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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported): May 16, 2000
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Tutornet.com Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-28773 65-0910071
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
11410 Isaac Newton Square, Suite 105, Reston, Virginia 20190
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 375-8619
Former Name and Address (on Form 10-QSB filed April 19, 2000):
Segway Corp.
4400 Route 9 South, 2nd Floor
Freehold, NJ 07728
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Item 1. Changes in Control of Registrant
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated as of
May 16, 2000 between Tutornet.com Group, Inc., a Delaware corporation
("Tutornet"), and Segway Corp., a New Jersey corporation (the "Company"), all
the outstanding shares of common stock of the Company were exchanged for 5,000
shares of common stock of Tutornet in a transaction in which Tutornet was the
surviving company.
The Merger Agreement was adopted by the unanimous consent of the Company's Board
of Directors and approved by the unanimous consent of its shareholders on May
16, 2000. The Merger Agreement was adopted by the unanimous consent of the Board
of Directors of Tutornet on May 16, 2000.
Prior to the merger, the Company had 5,555,556 shares of common stock
outstanding which shares were exchanged for 5,000 shares of common stock of
Tutornet. By virtue of the merger, Tutornet acquired 100% of the issued and
outstanding common stock of the Company. As a result of the merger, Richard I.
Anslow, the sole director and executive officer of the Company, no longer
controls the registrant.
Prior to the effectiveness of the merger, Tutornet had an aggregate of
18,067,674 Class A and 4,750,000 Class B shares of common stock, par value
$.00001, issued and outstanding.
Upon effectiveness of the merger, Tutornet had an aggregate of 18,072,674 Class
A, and 4,750,000 Class B shares of common stock outstanding.
The Articles of Incorporation and Bylaws of Tutornet will be the Articles of
Incorporation and Bylaws of the successor issuer. The directors and officers of
Tutornet will be the directors and officers of the successor issuer.
The following persons beneficially own 5% or more of the equity securities of
Tutornet, taking into account securities that permit them to acquire shares of
common stock within the next 60 days:
<TABLE>
<CAPTION>
Name, Address & Title Number of Shares Percent of Shares
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
Euburn Forde, President, CEO, Director 8,189,000 Class A 45.31%
1036 Leigh Mill Road 3,500,000 Class B 73.68%
Great Falls, VA 22066
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Rajiv Dalal, CFO, Director 1,516,666 Class A 8.39%
111 Elizabeth Avenue 1,250,000 Class B 26.32%
Islin, NJ
- - -------------------------------------------------------------------------------------------------
Andrew Tam, Exec. Vice Pres, Director 1,000,000 Class A 5.53%
28 Mitchell Place
Greenwich, CN
- - -------------------------------------------------------------------------------------------------
All Directors and Executive Officers as a 10,705,666 Class A 59.24%
Group (3 persons) 4,750,000 Class B 100.00%
- - -------------------------------------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, all shares are owned of record.
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Tutornet is not aware of any arrangements which may result in a change of
control of the registrant.
The Merger Agreement is filed as an exhibit to this report on Form 8-K and is
incorporated in its entirety herein by reference. The foregoing description is
modified by such reference.
Item 2. Acquisition or Disposition of Assets
The consideration exchanged pursuant to the Merger Agreement was negotiated
between the Company and Tutornet.
In evaluating Tutornet as a candidate for the proposed merger, the Company used
criteria such as the value of the assets of Tutornet, Tutornet's current
business operations and anticipated operations, and its business name and
reputation. The Company determined that the consideration for the merger was
reasonable.
Tutornet intends to continue its business and enhance shareholder value through
the delivery of live, personalized tutoring services over the Internet for
students in kindergarten through college.
HISTORY OF TUTORNET
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Tutornet was incorporated in Delaware on April 4, 2000 as "Zycom, Inc." for the
purpose of changing the domicile and continuing the existence of a Colorado
corporation known as Zycom, Inc., formed on May 24, 1983. At a special meeting
of the shareholders of Zycom held on April 14, 2000, the shareholders approved
(i) a change of domicile from the State of Colorado to the State of Delaware;
(ii) a stock dividend of six shares for each one share outstanding; (iii) the
adoption of a stock option plan; (iv) a change in the authorized shares; (v) a
change of Zycom's name to "Tutornet.com Group, Inc." and (vi) adoption of an
amendment to the articles of incorporation limiting the monetary liability of
the directors.
