bylaws of the Registrant
3.1 Form of Common Stock share certificate
6.1 1998 Stock Option Plan, as amended
6.2 1998 Directors Stock Option Plan, as amended
6.3 1998 Employee Stock Purchase Plan
6.4 Form of Stock Option Agreement (1998 Stock Option Plan)
6.5 Form of Stock Option Agreement (1998 Director's Stock Option
Plan)
6.6 Form of Subscription Agreement (1998 Employee Stock Purchase
Plan)
6.7 Form of Affiliate Program Agreement
6.8 Form of Confidentiality and Non-Competition Agreement
6.9 freeENGLISH Non-Exclusive Linking Agreement dated May 20,
1999 between the Registrant and the Ministry of University
Affairs (Thailand)
6.10 Memorandum of Understanding between EDUVERSE Accelerated
Learning Systems (Canada), Inc. and the Ministry of
University Affairs (Thailand)
6.11 Manufacturer's Representation Agreement dated March 1, 1999
between the Registrant and Tri Synergy, Inc.
6.12 Software License Agreement dated May 7, 1998 by and among
the Registrant, Boswell International Technologies Ltd. And
Boswell Industries Inc.
<PAGE>
Exhibit
Number Description
------ -----------
6.13 Employment Agreement effective May 3, 1999 between EDUVERSE
Accelerated Learning Systems (Canada ) Inc. and Marc Crimeni
6.14 Employment Agreement effective May 3, 1999 between EDUVERSE
Accelerated Learning Systems (Canada) Inc. and Robert Harris
6.15 Employment Agreement effective May 3, 1999 between EDUVERSE
Accelerated Learning Systems (Canada) Inc. and Jeffery Mah
6.16 Employment Agreement effective May 3, 1999 between EDUVERSE
Accelerated Learning Systems (Canada) Inc. and Lorne Reicher
8.1 Stock Exchange Agreement and Plan of Reorganization dated
May 28, 1998 between the Registrant and ESL Pro Systems Inc.
8.2 Stock Exchange Agreement and Plan of Reorganization dated
May 29, 1998 between the Registrant and Marketing Services
Inc.
27.1 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
EDUVERSE.COM
Date: September 3, 1999 By /s/ Mark Bruk
-----------------------------------
Mark Bruk
President, Chief Executive Officer
<PAGE>
Exhibit Sequentially Number
Number Description Page
------ ----------- -------------------
2.1 Articles of Incorporation of the
Registrant, as amended
2.2 Bylaws of the Registrant
3.1 Form of Common Stock share
certificate
6.1 1998 Stock Option Plan, as amended
6.2 1998 Directors Stock Option Plan,
as amended
6.3 1998 Employee Stock Purchase Plan
6.4 Form of Stock Option Agreement
(1998 Stock Option Plan)
6.5 Form of Stock Option Agreement
(1998 Director's Stock Option Plan)
6.6 Form of Subscription Agreement
(1998 Employee Stock Purchase Plan)
6.7 Form of Affiliate Program Agreement
6.8 Form of Confidentiality and
Non-Competition Agreement
6.9 freeENGLISH Non-Exclusive Linking
Agreement dated May 20, 1999 between
the Registrant and the Ministry of
University Affairs (Thailand)
6.10 Memorandum of Understanding between
EDUVERSE Accelerated Learning Systems
(Canada), Inc. and the Ministry of
University Affairs (Thailand)
6.11 Software License Agreement dated
May 7, 1998 by and among the Registrant,
Boswell International Technologies Ltd.
and Boswell Industries Inc.
6.12 Employment Agreement effective
May 3, 1999 between EDUVERSE Accelerated
Learning Systems (Canada ) Inc. and
Marc Crimeni
6.13 Employment Agreement effective
May 3, 1999 between EDUVERSE Accelerated
Learning Systems (Canada) Inc. and
Robert Harris
6.14 Employment Agreement effective
May 3, 1999 between EDUVERSE Accelerated
Learning Systems (Canada) Inc. and
Jeffery Mah
<PAGE>
Exhibit Sequentially Number
Number Description Page
------ ----------- -------------------
6.15 Employment Agreement effective
May 3, 1999 between EDUVERSE Accelerated
Learning Systems (Canada) Inc. and
Lorne Reicher
8.1 Stock Exchange Agreement and Plan of
Reorganization dated May 28, 1998 between
the Registrant and ESL Pro Systems Inc.
8.2 Stock Exchange Agreement and Plan of
Reorganization dated May 29, 1998 between
the Registrant and Marketing Services Inc.
27.1 Financial Data Schedule
EXHIBIT 2.1
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 19, 1999
C9528-91
/s/ DEAN HELLER
DEAN HELLER, SECRETARY OF STATE
Certificate of Amendment to Articles of Incorporation
For Profit Nevada Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
- Remit in Duplicate -
DEAN HELLER, SECRETARY OF STATE
1. Name of corporation: EDUVERSE Accelerated Learning Systems, Inc.
2. The articles have been amended as follows (provide article numbers, if
available).
Article I
The name of the corporation (hereinafter called the Corporation) is EDUVERSE
ACCELERATED LEARNING SYSTEMS, INC.
Article I is hereby amended to read as follows:
The name of the corporation (hereinafter called the Corporation) is amended to:
EDUVERSE.COM
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a vote
by classes or series, or as may be required by the provisions of the articles of
incorporation have voted in favor of the amendment is 7,571,134 (59.9%) of the
12,647,452 entitled to vote*:
4. Signatures:
/s/ Mark Bruk /s/ Robert Harris
- ------------------------------- ------------------------------
President or Vice President Secretary or Asst. Secretary
(acknowledgement required) (acknowledgement not required)
State of: British Columbia
County of: Vancouver
This instrument was acknowledged before me on
May 18, 1999, by
Mark Bruk (Name of Person)
as President
as designated to sign this certificate
of AMENDMENT TO ARTICLES
(name on behalf of whom instrument was executed)
/s/ Anthony K. Wooster ANTHONY K. WOOSTER
- -------------------------------- BARRISTER & SOLICITOR
Notary-Public Signature 1000 - 1100 WEST GEORGIA ST.
VANCOUVER, B.C.
[Illegible]
* If any proposed amendment would alter or change any preference or any relative
or other right given to any class or series of outstanding shares, then the
amendment must be approved by the vote, in addition to the affirmative vote
otherwise required, of the holders of shares representing a majority of the
voting power of each class or series affected by the amendment regardless of
limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above information and remit the proper
fees may cause this filing to be rejected.
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock) Filed by:
PERFECT FUTURE LTD.
(Name of Corporation)
We the undersigned Mark E. Bruk, President and Robert Harris, Secretary of
Perfect Future Ltd.
do hereby certify:
That the Board of Directors of said Corporation at a meeting duly convened, held
on the 11th day of June, 1998, adopted a resolution to amend the original
articles as follows:
Article I
The name of the corporation (hereinafter called the Corporation) is PERFECT
FUTURE, LTD.
Article I is hereby amended to read as follows:
The name of the corporation (hereinafter called the Corporation) is amended
to: EDUVERSE Accelerated Learning Systems, Inc.
The number of shares of the Corporation issued and outstanding and entitled to
vote on an amendment to the Articles of Incorporation is ELEVEN MILLION TWO
HUNDRED AND FIFTY THOUSAND (11,250,000) common $0.001 par value stock, that the
said change(s) and amendment have been consented to and approved by a majority
vote of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/ Mark Bruk
--------------------------------
President
/s/ Robert Harris
--------------------------------
Secretary
Province of British Columbia
County of Vancouver
On June 15, 1998, personally appeared before me, a Notary Public, Mark E. Bruk,
who acknowledged that he executed the above instrument.
/s/ Kesho Ram Ditta
--------------------------------
Signature of Notary
(NOTARY STAMP)
KESHO RAM DITTA
Barrister & Solicitor
1829 West Broadway
Vancouver, B.C. Canada
V6J 1Y5
Ph: (604) 733-6913
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
DEC 22, 1997
C9528-91
/s/ DEAN HELLER
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(AFTER ISSUANCE OF STOCK)
Perfect Future, LTD.
Name of Corporation
We the undersigned Spencer Bradley Vice President and President or Vice
President Shaun Hadley of Perfect Future, Ltd. Secretary or Assistant
Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened
and held on the 15th day of December, 1997, adopted a resolution to amend
the original articles as follows:
Article IV is hereby amended to read as follows:
The corporation is authorized to do a FORWARD SPLIT of the issued and
outstanding shares of two and one half for one. Making the total issued and
outsanding 2,250,000 two million two hundred and fifty thousand.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation are 2,250,000 ; that the said
change(s) and amendment has been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
/s/ Spencer Bradley
--------------------------------
President or Vice President
/s/ Shaun Bradley
--------------------------------
Secretary or Assistant Secretary
State of Nevada )
) ss.
County of Clark )
On 12/22/97, personally appeared before me, a Notary Public, Spencer
Bradley & Shaun Hadley (Names of persons appearing and signing document) who
acknowledged that they executed the above instrument.
/s/ Todd Fredlund
--------------------------------
Signature of Notary
RECEIVED STAMP OFFICIAL SEAL
DEC 22, 1997 TODD FREDLUND
SECRETARY OF STATE NOTARY PUBLIC STATE OF NEVADA
CLARK COUNTY
MY COMMISSION EXPIRES: JULY 3, 2001
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLE OF INCORPORATION
(AFTER ISSUANCE OF STOCK)
Perfect Future, Ltd.
Name of Corporation
We the undersigned Donald Bradley and President or Vice President Hadley of
Perfect Future, Ltd. Secretary or Assistant Secretary Name of Corporation do
hereby certify:
That the Board of Directors of said corporation at a meeting duly convened
and held on the 22nd day of April 1997, adopted a resolution to amend
the original articies as follows:
Article IV is hereby amended to read as follows: The corporation is
authorized to have two clases of stock:(1) Common ; (2) non voting
preferred. The total amount of authorized shares is 50,000,000 common and
5,000,000 preferred, each class of which shall have a par value of $0.001.
The number of shares of the corporation outstanding and entitied to vote on an
amendment to the Articles of Incorporation are 900,000 , that the said change(s)
and amendment has been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitied to vote thereon.
/s/ Donald Bradley
--------------------------------
President or Vice President
/s/ Shaun Bradley
--------------------------------
Secretary or Assistant Secretary
State of Nevada )
) ss.
County of Clark )
On April 29, 1997, personally appeared before me, a Notary Public, Donald
C. Bradley & Shaun Hadley (Names of persons appearing and signing document) who
acknowledged that they executed the above instrument.
CLAUDIA HILL /s/ Claudia Hill
NOTARY PUBLIC - NEVADA --------------------------------
MY APPT. EXP. AUG. 26, 2000 Signature of Notary
NO. 92-4142-1
<PAGE>
THIS FORM SHOULD ACCOMPANY AMENDED AND RESTATED ARTICLES
OF INCORPORATION FOR A NEVADA CORPORATION
1. Name of corporation Perfect Future, Ltd.
2. Date of adoption of Amended and Restated Articles April 22, 1997
3. If the articles were amended, please indicate what changes have been made:
(a) Was there a name change? Yes [ ] No [ X ] If yes, what is the new name?
(b) Did you change the resident agent? Yes [ ] No [ X ] If yes, please
indicate the new resident agent and address.
Please attach the resident agent acceptance certificate.
(c) Did you change the purposes? Yes [ ] No [ X ] Did you add Banking? [ ]
Gaming? [ ] Insurance? [ ] None of these? [ ]
(d) Did you change the capital stock? Yes [ X ] No [ ]
If yes, what is the new capital stock?
5,000,000 Preferred over and above 50,000,000 Common (e) Did you change
the directors? Yes [ ] No [ X ] If yes, indicate the change:
(f) Did you add the directors liability provision? Yes [ ] No [ X ]
(g) Did you change the period of existence? Yes [ ] No [ X ]
If yes, what is the new existence?
(h) If none of the above apply, and you have amended or modified the
articles, how did you change your articles?
By adding 5,000,000 Shares of authorized Preferred in addition to the
50,000,000 Common both with a par of .001 per share.
/s/ Donald C. Bradley, President April 29, 1997
- -------------------------------------- ---------------
Name and Title of Officer Date
State of Nevada )
) ss.
County of Clark )
On April 29, 1997 , personally appeared before me, a Notary Public, Donald
C. Bradley , who acknowledged that he/she executed the above instrument.
CLAUDIA HILL /s/ Claudia Hill
NOTARY PUBLIC - NEVADA --------------------------------
MY APPT. EXP. AUG. 26, 2000 Signature of Notary
NO. 92-4142-1
- 7 -
<PAGE>
ARTICLES OF AMENDMENT
OF
PERFECT FUTURE, LTD.
The Articles of Amendment to the original Articles of Incorporation of
WARD'S FUTURA AUTOMOTIVE, LTD. a Nevada corporation are set up as follows:
A. ARTICLE I -
The name of the corporation (hereinafter called the corporation) is PERFECT
FUTURE, LTD.
AMENDMENT - ARTICLE I -
The name of the corporation is amended to: PERFECT FUTURE, LTD.
B. Article IV
The total amount of authorized shares is 50,000,000 having par value of
.001.
AMENDMENT - ARTICLE IV
The total amount of authorized shares is 50,000,000 of common shares at a
par of .001.
As of the date of the Special Meeting of Shareholders the Company had
issued and outstanding TWO MILLION (2,000,000) shares of COMMON .001 par value
stock, held by 30 shareholders all of which were entitled to vote on the
proposed amendment.
<PAGE>
PAGE 2
AMENDMENT
TO
ARTICLE VI PERFECT FUTURE, LTD.
At the Special Stockholders Meeting held December 5, 1995, TWO MILLION
SHARES voted in favor of the amendment and none (0) voted against the amendment.
Dated this 5th day of December 1995
/s/ Donald C. Bradley
- ------------------------------- President
/s/ Shaun Hadley
- ------------------------------- Secretary
STATE OF NEVADA
COUNTY OF CLARK
On December 5th, 1995 Donald C. Bradley, personally appeared before me a notary
public, acknowledges that Donald C Bradley executed the above instrument.
Signature of Notary /s/ Kristina A. Heffner
--------------------------------
NOTARY PUBLIC
STATE OF NEVADA
COUNTY OF CLARK
KRISTINA A. HEFFNER
My Appointment Expires Oct. 20, 1996
<PAGE>
FILED FILING FEE: $175.00
IN THE OFFICE OF THE RECEIPT # C26033
SECRETARY OF STATE OF THE TAJ MAHAL, LTD.
STATE OF NEVADA 5312 ITHACA
LAS VEGAS, NEVADA 89122
OCT 22, ----
C9528-91
/s/ Cheryl Lau
DEAN HELLER, SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
WARD'S FUTURA ATOMOTIVE, LTD.
KNOW ALL MEN BY THESE PRESENTS:
We, the undersigned, natural persons of the age of 21 years, or more,
acting as incorporators of a corporation under the Nevada Business Corporation
Act, adopt the following Articles of Incorporation for such corporation:
ARTICLE I - NAME
The name of he Corporation shall be WARD'S FUTURA ATOMOTIVE, LTD.
ARTICLE II - DURATION
The period of its duration shall be perpetual unless dissolved or
terminated according to law.
ARTICLE III - CORPORATE PURPOSES
The general purposes and objects for which the corporation is organized are
to engage primarily in any type of manufacturing of automobiles, and /or
marketing of automobiles or, automotive related products both retail and
wholesale. Realstate uninproved or improved, land development, and/or investment
in real property or real estate related endeavors. To engage in any business,
investment or other pursuit or activity, whether retail or wholesale, whether
commercial or industrial; and to perform any and all other lawful acts or
purposes as are or may be granted to corporate entities under the laws of the
State of Nevada and by any other state or foreign country. The corporation may
conduct its business anywhere within the States of the United States of America
or in any foreign country, without in any way limiting the foregoing powers. It
is hereby provided that the corporation shall have the power to do any and all
acts and things that may be reasonably necessary or appropriate to accomplish
any of the foregoing purposes for which the corporation is formed.
<PAGE>
ARTICLE IV - SHARES OF STOCK
The aggregate number of shares which the corporation shall have authority
to issue is 50,000,000 shares of common stock at par value of $0.001 per share,
or a total capitalization of $50,000.00
There shall be no cumulative voting, and all pre-emptive rights are denied.
Each share shall entitle the holder thereof to one vote at all meetings of the
stockholders.
Stockholders shall not be liable to the corporation or its creditors for
any debts or obligations of the corporation.
ARTICLE V - STOCK RESTRICTIONS
All shares of stock in the company are assignable and any stockholder may
sell, assign and transfer his shares and certificates of stock at pleasure
except that no such transfer, sale or assignment shall be valid unless and until
it shall have been entered upon the books of the company and the old certificate
or certificates shall have been surrendered for cancellation to the secretary
and a new certificate or certificates issued in lieu of the same.
ARTICLE VI - COMMENCING BUSINESS
The corporation will not commence business until consideration of the value
of at least One Thousand Dollars (1,000.00) has been received for the issuance
of shares.
ARTICLE VII - REGISTERED AGENT AND OFFICE
The name and post office address of its initial registered agent is Donald
C. Bradley, 5312 Ithaca, Las Vegas, NV. 89122
<PAGE>
ARTICLE VIII - DIRECTORS
That the number of directors of this corporation, their qualifications,
terms of office and the time and manner of their election, removal and
resignation shall be as follows:
The number of directors shall not be less than two (2) nor more than seven
(7), the exact number within such limits to be determined in the manner
prescribed by the by-laws.
Directors shall be elected at the annual meeting of the stock holders of
this corporation and shall serve for one (1) year and until their successors
shall have been duly elected and qualified.
A majority of the entire number of directors, but not less than (2), shall
be necessary to form a quorum of the board of directors, authorized to transact
the business and exercise the corporate powers of the corporation.
Such officers shall consist of:
(a) President;
(b) One or more Vice Presidents as shall be provided by the by-laws or the
board of directors;
(c) A Secretary; and,
(d) A Treasurer - may be held by officers who concurrently hold another
office.
Such officers shall be elected annually by the board of directors and shall
serve for one (1) year and until their successors shall have been duly elected
and qualified.
Any officer may be removed by vote of a majority of the board of directors
or in such other manner as may be prescribed in the by-laws.
<PAGE>
ARTICLE IX
That the following named person, parties hereto, shall be the directors and
officers of this corporation from the date hereof and until their successors
shall have been elected and qualified:
PRESIDENT & DIRECTOR: DONALD C. BRADLEY
5312 ITHACA,
LAS VEGAS, NV 89122
VICE PRESIDENT & DIRECTOR:
SECRETARY/TREASURER & DIRECTOR: SHIRLENE BRADLEY
5312 ITHACA
LAS VEGAS, NV 89122
ARTICLE X - SHAREHOLDER LIABILITY
That the private property of the stockholders of this corporation shall not
be liable for the debts or obligations of the corporation.
ARTICLE XI - INCORPORATORS
The name and address of each incorporator is:
DONALD C. BRADLEY
5312 ITHACA
LAS VEGAS, NV 89122
SHIRLENE BRADLEY
5312 ITHACA
LAS VEGAS, NV 98122
<PAGE>
ARTICLE XII - 1244 STOCK
Shares of stock of this corporation authorized and issued pursuant to these
Articles of Incorporation within two (2) years from the date of incorporation
are, for the purpose of the Internal Revenue Code, authorized and issued in
compliance with and as prescribed by Section 1244 of the Internal Revenue Code
of 1954, as amended shall be known as "Section 1244 Stock."
ARTICLE XIII - DIRECTORS' AND OFFICERS' CONTRACTS
No contract or other transaction between this corporation and one or more
of its directors or any other corporation, firm, association or entity in which
one or more of its directors are directors or officers are financially
interested shall be either void or voidable because of such relationship or
interest, or because such director or directors are present at the meeting of
the board of directors or a committee thereof, which authorizes, approves or
ratifies such contracts or transaction, or because his or their votes are
counted for such purpose, if: (a) the fact of such relationship or interest is
disclosed or known to the board of directors or committee which authorizes,
approves or ratifies the contract or transaction by vote or consent sufficient
for the purpose without counting the votes or consents of such interested
director; or (b) the fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or, (c) the contract or
transaction is fair and reasonable to the corporation. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the board of directors or committee thereof which authorizes, approves or
ratifies such contract or transaction.
<PAGE>
INCORPORATORS
STATE OF NEVADA )
:
COUNTY OF CLARK )
On October 21, 1991, personally appeared before me, Donald C. Bradley
and Shirlene Bradley, who being duly sworn by me first, declared that he had
read the foregoing Articles of Incorporation, that he had signed the foregoing
document as an incorporator and that the statements contained therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this day of
October , 1991.
/s/ Donald C. Bradley
-----------------------------------
Donald C. Bradley
/s/ Shirlene Bradley
-----------------------------------
Shirlene Bradley
/s/ O Chase
-----------------------------------
Notary Public
My Commission Expires:
2-4-95
I, Donald C. Bradley acting as registered Agent, in the State of Nevada and
living in Clark County, Nevada, do hereby accept the full legal responsibility
as Agent for the corporation, registered under the name of Ward's Futura
Atomotive, LTD. who's address is, 5312 Ithaca, Las Vegas, NV. 89122.
/s/ Donald C. Bradley
-----------------------------------
Donald C. Bradley
STATE OF NEVADA )
:
COUNTY OF CLARK )
SUBSCRIBED AND SWORN to before me this 21st day of October, 1991.
/s/ O Chase
-----------------------------------
Notary Public
Residing in Las Vegas, Nevada
My Commission Expires: 2-4-95
EXHIBIT 2.2
AMENDED BY-LAWS
OF
EDUVERSE.COM
ARTICLE I
MEETING OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of the Company shall be held
at its office in the City of Reno, Washoe County, State of Nevada at 6:00
o'clock in the P.M. on the 1st day of November in each year, if not a legal
holiday, and if a legal holiday, then on the next succeeding day not a legal
holiday, for the purpose of electing directors of the Company to serve during
the ensuing year and for the transaction of such other business as may be
brought before the meeting.
At least five (5) days' written notice specifying the time and place, when and
where, the annual meeting shall be convened, shall be mailed in a United States
Post Office addressed to each of the stockholders of record at the time of
issuing the notice at his or her, or its address last known, as the same appears
on the books of the Company.
SECTION 2. Special meetings of the stockholders may be held at the office of the
Company in the State of Nevada, or elsewhere, whenever called by the President,
or by the Board of Directors, of by vote of, or by an instrument in writing
signed by the holders of fifty-two percent (52%) of the issued and outstanding
capital stock of the Company. At least ten (10) days' written notice of such
meeting, specifying the day and hour and place, when and where such meeting
shall be convened, and objects for calling the same, shall be mailed in a United
States Post Office, addressed to each of the stockholders of record at the time
of issuing the notice, at his or her or its address last known, as the same
appears on the books of the Company.
SECTION 3. If all the stockholders of the Company shall waive notice of a
meeting, no notice of such meeting shall be required, and whenever all of the
stockholders shall meet in person or by proxy, such meeting shall be valid for
all purposes without call or notice, and at such meeting any corporate action
may be taken.
The written certificate of the officer or officers calling any meeting setting
forth the substance of the notice, any the time and place of the
<PAGE>
mailing of the same to the several stockholders, and the respective addresses to
which the same were mailed, shall be prima facie evidence of the manner and fact
of the calling and giving such notice.
If the address of any stockholder does not appear upon the books of the Company,
it will be sufficient to address any notice to such stockholder at the principal
office of the Company.
SECTION 4. All business lawful to be transacted by the stockholders of the
Company may be transacted at any special meeting or at any adjournment thereof.
Only such business, however, shall be acted upon at special meeting of the
stockholders as shall have been referred to in the notice calling such meeting,
but at any stockholders' meeting at which all of the outstanding capital stock
of the Company is represented, either in person or by proxy, any lawful business
may be transacted, and such meeting shall be valid for all purposes.
SECTION 5. At the stockholders' meetings the holders of fifty-two percent (52%)
in amount of the entire issued and outstanding capital stock of the Company,
shall constitute a quorum for all purposes of such meetings.
If the holders of the amount of stock necessary to constitute a quorum shall
fail to attend, in person or by proxy, at the time and place fixed by these
By-Laws for any annual meeting, or fixed by a notice as above provided for a
special meeting, a majority in interest of the stockholders present in person or
by proxy may adjourn from time to time without notice other than by announcement
at the meeting, until holders of the amount of stock requisite to constitute a
quorum shall attend. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted as
originally called.
SECTION 6. At each meeting of the stockholders every stockholder shall be
entitled to vote in person or by his duly authorized proxy appointed by
instrument in writing subscribed by such stockholder or by his duly authorized
attorney. Each stockholder shall have one vote for each share of stock standing
registered in his or her or its name on the books of the Company, ten (10) days
preceding the day of such meeting. The votes for directors, and upon demand by
any stockholder, the votes upon any question before the meeting, shall be viva
voce.
At each meeting of the stockholders, a full, true and complete list, in
alphabetical order, of all the stockholders entitled to vote at such meeting,
and indicating the number of shares held by each, certified by the Secretary of
the Company, shall be furnished, which list shall be prepared at least ten (10)
days before such meeting, and shall be open to
<PAGE>
the inspection of the stockholders, or their agents or proxies, at the place
where such meeting is to be held, and for ten (10) days prior thereto. Only the
persons in whose names shares of stock are registered on the books of the
Company for ten days preceding the date of such meeting, as evidenced by the
list of stockholders, shall be entitled to vote at such meeting. Proxies and
powers of Attorney to vote must be filed with the Secretary of the Company
before an election or a meeting of the stockholders, or they cannot be used at
such election or meeting.
SECTION 7. At each meeting of the stockholders the polls shall be opened and
closed; the proxies and ballots issued, received, and be taken in charge of, for
the purpose of the meeting, and all questions touching the qualifications of
voters and the validity of proxies, and the acceptance or rejection of votes,
shall be decided by two (2) inspectors. Such inspectors shall be appointed at
the meeting by the presiding officer of the meeting.
SECTION 8. At the stockholders' meetings, the regular order of business shall be
as follows:
1. Reading and approval of the Minutes of previous meeting or meetings;
2. Reports of the Board of Directors, the President, Treasurer and
Secretary of the Company in the order named;
3. Reports of Committee;
4. Election of Directors;
5. Unfinished Business;
6. New Business;
7. Adjournment.
<PAGE>
ARTICLE II
DIRECTORS AND THEIR MEETINGS
SECTION 1. The Board of Directors of the Company shall consist of two (2) to
seven (7) persons who shall be chosen by the stockholders annually, at the
annual meeting of the Company, and who shall hold office for one (1) year, and
until their successors are elected and qualify.
SECTION 2. When any vacancy occurs among the Directors by death, resignation,
disqualification or other cause, the stockholders, at any regular or special
meeting, or at any adjourned meeting thereof, or the remaining Directors, by the
affirmative vote of a majority thereof, shall elect a successor to hold office
for the unexpired portion of the term of the Director whose place shall have
become vacant and until his successor shall have been elected and shall qualify.
SECTION 3. Meetings of the Directors may be held at the principal office of the
Company in the State of Nevada or elsewhere, at such place or places as the
Board of Directors may, from time to time, determine.
SECTION 4. Without notice or call, the Board of Directors shall hold its first
annual meeting for the year immediately after the annual meeting of the
stockholders or immediately after the election of Directors at such annual
meeting.
Regular meetings of the Board of Directors shall be held at the office of the
Company in the City of Reno, Washoe County, State of Nevada at 6:00 o'clock in
the P.M. on the 1st day of November in each year or where necessary. Notice of
such regular meetings shall be mailed to each Director by the Secretary at least
three (3) days previous to the day fixed for such meetings, but no regular
meeting shall be held void or invalid if such notice is not given, provided the
meeting is held at the time and place fixed by these By-Laws for holding such
regular meetings.
Special meetings of the Board of Directors may be held on the call of the
President or Secretary on at least three (3) days notice by mail or telegraph.
Any meeting of the Board of Directors, no matter where held, at which all of the
members shall be present, even though without or of which notice shall have been
waived by all absentees, provided a quorum shall be present, shall be valid for
all purposes unless otherwise indicated in the notice calling the meeting or in
the waiver of notice.
<PAGE>
Any and all business may be transacted by any meeting of the Board of Directors,
either regular or special.
SECTION 5. A majority of the Board of Directors in office shall constitute a
quorum for the transaction of business, but if at any meeting of the Board of
Directors there be less that a quorum present, a majority of those present may
adjourn from time to time, until a quorum shall be present, and no notice of
such adjournment shall be required. The Board of Directors may prescribe rules
not in conflict with the By-Laws for the conduct of business; provided, however,
that in the fixing of salaries of the officers of the Company, the unanimous
action of all Directors shall be required.
SECTION 6. A Director need not be a stockholder of the Company.
SECTION 7. The Directors shall be allowed and paid all necessary expenses
incurred in attending any meeting of the Board of Directors, but shall not
receive any compensation for their services as Directors until such time as the
Company is able to declare and pay dividends on its capital stock.
SECTION 8. The Board of Directors shall make a report to the stockholders at
annual meetings of the stockholders of the condition of the Company, and shall,
at request, furnish each of the stockholders with a true copy thereof.
The Board of Directors in its discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders called for
the purpose of considering any such contract or act, which, if approved, or
ratified by the vote of the holders of a majority of the capital stock of the
Company represented in person or by proxy, shall be valid and binding upon the
Company and upon all the stockholders thereof, as if it had been approved or
ratified by every stockholder of the Company.
SECTION 9. The Board of Directors shall have the power from time to time to
provide for the management of the offices of the Company in such manner as they
see fit, and in particular from time to time to delegate any of the powers of
the Board of Directors in the course of the current business of the Company to
any standing or special committee or to any officer or agent and to appoint any
persons to be agents of the Company with such powers (including the power to
subdelegate), and upon such terms as may be deemed fit.
SECTION 10. The Board of Directors is invested with the complete and
unrestrained authority in the management of all affairs of the Company,
<PAGE>
and is authorized to exercise for such purpose as the General Agent of the
Company, its entire corporate authority.
SECTION 11. The regular order of business at meetings of the Board of Directors
shall be as follows:
1. Reading and approval of the Minutes of any previous meeting or
meetings;
2. Reports of Officers and Committeemen;
3. Election of Officers;
4. Unfinished Business;
5. New Business;
6. Adjournment.
<PAGE>
ARTICLE III
OFFICERS AND THEIR DUTIES
SECTION 1. The Board of Directors, at its first and after each meeting after the
annual meeting of stockholders, shall elect a President, a Vice President, a
Secretary and a Treasurer, to hold office for one (1) year next coming, and
until their successors are elected and qualify. The offices of the Secretary and
Treasurer may be held by one (1) person.
Any vacancy in any of said offices may be filled by the Board of Directors.
The Board of Directors may from time to time, by resolution, appoint such
additional Vice Presidents and additional Assistant Secretaries, Assistant
Treasurer and Transfer Agents of the Company as it may deem advisable; prescribe
their duties, and fix their compensation, and all such appointed officers shall
be subject to removal at any time by the Board of Directors. All officers,
agents, and factors of the Company shall be chosen and appointed in such manner
and shall hold their office for such terms as the Board of Directors may by
resolution prescribe.
SECTION 2. The President shall be the executive officer of the Company and shall
have the supervision and, subject to the control of the Board of Directors, the
direction of the Company's affairs, with full power to execute all resolutions
and orders of the Board of Directors not especially entrusted to some other
officer of the Company. He shall be a member of the Executive Committee, and the
Chairman thereof; he shall preside at all meetings of the Board of Directors,
and at all meetings of the stockholders, and shall sign the Certificates of
Stock issued by the Company, and shall perform such other duties as shall be
prescribed by the Board of Directors.
All checks, draft and other instruments obligating the Company to pay money, and
the withdrawal of funds on deposit, shall be executed on behalf of the Company
by the President.
SECTION 3. The Vice President shall be vested with all the powers and perform
all the duties of the President in his absence or inability to act, including
the signing of the Certificates of Stock issued by the Company, and he shall so
perform such other duties as shall be prescribed by the Board of Directors.
SECTION 4. The Treasurer shall have the custody of all the funds and securities
of the Company. When necessary or proper he shall endorse on
<PAGE>
behalf of the Company for collection checks, notes, and other obligations; he
shall deposit all monies to the credit of the Company in such bank or banks or
other depository as the Board of Directors may designate; he shall sign all
receipts and vouchers for payments made by the Company, except as herein
otherwise provided. He shall sign with the President all bills of exchange and
promissory notes of the Company; he shall also have the care and custody of the
stocks, bonds, certificates, vouchers, evidence of debts, securities, and such
other property belonging to the Company as the Board of Directors shall
designate; he shall sign all papers required by law or by those By-Laws or the
Board of Directors to be signed by the Treasurer. Whenever required by the Board
of Directors, he shall render a statements of his cash account; he shall enter
regularly in the books of the Company to be kept by him for the purpose, full
and accurate accounts of all monies received and paid by him on account of the
Company. He shall at all reasonable times exhibit the books of account to any
Directors of the Company during business hours, and he shall perform all acts
incident to the position of Treasurer subject to the control of the Board of
Directors.
The Treasurer shall, if required by the Board of Directors, give bond to the
Company conditioned for the faithful performance of all his duties as Treasurer
in such sum, and with such security as shall be approved by the Board of
Directors, with expense of such bond to be borne by the Company.
SECTION 5. The Board of Directors may appoint an Assistant Treasurer who shall
have such powers and perform such duties as may be prescribed for him by the
Treasurer of the Company or by the Board of Directors, and the Board of
Directors shall require the Assistant Treasurer to give a bond to the Company,
in such sum and with such security as it shall approve, as conditioned for the
faithful performance of his duties as Assistant Treasurer, the expense of such
bond to be borne by the Company.
SECTION 6. The Secretary shall keep the Minutes of all meetings of the Board of
Directors and the Minutes of all meetings of the stockholders and of the
Executive Committee in books provided for that purpose. He shall attend to the
giving and serving of all notices of the Company; he may sign with the President
or Vice President, in the name of the Company, all contracts authorized by the
Board of Directors or Executive Committee; he shall affix the corporate seal of
the Company thereto when so authorized by the Board of Directors or Executive
Committee; he shall have the custody of the corporate seal of the Company; he
shall affix the corporate seal to all certificates of stock duly issued by the
Company; he shall have charge of Stock Certificate Books, Transfer Books and
Stock Ledgers, and such other books and papers as the Board of Directors or the
<PAGE>
Executive Committee may direct, all of which shall at all reasonable times be
open to the examination of any Director upon application at the office of the
Company during business hours, and he shall, in general, perform all duties
incident to the office of Secretary.
SECTION 7. The Board of Directors may appoint an Assistant Secretary who shall
have such powers and perform such duties as may be prescribed for him by the
Secretary of the Company or by the Board of Directors.
SECTION 8. Unless otherwise ordered by the Board of Directors, the President
shall have full power and authority in behalf of the Company to attend and to
act and to vote at any meetings of the stockholders of any corporation in which
the Company may hold stock, and at any such meetings, shall possess and may
exercise any and all rights and powers incident to the ownership of such stock,
and which as the new owner thereof, the Company might have possessed and
exercised if present. The Board of Directors, by resolution, from time to time,
may confer like powers on any person or persons in place of the President to
represent the Company for the purposes in this section mentioned.
<PAGE>
ARTICLE IV
CAPITAL STOCK
SECTION 1. The capital stock of the Company shall be issued in such manner and
at such times and upon such conditions as shall be prescribed by the Board of
Directors.
The President is authorized to issue and sell shares of capital stock of the
Company.
SECTION 2. Ownership of stock in the Company shall be evidenced by certificates
of stock in such forms as shall be prescribed by the Board of Directors, and
shall be under the seal of the Company and signed by the President or the Vice
President and also by the Secretary of by an Assistant Secretary.
All certificates shall be consecutively numbered; the name of the person owning
the shares represented thereby with the number of such shares and the dates of
issue shall be entered on the Company's books.
No certificates shall be valid unless it is signed by the President or Vice
President and by the Secretary or Assistant Secretary.
All certificates surrendered to the Company shall be cancelled and no new
certificate shall be issued until the former certificate for the same number of
shares shall have been surrendered or cancelled.
SECTION 3. No transfer of stock shall be valid as against the Company except on
surrender and cancellation of the certificate therefor, accompanied by an
assignment or transfer by the owner therefor, made either in person or under
assignment, a new certificate shall be issued therefor.
Whenever any transfer shall be expressed as made for collateral security and not
absolutely, the same shall be so expressed in the entry of said transfer on the
books of the Company.
SECTION 4. The Board of Directors shall have power and authority to make all
such rules and regulations not inconsistent herewith as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
the capital stock of the Company.
<PAGE>
The Board of Directors may appoint a transfer agent and a registrar of transfers
and may require all stock certificates to bear the signature of such transfer
agent and such registrar of transfer.
SECTION 5. The Stock Transfer Books shall be closed for all meetings of the
stockholders for the period of ten (10) days prior to such meetings and shall be
closed for the payment of dividends during such periods as from time to time may
be fixed by the Board of Directors, and during such periods no stock shall be
transferable.
SECTION 6. Any person or persons applying for a certificate of stock in lieu of
one alleged to have been lost or destroyed, shall make affidavit or affirmation
of the fact, and shall deposit with the Company an affidavit. Whereupon, at the
end of six (6) months after the deposit of said affidavit and upon such person
or persons giving Bond of Indemnity to the Company with surety to be approved by
the Board of Directors in double the current value of stock against damage, loss
or inconvenience to the Company, which may or can arise in consequence of a new
or duplicate certificate being issued in lieu of the one lost or missing, the
Board of Directors may cause to be issued to such person or person a new
certificate, or a duplicate of the certificate, or a duplicate of the
certificate so lost or destroyed. The Board of Directors may, in its discretion
refuse to issue such new or duplicate certificate save upon the order of some
court having jurisdiction in such matter, anything herein to the contrary
notwithstanding.
<PAGE>
ARTICLE V
OFFICES AND BOOKS
SECTION 1. The principal office of the Company, in Reno, Washoe County, Nevada,
shall be at Suite 209, 1135 Terminal Way, and the Company may have a principal
office in any other state or territory as the Board of Directors may designate.
SECTION 2. The Stock and Transfer Books and a copy of the By-Laws and Articles
of Incorporation of the Company shall be kept at its principal office in the
City of Reno, Washoe County, State of Nevada, for the inspection of all who are
authorized or have the right to see the same, and for the transfer of stock. All
other books of the Company shall be kept at such places as may be prescribed by
the Board of Directors.
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 1. The Board of Directors shall have power to reserve over and above the
capital stock paid in, such an amount in its discretion as it may deem advisable
to fix as a reserve fund, and may, from time to time, declare dividends from the
accumulated profits of the Company in excess of the amounts so reserved, and pay
the same to the stockholders of the Company, and may also, if it deems the same
advisable, declare stock dividends of the unissued capital stock of the Company.
SECTION 2. No agreement, contract or obligation (other than checks in payment of
indebtedness incurred by authority of the Board of Directors) involving the
payment of monies or the credit of the Company for more than one million dollars
($1,000,000.00), shall be made without the authority of the Board of Directors,
or of the Executive Committee acting as such.
SECTION 3. Unless otherwise ordered by the Board of Directors, all agreements
and contracts shall be signed by the President and the Secretary in the name and
on behalf of the Company, and shall have the corporate seal thereto attached.
SECTION 4. All monies of the Company shall be deposited when and as received by
the Treasurer in such bank or banks or other depository as may from time to time
be designated by the Board of Directors, and such deposits shall be made in the
name of the Company.
SECTION 5. No note, draft, acceptance, endorsement or other evidence of
indebtedness shall be valid or against the Company unless the same shall be
signed by the President or a Vice President, and attested by the Secretary or an
Assistant Secretary, or signed by the Treasurer or an Assistant Treasurer, and
countersigned by the President, Vice President, or Secretary, except that the
Treasurer or an Assistant Treasurer may, with countersignature, make
endorsements for deposit to the credit of the Company in all its duly authorized
depositories.
SECTION 6. No loan or advance of money shall be made by the Company to any
stockholder or officer therein, unless the Board of Directors shall otherwise
authorize.
SECTION 7. No Director nor Executive Officer of the Company shall be entitled to
any salary or compensation for any services performed for the Company, unless
such salary or compensation shall be fixed by resolution
<PAGE>
of the Board of Directors, adopted by the unanimous vote of all the Directors
voting in favor thereof.
SECTION 8. The Company may take, acquire, hold, mortgage, sell, or otherwise
deal in stocks or bonds or securities of any other corporation, if and as often
as the Board of Directors shall so elect.
SECTION 9. The Directors shall have power to authorize and cause to be executed,
mortgages, and liens without limit as to amount upon the property and franchise
of this Company, and pursuant to the affirmative vote, either in person or by
proxy, of the holders of a majority of the capital stock issued and outstanding;
the Directors shall have the authority to dispose in any manner of the whole
property of this Company.
SECTION 10. The Company shall have a corporate seal, the design thereof being as
follows:
eduverse.com
<PAGE>
ARTICLE VII
AMENDMENT OF BY-LAWS
SECTION 1. Amendments and changes of these By-Laws may be made at any regular or
special meeting of the Board of Directors by a vote of not less than all of the
entire Board of Directors, or may be made by a vote of, or consent in writing
signed by the holders of fifty-two percent (52%) of the issued and outstanding
capital stock of the Company.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, being the directors of
the above named Company, do hereby consent to the foregoing By-Laws and adopt
the same as and for the By-Laws of said Company.
IN WITNESS WHEREOF, we have hereunto act our hand this
----------------------------------------
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----------------------------------------
----------------------------------------
EXHIBIT 3.1
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
-----------------------
CUSIP NO. 281649 10 3
-----------------------
- ------------------ ---------------
NUMBER [EDUVERSE ACCELERATED LEARNING SHARES
- ------------------ SYSTEMS, INC. LOGO] ---------------
EDUVERSE Accelerated Learning Systems, Inc.
AUTHORIZED COMMON STOCK: 50,000,000 SHARES * PAR VALUE: $.001
SPECIMEN
THIS CERTIFIES THAT ********
IS THE RECORD HOLDER OF ************************ SHARES
Shares of EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated: ***********
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
CORPORATE SEAL
NEVADA
/s/ Mark Bruk
----------------------
President
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
EXHIBIT 6.1
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
AMENDED 1998 STOCK OPTION PLAN
AS ADOPTED BY THE BOARD OF DIRECTORS ON MAY 30, 1999
AS APPROVED BY THE STOCKHOLDERS ON MAY 30, 1999
1. PURPOSE. This 1998 Stock Option Plan ("Plan") is established as a
compensatory plan to attract, retain and provide equity incentives to selected
persons to promote the financial success and progress of EDUVERSE Accelerated
Learning Systems, Inc., a Nevada corporation, (the "Company"). Capitalized terms
not previously defined herein are defined in Section 16 of this Plan.
2. TYPES OF OPTIONS AND SHARES. Options granted under this Plan (The "Options")
may be either (a) incentive stock options ("ISOs") within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended (the "Revenue Code"), or
(b) nonqualified stock options ("NQSOs"), as designated at the time of grant.
The shares of stock that may be purchased upon exercise of Options granted under
this Plan (the "Shares") are shares of the common stock of the Company.
3. NUMBER OF SHARES. The aggregate number of Shares that may be issued pursuant
to options granted under this Plan is 1,500,000 Shares, subject to adjustment as
provided in this Plan. If any Option expires or is terminated without being
exercised in whole or in part, the unexercised or released Shares from such
Options shall be available for future grant and purchase under this Plan. At all
times during the term of this Plan, the Company shall reserve and keep available
such number of Shares as shall be required to satisfy the requirements of
outstanding Options under this Plan.
4. ELIGIBILITY. Options may be granted to employees, consultants, officers, and
directors who are employees of the Company, or any Parent, Subsidiary or
Affiliate of the Company (jointly "Staff Members"). Directors who are not Staff
Members of the Company are not eligible to participate in this Plan. ISOs may be
granted only to Staff Members of the Company or a Parent or Subsidiary of the
Company. The Committee (as defined in Section 13) in its sole discretion shall
select the recipients of Options ("Optionees"). An Optionee may be granted more
than one Option under this Plan. The Company may also, from time to time, assume
outstanding options granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either (i) granting an Option
under this Plan in replacement of the option assumed by the Company, or (ii)
treating the assumed option as if it had been granted under this Plan if the
terms of such assumed option could be applied to an Option granted under this
Plan. Such assumption shall be permissible if the holder of the assumed option
would have been eligible to be granted an Option hereunder if the other company
had applied the rules of this Plan to such grant.
5. TERMS AND CONDITIONS OF OPTIONS. The Committee shall determine whether each
Option is to be an ISO or an NQSO, the number of Shares subject to the Option,
the exercise
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 1
AMENDED 1998 STOCK OPTION PLAN
<PAGE>
price of the Option, the period during which the Option may be exercised, and
all other terms and conditions of the Option, subject to the following:
a. Form of Option Grant. Each Option granted under this Plan shall be evidenced
by a written Stock Option Grant (the "Grant") in such form (which need not be
the same for each Optionee) as the Committee shall from time to time approve,
which Grant shall comply with and be subject to the terms and conditions of this
Plan.
b. Date of Grant. The date of grant of an Option shall be the date on which the
Committee makes the determination to grant such Option unless otherwise
specified by the committee. The Grant representing the Option will be delivered
to Optionee with a copy of this Plan within a reasonable time after the granting
of the Option.
c. Exercise Price. The exercise price of an Option shall be determined by the
Committee on the date the Option is granted; provided that the exercise price of
an Option shall be not less than 100% of the Fair Market Value of the Shares on
the date the Option is granted; and provided further that the exercise price of
any Option granted to a person owning more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary of the
Company ("Ten Percent Stockholder") shall not be less than 110% of the Fair
Market Value of the Shares on the date the Option is granted.
d. Exercise Period. Options shall be exercisable within the times or upon the
events determined by the Committee as set forth in the Grant; provided, however,
that no Option shall be exercisable after the expiration of ten (10) years from
the date the Option is granted, and provided further that no ISO granted to a
Ten Percent Stockholder shall be exercisable after the expiration of five (5)
years from the date the Option is granted.
e. Limitations on ISOs. The aggregate Fair Market Value (determined as of the
time an Option is granted) of stock with respect to which ISOs are exercisable
for the first time by an Optionee during any calendar year (under this Plan or
under any other incentive stock option plan of the Company or any Parent or
Subsidiary of the Company) shall not exceed $100,000. If the Fair Market Value
of Shares with respect to which ISOs are exercisable for the first time by an
Optionee during any calendar year exceeds $100,000, the Options for the first
$100,000 worth of Shares to become exercisable in such year shall be ISOs and
the Options for the amount in excess of $100,000 that becomes exercisable in
that year shall be NQSOs. In the event that the Revenue Code or the regulations
promulgated thereunder are amended after the effective date of this Plan to
provide for a different limit on the Fair Market Value of Shares permitted to be
subject to ISOs, such different limit shall be incorporated herein and shall
apply to any Options granted after the effective date of such amendment.
f. Options Non-Transferable. Options granted under this Plan, and any interest
therein, shall not be transferable or assignable by Optionee, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of Optionee only by Optionee; provided, however, that NQSOs held by an
Optionee who is not an officer or director of the Company or other person (in
each case, an "Insider") whose transactions in the Company's common stock are
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), may be
- --------------------------------------------------------------------------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 2
AMENDED 1998 STOCK OPTION PLAN
<PAGE>
transferred to such family members, trust and charitable institutions as the
Committee, in its sole discretion, shall approve at the time of the grant of
such Option.
g. Assumed Options. In the event the Company assumes an option granted by
another company, the terms and conditions of such option shall remain unchanged
(except the exercise price and the number and nature of shares issuable upon
exercise, which will be adjusted appropriately pursuant to Section 425(c) of the
Revenue Code). In the event the Company elects to grant a new option rather than
assuming an existing option (as specified in Section 4), such new option may
instead be granted with a similarly adjusted exercise price.
h. Limitation on Options granted to Individuals. The number of options that may
be granted to optionees from July 1, 1998 through the end of the term of the
1998 Plan, June 30, 2008 is limited to one million shares per individual.
6. EXERCISE OF OPTIONS.
a. Notice. Options may be exercised only by delivery to the Company of a written
stock option exercise agreement (the "Exercise Agreement") in a form approved by
the Committee (which need not be the same for each Optionee), stating the number
of Shares being purchased, the restrictions imposed on the Shares, if any, and
such representations and agreements regarding Optionee's investment intent and
access to information, if any, as may be required by the Company to comply with
applicable securities laws, together with payment in full of the exercise price
for the number of Shares being purchased.
b. Payment. Payment for the Shares may be made in cash (by check) or, where
approved by the Committee in its sole discretion at the time of grant and where
permitted by law: (i) by cancellation of indebtedness of the Company to the
Optionee; (ii) by surrender of shares of common stock of the Company having a
Fair Market Value equal to the applicable exercise price of the Options, that
have been owned by Optionee for more than six (6) months (and which have been
paid for within the meaning of the Securities and Exchange Commission ("SEC")
Rule 144 and, if such shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect to such shares), or
were obtained by Optionee in the open public market; (iii) by tender of a full
recourse promissory note having such terms as may be approved by the Committee
and bearing interest at a rate sufficient to avoid imputation of income under
Sections 483 and 1274 of the Revenue Code, provided that the portion of the
exercise price equal to the par value of the Shares, if any, must be paid in
cash or other legal consideration; (iv) by waiver of compensation due or accrued
to Optionee for services rendered; (v) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from Optionee and a
broker-dealer that is a member of the National Association of Securities Dealers
(a "NASD Dealer") whereby Optionee irrevocably elects to exercise the option and
to sell a portion of the Shares so purchased to pay for the exercise price and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (vi) provided that a public
market for the Company's stock exists, through a "margin" commitment from
Optionee and a NASD Dealer whereby Optionee irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
exercise price, and whereby the
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<PAGE>
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; or (vii) by any combination of the
foregoing.
c. Withholding Taxes. Prior to issuance of the Shares upon exercise of an
Option, Optionee shall pay or make adequate provision for any federal or state
withholding obligations of the Company, if applicable.
d. Limitations on Exercise. Notwithstanding the exercise periods set forth in
the Grant, exercise of an Option shall always be subject to the following:
(i) If Optionee ceases to be employed by the Company or any Parent,
Subsidiary or Affiliate of the Company for any reason except death or
disability, Optionee may exercise such Optionee's Options to the extent
(and only to the extent) that they would have been exercisable upon the
date of termination, within three (3) months after the date of termination
(or such shorter time period as may be specified in the Grant), but in any
event no later than the expiration date of the Options;
(ii) If Optionee's employment with the Company or any Parent, Subsidiary or
Affiliate of the Company is terminated because of the death of Optionee or
disability of Optionee within the meaning of Section 22(e)(3) of the
Revenue Code, Optionee's Options may be exercised to the extent (and only
to the extent) that they would have been exercisable by Optionee on the
date of termination, by Optionee (or Optionee's legal representative)
within twelve (12) months after the date of termination (or such shorter
time period as may be specified in the Grant), but in any event no later
than the expiration date of the Options.
(iii) The Committee shall have discretion to determine whether Optionee has
ceased to be employed by the Company or any Parent, Subsidiary or Affiliate
of the Company and the effective date on which such employment or other
relationship terminated.
(iv) The Committee may specify a reasonable minimum number of Shares that
may be purchased on any exercise of an Option, provided that such minimum
number will not prevent Optionee from exercising the full number of Shares
as to which the Option is then exercisable.
(v) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act of 1933, as amended (the "Securities
Act"), all applicable state securities laws and the requirements of any
stock exchange or national market system upon which the Shares may then be
listed, as they are in effect on the date of exercise. The Company shall be
under no obligation to register the Shares with the SEC or to effect
compliance with the registration, qualification or listing requirements of
any state securities laws, stock exchange or national market system, and
the Company shall have no liability for any inability or failure to do so.
(vi) An Option shall not be exercisable until such time as the Plan has
been approved by the stockholders in accordance with paragraph 12 below.
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<PAGE>
7. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Committee shall have the
power to modify, extend or renew outstanding Options and to authorize the grant
of new Options in substitution therefor, provided that any such action may not,
without the written consent of Optionee, impair any rights under any Option
previously granted. Any outstanding ISO that is modified, extended, renewed or
otherwise altered shall be treated in accordance with Section 424(h) of the
Revenue Code. The Committee shall have the power to reduce the exercise price of
outstanding Options without the consent of Optionees by a written notice to the
Optionees affected; provided, however, that the exercise price per Share may not
be reduced below the minimum exercise price that would be permitted under
Section 5(c) of this Plan for Options granted on the date the action is taken to
reduce the exercise price.
8. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the rights of a
stockholder with respect to any Shares subject to an Option until such Option is
properly exercised. No adjustment shall be made for dividends or distributions
or other rights for which the record date is prior to such date, except as
provided in this Plan. The Company shall provide to each Optionee a copy of the
annual financial statements of the Company at such time after the close of each
fiscal year of the Company as such statements are generally released by the
Company to its common stockholders generally.
9. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted under
this Plan shall confer on any Optionee any right to continue in the employ of,
or other relationship with, the Company or any Parent, Subsidiary or Affiliate
of the Company or limit in any way the right of the Company or any Parent,
Subsidiary or Affiliate of the Company to terminate Optionee's employment or
other relationship at any time, with or without cause.
10. ADJUSTMENT OF OPTION SHARES. In the event that the number of outstanding
shares of common stock of the Company is changed by a stock dividend, stock
split, reverse stock split, combination, reclassification or similar change in
the capital structure of the Company without consideration, or if a substantial
portion of the assets of the Company are distributed, without consideration in a
spin-off or similar transaction, to the stockholders of the Company, the number
of Shares available under this Plan and the number of Shares subject to
outstanding Options and the exercise price per Share of such Options shall be
proportionately adjusted, subject to any required action by the Board of
Directors (the "Board") or stockholders of the Company and compliance with
applicable securities laws; provided, however, that a fractional share shall not
be issued upon exercise of any Option and any fractions of a Share that would
have resulted shall either be cashed out at Fair Market Value or the number of
Shares issuable under the Option shall be rounded up to the nearest whole
number, as determined by the Committee; and provided further that the exercise
price may not be decreased to below the par value, if any, for the Shares.
11. ASSUMPTION OF OPTIONS BY SUCCESSORS.
a. In the event of (i) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly owned
subsidiary, a reincorporation, or other transaction in which there is no
substantial change in the stockholders of the corporation and the Options
granted under this Plan are assumed by the successor corporation, which
assumption shall be binding on all optionees), (ii) a dissolution or liquidation
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<PAGE>
of the Company, (iii) the sale of substantially all of the assets of the
Company, or (iv) any other transaction which qualifies as a "corporate
transaction" under Section 424(a) of the Revenue Code wherein the stockholders
of the Company give up all of their equity interest in the Company (except for
the acquisition of all or substantially all of the outstanding shares of the
Company), all outstanding Options shall, not withstanding any contrary terms of
the Grant, accelerate and become exercisable in full prior to the consummation
of such dissolution, liquidation, merger, sale of assets or other corporate
transaction, at such times and on such conditions as the Board shall determine,
unless the successor corporation assumes the outstanding Options or substitutes
substantially equivalent options. In the event of (i) an acquisition of all or
substantially all of the outstanding shares of the Company, or (ii) a change in
the senior management of the Company which adversely affects your position,
salary or employment with the Company and as a result of this change you or the
Company decide to terminate your employment, then all outstanding Options shall,
not withstanding any contrary terms of the Grant, accelerate and become
exercisable in full. If the Fair Market Value of Shares with respect to which
all ISOs are first exercisable in such calendar year exceeds $100,000, the
Options for the first $100,000 worth of Shares to become exercisable in that
year shall be ISOs and the Options for the amount in excess of $100,000 shall be
NQSOs.
b. Subject to the foregoing provisions of this Section 11, in the event of the
occurrence of any transaction described in Section 11(a), any outstanding Option
shall be treated as provided in the applicable agreement or plan of merger,
consolidation, dissolution, liquidation, sale of assets or other "corporate
transaction".
12. ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall become effective on the
date that it is adopted by the Board of Directors of the Company. This Plan
shall be approved by the stockholders of the Company, in any manner permitted by
applicable corporate law, within twelve (12) months before or after the date
this Plan is adopted by the Board. Upon the effective date of the Plan, the
Board may grant Options pursuant to this Plan; provided that, in the event that
stockholder approval is not obtained within the time period provided herein, all
Options granted hereunder shall terminate. No Option that is issued as a result
of any increase in the number of shares authorized to be issued under this Plan
shall be exercised prior to the time such increase has been approved by the
stockholders of the Company and all such Options granted pursuant to such
increase shall similarly terminate if such Stockholder approval is not obtained.
After the Company becomes subject to Section 16(b) of the Exchange Act, the
Company will comply with the requirements of Rule 16b-3 with respect to
stockholder approval.
13. ADMINISTRATION. This Plan may be administered by the Board or a committee
appointed by the Board (the "Committee"). If at the earlier of September 1, 1998
or the date that the Board resolves to conform to the amended Rules promulgated
by the SEC effective May 1, 1998 pursuant to Section 16 of the Exchange Act, the
Board is not comprised entirely of Disinterested Persons, the Company will take
appropriate steps to comply with the disinterested director requirements of
Section 16(b) of the Exchange Act, which may consist of the appointment by the
Board of a Committee consisting of not less than two (2) persons (who are
members of the Board), each of whom is a Disinterested Person. As used in this
Plan, references to the "Committee" shall mean either the committee appointed by
the Board to administer this Plan or the Board if no committee has been
established. The interpretation by the Committee of any of the provisions of
this Plan or any Option granted under this Plan shall be final and binding upon
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AMENDED 1998 STOCK OPTION PLAN
<PAGE>
the Company and all persons having an interest in any Option or any Shares
purchased pursuant to an Option. The Committee may delegate to officers of the
Company the authority to grant Options under this Plan to Optionees who are not
Insiders of the Company.
14. TERM OF PLAN. Options may be granted pursuant to this Plan from time to time
within a period of ten (10) years from the date on which this Plan is adopted by
the Board.
15. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time terminate or
amend this Plan in any respect including (but not limited to) amendment of any
form of grant, exercise agreement or instrument to be executed pursuant to this
Plan; provided, however, that the Committee shall not, without the approval of
the stockholders of the company, amend this Plan in any manner that requires
such stockholder approval pursuant to the Revenue Code or the regulations
promulgated thereunder as such provisions apply to ISO plans or pursuant to the
Exchange Act or Rule 16b-3 (or its successor) promulgated thereunder.
16. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall have
the following meanings:
a. "Parent" means any corporation (other than the Company) in an unbroken chain
of corporations ending with the Company if, at the time of the granting of the
Option, each of such corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
b. "Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, at the time of granting of
the Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
c. "Affiliate" means any corporation that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, another corporation, where "control" (including the terms "controlled by"
and "under common control with") means the possession, direct or indirect, of
the power to cause the direction of the management and policies of the
corporation, whether through the ownership of voting securities, by contract or
otherwise.
d. "Disinterested Person" means a director who is not, during the period that he
is a member of the Committee and for one (1) year prior to service as a member
of the Committee, granted or awarded equity securities pursuant to this Plan or
any other plan of the Company or any Parent, Subsidiary or Affiliate of the
Company, except in accordance with the requirements set forth in Rule
16b-3(c)(2), as promulgated by the SEC under Section 16(b) of the Exchange act,
as such Rule is amended from time to time and as interpreted by the SEC.
e. "Fair Market Value" shall mean the fair market value of the Shares as
determined by the Committee from time to time in good faith. In the event the
common stock of the Company is listed on a stock exchange or on the NASD OTC
Bulletin Board System, the Fair Market Value shall be the closing price of the
Corporation's common stock on the date of determination.
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<PAGE>
Employee#: ----------
Grant#: -------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
INCENTIVE STOCK OPTION GRANT
EDUVERSE Accelerated Learning Systems, Inc., a Nevada corporation, (the
"Company") hereby grants to the optionee named below (the "Optionee"), an
incentive stock option (the "Option") under the Company's 1998 Stock Option
Plan, as amended (the "Plan"), to purchase the total number of shares set forth
below of common stock of the Company (the "Option Shares") at the exercise price
per share set forth below (the "Exercise Price"). The option is subject to all
the terms and conditions of the Incentive Stock Option Grant including the terms
and conditions contained in the attached Appendix A (the "Grant") and the Plan,
the provisions of which are incorporated herein by reference. The principal
features of the option are as follows:
Optionee: -----------------------------------------------------
Address: -----------------------------------------------------
Number of Option Shares: -----------------------------------------------------
Exercise Price per Share: -----------------------------------------------------
Date of Grant: -----------------------------------------------------
Expiration Date: -----------------------------------------------------
Post Termination Exercise: -----------------------------------------------------
Vest Start Date: -----------------------------------------------------
Subject to the terms and conditions of the Plan and this Grant, the Option shall
vest 2% per month for 50 months on the 1st day of each calendar month until the
earlier of (1) the date the option becomes fully vested or (2) the date the
optionee ceases to be employed. An optionee shall be deemed to have worked a
calendar month if optionee has worked any portion of that month. Vesting will be
suspended during any unpaid leave of absence. Optionee may first exercise the
Option with respect to the vested Option Shares on the first day of the 7th
month from Vest Start Date. Optionee may then exercise the Option with respect
to vested Option Shares at any time until expiration or termination.
PLEASE READ ALL OF APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS
OF THE OPTION.
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
Per: -----------------------------------
Mark E. Bruk, President & CEO
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<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
INCENTIVE STOCK OPTION GRANT
ACCEPTANCE
Optionee hereby acknowledges that a copy of the Plan, as amended, is available
upon request from the Administration department and can also be accessed
electronically. Optionee represents that Optionee has read and understands the
terms and conditions thereof, and accepts the Option subject to all the terms
and conditions of the Plan and the Grant.
OPTIONEE ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE
OF THE OPTION AND THAT OPTIONEE SHOULD CONSULT A TAX ADVISER PRIOR TO SUCH
EXERCISE.
- ----------------------------------
Optionee
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AMENDED 1998 STOCK OPTION PLAN
<PAGE>
Employee#: ----------
Grant#: -------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION GRANT
EDUVERSE Accelerated Learning Systems, Inc., a Nevada corporation, (the
"Company") hereby grants to the optionee named below (the "Optionee"), a
non-qualified stock option (the "Option") under the Company's 1998 Stock Option
Plan, as amended (the "Plan"), to purchase the total number of shares set forth
below of common stock of the Company (the "Option Shares") at the exercise price
per share set forth below (the "Exercise Price"). The option is subject to all
the terms and conditions of the Nonqualified Stock Option Grant including the
terms and conditions contained in the attached Appendix A (the "Grant") and the
Plan, the provisions of which are incorporated herein by reference. The
principal features of the option are as follows:
Optionee: -----------------------------------------------------
Address: -----------------------------------------------------
Number of Option Shares: -----------------------------------------------------
Exercise Price per Share: -----------------------------------------------------
Date of Grant: -----------------------------------------------------
Expiration Date: -----------------------------------------------------
Vest Start Date: -----------------------------------------------------
Subject to the terms and conditions of the Plan and this Grant, the Option shall
vest 2% per month for 50 months on the 1st day of each calendar month until the
earlier of (1) the date the option becomes fully vested or (2) the date the
optionee ceases to be employed. An optionee shall be deemed to have worked a
calendar month if optionee has worked any portion of that month. Vesting will be
suspended during any unpaid leave of absence. Optionee may first exercise the
Option with respect to the vested Option Shares on the first day of the 7th
month from Vest Start Date. Optionee may then exercise the Option with respect
to vested Option Shares at any time until expiration or termination.
PLEASE READ ALL OF APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS
OF THE OPTION.
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
Per: -----------------------------------
Mark E. Bruk, President & CEO
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<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION GRANT
ACCEPTANCE
Optionee hereby acknowledges that a copy of the Plan, as amended, is available
upon request from the Administration department and can also be accessed
electronically. Optionee represents that Optionee has read and understands the
terms and conditions thereof, and accepts the Option subject to all the terms
and conditions of the Plan and the Grant.
OPTIONEE ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE
OF THE OPTION AND THAT OPTIONEE SHOULD CONSULT A TAX ADVISER PRIOR TO SUCH
EXERCISE.
- ----------------------------------
Optionee
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<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION TERMS AND CONDITIONS
UNDER THE 1998 STOCK OPTION PLAN, AS AMENDED
1. Form of Option Grant. Each Option granted under the Plan shall be evidenced
by a written Stock Option Grant (the "Grant") in such form (which need not be
the same for each Optionee) as the Committee shall from time to time approve,
which Grant shall comply with and be subject to the terms and conditions of the
Plan.
2. Date of Grant. The date of grant of the Option shall be the date on which the
Committee makes the determination to grant such Option unless otherwise
specified by the committee. The Grant representing the Option will be delivered
to Optionee within a reasonable time after the granting of the Option. Copies of
the Plan will be available electronically and can also be obtained by contacting
the Stock Administration Department.
3. Exercise Price. The exercise price of the Option shall be determined by the
Committee on the date the Option is granted; provided that the exercise price of
the Option shall be not less than 100% of the Fair Market Value of the Shares on
the date the Option is granted.
4. Exercise Period. Options shall be exercisable within the times or upon the
events determined by the Committee as set forth in the Grant; provided, however,
that no Option shall be exercisable after the expiration of ten (10) years from
the date the Option is granted.
5. Restrictions on Exercise. Exercise of the Option is subject to the following
limitations:
(a) The Option may not be exercised until the Plan has been approved by the
stockholders of the Company as set forth in the Plan.
(b) The Option may not be exercised unless such exercise is in compliance with
the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended,
all applicable state securities laws, and the requirements of any stock exchange
or national market system on which the Company's Common Stock may be listed, as
they are in effect on the date of exercise.
(c) The Option may be exercised even if there is outstanding, within the meaning
of Section 422A(c)(7) of the Internal Revenue Code of 1954, as amended (the
"Code"), any incentive stock option to purchase stock of the Company or its
Parent or Subsidiary (as defined in the plan) that was granted to the Optionee
before the grant of the Option.
6. Termination of Option.
(a) Except as provided in this section, the Option shall terminate in whole if
Optionee ceases to be a Staff Member of the Company and may not be exercised to
the extent terminated. If the Optionee ceases to be a Staff Member of the
Company for any reason except by death or disability, the Option, to the extent
it is exercisable on the date on which the Optionee ceases to be a Staff Member
(the "Termination Date"), may be exercised by the Optionee within three (3)
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 12
AMENDED 1998 STOCK OPTION PLAN
<PAGE>
months after the Termination Date (or such shorter time period as may be
specified in the Grant), but in no event later than the Expiration Date.
(b) Except as provided in this section, the Option shall terminate in part, if
Optionee ceases to be a full time Staff Member of the Company but remains a
Staff Member of the Company, and may not be exercised to the extent terminated.
If the Optionee ceases to be a full time Staff Member of the Company for any
reason other than disability, the Option, to the extent it is exercisable on the
date on which the Optionee ceases to be a full time Staff Member, may be
exercised by the Optionee within three (3) months after the Termination Date (or
such shorter time period as may be specified in the Grant), but in no event
later than the Expiration Date.
(i) An Optionee shall be deemed to be a "full time" Staff Member if Optionee
works not less than 40 hours per week, unless prevailed upon by local law.
(ii) Except as to the number of Option Shares for which the Option terminates in
accordance with subsection (b)(iii) below, the Option shall continue to vest
with respect to Option Shares in equal monthly amounts from the Termination Date
to the time the Optionee has been continuously employed 50 calendar months from
the vest start date set forth in the Grant.
(iii) The number of Option Shares for which the Option shall terminate in
accordance with this Paragraph will be determined by multiplying the total
number of Option Shares by the following fraction:
40 minus [number of hours regularly worked per week]
----------------------------------------------------
40
(c) If the Optionee's employment with the Company is terminated because of the
death of the Optionee or disability of the Optionee within the meaning of
Section 22(e)(3) of the Code, the Option, to the extent that it is exercisable
on the Termination Date, may be exercised by the Optionee (or the Optionee's
legal representative) at any time prior to the expiration of twelve (12) months
after the Termination Date (or such shorter time period as may be specified in
the Grant), but in any event no later than the Expiration Date.
(d) Nothing in the Plan or the Grant shall confer on Optionee any right to
continue in the employ of, or other relationship with, the Company or any
Parent, Subsidiary or Affiliate of the Company or limit in any way the right of
the Company or any Parent, Subsidiary or Affiliate of the Company to terminate
Optionee's employment or other relationship at any time, with or without cause.
7. Manner of Exercise.
(a) The Option shall be exercisable by delivery to the Company of written notice
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Board of Directors of the Company, which shall set forth the
Optionee's election to exercise the Option, the number of Option Shares being
purchased, and such other representations and agreements as to the Optionee's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws.
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AMENDED 1998 STOCK OPTION PLAN
<PAGE>
(b) Such notice shall be accompanied by full payment of the Exercise Price (i)
in cash; (ii) by tender of shares of Common Stock of the Company having a fair
market value equal to the Exercise Price; or (iii) a combination of the
foregoing, provided that a portion of the exercise price equal to the par value
of the Shares, if any, must be paid in cash or other legal consideration.
(c) Prior to the issuance of the Option Shares upon exercise of the Option, the
Optionee must pay or make adequate provision for any applicable federal, state,
or provincial withholding obligations of the Company.
(d) Provided that such notice and payment are in form and substance satisfactory
to counsel for the Company, the Company shall issue the Option Shares registered
in the name of the Optionee or the Optionee's legal representative.
8. Compliance with Laws and Regulations. The issuance and transfer of Option
Shares shall be subject to compliance by the Company and the Optionee with all
applicable requirements of federal and state laws and with all applicable
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of such issuance or transfer.
9. Nontransferability of Option. The Option may not be transferred in any manner
other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the Optionee only by the Optionee. The terms of
the Option shall be binding upon the executors, administrators, successors and
assigns of the Optionee.
10. Tax Consequences. Set forth below is a brief summary as of the date the form
of grant was adopted of some of the federal and Nevada tax consequences of
exercise of the Option and disposition of the Shares. Additional information is
included in the Plan, as amended. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
(a) Exercise. Upon exercise, Optionee will recognize compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exercise Price. The
Company may be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(b) Disposition of the Shares. For federal tax purposes, if the Shares are held
for more than twelve (12) months but not more than eighteen (18) months after
the date of transfer of the Shares pursuant to the exercise of a nonqualified
stock option, any gain realized on the disposition of the Shares will be treated
as mid-term capital gain. If the Shares are held for more than eighteen (18)
months any such gain will be treated as long-term capital gain. The maximum
mid-term capital gain rate is twenty-eight percent (28%) and the maximum
long-term capital gain rate is twenty percent (20%).
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 14
AMENDED 1998 STOCK OPTION PLAN
<PAGE>
11. Interpretation. Any dispute regarding the interpretation of this agreement
shall be submitted by Optionee or the Company forthwith to the Company's Board
of Directors or the committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The resolution of such a
dispute by the Board or committee shall be final and binding on the Company and
on Optionee.
12. Entire Agreement. The Exercise Notice and Agreement attached as Exhibit A
and the Plan available upon request from the Stock Administration department and
also accessible electronically is incorporated herein by reference. The Grant,
the Plan and the Exercise Notice and Agreement constitute the entire agreement
of the parties and supersede all prior undertakings and agreements with respect
to the subject matter hereof.
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AMENDED 1998 STOCK OPTION PLAN
<PAGE>
EXHIBIT A TO THE GRANT AGREEMENT
STOCK OPTION EXERCISE NOTICE AND AGREEMENT
EDUVERSE Accelerated Learning Systems, Inc.
Suite 209, 1135 Terminal Way
Reno, Nevada 89502
Attention: Stock Administrator
1. Exercise of Option. The undersigned ("Optionee") hereby elects to exercise
Optionee's option to purchase -------- shares of the Common Stock (the "Option
Shares") of EDUVERSE Accelerated Learning Systems, Inc. (the "Company") under
and pursuant to the Company's 1998 Stock Option Plan (the "Plan") and the stock
option grant numbered #------- and dated --------------- (the "Grant"). The
terms and conditions of the Plan and the Grant are hereby incorporated into and
made a part of this Agreement by this reference.
2. Representations of Optionee. Optionee hereby acknowledges, represents and
warrants that Optionee has received, read and understood the Plan and the Grant
and will abide by and be bound by their terms and conditions.
3. Compliance with Securities Laws. Optionee understands and acknowledges that
the exercise of any rights to purchase any Option Shares is expressly
conditioned upon compliance with the Securities Act of 1933, the Exchange Act of
1934, the requirements of any stock exchange or national market system on which
the Company's stock may be listed, and all applicable state securities laws.
Optionee agrees to cooperate with the Company to ensure compliance with such
laws.
4. Stop Transfer Notices. Optionee understands and agrees that the Company may
issue appropriate "stop transfer" instructions to its transfer agent to ensure
compliance with the restrictions on transfer.
5. Tax Consequences. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX
CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE OPTION
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE OPTION SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF OPTIONEE IS AN INSIDER SUBJECT TO SECTION
16(B) OF THE EXCHANGE ACT, OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH
OPTIONEE'S TAX ADVISERS CONCERNING THE ADVISABILITY OF FILING AN 83(B) ELECTION
WITH THE INTERNAL REVENUE SERVICE.
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 16
AMENDED 1998 STOCK OPTION PLAN
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6. Delivery of Payment. Optionee herewith delivers to the Company the aggregate
purchase price of the Option Shares that Optionee has elected to purchase and
has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
7. Entire Agreement. This Exercise Agreement, the Plan and the Grant constitute
the entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by Nevada law except for that body of law
pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: EDUVERSE ACCELERATED
LEARNING SYSTEMS, INC.
- -------------------------------- Per: ---------------------------------
Mark E. Bruk, President & CEO
- --------------------------------
(Print Name)
Dated: ------------------------- Dated: -------------------------------
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 17
AMENDED 1998 STOCK OPTION PLAN
EXHIBIT 6.2
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
1998 DIRECTORS' STOCK OPTION PLAN
AS ADOPTED BY THE BOARD OF DIRECTORS ON JUNE 3, 1998
AS APPROVED BY THE STOCKHOLDERS ON JUNE 3, 1998
1. PURPOSE. This 1998 Directors' Stock Option Plan ("Plan") is established to
provide equity incentives for members of the Board of Directors of EDUVERSE
Accelerated Learning Systems, Inc., a Nevada corporation (the "Company") who are
not employees of the Company, to promote the financial success and progress of
the Company by granting such persons options ("Options") to purchase shares of
the Common Stock ("Shares") of the Company, and to provide the opportunity for
such persons to receive Shares of common stock of the Company in lieu of cash
compensation.
2. ADOPTION AND APPROVAL. This Plan shall become effective on the date it is
approved by the affirmative vote or written consent of the holders of a majority
of the outstanding shares of the Company.
3. NUMBER OF SHARES. The maximum number of Shares that may be issued pursuant to
Options granted under this Plan shall be 150,000 Shares, subject to adjustment
as provided in Section 11 below. If any Option is terminated for any reason
without being exercised in whole or in part, the Shares thereby released from
such Option shall continue to be available under this Plan. At all times during
the term of this Plan, the Company shall reserve and keep available such number
of Shares as shall be required to satisfy the requirements of outstanding
Options under this Plan.
4. ADMINISTRATION. This Plan shall be administered by the Board or by a
Committee of not less than two (2) members of the Board appointed to administer
this Plan (as used herein, the term "Board" shall mean either such Committee or
the Board if no Committee has been established). The interpretation by the Board
of any of the provisions of this Plan or any Option granted under this Plan
shall be final and binding upon the Company and all persons having an interest
in any Option or any Shares purchased pursuant to an Option.
5. ELIGIBILITY AND AWARD FORMULA. Options may be granted only to such directors
of the Company who are not employees of the Company ("Optionees") in accordance
with the following formula:
a. Upon initial election or appointment to the Board of Directors, each Optionee
shall be granted an option to purchase up to 25,000 shares of the Company's
common stock on the date of election or appointment.
b. Upon re-election to the Board of Directors at the annual meeting of
stockholders of the Company, each Optionee shall be granted an option to
purchase 8,000 shares of the Company's common stock on the date of re-election;
provided, however, that any such Optionee who
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
received such Optionee's initial grant pursuant to (a) above since the last
annual meeting of stockholders shall receive a prorated annual grant to purchase
a number of shares determined as set forth above and multiplied by a fraction
whose numerator is the number of calendar months or portions thereof that the
director has served since the date of the initial grant and whose denominator is
twelve. The provisions of this Section 5 shall not be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code of 1986, as amended (the "Code") or the rules thereunder.
6. TERMS AND CONDITIONS OF OPTIONS. The Option shall be subject to the following
terms and conditions:
(a) Form of Option Grant. Each Option granted under this Plan shall be evidenced
by a written Stock Option Grant ("Grant") in such form as the Board shall from
time to time establish, which Grant shall incorporate the provisions of this
Plan by reference and shall comply with and be subject to the terms and
conditions of this Plan.
(b) Exercise Price. The exercise price of any Option shall be not less than 100%
of the fair market value per share of the Company's common stock on the date the
Option is granted. Fair market value shall be the closing price on the NASD OTC
Bulletin Board System.
(c) Exercise Period. Options shall be exercisable as to two percent (2%) of the
Shares immediately on the date of grant and as to an additional two percent (2%)
of the Shares on the first day of each calendar month beginning after the date
of grant; provided, however, that no Option shall be exercisable after
expiration of ten (10) years from the date the Option is granted.
(d) Date of Grant. The date of grant of an Option shall be the date provided in
Section 5 above. The Grant representing the Option shall be delivered to the
Optionee within a reasonable time after the granting of the Option.
(e) Provision of Information. The Company shall provide to each Optionee a copy
of the annual financial statements of the Company, at such time after the close
of each fiscal year of the Company as they are released by the Company to its
stockholders.
7. EXERCISE OF OPTIONS.
(a) Notice. Options may be exercised only by delivery of a written notice to the
Company, in a form approved by the Board, stating the number of Shares being
purchased and such other representations and agreements as to the Optionee's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws, together with payment of the exercise
price for the number of Shares being purchased.
(b) Payment. Payment for the Shares may be made in cash (by check) or, where
permitted by law: (i) by cancellation of indebtedness of the Company to the
Optionee; (ii) by surrender of shares of common stock of the Company having a
fair market value equal to the applicable exercise price of the Options, that
have been owned by Optionee for more than six (6) months (and which have been
paid for within the meaning of the Securities and Exchange Commission
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 2
1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
("SEC") Rule 144 and, if such shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect to such shares), or
were obtained by Optionee in the open public market; (iii) by Optionee making an
irrevocable election in writing to reduce cash compensation in lieu of shares of
common stock of the Company as described in Section 9 below; (iv) provided that
a public market for the Company's stock exists, through a "same day sale"
commitment from Optionee and a broker-dealer that is a member of the National
Association of Securities Dealers (a "NASD Dealer") whereby Optionee irrevocably
elects to exercise the option and to sell a portion of the Shares so purchased
to pay for the exercise price and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the exercise price directly to the
Company; or (v) by any combination of the foregoing.
(c) Withholding Taxes. Prior to issuance of the Shares upon exercise of an
Option, the optionee shall pay or make adequate provision for any federal or
state withholding obligations of the Company, if applicable.
(d) Limitations on Exercise. Notwithstanding the exercise periods set forth in
the Grant, exercise of an Option shall always be subject to the following
limitations:
(i) An Option shall not be exercisable until such time as the Plan has been
approved by the stockholders of the Company in accordance with Section 3
above.
(ii) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable
state securities laws, as they are in effect on the date of exercise.
(iii) If the Optionee ceases to be a director of the Company for any reason
except death or disability, the Optionee may exercise such Optionee's
Options to the extent (and only to the extent) that they would have been
exercisable upon the date of termination, within three (3) months after the
date of termination (or such shorter time period as may be specified in the
Grant), but in any event no later than the expiration date of the Option.
(iv) If the Optionee ceases to be a director of the Company because of
death or disability, the Optionee's Options may be exercised to the extent
(and only to the extent) that they would have been exercisable by Optionee
on the date of termination by Optionee (or Optionee's legal representative)
within twelve (12) months after the date of termination (or such shorter
time period as may be specified in the Grant), but in any event no later
than the expiration date of the Option.
8. DEFERRAL OF REGULAR CASH COMPENSATION INTO COMMON STOCK OF THE COMPANY.
Each Optionee may elect to reduce all or part of the cash compensation otherwise
payable for services to be rendered by him as a director (including the annual
retainer and any fees payable for serving on the Board or a Committee of the
Board) and to receive in lieu thereof Shares. Any such election shall be in
writing and must be made before the services are rendered giving rise to such
compensation, and may not be revoked or changed thereafter during the Director's
term. On
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 3
1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
such election, the cash compensation otherwise payable will be increased by 10%
for purposes of determining the number of Shares to be credited to such
Optionee.
If an Optionee so elects to defer, there shall be credited to such Optionee a
number of Shares equal to the amount of the deferral (increased by 10% as
described in the preceding sentence) divided by the fair market value as
determined by the closing price on the NASD OTC Bulletin Board System on the day
in which the compensation would have been paid in the absence of a deferral
election.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an Option
may be exercisable only by the Optionee. No Option may be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the rights of a
shareholder with respect to any Shares subject to an Option until the Option has
been validly exercised and the Shares have been issued. No adjustment shall be
made for dividends or distributions or other rights for which the record date is
prior to the date of issuance, except as provided in Section 11 below.
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of outstanding
shares of Common Stock of the Company is changed by a stock dividend, stock
split, reverse stock split or similar change in the capital structure of the
Company, the number of shares available under this Plan and the number of Shares
subject to outstanding Options and the exercise price per share of such Options
shall be proportionately adjusted, subject to any required action by the Board
or stockholders of the Company; provided, however, that no certificate or scrip
representing fractional shares shall be issued upon exercise of any Option and
any resulting fractions of a share shall be ignored.
12. NO OBLIGATION TO EMPLOY. Nothing in this Plan or in any Option granted under
this Plan shall confer on any Optionee any right to continue as a Director.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of Shares upon
exercise of any Options shall be subject to compliance with all applicable
requirements of law, including without limitation compliance with the Securities
Act of 1933, as amended, any required approval by the Commissioner of
Corporations of the State of Nevada, compliance with all applicable state
securities laws and compliance with the requirements of any stock exchange on
which the Shares may be listed.
14. ACCELERATION OF EXERCISABILITY ON CHANGE IN CONTROL. Upon a Change in
Control (as defined below) of the Company, all options theretofore granted and
not previously exercisable shall become fully exercisable to the same extent and
in the same manner as if they had become exercisable by passage of time in
accordance with the provisions of the Plan relating to periods of exercisability
and to termination of employment. As used in this section, a Change in Control
of the Company means (i) a dissolution or liquidation of the Company, (ii) a
merger or consolidation whereby the Company becomes a subsidiary of another
corporation or, in which
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 4
1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
the Company is not the surviving corporation (other than a merger or
consolidation with a wholly owned subsidiary, a reincorporation, or other
transaction in which there is no substantial change in the stockholders of the
corporation and the Options granted under this Plan are assumed by the successor
corporation, which assumption shall be binding on all optionees), (iii) the sale
of substantially all of the assets of the Company, or (iv) any other transaction
which qualifies as a "corporate transaction" under Section 424(a) of the Revenue
Code wherein the stockholders of the Company give up all of their equity
interest in the Company (except for the acquisition of all or substantially all
of the outstanding shares of the Company).
15. AMENDMENT OR TERMINATION OF PLAN. Subject to the limitations set forth in
Section 6 above, the Board may at any time terminate or amend this Plan;
provided, however, that the Board shall not, without the approval of the
stockholders of the Company, increase the total number of Shares available under
this Plan (except by operation of the provisions of Sections 3 and 11 above) or
change the class of persons eligible to receive Options. In any case, no
amendment of this Plan may adversely affect any then outstanding Options or any
unexercised portions thereof without the written consent of the Optionee.
16. EFFECTIVE PERIOD OF PLAN. Options may be granted pursuant to this Plan from
time to time from the date this Plan is approved by the stockholders of the
Company but no later than June 30, 2008.
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 5
1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
1998 DIRECTORS' NONQUALIFIED STOCK OPTION GRANT
Optionee: -----------------------------------------------------
Address: c/o EDUVERSE Accelerated Learning Systems, Inc.
Suite 209, 1135 Terminal Way, Reno, NV 89502
Number of Option Shares: -----------------------------------------------------
Exercise Price per Share: -----------------------------------------------------
Date of Grant: -----------------------------------------------------
Expiration Date: -----------------------------------------------------
Post Termination Exercise: -----------------------------------------------------
Vest Start Date: -----------------------------------------------------
1. Grant of Option: EDUVERSE Accelerated Learning Systems, Inc. (the "Company"),
a Nevada corporation, hereby grants to the optionee named above (the "Optionee")
a nonqualified stock option (this "Option") to purchase the total number of
shares set forth above of Common Stock of the Company (the "Option Shares") at
the exercise price per share set forth above (the "Exercise Price"), subject to
all of the terms and conditions of this Nonqualified Stock Option Grant
("Grant") and the Company's 1998 Directors' Stock Option Plan, (the "Plan"), the
provisions of which are incorporated herein by this reference.
2. Exercise Period of Option. Subject to the terms and conditions of the Plan
and this Grant, this Option shall become exercisable as to two percent (2%) of
the Shares immediately on the date of grant set forth above (the "Date of
Grant") and as to an additional two percent (2%) of the Shares on the first day
of each calendar month beginning after the Date of Grant.
3. Restrictions on Exercise. Exercise of this Option is subject to the following
limitations:
(a) This Option may not be exercised until the Plan has been approved by the
stockholders of the Company as set forth in the Plan.
(b) This Option may not be exercised unless such exercise is in compliance with
the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended,
all applicable state securities laws, and the requirements of any stock exchange
or national market system on which the Company's Common Stock may be listed, as
they are in effect on the date of exercise.
4. Termination of Option.
(a) Except as provided in this Section, this Option shall terminate in whole if
Optionee ceases to be a member (a "Board Member") of the Board of Directors of
the Company or any Parent, Subsidiary or Affiliate of the Company and may not be
exercised to the extent terminated. If the Optionee ceases to be a Board Member
of the Company for any reason except by death or
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 6
1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
disability, this Option, to the extent it is exercisable by the Optionee on the
date on which the Optionee ceases to be a Board Member (the "Termination Date"),
may be exercised by the Optionee within three (3) months after the Termination
Date (or such shorter time period as may be specified in the Grant), but in no
event later than the Expiration Date.
(b) If the Optionee ceases to be a Board Member because of the death of the
Optionee or disability of the Optionee within the meaning of Section 22(e)(3) of
the Code, this Option, to the extent that it is exercisable by the Optionee on
the Termination Date, may be exercised by the Optionee (or the Optionee's legal
representative) at any time prior to the expiration of twelve (12) months after
the Termination Date (or such shorter time period as may be specified in the
Grant), but in any event no later than the Expiration Date.
5. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Company of written
notice in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Board of Directors or the committee thereof that administers the
Plan, which shall set forth the Optionee's election to exercise this Option, the
number of Option Shares being purchased, and such other representations and
agreements as to the Optionee's investment intent and access to information as
may be required by the Company to comply with applicable securities laws.
(b) Such notice shall be accompanied by full payment of the Exercise Price (i)
in cash; (ii) by tender of shares of Common Stock of the Company having a fair
market value equal to the Exercise Price; (iii) by tender of a full-recourse
promissory note in such form as the Board may approve at the time the Option is
granted; or (iv) by any combination of the foregoing.
(c) Prior to the issuance of the Option Shares upon exercise of this Option, the
Optionee must pay or make adequate provision for any applicable federal or state
withholding obligations of the Company. If Optionee is an Insider subject, at
the time of exercise of this Option, to Section 16(b) of the Securities Exchange
Act of 1934, as amended, the Optionee may provide for payment of withholding
taxes upon exercise of the Option by requesting that the Company retain Shares
with a Fair Market Value equal to the minimum amount of taxes required to be
withheld, all as set forth in Section 8(c) of the Plan. In such case, the
Company shall issue the net number of Shares to the Optionee by deducting the
Shares retained from the Shares exercised.
(d) Provided that such notice and payment are in form and substance satisfactory
to counsel for the Company, the Company shall issue the Option Shares registered
in the name of the Optionee or the Optionee's legal representative.
6. Compliance with Laws and Regulations. The issuance and transfer of Option
Shares shall be subject to compliance by the Company and the Optionee with all
applicable requirements of federal and state laws and with all applicable
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of such issuance or transfer.
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
7. Nontransferability of Option. This Option may not be transferred in any
manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the Optionee only by the Optionee. The terms of
this Option shall be binding upon the executors, administrators, successors and
assigns of the Optionee.
8. Tax Consequences. Set forth below is a brief summary as of the date of this
Option of some of the federal and Nevada tax consequences of exercise of this
Option and disposition of the Shares. Additional information is included in the
Plan, as amended. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise. Upon exercise, Optionee will recognize compensation income in an
amount equal to the excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price for those Shares. Optionee
represents that Optionee has consulted any tax consultant(s) Optionee deems
advisable in connection with the purchase of the Shares.
(b) Disposition of the Shares. For federal tax purposes, for shares disposed of
after 1986, long-term capital gain will generally be treated as ordinary income
subject to the maximum tax rate. If the shares acquired pursuant to the exercise
of a nonqualified stock option are held for at least six (6) months after the
date of transfer pursuant to the exercise of the nonqualified stock option, any
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes for potential set-off against capital
losses.
9. Interpretation. Any dispute regarding the interpretation of this agreement
shall be submitted by Optionee or the Company forthwith to the Company's Board
of Directors or the committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The resolution of such a
dispute by the Board or committee shall be final and binding on the Company and
on Optionee.
10. Entire Agreement. The Plan and the Notice and Agreement attached as Exhibit
A are incorporated herein by reference. This Grant, the Plan and the Notice and
Agreement constitute the entire agreement of the parties and supersede all prior
undertakings and agreements with respect to the subject matter hereof.
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
Per: -----------------------------------
Mark E. Bruk, President & CEO
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 8
1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
1998 DIRECTORS' NONQUALIFIED STOCK OPTION GRANT
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, as amended,
represents that Optionee has read and understands the terms and provisions
thereof, and accepts this Option subject to all the terms and provisions of the
Plan and this Grant. Optionee acknowledges that there may be adverse tax
consequences upon exercise of this Option and that Optionee should consult a tax
adviser prior to such exercise.
OPTIONEE ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE
OF THE OPTION AND THAT OPTIONEE SHOULD CONSULT A TAX ADVISER PRIOR TO SUCH
EXERCISE.
- ----------------------------------
Optionee
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 9
1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
NON-REVOCABLE NOTICE OF ELECTION OF DEFERRAL
UNDER THE 1998 DIRECTORS' STOCK OPTION PLAN
Service Year of Deferral: From July 1998 through June 1999.
I -----------------------, a director (the "Director") of the Board of Directors
of EDUVERSE Accelerated Learning Systems, Inc. (the "Company"), hereby elects to
receive shares of Common Stock of the Company, (the "Shares") in lieu of cash
compensation pursuant to the 1998 Directors' Stock Option Plan (the "Plan")
effective July 1, 1998. The Director acknowledges that this election is
irrevocable for the service year.
II. Designation of cash compensation to use for purchasing the Shares:
Formula: [Compensation x 110% / Common Stock FMV on date of service]
Dollar Amount: $------------------
or
Percentage of Director's yearly fees: -----------%
Source of fees (check all that apply):
Annual Retainer: ----------------
Committee Meetings: -------------
III. Certificate registration and mailing instructions:
IV. The Director hereby acknowledges that:
The Shares will be issued under the Plan quarterly and delivered in certificate
form within a reasonable time and at such place as the Director requests. Any
amount remaining from the Directors' compensation that is insufficient to
purchase a full Share shall be carried forward, without interest, to the next
quarterly Shares purchase.
The Shares will be issued in compliance with the Securities Act of 1933, as
amended, the Exchange Act of 1934, as amended, all applicable state securities
laws, and the requirements of any stock exchange or national market system on
which the Company's common stock may be listed, as they are in effect on the
date of issue.
In connection with any registration of the Company's securities, upon the
request of the Company or the underwriters managing any public offering of the
Company's securities, the Director will not sell or otherwise dispose of any
Shares without the prior written consent of the Company or such underwriters, as
the case may be, for a period of time (not to exceed one hundred and eighty
(180) days) from the effective date of such registration as the Company or the
underwriters may specify for employee stockholders generally.
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
The Shares will have restricted legends placed upon the Certificate pursuant to
Rule 144 and Section 16(b)(3). The Company may issue appropriate "stop transfer"
instructions to its transfer agent to ensure compliance with the restrictions on
transfer.
Copies of the Plan and Prospectus are available upon request from the Stock
Administration department.
The Director understands that the Director may suffer adverse tax consequences
as a result of the Director's purchase or disposition of the Shares. The
Director represents that the Director has consulted with any tax consultant(s)
the Director deems advisable in connection with the purchase or disposition of
the Shares and that the Director is not relying on the Company for any tax
advice.
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
EXHIBIT A
DIRECTORS' STOCK OPTION EXERCISE NOTICE AND AGREEMENT
EDUVERSE Accelerated Learning Systems, Inc.
Suite 209, 1135 Terminal Way
Reno, Nevada, US 89502
Attention: Stock Administrator
1. Exercise of Option. The undersigned ("Optionee") hereby elects to exercise
Optionee's option to purchase -------- shares of the Common Stock (the "Option
Shares") of EDUVERSE Accelerated Learning Systems, Inc. (the "Company") under
and pursuant to the Company's 1998 Directors' Stock Option Plan, (the "Plan")
and the stock option grant dated ------------------ (the "Grant"). The terms and
conditions of the Plan and the Grant are hereby incorporated into and made a
part of this Agreement by this reference.
2. Representations of Optionee. Optionee hereby acknowledges, represents and
warrants that Optionee has received, read and understood the Plan and the Grant
and will abide by and be bound by their terms and conditions.
3. Compliance with Securities Laws. Optionee understands and acknowledges that
the exercise of any rights to purchase any Option Shares is expressly
conditioned upon compliance with the Securities Act of 1933, the Exchange Act of
1934, the requirements of any stock exchange or national market system on which
the Company's stock may be listed, and all applicable state securities laws.