On April 25, 2000, Tutornet closed a reorganization agreement with Tutornet.com,
Inc., a Delaware corporation ("Tutornet Sub"), in which Tutornet issued
16,274,674 shares of common stock, and 4,750,000 shares of series B super voting
common stock (3 votes per share), in return for 51.18% of the outstanding Class
A common stock, and all of the Class B common stock (3 votes per share), of
Tutornet Sub. As a result of the reorganization Tutornet controls approximately
66% of the voting equity in Tutornet Sub and will focus its efforts on the
development of Tutornet Sub's business.
Tutornet Sub was incorporated in the State of Delaware on October 21, 1997,
under the name "Globenet Communication Services, Inc." It subsequently changed
its name to "Tutornet.com, Inc." Tutornet Sub is the legal entity that operates
the core business of providing live, personalized tutoring services over the
Internet for students in kindergarten through college and
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is attempting to provide better educational opportunities on-demand and on-line
to students worldwide. Tutornet Sub on-line services include math and science
subjects and are available throughout the school day and evenings for homework
assistance. Tutoring is also available in Spanish. Tutornet maintains a web site
on the Internet at www.tutornet.com.
Tutornet intends to acquire the balance of the outstanding shares of Tutornet
Sub stock in the future. Tutornet's expression of intent in the preceding
sentence is not an offer to sell its securities and is not a solicitation of an
offer to buy its securities. Any offering in connection with the acquisition of
the balance of the outstanding shares of Tutornet Sub will be conducted only
with the remaining shareholders of Tutornet Sub and only with an appropriate
disclosure document in place.
BUSINESS OF TUTORNET
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Overview
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Tutornet/TM/ Inc., a Delaware corporation, is the pioneer provider of live,
personalized tutoring services over the Internet for students in kindergarten
through college.
By combining innovative interactive technology with a growing cadre of highly
qualified and specially trained tutors called Netucators/TM/, Tutornet/TM/ has
met the challenge of providing better educational opportunities on-demand, on-
line, economically and effectively, to students worldwide.
Tutornet/TM/ on-line services include math and science subjects and are
available throughout the school day and evenings for homework assistance.
Many subject offerings are currently available on a 24-hours a day, 7-days a
week (24/7), and all subjects are scheduled to be available on a 24/7 basis by
Summer 2000.
Tutoring in Spanish is currently available.
Tutornet's/TM/ goal is to meet the educational needs of a global population by
becoming the Internet Educational Portal (IEP).
Product
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Tutornet/TM/ supplements traditional in-school and home-school instruction with
Internet-accessed, live, real-time, interactive tutoring services utilizing a
unique and uniform platform, available in the United States and in other
countries. Students and Netucators/TM/ (Tutornet's/TM/ on-line tutors) interact
via chat lines and notations on a whiteboard in either the public or private
mode to ensure each student receives individualized attention and maintains
privacy.
Tutornet/TM/ classrooms started with a focus on math and science and have since
expanded to include Spanish-speaking classrooms with more subjects to be added
in the near future.
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The Internet gives Tutornet/TM/ a global marketing base and the ability to offer
high quality, affordable tutoring to students all over the world. Tutornet/TM/
is one of the first global educational service to meet the tutoring needs of
students and to do so from the comfort and security of their homes and schools.
Tutornet/TM/ is easily accessible using any computer via an Internet Service
Provider (ISP) running a standard Web Browser. These include AOL 4.0, Netscape
Navigator 4.0, and Microsoft Internet Explorer 4.0.
Subscribers do not have to install or download any software; they simply log
onto the site and enter their name and password. The software is dynamically
loaded to the subscriber's personal computer (PC) for immediate use.
Subscribers register with Tutornet in one of three ways:
1) On-line with a credit card through the Tutornet/TM/ site
2) By mail-in payment
3) By purchase of a pre-paid subscription card
Once registered, subscribers select a subject and are assigned a Tutornet/TM/
classroom run by a qualified Netucator/TM/. Subscribers submit questions on-line
to the Netucator/TM/, who helps them understand and complete homework
assignments and/or prepare for exams.
Netucators/TM/ instruct and answer questions using electronic whiteboards and
chat lines.
Netucators/TM/ can call up and display on classroom whiteboards relevant
educational web sites. With this "group browsing" feature, Netucators/TM/ can
provide the vast resources of the worldwide web to guide students through the
learning process.
Students are not given the answer to homework problems; rather, they are tutored
in the real sense through discussion of concepts and use of examples, which
ultimately helps students reach the correct answer through understanding.