Optionee agrees to cooperate with the Company to ensure compliance with such
laws.
4. Stop Transfer Notices. Optionee understands and agrees that the Company may
issue appropriate "stop transfer" instructions to its transfer agent to ensure
compliance with the restrictions on transfer.
5. Tax Consequences. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX
CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE OPTION
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE OPTION SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF OPTIONEE IS AN INSIDER SUBJECT TO SECTION
16(B) OF THE EXCHANGE ACT, OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH
OPTIONEE'S TAX ADVISERS CONCERNING THE ADVISABILITY OF FILING AN 83(B) ELECTION
WITH THE INTERNAL REVENUE SERVICE.
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
6. Delivery of Payment. Optionee (or Optionee's broker acting as agent) herewith
delivers to the Company the aggregate purchase price of the Option Shares that
Optionee has elected to purchase, in cash (by check payable to EDUVERSE
Accelerated Learning Systems, Inc.) in the amount of $ ----------------, receipt
of which is acknowledged by the Company.
7. Entire Agreement. This Exercise Agreement, the Plan and the Grant constitute
the entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by Nevada law except for that body of law
pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: EDUVERSE ACCELERATED
LEARNING SYSTEMS, INC.
- -------------------------------- Per: ---------------------------------
Mark E. Bruk, President & CEO
- --------------------------------
(Print Name)
Dated: ------------------------- Dated: -------------------------------
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
1998 DIRECTORS' STOCK OPTION PLAN
JULY 1, 1998
150,000 SHARES
COMMON STOCK, $.001 PAR VALUE
EDUVERSE Accelerated Learning Systems, Inc., a Nevada corporation (the
"Company"), is offering an aggregate of 150,000 shares of its authorized but
unissued Common Stock to members of the Board of Directors of the Company who
are not employees of the Company (the "Directors") pursuant to the terms and
conditions of the Company's 1998 Directors' Stock Option Plan, as amended (the
"Directors' Plan") as described herein.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE SECURITIES
COMMISSION NOR HAS ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
INTRODUCTION
This document relates to unexercised options to purchase shares of Common Stock
of the Company granted or to be granted to members of the Board of Directors of
the Company, who are not employees of the Company (provided such directors
render bona fide services not in connection with the offer and sale of
securities in a capital raising transaction) under the Directors' Plan. A
registration statement with respect to such shares of Common Stock (the
"Registration Statement") will be filed with the Securities and Exchange
Commission (the "SEC").
Additional information about the Directors' Plan and the administrators can be
obtained by contacting the Stock Administration Department, 775.332.3325. The
address of the corporation is Suite 209, 1135 Terminal Way, Reno, Nevada 89502.
QUESTIONS AND ANSWERS ABOUT THE OPTIONS
1. WHAT IS THE HISTORY OF THE DIRECTORS' PLAN?
The Directors' Plan was adopted by the Company's Board of Directors on June 3,
1998 and was approved by the Company's stockholders on June 3,1998.
2. WHAT IS THE PURPOSE OF THE DIRECTORS' PLAN?
The Directors' Plan is established to provide equity incentives for members of
the Board of Directors who are not employees of the Company, to promote the
financial success and progress
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
of the Company by granting such persons options ("Options") to purchase shares
of the Common Stock ("Shares") of the Company, and to provide the opportunity
for such persons to receive Shares in lieu of cash compensation
3. WHO IS ELIGIBLE TO PARTICIPATE?
Members of the Board of Directors of the Company who are not employees of the
Company (provided such directors render bona fide services not in connection
with the offer and sale of securities in a capital-raising transaction) may
receive options under the Directors' Plan.
4. WHAT KIND OF OPTIONS ARE THERE?
The Company can grant only "Nonqualified Stock Options" or "NQSO's" under the
Directors' Plan. Under NQSO's, the director is required to recognize ordinary
income at the time of exercise for the difference between the exercise price and
the fair market value.
5. CAN A DIRECTOR HOLD MORE THAN ONE OPTION?
Yes.
6. IS THERE A LIMIT TO THE NUMBER OR SIZE OF OPTIONS A DIRECTOR CAN GET?
Options under the Directors' Plan are granted in accordance with the following
formula. Directors shall be granted an option for 25,000 shares upon election to
the Board of Directors. Upon re-election to the Board of Directors, each
Director shall be granted an option to purchase 8,000 shares of the Company's
common stock on the date of re-election, subject to proration if the Director's
initial grant was granted since the last annual meeting of stockholders.
7. HOW CAN DIRECTORS RECEIVE SHARES INSTEAD OF CASH COMPENSATION?
Directors may elect to receive all or part of their annual retainer and/or
meeting fees in stock. In order to do so, the Directors must make an irrevocable
election prior to rendering services for the current year. In exchange for
forgoing cash in lieu of stock, the amount of compensation given in stock shall
be increased by 10%.
8. WHEN CAN DIRECTORS EXERCISE OPTIONS?
Options granted under the Directors' Plan typically become exercisable at the
rate of 2% per month beginning the month the director joins the Board. The
exercisability of the options is set forth on the first page of the option grant
or option agreement.
9. HOW LONG DO THE DIRECTORS HAVE TO EXERCISE?
All options must be exercised within ten (10) years after the option grant date
for the Directors' Plan.
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
10.WHAT DETERMINES THE EXERCISE PRICE?
The exercise price of any Option is determined on the date the Option is
granted. It shall be not less than 100% of the closing price of the Company's
Common Stock on the NASD OTC Bulletin Board System on the date of grant.
11.HOW DOES A DIRECTOR EXERCISE OPTIONS?
To exercise an option, a director must deliver to the Stock Administration
Department of the Company a signed copy of the Stock Option Exercise Notice and
Agreement for the Directors' Plan. Payment for the shares may be made in cash
(by check from the Director or his designated broker) or, when authorized by the
Board at the time of the grant of the option under the Directors' Plan, shares
of fully paid Common Stock of the Company, a full recourse promissory note or
certain other forms of payment. The Company will then issue a certificate
representing the shares purchased.
12.ARE THERE ANY RESTRICTIONS ON THE RESALE OF SHARES A DIRECTOR PURCHASES?
The Directors' Plan does not impose any restrictions on the resale of shares of
Common Stock purchased. However, directors are, by definition, affiliates of the
Company, and resales are therefore required to be effected in accordance with
Rule 144. Directors are also subject to the short-swing profit restrictions
outlined in Rule 16-3 under the Securities Exchange Act of 1934. In addition,
there may be tax consequences associated with the sale or other disposition of
shares. See "Tax Information," below.
13.CAN DIRECTORS TRANSFER THEIR OPTIONS?
Generally, no. Options may not be transferred by a director except by will or
the laws of descent and distribution.
14.WHAT HAPPENS IF A DIRECTOR RESIGNS FROM THE BOARD OF THE COMPANY?
In the event that a director's relationship with the Company is terminated for
any reason other than death or disability, the director will have the right to
exercise any options, to the extent (and only to the extent) that the options
would have been exercisable upon the date of termination, within three (3)
months after the date of termination (or such shorter time period as may be
specified in the Grant), but in any event no later than the expiration date of
the Options.
In the event that a director's relationship with the Company is terminated
because of death or disability, options granted under the Directors' Plan may be
exercised to the extent (and only to the extent) that they would have been
exercisable on the date of termination, within twelve (12) months after the date
of termination (or such shorter time period as may be specified in the Grant),
but in any event no later than the expiration date of the Options.
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
15.IS THE OPTION AN EMPLOYMENT CONTRACT?
No. The option grant or agreement does not impose any obligation whatsoever upon
the director or the Company to continue a relationship with the Company. Such
relationship is terminable at will by the director or the Company.
16.DO DIRECTOR OPTIONS GET ADJUSTED FOR FUTURE EVENTS?
If the Company issues additional securities to raise more capital, no
adjustments will be made. However, if there is a stock split, stock dividend or
similar change in the Company's capital structure without receipt of
consideration by the Company, the number of shares subject to and the exercise
price of options issued under the Directors' Plan will be adjusted accordingly.
The number of shares reserved under the Directors' Plan will also be
proportionately adjusted.
17.WHAT HAPPENS IN A MERGER OR CONSOLIDATION ?
Upon a Change in Control (as defined below) of the Company, all options
theretofore granted and not previously exercisable shall become fully
exercisable to the same extent and in the same manner as if they had become
exercisable by passage of time in accordance with the provisions of the Plan
relating to periods of exercisability and to termination of employment. As used
in this section, a Change in Control of the Company means (i) a dissolution or
liquidation of the Company, (ii) a merger or consolidation whereby the Company
becomes a subsidiary of another corporation or, in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly owned
subsidiary, a reincorporation, or other transaction in which there is no
substantial change in the stockholders of the corporation and the Options
granted under this Plan are assumed by the successor corporation, which
assumption shall be binding on all optionees), (iii) the sale of substantially
all of the assets of the Company, or (iv) any other transaction which qualifies
as a "corporate transaction" under Section 424(a) of the Revenue Code wherein
the stockholders of the Company give up all of their equity interest in the
Company (except for the acquisition of all or substantially all of the
outstanding shares of the Company)..
18.WHAT HAPPENS TO UNEXERCISED, EXPIRED OPTIONS?
If an option granted pursuant to the Directors' Plan is terminated for any
reason without being exercised in whole or in part or if it expires according to
its terms, the shares thereby released from such option will become available
again under the Directors' Plan.
19.HOW ARE THE OPTIONS ADMINISTERED?
The Directors' Plan is administered by the Compensation Committee of the Board
of Directors of the Company (referred to, along with the Board of Directors, as
the "Board" as the context requires), whose address is the same as that of the
Company's principal executive offices. The Board designates the optionees,
exercise prices, exercise periods and dates of grants. The members of the
Compensation Committee receive a yearly fee; no additional compensation is
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 17
1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
paid for administering the Directors' Plan. The Company bears all expenses in
connection with administration of the Directors' Plan.
20.WHO IS ON THE COMPENSATION COMMITTEE?
The Compensation Committee currently consists solely of Mr. Mark Bruk, who is an
affiliate of the Company. Other than as disclosed herein (including disclosures
in material incorporated by reference herein), members of the Compensation
Committee that administer the Directors' Plan have no material relationships
with the Company, its employees or its affiliates.
21.WHO ELECTS THE BOARD AND THE COMPENSATION COMMITTEE?
The members of the full Board are elected each year at the Company's annual
meeting of stockholders and serve until the next annual meeting or until their
successors are elected and qualified. The stockholders may remove members of the
full Board from office by following certain voting procedures set forth in the
Company's by-laws and applicable corporate law. The members of the Compensation
Committee are chosen by the full Board and serve at its discretion.
22.WHAT IF THERE IS A DISPUTE CONCERNING THE DIRECTORS' PLAN?
Subject to the provisions of the Directors' Plan, the Compensation Committee has
the authority to construe and interpret any of the provisions of the Directors'
Plan or any options granted thereunder. Such interpretations are binding on the
Company and on the director. Members of the Board can be contacted by writing to
them at the Company's principal executive offices to the attention of the Stock
Administration department.
23.HOW CAN THE DIRECTORS' PLAN CHANGE?
Subject to the terms and conditions of the Directors' Plan and applicable law,
the Board may modify, extend or renew outstanding options. The Board may
terminate or amend the Directors' Plan in any respect provided it does not,
without stockholder approval, amend the Directors' Plan in any manner that
requires such stockholder approval pursuant to the Code or the Securities
Exchange Act of 1934, as amended (the "1934 Act") (including Rule 16b-3
promulgated thereunder). Currently, this means that the Board must have
stockholder approval among other things, to increase the number of shares
available under the Directors' Plan, to change the class of persons eligible to
receive options or to make a change that materially increases the benefits
accruing to Directors' Plan participants.
24.CAN I GET ADDITIONAL INFORMATION ABOUT THE DIRECTORS' PLAN AND OPTIONS ISSUED
UNDER THAT PLAN?
The full text of the Directors' Plan is attached. These questions and answers
are simply a guide to the principal provisions of the Directors' Plan and are
qualified in their entirety by the wording of those documents.
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
You may also contact the Company's Manager of Stock Administration with any
specific questions you may have regarding the Directors' Plan.
25.CAN DIRECTORS RECEIVE INFORMATION PROVIDED TO STOCKHOLDERS?
Yes, any optionee under the Directors' Plan can obtain material sent by the
Company to its stockholders by contacting the Stock Administration Department at
the Company's headquarters.
26.DOES THE COMPANY PROVIDE ANY INDEMNIFICATION TO DIRECTORS?
Yes, the Company indemnifies Directors to the extent permitted by law, the
Articles of Incorporation, and the Company's Bylaws. However, the Company has
been informed by the Securities and Exchange Commission that such
indemnification is against public policy as expressed in the 1933 Act and is
therefore unenforceable.
TAX INFORMATION
EACH PARTICIPANT SHOULD CONSULT A TAX ADVISOR CONCERNING FEDERAL (AND ANY STATE
AND LOCAL) INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE DIRECTORS' PLAN. THE
FOLLOWING DISCUSSION DOES NOT PURPORT TO DESCRIBE STATE OR LOCAL INCOME TAX
CONSEQUENCES OR TAX CONSEQUENCES FOR PARTICIPANTS IN COUNTRIES OTHER THAN THE
UNITED STATES.
The Directors' Plan is not qualified under Section 401(a) of the Code.
TAX TREATMENT OF THE OPTIONEE
Tax Consequences. Set forth below is a brief summary as of the date the form of
grant was adopted of some of the federal and Nevada tax consequences of exercise
of the Option and disposition of the Shares. Additional information is included
in the Plan, as amended. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
Exercise. Upon exercise, Optionee will recognize compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise Price.
Disposition of the Shares. For federal tax purposes, if the Shares are held for
more than twelve (12) months but not more than eighteen (18) months after the
date of transfer of the Shares pursuant to the exercise of a nonqualified stock
option, any gain realized on the disposition of the Shares will be treated as
mid-term capital gain. If the Shares are held for more than eighteen (18) months
any such gain will be treated as long-term capital gain. The maximum mid-term
capital gain rate is twenty-eight percent (28%) and the maximum long-term
capital gain rate is twenty percent (20%).
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1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
Exercises Within Six Months of a Section 16(b) Purchase. If an optionee
exercises an option more than six months from the date of grant but within six
months from the date of a prior purchase that does not constitute an exempt
purchase under Section 16(b) of the 1934 Act.
TAX TREATMENT OF THE COMPANY
The Company will be entitled to a deduction in connection with the exercise of
an NQSO by a domestic director to the extent that the optionee recognizes
ordinary income.
ERISA
The Company believes that the Directors' Plan is not subject to any of the
provisions of the Employee Retirement Income Security Act of 1974.
AVAILABILITY OF ADDITIONAL INFORMATION
The Company will file a Registration Statement with the SEC with respect to the
shares issuable pursuant to the exercise of options granted under the Directors'
Plan. The Registration Statement will incorporate by reference the following
documents:
(a) The Registrant's latest annual report filed pursuant to Section 13 or 15(d)
of the Exchange Act or the latest prospectus filed pursuant to Rule 424(b) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the
latest prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933
(the "1933 Act"), that contains audited financial statements for the
Registrant's latest fiscal year for which such statements have been filed.
(b)All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange
Act since the end of the fiscal year covered by the annual report or the
prospectus referred to in (a) above.
(c)The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement filed with the Commission under Section 12
of the Exchange Act, including any amendment or report filed for the purpose of
updating such description .
All documents subsequently filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such documents.
The Company will provide, upon written or oral request and without charge: (1) a
copy of any document incorporated by reference in the Registration Statement
(not including exhibits to such document unless such exhibits are specifically
incorporated by reference into such document); (2) a copy of the Company's most
recent Annual Report to Shareholders (or such alternative document as Rule
428(b)(2) under the 1933 Act permits); (3) a copy of all reports, proxy
statements and other communications distributed by the Company to its
stockholders generally;
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 20
1998 DIRECTORS' STOCK OPTION PLAN
<PAGE>
and (4) a copy of all documents that constitute a part of the prospectus
required to be delivered to each Plan participant. Please direct all requests to
the Manager of Stock Administration.
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EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 21
1998 DIRECTORS' STOCK OPTION PLAN
EXHIBIT 6.3
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
AS ADOPTED BY THE BOARD OF DIRECTORS ON JUNE 3, 1998
AS APPROVED BY THE STOCKHOLDERS ON JUNE 3, 1998
1. Establishment of Plan. EDUVERSE Accelerated Learning Systems, Inc., (the
"Company") proposes to grant options for purchase of the Company's common Stock
to eligible employees of the Company and Subsidiaries (as hereinafter defined)
pursuant to this Employee Stock Purchase Plan (the "Plan"). For purposes of this
Plan, "parent corporation" and "Subsidiary" (collectively, "Subsidiaries") shall
have the same meanings as "parent corporation" and "subsidiary corporation" in
Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code"). The Company intends that the Plan shall qualify as an
"employee stock purchase plan" under Section 423 of the Code (including any
amendments or replacements of such section), and the Plan shall be so construed.
Any term not expressly defined in the Plan but defined for purposes of Section
423 of the Code shall have the same definition herein. A total of 500,000 shares
of Common Stock are reserved for issuance under the Plan. Such number shall be
subject to adjustments effected in accordance with Section 14 of the Plan.
2. Purposes. The purpose of the Plan is to provide employees of the Company and
Subsidiaries designated by the Board of Directors as eligible to participate in
the Plan with a convenient means to acquire an equity interest in the Company
through payroll deductions, to enhance such employees' sense of participation in
the affairs of the Company and Subsidiaries, and to provide an incentive for
continued employment.
3. Administration. This Plan may be administered by the Board or a committee
appointed by the Board (the "Committee"). Until the earlier of September 1, 1998
or the date that the Board resolves to conform to the amended Rules promulgated
by the SEC effective May 1, 1998 pursuant to Section 16 of the Exchange Act, the
Plan shall be administered by the Board or a committee appointed by the Board
consisting of not less than two (2) persons (who are members of the Board), each
of whom is a disinterested director. As used in this Plan, references to the
"Committee" shall mean either the committee appointed by the Board to administer
this Plan or the Board if no committee has been established. Subject to the
provisions of the Plan and the limitations of Section 423 of the Code or any
successor provision in the Code, all questions of interpretation or application
of the Plan shall be determined by the Committee and its decisions shall be
final and binding upon all participants. Members of the Committee shall receive
no compensation for their services in connection with the administration of the
Plan, other than standard fees as established from time to time by the Board of
Directors of the Company for services rendered by Board members serving on Board
committees. All expenses incurred in connection with the administration of the
Plan shall be paid by the Company.
4. Eligibility. Any employee of the Company or the Subsidiaries is eligible to
participate in an Offering Period (as hereinafter defined) under the Plan except
the following:
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1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
(a) employees who are not employed by the Company or Subsidiaries on the
fifteenth (15th) day of the month before the beginning of such Offering Period;
(b) employees who are customarily employed for less than 20 hours per week;
(c) employees who are customarily employed for less than five (5) months in a
calendar year
(d) employees who, together with any other person whose stock would be
attributed to such employee pursuant to Section 424(d) of the Code, own stock or
hold options to purchase stock or who, as a result of being granted an option
under the Plan with respect to such Offering Period, would own stock or hold
options to purchase stock possessing five (5) percent or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Subsidiaries; and
(e) employees who would, by virtue of their participation in such Offering
Period, be participating simultaneously in more than one Offering Period under
the Plan.
5. Offering Dates. The Offering Periods of the Plan (the "Offering Period")
shall be of twelve (12) months duration commencing on the first business day of
January and July of each year and ending on the last business day of December
and June, respectively, hereafter. The first Offering Period shall commence on
July 1, 1998. The first day of each Offering Period is referred to as the
"Offering Date". Each Offering Period shall consist of two (2) six-month
purchase periods (individually, a "Purchase Period"), during which payroll
deductions of the participant are accumulated under this Plan. Each such
six-month Purchase Period shall commence on the first business day of January
and July of an Offering Period and shall end on the last business day of the
following June and December, respectively. The last business day of each
Purchase Period is hereinafter referred to as the Purchase Date. The Board of
Directors of the Company shall have the power to change the duration of Offering
Periods or Purchase Periods without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period or Purchase Period, as the case may be, to be affected.
6. Participation in the Plan. Eligible employees may become participants in an
Offering Period under the Plan on the first Offering Date after satisfying the
eligibility requirements by delivering to the Company's or Subsidiary's
(whichever employs such employee) payroll department (the "payroll department")
not later than the 15th day of the month before such Offering Date unless a
later time for filing the subscription agreement is set by the Board for all
eligible employees with respect to a given Offering Period a subscription
agreement authorizing payroll deductions. An eligible employee who does not
deliver a subscription agreement to the payroll department by such date after
becoming eligible to participate in such Offering Period under the Plan shall
not participate in that Offering Period or any subsequent Offering Period unless
such employee enrolls in the Plan by filing the subscription agreement with the
payroll department not later than the 15th day of the month preceding a
subsequent Offering Date. Once an employee becomes a participant in an Offering
Period, such employee will automatically participate in the Offering Period
commencing immediately following the last day of the prior Offering Period
unless the employee withdraws from the Plan or terminates further participation
in the Offering Period as set forth in Section 11 below. Such participant is not
required to file
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1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
any additional subscription agreements in order to continue participation in the
Plan. Any participant whose option expires and who has not withdrawn from the
Plan pursuant to Section 11 below will automatically be re-enrolled in the Plan
and granted a new option on the Offering Date of the next Offering Period. A
participant in the Plan may participate in only one Offering Period at any time.
7. Grant of Option on Enrollment. Enrollment by an eligible employee in the Plan
with respect to an Offering Period will constitute the grant (as of the Offering
Date) by the Company to such employee of an option to purchase on each Purchase
Date up to that number of shares of Common Stock of the Company determined by
dividing the amount accumulated in such employee's payroll deduction account
during such Purchase Period by the lower of (i) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Offering Date
(the "Entry Price") or (ii) eighty-five percent (85%) of the fair market value
of a share of the company's Common Stock on the Purchase Date, provided,
however, that the number of shares of the Company's Common Stock subject to any
option granted pursuant to this Plan shall not exceed the lesser of (a) the
maximum number of shares set by the Board pursuant to Section 10(c) below with
respect to all Purchase Periods within the applicable Offering Period or
Purchase Period, or (b) two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date as the denominator.
Fair market value of a share of the Company's Common Stock shall be determined
as provided in Section 8 hereof.
8. Purchase Price. The purchase price per share at which a share of Common Stock
will be sold in any Offering Period shall be eighty-five percent (85%) of the
lesser of:
(a) the fair market value on the Offering Date or
(b) the fair market value on the Purchase Date.
For purposes of the Plan, the term "fair market value" on a given date shall
mean the closing bid from the previous day's trading of a share of the Company's
Common Stock as reported on the NASD OTC Bulletin Board System.
9. Payment of Purchase Price; Changes in Payroll Deductions; Issuance of Shares.
(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Purchase Period. The deductions are made as a
percentage of the employee's compensation in one percent (1%) increments not
less than two percent (2%) nor greater than ten percent (10%). Compensation
shall mean all W-2 compensation, including, but not limited to base salary,
wages, commissions, overtime, shift premiums and bonuses, plus draws against
commissions; provided, however, that for purposes of determining a participant's
compensation, any election by such participant to reduce his or her regular cash
remuneration under Sections 125 or 401(k) of the Code shall be treated as if the
participant did not make such election. Payroll deductions shall commence with
the first pay period following the Offering Date and shall continue to the end
of the Offering Period unless sooner altered or terminated as provided in the
Plan.
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(b) A participant may lower (but not increase) the rate of payroll deductions
during a Purchase Period by filing with the payroll department a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing more than 15 days after the
payroll department's receipt of the authorization and shall continue for the
remainder of the Offering Period unless changed as described below. Such change
in the rate of payroll deductions may be made at any time during an Offering
Period, but not more than one change may be made effective during any Purchase
Period. A participant may increase or lower the rate of payroll deductions for
any subsequent Purchase Period by filing with the payroll department a new
authorization for payroll deductions not later than the 15th day of the month
before the beginning of such Purchase Period.
(c) All payroll deductions made for a participant are credited to his or her
account under the Plan and are deposited with the general funds of the Company;
no interest accrues on the payroll deductions. All payroll deductions received
or held by the Company may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
(d) On each Purchase Date, as long as the Plan remains in effect and provided
that the participant has not submitted a signed and completed withdrawal form
before that date which notifies the Company that the participant wishes to
withdraw from that Offering Period under the Plan and have all payroll
deductions accumulated in the account maintained on behalf of the participant as
of that date returned to the participant, the Company shall apply the funds then
in the participant's account to the purchase of whole shares of Common Stock
reserved under the option granted to such participant with respect to the
Offering Period to the extent that such option is exercisable on the Purchase
Date. The purchase price per share shall be as specified in Section 8 of the
Plan. Any cash remaining in a participant's account after such purchase of
shares shall be refunded to such participant in cash; provided, however, that
any amount remaining in participant's account on a Purchase Date which is less
than the amount necessary to purchase a full share of Common Stock of the
Company shall be carried forward, without interest, into the next Purchase
Period or Offering Period, as the case may be. In the event that the Plan has
been oversubscribed, all funds not used to purchase shares on the Purchase Date
shall be returned to the participant. No Common Stock shall be purchased on a
Purchase Date on behalf of any employee whose participation in the Plan has
terminated prior to such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the Company shall
arrange the delivery to each participant, as appropriate, of a certificate
representing the shares purchased upon exercise of his option; provided that the
Board may deliver certificates to a broker or brokers that hold such
certificates in street name for the benefit of each such participant.
(f) During a participant's lifetime, such participant's option to purchase
shares hereunder is exercisable only by him or her. The participant will have no
interest or voting right in shares covered by his or her option until such
option has been exercised. Shares to be delivered to a participant under the
Plan will be registered in the name of the participant or in the name of the
participant and his or her spouse.
- --------------------------------------------------------------------------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 4
1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
10. Limitations on Shares to be Purchased.
(a) No employee shall be entitled to purchase stock under the Plan at a rate
which, when aggregated with his or her rights to purchase stock under all other
employee stock purchase plans of the Company or any Subsidiary, exceeds
twenty-five thousand dollars ($25,000) in fair market value, determined as of
the Offering Date (or such other limit as may be imposed by the Code) for each
calendar year in which the employee participates in the Plan.
(b) No more than two hundred percent (200%) of the number of shares determined
by using eighty-five percent (85%) of the fair market value of a share of the
Company's Common Stock on the Offering Date as the denominator may be purchased
by a participant on any single Purchase Date.
(c) No employee shall be entitled to purchase more than the Maximum Share Amount
(as defined below) on any single Purchase Date. Not less than thirty days prior
to the commencement of any Purchase Period, the Board may, in its sole
discretion, set a maximum number of shares which may be purchased by any
employee at any single Purchase Date (hereinafter the "Maximum Share Amount").
In no event shall the Maximum Share Amount exceed the amounts permitted under
Section 10(b) above. If a new Maximum Share Amount is set, then all participants
must be notified of such Maximum Share Amount not less than fifteen (15) days
prior to the commencement of the next Purchase Period. Once the Maximum Share
Amount is set, it shall continue to apply with respect to all succeeding
Purchase Dates and Purchase Periods unless revised by the Board as set forth
above.
(d) If the number of shares to be purchased on a Purchase Date by all employees
participating in the Plan exceeds the number of shares then available for
issuance under the Plan, the Company shall make a pro rata allocation of the
remaining shares in as uniform a manner as shall be practicable and as the Board
shall determine to be equitable. In such event, the Company shall give written
notice of such reduction of the number of shares to be purchased under a
participant's option to each employee affected thereby.
(e) Any payroll deductions accumulated in a participant's account which are not
used to purchase stock due to the limitations in this Section 10 shall be
returned to the participant as soon as practicable after the end of the Offering
Period.
11.Withdrawal.
(a) Each participant may withdraw from an Offering Period under the Plan by
signing and delivering to the payroll department notice on a form provided for
such purpose. Such withdrawal may be elected at any time at least fifteen (15)
days prior to the end of an Offering Period.
(b) Upon withdrawal from the Plan, the accumulated payroll deductions shall be
returned to the withdrawn employee and his or her interest in the Plan shall
terminate. In the event an employee voluntarily elects to withdraw from the
Plan, he or she may not resume his or her participation in the Plan during the
same Offering Period, but he or she may participate in any Offering Period
- --------------------------------------------------------------------------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 5
1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
under the Plan which commences on a date subsequent to such withdrawal by filing
a new authorization for payroll deductions in the same manner as set forth above
for initial participation in the Plan. However, if the participant is an
"insider" for purposes of Rule 16(b), he or she shall not be eligible to
participate in any Offering Period under the Plan which commences less than six
(6) months from the date of withdrawal from the Plan.
(c) A participant may participate in the current Purchase Period under an
Offering Period (the "Current Offering Period") and enroll in the Offering
Period commencing after such Purchase Period (the "New Offering Period") by (i)
withdrawing from participating in the Current Offering Period effective as of
the last day of a Purchase Period within that Offering Period and (ii) enrolling
in the New Offering Period. Such withdrawal and enrollment shall be effected by
filing with the payroll department at least fifteen (15) days prior to the end
of a Purchase Period such form or forms as are provided for such purposes.
12. Termination of Employment. Termination of a participant's employment for any
reason, including retirement or death or the failure of a participant to remain
an eligible employee, terminates his or her participation in the Plan
immediately. In such event, the payroll deductions credited to the participant's
account will be returned to him or her or, in the case of his or her death, to
his or her legal representative. For this purpose, an employee will not be
deemed to have terminated employment or failed to remain in the continuous
employ of the Company in the case of sick leave, military leave, or any other
leave of absence approved by the Board of Directors of the Company; provided
that such leave is for a period of not more than ninety (90) days or
re-employment upon the expiration of such leave is guaranteed by contract or
statute.
13. Return of Payroll Deductions. In the event an employee's interest in the
Plan is terminated by withdrawal, termination of employment or otherwise, or in
the event the Plan is terminated by the Board, the Company shall promptly
deliver to the employee all payroll deductions credited to his account. No
interest shall accrue on the payroll deductions of a participant in the Plan.
14. Capital Changes. Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each option under the
Plan which has not yet been exercised and the number of shares of Common Stock
which have been authorized for issuance under the Plan but have not yet been
placed under option (collectively, the "Reserves"), as well as the price per
share of Common Stock covered by each option under the Plan which has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split or
the payment of a stock dividend (but only on the Common Stock) or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration". Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
- --------------------------------------------------------------------------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 6
1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under the Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the optioned
stock, including shares which would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each option under
the Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock. If the Board makes an
option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of twenty (20) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion, also
make provision for adjusting the Reserves, as well as the price per share of
Common Stock covered by each outstanding option, in the event that the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of shares of its outstanding common Stock, and in
the event of the Company being consolidated with or merged into any other
corporation.
15. Nonassignability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 22 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect.
16. Reports. Individual accounts will be maintained for each participant in the
Plan. Each participant shall receive promptly after the end of each Purchase
Period a report of his account setting forth the total payroll deductions
accumulated, the number of shares purchased, the per share price thereof and the
remaining cash balance, if any, carried forward to the next Purchase Period or
Offering Period, as the case may be.
17. Notice of Disposition. Each participant shall notify the Company if the
participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within twelve (12) months from the Purchase Date on which such
shares were purchased (the "Notice Period"). Unless such participant is
disposing of any of such shares during the Notice Period, such participant shall
keep the certificates representing such shares in his or her name (and not in
the name of a nominee) during the Notice Period. The Company may, at any time
during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to the Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on certificates.
- --------------------------------------------------------------------------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 7
1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
18. No Rights to Continued Employment. Neither this Plan nor the grant of any
option hereunder shall confer any right on any employee to remain in the employ
of the Company or any Subsidiary or restrict the right of the Company or any
Subsidiary to terminate such employee's employment.
19. Equal Rights and Privileges. All eligible employees shall have equal rights
and privileges with respect to the Plan so that the Plan qualifies as an
"employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
the Plan which is inconsistent with Section 423 or any successor provision of
the Code shall without further act or amendment by the Company or the Board be
reformed to comply with the requirements of Section 423. This Section 19 shall
take precedence over all other provisions in the Plan.
20. Notices. All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Company at the location, or by the
person, designated by the Company for the receipt thereof.
21. Stockholder Approval of Amendments. Any required approval of the
stockholders of the Company for an amendment shall be solicited at or prior to
the first annual meeting of stockholders held subsequent to the grant of an
option under the Plan as then amended to an officer or director of the Company.
If such stockholder approval is obtained at a duly held stockholders' meeting,
it must be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the company represented and voting at the meeting, or if
such stockholder approval is obtained by written consent, it must be obtained by
the majority of the outstanding shares of the Company; provided, however, that
approval at a meeting or by written consent may be obtained by a lesser degree
of stockholder approval if the Board determines, in its discretion after
consultation with the Company's legal counsel, that such lesser degree of
stockholder approval will comply with all applicable laws and will not adversely
affect the qualification of the Plan under Section 423 of the Code or Rule 16b-3
promulgated under the Exchange Act ("Rule 16b-3").
22. Designation of Beneficiary
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such shares or cash
to the executor or administrator of the estate of the participant, or if
- --------------------------------------------------------------------------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 8
1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
23. Conditions Upon Issuance of Shares; Limitation on Sale of Shares. Shares
shall not be issued with respect to an option unless the exercise of such option
and the issuance and delivery of such shares pursuant thereto shall comply with
all applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
24. Applicable Law. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of Nevada.
25. Amendment or Termination of the Plan. This Plan shall be effective on the
day after the effective date of the Company's Registration Statement filed with
the Securities Exchange Commission under the Securities Act of 1933, as amended,
with respect to the shares issuable under the Plan (the "Effective Date"),
subject to approval by the stockholders of the Company within twelve (12) months
after the date the Plan is adopted by the Board of Directors of the company and
the Plan shall continue until the earlier to occur of termination by the Board,
issuance of all of the shares of Common Stock reserved for issuance under the
Plan, or ten (10) years from the adoption of the Plan by the Board. The Board of
Directors of the Company may at any time amend or terminate the Plan, except
that any such termination cannot affect options previously granted under the
Plan, nor may any amendment make any change in an option previously granted
which would adversely affect the right of any participant, nor may any amendment
be made without approval of the stockholders of the Company obtained in
accordance with Section 21 hereof within 12 months of the adoption of such
amendment (or earlier if required by Section 21) if such amendment would:
(a) Increase the number of shares that may be issued under the Plan;
(b) Change the designation of the employees (or class of employees) eligible for
participation in the Plan or;
(c) Constitute an amendment for which stockholder approval is required in order
to comply with Rule 16b-3 (or any successor rule) of the Exchange Act.
- --------------------------------------------------------------------------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 9
1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN ACTION FORM
ENROLLMENT/CHANGE/WITHDRAWAL AGREEMENT
- --------------------------------------------------------------------------------
SECTION 1:
Action Complete Sections
------ -----------------
[ ] New Enrollment 2, 3, 4, 6, 8
[ ] Payroll Deduction Change 2, 4, 8
[ ] Withdrawal 2, 5, 8
[ ] Beneficiary Change 2, 6, 8
- --------------------------------------------------------------------------------
SECTION 2: PERSONAL INFORMATION
NAME: --------------------------------------------------------------
SS#: --------------------------------------------------------------
ADDRESS: ----------------------------------------------------------
LOCATION: ---------------------------------------------------------
- --------------------------------------------------------------------------------
SECTION 3: NEW ENROLLMENT
I hereby elect to participate in the EDUVERSE Employee Stock Purchase
Plan (the "Plan") and I agree to be bound by its terms. Stock
purchased under the Plan should be registered in my name
-------------------- or in my name together with the following name:
---------------------------------------------------------------------
If spouse, circle one: Joint Tenancy/Community Property.
- --------------------------------------------------------------------------------
SECTION 4: PAYROLL DEDUCTION AUTHORIZATION
I hereby authorize payroll deductions from each paycheck in that
percentage of my compensation as shown below, in accordance with the
Plan.
Amount to be Deducted (Circle One):
0% 2% 3% 4% 5% 6% 7% 8% 9% 10%
- --------------------------------------------------------------------------------
SECTION 5: WITHDRAWAL
Effective: _______/_______/_______ (Month/Day/Year) I will cease
participating in the Plan, all monies contributed to the Plan thus far
will be returned, and I may not re-enroll until the next Offering
Period.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 10
1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
- --------------------------------------------------------------------------------
SECTION 6: BENEFICIARY
In the event of my death, I hereby designate the following person(s) as my
beneficiary(ies) to receive all payments and/or stock due me under the Employee
Stock Purchase Plan:
Primary Beneficiary: ----------------- %:---- Relationship:------------------
Primary Beneficiary: ----------------- %:---- Relationship:------------------
Note: If more than one primary beneficiary listed, please indicate % allocated
to each.
Secondary Beneficiary: --------------------- Relationship:------------------
If primary beneficiary is other than spouse, spouse must consent to such
beneficiary designation.
Signature of Spouse: -------------------------------- Date:---------------
- --------------------------------------------------------------------------------
SECTION 7: ACCUMULATION AND SUCCESSIVE
ACCUMULATION I understand that my payroll deductions will be accumulated for the
automatic purchase of shares of Common Stock at the end of each Purchase Period.
The purchase price per share will be the lower of (i) 85% of the fair market
value on the first day of an Offering Period or (ii) 85% of the fair market
value on the last day of an Exercise Period.
SUCCESSIVE I understand that this enrollment will be effective for each
subsequent Offering Period unless I withdraw from the PERIODS Plan or otherwise
become ineligible to participate in the Plan. In the event, however, that the
Offering Price for the new Offering Period for which I am not enrolled is less
than the Offering Price for the Offering Period for which I am currently
enrolled, I understand that I will automatically be withdrawn from the current
Offering Period and re-enrolled in the new Offering Period unless I notify the
Company to the contrary.
REVIEW OF PROSPECTUS I have received a copy of the Company's most recent
prospectus which describes the Plan. I understand that my participation is in
all respects subject to the terms of the Plan.
- --------------------------------------------------------------------------------
SECTION 8: AUTHORIZATION
Signature of Employee: -------------------------------- Date:---------------
- --------------------------------------------------------------------------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC. Page 11
1998 EMPLOYEE STOCK PURCHASE PLAN
EXHIBIT 6.4
Employee#: ----------
Grant#: -------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
INCENTIVE STOCK OPTION GRANT
EDUVERSE Accelerated Learning Systems, Inc., a Nevada corporation, (the
"Company") hereby grants to the optionee named below (the "Optionee"), an
incentive stock option (the "Option") under the Company's 1998 Stock Option
Plan, as amended (the "Plan"), to purchase the total number of shares set forth
below of common stock of the Company (the "Option Shares") at the exercise price
per share set forth below (the "Exercise Price"). The option is subject to all
the terms and conditions of the Incentive Stock Option Grant including the terms
and conditions contained in the attached Appendix A (the "Grant") and the Plan,
the provisions of which are incorporated herein by reference. The principal
features of the option are as follows:
Optionee: -----------------------------------------------------
Address: -----------------------------------------------------
Number of Option Shares: -----------------------------------------------------
Exercise Price per Share: -----------------------------------------------------
Date of Grant: -----------------------------------------------------
Expiration Date: -----------------------------------------------------
Post Termination Exercise: -----------------------------------------------------
Vest Start Date: -----------------------------------------------------
Subject to the terms and conditions of the Plan and this Grant, the Option shall
vest 2% per month for 50 months on the 1st day of each calendar month until the
earlier of (1) the date the option becomes fully vested or (2) the date the
optionee ceases to be employed. An optionee shall be deemed to have worked a
calendar month if optionee has worked any portion of that month. Vesting will be
suspended during any unpaid leave of absence. Optionee may first exercise the
Option with respect to the vested Option Shares on the first day of the 7th
month from Vest Start Date. Optionee may then exercise the Option with respect
to vested Option Shares at any time until expiration or termination.
PLEASE READ ALL OF APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS
OF THE OPTION.
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
Per: -----------------------------------
Mark E. Bruk, President & CEO
<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
INCENTIVE STOCK OPTION GRANT
ACCEPTANCE
Optionee hereby acknowledges that a copy of the Plan, as amended, is available
upon request from the Administration department and can also be accessed
electronically. Optionee represents that Optionee has read and understands the
terms and conditions thereof, and accepts the Option subject to all the terms
and conditions of the Plan and the Grant.
OPTIONEE ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE
OF THE OPTION AND THAT OPTIONEE SHOULD CONSULT A TAX ADVISER PRIOR TO SUCH
EXERCISE.
- ----------------------------------
Optionee
<PAGE>
Employee#: ----------
Grant#: -------------
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION GRANT
EDUVERSE Accelerated Learning Systems, Inc., a Nevada corporation, (the
"Company") hereby grants to the optionee named below (the "Optionee"), a
non-qualified stock option (the "Option") under the Company's 1998 Stock Option
Plan, as amended (the "Plan"), to purchase the total number of shares set forth
below of common stock of the Company (the "Option Shares") at the exercise price
per share set forth below (the "Exercise Price"). The option is subject to all
the terms and conditions of the Nonqualified Stock Option Grant including the
terms and conditions contained in the attached Appendix A (the "Grant") and the
Plan, the provisions of which are incorporated herein by reference. The
principal features of the option are as follows:
Optionee: -----------------------------------------------------
Address: -----------------------------------------------------
Number of Option Shares: -----------------------------------------------------
Exercise Price per Share: -----------------------------------------------------
Date of Grant: -----------------------------------------------------
Expiration Date: -----------------------------------------------------
Vest Start Date: -----------------------------------------------------
Subject to the terms and conditions of the Plan and this Grant, the Option shall
vest 2% per month for 50 months on the 1st day of each calendar month until the
earlier of (1) the date the option becomes fully vested or (2) the date the
optionee ceases to be employed. An optionee shall be deemed to have worked a
calendar month if optionee has worked any portion of that month. Vesting will be
suspended during any unpaid leave of absence. Optionee may first exercise the
Option with respect to the vested Option Shares on the first day of the 7th
month from Vest Start Date. Optionee may then exercise the Option with respect
to vested Option Shares at any time until expiration or termination.
PLEASE READ ALL OF APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS
OF THE OPTION.
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
Per: -----------------------------------
Mark E. Bruk, President & CEO
<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION GRANT
ACCEPTANCE
Optionee hereby acknowledges that a copy of the Plan, as amended, is available
upon request from the Administration department and can also be accessed
electronically. Optionee represents that Optionee has read and understands the
terms and conditions thereof, and accepts the Option subject to all the terms
and conditions of the Plan and the Grant.
OPTIONEE ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE
OF THE OPTION AND THAT OPTIONEE SHOULD CONSULT A TAX ADVISER PRIOR TO SUCH
EXERCISE.
- ----------------------------------
Optionee
<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION TERMS AND CONDITIONS
UNDER THE 1998 STOCK OPTION PLAN, AS AMENDED
1. Form of Option Grant. Each Option granted under the Plan shall be evidenced
by a written Stock Option Grant (the "Grant") in such form (which need not be
the same for each Optionee) as the Committee shall from time to time approve,
which Grant shall comply with and be subject to the terms and conditions of the
Plan.
2. Date of Grant. The date of grant of the Option shall be the date on which the
Committee makes the determination to grant such Option unless otherwise
specified by the committee. The Grant representing the Option will be delivered
to Optionee within a reasonable time after the granting of the Option. Copies of
the Plan will be available electronically and can also be obtained by contacting
the Stock Administration Department.
3. Exercise Price. The exercise price of the Option shall be determined by the
Committee on the date the Option is granted; provided that the exercise price of
the Option shall be not less than 100% of the Fair Market Value of the Shares on
the date the Option is granted.
4. Exercise Period. Options shall be exercisable within the times or upon the
events determined by the Committee as set forth in the Grant; provided, however,
that no Option shall be exercisable after the expiration of ten (10) years from
the date the Option is granted.
5. Restrictions on Exercise. Exercise of the Option is subject to the following
limitations:
(a) The Option may not be exercised until the Plan has been approved by the
stockholders of the Company as set forth in the Plan.
(b) The Option may not be exercised unless such exercise is in compliance with
the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended,
all applicable state securities laws, and the requirements of any stock exchange
or national market system on which the Company's Common Stock may be listed, as
they are in effect on the date of exercise.
(c) The Option may be exercised even if there is outstanding, within the meaning
of Section 422A(c)(7) of the Internal Revenue Code of 1954, as amended (the
"Code"), any incentive stock option to purchase stock of the Company or its
Parent or Subsidiary (as defined in the plan) that was granted to the Optionee
before the grant of the Option.
6. Termination of Option.
(a) Except as provided in this section, the Option shall terminate in whole if
Optionee ceases to be a Staff Member of the Company and may not be exercised to
the extent terminated. If the Optionee ceases to be a Staff Member of the
Company for any reason except by death or disability, the Option, to the extent
it is exercisable on the date on which the Optionee ceases to be a Staff Member
(the "Termination Date"), may be exercised by the Optionee within three (3)
<PAGE>
months after the Termination Date (or such shorter time period as may be
specified in the Grant), but in no event later than the Expiration Date.
(b) Except as provided in this section, the Option shall terminate in part, if
Optionee ceases to be a full time Staff Member of the Company but remains a
Staff Member of the Company, and may not be exercised to the extent terminated.
If the Optionee ceases to be a full time Staff Member of the Company for any
reason other than disability, the Option, to the extent it is exercisable on the
date on which the Optionee ceases to be a full time Staff Member, may be
exercised by the Optionee within three (3) months after the Termination Date (or
such shorter time period as may be specified in the Grant), but in no event
later than the Expiration Date.
(i) An Optionee shall be deemed to be a "full time" Staff Member if Optionee
works not less than 40 hours per week, unless prevailed upon by local law.
(ii) Except as to the number of Option Shares for which the Option terminates in
accordance with subsection (b)(iii) below, the Option shall continue to vest
with respect to Option Shares in equal monthly amounts from the Termination Date
to the time the Optionee has been continuously employed 50 calendar months from
the vest start date set forth in the Grant.
(iii) The number of Option Shares for which the Option shall terminate in
accordance with this Paragraph will be determined by multiplying the total
number of Option Shares by the following fraction:
40 minus [number of hours regularly worked per week]
----------------------------------------------------
40
(c) If the Optionee's employment with the Company is terminated because of the
death of the Optionee or disability of the Optionee within the meaning of
Section 22(e)(3) of the Code, the Option, to the extent that it is exercisable
on the Termination Date, may be exercised by the Optionee (or the Optionee's
legal representative) at any time prior to the expiration of twelve (12) months
after the Termination Date (or such shorter time period as may be specified in
the Grant), but in any event no later than the Expiration Date.
(d) Nothing in the Plan or the Grant shall confer on Optionee any right to
continue in the employ of, or other relationship with, the Company or any
Parent, Subsidiary or Affiliate of the Company or limit in any way the right of
the Company or any Parent, Subsidiary or Affiliate of the Company to terminate
Optionee's employment or other relationship at any time, with or without cause.
7. Manner of Exercise.
(a) The Option shall be exercisable by delivery to the Company of written notice
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Board of Directors of the Company, which shall set forth the
Optionee's election to exercise the Option, the number of Option Shares being
purchased, and such other representations and agreements as to the Optionee's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws.
<PAGE>
(b) Such notice shall be accompanied by full payment of the Exercise Price (i)
in cash; (ii) by tender of shares of Common Stock of the Company having a fair
market value equal to the Exercise Price; or (iii) a combination of the
foregoing, provided that a portion of the exercise price equal to the par value
of the Shares, if any, must be paid in cash or other legal consideration.
(c) Prior to the issuance of the Option Shares upon exercise of the Option, the
Optionee must pay or make adequate provision for any applicable federal, state,
or provincial withholding obligations of the Company.
(d) Provided that such notice and payment are in form and substance satisfactory
to counsel for the Company, the Company shall issue the Option Shares registered
in the name of the Optionee or the Optionee's legal representative.
8. Compliance with Laws and Regulations. The issuance and transfer of Option
Shares shall be subject to compliance by the Company and the Optionee with all
applicable requirements of federal and state laws and with all applicable
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of such issuance or transfer.
9. Nontransferability of Option. The Option may not be transferred in any manner
other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the Optionee only by the Optionee. The terms of
the Option shall be binding upon the executors, administrators, successors and
assigns of the Optionee.
10. Tax Consequences. Set forth below is a brief summary as of the date the form
of grant was adopted of some of the federal and Nevada tax consequences of
exercise of the Option and disposition of the Shares. Additional information is
included in the Plan, as amended. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
(a) Exercise. Upon exercise, Optionee will recognize compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exercise Price. The
Company may be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(b) Disposition of the Shares. For federal tax purposes, if the Shares are held
for more than twelve (12) months but not more than eighteen (18) months after
the date of transfer of the Shares pursuant to the exercise of a nonqualified
stock option, any gain realized on the disposition of the Shares will be treated
as mid-term capital gain. If the Shares are held for more than eighteen (18)
months any such gain will be treated as long-term capital gain. The maximum
mid-term capital gain rate is twenty-eight percent (28%) and the maximum
long-term capital gain rate is twenty percent (20%).
<PAGE>
11. Interpretation. Any dispute regarding the interpretation of this agreement
shall be submitted by Optionee or the Company forthwith to the Company's Board
of Directors or the committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The resolution of such a
dispute by the Board or committee shall be final and binding on the Company and
on Optionee.
12. Entire Agreement. The Exercise Notice and Agreement attached as Exhibit A
and the Plan available upon request from the Stock Administration department and
also accessible electronically is incorporated herein by reference. The Grant,
the Plan and the Exercise Notice and Agreement constitute the entire agreement
of the parties and supersede all prior undertakings and agreements with respect
to the subject matter hereof.
<PAGE>
EXHIBIT A TO THE GRANT AGREEMENT
STOCK OPTION EXERCISE NOTICE AND AGREEMENT
EDUVERSE Accelerated Learning Systems, Inc.
Suite 209, 1135 Terminal Way
Reno, Nevada 89502
Attention: Stock Administrator
1. Exercise of Option. The undersigned ("Optionee") hereby elects to exercise
Optionee's option to purchase -------- shares of the Common Stock (the "Option
Shares") of EDUVERSE Accelerated Learning Systems, Inc. (the "Company") under
and pursuant to the Company's 1998 Stock Option Plan (the "Plan") and the stock
option grant numbered #------- and dated --------------- (the "Grant"). The
terms and conditions of the Plan and the Grant are hereby incorporated into and
made a part of this Agreement by this reference.
2. Representations of Optionee. Optionee hereby acknowledges, represents and
warrants that Optionee has received, read and understood the Plan and the Grant
and will abide by and be bound by their terms and conditions.
3. Compliance with Securities Laws. Optionee understands and acknowledges that
the exercise of any rights to purchase any Option Shares is expressly
conditioned upon compliance with the Securities Act of 1933, the Exchange Act of
1934, the requirements of any stock exchange or national market system on which
the Company's stock may be listed, and all applicable state securities laws.
Optionee agrees to cooperate with the Company to ensure compliance with such
laws.
4. Stop Transfer Notices. Optionee understands and agrees that the Company may
issue appropriate "stop transfer" instructions to its transfer agent to ensure
compliance with the restrictions on transfer.
5. Tax Consequences. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX
CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE OPTION
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE OPTION SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF OPTIONEE IS AN INSIDER SUBJECT TO SECTION
16(B) OF THE EXCHANGE ACT, OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH
OPTIONEE'S TAX ADVISERS CONCERNING THE ADVISABILITY OF FILING AN 83(B) ELECTION
WITH THE INTERNAL REVENUE SERVICE.
<PAGE>
6. Delivery of Payment. Optionee herewith delivers to the Company the aggregate
purchase price of the Option Shares that Optionee has elected to purchase and
has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
7. Entire Agreement. This Exercise Agreement, the Plan and the Grant constitute
the entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by Nevada law except for that body of law
pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: EDUVERSE ACCELERATED
LEARNING SYSTEMS, INC.
- -------------------------------- Per: ---------------------------------
Mark E. Bruk, President & CEO
- --------------------------------
(Print Name)
Dated: ------------------------- Dated: -------------------------------
EXHIBIT 6.5
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
1998 DIRECTORS' NONQUALIFIED STOCK OPTION GRANT
Optionee: -----------------------------------------------------
Address: c/o EDUVERSE Accelerated Learning Systems, Inc.
Suite 209, 1135 Terminal Way, Reno, NV 89502
Number of Option Shares: -----------------------------------------------------
Exercise Price per Share: -----------------------------------------------------
Date of Grant: -----------------------------------------------------
Expiration Date: -----------------------------------------------------
Post Termination Exercise: -----------------------------------------------------
Vest Start Date: -----------------------------------------------------
1. Grant of Option: EDUVERSE Accelerated Learning Systems, Inc. (the "Company"),
a Nevada corporation, hereby grants to the optionee named above (the "Optionee")
a nonqualified stock option (this "Option") to purchase the total number of
shares set forth above of Common Stock of the Company (the "Option Shares") at
the exercise price per share set forth above (the "Exercise Price"), subject to
all of the terms and conditions of this Nonqualified Stock Option Grant
("Grant") and the Company's 1998 Directors' Stock Option Plan, (the "Plan"), the
provisions of which are incorporated herein by this reference.
2. Exercise Period of Option. Subject to the terms and conditions of the Plan
and this Grant, this Option shall become exercisable as to two percent (2%) of
the Shares immediately on the date of grant set forth above (the "Date of
Grant") and as to an additional two percent (2%) of the Shares on the first day
of each calendar month beginning after the Date of Grant.
3. Restrictions on Exercise. Exercise of this Option is subject to the following
limitations:
(a) This Option may not be exercised until the Plan has been approved by the
stockholders of the Company as set forth in the Plan.
(b) This Option may not be exercised unless such exercise is in compliance with
the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended,
all applicable state securities laws, and the requirements of any stock exchange
or national market system on which the Company's Common Stock may be listed, as
they are in effect on the date of exercise.
4. Termination of Option.
(a) Except as provided in this Section, this Option shall terminate in whole if
Optionee ceases to be a member (a "Board Member") of the Board of Directors of
the Company or any Parent, Subsidiary or Affiliate of the Company and may not be
exercised to the extent terminated. If the Optionee ceases to be a Board Member
of the Company for any reason except by death or
<PAGE>
disability, this Option, to the extent it is exercisable by the Optionee on the
date on which the Optionee ceases to be a Board Member (the "Termination Date"),
may be exercised by the Optionee within three (3) months after the Termination
Date (or such shorter time period as may be specified in the Grant), but in no
event later than the Expiration Date.
(b) If the Optionee ceases to be a Board Member because of the death of the
Optionee or disability of the Optionee within the meaning of Section 22(e)(3) of
the Code, this Option, to the extent that it is exercisable by the Optionee on
the Termination Date, may be exercised by the Optionee (or the Optionee's legal
representative) at any time prior to the expiration of twelve (12) months after
the Termination Date (or such shorter time period as may be specified in the
Grant), but in any event no later than the Expiration Date.
5. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Company of written
notice in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Board of Directors or the committee thereof that administers the
Plan, which shall set forth the Optionee's election to exercise this Option, the
number of Option Shares being purchased, and such other representations and
agreements as to the Optionee's investment intent and access to information as
may be required by the Company to comply with applicable securities laws.
(b) Such notice shall be accompanied by full payment of the Exercise Price (i)
in cash; (ii) by tender of shares of Common Stock of the Company having a fair
market value equal to the Exercise Price; (iii) by tender of a full-recourse
promissory note in such form as the Board may approve at the time the Option is
granted; or (iv) by any combination of the foregoing.
(c) Prior to the issuance of the Option Shares upon exercise of this Option, the
Optionee must pay or make adequate provision for any applicable federal or state
withholding obligations of the Company. If Optionee is an Insider subject, at
the time of exercise of this Option, to Section 16(b) of the Securities Exchange
Act of 1934, as amended, the Optionee may provide for payment of withholding
taxes upon exercise of the Option by requesting that the Company retain Shares
with a Fair Market Value equal to the minimum amount of taxes required to be
withheld, all as set forth in Section 8(c) of the Plan. In such case, the
Company shall issue the net number of Shares to the Optionee by deducting the
Shares retained from the Shares exercised.
(d) Provided that such notice and payment are in form and substance satisfactory
to counsel for the Company, the Company shall issue the Option Shares registered
in the name of the Optionee or the Optionee's legal representative.
6. Compliance with Laws and Regulations. The issuance and transfer of Option
Shares shall be subject to compliance by the Company and the Optionee with all
applicable requirements of federal and state laws and with all applicable
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of such issuance or transfer.
<PAGE>
7. Nontransferability of Option. This Option may not be transferred in any
manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the Optionee only by the Optionee. The terms of
this Option shall be binding upon the executors, administrators, successors and
assigns of the Optionee.
8. Tax Consequences. Set forth below is a brief summary as of the date of this
Option of some of the federal and Nevada tax consequences of exercise of this
Option and disposition of the Shares. Additional information is included in the
Plan, as amended. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise. Upon exercise, Optionee will recognize compensation income in an
amount equal to the excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price for those Shares. Optionee
represents that Optionee has consulted any tax consultant(s) Optionee deems
advisable in connection with the purchase of the Shares.
(b) Disposition of the Shares. For federal tax purposes, for shares disposed of
after 1986, long-term capital gain will generally be treated as ordinary income
subject to the maximum tax rate. If the shares acquired pursuant to the exercise
of a nonqualified stock option are held for at least six (6) months after the
date of transfer pursuant to the exercise of the nonqualified stock option, any
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes for potential set-off against capital
losses.
9. Interpretation. Any dispute regarding the interpretation of this agreement
shall be submitted by Optionee or the Company forthwith to the Company's Board
of Directors or the committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The resolution of such a
dispute by the Board or committee shall be final and binding on the Company and
on Optionee.
10. Entire Agreement. The Plan and the Notice and Agreement attached as Exhibit
A are incorporated herein by reference. This Grant, the Plan and the Notice and
Agreement constitute the entire agreement of the parties and supersede all prior
undertakings and agreements with respect to the subject matter hereof.
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
Per: -----------------------------------
Mark E. Bruk, President & CEO
<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
1998 DIRECTORS' NONQUALIFIED STOCK OPTION GRANT
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, as amended,
represents that Optionee has read and understands the terms and provisions
thereof, and accepts this Option subject to all the terms and provisions of the
Plan and this Grant. Optionee acknowledges that there may be adverse tax
consequences upon exercise of this Option and that Optionee should consult a tax
adviser prior to such exercise.
OPTIONEE ACKNOWLEDGES THAT THERE MAY BE ADVERSE TAX CONSEQUENCES UPON EXERCISE
OF THE OPTION AND THAT OPTIONEE SHOULD CONSULT A TAX ADVISER PRIOR TO SUCH
EXERCISE.
- ----------------------------------
Optionee
<PAGE>
EDUVERSE ACCELERATED LEARNING SYSTEMS, INC.
NON-REVOCABLE NOTICE OF ELECTION OF DEFERRAL
UNDER THE 1998 DIRECTORS' STOCK OPTION PLAN
Service Year of Deferral: From July 1998 through June 1999.
I -----------------------, a director (the "Director") of the Board of Directors
of EDUVERSE Accelerated Learning Systems, Inc. (the "Company"), hereby elects to
receive shares of Common Stock of the Company, (the "Shares") in lieu of cash
compensation pursuant to the 1998 Directors' Stock Option Plan (the "Plan")
effective July 1, 1998. The Director acknowledges that this election is
irrevocable for the service year.
II. Designation of cash compensation to use for purchasing the Shares:
Formula: [Compensation x 110% / Common Stock FMV on date of service]
Dollar Amount: $------------------
or
Percentage of Director's yearly fees: -----------%
Source of fees (check all that apply):
Annual Retainer: ----------------
Committee Meetings: -------------
III. Certificate registration and mailing instructions:
IV. The Director hereby acknowledges that:
The Shares will be issued under the Plan quarterly and delivered in certificate
form within a reasonable time and at such place as the Director requests. Any
amount remaining from the Directors' compensation that is insufficient to
purchase a full Share shall be carried forward, without interest, to the next
quarterly Shares purchase.
The Shares will be issued in compliance with the Securities Act of 1933, as
amended, the Exchange Act of 1934, as amended, all applicable state securities
laws, and the requirements of any stock exchange or national market system on
which the Company's common stock may be listed, as they are in effect on the
date of issue.
In connection with any registration of the Company's securities, upon the
request of the Company or the underwriters managing any public offering of the
Company's securities, the Director will not sell or otherwise dispose of any
Shares without the prior written consent of the Company or such underwriters, as
the case may be, for a period of time (not to exceed one hundred and eighty
(180) days) from the effective date of such registration as the Company or the
underwriters may specify for employee stockholders generally.
<PAGE>
The Shares will have restricted legends placed upon the Certificate pursuant to
Rule 144 and Section 16(b)(3). The Company may issue appropriate "stop transfer"
instructions to its transfer agent to ensure compliance with the restrictions on
transfer.
Copies of the Plan and Prospectus are available upon request from the Stock
Administration department.
The Director understands that the Director may suffer adverse tax consequences
as a result of the Director's purchase or disposition of the Shares. The
Director represents that the Director has consulted with any tax consultant(s)
the Director deems advisable in connection with the purchase or disposition of
the Shares and that the Director is not relying on the Company for any tax
advice.
<PAGE>
EXHIBIT A
DIRECTORS' STOCK OPTION EXERCISE NOTICE AND AGREEMENT
EDUVERSE Accelerated Learning Systems, Inc.
Suite 209, 1135 Terminal Way
Reno, Nevada, US 89502
Attention: Stock Administrator
1. Exercise of Option. The undersigned ("Optionee") hereby elects to exercise
Optionee's option to purchase -------- shares of the Common Stock (the "Option
Shares") of EDUVERSE Accelerated Learning Systems, Inc. (the "Company") under
and pursuant to the Company's 1998 Directors' Stock Option Plan, (the "Plan")
and the stock option grant dated ------------------ (the "Grant"). The terms and
conditions of the Plan and the Grant are hereby incorporated into and made a
part of this Agreement by this reference.
2. Representations of Optionee. Optionee hereby acknowledges, represents and
warrants that Optionee has received, read and understood the Plan and the Grant
and will abide by and be bound by their terms and conditions.
3. Compliance with Securities Laws. Optionee understands and acknowledges that
the exercise of any rights to purchase any Option Shares is expressly
conditioned upon compliance with the Securities Act of 1933, the Exchange Act of
1934, the requirements of any stock exchange or national market system on which
the Company's stock may be listed, and all applicable state securities laws.
Optionee agrees to cooperate with the Company to ensure compliance with such
laws.
4. Stop Transfer Notices. Optionee understands and agrees that the Company may
issue appropriate "stop transfer" instructions to its transfer agent to ensure
compliance with the restrictions on transfer.
5. Tax Consequences. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX
CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE OPTION
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE OPTION SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF OPTIONEE IS AN INSIDER SUBJECT TO SECTION
16(B) OF THE EXCHANGE ACT, OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH
OPTIONEE'S TAX ADVISERS CONCERNING THE ADVISABILITY OF FILING AN 83(B) ELECTION
WITH THE INTERNAL REVENUE SERVICE.
<PAGE>
6. Delivery of Payment. Optionee (or Optionee's broker acting as agent) herewith
delivers to the Company the aggregate purchase price of the Option Shares that
Optionee has elected to purchase, in cash (by check payable to EDUVERSE
Accelerated Learning Systems, Inc.) in the amount of $ ----------------, receipt
of which is acknowledged by the Company.
7. Entire Agreement. This Exercise Agreement, the Plan and the Grant constitute
the entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by Nevada law except for that body of law
pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: EDUVERSE ACCELERATED
LEARNING SYSTEMS, INC.
- -------------------------------- Per: ---------------------------------
Mark E. Bruk, President & CEO
- --------------------------------
(Print Name)
Dated: ------------------------- Dated: -------------------------------
EXHIBIT 6.6
EMPLOYEE STOCK PURCHASE PLAN ACTION FORM
ENROLLMENT/CHANGE/WITHDRAWAL AGREEMENT
- --------------------------------------------------------------------------------
SECTION 1:
Action Complete Sections
------ -----------------
[ ] New Enrollment 2, 3, 4, 6, 8
[ ] Payroll Deduction Change 2, 4, 8
[ ] Withdrawal 2, 5, 8
[ ] Beneficiary Change 2, 6, 8
- --------------------------------------------------------------------------------
SECTION 2: PERSONAL INFORMATION
NAME: --------------------------------------------------------------
SS#: --------------------------------------------------------------
ADDRESS: ----------------------------------------------------------
LOCATION: ---------------------------------------------------------
- --------------------------------------------------------------------------------
SECTION 3: NEW ENROLLMENT
I hereby elect to participate in the EDUVERSE Employee Stock Purchase
Plan (the "Plan") and I agree to be bound by its terms. Stock
purchased under the Plan should be registered in my name
-------------------- or in my name together with the following name:
---------------------------------------------------------------------
If spouse, circle one: Joint Tenancy/Community Property.
- --------------------------------------------------------------------------------
SECTION 4: PAYROLL DEDUCTION AUTHORIZATION
I hereby authorize payroll deductions from each paycheck in that
percentage of my compensation as shown below, in accordance with the
Plan.
Amount to be Deducted (Circle One):
0% 2% 3% 4% 5% 6% 7% 8% 9% 10%
- --------------------------------------------------------------------------------
SECTION 5: WITHDRAWAL
Effective: _______/_______/_______ (Month/Day/Year) I will cease
participating in the Plan, all monies contributed to the Plan thus far
will be returned, and I may not re-enroll until the next Offering
Period.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SECTION 6: BENEFICIARY
In the event of my death, I hereby designate the following person(s) as my
beneficiary(ies) to receive all payments and/or stock due me under the Employee
Stock Purchase Plan:
Primary Beneficiary: ----------------- %:---- Relationship:------------------
Primary Beneficiary: ----------------- %:---- Relationship:------------------
Note: If more than one primary beneficiary listed, please indicate % allocated
to each.
Secondary Beneficiary: --------------------- Relationship:------------------
If primary beneficiary is other than spouse, spouse must consent to such
beneficiary designation.
Signature of Spouse: -------------------------------- Date:---------------
- --------------------------------------------------------------------------------
SECTION 7: ACCUMULATION AND SUCCESSIVE
ACCUMULATION I understand that my payroll deductions will be accumulated for the
automatic purchase of shares of Common Stock at the end of each Purchase Period.
The purchase price per share will be the lower of (i) 85% of the fair market
value on the first day of an Offering Period or (ii) 85% of the fair market
value on the last day of an Exercise Period.
SUCCESSIVE I understand that this enrollment will be effective for each
subsequent Offering Period unless I withdraw from the PERIODS Plan or otherwise
become ineligible to participate in the Plan. In the event, however, that the
Offering Price for the new Offering Period for which I am not enrolled is less
than the Offering Price for the Offering Period for which I am currently
enrolled, I understand that I will automatically be withdrawn from the current
Offering Period and re-enrolled in the new Offering Period unless I notify the
Company to the contrary.
REVIEW OF PROSPECTUS I have received a copy of the Company's most recent
prospectus which describes the Plan. I understand that my participation is in
all respects subject to the terms of the Plan.
- --------------------------------------------------------------------------------
SECTION 8: AUTHORIZATION
Signature of Employee: -------------------------------- Date:---------------
EXHIBIT 6.7
[LOGO OF EDUVERSE.COM]
Education, Advertising & the Internet
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free ENGLISH Affiliate Program Agreement Page 1
<PAGE>
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Program because those sites:
a) promote sexually explicit material, alcohol or tobacco products,
b) promote violence,
c) promote illegal activities,
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free ENGLISH Affiliate Program Agreement Page 2
<PAGE>
d) promote discrimination based on race, sex, religion, national origin,
physical disability, sexual orientation or age, or
e) violate intellectual property rights of others.
6. Scope of Agreement
a) Participation in the Program constitutes your agreement to be bound by
the terms and conditions of this Agreement. eduverse.com reserves the
right, at its discretion, to change, modify, add or delete any portion of
this Agreement at any time. Notification of changes to this Agreement will
be posted in the Member's Section of the Program.
b) If the terms or conditions of this Agreement in its current form, or any
future changes to this Agreement are unacceptable to you, or cause you to
no longer be in compliance with the Agreement, you may terminate your
participation in the Program by ceasing use of the freeENGLISH links and
URL(s) and promptly notifying eduverse.com of the same (see Section 9
regarding termination).
c) eduverse.com may change, suspend or discontinue any aspect of the
Program at any time, including the availability of any Program feature,
database, or content, with thirty (30) days written notice.
7. Licensing; Ownership
a) eduverse.com grants you a revocable, limited, non-exclusive license to
use the name, logos, trademarks, service marks, trade dress, proprietary
technology, graphic banners or other information (the "eduverse.com
Intellectual Property"), as provided by eduverse.com during the
registration process, on your site for the sole purpose of creating a link
from your site to freeENGLISH during your participation in the Program. You
may not use the eduverse.com Intellectual Property for any other purpose.
Upon termination of this Agreement, you shall immediately terminate the use
of the eduverse.com Intellectual Property. Except as expressly set forth in
this Agreement, you may not copy, distribute, modify, reverse engineer, or
create derivative works from the eduverse.com Intellectual Property.
b) You grant eduverse.com a revocable, non-exclusive, worldwide,
royalty-free license to use any of your names, logos, trademarks, service
marks, trade dress, proprietary technology, graphic banners or other
information ("Your Intellectual Property"), submitted by you for
participation in this Program as reasonably necessary to perform its
obligations under this Agreement. eduverse.com may not use Your
Intellectual Property for any other purpose. Upon termination of this
Agreement, eduverse.com shall immediately terminate the use of Your
Intellectual Property. Except as expressly set forth in this Agreement,
eduverse.com may not copy, distribute, modify, reverse engineer, or create
derivative works from Your Intellectual Property.
c) Each party owns and shall retain all right, title and interest in its
names, logos, trademarks, service marks, trade dress, copyrights and
proprietary technology including without limitation, those names, logos,
trademarks, service marks, trade dress, copyrights and proprietary
technology currently used or which may be developed and/or used by it in
the future. The goodwill associated with the use of the same shall inure
solely to the benefit of the owning party.
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free ENGLISH Affiliate Program Agreement Page 3
<PAGE>
8. Image Scans
In the event that eduverse.com provides you with access to designated digitally
scanned images displayed on freeENGLISH, you agree to display the scans in their
entirety and to limit your use of the scans to the advertisement or review of
the displayed images in accordance with the U.S. Copyright Act. Should you
desire to modify or use the scans in a manner which is not in accordance with
the U.S Copyright Act, you agree to obtain the permission of the appropriate
copyright holder prior to such modification or use. You understand and agree
that you are solely responsible for compliance with the U.S. Copyright Act. In
addition, you may not provide the digital scans to third parties without prior
written permission from eduverse.com. This grant of access to designated
digitally scanned images shall not be construed to be a grant of access to use
any other copyrighted materials, including, but not limited to reviews,
articles, ad banners, photographs, images, illustrations, audio clips and video
clips displayed on freeENGLISH without prior written permission from
eduverse.com.
9. Termination
a) You may terminate your participation in the Program at any time by
sending an email with the Subject "Cancellation," along with your account
number to: [email protected]. eduverse.com will pay you all
commissions accrued until the point of termination and on a quarterly basis
thereafter, will continue to pay you all commissions due to you for your
users until such time as there are no active freeENGLISH users that had
registered on freeENGLISH from a link on your web site during your active
participation in the Program.
b) With thirty (30) days written notice, eduverse.com may, in its sole
discretion, terminate or suspend your participation in the Program for any
reason whatsoever, including, without limitation, breach of this Agreement
or assignment of this Agreement or any portion of this Agreement by you
without the prior written permission of eduverse.com, and such termination
notice may be sent by email to you. Subject to the foregoing restriction,
this Agreement shall be binding upon you and eduverse.com and your and
eduverse.com's respective heirs, executors, successors and assigns.
c) Upon termination by either you or eduverse.com, each of us will
immediately revoke the license referred to in Section 7 of this Agreement
and cease any and all use of the other's name, logos, trademarks, service
marks, trade dress, proprietary technology and graphic banners or other
information submitted or provided by the other party, and, promptly (within
ten (10) days) of the effective date of termination return or destroy all
assets (digital, proprietary or otherwise), including all whole or partial
copies thereof, belonging to the other; and, upon request of the other,
will certify the same in writing to the other.
d) Sections 7(c), 9, 10 and 11 shall survive termination of this Agreement.
10. Your Representations; Indemnification
a) You represent and warrant that any material that is displayed on your
site and/or provided by you for display on freeENGLISH will not:
i) infringe on any third party's copyright, patent, trademark, trade
secret or other proprietary rights;
ii) violate any applicable law, statute, ordinance or regulation;
iii) be defamatory or libelous;
iv) violate any applicable pornography or obscenity laws;
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free ENGLISH Affiliate Program Agreement Page 4
<PAGE>
v) promote violence or contain hate speech; or
vii) contain viruses, trojan horses, worms, time bombs, cancelbots or
other similar harmful or deleterious programming routines.
b) You agree to indemnify, defend and hold harmless eduverse.com and its
affiliates, directors, officers, employees and agents, from and against any
and all liability, claim, loss, damage, injury or expense (including
reasonable attorneys' fees) brought by a third party, arising out of a
breach, or alleged breach, of any of your representations, warranties or
obligations herein.
11. General Provisions
a) freeENGLISH and the Program are provided on an "as is" basis without
warranties of any kind, either express or implied, including, without
limitation, warranties or implied warranties of merchantability or fitness
for a particular purpose. In no event shall eduverse.com be liable to you
for any direct, indirect, special, exemplary, consequential or incidental
damages, whether such damages are alleged in tort, contract or indemnity
arising out of the use or inability to use the freeENGLISH, the failure for
any reason to return users to your site or loss of data, even if
eduverse.com is informed of the possibility of such damages. In the event
of dissatisfaction, your sole and exclusive remedy is to terminate
participation in the Program. eduverse.com is liable for any breach of this
Agreement with respect to the payment of commissions due to you and with
respect to the proper use of Your Intellectual Property as per this
Agreement.
b) eduverse.com agrees to defend, indemnify and hold you harmless for any
loss, damage or liability for any claimed infringement of any U.S. patent
right, copyright and trade secrets, or other proprietary rights asserted by
any third person arising out of your use of freeENGLISH or any eduverse.com
products, provided (1) that eduverse.com is promptly notified in writing by
you of any such claim against you, (2) that you authorize eduverse.com to
assume sole control over the defense of any such claim thereafter, together
with the right to settle or compromise such claim, and (3) that you make
available to eduverse.com such information, assistance and authority as may
be reasonably requested by eduverse.com in order to enable eduverse.com to
defend any such claim. In the event any such claim is asserted,
eduverse.com shall have the right without limitation, at its option either
(a) to obtain such rights and/or licenses from the claimant as may be
necessary to enable you to continue using and/or marketing the eduverse.com
Products which are the subject of the claim, and/or (b) to modify the
eduverse.com Products with respect to which such claim is asserted so as to
avoid further claimed infringement by such Person. eduverse.com further
agrees to indemnify and hold you harmless from and against any and all
liabilities, costs, damages and expenses (including legal costs) arising
out of or in connection with any issue for warranty. eduverse.com agrees to
indemnify you (including reasonable attorney's fees and costs of
litigation) against and hold you harmless from any and all claims by any
other party resulting from eduverse.com's acts, omissions or
representations, regardless of the form of action. A copy of eduverse.com's
current End User License Agreement for ENGLISH PRO Web Edition is attached
hereto as Exhibit A.
c) Each party shall act as an independent contractor and shall have no
authority to make or accept any representations or offers on the other's
behalf.
d) This Agreement has been made in and shall be construed and enforced in
accordance with the laws of the State of Nevada. Any action to enforce this
Agreement shall be brought in the federal or state courts located in Reno,
NV.
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free ENGLISH Affiliate Program Agreement Page 5
<PAGE>
e) If you need to send official correspondence, send it via certified mail
return receipt requested to:
eduverse.com
Suite 209, 1135 Terminal Way
Reno, NV, US 89502
Attn: General Counsel
f) The terms and conditions of this Agreement represent the entire
understanding between eduverse.com and you with respect to the subject
matter of this Agreement, and supersede all prior and contemporaneous
agreements express or implied, oral or written, except as herein contained.
You may not modify or amend this Agreement other than by an agreement in
writing signed by both eduverse.com and you.
I represent that I am an officer
or other authorized representative
of the Company with the power to
enter into this Agreement on behalf
of the Company. I have read and
understood this Agreement and agree
that the Company shall be bound by
all of its terms and conditions.
COMPANY | eduverse.com
|
- ---------------------------------- |
|
|
|
| /s/ Mark E. Bruk
| --------------------------------
Per: ----------------------------- |
| President & CEO
- ---------------------------------- |
Print Name |
| --------------------------------
- ---------------------------------- | Date
Print Title |
|
- ---------------------------------- |
Date |
|
EXHIBIT 6.8
EDUVERSE ACCELERATED LEARNING SYSTEMS (CANADA), INC.
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS AGREEMENT is dated for reference the 3rd day of May 1999.
BETWEEN
EDUVERSE Accelerated Learning Systems (Canada), Inc., a company
incorporated under the laws of the Province of British Columbia and having
an office at 2nd Floor, 1235 West Pender Street, Vancouver, British
Columbia, V6E 2V6.
(hereinafter referred to as the "Company")
AND
--------------- having an address for notice at -----------------
------------------------------.
(hereinafter referred to as the "Employee")
WHEREAS:
A. The Company is principally engaged in the business of researching, developing
and marketing multimedia educational software products (the "Company's
Business);
B. The Employee has been hired by the Company to work in the Company's Business;
C. The Employee and the Company wish to incorporate all of the terms of this
Agreement into the contract of employment between them;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the Company
agreeing to employ the Employee and the Employee agreeing to work for the
Company, the parties agree as follows:
1. Trade Secrets. The Employee understands that in the performance of his/her
job duties with the Company, he/she will be exposed to the Trade Secrets of
the Company. The term "Trade Secrets" means technical information or
material that is commercially valuable to the Company and not generally
known in the industry. This includes, without limiting the generality of
the foregoing, the following:
(a) any and all versions of the Company's proprietary computer software
(including source code and object code), hardware, firm-ware and
documentation;
(b) technical information concerning the Company's products, processes and
services, including product and process data and specifications,
diagrams, flow charts drawings, test results, know-how, inventions,
research projects and product development; and
product and process data and specifications, diagrams, flow charts
drawings, test results, know-how, inventions, research projects and
product development; and
1
<PAGE>
(c) any and all versions of proprietary software which the Company is
entitled to use in the Company's Business.
2. Confidential Information. The Employee understands that in the performance
of his/her job duties with the Company, he/she will be exposed to
Confidential Information of the Company. The term "Confidential
Information" means non-technical information or material that is
commercially valuable to the Company and not generally known in the
industry. This includes, without limiting the generality of the foregoing,
the following;
(a) information concerning the Company's Business, including cost
information, profits, sales information, accounting and unpublished
financial information, business plans, markets and marketing methods,
customer lists and customer information, purchasing techniques,
supplier lists and supplier information, and advertising strategies;
(b) information concerning the Company's employees, including their
salaries, strengths, weaknesses and skills;
(c) information submitted by the Company's customers, suppliers,
employees, consultants or co-venturers with the Company for study,
evaluation or use;
(d) any other information not generally known to the public which, if
misused or disclosed, could reasonably be expected to adversely affect
the Company's business.
3. Nondisclosure of Trade Secrets. The Employee will keep the Company's Trade
Secrets, whether or not prepared or developed by the Employee, in the
strictest confidence. He/she will not use or disclose such Trade Secrets to
others without the Company's prior written consent. The Company may for any
reason withhold its consent to disclosure of Trade Secrets by the Employee.
4. Nondisclosure of Confidential Information. The Employee will keep the
Company's Confidential Information, whether or not prepared or developed by
the Employee, in the strictest confidence. He/she will not use or disclose
such Confidential Information to others without the Company's prior written
consent. The Company may for any reason withhold its consent to disclosure
of Confidential Information by the Employee.
5. Confidential Information of Others. The Employee will not disclose to the
Company, use in the Company's Business, or cause the Company to use, any
information or material that is confidential information or a trade secret
of others.
6. Return of Materials. When the Employee's employment with the Company ends,
for whatever reason, he/she will promptly deliver to the Company all
originals and copies of all documents, records, computer hardware, computer
software programs, media and other materials containing any of the
Company's Trade Secrets or Confidential Information. He/she will also
return to the Company all equipment, files, software programs, letterhead &
business cards and other personal property belonging to the Company.
8. Confidential Information Confidentiality Obligation Survives Employment.
The Employee understands and agrees that his/her obligation to maintain the
confidentiality and security of the Company's Confidential Information will
remain binding upon him/her even after his/her employment with the Company
ends and continues for so long as such material remains Confidential
Information.
2
<PAGE>
9. Disclosure of Developments. While the Employee is employed by the Company
he/she will promptly inform the Company of the full details of all his/her
inventions, discoveries, improvements, innovations, ideas, products and
processes (collectively called "Developments"), whether or not patentable,
copyrightable, or otherwise protectable, that he/she conceives, completes,
or reduces to practice, (whether jointly or with others), in the course of
his/her employment and which:
(a) relate to the Company's Business as presently carried on or as carried
on in the future or which relate to the Company's or prospective
business, or actual or demonstrably anticipated research and
development of the Company;
(b) result from any work he/she does using any equipment, facilities,
materials, Trade Secrets, Confidential Information or personnel of the
Company; or
(c) result from or are suggested by any work that he/she may do for the
Company.
10. Assignment of Rights. The Employee acknowledges and agrees that the Company
or the Company's designee retains all rights, titles and interests in the
Developments which arise during the course of his/her employment with the
Company. Accordingly, the Employee hereby assigns and relinquishes to the
Company or the Company's designee, any and all right, title and interest in
all:
(a) patent rights,
(b) copyrights,
(c) trade secret rights, and
(d) work rights,
(collectively called "Rights") which arise with respect to the
Developments.
11. Execution of Documents. The Employee agrees to promptly execute written
assignments of specific Rights and such other documents as are properly
required to enable the Company to obtain, maintain, and enforce patents,
copyrights, and work right registrations relating to the Developments, when
so requested by the Company from time to time. In the event the Company is
unable, after reasonable effort, to secure the Employee's signature on any
such document, whether because of any physical or mental incapacity or for
any other reason whatsoever, the Employee hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as his/her
agent and attorney-in-fact to act for and in his/her behalf and stead to
execute and file any patent, copyright and work right application relating
to the Developments and to do all other lawfully permitted acts to further
the prosecution, issuance, maintenance and enforcement of letters, patent,
copyright, and work right thereon with the same legal force and effect as
if executed by the Employee.
12. Conflict of Interest. During the Employee's employment by the Company,
he/she will not engage in any business activity competitive with the
Company's Business as presently carried on or as carried on in the future
nor will he/she engage in any other activities that conflict with the best
interests of the Company or which interfere with the effective performance
of
3
<PAGE>
his/her employment duties, save and except as expressly consented to in
writing by the Company.
13. Post-employment Non-competition Agreement. The Employee understands that
during his/her employment by the Company he/she may become familiar with
the Confidential Information and Trade Secrets of the Company. Therefore,
it is possible that he/she could gravely harm the Company if he/she worked
for a competitor. Accordingly, he/she agrees for 6 months following the end
of his/her employment with the Company not to engage in, or contribute
his/her knowledge to any work that is competitive or functionally similar
to any Developments or to a service or product on which he/she worked while
with the Company at any time during the 12 months immediately before
his/her employment with the Company ended. The Employee further agrees that
during the 6 months following the end of his/her employment with the
Company he/she will not compete with the Company's Business, directly or
indirectly (it being understood that competition includes the design,
development, production, promotion or sale of products or services
competitive with those marketed, developed or supported in the Company's
Business) and that he/she will not divert or attempt to divert from the
Company any business the Company enjoyed or solicited from their customers
during the 12 months prior to the termination of his/her employment. For
the purposes of this section, the post-employment restrictions on the
Employee shall apply in all regions of the world (collectively called
"Market Territories").
The Employee acknowledges and agrees that the hardware and software
developed by the Company is, or is intended to be, distributed to customers
throughout the Market Territories. Accordingly, he/she agrees that these
restrictions on his/her post-employment activities shall apply throughout
the Market Territories. The Employee further agrees that the time and
territories restrictions set out herein are fair and reasonable for the
protection of the Company's interests and hereby waives his/her right to
use as a defense to any action brought against him/her hereunder that the
time and territorial restrictions are unreasonable in scope or length. In
the event that a court of competent jurisdiction finds any subsection or
subsections dealing with the territorial restriction of this section to be
unenforceable, then that subsection or subsections as the case may be,
shall be severed from this Agreement and the remaining subsections shall
remain in effect.
14. Noninterference with the Company Employees. While employed by the Company
and for 6 months afterwards, the Employee agrees that he/she will not
induce, or attempt to induce, any Company employee to quit the Company's
employ or recruit or hire away any Company employee.
15. Enforcement. The Employee acknowledges and agrees that in the event of a
breach or threatened breach of this Agreement, money damages would be an
inadequate remedy and extremely difficult to measure. The Employee
therefore agrees that the Company shall be entitled to an injunction to
restrain the Employee for such breach or threatened breach. In addition,
any breach or threatened breach of this Agreement will result in the
Company taking disciplinary action against the Employee up to and including
termination of employment. Nothing in this Agreement shall be construed as
preventing the Company from pursuing any remedy at law or in equity for any
breach or threatened breach.
16. Effective Date. It was understood and agreed between the Company and the
Employee when the Employee commenced his/her employment with the Company
that an agreement substantially similar to this Agreement was a condition
of employment. The Employee and Company hereby incorporate all of the terms
of this Agreement into the contract of
4
<PAGE>
employment between them and further agree that the terms of this Agreement
are incorporated effective as of the entering into of the said contract of
employment by the Employee and Company.
17. Notices. Except as otherwise expressly provided berein, any and all notices
or demands which must or may be given hereunder or under any other
instrument contemplated hereby shall be given by delivery in person or by
regular mail or by facsimile transmission to the parties' respective
address set out on the first page of this Agreement. All such
communications, notices or presentations and demands provided for herein
shall be deemed to have been delivered when actually delivered in person to
the respective party, or if mailed, then on the date it would be delivered
in the ordinary course of mail, or if sent by facsimile transmission, on
the date of receipt of confirmation that the transmission has been
received. Any party may change its address hereunder on twenty days notice
to the other party in compliance with this section.
18. Severability. If any provision of this Agreement is wholly or partially
unenforceable for any reason, such unenforceable provision shall be severed
from the whole thereby preserving the enforceability to the balance of this
Agreement, and all provisions of this Agreement shall, if alternative
interpretations are applicable, be construed so as to preserve the
enforceability thereof.
19. General. Time will be of the essence hereof. The Employee acknowledges and
declares that he/she has been provided with sufficient time and opportunity
to consider all factors relating to this Agreement, has retained and
consulted independent counsel to advise him/her, or in the alternative has
elected to waive his/her right to retain and consult independent counsel
he/she further acknowledges and declares that he/she has read and
understands the terms of this Agreement and has signed it voluntarily with
full awareness of its consequences. This Agreement may not be assigned by
the Employee without the express written consent of the Company. Wherever
the singular, masculine, or neuter is used in this Agreement, the same
shall be construed as meaning the plural or feminine, and visa versa, where
the context or the parties so require. The headings used herein are for
convenience of reference only and shall not affect the interpretation of
this Agreement. Facsimile or photostatic copies of signatures are
acceptable and are of the same force and effect as original signatures for
all intents and purposes The waiver by either party of any breach of any
provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach. The provisions of this Agreement shall survive
any termination of the contract of employment, which embodies this
Agreement. This Agreement may be executed in several counterparts, each of
which so executed shall be deemed to be an original, and such counterparts
together shall constitute but one and the same instrument. The preambles or
recitals hereto are hereby incorporated herein and form an integral part of
this Agreement. This Agreement: shall enure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors
and permitted assigns.
IN WITNESS WHEREOF the parties hereto have duly executed this agreement under
seal as of the date first above written.
5
<PAGE>
EDUVERSE ACCELERATED LEARNING |
SYSTEMS (CANADA), INC. |
|
|
|
|
- ------------------------------------- |
(Authorized Signature) |
|
|
|
SIGNED, SEALED and DELIVERED by |
the Employee in the presence of: |
|
|
|
- ------------------------------------- | ---------------------------
Signature | Signature of Employee
|
- ------------------------------------- |
Name |
| ---------------------------
- ------------------------------------- | Date Signed
Address |
|
- ------------------------------------- |
Occupation |
|
EXHIBIT 6.9
[COMPANY LOGO]
EDUVERSETM Accelerated Learning Systems, Inc.
Please review the following terms of the freeENGLISH Affiliate Program Agreement
for Governments & Ministries.
- --------------------------------------------------------------------------------
freeENGLISH Non-Exclusive Linking Agreement
This Agreement is between EDUVERSE Accelerated Learning Systems, Inc.
("EDUVERSE"), and you, the company ("you" or "Company"), and relates to your
company's participation in the freeENGLISH Affiliate Program ("Program") and
links from your company's we site to the www.freeENGLISH .com web site
("freeENGLISH").
1. Program Links
a) You can link your site to any areas within freeENGLISH using specified
URLs and links which will be provided by EDUVERSE upon the acceptance
of your application into the Program. There is no limit to the number
of links to freeENGLISH that you can post on your site. You may add or
remove links at your discretion. You may decide where to link within
freeENGLISH, and where to post the links on your site.
b) You may not use any links to freeENGLISH which were not provided by
EDUVERSE without prior written approval by EDUVERSE. EDUVERSE will not
be responsible for paying commissions to you for gross revenues
generated from a user entering freeENGLISH from your site if you have
not properly implemented the links and the URLs as specified by
EDUVERSE. It is your responsibility to notify EDUVERSE of any
malfunctioning of the link or any other problems with your
participation in the Program.
c) EDUVERSE will provide you with a link on freeENGLISH that allows
visitors from your site to return to the URL of the site you
registered for the Program. EDUVERSE will remove this link upon your
request. EDUVERSE may also remove this link at any time, at its sole
discretion.
d) As a Program member, you may not promote your freeENGLISH links
through unsolicited emailing (i.e. spamming) and newsgroup postings.
2. Tracking your Commissions
a) During the period of your participation in the Program and subsequent
to your active participation in the Program, EDUVERSE will pay you a
15% commission for all gross revenues generated from a user who
initially entered freeENGLISH directly through an EDUVERSE designated
link on your site and who later entered freeENGLISH either through the
freeENGLISH application, the same link or through another link, using
the same USERID as when the user initially entered freeENGLISH.
"Gross Revenues" means the gross amounts received by EDUVERSE from the
sale of advertisements, which advertisements were displayed to your
users, and from the sale of products and services through affiliate
programs established by EDUVERSE, which products and services were
sold to your users.
b) EDUVERSE will electronically track the users that have visited
freeENGLISH from your site and will allow you to monitor the tracking.
All determinations of the commissions will be made by EDUVERSE's
in-house accountant or its regularly engaged independent certified
public accountant, which determination shall be final and binding on
the parties hereto. Payments will be made in U.S. dollars within
thirty (30) days after the close of each calendar quarter for
advertising
- --------------------------------------------------------------------------------
freeENGLISH Affiliate Program Agreement Page 1
<PAGE>
revenues collected during the prior calendar quarter, unless such
payment amount is less than $100.00. Payments of less than $100.00
shall be carried over to each following calendar quarter and shall be
made within thirty (30) days after the close of the calendar quarter
in which the accumulated payment amounts equal $100.00 or more.
Notwithstanding the foregoing, all payments shall be made within
thirty (30) days after the date of the calendar year for amounts
collected during the prior calendar year or within thirty (30) days
after the termination of this Agreement, whichever occurs first.
c) Within thirty (30) days after the end of each calendar month, EDUVERSE
will make available to you a report listing the number of users during
the preceding calendar month, the Gross Revenues collected and the
commission due you.
d) EDUVERSE will maintain books and records of Gross Revenues derived
from your users, in accordance with Generally Accepted Accounting
Principles. On an annual basis, EDUVERSE shall engage at EDUVERSE's
own expense, an independent auditor to certify EDUVERSE's compliance
with the terms of this agreement and amount and accuracy of payments
to you made under this Agreement.
3. freeENGLISH Site Policy
a) EDUVERSE shall have the sole right and responsibility for determining
the advertising pricing policy on FreeENGLISH. All advertisements
shall be subject to acceptance by EDUVERSE, in its sole discretion.
All advertisements accepted shall be subject to the terms and
conditions of EDUVERSE's then current terms and conditions of
advertising. Such terms may be changed at any time, without notice to
you. EDUVERSE shall have no obligation to advertise any company's
products or services. Prices for advertisements shall be set solely by
EDUVERSE and shall be consistent with prices for freeENGLISH
advertisements in similar geographic regions. EDUVERSE reserves the
right to change its prices at any time, without notice to you or
advertisers.
b) All advertisements accepted by EDUVERSE will then be submitted to you
for your approval, which approval will not be unreasonably withheld.
If approval is not received by EDUVERSE within seventy-two (72) hours
of submission of the advertisement(s) to you, EDUVERSE will consider
the advertisement(s) to be approved by you and you will have no
recourse against EDUVERSE for said advertisement(s) being used within
the Program.
c) You agree not to make any representations, warranties or other
statements concerning any customer service matter, including
freeENGLISH policies, advertising availability and/or pricing without
the prior written consent of EDUVERSE and EDUVERSE is not responsible
or liable in any manner for any such statements.
4. Special Promotions
You acknowledge that in the event that you and EDUVERSE enter into any special
marketing and promotional activities not set forth in this Agreement, there may
be additional costs associated with such activities. You and EDUVERSE shall
agree in advance in a written promotion schedule (signed by an authorized
representative of EDUVERSE and your Company) as to the scope of such special
marketing and promotional activities and the amount of funds and/or other
resources to be contributed to such activities by you and EDUVERSE. Any and all
promotion schedules shall be deemed appended to this Agreement.
- --------------------------------------------------------------------------------
freeENGLISH Affiliate Program Agreement Page 2
<PAGE>
5. Site Qualification
We may exclude sites that we feel do not qualify for participation in the
Program because those sites:
a) promote sexually explicit material,
b) promote violence,
c) promote illegal activities,
d) promote discrimination based on race, sex, religion, national origin,
physical disability, sexual orientation or age, or
e) violate intellectual property rights of others.