In Fall 1999, the Company expects to initiate a live audio feature, enabling
Netucators/TM/ and students to talk directly to each other.
Currently, Tutornet/TM/ focuses on math and science subjects for students from
kindergarten through college. The Company recognizes these subject areas to be
universally required and based on the same principles worldwide.
Mathematics Science
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Basic Math Basic Science
Algebra I Biology
Algebra II Chemistry
Geometry Physics
Trigonometry
Calculus
SAT Math
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Students can submit queries in either a public or a private mode. In the
'public' mode, everyone in the classroom sees the question and the tutor's
response. If the student chooses the 'private' mode, only the student and the
Netucator/TM/ view the questions and the responses.
Tutornet/TM/ initially focused on English-speaking students; however, Spanish-
tutored courses were added in the summer of 1999.
The Company currently provides on-line tutoring at the most-needed times: during
and after school and into the evening hours. With international expansion
underway, the Company plans to go to a 24/7 schedule in Summer 2000.
Because it is an Internet business, Tutornet/TM/ is not limited to US-based
teachers, but can employ tutors wherever well-educated and well-qualified
teachers are available.
All Netucators/TM/ must meet Tutornet's/TM/ stringent background and teacher
qualification requirements. As the Tutornet/TM/ customer base grows and the need
for additional Netucators/TM/ rises, the Company has available a vast pool of
qualified international teachers to draw upon. This will allow Tutornet/TM/ to
provide not only cultural diversity, but also to lower costs to the Company, and
to provide value-added services to our subscribers.
Netucators/TM/ are selected for professional experience, academic knowledge and
credentials, and proven teaching ability. All Netucators/TM/ are certified
teachers, college professors, or graduate students.
Candidates undergo rigorous background investigations to assure only highly
qualified candidates are employed. In addition, new Netucators/TM/ receive
training in the special skills of on-line tutoring prior to their first on-line
session.
Tutornet/TM/ understands that parents are concerned about the decorum and
behavior of the Internet experience. Tutornet/TM/ addresses those concerns by
providing Netucators/TM/ the ability - and charging them with the responsibility
- - -to control the classroom by blocking disruptive comments and, when necessary,
to preserve the decorum of the learning process by expelling students for
inappropriate behavior.
To allay concerns of parents and students about the possibility of unwanted
after-classroom contact between students, and between students and
Netucators/TM/, Tutornet/TM/ uses a security shield to prevent contact between
users except in an authorized Tutornet/TM/ classroom.
Tutornet/TM/ Quality Control specialists monitor on-line performance of
Netucators/TM/ to ensure that Tutornet's academic and behavioral standards are
maintained.
The Market
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"It's a national priority that our students achieve higher levels of
performance in math, science, and all of the core courses in the middle and
high school
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curricula. State legislatures and local Boards of Education are imposing
higher standards for passing and graduating students. At the same time,
however, budgets ... have been cut and many families can afford neither the
time nor the expense that private tutoring requires.
Tutornet.com/TM/ is the solution to that challenge, using the power of the
Internet and the technology of computing to make it possible for every
child to have the personal assistance required, at a reasonable price, to
perform to higher expectations. As we add to our courses and broaden our
reach, we look forward to being seen as an integral player in the education
of children, together with schools, teachers, and parents."
Mr. Euburn R. A. Forde
President & CEO
Demand for tutoring services is at an all-time high and growing. Demand for
tutoring stems from the confluence of several issues. These include recurring
school violence, classroom overcrowding, shortage of qualified educators, and
poor academic performance.
While these issues are truly global in nature, in the US, the problem is acute.
In recent standardized tests, 10,000 American students placed second-to-last
among 21 nations in the subjects of math and science.
Education is fundamental to the development of different cultures and social
organizations. Securing a 'better' education for children is a universal goal in
every country and culture. Simply said, the market for the Company's product is
as large as the number of children on the planet.
Families are recognizing that their children need more than what public schools
offer, particularly when vying to get into preferred colleges. Consequently,
many families and students opt for tutors as a way to bridge the gap between
what they want from education and what the schools offer them.
The US has 15,000 school systems and more than 50 million students.
David Nagel of Bear Stearns believes some 7 million of these 50 million students
- - - or 14% - require tutoring of one sort or another. Moreover, according to a
Newsweek poll, half of US parents would like their children to be tutored.