6. Scope of Agreement
a) Participation in the Program constitutes your agreement to be bound by
the terms and conditions of this Agreement. EDUVERSE reserves the
right, at its discretion, to change, modify, add or delete any portion
of this Agreement at any time. Notification of changes to this
Agreement will be posted in the Member's Section of the Program.
b) If the terms or conditions of this Agreement in its current form or
any future changes to this Agreement are unacceptable to you, or cause
you to no longer be in compliance with the Agreement, you may
terminate your participation in the Program by ceasing use of the
freeENGLISH links and URL(s) and promptly notifying EDUVERSE of the
same (see Section 9 regarding termination).
c) EDUVERSE may change, suspend or discontinue any aspect of the Program
at any time, including the availability of any Program feature,
database, or content, with thirty (30) days written notice.
7. Licensing; Ownership
a) EDUVERSE grants you a revocable, limited, non-exclusive license to use
the name, logos, trademarks, service marks, trade dress, proprietary
technology, graphic banners or other information (the "EDUVERSE
Intellectual Property"), as provided by EDUVERSE during the
registration process, on your site for the sole purpose of creating a
link from your site to freeENGLISH during your participation in the
Program. You may not use the EDUVERSE Intellectual Property for any
other purpose. Upon termination of this Agreement, you shall
immediately terminate the use of the EDUVERSE Intellectual Property.
Except as expressly set forth in this Agreement, you may not copy,
distribute, modify, reverse engineer, or crate derivative works from
the EDUVERSE Intellectual Property.
b) You grant EDUVERSE a revocable, non-exclusive, worldwide, royalty-free
license to use any of your names, logos, trademarks, service marks,
trade dress, proprietary technology, graphic banners or other
information ("Your Intellectual Property"), submitted by you for
participation in this Program as reasonably necessary to perform its
obligations under this Agreement. EDUVERSE may not use Your
Intellectual Property for any other purpose. Upon termination of this
Agreement, EDUVERSE shall immediately terminate the use of Your
Intellectual Property. Except as expressly set forth in this
Agreement, EDUVERSE may not copy, distribute modify, reverse engineer,
or create derivative works from Your Intellectual Property.
- --------------------------------------------------------------------------------
freeENGLISH Affiliate Program Agreement Page 3
<PAGE>
c) Each party owns and shall retain all right, title and interest in its
names, logos, trademarks, service marks, trade dress, copyrights and
proprietary technology including without limitation, those names,
logos, trademarks, service marks, trade dress, copyrights and
proprietary technology currently used or which may be developed and/or
used by it in the future. The goodwill associated with the use of the
same shall inure solely to the benefit of the owning party.
8. Image Scans
In the event that EDUVERSE provides you with access to designated digitally
scanned images displayed on freeENGLISH, you agree to display the scans in their
entirety and to limit your use of the scans to the advertisement or review of
the displayed images in accordance with the U.S. Copyright Act. Should you
desire to modify or use the scans in a manner which is not in accordance with
the U.S. Copyright Act, you agree to obtain the permission of the appropriate
copyright holder prior to such modification or use You understand and agree that
you are solely responsible for compliance with the U.S. Copyright Act. In
addition, you may not provide the digital scans to third parties without prior
written permission from EDUVERSE This grant of access to designated digitally
scanned images shall not be construed to be a grant of access to use any other
copyrighted materials, including, but not limited to reviews, articles, ad
banners, photographs, images, illustrations, audio clips and video clips
displayed on freeENGLISH without prior written permission from EDUVERSE.
9. Termination
a) You may terminate your participation in the Program at any time by
sending an email with the Subject "Cancellation," along with your
account number to: [email protected]. EDUVERSE will pay you
all commissions accrued until the point of termination and on a
quarterly basis thereafter, will continue to pay you all commission
due to you for your users until such time as there are no active
freeENGLISH users that had registered on freeENGLISH from a link on
your web site during your active participation in the Program.
b) With thirty (30) days write notice, EDUVERSE may, in its sole
discretion, terminate or suspend your participation in the Program for
any reason whatsoever, including, without limitation, breach of this
Agreement or assignment of this Agreement or any portion of this
Agreement by you without the prior written permission of EDUVERSE, and
such termination notice may be sent by email to you. Subject to the
foregoing restriction, this Agreement shall be binding upon you and
EDUVERSE and your and EDUVERSE's respective heirs, executors,
successors and assigns.
c) Upon termination by either you or EDUVERSE, each of us will
immediately revoke the license referred to in Section 7 of this
Agreement and cease any and all use of the other's name, logos,
trademarks, service marks, trade dress, proprietary technology and
graphic banners or other information submitted or provided by the
other party, and, promptly (within ten (10) days) of the effective
date of termination return or destroy all assets (digital, proprietary
or otherwise), including all whole or partial copies thereof,
belonging to the other; and, upon request of the other, will certify
the same in writing to the other.
d) Sections 7(c), 9, 10 and 11 shall survive termination of this
Agreement.
10. Your Representations; Indemnification
a) You represent and warrant that any material that is displayed on your
site and/or provided by you for display on freeENGLISH will not:
- --------------------------------------------------------------------------------
freeENGLISH Affiliate Program Agreement Page 4
<PAGE>
i) infringe on any third party's copyright, patent, trademark, trade
secret or other proprietary rights;
ii) violate any applicable law, statute, ordinance or regulation;
iii) be defamatory or libelous;
iv) violate any applicable pornography or obscenity laws;
v) promote violence or contain hate speech; or
vi) contain viruses, trojan horses, worms, time bombs, cancelbots or
other similar harmful or deleterious programming routines.
b) You agree to indemnify, defend and hold harmless EDUVERSE and its
affiliates, directors, officers, employees and agents, from and
against any and all liability, claim, loss, damage, injury or expense
(including reasonable attorneys' fees) brought by a third party,
arising out of a breach, or alleged breach, of any of your
representations, warranties or obligations herein.
11. General Provisions
a) freeENGLISH and the Program are provided on an "as is" basis without
warranties of any kind, either express or implied, including, without
limitation, warranties or implied warranties of merchantability or
fitness for a particular purpose. In no event shall EDUVERSE be liable
to you for any direct, indirect, special, exemplary, consequential or
incidental damages, whether such damages are alleged in tort, contract
or indemnity arising out of the use or inability to use the
freeENGLISH, the failure for any reason to return users to your site
or loss of data, even if EDUVERSE is informed of the possibility of
such damages. In the event of dissatisfaction, your sole and exclusive
remedy is to terminate participation in the Program. EDUVERSE is
liable for any breach of this Agreement with respect to the payment of
commissions due to you and with respect to the propre use of Your
Intellectual Property as per this Agreement.
b) EDUVERSE agrees to defend, indemnify and hold you harmless for any
loss, damage or liability for any claimed infringement of any U.S.
patent right, copyright and trade secrets, or other proprietary rights
asserted by any third person arising out of your use of freeENGLISH or
any EDUVERSE products, provided (1) that EDUVERSE is promptly notified
in writing by you of any such claim against you, (2) that you
authorize EDUVERSE to assume sole control over the defense of any such
claim thereafter, together with the right to settle or compromise such
claim, and (3) that you make available to EDUVERSE such information,
assistance and authority as may be reasonably requested by EDUVERSE in
order to enable EDUVERSE to defend any such claim. In the event any
such claim is asserted, EDUVERSE shall have the right without
limitation, at its option either (a) to obtain such rights and/or
licenses from the claimant as may be necessary to enable you to
continue using and/or marketing the EDUVERSE Products which are the
subject of the claim, and/or (b) to modify the EDUVERSE Products with
respect to which such claim is asserted so as to avoid further claimed
infringement by such Person. EDUVERSE further agrees to indemnify and
hold you harmless from and against any and all liabilities, costs,
damages and expenses (including legal costs) arising out of or in
connection with any issue for warranty. EDUVERSE agrees to indemnify
you (including reasonable attorney's fees and costs of litigation)
against and hold you harmless from any and all claims by any other
party resulting from EDUVERSE's acts, omissions or representations,
regardless of the form of action. A copy of EDUVERSE's current End Use
License Agreement for freeENGLISH is attached hereto as Exhbit A.
c) Each party shall act as an independent contractor and shall have no
authority to make or accept any representtions or offers on the
other's behalf.
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freeENGLISH Affiliate Program Agreement Page 5
<PAGE>
d) This Agreement has been made in and shall be construed and enforced in
accordance with the laws of the State of Nevada. Any action to enforce
this Agreement shall be brought in the federal or state courts located
in Reno, NV.
e) If you need to send official correspondence, send it via certified
mail return receipt requested to:
EDUVERSE Accelerated Learning Systems, Inc.
Suite 209, 1135 Terminal Way
Reno, NV US 89502
Attn: General Counsel
f) The terms and conditions of this Agreement represent the entire
understanding between EDUVERSE and you with respect to the subject
matter of this Agreement, and supersede all prior and contemporaneous
agreements express or implied, oral or written, except as herein
contained. You may not modify or amend this Agreement other than by an
agreement in writing signed by both EDUVERSE and you.
I represent that I am an officer
or other authorized representative
of the Company with the power to
enter into this Agreement on behalf
of the Company. I have read and
understood this Agreement and agree
that the Company shall be bound by
all of its terms and conditions.
COMPANY | eduverse.com
|
Ministry of University Affairs |
|
|
|
| /s/ Mark E. Bruk
| --------------------------------
Per: Songkram Luangtongkum |
|
Songkram Luangtongkum | President & CEO
- ---------------------------------- |
Print Name |
| --------------------------------
Deputy Permanent Secretary |
for University Affairs |
- ---------------------------------- | Date
Print Title |
|
May 20, 1999 |
- ---------------------------------- |
Date |
|
- --------------------------------------------------------------------------------
freeENGLISH Affiliate Program Agreement Page 5
EXHIBIT 6.10
MEMORANDUM OF UNDERSTANDING
between
Ministry of University Affairs,
Kingdom of Thailand
and
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Canada
~
The Ministry of University Affairs (MUA) and Eduverse Accelerated Learning
Systems (Canada), Inc. wishing to establish formal relationships between the two
parties agree to cooperate on the development and deployment of distance
educational software programs to enhance the educational experience of the
students of Thailand.
<PAGE>
Scope of Cooperation
The areas of cooperation will focus on the development of computer based
distance educational software using EDUVERSE e-education technology.
a. EDUVERSE will, at no cost, supply to The Ministry its English language
pronunciation software known as ENGLISH PRO Web Edition.
b. EDUVERSE will, at no cost to The Ministry, supply a file server(s) to
be placed on the UniNet backbone to deliver ENGLISH PRO Web Edition
software and course curriculum to schools and institutions connected to
the UniNet network.
c. EDUVERSE will insure, at no cost to The Ministry, acceptable
performance of ENGLISH PRO Web Edition software on workstations
connected throughout the Uninet network.
d. EDUVERSE will provide, at no cost to The Ministry, the necessary
support staff to maintain ENGLISH PRO Web Edition on the UniNet network
and all ENGLISH PRO Web Edition product updates and improvements.
e. The Ministry will provide, at no cost to EDUVERSE, adequate physical
space and security for the EDUVERSE file server(s) on The Ministry's
premises and throughout the UniNet network.
f. The Ministry will provide, at no cost to EDUVERSE, assistance necessary
for the installation of the ENGLISH PRO Web Edition software all
workstations connected to the UniNet network.
g. The Ministry will provide the necessary technical details to EDUVERSE
as required to implement the ENGLISH PRO Web Edition software and
curriculum.
h. The Ministry will work with EDUVERSE to develop additional distance
education course curriculum for The Ministry using EDUVERSE's unique
e-education model to be deployed when completed in a similar manner to
the deployment and arrangements concerning ENGLISH PRO Web Edition.
i. The Ministry and EDUVERSE will develop computer based courses for
Learning on Demand, for Lifelong Learning to strengthen the Ministry's
Learning Resources Centers.
ENGLISH PRO Web Edition
ENGLISH PRO Web Edition is EDUVERSE's English language multimedia pronunciation
software product. ENGLISH PRO Web Edition features: a Picture Dictionary;
Phonetic Keyboard; Word Dictionary; Image Sound Effects; VPA (Visual
Pronunciation Assistant); Record and Playback; Multimedia Lesson Introductions;
Easy-to-use Navigation Buttons; and Multimedia Lesson Introduction including
Detailed Information for each Sound describing the Movement of the Articulators.
ENGLISH PRO Web Edition uses a constructivist instruction approach based on an
extension of the principles of the International Phonetic Alphabet (IPA) to the
description of the sounds of the English language. ENGLISH PRO Web Edition
introduces each of the English phonemes and their main contextual variants.
In Witness whereof, the parties hereto have affixed their signatures:
For EDUVERSE Accelerate Learning For Office of the Permanent Security
Systems, Canada Inc. Ministry of University Affairs
/s/ Marc Crimeni /s/ Vanchai Sirichana
- ------------------------------ ------------------------------------
Mr. Marc Crimeni Dr. Vanchai Sirichana
Executive Vice President Permanent Secretary
EDUVERSE Accelerated Learning Ministry of University Affairs
Systems Canada Inc. Thailand
Witness:
/s/ Bernard Giroux /s/ Prachuab Chaiyasarn
- ------------------------------ ------------------------------------
H.E. Mr. Bernard Giroux H.E. Prachaub Chaiyasarn
Ambassador of Canada Minister of University Affairs,
Thailand
15 July 1999
Ministry of University Affairs
Bangkok, Thailand
EXHIBIT 6.11
ALL INFORMATION PROPRIETARY, CONFIDENTIAL & PROPERTY OF TRI SYNERGY, INC.
MANUFACTURER'S REPRESENTATION AGREEMENT
This agreement is by and between Manufacturer: Eduverse Accelerated Learning
Systems, Inc. of the address: 1135 Terminal Way, Suite 209, Reno, Nevada 89502
(hereinafter referred to as "Manufacturer" or "MGS") and TRI SYNERGY, Inc., of
91 Westland Ave., Suite 520, Boston, MA 02115 (hereinafter referred to as "TSI
or "Representative"). WHEREAS, Manufacturer is in the business of developing and
manufacturing software for sale to the business community and the general
public;
WHEREAS, Representative is in the business of selling and marketing software to
distributors, reseller and mass merchants, etc.;
WHEREAS, Manufacturer wishes to authorized Representative to sell and market
Manufacturer's software, as defined in Exhibit B.
NOW, THEREFORE, the parties agree as follows:
1. Representation. Manufacturer hereby appoints TSI as it exclusive
Representative and Public Relations Agent for the accounts within the
territories and services defined by, or added to, Exhibit "A" that are
attached hereto and incorporated herewith. Manufacturer and TSI may add
territories and/or products to Exhibit A or B at any time so long as both
parties agree. All additions and deletions are to be in writing, dated and
signed by both parties. Manufacturer agrees and understands that
Representative represents and will continue to represent other
manufacturers or companies who are or may in the future be competitors of
Manufacturer. It is understood by and between the parties hereto that such
representation by Representative of competitors of Manufacturer does not
create any conflict of interest or breach of the terms of the Agreement
between the parties.
2) Representation Responsibilities. TSI is granted the exclusive right to
represent Manufacturer and its products, as specified in Exhibit A, to
software distributors, resellers and mass merchants, etc. ("Customers").
TSI must faithfully represent all products, claims ,pricing and product
viability as specified in writing by Manufacturer. All invoicing, product
shipment, terms, handling, marketing and/or co-op authorization and support
are the sole responsibility of the Manufacturer. TSI shall use its best
efforts and good judgement to realize the highest possible sales for the
products of Manufacturer. When requested by Manufacturer, TSI shall, within
ten (10) business days following any request, submit a report on the
progress of sales activities and sales projections; provided, however, that
Manufacturer shall not make such requests more than one (1) time per
quarter.
3) Commissions, Fees & Expenses. The parties have agreed that commission,
monthly (initialed) fees and expenses as defined by Exhibit A and/or
otherwise described herein will be paid to Representative by Manufacturer
on all orders accepted and delivered by Manufacturer at such times and in
the manner described in Paragraph 5 herein below.
4) Trade Shows and other Expenses. Manufacturer will have the option to
participate in industry trade shows, retail and distributor sales meetings,
entertainment and events with prior written (via fax or email) approval at
a shared rate with other manufacturers. Checks payable for these events
must be received by TSI no later than fourteen (14) days prior to the
event. If Manufacturer requests Representative's participation that
requires travel, Manufacturer shall book and pay for all related expenses
of TSI. Manufacturer will pay for all mailings and freight expenses with
prior written approval. If agreed upon expenses and fees have not been paid
as agreed TSI, reserves the right to deduct such expenses and fees from any
distributor payments made to Manufacturer by TSI.
5) Payment. In the event that Manufacturer is using TSI affiliate for
distribution, commissions due Representative will be deducted from amounts
paid to TSI from Distributors for all products covered by this agreement.
Monthly fees shall be paid by Manufacturer to TSI and shall be received no
later than the 1st (initialed) day of each month in advance. TSI shall not
be required to invoice Manufacturer for any such amounts. If the
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ALL INFORMATION PROPRIETARY, CONFIDENTIAL & PROPERTY OF TRI SYNERGY, INC.
<PAGE>
monthly fee payment has not been received by the due date TSI may deduct
monthly fees and unpaid expenses from any payments made to Manufacturer by
TSI as well as any accrued interest and/or late charges (see Paragraph 9).
All checks will be payable to TSI and mailed to 91 Westland Ave. Suite
#330, Boston, MA 02115 Attn: Shane Nestler. Any change to this information
will be made in writing from TSI. In the event that the Manufacturer does
direct billing and distribution, commissions due Representative will be
paid with ten business days of payment received by Manufacturer without the
requirement of delivery of an invoice.
6) Reporting. In the event that the Manufacturer does direct distribution,
Manufacturer agrees to provide Representative with a written report on a
monthly basis, showing in detail the sales made to the accounts covered by
this agreement and commissions owed to Representative. Manufacturer also
agrees simultaneously to provide copies of all invoices, notification of
shipment and purchase orders for the month. This report shall be provided
no later than ten (10) business days after the end of the month.
7) Term & Termination. The term of this agreement shall commence on the date
indicated on the signature lines of this contract for an initial term of
one (1) year, said term shall automatically renew in one (1) year
increments unless written notice is sent by either party, properly
addressed and postage prepaid (via certified mail) ninety (90) days prior
to contract expiration. At any time after month seven (7) if there are not
sufficient funds to deduct the monthly fee, Manufacturer may terminate this
agreement with (30) thirty days written notice with commission payable for
one hundred & eighty (180) days after the date of termination [on all
product shipped and paid for in full prior to the end of 180 days
(Initialed)]. Contract can be terminated or amended at any time with the
written consent of all contract signatories. After an initial period of one
(1) year, this contract can be terminated with ninety (90) days written
notice with commission payable for one hundred & eighty (180) days after
the date of termination [on all product shipped and paid for in full prior
to the end of 180 days (Initialed)].
8) Late Charges and Liquidated Damages. If any amount payable to TSI under
this agreement is not received by TSI within ten days of the date that such
amount becomes first due (the "Due Date"), then such amount (the
"Delinquent Amount") will bear interest from and after the Due Date until
paid at an annual rate of interest equal to 25% (the "Default Rate"). In
addition, Manufacturer will also pay to TSI a late payment
collection-processing fee ("Late Fee") in an amount equal to 25% of the
Delinquent Amount to defray the expense incident to the administration,
processing and collection of the Delinquent Amount. Delinquent Amounts and
that the Late Fee is a reasonable estimate by the parties for the actual
amount of damage which will be incurred by Representative to collect
Delinquent Amounts. From time to time, at the option of Representative, the
Late Fee will be immediately payable when first due or will be added to the
unpaid principal balance.
9) Attorney's Fees. If any arbitration, litigation, action, suit or other
proceeding is instituted to remedy, prevent or obtain relief from a breach
of this agreement in relation or pertaining to a declaration of rights
under this agreement the prevailing party shall be entitled to recovery of
all such party or parties' attorneys' fees incurred in each and every such
action, suit or other proceeding, including any and all appeals or
petitions therefrom. As used in this agreement "attorneys' fees" shall be
deemed to be the full and actual costs of any legal services actually
performed in connection with the matters involved, including those related
to any appeal or the enforcement of any judgment, calculated on the basis
of the usual fee charged by attorneys performing such services, and will
not be limited to "reasonable attorneys' fees" as defined in any statute or
rule of court.
10) Amendments/Waivers. This agreement may be amended, supplemented, modified
or rescinded only through an express written instrument signed by all the
parties or their respective successors and assigns.
11) Counterparts. This agreement may be executed in any number of counterparts,
each of which will be deemed to be an original, but all of which together
will constitute one and the same instrument.
12) Severability. Each provision of this agreement is intended to be severable
and if any term or provision herein is deemed invalid or unenforceable for
any reason, such illegality or invalidity will not affect the validity or
the remainder of this agreement and, intent will be given to the invalid or
unenforceable provision.
13) Entire Representative Agreement. This Representation Agreement, together
with all Exhibits and Addendum contains the entire and complete
understanding among the parties concerning its subject matter
Initials Page 2 of 5 Initials
ALL INFORMATION PROPRIETARY, CONFIDENTIAL & PROPERTY OF TRI SYNERGY, INC.
<PAGE>
and all representations, agreements, arrangements and understandings
between the parties, whether oral or written, have been fully merged herein
and are superseded hereby concerning sales, marketing and public relations.
The Distribution Agreement is an entirely separate agreement.
14) Successors. This agreement will be binding upon and inure to the benefit of
the parties and their respective heirs, legatees, legal representatives,
successors and assigns.
15) Arbitration. This agreement will be interpreted in accordance with
Connecticutt law, including all matters of construction, validity,
performance and enforcement, without giving effect to any principles of
conflict of laws. Any dispute or proceeding concerning this agreement will
be resolved by binding arbitration to be held in Norwalk, CT. All parties
waive the right to a trial by jury of any claim or controversy arising
under this agreement. Any party may demand arbitration through written
notice sent by certified mail to the other (an "Arbitration Demand").
Within 15 days after the date that the Arbitration demand is first mailed,
each of the parties will confer to select a mutually acceptable arbitrator
in the state of Connecticut. In the event that neither are able to do so,
then each party shall, within five (5) days following the expiration of
such fifteen (15) day period, select an arbitrator and the two arbitrators,
within five (5) days thereafter, shall select a third arbitrator The venue
for all issues will be the state of Connecticut.
16) Interpretation. The language in all parts of this agreement will be in all
cases construed simply according to its fair meaning and not strictly for
or against any party. Whenever the context requires all words used in the
singular will be construed to have been used in the plural, and vice versa,
and each gender will include any other gender. The captions of the sections
of this agreement are fully incorporated into this agreement by reference.
Unless expressly set forth otherwise herein, all references herein to a
"day," "month" or "year" will be deemed to be a reference to a calendar
day, month or year, as the case may be. No portion of this agreement will
inure to the benefit of any party whatsoever other than the signatories.
All cross-references herein will refer to provisions within this agreement,
and will not be deemed to be references to the overall transaction or to
any other agreement or document.
17) Force Majeure. Neither party shall be liable for any failure to perform
under this Agreement resulting from any case beyond the reasonable control
of that party, including, but not limited to, an act of God; accident;
telephone service provider problem; war; fire; lockout; strike or labor
dispute; riot or civil commotion; act of public enemy; enactment, rule,
order or act of a civil or military authority; or acts or omissions of the
other party.
18) Independent Contractor. Representative is and shall be an independent
contractor. Nothing herein contained in this Agreement shall be construed
so as to create a partnership or joint venture and neither party hereto
shall be liable for the debts or obligations of the other. No employee of
Representative shall be deemed to be an employee of the Manufacturer. The
Manufacturer shall not have the power to hire or fire employees and, except
as expressly provided herein, the Manufacturer may not control or have
access to Representative funds or the expenditure thereof, or in any other
way exercised dominion or control over Representative's business.
IN WITNESS WHEREOF, the parties signing below are legally authorized to and have
elected to execute this agreement as of the date filled in below:
Manufacturer: Eduverse Accelerated Representative: TRI SYNERGY, Inc.
Learning Systems, Inc.
By: Mark Bruk By: Tamra Anne Nestler
Signature: X /s/ Mark Bruk Signature: X /s/ Tamra Anne Nestler
Title: President & CEO Title: President & CEO
Date: March 1, 1999 Date: March 1, 1999
Initials Page 3 of 5 Initials
ALL INFORMATION PROPRIETARY, CONFIDENTIAL & PROPERTY OF TRI SYNERGY, INC.
<PAGE>
Exhibit A
Territory, Accounts, and Commissions
1. Contract Territory. U.S. and Canada.
2. Accounts. Commission will be paid to Tri Synergy, Inc. for all sales
through Navarre and all other distributors or retailers or other accounts
added by name and in writing (or via email) to this Exhibit by both
parties.
3. Commissions and Fees. The parties have agreed that Manufacturer will pay
commissions to Tri Synergy, Inc. on all paid invoices for all sales on a
gross basis.
4. Commission. Commissions of 10% of gross sales will be paid to Tri Synergy,
Inc. on paid invoices for gross sales on all orders accepted and delivered
by Manufacturer, Manufacturer will pay these commission on gross sales with
no deductions whatsoever. Any exclusion to this commission structure will
be made in writing, signed and agreed to by both parties and make part of
Exhibit A. Minimum commissions will be paid of $2.00 per box or $1.00 per
jewel case when normal 10% commission rate is lower than these amounts.
5. Monthly Sales, Marketing and Public Relations Fees and Expenses. A monthly
consulting and public relations fee will be paid to Tri Synergy, Inc. as
defined in Exhibit C in addition to the commissions and expenses. It is
further agreed that once Publisher has more than one title the monthly fee
will be raised to $5000 (five thousand dollars) with the start date to be
mutually acceptable for this increase. This fee for months #4,5 and 6 shall
be paid in advance each month and shall be received by the Boston office of
Tri Synergy, Inc. no later than the 1st day of each month with the first
payment due on the execution date of this Agreement. This monthly fee shall
be paid automatically and not require any invoicing by Tri Synergy, Inc.
Beginning with the seventh month and providing there is sufficient payable
invoices through Distribution (Navarre) the monthly fee shall be deducted
from monies paid from TSI to Eduverse. If during any subsequent month there
are not sufficient funds to deduct the monthly fee, Eduverse agrees to
revert back to the original payment agreement. All sales, marketing and
public relations expenses including but not limited to: mailings,
entertainment, travel, fax broadcasts, wire broadcasts, mileage,
transportation, meals and lodging will be reimbursed or prepaid by
Manufacturer. For reimbursement of expenses, TSI must submit to
Manufacturer an invoice and an expense report including copies of receipts
or credit card statements (cash expenses will not require a receipt),
meeting description and purpose of the trip and a copy of the written or
email pre-approval authorization for the expense. Approximate expense costs
will be submitted for pre-approval in writing or via email to Manufacturer.
It is understood that the approximation is not an exact figure and the
actual expensed amount may be higher or lower than the approximation and
that Manufacturer will pay the actual amount of the expenses incurred. All
pre-approved expenses shall be paid within ten days of invoice. Trade show
fees agreed to in writing or via email shall be paid fourteen days in
advance and require no expense report. Press Tours shall be prepaid at a
rate of $500 (five hundred dollars) per day in addition to airline tickets
and transportation to and from airport and hotel. The $500 per day fee
shall commence on the date of departure to destination city and shall be
paid through the date of departure/return.
6. All payments in relation to this contract will be made in US Dollars.
7. Any and all expenses shall be pre-approved if done so via email, certified
mail, fax or prepayment.
8. Either party can cancel this contract if TSI fails to deliver purchase
orders equal to at least 1000 units within 120 days from product mailing
date.
Initials Page 4 of 5 Initials
ALL INFORMATION PROPRIETARY, CONFIDENTIAL & PROPERTY OF TRI SYNERGY, INC.
<PAGE>
Exhibit B
Product List
Manufacturer hereby authorizes Representative as exclusive agent in the
Territory as defined in Exhibit A of this Manufacturer's Representation
Agreement to sell and market all current and future software product(s). The
following software product(s), and the platform that they are available on, are
being made available to Tri Synergy, Inc. to market and sell by the terms listed
in this Manufacturer's Representation Agreement and the Exhibits hereto. All
other Manufacturer's titles will be automatically added to this list and
additions do not need to be made in writing to be commissionable.
All titles released by Manufacturer within the term of this contract will be
included in this contract. Initial titles will be:
CD ROM/ 3.5
ENGLISH Pro 6.2 Shrink Wrapped Product
Initials Page 5 of 5 Initials
ALL INFORMATION PROPRIETARY, CONFIDENTIAL & PROPERTY OF TRI SYNERGY, INC.
<PAGE>
Exhibit C
Monthly fee payment schedule:
-------------------- ------------ --------------------
Prepaid Payment out of
Period / Date Payment Sell Through
-------------------- ------------ --------------------
Month 1 $4,000 $3,000
-------------------- ------------ --------------------
Month 2 $0 $3,000
-------------------- ------------ --------------------
Month 3 $2,000 $3,000
-------------------- ------------ --------------------
Month 4 $4,000 $0
-------------------- ------------ --------------------
Month 5 $4,000 $0
-------------------- ------------ --------------------
Month 6 $4,000 $0
-------------------- ------------ --------------------
Month 7 $0 $4,000
-------------------- ------------ --------------------
Month 8 $0 $4,000
-------------------- ------------ --------------------
Month 9 $0 $4,000
-------------------- ------------ --------------------
Month 10 $0 $4,000
-------------------- ------------ --------------------
Month 11 $0 $4,000
-------------------- ------------ --------------------
Month 12 * $0 $4,000
-------------------- ------------ --------------------
* All subsequent months will be at the month 12 rate unless some new rate
applies. Per Exhibit A, once Eduverse has more than one title for TSI to
represent the monthly rate increases to $5000. All funds are USD.
Initials Page 6 of 5 Initials
ALL INFORMATION PROPRIETARY, CONFIDENTIAL & PROPERTY OF TRI SYNERGY, INC.
<PAGE>
TSI Distribution Agreement
By and Between
Tri Synergy, Inc. (Hereafter known as TSI or Representative) of
91 Westland Ave., Suite 330
Boston, MA 02215
And
Eduverse Accelerated Learning Systems, Inc. (Hereafter known as Manufacturer) of
1135 Terminal Way, Suite 209
Reno, Nevada 89502
For Distribution through Navarre Corporation (Hereafter known as Distributor/s)
1) Fees and Commissions. This agreement will confirm that Manufacturer agrees
to pay TSI an initial fee of $1000.00 (one thousand dollars) per product,
per distributor, once distributor is approved in writing by Manufacturer,
in addition to a 15% (fifteen percent) commission on gross sales as defined
herein for arranging the distribution of products (See Attachment A)
through Distributor. Manufacturer agrees to pay an initial fee of $1000.00
for each product. The initial fee of $1000 per product shall be prepaid
upon contract execution or the addition of each new product, as applicable.
Manufacturer understands and acknowledges that the distribution fee and the
distribution commissions are entirely separate from the sales commissions
and fees as contained in the Manufacturer's Representation Agreement. In
the event that Manufacturer chooses to distribute to Ingram through TSI a
fee of $1000 per month shall be paid in advance by Manufacturer to Ingram.
The commission percentage is applied to "gross sales" which, for the
purpose of this Agreement shall be defined as the wholesale price to the
Distributor and shall be paid on all product shipped on a gross basis. It
is in addition to all other deductions and from time to time may request
additional percentage discounts and/or marketing allowances for specific
retailers. Once approved in writing by the Manufacturer all contract
deductions and marketing requests will be the sole responsibility of the
Manufacturer and are in addition to the initial fees and the commission.
2) Purchase Orders and Freight. Distributor will issue purchase orders to TSI
and TSI will forward via fax to Manufacturer. Manufacturer will then
initial and return the purchase order via fax to TSI (617) 267-1576 Attn.:
Shane Nestler. Manufacturer is responsible for all freight charges.
Manufacturer shall follow attached Distributor Routing Guide(s). All
purchase orders must be shipped freight prepaid by Manufacturer (F.O.B.
destination) and must be received by the due date referenced on the
purchase order. A packing list showing Distributor purchase order number,
quantity ordered, quantity shipped and a detailed identification of the
products must accompany all shipments. Any violation of Distributor Routing
Guide (attached) or inaccuracy of freight or date of receipt will result in
penalties and/or charges by Distributor and will be the sole responsibility
of the Manufacturer. Manufacturer shall furnish to TSI proof of delivery of
each shipment along with a copy of the applicable purchase order within ten
(10) business days following the date of shipment.
3) Product Submission Forms. Upon the request of TSI Manufacturer will fill
out a Product Submission Form for each product with UPC code, dimensions,
weight and case pack quantity. Any violation or inaccuracy of these items
will result in penalties and/or charges by Distributor and will be the sole
responsibility of the Manufacturer. Once a Product Submission Form is
submitted to TSI by Manufacturer said product will be considered added to
the Attachment A, Product List and all Agreement terms apply.
4) Returns. In the event of any returns by customers or retailers of any
defective or incomplete products under this agreement TSI shall deduct a
$1.25 handling fee per product returned. Manufacturer is responsible for
all return freight for all returned product in addition to the returns
handling fee.
Confidential Page 1 02/23/99
<PAGE>
5) Payments. All Distributor and Retail deductions will be in turn deducted
from payments to Manufacturer. All TSI Distributor contracts have Net 60
terms. Manufacturer acknowledges that these are the contractual terms and
not the actual payment terms. Actual payment terms depend on multiple
variables such as: sales, placement, cash flow, history and season. TSI
will remit payment (less TSI commission, price protections, returns,
defectives, Distributor contract deductions and Retail marketing, co-op,
rebated and contractual deductions) to Manufacturer within ten business
days of receipt of payment from Distributor. No funds are due Manufacturer
unless Distributor makes payment to TSI.
6) Contact. Manufacturer agrees to have no direct contact with Distributor and
to direct all questions to TSI.
7) Factoring. Manufacturer agrees not to factor TSI, Navarre, Ingram or GT
invoices or purchase orders without the express written consent of TSI.
8) Advertising & Marketing. Manufacturer is responsible for all advertising
and/or marketing costs involved with Distribution and sale of their
products. All Retail marketing approved by Manufacturer must be paid in
advance by Manufacturer unless otherwise agreed to in writing by TSI.
Manufacturer will supply TSI and/or Distributor with promotional samples at
no charge as requested by TSI.
9) Technical Support. Manufacturer recognizes and agrees to provide the
customers and retailers with technical support at Manufacturers expense.
10) Distributor Bankruptcy. In the event that a Distributor or Retailer should
declare any type of bankruptcy, TSI is indemnified and held harmless by
Manufacturer. TSI is only required to pay Manufacturer on invoices paid by
Distributor to TSI. If invoices are uncollected or uncollectable due to
insolvency or bankruptcy of distributor, TSI is released from all financial
obligations on effected invoices. However, monies or a portion of monies
are still due if any bankruptcy settlement is made in the future with
appropriate percentage discounts applied. TSI will make best efforts to
file claims and to collect on outstanding invoices as are permitted under
applicable bankruptcy laws.
11) End User Claims. Manufacturer shall have sole and exclusive responsibility
for the intellectual content of the Product. Manufacturer shall defend,
indemnify and hold harmless TSI from and against any and all claims,
demands, actions, suits and liabilities, including attorney fees,
arbitration or court costs, arising out of the intellectual content of the
Product as it appears on the CD ROM or other media as delivered to TSI or
its customers from the Manufacturer. Manufacturer shall have sole and
exclusive responsibility for the quality, merchantability and fitness of
the physical Product including but not limited to the software.
Manufacturer shall defend, indemnify and hold harmless TSI from and against
any and all claims, demands, actions, suits and liabilities, including
attorney fees, arbitration or court costs, arising out of any Product
defect or omission in the computer program or documentation.
12) Indemnity, Warranty and Infringement of Proprietary Rights. Manufacturer
warrants and represents that it owns all proprietary rights to, or is
otherwise entitled to grant the licenses and rights for all of the matters
covered under this agreement. Manufacturer shall defend, indemnify and hold
harmless TSI from and against any and all claims, demands, actions, suits
and liabilities, including attorney fees and arbitration or court costs,
arising out of any assertion that any proprietary interest licensed under
this agreement infringes upon the proprietary interest of another relating
to distributed Product.
Manufacturer or its agent shall immediately notify TSI of any "bugs" or
other program errors, which comes to its attention.
13) Partial Invalidity. If any term or provision of this Agreement or the
application thereof of any person or circumstance shall to any extent be
held invalid or unenforceable, the remainder of this Agreement
Confidential Page 2 02/23/99
<PAGE>
or the application of such term or provision to such person or
circumstances other than those to which it has been held unenforceable
shall not be affected thereby, and each term and provision of this
Agreement shall be valid and enforced to the fullest extent of the law.
14) Independent Business. Nothing contained herein shall be deemed or construed
as creating a joint venture or partnership by and between the parties.
15) Attorneys' Fees. In any action between the parties to enforce any of the
terms of this Agreement or any other contract relating to this Agreement,
the prevailing party shall be entitled to recover costs and expenses,
including reasonable attorneys' fees.
16) Entire Agreement for Distribution. This Distribution Agreement,
incorporating "Attachment A" and any subsequent duly authorized
addendum(s), is the entire agreement of the parties. Any modification shall
be in writing signed by both parties. The un-enforceability of any
provision(s) of this agreement shall not invalidate the remaining
provisions of this agreement. Either parties without the written consent of
both parties may not assign this Agreement. Any assignment by either party
without the other party's consent shall be void. This contract is for
Distribution only; the Sales contract is entirely separate.
17) Arbitration. If at any time during the term of this Agreement any dispute,
difference, or disagreement shall arise upon or in respect of the
Agreement, and/or the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed
upon by the parties, or if no single arbiter can be agreed upon, an arbiter
or arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall
be settled by arbitration in accordance with the then prevailing commercial
rules of the American Arbitration Association, and judgment upon the award
rendered by the arbiter may be entered in any court having jurisdiction
thereof. This Agreement shall be governed by and construed in accordance
with the laws of the State of Connecticut. The parties hereto consent to
the jurisdiction and venue of the State of Connecticut and the County of
Fairfield, Connecticut.
18) Term and Termination of Agreement. This term of this Agreement is for one
(1) year and will automatically renew on an annual basis on the anniversary
date unless either party gives 90 (ninety) day written notice. The
Agreement can only be terminated during the initial one-year period if both
the Manufacturer and TSI agree in writing.
19) Notice. Any notice provided for in this agreement shall be in writing, sent
by certified or registered mail to the address of the party reflected in
this, or to such other address for which notice is given under this
agreement. If sent by mail, notice shall be effective upon receipt.
20) Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one of the same instrument. This Agreement may be executed
by telecopied or faxed signatures with the same effect as original
signatures.
I have read this agreement and agree to abide by its terms and conditions:
Manufacturer: Eduverse Accelerated Tri Synergy, Inc.
Learning Systems, Inc.
Signature: /s/ Mark Bruk Signature: /s/ Tamra Nestler
-------------------------- ---------------------
Hereunto duly authorized Hereunto duly authorized
Print Name: Mark Bruk Print Name: Tamra Nestler
Title: President & CEO Title: President & CEO
Date: March 1, 1999 Date: March 1, 1999
Confidential Page 3 02/23/99
<PAGE>
Attachment A
Distribution contract product list:
ENGLISH Pro 6.2 Shrink Wrapped Product
Confidential Page 4 02/23/99
EXHIBIT 6.12
BOSWELL - ESL PRO SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT made as of the 7th day of May, 1998
BETWEEN:
ESL PRO SYSTEMS INC., a Nevada company having an office at 1135 Terminal
Way, Suite 209, Reno, Nevada 89502
(hereinafter referred to as "ESL Pro")
OF THE FIRST PART
AND:
BOSWELL INTERNATIONAL TECHNOLOGIES LTD., a British Columbia company having
an office at 415 South Tower, 5811 Cooney Road, Richmond, British Columbia,
Canada V6X 3M1
(hereinafter referred to as "Boswell International")
AND:
BOSWELL INDUSTRIES INC., a British Columbia company having an office at 415
South Tower, 5811 Cooney Road, Richmond, British Columbia, Canada V6X 3M1
(hereinafter referred to as "Boswell Industries")
(Boswell International and Boswell Industries are hereinafter collectively
referred to as "Boswell")
OF THE SECOND PART
WHEREAS Boswell has developed and owns certain computer software;
AND WHEREAS ESL Pro desires to develop, distribute and sublicense software
products based on Boswell's software and Boswell is willing to grant to ESL Pro
an exclusive worldwide right to develop and distribute such software products on
the terms and conditions set out in this Agreement.
NOW THEREFORE, in consideration of these premises and the mutual covenants
contained in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Boswell - ESL Pro Software License Agreement
Page 1
<PAGE>
1. INTERPRETATION
1.1 Definitions. In this Agreement, the following words and phrases shall have
the following meanings:
(a) "Derived Works" shall mean any work based on the Software and/or
Documentation which work contains code from the Software and/or text
from the Documentation, including:
(i) any revision, modification, translation, abridgement,
condensation, expansion, or any other form in which the
Software and/or Documentation may be recast, transformed, or
adapted,
(ii) any work consisting of editorial revisions, annotations,
elaborations or other modifications to the Software and/or
Documentation which, as a whole, represent an original work
of authorship,
(iii) any product in Object Code Form derived from any Derived
Works, and
(iv) any literature and other materials that together or
separately are provided by ESL Pro to End Users that specify
or describe the functions, characteristics, performance,
structure, sequence, organization and operation of the
Derived Works;
Derived Works shall not include any software or documentation that ESL
Pro can establish:
(i) is developed by or for ESL Pro independent of the Software
and Documentation, or
(ii) is licensed or sub-licensed by ESL Pro from a third party;
(b) "Documentation" shall mean the literature, programmer's notes and
other materials set out in Schedule A to this Agreement provided by
Boswell to ESL Pro that specify, describe or otherwise relate to the
functions, characteristics, performance, structure, sequence,
organization and operation of the Software;
(c) "Effective Date" shall mean the 7th day of May, 1998;
(d) "End User" shall mean the ultimate user of the Software or Derived
Works and who has obtained such Software or Derived Works pursuant to
a sublicence agreement;
(e) "Initial Term" shall mean the nine (9) year, five (5) month period
commencing on the Effective Date and ending on September 30, 2007;
Boswell - ESL Pro Software License Agreement
Page 2
<PAGE>
(f) "Market" shall mean the English as a Second Language market;
(g) "Object Code Form" shall mean a form of computer software resulting
from the translation of processing of the Source Code Form of such
software by a computer into machine language or intermediate code,
which is in a form that would not be convenient to human understanding
of the program logic, but is appropriate for execution or
interpretation by a computer;
(h) "Recognized Stock Exchange" shall mean any recognized public market
for the securities of the company, including but not limited to, the
NASD Bulletin Board market in the United States.
(i) "Renewal Term" shall mean any renewal term as set out in section 10.2;
(j) "Reseller" shall mean any original equipment manufacturer (OEM),
dealer, reseller, distributor or other entity authorized by ESL Pro to
distribute and sublicence the Software or Derived Works to
subdistributors or End Users;
(k) "Software" shall mean the computer software described in Schedule A to
this Agreement, including any modifications, enhancements or upgrades
thereto developed by Boswell; and
(1) "Source Code Form" shall mean a form of computer software in which a
computer program's logic is easily deduced by a human being with skill
in the art, such as a printed listing of the program or a form from
which a printed listing can be easily generated.
2. GRANT OF LICENCE
2.1 Software Distribution Licence. Boswell hereby grants to ESL Pro, and ESL
Pro hereby accepts, subject to the terms and conditions of this Agreement,
the exclusive worldwide right to use, manufacture, copy, distribute, sell,
market, lease, rent, operate, service and otherwise commercialize and
exploit the Software, directly and through Resellers, in Object Code form,
and the Documentation in the Market, with the right to exploit the same as
a part of a Derived Work in the Market for the Initial term and any Renewal
Terms thereafter.
2.2 Software Development Licence. Boswell hereby grants to ESL Pro, and ESL Pro
hereby accepts, subject to the terms and conditions of this Agreement, the
exclusive worldwide right to use, copy, revise, modify, translate,
condense, expand, develop, add to, subtract from, change, improve, maintain
and otherwise develop Derived Works from the Software and the
Documentation, in either Object Code Form or Source Code Form, for the
Initial Term and any Renewal Terms thereafter in the Market.
2.3 Right of First Refusal. Boswell hereby grants to ESL Pro, and ESL Pro
hereby accepts, a right of first refusal to use, manufacture, copy,
distribute, sell, market,
Boswell - ESL Pro Software License Agreement
Page 3
<PAGE>
lease, rent, operate, service and otherwise commercialize and exploit the
Software, in Object Code Form, and the Documentation at a royalty rate to
be determined at the time the right is exercised, in the following markets
not included in the Market:
(a) Japanese as a Second Language;
(b) Spanish as a Second Language;
(c) French as a Second Language;
(d) Chinese as a Second Language; and
(e) any other languages being taught as a Second Language.
3. OWNERSHIP OF SOFTWARE AND DERIVED WORKS
3.1 Software. Subject to the terms and conditions of this Agreement, Boswell
shall retain all right, title and interest in and to the Software and the
Documentation and ESL Pro shall not have any ownership interest in any
element, segment or component of the Software or the Documentation.
3.2 Derived Works. Subject to the terms and conditions of this Agreement, ESL
Pro shall retain all right, title and interest in and to all Derived Works
developed by or for ESL Pro, ESL Pro shall retain all right, title and
interest in any patents, trademarks and copyrights awarded to ESL Pro in
respect of such Derived Works, and Boswell shall not have any ownership
interest in any element, segment or component of the Derived Works
developed by or for ESL Pro.
4. DELIVERY OF SOFTWARE
4.1 Delivery of Software. Boswell shall deliver to ESL Pro one (1) complete
copy of the Software, in Source Code Form and in Object Code Form, and the
Documentation, as set out in Schedule A, on or before the date of execution
of this Agreement.
4.2 Delivery of Modifications. Boswell will provide to ESL Pro, at no charge,
copies of any modifications, enhancements or upgrades of the Software and
the Documentation, in both Source Code Form and Object Code Form, which it
may develop. All such modifications, enhancements or upgrades shall form a
part of the Software and the Documentation, as applicable, licensed to ESL
Pro under this Agreement.
Boswell - ESL Pro Software License Agreement
Page 4
<PAGE>
5. PAYMENTS
5.1 Royalties. ESL Pro will pay to Boswell during each year of the Initial
Term, the royalties set out in Schedule B to this Agreement, in accordance
with the schedule set out therein.
5.2 Minimum Royalties. ESL Pro will pay to Boswell the minimum royalties for
each year of the Initial Term, as set out in Schedule B to this Agreement.
Minimum royalties paid by ESL Pro to Boswell in respect of any year shall
be credited against royalties payable by ESL Pro for such year under
section 5.1.