Tutornet/TM/ is confident that the education and tutoring marketplace will
continue to evolve rapidly as indicated by many reports on distance learning.
For example, a recent Maise Center Survey found that Wall Street investors and
venture capital groups are gravitating to the expanding marketplace of learning,
training, and knowledge-delivery products. In addition, the Maise Center
receives calls weekly from investment houses and financial publications
interested in expanding their education and tutoring portfolios.
Research by Scott L. Soffen of Legg Mason in October 1997, determined the
following about the Internet education marketplace:
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A. Studies show that distance education is as effective as traditional
classroom-based instruction;
B. Internet-based distance education will be a major market in the near
future; and
C. In the long-term, an Internet-based education program could prove to be a
threat to traditional brick and mortar colleges whose historical
competitive advantage has been geographic convenience.
Tutornet/TM/ believes it is well positioned to grow with the Internet market
momentum which, according to projections from Forrester Research, is expected to
grow at a phenomenal rate with the terabytes per month increasing from 4,500 to
15,000 by the year 2000. This growth translates into Internet commerce
increasing from $8 billion in 1997 to $327 billion in 2002.
Research has shown that average American households have a need for the Internet
- - - or believe they do - in order to keep up with the 'Information Age.'
Tutornet/TM/ leverages the fundamental need to provide parents with the most
important family-oriented content on the Internet - high quality education for
their children.
Recent news articles have focused on the need for additional academic assistance
and indicate that a `ripe time' and market exists for Tutornet/TM/. A 1998
Newsweek Magazine article, "The Tutor Age," stated that "a Newsweek Poll found
that 42 percent of Americans believe there's a great need for children to
receive private outside tutoring."
In addition, a Washington Post article said, "American high school seniors have
scored far below their peers from many countries on a rigorous new international
exam in math and science" - February 25, 1998, page 1.
According to Newsweek Magazine, the potential market consists of "students in
the top 5 percent and bottom 15 percent of their classes, too gifted or too slow
for standard classroom work. That adds up to almost 7 million kids just in
grades one through eight."
A market study by Georgia Tech Research on the Internet has helped Tutornet/TM/
gauge the marketplace. This study showed the following market dynamics and
indicators:
o There are more than 60 million Internet users in the world
o By the year 2001, this number is expected to rise to more than 200 million
users world-wide
o The average Internet user is affluent, young, professional, and educated
o The mean income for Internet users is $58,000 per year
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o 83.2% of Internet users have been to college
o The average Internet user is 35.2 years old
o More people are buying products and services through the Internet, and
o 91.84% of users use the Internet to access product information
The demand for tutoring in the US alone gives Tutornet/TM/ a great opportunity
to capture a major portion of a market that is not being served.
More importantly, the international reach of Tutornet/TM/ positions the Company
to become the leader in school and home-based tutoring over the Internet.
Competition
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Tutornet's/TM/ business and marketing strategies are designed to capture a major
share of the tutoring market by making the service affordable, easily
accessible, and available during school and homework hours.
Traditional tutoring businesses, such as Sylvan Learning Centers, Huntington
Learning Center, and Score! Educational Centers require students to live near or
travel to their tutoring centers and to pay, on average, from $25 to as much as
$125 per hour. Parents may pay from $120 to $500 monthly for tutoring in only
one subject.
By contrast, Tutornet's/TM/ on-line, interactive tutoring costs just $29.99 per
month per subscriber for unlimited use.
Tutornet/TM/ offers the following advantages over conventional tutoring:
1. Convenience: Tutornet/TM/ students access the service at their convenience
from the comfort of home or school. In addition, Tutornet/TM/ students get
their specific questions answered directly, in real-time, from highly
qualified tutors. Traditional tutors usually follow fixed schedules and
teaching plans and have little flexibility in scheduling, location, or
subject matter.
2. Flexibility and Choice: The Tutornet/TM/ student chooses from a variety of
subjects, compared to one subject that a conventional visiting tutor
typically can offer. Thus, the Tutornet/TM/ student is able to focus
instantly on the subjects and problems of utmost concern, rather than on
the fixed academic schedules of conventional tutors, which may not
accommodate student learning requirements.
3. Global Exposure: The Tutornet/TM/ student is exposed to a broader base of
students and cultures by virtue of participating in Tutornet/TM/ electronic
classrooms with students from all over the world. This exposure to the
questions, thought processes, and cultures of students from other countries
is an extraordinary learning experience and unique to Tutornet/TM/.
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4. Cost: Per subscriber, Tutornet/TM/ costs just $29.99 per month, unlimited
usage, compared to traditional tutoring, which can cost from $25.00 to
$125.00 per hour - or more.
As its top priority, Tutornet/TM/ was designed to recognize and serve the needs
of the student, developing a ready-to-use, easy-to-use platform at an affordable
price. We believe these factors will increase actual Tutornet/TM/ on-line time
per student in comparison to traditional tutoring programs.
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Table 1.0
Price Comparison
SERVICE AVG COST AVG COST
PER HOUR PER MONTH
TutornetTM $ 5 $ 30
Sylvan Learning Centers $50 $200
Score! Education Center $50 $200
Huntington Learning Ctrs $75 $300
Private Tutors $25-$125 $100-$500
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The following competitors on the Internet offer some level of on-line education
for children:
o Tutornet/TM/
Tutornet/TM/ provides a virtual classroom with the following features:
live, interactive tutors; background checks on tutors to protect students;
secured site; electronic classrooms; full classroom functionality with
whiteboard, electronic pens; choice of public or private communication
modes between Netucators/TM/ and students; security screening; student
removal for misbehavior; Q&A submission and dialog; tutors are qualified
professors, certified school teachers, or graduate students; priced at
$29.99 a month per subscriber for unlimited access.
o TUTOR 2000
A tutor referral service that helps students find tutors. Tutors subscribe
to Tutor 2000 and have their own chat room where students keyboard in
questions. Tutor 2000's basic chat room lacks a whiteboard and electronic
pens; consequently, tutors cannot render mathematics and science symbols to
illustrate either the problem or the solution.
Tutor 2000 is not responsible for the quality of the service or security
for students. Tutors individually choose their hourly rates, from free to
$150 per hour, and method of communication: face-to-face, chat room, e-
mail, fax, or telephone.
o HOMEWORK CENTRAL
Homework Central provides a search-engine service for students looking for
specific research information. This is not tutoring, only guidance on where
and how to quickly find a particular piece of information on the Internet.
This service may be viewed as more complementary than competitive.
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o DOCTOR MATH
Doctor Math is an e-mail based tutoring service in which students submit
questions and wait an average 2 days for a response. Because tutors are
volunteers, the service is free. Lack of timely response and inconsistent
quality may be problems.
o HOMEWORK HELP.COM
Homework Help.com is a self-paced tutorial service in which the student
logs on to the site, selects the subject of interest, and runs self-paced
programs, which simulate math or science formulae and which animate the
programs. If the students become stuck, they are on their own because no
live help is available. These programs take excessive time to download and
the simulation requires that the student have some understanding of the
problem for which they are seeking help. This service is more complementary
than competitive.
TOPTUTORS.COM
Toptutors offer online one-to-one tutoring over the Internet. The service
is not currently operational, but according to the site, is expected to be
up by Spring 2000. Toptutors is not an on-demand service - rather, students
must schedule a time with a tutor beforehand. Unlike Tutornet, students
must work with the tutor's schedule.
Marketing Strategy
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Tutornet's/TM/ revenue goal is to attain $200 million in annual revenues by the
five-year point. To do so will require the Company to establish and maintain a
subscriber base of approximately 3,000,000 subscribers, a goal that Tutornet
believes is achievable given the current acceptance and momentum that the
Company's products have in the marketplace.
Tutornet's/TM/ corporate goal is to become the premier Internet Education Portal
(IEP), the leader in providing live, interactive, on-line tutoring worldwide.
Tutornet's/TM/ strategy is to expand the tutoring service rapidly and use it as
an entree to provide valuable interactive content to multiple education
segments. This strategy will perfectly position Tutornet/TM/ to be the premier
global provider in Internet education. Tutornet/TM/ plans to set up regional
gateway operations in the United States (headquarters), Australia, United
Kingdom, Trinidad and Tobago to effectively serve the regions of North America,
Europe, Asia Pacific, selected parts of Africa, the Caribbean, and Central and
South America.