5.3 Share Issuance. Within twenty-eight (28) days of the signing of this
Agreement, ESL Pro will deliver to Boswell three hundred and sixty three
thousand and six hundred (363,600) Common Shares in ESL Pro representing
eighteen point eighteen percent (18.18%) of the total number of issued and
outstanding common shares of all classes of ESL Pro. At no time, prior to
ESL Pro being listed on a Recognized Stock Exchange as contemplated in
section 5.4, shall Boswell's equity interest in the issued and outstanding
share capital of ESL Pro be less than eighteen point eighteen percent
(18.18%) of the total number of issued and outstanding common shares of all
classes of ESL Pro. Upon any issuance of common shares in ESL Pro, ESL Pro
will issue to Boswell, at no cost to Boswell, a pro-rata number of Common
Shares that would bring Boswell's equity interest in the issued and
outstanding share capital of ESL Pro to eighteen point eighteen percent
(18.18%) of the total number of issued and outstanding common shares of all
classes of ESL Pro.
5.4 Right of First Refusal to Purchase Shares. If at any time prior to the
listing and posting of the shares of ESL Pro on a Recognized Stock
Exchange, Boswell desires to sell or transfer any of the shares in ESL Pro
delivered to Boswell pursuant to this Agreement, ESL Pro shall have a right
of first refusal to purchase the shares in ESL Pro proposed to be sold by
Boswell. Notwithstanding the foregoing, in any calendar year prior to the
listing and posting of the shares of ESL Pro on a Recognized Stock
Exchange, Boswell may sell or transfer no more than a total of one third of
the total number of shares in ESL Pro held by it during such year or as the
Recognized Stock Exchange may require.
5.5 Redemption Fee. ESL Pro may redeem the shares in ESL Pro delivered to
Boswell pursuant to this Agreement in the event that Boswell breaches its
obligation of non-competition under section 9.1 or if Boswell is unable to
license the Software or Documentation under section 12.1, for a price of
US$0.01 per share. Upon redemption of such shares, all other provisions of
this Agreement not affected by the redemption of the shares held by Boswell
shall remain in full force and effect.
5.6 Elimination of Royalties. ESL Pro's royalty obligations under sections 5.1
and 5.2 shall immediately cease if Boswell breaches its obligation of
non-competition under section 9.1.
Boswell - ESL Pro Software License Agreement
Page 5
<PAGE>
5.7 Assumption of Patent Prosecutions. Boswell shall permit ESL Pro to assume
prosecution of all patent applications filed in Canada or in the United
States, by Boswell, in respect of the Software and the cost of maintaining
and prosecuting such patent applications shall be deducted from future
royalty payments to be made by ESL Pro under section 5.1, notwithstanding
the year in which any such cost is incurred. Nothing in this section 5.7
shall affect ESL Pro's obligation to make minimum royalty payments under
section 5.2.
5.8 Quarterly Reports. ESL Pro will submit to Boswell quarterly reports along
with any corresponding royalty fees as specified in Schedule B. Such
reports will identify the type and quantities of Software or Derived Works
distributed by ESL Pro during the calendar quarter. Such reports and
payments will be due within thirty (30) days after each calendar quarter
end and will be submitted even if no reportable transactions occurred
during the quarter covered by the report. Upon request of Boswell, ESL Pro
will provide End Users' name, quantities of Software or Derived Works
licensed and date of shipment if available. The report will also include
the units of Software or Derived Works in ESL Pro's possession. ESL Pro
will maintain, and make available for review and copying by Boswell and its
representatives upon reasonable notice during normal business hours, all
relevant records of ESL Pro's Software or Derived Works transactions.
Within ninety (90) days after the end of ESL Pro's fiscal year, ESL Pro
will certify to Boswell in writing the quantities of the Software or
Derived Works licensed during the fiscal year then ended. This
certification will be provided by an executive officer of ESL Pro, its
corporate internal auditors, or its independent certified public
accountants.
6. TRADEMARKS
6.1 Ownership of Trademarks. ESL Pro acknowledges and agrees that Boswell is
the sole and exclusive owner of the trademark "Boswell" (the "Trademark")
and that Boswell is the exclusive licensing agent thereof.
6.2 Trademark Licence. Boswell hereby grants to ESL Pro a non-exclusive,
worldwide, royalty-free licence (without the right to sublicense) to use
the Trademark to refer to the Software, the Documentation or any Derived
Works, provided that ESL Pro will ensure that the character and quality of
the Software, the Documentation and the Derived Works will be similar to or
better than the Software and the Documentation currently marketed by
Boswell. ESL Pro shall have no other rights in respect of the Trademarks.
In accepting the licence to use the Trademark granted hereunder, ESL Pro
shall have no obligation to use the Trademark, and the parties acknowledge
that any use of the Trademark by ESL Pro shall be entirely voluntary.
6.3 Proprietary Notices. ESL Pro shall ensure that all copies of the Software,
the Documentation and the Derived Works that use the Trademark shall be
accompanied, where reasonable and appropriate, by a proprietary notice
consisting of the following elements:
Boswell - ESL Pro Software License Agreement
Page 6
<PAGE>
(a) the statement "Boswell" is a proprietary trademark of Boswell
International Technologies Ltd., and is licensed to ESL Pro
Development Inc."; and
(b) the "TM" or "R" symbol, as instructed by Boswell, after the first
prominent use of the Trademark in the Software, the Documentation and
the Derived Works. ESL Pro shall have a period of thirty (30) days in
which to begin the use of "R" symbol in replacement of the "TM" symbol
upon receiving instruction to do so by Boswell.
6.4 Inspection of Trademark Use. Upon reasonable notice and request from
Boswell, ESL Pro agrees to provide to Boswell:
(a) reproductions of any "splash screens", "about boxes" and other
notices, copyrights, trademarks, and logos used by ESL Pro in respect
of the Software, the Documentation or the Derived Works; and
(b) copies of the Software, the Documentation and the Derived Works, in
Object Code Form only;
(c) any advertising and promotional materials on which the Trademark is
used
so that Boswell may inspect same and monitor ESL Pro's compliance with the
provisions of sections 6.2 and 6.3, but for no other purpose may Boswell
use this right.
6.5 Protection and Infringement. ESL Pro agrees to cooperate with and assist
Boswell in obtaining, maintaining, protecting, enforcing and defending
Boswell's proprietary rights in and to the Trademark. In the event that ESL
Pro learns of any infringement, threatened infringement or passing-off in
respect of the Trademark, or that any third party claims or alleges that
the Trademark infringes the right of the third party or is otherwise liable
to cause deception or confusion to the public, ESL Pro shall promptly
notify Boswell giving the particulars thereof. In the event Boswell decides
that proceedings should be commenced, ESL Pro shall provide Boswell with
any necessary information and reasonable assistance.
Each party undertakes to cooperate fully with the other in any action
against any infringer of the Trademark. ESL Pro, in its absolute
discretion, may notify Boswell that it wishes Boswell to join with ESL Pro
in taking steps to end such infringement including legal proceedings in the
parties' joint names. Upon agreement between the parties as to the
proportions in which they shall share the costs thereof, such steps will be
taken. In the event of joint proceedings being taken and damages being
awarded, the costs of the proceedings so far as not recoverable in the
proceedings shall be shared by the parties in the same proportion as they
are awarded damages. If the parties fail to agree as to the proportions in
which they shall share the costs thereof, ESL Pro may, in its absolute
discretion and at its expense, take steps to end such infringement
including legal proceedings in the parties' joint names, so long as ESL Pro
pays Boswell's costs in taking such steps.
Boswell - ESL Pro Software License Agreement
Page 7
<PAGE>
It is understood that ESL Pro has no obligation to incur any costs for
protection of infringement of the Trademark, unless it chooses to.
7. REPRESENTATIONS AND WARRANTIES
7.1 Boswell's Representations and Warranties. Boswell represents and warrants
that:
(a) it holds the entire right, title and interest in and to the Software
and the Documentation, free and clear of the claims and interests of
any third party;
(b) it has the right and power to license on an exclusive basis the
Software and the Documentation;
(c) it has filed applications for patent protection in Canada in respect
of the Software; and
(d) the execution and delivery of this Agreement does not violate or
constitute a breach of the terms of any agreement, document, charter
or by-laws to which Boswell is a party or otherwise bound.
8. ESCROW
8.1 Escrow of Derived Works. Subject to the negotiation of an escrow agreement
satisfactory to both parties, ESL Pro agrees to place in escrow with a
mutually agreeable escrow agent, one (1). copy of each Derived Work
developed by or for ESL Pro under this Agreement, in Source Code Form. ESL
Pro agrees to update the currency of the Derived Works held in escrow for
each major revision of the Derived Works, provided that ESL Pro shall not
be required to updates more than two (2) times per year.
8.2 Escrow Agreement. ESL Pro and Boswell agree to negotiate in good faith, the
terms and conditions of an escrow agreement pursuant to section 8.1.
9. NON-COMPETITION
9.1 Covenant Not to Compete. During the Initial Term and any Renewal Term,
Boswell shall not sell, sublicence, manufacture, lease, distribute or
otherwise provide or promote any software products derived from or
providing a similar functionality to the Software in the Market, either
directly or indirectly, nor assist any other person in doing so, except
with the written consent of ESL Pro.
9.2 For the purposes of this Section, "Identifiers" for any software shall mean
the software's packaging, trademarks, marketing materials, promotions,
advertising, product name, the displays in the software itself and the
software's documentation
Boswell - ESL Pro Software License Agreement
Page 8
<PAGE>
with the sole exception that Identifiers are not to include the trademark
BOSWELL. With respect to Boswell licensing the Software to other licensees,
for teaching English, Boswell will ensure that the following language will
appear in the license and sublicense agreements and shall enforce same (as
per section 9.3:
1. except to the extent required by law, the Identifiers for the Software
contain no foreign language content and no references to foreign
languages;
2. each of the Identifiers for the Software shall be expressly targeted
at a market other than English as a Second Language, and
3. the Software and Identifiers shall appear to reasonable consumers of
such product to be for use for markets other than English as a Second
Language.
Boswell shall ensure direct and indirect compliance with this Section by
itself and all Boswell's licensees and sub-licensees by obtaining the
agreement of such parties for the benefit of Boswell and ESL Pro, to be
bound by these Sections 9. 1 and 9.2 and to obtain such covenants from any
further sub-licensees within all license agreements with all such parties.
9.3 Enforcement. Boswell agrees to cooperate with and assist ESL Pro in
maintaining, protecting, enforcing and defending ESL Pro's proprietary
rights in and to the Software and Documentation in the Market. In the event
that Boswell learns of any infringement, threatened infringement or
passing-off in respect of the Software or Documentation Boswell shall
promptly notify ESL Pro giving the particulars thereof. In the event ESL
Pro decides that proceedings should be commenced, Boswell shall provide ESL
Pro with any necessary information and reasonable assistance.
Each party undertakes to cooperate fully with the other in any action
against any infringer of the Software or Documentation in the Market. ESL
Pro, in its absolute discretion, may notify Boswell that it wishes Boswell
to join with ESL Pro in taking steps to end such infringement including
legal proceedings in the parties' joint names. Upon agreement between the
parties as to the proportions in which they shall share the costs thereof,
such steps will be taken. In the event of joint proceedings being taken and
damages being awarded, the costs of the proceedings so far as not
recoverable in the proceedings shall be shared by the parties in the same
proportion as they are awarded damages. If the parties fail to agree as to
the proportions in which they shall share the costs thereof, ESL Pro may,
in its absolute discretion and at its expense, take steps to end such
infringement including legal proceedings in the parties' joint names, so
long as ESL Pro pays Boswell's costs in taking such steps.
It is understood that Boswell has no obligation to incur any costs for
protection of infringement of the Software or Documentation in the Market,
unless it chooses to.
ESL Pro shall have the right to audit the records of Boswell and its
licenses on reasonable notice to ensure compliance with sections 9.1, 9.2
and 9.3.
Boswell - ESL Pro Software License Agreement
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<PAGE>
10. TERM AND TERMINATION
10.1 Initial Term. This Agreement shall commence on the Effective Date and shall
continue through the Initial Term and each subsequent Renewal Term, if any.
10.2 Renewal Terms. This Agreement will be renewed automatically for 3 (three)
consecutive ten-year (10) periods (the "Renewal Terms") on the same terms
and conditions as are set out herein, except for price and payment terms,
as provided elsewhere in this Agreement.
10.3 Termination. This Agreement may be terminated:
(a) by either party, immediately, in the event any assignment is made by
the other party for the benefit of creditors, or if a receiver,
trustee in bankruptcy or similar officer shall be appointed to take
charge of any or all of the other party's property, or if the other
party files a voluntary petition under federal bankruptcy laws or such
petition is filed against the other party and is not dismissed within
one hundred and twenty (120) days;
(b) by Boswell, on thirty (30) days written notice, in the event ESL Pro
fails three (3) times, during the Initial Term or a single Renewal
Term, to make a royalty payment under section 5.1 or a minimum royalty
payment under section 5.2, and fails to cure such breach within ninety
(90) days of receipt of written notice thereof;
(c) by Boswell, on thirty (30) days written notice, in the event ESL Pro
issues any common shares in ESL Pro, which would dilute the equity
position in ESL Pro owned by Boswell, and fails to cure such condition
within ninety (90) days of receipt of written notice thereof;
(d) by ESL Pro, on ninety (90) days written notice, at any time after the
third anniversary of the Effective Date; and
(e) on notice by Boswell on the third anniversary of the Effective Date,
if:
(i) ESL Pro is not a publicly traded company on a Recognized
Stock Exchange, and
(ii) ESL Pro elects not to offer to redeem the Common Shares in
ESL Pro, held by Boswell, at one-hundred and thirty-three
percent (133%) of their fair market value, which fair market
value is to be determined by the auditors of ESL Pro as of
the third anniversary of the Effective Date. It is agreed by
both parties that the fair market value assessment of the
Common Shares of ESL Pro will be completed by the auditors
of ESL Pro within ninety (90) days of the third anniversary
of the Effective Date.
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<PAGE>
With respect to the period of the notice set out in this section (e),
in the event that, on the third anniversary of the Effective Date:
(i) ESL Pro has made application to a Recognized Stock Exchange
for listing on such stock exchange, the period for cure
after the notice shall be one hundred and eighty (180) days,
and,
(ii) ESL Pro has not made such an application, the period for
cure after the notice shall be thirty (30) days.
10.4 Effect of Termination. Upon expiration or earlier termination of this
Agreement for any reason:
(a) all rights, obligations and licences of the parties hereunder shall
cease, except that:
(i) ESL Pro's liability for any charges, payments or expenses
due to Boswell which accrued prior to the termination date
shall not be extinguished by termination, and such amount
(if not otherwise due on an earlier date), shall be
immediately due and payable on the termination date, and
(ii) ESL Pro shall have the right to distribute and sell all
copies of the Software and the Documentation in its
inventory on the date of such termination or expiration
provided that ESL Pro complies with the terms and conditions
of this Agreement related to the distribution thereof;
(b) ESL Pro shall deliver to Boswell, at ESL Pro's expense
(i) all originals and copies of the Software and the
Documentation in the possession or under the control of ESL
Pro or any affiliate, and
(ii) all materials in the possession of ESL Pro that display any
trademark, trade name or other proprietary mark of Boswell.
ESL Pro shall certify in writing to Boswell within ten (10) days
following termination that it has complied with this subsection (b);
and
(c) the sublicences granted under this Agreement by ESL Pro to End Users
or Resellers (solely with respect to existing inventory of the
Reseller) prior to termination shall not be affected by the
termination of this Agreement, so long as such End Users or Resellers
are not in breach of their sublicence agreements with ESL Pro and
agree to owe all further obligations thereunder directly to Boswell.
Boswell - ESL Pro Software License Agreement
Page 11
<PAGE>
10.5 Release of Derived Works. Upon any early termination of this Agreement
under subsection 10.3(a), where terminated by Boswell, or subsections
10.3(b) through 10.3(e), the Derived Works held in escrow under section
8.1, if any, shall be released to Boswell and ownership of all patents,
trademarks and copyrights awarded to ESL Pro in respect of the Derived
Works, to the extent owned by ESL Pro, shall be transferred to Boswell.
11. CONFIDENTIALITY
11.1 Proprietary Information. Boswell and ESL Pro agree and acknowledge that in
order to further the performance of this Agreement, they will be required
to disclose to each other certain of their respective confidential
information which will be identified as such in writing ("Confidential
Information"). The Source Code Form of the Software and the Documentation,
whether or not it is identified in writing as "Confidential Information",
shall be deemed the Confidential Information of Boswell under this
Agreement.
11.2 Protection of Property Information. Each party agrees to take all
reasonable steps to protect, in perpetuity, the confidentiality of the
other party's Confidential Information with at least the same degree of
care that it utilizes with respect of its own similar proprietary
information.
(a) not to disclose or otherwise permit any other person or entity access
to, in any manner, the Confidential Information of the other party or
any part thereof, in any form whatsoever, except to its employees (or
in the case of ESL Pro, a Reseller) requiring access to such
Confidential Information in the course of his or her employment in
connection with this Agreement or a Reseller sublicence agreement and
who has signed an agreement obligating the employee or the Reseller to
maintain the confidentiality of such Confidential Information;
(b) to notify the other party promptly and in writing of the circumstances
surrounding any suspected possession, use or knowledge of the such
party's Confidential Information or any part thereof at any location
or by any person or entity other than those authorized by this
Agreement; and
(c) not to use the Confidential Information of the other party for any
purpose other than as explicitly set forth in this Agreement.
11.3 Exceptions. Nothing in this article 11 shall restrict the receiving party
from disclosing the Confidential Information of the other party, if such
Confidential Information:
(a) was rightly possessed by the receiving party before it was received
from the disclosing party;
Boswell - ESL Pro Software License Agreement
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<PAGE>
(b) is independently developed by the receiving party without reference to
the disclosing party's Confidential Information;
(c) is subsequently furnished to the receiving party by a third party not
under any obligation of confidentiality with respect to such
Confidential Information, and without restrictions on use or
disclosure; or
(d) is or becomes public or available to the general public otherwise than
through any act or default of the receiving party.
12. INDEMNIFICATION
12.1 Indemnification for Infringement. Except as provided below, Boswell shall
defend and indemnify ESL Pro from and against any damages, liabilities,
costs and expenses (including reasonable attorney's fees) arising out of
any claim that the Software or the Documentation infringes any valid patent
or copyright or misappropriates a trade secret of a third party, provided
that:
(a) ESL Pro shall have promptly provided Boswell with written notice
thereof and reasonable cooperation, information, and assistance in
connection therewith; and
(b) Boswell shall have sole control and authority with respect to the
defence, settlement, or compromise thereof.
Should any Software or Documentation become or, in Boswell's
reasonable opinion, be likely to become the subject of an injunction
preventing its use as contemplated in this Agreement, Boswell may, at
its option:
(c) procure for ESL Pro the right to continue using such Software or
Documentation; or
(d) replace or modify such Software or Documentation so that it becomes
non-infringing.
If the remedies provided under subsections (c) and (d) are not
reasonably available to Boswell, the ESL Pro may, at its sole option:
(e) terminate the Agreement and redeem the shares in ESL Pro delivered to
Boswell pursuant to this Agreement, for a price of US$0.01 per share
(see section 5.5)..
Any damages, liabilities, costs and expenses (including reasonable
attorney's fees) incurred by ESL Pro as a result of a valid action
against the Software or Documentation, shall be deducted from future
royalty payments.
Boswell - ESL Pro Software License Agreement
Page 13
<PAGE>
12.2 Exclusions. Boswell shall not have liability or obligation to ESL Pro
hereunder with respect to any patent, copyright or trade secret
infringement or claim thereof based upon:
(a) use of the Software or Documentation by ESL Pro in combination with
any devices or products not authorized by Boswell;
(b) use of the Software or Documentation in an application or environment
for which such Software or Documentation were not designed or
contemplated;
(c) modifications, alterations or enhancements of the Software or
Documentation not created by or for Boswell, or
(d) any claim of infringement of a patent, copyright or trade secret in
which ESL Pro or any affiliate of ESL Pro has an interest.
ESL Pro shall indemnify and hold Boswell harmless from all costs,
damages and expenses (including reasonable attorney's fees) arising
from any claim enumerated in subsections (a) through (d) above.
12.3 Entire Liability. This article 12 states the entire liability of Boswell
with respect to infringement of patent, copyright and trade secrets by the
Software or Documentation or any part thereof or by their operation.
13. GENERAL PROVISIONS
13.1 Assignment. This Agreement may not be assigned by ESL Pro without the prior
written consent of Boswell whose consent shall not be unreasonably
withheld. In the case of any permitted assignment or transfer of or under
this Agreement, this Agreement or the relevant provisions shall be binding
upon, and inure to the benefit of the successors, executors, heirs,
representatives, administrators and assigns of the parties hereto.
13.2 Entire Agreement; Amendment. This Agreement and Schedule A and B attached
hereto constitute this entire agreement between the parties with regard to
the subject matter hereof. All other agreements between the parties shall
still be in effect. No amendment, modification or change of terms of this
Agreement shall bind either party unless in writing signed by both parties.
13.3 Force Majeure. In the event that either party is prevented from performing,
or is unable to perform, any of its obligations under this Agreement due to
any cause beyond the reasonable control of the party invoking this
provision, the affected party's performance shall be excused and the time
for performance shall be extended for the period of delay or inability to
perform due to such occurrence.
Boswell - ESL Pro Software License Agreement
Page 14
<PAGE>
13.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia, Canada and
the parties hereto irrevocably attorn to the jurisdiction of the courts of
such province.
13.5 Headings. Captions and heading contained in this Agreement have been
included for ease of reference and convenience and shall not be considered
in interpreting or construing this Agreement.
13.6 No Agency; Independent Contractors. Nothing contained in this Agreement
shall be deemed to imply or constitute either party as the agent or
representative of the other party, or both parties as joint ventures or
partners of any purpose.
13.7 Notice. Any notice or communication from one party to the other shall be in
writing and either personally delivered or sent via facsimile or certified
mail, postage prepaid and return receipt requested addressed, to such other
party at the address specified below or such other address as either party
may from time to time designate in writing to the other party.
If to Boswell:
Boswell International Technologies Ltd. & Boswell Industries Inc.
415 South Tower, 5811 Cooney Road
Richmond, British Columbia
Canada V6X 3M1
Attention: Ron McIntyre
Telephone No: (604) 684-1292
Fax No. (604) 684-7093
If to ESL Pro:
ESL Pro Systems Inc.
1135 Terminal Way, Suite 209
Reno, Nevada 89502
Attention: Mark E. Bruk
Telephone No: (604) 623-4864
Fax No.: (604) 623-4828
No change of address shall be binding upon the other party hereto until
written notice thereof is received by such party at the address shown
herein. All notices shall be in English and shall be effective upon
receipt.
13.8 No Waiver. The waiver by either party of a breach or a default of any
provision of this Agreement by the other party shall be construed as a
waiver or any succeeding breach of the same or any other provision, nor
shall any delay or omission on the
Boswell - ESL Pro Software License Agreement
Page 15
<PAGE>
part of either party to exercise or avail itself of any right, power or
privilege that it has, or may have hereunder, operate as a waiver of any
right, power or privilege by such party.
13.9 Publicity.
(a) Neither party shall originate any publicity, news release or other
public announcement relating to this Agreement or the existence of an
arrangement between the parties without the prior written approval of
the other party, except as otherwise required by law.
(b) Upon acceptance of this Agreement, Boswell agrees to use its best
efforts to deliver a news release to its shareholders announcing the
signing of this Agreement and also agrees to provide ESL Pro
reasonable access to the Boswell web site on the world wide web
(www.boswell.com) for the purposes of providing links to the ESL Pro
web site (www.eslpro.com).
13.10 Quiet Enjoyment. In the event of any dispute between the two parties
concerning a material breach of this Agreement (except with respect of
section 10.3(b) or 10.3(c)) both parties shall have the right to quiet
enjoyment of the products or services detailed within the Agreement until
the dispute is completely resolved. If a period of ninety (90) days elapses
and the dispute is not resolved, then both parties agree that the dispute
will go to binding arbitration. This provision specifically provides ESL
Pro the right to continue conducting its business during any aforementioned
dispute with Boswell and Boswell agrees not to contact or solicit ESL Pro's
clients or enter the Market, until any such dispute is completely resolved.
13.11 Survival. The provisions of sections 10.4 and 10.5 and articles 11
(Confidentiality), 12 (indemnification) and 13 (General Provisions) shall
survive any termination or expiration of this Agreement according to their
respective terms.
13.12 Arbitration. Except for applications for injunctions required to protect
Confidential Information, all disputes arising out of or in connection with
this Agreement or in respect of any defined legal relationship associated
therewith or derived therefrom shall be referred to and finally resolved by
arbitration under the rules of the British Columbia International
Commercial Arbitration Centre, and in connection therewith:
(a) the appointing authority shall be the British Columbia International
Arbitration Centre;
(b) the arbitration will be conducted by a single arbitrator unless the
parties agree otherwise;
(c) the case shall be administered by the British Columbia International
Commercial Arbitration Centre in accordance with its Procedures for
Cases under the BCICAC Rules;
Boswell - ESL Pro Software License Agreement
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<PAGE>
(d) the place of arbitration shall be Vancouver, British Columbia, Canada;
and the language of the arbitration shall be English.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first above written.
ESL PRO SYSTEMS INC.
by its authorized signatory:
- -----------------------------------
Mark E. Bruk, President
BOSWELL INTERNATIONAL TECHNOLOGIES LTD.
by its authorized signatory:
- -----------------------------------
Ron McIntyre, Chairman
BOSWELL INDUSTRIES INC.
by its authorized signatory:
- -----------------------------------
Ron Craig, President
Boswell - ESL Pro Software License Agreement
Page 17
<PAGE>
SCHEDULE A
THE SOFTWARE AND THE DOCUMENTATION
Boswell will deliver to ESL Pro one (1) copy of each of the following:
Software
* Boswell English as a Second Language Program - Level One (in Source Code
Form)
* Digifusion (in Source Code Form)
* Dr Boz (in Source Code Form)
* Bozinput (in Source Code Form)
* Boswell Picture Dictionary (in Source Code Form)
* Boswell keyboard firmware (in Source Code Form)
Documentation
* Boswell ESL Program - Level One -- Online Users Guide (Windows HLP file)
* Boswell ESL Program - Level One - Users Guide (Word file)
* Product Evaluations & Government Studies (Word file)
* TV Documentary footage * Newspaper articles
* Radio Interviews * other Marketing Materials
* Boswell keyboard mold (for plastic top keyboard case)
The Software and the Documentation shall include any related technology not
specifically outlined in this schedule.
----------------------------------------------------------------------
The Software and Documentation has been accepted by ESL Pro as of the date set
out below.
ESL PRO SYSTEMS INC.
by its authorized signatory:
- ------------------------------------ ----------------
Mark E. Bruk, President Date
-A-1-
<PAGE>
SCHEDULE B
ROYALTY SCHEDULE
ESL Pro will pay to Boswell a royalty equal to five percent (5%) of the gross
dollar amounts received by ESL Pro for licensing the Software and the
Documentation and the Derived Works, which contain Software, in the Market. ESL
Pro shall have no obligation to pay royalties in respect of Software and
Documentation for which it does not receive monetary consideration, if such
Software and the Documentation and the Derived Works was given away as: (i)
promotional copies; (ii) demonstration copies; or (iii) for co-operative
advertising, and such Software or Documentation or Derived Works was given away
for the purpose of generating future revenues.
As an advance against the royalties due each year, ESL Pro will pay to Boswell a
minimum royalty, equal to $80,000 in the 1st year and five months ending
September 30, 1999, $95,000 in the 3rd year, $150,000 in the 4th year. In each
of year 5 through year 10, the minimum royalty will be ten (10%) percent greater
than in the previous year. For each year of each subsequent Renewal Term, the
minimum royalty will be five (5%) percent greater than in the previous year.
The minimum royalties paid by ESL Pro to Boswell in respect of any year will be
considered an advance against royalties payable by ESL Pro for such year and
will be credited against such royalties.
ESL Pro will pay to Boswell the royalties as per the following schedule:
<TABLE>
Term Year Description Date Amount
- ---- ---- ----------- ---- ------
<S> <C> <C> <C> <C>
1 1 Quarterly Royalty Fee summary & payment 06/30/1998 *
1 Quarterly Royalty Fee summary & payment 09/30/1998 *
1 2 Minimum Royalty Fee payment 10/31/1998 $80,000
1 2 Quarterly Royalty Fee summary & payment 12/31/1998 *
1 2 Quarterly Royalty Fee summary & payment 03/31/1999 *
1 2 Minimum Royalty Fee payment 04/01/1999 *
1 2 Quarterly Royalty Fee summary & payment 06/30/1999 *
1 2 Quarterly Royalty Fee summary & payment 09/30/1999 *
1 3 Minimum Royalty Fee payment 10/01/1999 $45,000
1 3 Quarterly Royalty Fee summary & payment 12/31/1999 *
1 3 Quarterly Royalty Fee summary & payment 03/31/2000 *
1 3 Minimum Royalty Fee payment 04/01/2000 $50,000
1 3 Quarterly Royalty Fee summary & payment 06/30/2000 *
1 3 Quarterly Royalty Fee summary & payment 09/30/2000 *
1 4 Minimum Royalty Fee payment 10/01/2000 $75,000
1 4 Quarterly Royalty Fee summary & payment 12/31/2000 *
1 4 Quarterly Royalty Fee summary & payment 03/31/2001 *
1 4 Minimum Royalty Fee payment 04/01/2001 $75,000
1 4 Quarterly Royalty Fee summary & payment 06/30/2001 *
1 4 Quarterly Royalty Fee summary & payment 09/30/2001 *
1 5 Minimum Royalty Fee payment 10/01/2001 *
</TABLE>
-B-1-
<PAGE>
<TABLE>
Term Year Description Date Amount
- ---- ---- ----------- ---- ------
<S> <C> <C> <C> <C>
1 5 Quarterly Royalty Fee summary & payment 12/31/2001 *
1 5 Quarterly Royalty Fee summary & payment 03/31/2002 *
1 5 Minimum Royalty Fee payment 04/01/2002 $82,500
1 5 Quarterly Royalty Fee summary & payment 06/30/2002 *
1 5 Quarterly Royalty Fee summary & payment 09/30/2002 *
1 6 Minimum Royalty Fee payment 10/01/2002 $90,750
1 6 Quarterly Royalty Fee summary & payment 12/31/2002 *
1 6 Quarterly Royalty Fee summary & payment 03/31/2003 *
1 6 Minimum Royalty Fee payment 04/01/2003 $90,750
1 6 Quarterly Royalty Fee summary & payment 06/30/2003 *
1 6 Quarterly Royalty Fee summary & payment 09/30/2003 *
1 7 Minimum Royalty Fee payment 10/01/2003 $99,825
1 7 Quarterly Royalty Fee summary & payment 12/31/2003 *
1 7 Quarterly Royalty Fee summary & payment 03/31/2004 *
1 7 Minimum Royalty Fee payment 04/01/2004 $99,825
1 7 Quarterly Royalty Fee summary & payment 06/3012004 *
1 7 Quarterly Royalty Fee summary & payment 09/30/2004 *
1 8 Minimum Royalty Fee payment 10/01/2004 $109,808
1 8 Quarterly Royalty Fee summary & payment 12/31/2004 *
1 8 Quarterly Royalty Fee summary & payment 03/31/2005 *
1 8 Minimum Royalty Fee payment 04/01/2005 $109,808
1 8 Quarterly Royalty Fee summary & payment 06/30/2005 *
1 8 Quarterly Royalty Fee summary & payment 09/30/2005 *
1 9 Minimum Royalty Fee payment 10/01/2005 $120,788
1 9 Quarterly Royalty Fee summary & payment 12/31/2005 *
1 9 Quarterly Royalty Fee summary & payment 03/31/2006 *
1 9 Minimum Royalty Fee payment 04/01/2006 $120,788
1 9 Quarterly Royalty Fee summary & payment 06/30/2006 *
1 9 Quarterly Royalty Fee summary & payment 09/30/2006 *
1 10 Minimum Royalty Fee payment 10/01/2006 $132,867
1 10 Quarterly Royalty Fee summary & payment 12/31/2006 *
1 10 Quarterly Royalty Fee summary & payment 03/31/2007 *
1 10 Minimum Royalty Fee payment 04/01/2007 $132,867
1 10 Quarterly Royalty Fee summary & payment 06/30/2007 *
1 10 Quarterly Royalty Fee summary & payment 09/30/2007 *
2 1 Minimum Royalty Fee payment 10/01/2007 $139,510
2 1 Quarterly Royalty Fee summary & payment 12/31/2007 *
2 1 Quarterly Royalty Fee summary & payment 03/31/2008 *
2 1 Minimum Royalty Fee payment 04/01/2008 $139,510
2 1 Quarterly Royalty Fee summary & payment 06/30/2008 *
2 1 Quarterly Royalty Fee summary & payment 09/30/2008 *
</TABLE>
This payment schedule will continue through the Initial Term of the Agreement
and through subsequent Renewal Terms.
- --------------------------------------------------------------------------------
-B-2-
EXHIBIT 6.13
EDUVERSE ACCELERATED LEARNING SYSTEMS (CANADA), INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated for reference the 3rd day of May 1999.
BETWEEN
EDUVERSE Accelerated Learning Systems (Canada), Inc., a company
incorporated under the laws of the Province of British Columbia and having
an office at 2nd Floor, 1235 West Pender Street, Vancouver, British
Columbia, V6E 2V6.
(hereinafter referred to as the "Company")
AND
Marc Crimeni having an address for notice at 3322 Sophia Street, Vancouver,
BC, Canada V5V3T5.
(hereinafter referred to as the "Employee")
WHEREAS:
A. The Company is principally engaged in the business of researching,
developing and marketing multimedia educational software products (the
"Company's Business"),
B. The Employee has been hired by the Company to work in the Company's
Business;
C. The Employee and the Company wish to enter into this Agreement to record
the terms of employment between them;
NOW THEREFORE THIS AGREEMENT WITNESSES that for good consideration, the Company
hereby employs the Employee on the following terms and conditions:
1. Term of Employment. Subject to the provisions for termination set forth
below, the Employee's employment with the Company, pursuant to this
Agreement will begin on August 1, 1998 and continue until terminated in
accordance with this Agreement.
2. Salary. The Company shall pay the Employee a salary of $7,500.00 per month
for the services of the Employee, payable at regular payroll periods
established by the Company. The Employee's salary will be subject to
deductions for Income Tax, Canada Pension Plan and Employment Insurance
remittances (collectively the "Government Deductions") and for the
Employee's contributions to the employee benefit plan to be established by
the Company on terms approved by the Directors of the Company ("Benefit
Deductions").
3. Duties and Position. The Company will employ the Employee in the capacity
of Executive Vice President. The Employee's duties shall include those
commonly associated with the aforesaid capacity, including without
limitation the duties set out in Schedule "A". The Employee agrees that
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 1 of 7
----- --------
EDUV Employee
<PAGE>
his duties may be reasonably modified at the Company's discretion from time
to time The Employee will report to the President, or such other Company
employee that may be designated by the management of the Company (hereafter
referred to as "Manager") and will comply with all lawful instructions
given by his/her Manager.
4. Policies and Procedures. The Employee shall abide by all policies and
procedures defined by the Company in the Employee Orientation letter. These
policies and procedures may be updated and changed at any time at the
discretion of the Company.
5. Privacy. The company may monitor and/or review all email, voice mail,
Internet browser usage and phone calls when deemed necessary by the Company
without prior notice.
6. Devote Full Time to Company. The Employee will use his best efforts to
promote the interests of the Company. The Employee will devote full time,
attention and energies to the Company's Business, and during employment
with the Company, will not engage in any other business activity,
regardless of whether such activity is pursued for profit, gain, or other
pecuniary advantage. The Employee is not prohibited from making personal
investments in any other businesses provided those such businesses are not
engaged in activities which are or may be competitive with the Company's
Business and provided such investments do not require the Employee's active
involvement. The Employee shall not commit or purport to commit the Company
to:
(a) any financial obligation or liability in excess of $1,000.00, or
(b) sell or encumber any part of the assets of the Company.
7. Confidentiality. The Employee will not, during or after the term of his
employment, reveal any confidential information or trade secrets of the
Company to any person, firm, corporation, or entity. If the Employee
reveals or threatens to reveal any such information, the Company shall be
entitled to an injunction restraining the Employee from disclosing same, or
from rendering any services to any entity to whom said information has been
or is threatened to be disclosed. The right to secure an injunction is not
exclusive, and the Company may pursue any other remedies it has against the
Employee for a breach or threatened breach of this condition, including the
recovery of damages from the Employee. The Employee shall promptly sign and
deliver the Company's form of Confidentiality and Non-Competition Agreement
as a condition of employment.
8. Reimbursement of Expenses. The Employee may incur reasonable expenses for
furthering the Company's Business, including expenses for entertainment,
travel, and similar items. The Employee will obtain prior acceptance of the
expenses from his/her Manager. The Company shall reimburse the Employee for
all business expenses after the Employee presents a pre-approved itemized
account of expenditures including original receipts, which is approved by
his/her Manager pursuant to Company policy.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 2 of 7
----- --------
EDUV Employee
<PAGE>
9. Vacation. The Employee shall be entitled to a yearly paid vacation of 3
weeks and increases in accordance with the labour laws of British Columbia.
The Employee shall have due regard to the policies of the Company relating
to the scheduling of vacations and the reasonable directions of his/her
Manager.
10. Benefits. The Employee shall, subject to shareholder approval and
regulatory approval. be entitled to the following benefits from the Company
(with the specific details and terms of the following benefits to be
determined by the Directors of the Company from time to time):
(a) the Employee will participate in a stock option plan under which the
Employee will receive a stock option for the subscription purchase of
100,000 Common Shares in the Company at an exercise price of $1.65 US
per share;
(b) the Employee will participate in a stock purchase plan (as and when
established by the Company) under which the Employee will receive an
option to acquire an equity interest in the Company through payroll
deductions;
(c) the Employee will participate in a group benefits package that will
include disability insurance and term life insurance plans for
employees of the Company.
11. Open Market Stock Trading Restrictions. All Employees participating in open
market trades of the Company's shares, whether buying or selling, must
first notify the CFO or President of the Company. An Employee who purchases
shares of the Company on the open market must hold and may not sell those
shares for a minimum of 6 (six) months from the date of the last purchase
of any shares of the Company on the open market by such Employee. An
Employee who sells shares of the Company must wait a minimum of 6 (six)
months from the date of the last sale of Company shares by that Employee
before purchasing additional shares of the Company's stock on the open
market.
These restrictions do not apply to the exercise of stock options or the
shares acquired by an Employee pursuant to the exercise of stock options.
12. Disability. It is understood and agreed that while the Employee is entitled
to receive payments under any disability insurance plan for Employees of
the Company, then the Employee will not be entitled during such time, to
receive the salary set out in Section 2. The Employee's full compensation
will be reinstated upon the Employee's return to work on a full-time basis.
If the Employee is absent from work or is unable to fully and effectively
perform his duties because of illness or incapacity or for any other reason
for a continuous period of more than 270 days or for an aggregate period of
more than 270 days in any period of 365 days, then the Employer shall have
the option to terminate the Employee's employment upon 30 days prior
written notice.
13. Termination of Employment by the Company.
13.1 The Company may terminate the Employee's employment and this Agreement
at any time upon 14 days' written notice to the Employee. At the
Company's discretion, the Employee will continue to perform his duties
and will be paid his regular salary up to the date of termination; or
the Company will pay the Employee severance pay in accordance with the
labour laws of British Columbia, less applicable Government Deductions
and Benefit Deductions.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 3 of 7
----- --------
EDUV Employee
<PAGE>
13.2 Notwithstanding anything to the contrary contained in this Agreement,
the Company may (provided that the Common Shares of the Company have
not been the subject of a successful takeover bid) terminate the
Employee's employment upon 14 days' notice to the Employee without
payment of any severance allowance should any of the following events
occur:
(a) The Company's decision to terminate its business and liquidate
its assets; or
(b) Bankruptcy or reorganization of the Company to protect its assets
from creditors.
13.3 Notwithstanding anything to the contrary contained in this Agreement;
the Company may terminate the Employee's employment without notice
and/or severance, if the Employee commits any of the following:
(a) an act of fraud, dishonesty, negligent performance of employment
duties or the dereliction of employment duties;
(b) a breach of the terms of this Agreement or the Confidentiality
and Non-Competition Agreement, which breach is not fully
corrected by the Employee within 5 days of notice from the
Company; or
(c) any act or omission which constitutes "just cause" for dismissal
under the laws of British Columbia.
14. Termination of Employment by the Employee. The Employee may, without cause,
terminate his/her employment upon 30 days' written notice to the Company.
Following such notice from the Employee, the Company may require the
Employee to perform his duties to the date of termination and the Employee
will be paid his regular salary to date of termination. If the Company does
not require the Employee to remain for the duration of his/her notice, the
Company may pay the Employee severance pay in accordance with the laws of
British Columbia.
15. Death Benefit. If the Employee dies during the term of employment, the
Company shall pay to the Employee's estate the Employee's prevailing salary
less Government Deductions and Benefit Deductions up to and including the
end of the month in which death occurred.
16. Assistance in Litigation. Employee shall upon reasonable notice and at the
Company's expense, furnish such information and proper assistance to the
Company as it may reasonably require in connection with any litigation in
which it is, or may become, a party either during or after employment. The
Employee may, at its option and at the Company's expense, retain a lawyer
to attend with the Employee at any legal proceedings, which the Company
requires the Employee to be present at.
17. Effect on Prior Agreements. This Agreement supersedes any prior employment
agreement between the Company or any predecessor of the Company and the
Employee.
18. Settlement by Arbitration. Any claim or controversy that arises out of or
relates to this agreement, or the breach of it, shall be settled by
arbitration in accordance with the rules of the Commercial Arbitration
Center of Vancouver, British Columbia. Judgment upon the award rendered may
be entered in any court with jurisdiction.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 4 of 7
----- --------
EDUV Employee
<PAGE>
19. Severability. If, for any reason, any provision of this Agreement is held
invalid, all other provisions of this Agreement shall remain in effect. If
this Agreement is held invalid or cannot he enforced, then to the full
extent permitted by law any prior agreement between the Company (or any
predecessor thereof) and the Employee shall be deemed reinstated as if this
Agreement had not been executed.
20. Assumption of Agreement by Company's Successor and Assignees. The Company's
rights and obligations under this Agreement will endure to the benefit and
be binding upon the Company's successors and assignees.
21. Oral Modifications Not Binding. Oral modifications to this Agreement shall
have no effect. This Agreement may be modified only by a written agreement
signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
22. Notices. Except as otherwise expressly provided herein, any and all notices
or demands which must or maybe given hereunder or under any other
instrument contemplated hereby shall be given by delivery in person or by
regular mail or by facsimile transmission to the parties' respective
address set out on the first page of this Agreement. All such
communications, notices or presentations and demands provided for herein
shall be deemed to have been delivered when actually delivered in person to
the respective party, or if mailed, then on the date it would be delivered
in the ordinary course of mail, or if sent by facsimile transmission, on
the date of receipt of confirmation that the transmission has been
received. Any party may change its address hereunder on twenty days notice
to the other party in compliance with this section.
23. General. Time will be of the essence hereof. The Employee acknowledges and
declares that he has been provided with sufficient time and opportunity to
consider all factors relating to this Agreement, has retained, and
consulted independent counsel to advise him, or in the alternative has
elected to waive his right to retain and consult independent counsel. He
further acknowledges and declares that he has read and understands the
terms of this Agreement and has signed it voluntarily with full awareness
of its consequences. This Agreement may not be assigned by the Employee
without the express written consent of the Company. Wherever the singular
masculine or neuter is used in this Agreement, the same shall be construed
as meaning the plural or feminine, and visa versa, where the contest or the
parties so require. The headings used herein are for convenience of
reference only and shall not affect the interpretation of this Agreement.
Facsimile or photostat copies of signatures are acceptable and are of the
same force and effect as original signatures for all intents and purposes.
The waiver by either patty of any breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach. The
provisions of sections 7 and 16 herein shall survive the termination of the
Employee's employment and this Agreement. This Agreement may be executed in
several counterparts, each of which so executed shall be deemed to be an
original, and such counterparts together shall constitute but one and the
same instrument. The preambles or recitals hereto are hereby incorporated
herein and form an integral part of this Agreement. This Agreement shall
entire to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 5 of 7
----- --------
EDUV Employee
<PAGE>
IN WITNESS WHEREOF the parties hereto have duly executed this agreement under
seal as of the date first above written.
EDUVERSE ACCELERATED LEARNING |
SYSTEMS (CANADA), INC. |
|
|
|
|
- ------------------------------------- |
(Authorized Signature) |
|
|
|
SIGNED, SEALED and DELIVERED by |
the Employee in the presence of: |
|
|
|
- ------------------------------------- | ---------------------------
Signature | Signature of Employee
|
- ------------------------------------- |
Name |
| ---------------------------
- ------------------------------------- | Date Signed
Address |
|
- ------------------------------------- |
Occupation |
|
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 6 of 7
----- --------
EDUV Employee
<PAGE>
SCHEDULE "A"
This Schedule sets out the general duties of the position that the Employee has
accepted with the Company. This Schedule may be amended by a written job
description to be prepared by his/her Manager from time to time.
WORK DESCRIPTION: To perform sales and marketing activities for the Company.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 7 of 7
----- --------
EDUV Employee
EXHIBIT 6.14
EDUVERSE ACCELERATED LEARNING SYSTEMS (CANADA), INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated for reference the 3rd day of May 1999.
BETWEEN
EDUVERSE Accelerated Learning Systems (Canada), Inc., a company
incorporated under the laws of the Province of British Columbia and having
an office at 2nd Floor, 1235 West Pender Street, Vancouver, British
Columbia, V6E 2V6.
(hereinafter referred to as the "Company")
AND
Robert Harris having an address for notice at #406 - 1414 Barclay Street,
Vancouver, BC, Canada V6G1J4.
(hereinafter referred to as the "Employee")
WHEREAS:
A. The Company is principally engaged in the business of researching,
developing and marketing multimedia educational software products (the
"Company's Business"),
B. The Employee has been hired by the Company to work in the Company's
Business;
C. The Employee and the Company wish to enter into this Agreement to record
the terms of employment between them;
NOW THEREFORE THIS AGREEMENT WITNESSES that for good consideration, the Company
hereby employs the Employee on the following terms and conditions:
1. Term of Employment. Subject to the provisions for termination set forth
below, the Employee's employment with the Company, pursuant to this
Agreement will begin on January 1, 1999 and continue until terminated in
accordance with this Agreement.
2. Salary. The Company shall pay the Employee a salary of $3,000.00 per month
for the services of the Employee, payable at regular payroll periods
established by the Company. The Employee's salary will be subject to
deductions for Income Tax, Canada Pension Plan and Employment Insurance
remittances (collectively the "Government Deductions") and for the
Employee's contributions to the employee benefit plan to be established by
the Company on terms approved by the Directors of the Company ("Benefit
Deductions").
3. Duties and Position. The Company will employ the Employee in the capacity
of Manager, Creative & Research. The Employee's duties shall include those
commonly associated with the aforesaid capacity, including without
limitation the duties set out in Schedule "A". The Employee agrees that
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 1 of 7
----- --------
EDUV Employee
<PAGE>
his duties may be reasonably modified at the Company's discretion from time
to time The Employee will report to the Executive Vice President, or such
other Company employee that may be designated by the management of the
Company (hereafter referred to as "Manager") and will comply with all
lawful instructions given by his/her Manager.
4. Policies and Procedures. The Employee shall abide by all policies and
procedures defined by the Company in the Employee Orientation letter. These
policies and procedures may be updated and changed at any time at the
discretion of the Company.
5. Privacy. The company may monitor and/or review all email, voice mail,
Internet browser usage and phone calls when deemed necessary by the Company
without prior notice.
6. Devote Full Time to Company. The Employee will use his best efforts to
promote the interests of the Company. The Employee will devote full time,
attention and energies to the Company's Business, and during employment
with the Company, will not engage in any other business activity,
regardless of whether such activity is pursued for profit, gain, or other
pecuniary advantage. The Employee is not prohibited from making personal
investments in any other businesses provided those such businesses are not
engaged in activities which are or may be competitive with the Company's
Business and provided such investments do not require the Employee's active
involvement. The Employee shall not commit or purport to commit the Company
to:
(a) any financial obligation or liability in excess of $100.00, or
(b) sell or encumber any part of the assets of the Company.
7. Confidentiality. The Employee will not, during or after the term of his
employment, reveal any confidential information or trade secrets of the
Company to any person, firm, corporation, or entity. If the Employee
reveals or threatens to reveal any such information, the Company shall be
entitled to an injunction restraining the Employee from disclosing same, or
from rendering any services to any entity to whom said information has been
or is threatened to be disclosed. The right to secure an injunction is not
exclusive, and the Company may pursue any other remedies it has against the
Employee for a breach or threatened breach of this condition, including the
recovery of damages from the Employee. The Employee shall promptly sign and
deliver the Company's form of Confidentiality and Non-Competition Agreement
as a condition of employment.
8. Reimbursement of Expenses. The Employee may incur reasonable expenses for
furthering the Company's Business, including expenses for entertainment,
travel, and similar items. The Employee will obtain prior acceptance of the
expenses from his/her Manager. The Company shall reimburse the Employee for
all business expenses after the Employee presents a pre-approved itemized
account of expenditures including original receipts, which is approved by
his/her Manager pursuant to Company policy.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 2 of 7
----- --------
EDUV Employee
<PAGE>
9. Vacation. The Employee shall be entitled to a yearly paid vacation of 2
weeks and increases in accordance with the labour laws of British Columbia.
The Employee shall have due regard to the policies of the Company relating
to the scheduling of vacations and the reasonable directions of his/her
Manager.
10. Benefits. The Employee shall, subject to shareholder approval and
regulatory approval. be entitled to the following benefits from the Company
(with the specific details and terms of the following benefits to be
determined by the Directors of the Company from time to time):
(a) the Employee will participate in a stock option plan under which the
Employee will receive a stock option for the subscription purchase of
75,000 Common Shares in the Company at an exercise price of $0.68 US
per share;
(b) the Employee will participate in a stock purchase plan (as and when
established by the Company) under which the Employee will receive an
option to acquire an equity interest in the Company through payroll
deductions;
(c) the Employee will participate in a group benefits package that will
include disability insurance and term life insurance plans for
employees of the Company.
11. Open Market Stock Trading Restrictions. All Employees participating in open
market trades of the Company's shares, whether buying or selling, must
first notify the CFO or President of the Company. An Employee who purchases
shares of the Company on the open market must hold and may not sell those
shares for a minimum of 6 (six) months from the date of the last purchase
of any shares of the Company on the open market by such Employee. An
Employee who sells shares of the Company must wait a minimum of 6 (six)
months from the date of the last sale of Company shares by that Employee
before purchasing additional shares of the Company's stock on the open
market.
These restrictions do not apply to the exercise of stock options or the
shares acquired by an Employee pursuant to the exercise of stock options.
12. Disability. It is understood and agreed that while the Employee is entitled
to receive payments under any disability insurance plan for Employees of
the Company, then the Employee will not be entitled during such time, to
receive the salary set out in Section 2. The Employee's full compensation
will be reinstated upon the Employee's return to work on a full-time basis.
If the Employee is absent from work or is unable to fully and effectively
perform his duties because of illness or incapacity or for any other reason
for a continuous period of more than 270 days or for an aggregate period of
more than 270 days in any period of 365 days, then the Employer shall have
the option to terminate the Employee's employment upon 30 days prior
written notice.
13. Termination of Employment by the Company.
13.1 The Company may terminate the Employee's employment and this Agreement
at any time upon 14 days' written notice to the Employee. At the
Company's discretion, the Employee will continue to perform his duties
and will be paid his regular salary up to the date of termination; or
the Company will pay the Employee severance pay in accordance with the
labour laws of British Columbia, less applicable Government Deductions
and Benefit Deductions.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 3 of 7
----- --------
EDUV Employee
<PAGE>
13.2 Notwithstanding anything to the contrary contained in this Agreement,
the Company may (provided that the Common Shares of the Company have
not been the subject of a successful takeover bid) terminate the
Employee's employment upon 14 days' notice to the Employee without
payment of any severance allowance should any of the following events
occur:
(a) The Company's decision to terminate its business and liquidate
its assets; or
(b) Bankruptcy or reorganization of the Company to protect its assets
from creditors.
13.3 Notwithstanding anything to the contrary contained in this Agreement;
the Company may terminate the Employee's employment without notice
and/or severance, if the Employee commits any of the following:
(a) an act of fraud, dishonesty, negligent performance of employment
duties or the dereliction of employment duties;
(b) a breach of the terms of this Agreement or the Confidentiality
and Non-Competition Agreement, which breach is not fully
corrected by the Employee within 5 days of notice from the
Company; or
(c) any act or omission which constitutes "just cause" for dismissal
under the laws of British Columbia.
14. Termination of Employment by the Employee. The Employee may, without cause,
terminate his/her employment upon 30 days' written notice to the Company.
Following such notice from the Employee, the Company may require the
Employee to perform his duties to the date of termination and the Employee
will be paid his regular salary to date of termination. If the Company does
not require the Employee to remain for the duration of his/her notice, the
Company may pay the Employee severance pay in accordance with the laws of
British Columbia.
15. Death Benefit. If the Employee dies during the term of employment, the
Company shall pay to the Employee's estate the Employee's prevailing salary
less Government Deductions and Benefit Deductions up to and including the
end of the month in which death occurred.
16. Assistance in Litigation. Employee shall upon reasonable notice and at the
Company's expense, furnish such information and proper assistance to the
Company as it may reasonably require in connection with any litigation in
which it is, or may become, a party either during or after employment. The
Employee may, at its option and at the Company's expense, retain a lawyer
to attend with the Employee at any legal proceedings, which the Company
requires the Employee to be present at.
17. Effect on Prior Agreements. This Agreement supersedes any prior employment
agreement between the Company or any predecessor of the Company and the
Employee.
18. Settlement by Arbitration. Any claim or controversy that arises out of or
relates to this agreement, or the breach of it, shall be settled by
arbitration in accordance with the rules of the Commercial Arbitration
Center of Vancouver, British Columbia. Judgment upon the award rendered may
be entered in any court with jurisdiction.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 4 of 7
----- --------
EDUV Employee
<PAGE>
19. Severability. If, for any reason, any provision of this Agreement is held
invalid, all other provisions of this Agreement shall remain in effect. If
this Agreement is held invalid or cannot he enforced, then to the full
extent permitted by law any prior agreement between the Company (or any
predecessor thereof) and the Employee shall be deemed reinstated as if this
Agreement had not been executed.
20. Assumption of Agreement by Company's Successor and Assignees. The Company's
rights and obligations under this Agreement will endure to the benefit and
be binding upon the Company's successors and assignees.
21. Oral Modifications Not Binding. Oral modifications to this Agreement shall
have no effect. This Agreement may be modified only by a written agreement
signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
22. Notices. Except as otherwise expressly provided herein, any and all notices
or demands which must or maybe given hereunder or under any other
instrument contemplated hereby shall be given by delivery in person or by
regular mail or by facsimile transmission to the parties' respective
address set out on the first page of this Agreement. All such
communications, notices or presentations and demands provided for herein
shall be deemed to have been delivered when actually delivered in person to
the respective party, or if mailed, then on the date it would be delivered
in the ordinary course of mail, or if sent by facsimile transmission, on
the date of receipt of confirmation that the transmission has been
received. Any party may change its address hereunder on twenty days notice
to the other party in compliance with this section.
23. General. Time will be of the essence hereof. The Employee acknowledges and
declares that he has been provided with sufficient time and opportunity to
consider all factors relating to this Agreement, has retained, and
consulted independent counsel to advise him, or in the alternative has
elected to waive his right to retain and consult independent counsel. He
further acknowledges and declares that he has read and understands the
terms of this Agreement and has signed it voluntarily with full awareness
of its consequences. This Agreement may not be assigned by the Employee
without the express written consent of the Company. Wherever the singular
masculine or neuter is used in this Agreement, the same shall be construed
as meaning the plural or feminine, and visa versa, where the contest or the
parties so require. The headings used herein are for convenience of
reference only and shall not affect the interpretation of this Agreement.
Facsimile or photostat copies of signatures are acceptable and are of the
same force and effect as original signatures for all intents and purposes.
The waiver by either patty of any breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach. The
provisions of sections 7 and 16 herein shall survive the termination of the
Employee's employment and this Agreement. This Agreement may be executed in
several counterparts, each of which so executed shall be deemed to be an
original, and such counterparts together shall constitute but one and the
same instrument. The preambles or recitals hereto are hereby incorporated
herein and form an integral part of this Agreement. This Agreement shall
entire to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 5 of 7
----- --------
EDUV Employee
<PAGE>
IN WITNESS WHEREOF the parties hereto have duly executed this agreement under
seal as of the date first above written.
EDUVERSE ACCELERATED LEARNING |
SYSTEMS (CANADA), INC. |
|
|
|
|
- ------------------------------------- |
(Authorized Signature) |
|
|
|
SIGNED, SEALED and DELIVERED by |
the Employee in the presence of: |
|
|
|
- ------------------------------------- | ---------------------------
Signature | Signature of Employee
|
- ------------------------------------- |
Name |
| ---------------------------
- ------------------------------------- | Date Signed
Address |
|
- ------------------------------------- |
Occupation |
|
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 6 of 7
----- --------
EDUV Employee
<PAGE>
SCHEDULE "A"
This Schedule sets out the general duties of the position that the Employee has
accepted with the Company. This Schedule may be amended by a written job
description to be prepared by his/her Manager from time to time.
WORK DESCRIPTION: To perform creative marketing and research activities for the
Company.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 7 of 7
----- --------
EDUV Employee
EXHIBIT 6.15
EDUVERSE Accelerated Learning Systems (Canada), Inc.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated for reference the 3rd day of May 1999.
BETWEEN
EDUVERSE Accelerated Learning Systems (Canada), Inc., a company
incorporated under the laws of the Province of British Columbia and having
an office at 2nd Floor, 1235 West Pender Street, Vancouver, British
Columbia, V6E 2V6.
(hereinafter referred to as the "Company")
AND
Jeffrey Mah having an address for notice at 2861 Willoughby Avenue,
Burnaby, BC, Canada V3J1K5.
(hereinafter referred to as the "Employee")
WHEREAS:
A. The Company is principally engaged in the business of researching,
developing and marketing multimedia educational software products (the
"Company's Business"),
B. The Employee has been hired by the Company to work in the Company's
Business;
C. The Employee and the Company wish to enter into this Agreement to record
the terms of employment between them;
NOW THEREFORE THIS AGREEMENT WITNESSES that for good consideration, the Company
hereby employs the Employee on the following terms and conditions:
1. Term of Employment. Subject to the provisions for termination set forth
below, the Employee's employment with the Company, pursuant to this
Agreement will begin on August 1, 1998 and continue until terminated in
accordance with this Agreement.
2. Salary. The Company shall pay the Employee a salary of $6,500.00 per month
for the services of the Employee, payable at regular payroll periods
established by the Company. The Employee's salary will be subject to
deductions for Income Tax, Canada Pension Plan and Employment Insurance
remittances (collectively the "Government Deductions") and for the
Employee's contributions to the employee benefit plan to be established by
the Company on terms approved by the Directors of the Company ("Benefit
Deductions").
3. Duties and Position. The Company will employ the Employee in the capacity
of Chief Technology Officer. The Employee's duties shall include those
commonly associated with the aforesaid capacity, including without
limitation the duties set out in Schedule "A". The Employee agrees that his
duties
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 1 of 7
----- --------
EDUV Employee
<PAGE>
may be reasonably modified at the Company's discretion from time to time
The Employee will report to the President, or such other Company employee
that may be designated by the management of the Company (hereafter referred
to as "Manager") and will comply with all lawful instructions given by
his/her Manager.
4. Policies and Procedures. The Employee shall abide by all policies and
procedures defined by the Company in the Employee Orientation letter. These
policies and procedures may be updated and changed at any time at the
discretion of the Company.
5. Privacy. The company may monitor and/or review all email, voice mail,
Internet browser usage and phone calls when deemed necessary by the Company
without prior notice.
6. Devote Full Time to Company. The Employee will use his best efforts to
promote the interests of the Company. The Employee will devote full time,
attention and energies to the Company's Business, and during employment
with the Company, will not engage in any other business activity,
regardless of whether such activity is pursued for profit, gain, or other
pecuniary advantage. The Employee is not prohibited from making personal
investments in any other businesses provided those such businesses are not
engaged in activities which are or may be competitive with the Company's
Business and provided such investments do not require the Employee's active
involvement. The Employee shall not commit or purport to commit the Company
to:
(a) any financial obligation or liability in excess of $1,000.00, or
(b) sell or encumber any part of the assets of the Company.
7. Confidentiality. The Employee will not, during or after the term of his
employment, reveal any confidential information or trade secrets of the
Company to any person, firm, corporation, or entity. If the Employee
reveals or threatens to reveal any such information, the Company shall be
entitled to an injunction restraining the Employee from disclosing same, or
from rendering any services to any entity to whom said information has been
or is threatened to be disclosed. The right to secure an injunction is not
exclusive, and the Company may pursue any other remedies it has against the
Employee for a breach or threatened breach of this condition, including the
recovery of damages from the Employee. The Employee shall promptly sign and
deliver the Company's form of Confidentiality and Non-Competition Agreement
as a condition of employment.
8. Reimbursement of Expenses. The Employee may incur reasonable expenses for
furthering the Company's Business, including expenses for entertainment,
travel, and similar items. The Employee will obtain prior acceptance of the
expenses from his/her Manager. The Company shall reimburse the Employee for
all business expenses after the Employee presents a pre-approved itemized
account of expenditures including original receipts, which is approved by
his/her Manager pursuant to Company policy.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 2 of 7
----- --------
EDUV Employee
<PAGE>
9. Vacation. The Employee shall be entitled to a yearly paid vacation of 3
weeks and increases in accordance with the labour laws of British Columbia.
The Employee shall have due regard to the policies of the Company relating
to the scheduling of vacations and the reasonable directions of his/her
Manager.
10. Benefits. The Employee shall, subject to shareholder approval and
regulatory approval. be entitled to the following benefits from the Company
(with the specific details and terms of the following benefits to be
determined by the Directors of the Company from time to time):
(a) the Employee will participate in a stock option plan under which the
Employee will receive a stock option for the subscription purchase of
175,000 Common Shares in the Company at an exercise price of $1.50 US
per share;
(b) the Employee will participate in a stock purchase plan (as and when
established by the Company) under which the Employee will receive an
option to acquire an equity interest in the Company through payroll
deductions;
(c) the Employee will participate in a group benefits package that will
include disability insurance and term life insurance plans for
employees of the Company.
11. Open Market Stock Trading Restrictions. All Employees participating in open
market trades of the Company's shares, whether buying or selling, must
first notify the CFO or President of the Company. An Employee who purchases
shares of the Company on the open market must hold and may not sell those
shares for a minimum of 6 (six) months from the date of the last purchase
of any shares of the Company on the open market by such Employee. An
Employee who sells shares of the Company must wait a minimum of 6 (six)
months from the date of the last sale of Company shares by that Employee
before purchasing additional shares of the Company's stock on the open
market.
These restrictions do not apply to the exercise of stock options or the
shares acquired by an Employee pursuant to the exercise of stock options.
12. Disability. It is understood and agreed that while the Employee is entitled
to receive payments under any disability insurance plan for Employees of
the Company, then the Employee will not be entitled during such time, to
receive the salary set out in Section 2. The Employee's full compensation
will be reinstated upon the Employee's return to work on a full-time basis.
If the Employee is absent from work or is unable to fully and effectively
perform his duties because of illness or incapacity or for any other reason
for a continuous period of more than 270 days or for an aggregate period of
more than 270 days in any period of 365 days, then the Employer shall have
the option to terminate the Employee's employment upon 30 days prior
written notice.
13. Termination of Employment by the Company.
13.1 The Company may terminate the Employee's employment and this Agreement
at any time upon 14 days' written notice to the Employee. At the
Company's discretion, the Employee will continue to perform his duties
and will be paid his regular salary up to the date of termination; or
the Company will pay the Employee severance pay in accordance with the
labour laws of British Columbia, less applicable Government Deductions
and Benefit Deductions.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 3 of 7
----- --------
EDUV Employee
<PAGE>
13.2 Notwithstanding anything to the contrary contained in this Agreement,
the Company may (provided that the Common Shares of the Company have
not been the subject of a successful takeover bid) terminate the
Employee's employment upon 14 days' notice to the Employee without
payment of any severance allowance should any of the following events
occur:
(a) The Company's decision to terminate its business and liquidate
its assets; or
(b) Bankruptcy or reorganization of the Company to protect its assets
from creditors.
13.3 Notwithstanding anything to the contrary contained in this Agreement;
the Company may terminate the Employee's employment without notice
and/or severance, if the Employee commits any of the following:
(a) an act of fraud, dishonesty, negligent performance of employment
duties or the dereliction of employment duties;
(b) a breach of the terms of this Agreement or the Confidentiality
and Non-Competition Agreement, which breach is not fully
corrected by the Employee within 5 days of notice from the
Company; or
(c) any act or omission which constitutes "just cause" for dismissal
under the laws of British Columbia.
14. Termination of Employment by the Employee. The Employee may, without cause,
terminate his/her employment upon 30 days' written notice to the Company.
Following such notice from the Employee, the Company may require the
Employee to perform his duties to the date of termination and the Employee
will be paid his regular salary to date of termination. If the Company does
not require the Employee to remain for the duration of his/her notice, the
Company may pay the Employee severance pay in accordance with the laws of
British Columbia.
15. Death Benefit. If the Employee dies during the term of employment, the
Company shall pay to the Employee's estate the Employee's prevailing salary
less Government Deductions and Benefit Deductions up to and including the
end of the month in which death occurred.
16. Assistance in Litigation. Employee shall upon reasonable notice and at the
Company's expense, furnish such information and proper assistance to the
Company as it may reasonably require in connection with any litigation in
which it is, or may become, a party either during or after employment. The
Employee may, at its option and at the Company's expense, retain a lawyer
to attend with the Employee at any legal proceedings, which the Company
requires the Employee to be present at.
17. Effect on Prior Agreements. This Agreement supersedes any prior employment
agreement between the Company or any predecessor of the Company and the
Employee.
18. Settlement by Arbitration. Any claim or controversy that arises out of or
relates to this agreement, or the breach of it, shall be settled by
arbitration in accordance with the rules of the Commercial Arbitration
Center of Vancouver, British Columbia. Judgment upon the award rendered may
be entered in any court with jurisdiction.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 4 of 7
----- --------
EDUV Employee
<PAGE>
19. Severability. If, for any reason, any provision of this Agreement is held
invalid, all other provisions of this Agreement shall remain in effect. If
this Agreement is held invalid or cannot he enforced, then to the full
extent permitted by law any prior agreement between the Company (or any
predecessor thereof) and the Employee shall be deemed reinstated as if this
Agreement had not been executed.
20. Assumption of Agreement by Company's Successor and Assignees. The Company's
rights and obligations under this Agreement will endure to the benefit and
be binding upon the Company's successors and assignees.
21. Oral Modifications Not Binding. Oral modifications to this Agreement shall
have no effect. This Agreement may be modified only by a written agreement
signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
22. Notices. Except as otherwise expressly provided herein, any and all notices
or demands which must or maybe given hereunder or under any other
instrument contemplated hereby shall be given by delivery in person or by
regular mail or by facsimile transmission to the parties' respective
address set out on the first page of this Agreement. All such
communications, notices or presentations and demands provided for herein
shall be deemed to have been delivered when actually delivered in person to
the respective party, or if mailed, then on the date it would be delivered
in the ordinary course of mail, or if sent by facsimile transmission, on
the date of receipt of confirmation that the transmission has been
received. Any party may change its address hereunder on twenty days notice
to the other party in compliance with this section.
23. General. Time will be of the essence hereof. The Employee acknowledges and
declares that he has been provided with sufficient time and opportunity to
consider all factors relating to this Agreement, has retained, and
consulted independent counsel to advise him, or in the alternative has
elected to waive his right to retain and consult independent counsel. He
further acknowledges and declares that he has read and understands the
terms of this Agreement and has signed it voluntarily with full awareness
of its consequences. This Agreement may not be assigned by the Employee
without the express written consent of the Company. Wherever the singular
masculine or neuter is used in this Agreement, the same shall be construed
as meaning the plural or feminine, and visa versa, where the contest or the
parties so require. The headings used herein are for convenience of
reference only and shall not affect the interpretation of this Agreement.
Facsimile or photostat copies of signatures are acceptable and are of the
same force and effect as original signatures for all intents and purposes.
The waiver by either patty of any breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach. The
provisions of sections 7 and 16 herein shall survive the termination of the
Employee's employment and this Agreement. This Agreement may be executed in
several counterparts, each of which so executed shall be deemed to be an
original, and such counterparts together shall constitute but one and the
same instrument. The preambles or recitals hereto are hereby incorporated
herein and form an integral part of this Agreement. This Agreement shall
entire to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 5 of 7
----- --------
EDUV Employee
<PAGE>
IN WITNESS WHEREOF the parties hereto have duly executed this agreement under
seal as of the date first above written.
EDUVERSE ACCELERATED LEARNING |
SYSTEMS (CANADA), INC. |
|
|
|
|
- ------------------------------------- |
(Authorized Signature) |
|
|
|
SIGNED, SEALED and DELIVERED by |
the Employee in the presence of: |
|
|
|
- ------------------------------------- | ---------------------------
Signature | Signature of Employee
|
- ------------------------------------- |
Name |
| ---------------------------
- ------------------------------------- | Date Signed
Address |
|
- ------------------------------------- |
Occupation |
|
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 6 of 7
----- --------
EDUV Employee
<PAGE>
SCHEDULE "A"
This Schedule sets out the general duties of the position that the Employee has
accepted with the Company. This Schedule may be amended by a written job
description to be prepared by his/her Manager from time to time.
WORK DESCRIPTION: To perform product development activities for the Company.
REMUNERATION: After 3 months, the monthly salary will increase to $9,000.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 6 of 7
----- --------
EDUV Employee
EXHIBIT 6.16
EDUVERSE ACCELERATED LEARNING SYSTEMS (CANADA), INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated for reference the 3rd day of May 1999.
BETWEEN
EDUVERSE Accelerated Learning Systems (Canada), Inc., a company
incorporated under the laws of the Province of British Columbia and having
an office at 2nd Floor, 1235 West Pender Street, Vancouver, British
Columbia, V6E 2V6.
(hereinafter referred to as the "Company")
AND
Lorne Reicher having an address for notice at #80 - 2615 Fortress Drive,
Port Coquitlam, BC, Canada V3C6A8.
(hereinafter referred to as the "Employee")
WHEREAS:
A. The Company is principally engaged in the business of researching,
developing and marketing multimedia educational software products (the
"Company's Business"),
B. The Employee has been hired by the Company to work in the Company's
Business;
C. The Employee and the Company wish to enter into this Agreement to record
the terms of employment between them;
NOW THEREFORE THIS AGREEMENT WITNESSES that for good consideration, the Company
hereby employs the Employee on the following terms and conditions:
1. Term of Employment. Subject to the provisions for termination set forth
below, the Employee's employment with the Company, pursuant to this
Agreement will begin on January 1, 1999 and continue until terminated in
accordance with this Agreement.
2. Salary. The Company shall pay the Employee a salary of $5,000.00 per month
for the services of the Employee, payable at regular payroll periods
established by the Company. The Employee's salary will be subject to
deductions for Income Tax, Canada Pension Plan and Employment Insurance
remittances (collectively the "Government Deductions") and for the
Employee's contributions to the employee benefit plan to be established by
the Company on terms approved by the Directors of the Company ("Benefit
Deductions").
3. Duties and Position. The Company will employ the Employee in the capacity
of Vice President Operations. The Employee's duties shall include those
commonly associated with the aforesaid capacity, including without
limitation the duties set out in Schedule "A". The Employee agrees that
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 1 of 7
----- --------
EDUV Employee
<PAGE>
his duties may be reasonably modified at the Company's discretion from time
to time The Employee will report to the President, or such other Company
employee that may be designated by the management of the Company (hereafter
referred to as "Manager") and will comply with all lawful instructions
given by his/her Manager.
4. Policies and Procedures. The Employee shall abide by all policies and
procedures defined by the Company in the Employee Orientation letter. These
policies and procedures may be updated and changed at any time at the
discretion of the Company.
5. Privacy. The company may monitor and/or review all email, voice mail,
Internet browser usage and phone calls when deemed necessary by the Company
without prior notice.
6. Devote Full Time to Company. The Employee will use his best efforts to
promote the interests of the Company. The Employee will devote full time,
attention and energies to the Company's Business, and during employment
with the Company, will not engage in any other business activity,
regardless of whether such activity is pursued for profit, gain, or other
pecuniary advantage. The Employee is not prohibited from making personal
investments in any other businesses provided those such businesses are not
engaged in activities which are or may be competitive with the Company's
Business and provided such investments do not require the Employee's active
involvement. The Employee shall not commit or purport to commit the Company
to:
(a) any financial obligation or liability in excess of $100.00, or
(b) sell or encumber any part of the assets of the Company.
7. Confidentiality. The Employee will not, during or after the term of his
employment, reveal any confidential information or trade secrets of the
Company to any person, firm, corporation, or entity. If the Employee
reveals or threatens to reveal any such information, the Company shall be
entitled to an injunction restraining the Employee from disclosing same, or
from rendering any services to any entity to whom said information has been
or is threatened to be disclosed. The right to secure an injunction is not
exclusive, and the Company may pursue any other remedies it has against the
Employee for a breach or threatened breach of this condition, including the
recovery of damages from the Employee. The Employee shall promptly sign and
deliver the Company's form of Confidentiality and Non-Competition Agreement
as a condition of employment.
8. Reimbursement of Expenses. The Employee may incur reasonable expenses for
furthering the Company's Business, including expenses for entertainment,
travel, and similar items. The Employee will obtain prior acceptance of the
expenses from his/her Manager. The Company shall reimburse the Employee for
all business expenses after the Employee presents a pre-approved itemized
account of expenditures including original receipts, which is approved by
his/her Manager pursuant to Company policy.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 2 of 7
----- --------
EDUV Employee
<PAGE>
9. Vacation. The Employee shall be entitled to a yearly paid vacation of 2
weeks and increases in accordance with the labour laws of British Columbia.
The Employee shall have due regard to the policies of the Company relating
to the scheduling of vacations and the reasonable directions of his/her
Manager.
10. Benefits. The Employee shall, subject to shareholder approval and
regulatory approval. be entitled to the following benefits from the Company
(with the specific details and terms of the following benefits to be
determined by the Directors of the Company from time to time):
(a) the Employee will participate in a stock option plan under which the
Employee will receive a stock option for the subscription purchase of
100,000 Common Shares in the Company at an exercise price of $0.68 US
per share;
(b) the Employee will participate in a stock purchase plan (as and when
established by the Company) under which the Employee will receive an
option to acquire an equity interest in the Company through payroll
deductions;
(c) the Employee will participate in a group benefits package that will
include disability insurance and term life insurance plans for
employees of the Company.
11. Open Market Stock Trading Restrictions. All Employees participating in open
market trades of the Company's shares, whether buying or selling, must
first notify the CFO or President of the Company. An Employee who purchases
shares of the Company on the open market must hold and may not sell those
shares for a minimum of 6 (six) months from the date of the last purchase
of any shares of the Company on the open market by such Employee. An
Employee who sells shares of the Company must wait a minimum of 6 (six)
months from the date of the last sale of Company shares by that Employee
before purchasing additional shares of the Company's stock on the open
market.
These restrictions do not apply to the exercise of stock options or the
shares acquired by an Employee pursuant to the exercise of stock options.
12. Disability. It is understood and agreed that while the Employee is entitled
to receive payments under any disability insurance plan for Employees of
the Company, then the Employee will not be entitled during such time, to
receive the salary set out in Section 2. The Employee's full compensation
will be reinstated upon the Employee's return to work on a full-time basis.
If the Employee is absent from work or is unable to fully and effectively
perform his duties because of illness or incapacity or for any other reason
for a continuous period of more than 270 days or for an aggregate period of
more than 270 days in any period of 365 days, then the Employer shall have
the option to terminate the Employee's employment upon 30 days prior
written notice.
13. Termination of Employment by the Company.
13.1 The Company may terminate the Employee's employment and this Agreement
at any time upon 14 days' written notice to the Employee. At the
Company's discretion, the Employee will continue to perform his duties
and will be paid his regular salary up to the date of termination; or
the Company will pay the Employee severance pay in accordance with the
labour laws of British Columbia, less applicable Government Deductions
and Benefit Deductions.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 3 of 7
----- --------
EDUV Employee
<PAGE>
13.2 Notwithstanding anything to the contrary contained in this Agreement,
the Company may (provided that the Common Shares of the Company have
not been the subject of a successful takeover bid) terminate the
Employee's employment upon 14 days' notice to the Employee without
payment of any severance allowance should any of the following events
occur:
(a) The Company's decision to terminate its business and liquidate
its assets; or
(b) Bankruptcy or reorganization of the Company to protect its assets
from creditors.
13.3 Notwithstanding anything to the contrary contained in this Agreement;
the Company may terminate the Employee's employment without notice
and/or severance, if the Employee commits any of the following:
(a) an act of fraud, dishonesty, negligent performance of employment
duties or the dereliction of employment duties;
(b) a breach of the terms of this Agreement or the Confidentiality
and Non-Competition Agreement, which breach is not fully
corrected by the Employee within 5 days of notice from the
Company; or
(c) any act or omission which constitutes "just cause" for dismissal
under the laws of British Columbia.
14. Termination of Employment by the Employee. The Employee may, without cause,
terminate his/her employment upon 30 days' written notice to the Company.
Following such notice from the Employee, the Company may require the
Employee to perform his duties to the date of termination and the Employee
will be paid his regular salary to date of termination. If the Company does
not require the Employee to remain for the duration of his/her notice, the
Company may pay the Employee severance pay in accordance with the laws of
British Columbia.
15. Death Benefit. If the Employee dies during the term of employment, the
Company shall pay to the Employee's estate the Employee's prevailing salary
less Government Deductions and Benefit Deductions up to and including the
end of the month in which death occurred.
16. Assistance in Litigation. Employee shall upon reasonable notice and at the
Company's expense, furnish such information and proper assistance to the
Company as it may reasonably require in connection with any litigation in
which it is, or may become, a party either during or after employment. The
Employee may, at its option and at the Company's expense, retain a lawyer
to attend with the Employee at any legal proceedings, which the Company
requires the Employee to be present at.
17. Effect on Prior Agreements. This Agreement supersedes any prior employment
agreement between the Company or any predecessor of the Company and the
Employee.
18. Settlement by Arbitration. Any claim or controversy that arises out of or
relates to this agreement, or the breach of it, shall be settled by
arbitration in accordance with the rules of the Commercial Arbitration
Center of Vancouver, British Columbia. Judgment upon the award rendered may
be entered in any court with jurisdiction.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 4 of 7
----- --------
EDUV Employee
<PAGE>
19. Severability. If, for any reason, any provision of this Agreement is held
invalid, all other provisions of this Agreement shall remain in effect. If
this Agreement is held invalid or cannot he enforced, then to the full
extent permitted by law any prior agreement between the Company (or any
predecessor thereof) and the Employee shall be deemed reinstated as if this
Agreement had not been executed.
20. Assumption of Agreement by Company's Successor and Assignees. The Company's
rights and obligations under this Agreement will endure to the benefit and
be binding upon the Company's successors and assignees.
21. Oral Modifications Not Binding. Oral modifications to this Agreement shall
have no effect. This Agreement may be modified only by a written agreement
signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
22. Notices. Except as otherwise expressly provided herein, any and all notices
or demands which must or maybe given hereunder or under any other
instrument contemplated hereby shall be given by delivery in person or by
regular mail or by facsimile transmission to the parties' respective
address set out on the first page of this Agreement. All such
communications, notices or presentations and demands provided for herein
shall be deemed to have been delivered when actually delivered in person to
the respective party, or if mailed, then on the date it would be delivered
in the ordinary course of mail, or if sent by facsimile transmission, on
the date of receipt of confirmation that the transmission has been
received. Any party may change its address hereunder on twenty days notice
to the other party in compliance with this section.
23. General. Time will be of the essence hereof. The Employee acknowledges and
declares that he has been provided with sufficient time and opportunity to
consider all factors relating to this Agreement, has retained, and
consulted independent counsel to advise him, or in the alternative has
elected to waive his right to retain and consult independent counsel. He
further acknowledges and declares that he has read and understands the
terms of this Agreement and has signed it voluntarily with full awareness
of its consequences. This Agreement may not be assigned by the Employee
without the express written consent of the Company. Wherever the singular
masculine or neuter is used in this Agreement, the same shall be construed
as meaning the plural or feminine, and visa versa, where the contest or the
parties so require. The headings used herein are for convenience of
reference only and shall not affect the interpretation of this Agreement.
Facsimile or photostat copies of signatures are acceptable and are of the
same force and effect as original signatures for all intents and purposes.
The waiver by either patty of any breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach. The
provisions of sections 7 and 16 herein shall survive the termination of the
Employee's employment and this Agreement. This Agreement may be executed in
several counterparts, each of which so executed shall be deemed to be an
original, and such counterparts together shall constitute but one and the
same instrument. The preambles or recitals hereto are hereby incorporated
herein and form an integral part of this Agreement. This Agreement shall
entire to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 5 of 7
----- --------
EDUV Employee
<PAGE>
IN WITNESS WHEREOF the parties hereto have duly executed this agreement under
seal as of the date first above written.
EDUVERSE ACCELERATED LEARNING |
SYSTEMS (CANADA), INC. |
|
|
|
|
- ------------------------------------- |
(Authorized Signature) |
|
|
|
SIGNED, SEALED and DELIVERED by |
the Employee in the presence of: |
|
|
|
- ------------------------------------- | ---------------------------
Signature | Signature of Employee
|
- ------------------------------------- |
Name |
| ---------------------------
- ------------------------------------- | Date Signed
Address |
|
- ------------------------------------- |
Occupation |
|
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 6 of 7
----- --------
EDUV Employee
<PAGE>
SCHEDULE "A"
This Schedule sets out the general duties of the position that the Employee has
accepted with the Company. This Schedule may be amended by a written job
description to be prepared by his/her Manager from time to time.
WORK DESCRIPTION: To perform activities related to the operations of the
Company.
- --------------------------------------------------------------------------------
EDUVERSE Accelerated Learning Systems (Canada), Inc.
Employment Agreement
Page 7 of 7
----- --------
EDUV Employee
EXHIBIT 8.1
STOCK EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT, dated May 28, 1998, is made by and between PERFECT FUTURE, LTD.,
a Nevada corporation (the "Buyer"), on the one hand, and ESL PRO SYSTEMS INC., a
corporation incorporated under the laws of the State of Nevada and hereafter
referred to as "ESL PRO" or as the "Sellers" and MARK E. BRUK duly authorized
and appointed agent of the shareholders of ESL PRO, whose names appear on
"Exhibit A" attached hereto and who constitute all of the shareholders of ESL
PRO, on the other hand.
RECITALS
A. WHEREAS ESL PRO has an exclusive license to develop, market and sell an
existing ESL (English as a Second Language) software and hardware system
developed in Canada;
B. AND WHEREAS the Sellers are desirous of joining together to go public by
exchanging the shares of ESL PRO for shares of an existing publicly traded
entity on the NASD, OTC Bulletin Board, in a share for a share transaction
intending to qualify as a tax-free exchange pursuant to ss.368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended;
C. AND WHEREAS the Buyer is a publicly traded company listed on the NASD, OTC
Bulletin Board, with 2,250,000 (Two Million, Two Hundred and Fifty Thousand)
shares outstanding and desires to acquire the Sellers, for 2,000,000 (Two
Million) of its common shares. NOW THEREFORE the parties hereby agree that in
implementing said tax-free exchange and in consideration of the mutual covenants
set forth below, the parties hereby agree as follows:
Article I
EXCHANGE OF THE SHARES
1.01 Shares Being Exchanged. Subject to the terms and conditions of this
Agreement, the Sellers are selling, assigning, and delivering at the closing
provided for in Section 1.03 hereof (the "Closing"), 2,000,000 (Two Million)
common shares of ESL PRO, which shares represent all of the issued and
outstanding common shares of ESL PRO, free and clear of all liens, charges, or
encumbrances of any kind.
1.02 Consideration. In exchange for the said common shares of ESL PRO being
acquired by the Buyer, at the Closing, the Buyer will deliver to the Sellers
2,000,000 (Two Million) "restricted" common shares of the Buyer as that term is
defined in Rule 144 of the Securities Act of 1933, as amended.
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
Page 1 of 16
<PAGE>
1.03 Closing. The Closing of the transactions provided for in Section 1.04 and
1.05 is to take place at the offices of ESL PRO at Reno, Nevada simultaneously
with the execution and delivery of this Agreement, or at such other time or
place as may mutually be agreed upon by the parties. The Closing may also be
accomplished by wire, express mail, or other courier service, conference call,
or as otherwise agreed by the respective parties or their duly authorized
representatives.
1.04 Delivery by the Sellers. At the Closing, the Sellers will deliver to the
attorneys for the Buyer: (i) certificates representing the said common shares of
the Sellers, in form acceptable for transfer on the books of ESL PRO, with all
necessary transfer tax stamps attached; and (ii) all corporate records and items
set forth, the said certificates to be released to the Buyer when the stock
certificates referred to in Section 1.05 are delivered to the Sellers.
1.05 Delivery by the Buyer. At the Closing, or as soon as is practicable
thereafter, the Buyer will deliver to the Sellers, (i) stock certificates for
the said common shares of the Buyer, in the denominations set forth in "Exhibit
A"; and (ii) all corporate records and items set forth.
Article II
RELATED TRANSACTIONS
2.01 Expenses of the Transactions. The Buyer shall be responsible for paying all
expenses of this transaction, including but not limited to any filing fees,
legal fees not to exceed $5,000 (Five Thousand Dollars), accounting fees, escrow
agent fees, printing expenses, certificate engraving fees and transfer fees.
2.02 Additional Offering of Shares. The Buyer intends, shortly after the Closing
hereof, to attempt to raise additional operating capital through a private
offering of securities, contemplated to be offered pursuant to an exemption
under Regulation S of the Securities Act of 1933, as amended.
Article III
REPRESENTATIONS AND WARRANTIES BY THE BUYER
The Buyer hereby represents and warrants as follows:
3.01 Organization, Capitalization, etc.
(a) The Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada.
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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<PAGE>
(b) The authorized capital stock of the Buyer consists of 50,000,000 (Fifty
Million) common shares with a par value of $.001 per share, of which only
2,250,000 (Two Million, Two Hundred and Fifty Thousand) are issued and
outstanding, fully paid and nonassessable, and 5,000,000 (Five Million)
preferred shares with a par value of $.001 per share, of which none are
issued or outstanding.
(c) The Buyer has the corporate power and authority to carry on its
business as presently conducted and has full corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder and
the Buyer has been so authorized by the required majority of its
shareholders as evidenced by a certified resolution of the shareholders of
the Buyer and delivered to the Sellers at Closing.
3.02 Non Violation. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will constitute a
violation or default under any term or provision of the Certificate of
Incorporation or Bylaws of the Buyer, or of any contract, commitment, indenture,
other agreement or restriction of any kind or character to which the Buyer is a
party or by which the Buyer is bound.
3.03 Financial Statement. The Buyer has delivered to the Seller the balance
sheet of the Buyer as of June 30, 1997, prepared by Barry L. Friedman, P.C.,
C.P.A. The balance sheet is true and correct and a fair and accurate
presentation of the financial condition, assets and liabilities (whether
accrued, absolute, contingent, or otherwise) of the Buyer as of the date thereof
in accordance with generally accepted principals of accounting applied on a
consistent basis.
3.04 Tax Returns. The Buyer has duly filed all tax reports and returns required
to be filed by it and has fully paid all taxes and other charges claimed to be
due from it by federal, state, or local taxing authorities (including without
limitation those due in respect of its properties, income, franchises, licenses,
sales, and payrolls); there are not liens upon any of the Buyer's property or
assets; and there are not now any pending questions relating to, or claims
asserted for, taxes or assessments asserted against the Buyer.
3.05 Title to Properties: Encumbrances. The Buyer
has good and marketable title to all of its properties and assets, real and
personal, tangible and intangible, including without limitation the properties
and assets reflected in the June 30, 1997 balance sheet of the Buyer. All such
properties and assets reflected in that balance sheet have fair market or
realizable value at least equal to the value thereof as reflected upon the
balance sheet, and they are subject to no mortgage, pledge, lien, conditional
sale agreement, encumbrance, or charge of any nature.
3.06 Accounts Receivable. Any accounts receivable of the Buyer, whether
reflected in the Buyer's June 30, 1997 balance sheet or otherwise, represent
sales actually made in the ordinary course of business and any reserve for
uncollectability of receivables as reflected in the aforesaid balance sheet is
adequate and was calculated in a way consistent with past practice. Except to
extent set forth herein, there are not now any questions,
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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<PAGE>
controversies, or disputes relating to any accounts receivable of the Buyer.
3.07 Undisclosed Liabilities. Except to the extent reflected, or reserved
against, in the June 30, 1997 balance sheet of the Buyer, the Buyer as of that
date had no liabilities or obligations of any nature, whether absolute, accrued,
contingent, or otherwise, whether due or to become due.
3.08 Absence of Certain Changes. The Buyer has not since June 30 1997, and shall
not, have
(a) Suffered any material adverse change in financial condition, assets,
liabilities, or business;
(b) Incurred any obligation or liability (whether absolute, accrued,
contingent, or otherwise) other than as disclosed to the Sellers;
(c) Paid any claim or discharged or satisfied any lien or encumbrance or
paid or satisfied any liability (whether absolute, accrued, contingent, or
otherwise) other than liabilities shown or reflected in the Buyer's June
30, 1997 balance sheet or liabilities incurred since June 30, 1997 other
than those disclosed to the Sellers;
(d) Permitted or allowed any of its assets, tangible or intangible, to be
mortgaged, pledged, or subjected to any liens or encumbrances;
(e) Written down the value of any inventory or written-off as uncollectible
any notes or accounts receivable or any portion thereof, except for
write-offs of such items as disclosed to the Sellers;
(f) Cancelled any other debts or claims or waived any rights of substantial
value, or sold or transferred any of its assets or properties, tangible or
intangible, other than sales of inventory or merchandise as disclosed to
the Sellers;
(g) Made any capital expenditures or commitments for additions to property,
plant or equipment;
(h) Declared, paid or set aside for payment to its stockholders any
dividend or other distribution in respect of its capital stock or redeemed
or purchased or otherwise acquired any of its capital stock or any options
relating thereto or agreed to take any such action;
(i) Made any material change in any method of accounting or accounting
practice.
3.09 Litigation. There are no actions, claims, proceedings, or investigations
pending or, to the knowledge of the Buyer, threatened against the Buyer, and the
Buyer knows, or has no reason to know, of any basis for any such action,
proceeding, or investigation. There is no event or condition of any kind or
character pertaining to the business, assets, or prospects
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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<PAGE>
of the buyer that may materially and adversely affect such business, assets or
prospects.
3.10 Disclosure. The Buyer has disclosed to the Sellers all facts material to
the assets, prospects, and business of the Buyer. No representation or warranty
by the Buyer contained in this Agreement, and no statement contained in any
instrument, list, certificate, or writing furnished to the Sellers pursuant to
the provisions hereof or in connection with the transaction contemplated hereby,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading or necessary in order to provide a prospective purchaser of the
business of the Buyer with proper information as to the buyer and its affairs.
3.11 SEC Filings. The Buyer has filed on a timely basis all reports required to
be filed with the United States Securities and Exchange Commission (hereinafter
the "SEC").
3.12 Legend. The Certificates representing the shares in the Buyer, delivered by
Buyer to Seller pursuant to this Agreement shall bear a legend in the following
or similar form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 (the "Act"), as amended, or any other applicable
federal or state securities acts; and are 'restricted securities' as
defined by Rule 144 of the Act. The shares may not be transferred, sold or
otherwise disposed of unless: (1) a registration statement with respect to
the shares shall be effective under the act or any other federal or state
securities acts and (2) Buyer shall have received an opinion of counsel for
that no violations of any securities acts will be involved in any
transfer."
3.13 Holding Period. If the shares represented by these Certificates have been
held for a period of at least one (1) year and if Rule 144 of the Act is
applicable (there being no representations by the Buyer that Rule 144 is
applicable), then the Sellers may make sales of the Shares only under the terms
and conditions prescribed by Rule 144 of the Act.
3.14 Investment Intent. The Buyer is acquiring the said shares of the Sellers to
be transferred to it under this Agreement for investment and not with a view to
the sale or distribution thereof, and the Buyer has no commitment or present
intention to liquidate ESL PRO or to sell or otherwise dispose of the Shares.
3.15 Unregistered Shares and Access to Information. The Buyer understands the
offer and sale of the said shares of the Sellers have not been registered with
or reviewed by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, or with or by any state securities law administrator, and
no federal or state securities law administrator has reviewed or approved any
disclosure or other material concerning ESL PRO or the shares in the Buyer. The
Buyer has been provided with and reviewed all information concerning ESL PRO and
the said shares of the Sellers, as it has considered necessary or appropriate as
a prudent and knowledgeable investor to enable it to make an informed investment
decision concerning the said shares of the Sellers.
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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Article IV
REPRESENTATIONS AND WARRANTIES BY THE SELLERS
The Sellers hereby represent and warrant as follows:
4.01 Organization, etc.
(a) ESL PRO is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Nevada.
(b) The authorized capital stock of ESL PRO consists of 10,000,000 (Ten
Million) common shares with a par value of $.001 per share, 2,000,000 (Two
Million) of which are validly issued and outstanding, fully paid and
nonassessable.
(c) The Sellers have the corporate power and authority to carry on their
business as presently conducted and have full corporate power and authority
to enter into this Agreement and to carry out their obligations hereunder.
4.02 Authority. The execution and delivery of this Agreement by the Buyer and
the consummation by ESL PRO and Sellers of the transactions contemplated hereby
have been duly authorized.
4.03 No Violation. Neither the execution nor the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will constitute a
violation or default under any term or provision of the Certificate of
Incorporation or Bylaws of ESL PRO or of any contract, commitment, indenture, or
other agreement or restriction of any kind or character to which ESL PRO is a
party or by which they or the Sellers are bound.
4.04 Representations Regarding the Acquisition of the Shares.
(a) The undersigned understand that the SAID SHARES OF THE BUYER TO BE
RECEIVED FROM THE BUYER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCIES;
(b) The Sellers are not underwriters and are acquiring the said shares of
the Buyer solely for investment for their own account and not with a view
to, or for, resale in connection with any distribution within the meaning
of the federal securities act, the state securities acts or any other
applicable state securities acts;
(c) The Sellers understand the speculative nature and risks of investments
associated with the Buyer and confirm that the said shares of the Buyer are
suitable and consistent with their investment program and that their
financial position enables them to bear the risks of this investment; and
that there may not be any
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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public market for the said shares of the Buyer subscribed for herein;
(d) The said shares of the Buyer to be received by the Sellers may not be
transferred, encumbered, sold, hypothecated, or otherwise disposed of to
any person, without the express prior written consent of the Buyer and the
prior opinion of counsel for the Buyer that such disposition will not
violate federal and/or state securities acts. Disposition shall include,
but is not limited to acts of selling, assigning, transferring, pledging,
encumbering, hypothecating, or any form of conveying, whether voluntary or
not;
(e) To the extent that any federal, and/or state securities laws shall
require, the Sellers hereby agree that any shares of the Buyer acquired
pursuant to this Agreement shall be without preference as to assets;
(f) The Buyer is under no obligation to register or seek an exemption under
any federal and/or state securities acts for any shares of the Buyer or to
cause or permit such shares to be transferred in the absence of any such
registration or exemption and that the Sellers herein must hold such shares
indefinitely unless such shares are subsequently registered under any
federal and/or state securities acts or any exemption from registration is
available;
(g) The Sellers have been given: (1) all material books and records of the
Buyer; and (2) all material contracts and documents relating to the
proposed transactions;
(h) The Sellers have satisfied the suitability standards imposed by their
respective state securities laws. The said shares of the Buyer being
acquired from the Buyer have not been registered under federal or state
securities laws. The Sellers acknowledge that the Buyer has not complied
with any state securities laws in seeking an exemption from the
transactions contemplated by this Agreement. Accordingly, the Sellers waive
any and all rights, claims or causes of action they may have against the
Buyer under any state securities laws as a result of the Buyer's failure to
comply with applicable state securities laws.
4.05 Undisclosed Liabilities. ESL PRO has no liabilities or obligations of any
nature, whether absolute, accrued, contingent, or otherwise.
4.06 Absence of Certain Changes. ESL PRO shall not from the date of the balance
sheet (attached hereto as "Exhibit B") and income statements (attached hereto as
"Exhibit C") to be provided have:
(a) Suffered any material adverse change in financial condition, assets,
liabilities, business, or prospects;
(b) Incurred any obligation or liability (whether absolute, accrued,
contingent, or otherwise) other than in the ordinary course of business and
consistent with past
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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practices;
(c) Paid any claim or discharged or satisfied any lien or encumbrances or
paid or satisfied any liability (whether absolute, accrued, contingent, or
otherwise) other than liabilities to be shown or reflected in the audited
balance sheets or liabilities incurred in the ordinary course of business
and consistent with past practices;
(d) Permitted or allowed any of their assets, tangible or intangible, to be
mortgaged, pledged, or subjected to any liens or encumbrances;
(e) Written down the value of any inventory or written-off as uncollectible
any notes or accounts receivable or any portion thereof, except for
write-offs of such items in the ordinary course of business;
(f) Cancelled any other debts or claims or waived any rights of substantial
value, or sold or transferred any assets or properties, tangible or
intangible, other than sales of inventory or merchandise made in the
ordinary course of business and consistent with past practice;
(g) Made any capital expenditures or commitments in excess of $2,000 (Two
Thousand Dollars) for additions to property, plant or equipment;
(h) Declared, paid, or set aside for payment to stockholders any dividend
or other distribution in respect of its capital stock or any options
relating thereto or agreed to take any such options relating thereto or
agreed to take any such action;
(i) Made any material change in any method of accounting or accounting
practice.
4.07 Litigation. There are no actions, proceedings, or investigations pending
or, to the knowledge of the Sellers, threatened against ESL PRO, and Sellers
know, or have no reason to know, of any basis for any such actions, proceeding,
or investigation. There is no event or condition of any kind or character
pertaining to the businesses, assets, or prospects of ESL PRO that may
materially and adversely affect such business, assets or prospects.
4.08 Disclosure. ESL PRO have disclosed to the Buyer all facts material to the
assets, prospects, and business of ESL PRO, particularly with respect to ESL
PRO's abilities to develop, market, and sell English as a Second Language
software and hardware, ESL PRO's primary asset. No representation or warranty by
ESL PRO contained in this agreement, and no statement contained in any
instrument, list, certificate, or writing furnished to Buyer pursuant to the
provisions hereof or in connection with the transaction contemplated hereby,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading or necessary in order to provide a prospective purchaser of the
shares of ESL PRO with proper information as to ESL PRO and their affairs.
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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Article V
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
5.01 Survival of Representations. All representations, warranties and agreements
of the parties as contained in this Agreement, or expressly incorporated herein
by reference, shall survive the Closing hereunder and any investigation made by
or on behalf of any party hereto.
5.02 Statements as Representations. All statements contained herein, or in any
certificate or other document delivered pursuant to this Agreement shall be
deemed representations and warranties within the meaning of Section 5.01 hereof.
5.03 Indemnification by the Sellers. Subject to the terms and conditions of this
Article 5, the Sellers (sometimes referred to herein as the "Indemnifying
Party") hereby agree to indemnify, defend and hold harmless Buyer, any
subsidiary, director, officer, employee, agent or representative of Buyer
(collectively the "Indemnitees" and each individually, a "Indemnitee") from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties, attorneys' fees and expenses (collectively, "Damages"),
asserted against, imposed upon or incurred by the Indemnitees or any Indemnitee,
resulting from, relating to or arising out of:
(a) any breach of any representation, warranty or agreement of the Sellers
contained in or made pursuant to this Agreement or any facts or
circumstances constituting such a breach; or
(b) any act or omission of the Sellers or any of their respective
affiliates, trustees, officers, employees, agents or representatives
relating to the property, business, operations and activities of ESL PRO
which occurred, existed or failed to occur or exist prior to the Closing;
or
(c) any event, state of facts, circumstance or condition occurring or
existing (or not occurring or not in existence if the absence of such fact,
circumstance or condition forms the basis for Damages) relating to the
property, business, operations or activities of the Sellers before the
Closing.
5.04 Indemnification by Buyer. Subject to the terms and conditions of this
Article 5, Buyer (sometimes referred to herein as the "Indemnifying Party")
hereby agrees to indemnify, defend and hold harmless the Sellers, and any
director, officer, employee, agent or representative of the same (collectively
the "Indemnitees" and each individually, a "Indemnitee") from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties, attorneys' fees and expenses (collectively, "Damages"), asserted
against, resulting from, imposed upon or incurred by the Indemnitees or any
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Page 9 of 16
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Indemnitee, resulting from, relating to or arising out of:
(a) a breach of any representation, warranty or agreement of Buyer
contained in or made pursuant to this Agreement or any facts or
circumstances constituting such a breach;
(b) any act or omission of
Buyer or any of their respective affiliates, directors, officers,
employees, agents or representatives relating to the property,
business, operations and activities of the Buyer which occurred,
existed or failed to occur or exist subsequent to the Closing; or
(c)
any event, state of facts, circumstance or condition occurring or
existing (or not occurring or existing if the absence of such event,
fact, circumstance or condition forms the basis for Damages) relating
to the property, business, operations or activities of the Buyer
subsequent to the Closing.
5.05 Notice of Indemnification Claims. If a claim is made against any Indemnitee
(as defined in Section 5.03 or 5.04 hereof) and if such Indemnitee believes that
such claim, if successful, would give rise to a right of indemnification
hereunder against the Indemnifying Party (as defined in Section 5.03 or 5.04
hereof) or if any officer of an Indemnitee (an "executive officer") becomes
aware of facts or circumstances establishing that an Indemnitee has experienced
or incurred Damages subject to indemnification hereunder, then such Indemnitee
shall give written notice to the Indemnifying Party of such claim as soon as
reasonably practicable after the Indemnitee has received notice thereof, and in
no event more than 60 days after the Indemnitee has obtained actual knowledge
thereof (provided that failure to give such notice shall not limit the
Indemnifying Party's indemnification obligation hereunder except to the extent
that the delay in giving, or failure to give, the notice adversely affects the
Indemnifying Party's ability to defend against the claim). The Indemnitee
against whom such claim is made shall give the Indemnifying Party an opportunity
to defend such claim, at the Indemnifying Party's own expense and with counsel
selected by the Indemnifying Party and reasonably satisfactory to the
Indemnitee, provided that such Indemnitee shall at all times also have the right
to fully participate in the defense at its own expense. Failure of an
Indemnifying Party to give the Indemnitee written notice of its election to
defend such claim within 20 days after notice thereof shall have been given by
the Indemnitee against whom such claim is made to the Indemnifying Party shall
be deemed a waiver by such Indemnifying Party of its right to defend such claim.
If the Indemnifying Party shall elect not to assume the defense of such claim
(or if such Indemnifying Party shall be deemed to have waived its right to
defend such claim), the Indemnitee against whom such claim is made shall have
the right, but not the obligation, to undertake the sole defense of, and to
compromise or settle, the claim on behalf, for the account, and at the risk and
expense, of the Indemnifying Party (including without limitation the payment by
Indemnifying Party of the attorneys' fees of the Indemnitees). If one or more of
the Indemnifying Parties assume the defense of such claim, the obligation of
such Indemnifying Party hereunder as to such claim shall include taking all
steps necessary in the defense or settlement of such claim. The Indemnifying
Party shall not, in the defense of such claim, consent to the entry of any
judgment or enter into any settlement (except with
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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<PAGE>
the written consent of the Indemnitee) which does not include as an
unconditional term thereof the giving by the claimant to the Indemnitee against
whom such claim is made of a release from all liability in respect of such claim
except the liability satisfied by the Indemnifying Party on behalf of such
Indemnitee in connection with such judgment or settlement. If the claim is one
that cannot by its nature be defended solely by the Indemnifying Party, then the
Indemnitee shall make available, at the Indemnifying Party's expense, all
information and assistance that the Indemnifying Party may reasonably request.
5.06 Interpretation of Indemnification Rights. Notwithstanding the fact that
certain representations contained in Articles 3 and 4 of the Stock Exchange
Agreement may relate more directly to the basis or subject matter of an
indemnification claim asserted by a party to this Agreement, the parties
acknowledge and agree that even if any Damages asserted in such claim are not
subject to indemnification pursuant to paragraph (a) of Section 5.03 or 5.04, as
the case may be, such indemnification claim is subject to indemnification
hereunder if such claim comes within the scope of paragraphs (b) and (c) of
Section 5.03 or paragraphs (b) and (c) of Section 5.04, as the case may be.
Article VI
MISCELLANEOUS PROVISIONS
6.01 Amendment and Modifications. Subject to applicable law, this Agreement may
be amended, modified and supplemented only by written agreement between the
parties hereto which states that it is intended to be a modification of this
Agreement.
6.02 Waiver of Compliance. Any failure of the Buyer, on the one hand,
or Sellers, on the other, to comply with any obligation, covenant, agreement or
condition herein may be expressly waived in writing by the other party, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
6.03 Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand or mailed, certified or registered mail with postage
prepaid:
(a) if to the Buyer, to:
Perfect Future, Ltd.
7551 W. Charleston, Suite 35
Las Vegas, Nevada 89117
or to such other person or address as the Buyer shall furnish in
writing;
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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(b) if to Sellers, to:
ESL Pro Systems Inc.
1135 Terminal Way, Suite 209
Reno, Nevada 89502
or to such other person or address as the Sellers shall furnish in
writing.
6.04 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other party.
6.05 Governing Law. This Agreement and the legal relations among the parties
hereto shall be governed by and construed in accordance with the laws of the
State of Nevada.
6.06 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.07 Headings. The headings of the Sections and Articles of this Agreement are
inserted for convenience only and shall not constitute a part hereof or affect
in any way the meaning or interpretation of this Agreement.
6.08 Entire Agreement. This Agreement, including the Schedules hereto and the
other documents and certificates delivered pursuant to the terms hereof, set
forth the entire agreement and understanding of the parties hereto in respect of
the subject matter contained herein, and supersede all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto.
6.09 Third Parties. Except as specifically set forth or referred to herein,
nothing herein expressed or implied is intended or shall be construed to confer
upon or give to any person or corporation other than the parties hereto and
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
6.10 Further Assurances. Each of the parties hereto agrees that from time to
time, at the request of any of the other parties hereto and without further
consideration, it will execute and deliver such other documents and take such
other action as such other party may reasonably request in order to consummate
more effectively the transactions contemplated hereby. 6.11 Effect. In the event
any portion of this Agreement is deemed to be null and void under any state or
federal law, all other portions and provisions not deemed void or voidable shall
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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<PAGE>
be given full force and effect.
6.12 Press Release and Shareholders Communications. On the date of Closing, or
as soon thereafter as practicable Buyer and Sellers shall cause to have promptly
prepared and disseminated a news release concerning the execution and
consummation of the Agreement, such press release and communication to be
released promptly and within the time required by the laws, rules and
regulations as promulgated by the United States Securities and Exchange
Commission, and concomitant therewith to cause to be prepared a full and
complete letter to Buyer's shareholders which shall contain information required
by Regulation 240.14f-1 as promulgated under Section 14(f) as mandated under the
Securities and Exchange Act of 1934, as amended.
6.13 Tax Treatment. The transaction contemplated by this Agreement is intended
to qualify as a "tax-free" reorganization under the provisions of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. The Buyer and the
Sellers acknowledge, however, that each are being represented by their own tax
advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws, regulations
or interpretations; and no attorney's opinion or tax revenue ruling has been
obtained with respect to the tax consequences of the transactions contemplated
therewith.
6.14 Signatures via Fax. Signatures via fax are sufficient to bind the
respective parties to this Agreement, provided that the original is delivered by
courier to the Sellers' address as set out in Section 6.03(b).
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
Buyer and the Sellers, effective on the date first above written.
- --------------------------------------------------------------------------------
BUYER: PERFECT FUTURE LTD.
BY: ------------------------------ BY: -----------------------------
President and Director Director
- --------------------------------------------------------------------------------
SELLERS: ESL PRO SYSTEMS INC.
BY: ------------------------------
President and Director
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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EXHIBIT A
TO STOCK EXCHANGE AGREEMENT
# to be Issued in
ESL PRO SHARES # Issued in ESL PRO Perfect Future
- -------------- ------------------- --------------
Mark E. Bruk 806,950 806,950
Marc Crimeni 806,950 806,950
Boswell Industries Inc. 360,509 360,509
Maggie Magee Dodd 5,591 5,591
Al Hasley 5,000 5,000
Peter Apostoli 2,500 2,500
Wyn Roberts 10,000 10,000
Colin Laine 2,500 2,500
TOTAL 2,000,000 2,000,000
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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EXHIBIT B
TO STOCK EXCHANGE AGREEMENT
ESL PRO SYSTEMS INC.
BALANCE SHEET
as of May 27, 1998
ASSETS
------
CURRENT
Cash $2,000
Total Assets $2,000
LIABILITIES
CURRENT
Liabilities $ 0
---------
Total Liabilities $ 0
---------
SHAREHOLDER'S EQUITY
Share Capital $2,000
Retained Earnings $ 0
---------
Total Shareholder's Equity $2,000
Total Liabilities & Shareholder's Equity $2,000
APPROVED BY THE DIRECTORS:
- --------------------------, Director
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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EXHIBIT C
TO STOCK EXCHANGE AGREEMENT
ESL PRO SYSTEMS INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
as of May 27, 1998
Revenue $ 0
---------
Gross Profit $ 0
---------
Expenses $ 0
---------
Total Expenses $ 0
Income (Loss) before Income Taxes $ 0
Income Taxes $ 0
---------
Net Income (Loss) for the Year $ 0
Retained Earnings (Deficit), beginning of year $ 0
---------
Retained Earnings (Deficit), end of year $ 0
=========
APPROVED BY THE DIRECTORS:
- --------------------------, Director
Stock Exchange Agreement between Perfect Future, Ltd. and ESL Pro Systems, Inc.
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EXHIBIT 8.2
STOCK EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT, dated May 29, 1998, is made by and between PERFECT FUTURE, LTD.,
a Nevada corporation (the "Buyer"), on the one hand, and M&M INFORMATION &
MARKETING SERVICES INC., a corporation incorporated under the laws of the State
of Nevada and hereafter referred to as "M&M" or as the "Sellers" and MARK E.
BRUK duly authorized and appointed agent of the shareholders of M&M, whose names
appear on "Exhibit A" attached hereto and who constitute all of the shareholders
of M&M, on the other hand.
RECITALS
A. WHEREAS M&M is currently
(a) developing a 100% Pure Java distance education delivery environment and
toolkit;
(b) providing management expertise in the development, marketing, and sales of
leading-edge technologies; and
(c) desirous of raising money for operating capital;
B. AND WHEREAS the Sellers are desirous of joining together to go public by
exchanging the shares of M&M for shares of an existing publicly traded entity on
the NASD, OTC Bulletin Board, in a share for a share transaction intending to
qualify as a tax-free exchange pursuant to ss.368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended;
C. AND WHEREAS the Buyer is a publicly traded company listed on the NASD, OTC
Bulletin Board, with 4,250,000 (Four Million, Two Hundred and Fifty Thousand)
shares outstanding and desires to acquire the Sellers, for 7,000,000 (Seven
Million) of its common shares. NOW THEREFORE the parties hereby agree that in
implementing said tax-free exchange and in consideration of the mutual covenants
set forth below, the parties hereby agree as follows:
Article I
EXCHANGE OF THE SHARES
1.01 Shares Being Exchanged. Subject to the terms and conditions of this
Agreement, the Sellers are selling, assigning, and delivering at the closing
provided for in Section 1.03 hereof (the "Closing"), 7,000,000 (Seven Million)
common shares of M&M, which shares represent all of the issued and outstanding
common shares of M&M, free and clear of all liens, charges, or encumbrances of
any kind.
1.02 Consideration. In exchange for the said common shares of M&M
being acquired by the Buyer, at the Closing, the Buyer will deliver to the
Sellers 7,000,000 (Seven Million)
Stock Exchange Agreement between Perfect Future, Ltd. and
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"restricted" common shares of the Buyer as that term is defined in Rule 144 of
the Securities Act of 1933, as amended.
1.03 Closing. The Closing of the transactions provided for in Section 1.04 and
1.05 is to take place at the offices of M&M at Reno, Nevada simultaneously with
the execution and delivery of this Agreement, or at such other time or place as
may mutually be agreed upon by the parties. The Closing may also be accomplished
by wire, express mail, or other courier service, conference call, or as
otherwise agreed by the respective parties or their duly authorized
representatives.
1.04 Delivery by the Sellers. At the Closing, the Sellers will deliver to the
attorneys for the Buyer: (i) certificates representing the said common shares of
the Sellers, in form acceptable for transfer on the books of M&M, with all
necessary transfer tax stamps attached; and (ii) all corporate records and items
set forth, the said certificates to be released to the Buyer when the stock
certificates referred to in Section 1.05 are delivered to the Sellers.
1.05 Delivery by the Buyer. At the Closing, or as soon as is practicable
thereafter, the Buyer will deliver to the Sellers, (i) stock certificates for
the said common shares of the Buyer, in the denominations set forth in "Exhibit
A"; and (ii) all corporate records and items set forth.
1.06 Board Meeting of the Buyer. At the Closing, the directors of the Buyer will
elect Mark E. Bruk, Robert H. Harris and Marshall Farris as directors of the
Buyer and will then deliver resignations of all directors and officers of the
Buyer to the Sellers. The newly elected directors of the Buyer will then appoint
the new officers of the Buyer.
Article II
RELATED TRANSACTIONS
2.01 Expenses of the Transactions. The Buyer shall be responsible for paying all
expenses of this transaction, including but not limited to any filing fees,
legal fees not to exceed $5,000 (Five Thousand Dollars), accounting fees, escrow
agent fees, printing expenses, certificate engraving fees and transfer fees.
2.02 Additional Offering of Shares. The Buyer intends, shortly after the Closing
hereof, to attempt to raise additional operating capital through a private
offering of securities, contemplated to be offered pursuant to an exemption
under Regulation S of the Securities Act of 1933, as amended.
Stock Exchange Agreement between Perfect Future, Ltd. and
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Article III
REPRESENTATIONS AND WARRANTIES BY THE BUYER
The Buyer hereby represents and warrants as follows:
3.01 Organization, Capitalization, etc.
(a) The Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada.
(b) The authorized capital stock of the Buyer consists of 50,000,000
(Fifty Million) common shares with a par value of $.001 per share, of
which only 4,250,000 (Four Million, Two Hundred and Fifty Thousand)
are issued and outstanding, fully paid and nonassessable, and
5,000,000 (Five Million) preferred shares with a par value of $.001
per share, of which none are issued or outstanding.
(c) The Buyer has the corporate power and authority to carry on its
business as presently conducted and has full corporate power and
authority to enter into this Agreement and to carry out its
obligations hereunder and the Buyer has been so authorized by the
required majority of its shareholders as evidenced by a certified
resolution of the shareholders of the Buyer and delivered to the
Sellers at Closing.
3.02 Non Violation. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will constitute a
violation or default under any term or provision of the Certificate of
Incorporation or Bylaws of the Buyer, or of any contract, commitment, indenture,
other agreement or restriction of any kind or character to which the Buyer is a
party or by which the Buyer is bound.
3.03 Financial Statement. The Buyer has delivered to the Seller the balance
sheet of the Buyer as of June 30, 1997, prepared by Barry L. Friedman, P.C.,
C.P.A. The balance sheet is true and correct and a fair and accurate
presentation of the financial condition, assets and liabilities (whether
accrued, absolute, contingent, or otherwise) of the Buyer as of the date thereof
in accordance with generally accepted principals of accounting applied on a
consistent basis.
3.04 Tax Returns. The Buyer has duly filed all tax reports and returns required
to be filed by it and has fully paid all taxes and other charges claimed to be
due from it by federal, state, or local taxing authorities (including without
limitation those due in respect of its properties, income, franchises, licenses,
sales, and payrolls); there are not liens upon any of the Buyer's property or
assets; and there are not now any pending questions relating to, or claims
asserted for, taxes or assessments asserted against the Buyer.
3.05 Title to Properties: Encumbrances. The Buyer has good and marketable title
to all of its properties and assets, real and personal, tangible and intangible,
including without limitation the properties and assets reflected in the June 30,
1997 balance sheet of the
Stock Exchange Agreement between Perfect Future, Ltd. and
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Buyer. All such properties and assets reflected in that balance sheet have fair
market or realizable value at least equal to the value thereof as reflected upon
the balance sheet, and they are subject to no mortgage, pledge, lien,
conditional sale agreement, encumbrance, or charge of any nature.
3.06 Accounts Receivable. Any accounts receivable of the Buyer, whether
reflected in the Buyer's June 30, 1997 balance sheet or otherwise, represent
sales actually made in the ordinary course of business and any reserve for
uncollectability of receivables as reflected in the aforesaid balance sheet is
adequate and was calculated in a way consistent with past practice. Except to
extent set forth herein, there are not now any questions, controversies, or
disputes relating to any accounts receivable of the Buyer.
3.07 Undisclosed Liabilities. Except to the extent reflected, or reserved
against, in the June 30, 1997 balance sheet of the Buyer, the Buyer as of that
date had no liabilities or obligations of any nature, whether absolute, accrued,
contingent, or otherwise, whether due or to become due.
3.08 Absence of Certain Changes. The Buyer has not since June 30 1997, and shall
not, have
(a) Suffered any material adverse change in financial condition, assets,
liabilities, or business;
(b) Incurred any obligation or liability (whether absolute, accrued,
contingent, or otherwise) other than as disclosed to the Sellers;
(c) Paid any claim or discharged or satisfied any lien or encumbrance or
paid or satisfied any liability (whether absolute, accrued,
contingent, or otherwise) other than liabilities shown or reflected in
the Buyer's June 30, 1997 balance sheet or liabilities incurred since
June 30, 1997 other than those disclosed to the Sellers;
(d) Permitted or allowed any of its assets, tangible or intangible, to be
mortgaged, pledged, or subjected to any liens or encumbrances;
(e) Written down the value of any inventory or written-off as
uncollectible any notes or accounts receivable or any portion thereof,
except for write-offs of such items as disclosed to the Sellers;
(f) Cancelled any other debts or claims or waived any rights of
substantial value, or sold or transferred any of its assets or
properties, tangible or intangible, other than sales of inventory or
merchandise as disclosed to the Sellers;
(g) Made any capital expenditures or commitments for additions to
property, plant or equipment;
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(h) Declared, paid or set aside for payment to its stockholders any
dividend or other distribution in respect of its capital stock or
redeemed or purchased or otherwise acquired any of its capital stock
or any options relating thereto or agreed to take any such action;
(i) Made any material change in any method of accounting or accounting
practice.
3.09 Litigation. There are no actions, claims, proceedings, or investigations
pending or, to the knowledge of the Buyer, threatened against the Buyer, and the
Buyer knows, or has no reason to know, of any basis for any such action,
proceeding, or investigation. There is no event or condition of any kind or
character pertaining to the business, assets, or prospects of the buyer that may
materially and adversely affect such business, assets or prospects.
3.10 Disclosure. The Buyer has disclosed to the Sellers all facts material to
the assets, prospects, and business of the Buyer. No representation or warranty
by the Buyer contained in this Agreement, and no statement contained in any
instrument, list, certificate, or writing furnished to the Sellers pursuant to
the provisions hereof or in connection with the transaction contemplated hereby,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading or necessary in order to provide a prospective purchaser of the
business of the Buyer with proper information as to the buyer and its affairs.
3.11 SEC Filings. The Buyer has filed on a timely basis all reports required to
be filed with the United States Securities and Exchange Commission (hereinafter
the "SEC").
3.12 Legend. The Certificates representing the shares in the Buyer, delivered by
Buyer to Seller pursuant to this Agreement shall bear a legend in the following
or similar form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 (the "Act"), as amended, or any other applicable
federal or state securities acts; and are 'restricted securities' as
defined by Rule 144 of the Act. The shares may not be transferred, sold or
otherwise disposed of unless: (1) a registration statement with respect to
the shares shall be effective under the act or any other federal or state
securities acts and (2) Buyer shall have received an opinion of counsel for
that no violations of any securities acts will be involved in any
transfer."
3.13 Holding Period. If the shares represented by these Certificates have been
held for a period of at least one (1) year and if Rule 144 of the Act is
applicable (there being no representations by the Buyer that Rule 144 is
applicable), then the Sellers may make sales of the Shares only under the terms
and conditions prescribed by Rule 144 of the Act.
3.14 Investment Intent. The Buyer is acquiring the said shares of the Sellers to
be transferred to it under this Agreement for investment and not with a view to
the sale or distribution thereof, and the Buyer has no commitment or present
intention to liquidate
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M&M or to sell or otherwise dispose of the Shares.
3.15 Unregistered Shares and Access to Information. The Buyer understands the
offer and sale of the said shares of the Sellers have not been registered with
or reviewed by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, or with or by any state securities law administrator, and
no federal or state securities law administrator has reviewed or approved any
disclosure or other material concerning M&M or the shares in the Buyer. The
Buyer has been provided with and reviewed all information concerning M&M and the
said shares of the Sellers, as it has considered necessary or appropriate as a
prudent and knowledgeable investor to enable it to make an informed investment
decision concerning the said shares of the Sellers.
Article IV
REPRESENTATIONS AND WARRANTIES BY THE SELLERS
The Sellers hereby represent and warrant as follows:
4.01 Organization, etc.
(a) M&M is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Nevada.
(b) The authorized capital stock of M&M consists of 10,000,000 (Ten
Million) common shares with a par value of $.001 per share, 7,000,000
(Seven Million) of which are validly issued and outstanding, fully paid and
nonassessable.
(c) The Sellers have the corporate power and authority to carry on their
business as presently conducted and have full corporate power and authority
to enter into this Agreement and to carry out their obligations hereunder.
4.02 Authority. The execution and delivery of this Agreement by the Buyer and
the consummation by M&M and Sellers of the transactions contemplated hereby have
been duly authorized.
4.03 No Violation. Neither the execution nor the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will constitute a
violation or default under any term or provision of the Certificate of
Incorporation or Bylaws of M&M or of any contract, commitment, indenture, or
other agreement or restriction of any kind or character to which M&M is a party
or by which they or the Sellers are bound.
4.04 Representations Regarding the Acquisition of the Shares.
(a) The undersigned understand that the SAID SHARES OF THE BUYER TO BE
RECEIVED FROM THE BUYER HAVE NOT BEEN APPROVED OR
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DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES AGENCIES;
(b) The Sellers are not underwriters and are acquiring the said shares of
the Buyer solely for investment for their own account and not with a view
to, or for, resale in connection with any distribution within the meaning
of the federal securities act, the state securities acts or any other
applicable state securities acts;
(c) The Sellers understand the speculative nature and risks of investments
associated with the Buyer and confirm that the said shares of the Buyer are
suitable and consistent with their investment program and that their
financial position enables them to bear the risks of this investment; and
that there may not be any public market for the said shares of the Buyer
subscribed for herein;
(d) The said shares of the Buyer to be received by the Sellers may not be
transferred, encumbered, sold, hypothecated, or otherwise disposed of to
any person, without the express prior written consent of the Buyer and the
prior opinion of counsel for the Buyer that such disposition will not
violate federal and/or state securities acts. Disposition shall include,
but is not limited to acts of selling, assigning, transferring, pledging,
encumbering, hypothecating, or any form of conveying, whether voluntary or
not;
(e) To the extent that any federal, and/or state securities laws shall
require, the Sellers hereby agree that any shares of the Buyer acquired
pursuant to this Agreement shall be without preference as to assets;
(f) The Buyer is under no obligation to register or seek an exemption under
any federal and/or state securities acts for any shares of the Buyer or to
cause or permit such shares to be transferred in the absence of any such
registration or exemption and that the Sellers herein must hold such shares
indefinitely unless such shares are subsequently registered under any
federal and/or state securities acts or any exemption from registration is
available;
(g) The Sellers have been given: (1) all material books and records of the
Buyer; and (2) all material contracts and documents relating to the
proposed transactions;
(h) The Sellers have satisfied the suitability standards imposed by their
respective state securities laws. The said shares of the Buyer being
acquired from the Buyer have not been registered under federal or state
securities laws. The Sellers acknowledge that the Buyer has not complied
with any state securities laws in seeking an exemption from the
transactions contemplated by this Agreement. Accordingly, the Sellers waive
any and all rights, claims or causes of action they may have against the
Buyer under any state securities laws as a result of the Buyer's failure to
comply with applicable state securities laws.
Stock Exchange Agreement between Perfect Future, Ltd. and
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4.05 Undisclosed Liabilities. M&M has no liabilities or obligations of any
nature, whether absolute, accrued, contingent, or otherwise.
4.06 Absence of Certain Changes. M&M shall not from the date of the balance
sheet (attached hereto as "Exhibit B") and income statements (attached hereto as
"Exhibit C") to be provided have:
(a) Suffered any material adverse change in financial condition, assets,
liabilities, business, or prospects;
(b) Incurred any obligation or liability (whether absolute, accrued,
contingent, or otherwise) other than in the ordinary course of business and
consistent with past practices;
(c) Paid any claim or discharged or satisfied any lien or encumbrances or
paid or satisfied any liability (whether absolute, accrued, contingent, or
otherwise) other than liabilities to be shown or reflected in the audited
balance sheets or liabilities incurred in the ordinary course of business
and consistent with past practices;
(d) Permitted or allowed any of their assets, tangible or intangible, to be
mortgaged, pledged, or subjected to any liens or encumbrances;
(e) Written down the value of any inventory or written-off as uncollectible
any notes or accounts receivable or any portion thereof, except for
write-offs of such items in the ordinary course of business;
(f) Cancelled any other debts or claims or waived any rights of substantial
value, or sold or transferred any assets or properties, tangible or
intangible, other than sales of inventory or merchandise made in the
ordinary course of business and consistent with past practice;
(g) Made any capital expenditures or commitments in excess of $2,000 (Two
Thousand Dollars) for additions to property, plant or equipment;
(h) Declared, paid, or set aside for payment to stockholders any dividend
or other distribution in respect of its capital stock or any options
relating thereto or agreed to take any such options relating thereto or
agreed to take any such action;
(i) Made any material change in any method of accounting or accounting
practice.
4.07 Litigation. There are no actions, proceedings, or investigations pending
or, to the knowledge of the Sellers, threatened against M&M, and Sellers know,
or have no reason to know, of any basis for any such actions, proceeding, or
investigation. There is no event or condition of any kind or character
pertaining to the businesses, assets, or prospects of M&M that may materially
and adversely affect such business, assets or prospects.
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4.08 Disclosure. M&M have disclosed to the Buyer all facts material to the
assets, prospects, and business of M&M, particularly with respect to M&M's
abilities to develop, market, and sell leading-edge software and hardware, M&M's
primary asset. No representation or warranty by M&M contained in this agreement,
and no statement contained in any instrument, list, certificate, or writing
furnished to Buyer pursuant to the provisions hereof or in connection with the
transaction contemplated hereby, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading or necessary in order to provide a
prospective purchaser of the shares of M&M with proper information as to M&M and
their affairs.
Article V
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
5.01 Survival of Representations. All representations, warranties and agreements
of the parties as contained in this Agreement, or expressly incorporated herein
by reference, shall survive the Closing hereunder and any investigation made by
or on behalf of any party hereto.
5.02 Statements as Representations. All statements contained herein, or in any
certificate or other document delivered pursuant to this Agreement shall be
deemed representations and warranties within the meaning of Section 5.01 hereof.
5.03 Indemnification by the Sellers. Subject to the terms and conditions of this
Article 5, the Sellers (sometimes referred to herein as the "Indemnifying
Party") hereby agree to indemnify, defend and hold harmless Buyer, any
subsidiary, director, officer, employee, agent or representative of Buyer
(collectively the "Indemnitees" and each individually, a "Indemnitee") from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties, attorneys' fees and expenses (collectively, "Damages"),
asserted against, imposed upon or incurred by the Indemnitees or any Indemnitee,
resulting from, relating to or arising out of:
(a) any breach of any representation, warranty or agreement of the Sellers
contained in or made pursuant to this Agreement or any facts or
circumstances constituting such a breach; or
(b) any act or omission of the Sellers or any of their respective
affiliates, trustees, officers, employees, agents or representatives
relating to the property, business, operations and activities of M&M which
occurred, existed or failed to occur or exist prior to the Closing; or
(c) any event, state of facts, circumstance or condition occurring or
existing (or not occurring or not in existence if the absence of such fact,
circumstance or condition
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forms the basis for Damages) relating to the property, business, operations
or activities of the Sellers before the Closing.
5.04 Indemnification by Buyer. Subject to the terms and conditions of this
Article 5, Buyer (sometimes referred to herein as the "Indemnifying Party")
hereby agrees to indemnify, defend and hold harmless the Sellers, and any
director, officer, employee, agent or representative of the same (collectively
the "Indemnitees" and each individually, a "Indemnitee") from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties, attorneys' fees and expenses (collectively, "Damages"), asserted
against, resulting from, imposed upon or incurred by the Indemnitees or any
Indemnitee, resulting from, relating to or arising out of:
(a) a breach of any representation, warranty or agreement of Buyer
contained in or made pursuant to this Agreement or any facts or
circumstances constituting such a breach;
(b) any act or omission of Buyer or any of their respective affiliates,
directors, officers, employees, agents or representatives relating to the
property, business, operations and activities of the Buyer which occurred,
existed or failed to occur or exist subsequent to the Closing; or
(c) any event, state of facts, circumstance or condition occurring or
existing (or not occurring or existing if the absence of such event, fact,
circumstance or condition forms the basis for Damages) relating to the
property, business, operations or activities of the Buyer subsequent to the
Closing.
5.05 Notice of Indemnification Claims. If a claim is made against any Indemnitee
(as defined in Section 5.03 or 5.04 hereof) and if such Indemnitee believes that
such claim, if successful, would give rise to a right of indemnification
hereunder against the Indemnifying Party (as defined in Section 5.03 or 5.04
hereof) or if any officer of an Indemnitee (an "executive officer") becomes
aware of facts or circumstances establishing that an Indemnitee has experienced
or incurred Damages subject to indemnification hereunder, then such Indemnitee
shall give written notice to the Indemnifying Party of such claim as soon as
reasonably practicable after the Indemnitee has received notice thereof, and in
no event more than 60 days after the Indemnitee has obtained actual knowledge
thereof (provided that failure to give such notice shall not limit the
Indemnifying Party's indemnification obligation hereunder except to the extent
that the delay in giving, or failure to give, the notice adversely affects the
Indemnifying Party's ability to defend against the claim). The Indemnitee
against whom such claim is made shall give the Indemnifying Party an opportunity
to defend such claim, at the Indemnifying Party's own expense and with counsel
selected by the Indemnifying Party and reasonably satisfactory to the
Indemnitee, provided that such Indemnitee shall at all times also have the right
to fully participate in the defense at its own expense. Failure of an
Indemnifying Party to give the Indemnitee written notice of its election to
defend such claim within 20 days after notice thereof shall have been given by
the Indemnitee against whom such claim is made to the Indemnifying Party
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shall be deemed a waiver by such Indemnifying Party of its right to defend such
claim. If the Indemnifying Party shall elect not to assume the defense of such
claim (or if such Indemnifying Party shall be deemed to have waived its right to
defend such claim), the Indemnitee against whom such claim is made shall have
the right, but not the obligation, to undertake the sole defense of, and to
compromise or settle, the claim on behalf, for the account, and at the risk and
expense, of the Indemnifying Party (including without limitation the payment by
Indemnifying Party of the attorneys' fees of the Indemnitees). If one or more of
the Indemnifying Parties assume the defense of such claim, the obligation of
such Indemnifying Party hereunder as to such claim shall include taking all
steps necessary in the defense or settlement of such claim. The Indemnifying
Party shall not, in the defense of such claim, consent to the entry of any
judgment or enter into any settlement (except with the written consent of the
Indemnitee) which does not include as an unconditional term thereof the giving
by the claimant to the Indemnitee against whom such claim is made of a release
from all liability in respect of such claim except the liability satisfied by
the Indemnifying Party on behalf of such Indemnitee in connection with such
judgment or settlement. If the claim is one that cannot by its nature be
defended solely by the Indemnifying Party, then the Indemnitee shall make
available, at the Indemnifying Party's expense, all information and assistance
that the Indemnifying Party may reasonably request.
5.06 Interpretation of Indemnification Rights. Notwithstanding the fact that
certain representations contained in Articles 3 and 4 of the Stock Exchange
Agreement may relate more directly to the basis or subject matter of an
indemnification claim asserted by a party to this Agreement, the parties
acknowledge and agree that even if any Damages asserted in such claim are not
subject to indemnification pursuant to paragraph (a) of Section 5.03 or 5.04, as
the case may be, such indemnification claim is subject to indemnification
hereunder if such claim comes within the scope of paragraphs (b) and (c) of
Section 5.03 or paragraphs (b) and (c) of Section 5.04, as the case may be.
Article VI
MISCELLANEOUS PROVISIONS
6.01 Amendment and Modifications. Subject to applicable law, this Agreement may
be amended, modified and supplemented only by written agreement between the
parties hereto which states that it is intended to be a modification of this
Agreement.
6.02 Waiver of Compliance. Any failure of the Buyer, on the one hand, or
Sellers, on the other, to comply with any obligation, covenant, agreement or
condition herein may be expressly waived in writing by the other party, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
6.03 Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if
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delivered by hand or mailed, certified or registered mail with postage prepaid:
(a) if to the Buyer, to:
Perfect Future, Ltd.
7551 W. Charleston, Suite 35
Las Vegas, Nevada 89117
or to such other person or address as the Buyer shall furnish in
writing;
(b) if to Sellers, to:
M&M Information & Marketing Services Inc.
1135 Terminal Way, Suite 209
Reno, Nevada 89502
or to such other person or address as the Sellers shall furnish
in writing.
6.04 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other party.
6.05 Governing Law. This Agreement and the legal relations among the parties
hereto shall be governed by and construed in accordance with the laws of the
State of Nevada.
6.06 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.07 Headings. The headings of the Sections and Articles of this Agreement are
inserted for convenience only and shall not constitute a part hereof or affect
in any way the meaning or interpretation of this Agreement.
6.08 Entire Agreement. This Agreement, including the Schedules hereto and the
other documents and certificates delivered pursuant to the terms hereof, set
forth the entire agreement and understanding of the parties hereto in respect of
the subject matter contained herein, and supersede all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto.
6.09 Third Parties. Except as specifically set forth or referred to herein,
nothing herein expressed or implied is intended or shall be construed to confer
upon or give to any person or corporation other than the parties hereto and
their successors or assigns, any rights or
Stock Exchange Agreement between Perfect Future, Ltd. and
M&M Information & Marketing Services Inc.
Page 12 of 17
<PAGE>
remedies under or by reason of this Agreement.
6.10 Further Assurances. Each of the parties hereto agrees that from time to
time, at the request of any of the other parties hereto and without further
consideration, it will execute and deliver such other documents and take such
other action as such other party may reasonably request in order to consummate
more effectively the transactions contemplated hereby.
6.11 Effect. In the event any portion of this Agreement is deemed to be null and
void under any state or federal law, all other portions and provisions not
deemed void or voidable shall be given full force and effect.
6.12 Press Release and Shareholders Communications. On the date of Closing, or
as soon thereafter as practicable Buyer and Sellers shall cause to have promptly
prepared and disseminated a news release concerning the execution and
consummation of the Agreement, such press release and communication to be
released promptly and within the time required by the laws, rules and
regulations as promulgated by the United States Securities and Exchange
Commission, and concomitant therewith to cause to be prepared a full and
complete letter to Buyer's shareholders which shall contain information required
by Regulation 240.14f-1 as promulgated under Section 14(f) as mandated under the
Securities and Exchange Act of 1934, as amended.
6.13 Tax Treatment. The transaction contemplated by this Agreement is intended
to qualify as a "tax-free" reorganization under the provisions of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. The Buyer and the
Sellers acknowledge, however, that each are being represented by their own tax
advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws, regulations
or interpretations; and no attorney's opinion or tax revenue ruling has been
obtained with respect to the tax consequences of the transactions contemplated
therewith.
6.14 Signatures via Fax. Signatures via fax are sufficient to bind the
respective parties to this Agreement, provided that the original is delivered by
courier to the Sellers' address as set out in Section 6.03(b).
Stock Exchange Agreement between Perfect Future, Ltd. and
M&M Information & Marketing Services Inc.
Page 13 of 17
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
Buyer and the Sellers, effective on the date first above written.
- --------------------------------------------------------------------------------
BUYER: PERFECT FUTURE LTD.
BY: ------------------------------ BY: -----------------------------
President and Director Director
- --------------------------------------------------------------------------------
SELLERS: M&M INFORMATION & MARKETING SERVICES INC.
BY: ------------------------------
President and Director
Stock Exchange Agreement between Perfect Future, Ltd. and
M&M Information & Marketing Services Inc.
Page 14 of 17
<PAGE>
EXHIBIT A
TO STOCK EXCHANGE AGREEMENT
# to be Issued in
M&M SHARES # Issued in M&M Perfect Future
- ---------- --------------- --------------
Mark E. Bruk 2,939,150 2,939,150
Marc Crimeni 2,879,150 2,879,150
John & Helen Bruk 60,000 60,000
Ian Bruk 60,000 60,000
Bruce Bruk 60,000 60,000
Steven & Karen Bruk 30,000 30,000
Emily Bruk 30,000 30,000
Adele Paulson 90,000 90,000
Nick Sereda 90,000 90,000
Ron Crimeni 30,000 30,000
Adrian Crimeni 30,000 30,000
Iris Hickey 30,000 30,000
Darrel Crimeni 30,000 30,000
Zina Weston 30,000 30,000
David & Florence Mazzucco 30,000 30,000
Martin Mazzucco 30,000 30,000
Marlene Derrah 30,000 30,000
Deborah I. Joel 30,000 30,000
Marshall Farris 90,000 90,000
Jeffrey Mah 52,500 52,500
Bonnie Jean Mah 30,000 30,000
Jeff Giddens 52,500 52,500
Jeff Day 52,500 52,500
Lorne Johnson 52,500 52,500
Carlos Ceberio 2,500 2,500
Juraj Krajci 5,000 5,000
Dickson Wong 30,000 30,000
Ron Balshine 64,200 64,200
Robert Harris 15,000 15,000
Peter O'Donnell 15,000 15,000
Christopher Brough 30,000 30,000
TOTAL 7,000,000 7,000,000
Stock Exchange Agreement between Perfect Future, Ltd. and
M&M Information & Marketing Services Inc.
Page 15 of 17
<PAGE>
EXHIBIT B
TO STOCK EXCHANGE AGREEMENT
M&M INFORMATION & MARKETING SERVICES INC.
BALANCE SHEET
as of May 27, 1998
ASSETS
------
CURRENT
Cash $17,560
Total Assets $17,560
LIABILITIES
-----------
CURRENT
Liabilities $ 0
---------
Total Liabilities $ 0
---------
SHAREHOLDER'S EQUITY
--------------------
Share Capital $17,560
Retained Earnings $ 0
---------
Total Shareholder's Equity $17,560
Total Liabilities & Shareholder's Equity $17,560
APPROVED BY THE DIRECTORS:
- --------------------------, Director
Stock Exchange Agreement between Perfect Future, Ltd. and
M&M Information & Marketing Services Inc.
Page 16 of 17
<PAGE>
EXHIBIT C
TO STOCK EXCHANGE AGREEMENT
M&M INFORMATION & MARKETING SERVICES INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
as of May 27, 1998
Revenue $ 0
---------
Gross Profit $ 0
---------
Expenses $ 0
---------
Total Expenses $ 0
Income (Loss) before Income Taxes $ 0
Income Taxes $ 0
---------
Net Income (Loss) for the Year $ 0
Retained Earnings (Deficit), beginning of year $ 0
---------
Retained Earnings (Deficit), end of year $ 0
=========
APPROVED BY THE DIRECTORS:
- --------------------------, Director
Stock Exchange Agreement between Perfect Future, Ltd. and
M&M Information & Marketing Services Inc.
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-mos 6-mos
<FISCAL-YEAR-END> Dec-31-1998 Jun-30-1999
<PERIOD-END> Dec-31-1998 Dec-31-1998
<CASH> 37,757 331,733
<SECURITIES> 0 0
<RECEIVABLES> 18,477 120,702
<ALLOWANCES> 0 0
<INVENTORY> 44,421 15,464
<CURRENT-ASSETS> 106,306 467,899
<PP&E> 5,651 0
<DEPRECIATION> 4,205 7,336
<TOTAL-ASSETS> 297,880 646,531
<CURRENT-LIABILITIES> 368,442 146,721
<BONDS> 0 0
0 0
0 0
<COMMON> 11,607 12,751
<OTHER-SE> (82,169) 389,259
<TOTAL-LIABILITY-AND-EQUITY> 297,880 646,531
<SALES> 14,824 95,497
<TOTAL-REVENUES> 14,824 233,686
<CGS> 6,873 35,923
<TOTAL-COSTS> 424,667 519,184
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (415,043) (322,021)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (415,043) (322,021)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (415,043) (322,021)
<EPS-BASIC> (0.04) (0.06)
<EPS-DILUTED> (0.04) (0.06)
</TABLE>