Over the next 12 months, Tutornet/TM/ plans to concentrate on the K-12, college,
and professional market segments. The product portfolio will include:
o 1-to-1 live tutoring
o Inquiry-based live `homework/assignment helper'
o Live classes
o Content - including self-paced courses, `edutainment', creative
content
o Commerce - including high-value, unique content and related
merchandise
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Tutornet/TM/ employs a two-fold sales distribution strategy utilizing the
following elements:
1. Direct Sales:
Tutornet's/TM/ direct channels include:
o Internet sales
o Direct sales consultants
o Corporate sales consultants
Tutornet/TM/ is in the process of building a comprehensive territory-based
direct sales model with more than 3,000 trained commission-based
consultants by Year 2000 to focus on sales to corporations, foundations,
and other institutional groups. The sales model will be introduced in
phases. The first phase is expected to consist of 50 consultants in five
states by 4th Quarter 99.
2. Wholesale Marketing:
The second part of the Company's marketing strategy is to wholesale its
service through a multiplicity of distribution channels such as network
marketing companies, major Internet Service Providers, retail stores, and
electronic store merchants. This strategy will keep marketing and sales
costs low and allow rapid expansion of the service.
o Internet Service Providers (ISPs):
Tutornet/TM/ is in the process of co-branding with America OnLine
(AOL), the nation's largest ISP. The revenue-sharing arrangement
will allow the Company access to over 18 million AOL customers,
70% of whom have children. Subscribers will go directly from the
AOL page to Tutornet's/TM/ Home Page, and then into a classroom.
The Company expects to capture 5% of the AOL market, or 900,000
subscribers, in two years. This market share represents annual
revenues of $324 million when fully subscribed.
o Family Education Network (FEN):
FEN is the Internet leader for schools, Parent Teacher
Associations (PTAs), and parents communicating amongst themselves
over the Internet. FEN connects more than 3,000 school systems in
the United States, more than 500 PTA web sites, and tens of
thousands of parents.
o Give the Gift of Tutoring Program:
During 4th Quarter 99, Tutornet/TM/ intends to launch a high-
profile campaign aimed at school fundraising organizations, such
as the PTA, to sell TutornetTM subscriptions for raising funds
for their own organizations and, in the process, give the gift of
tutoring to students. Tutornet/TM/ is targeting approximately
75,000 PTAs around the country, and is expecting around 1,500
fund-raising campaigns during the program period.
o Retailers
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Tutornet/TM/ is targeting both on-line and regular retailers to
sell subscriptions. Tutornet/TM/ has already signed agreements
with Toys'R'Us on-line to sell subscriptions.
In addition, candidate retail electronic and education supply
stores have been researched as possible outlets for the
Company's service. Tutornet/TM/ has developed specific strategic
plans to engage one or more of these companies to offer the
Company's on-line tutoring service to their customers as one-
month promotions when they purchase specific products.
o Schools as Influencers
Tutornet/TM/ views school subscriptions as one of the most
important market segments to pursue. Tutornet/TM/ provides
wholesale-priced subscriptions to schools for use in study hall
so that students can access the service from school computers.
Tutornet/TM/ works with teachers, school guidance directors, and
media center staff to ensure that the students who need help the
most have access to the service. This arrangement will help
position Tutornet/TM/ to become the industry standard in
providing supplementary on-line tutoring for public schools.
Subsequently, accepted school usage makes it easier for parents
to accept the service at home.
The Company plans to have the endorsement of 250 schools in
1999, and more than 1,000 by the end of the year 2000.
o International Marketing
Tutornet/TM/ has contracted and deployed marketers globally and
has established sales forces in UK, Australia, and Trinidad and
Tobago.
Tutornet/TM/ plans to differentiate itself in the marketplace through the
development of a high-quality image supported by high profile branding. The
branding strategy is aimed at students, parents, educators, and other
influencers. Tutornet/TM/ will advertise through a combination of Internet
advertising, cable, broadcast, and radio.
Tutornet/TM/ has an Education Advisory Committee of distinguished educators who
will help the Company gain acceptance from parents, local PTAs, school boards,
and teachers, and ensure that the Company's services are appropriate to the
academic needs of its subscribers.
Tutornet/TM/ focuses its marketing efforts on the following market segments that
will create maximum return on investment:
o ELEMENTARY, MIDDLE, AND HIGH SCHOOL STUDENTS
Tutornet/TM/ targets elementary, middle school, and high school
students in the public and private school systems.
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Tutornet/TM/ focuses on students in key metropolitan areas such as the
Washington/Baltimore and New York/New Jersey/Connecticut, Atlanta,
Chicago, Dallas, Detroit, Honolulu, Houston, Los Angeles, Miami,
Philadelphia, St. Louis, San Antonio, San Francisco, Seattle, and
Tampa. These areas have high concentrations of middle/high income
parents willing to invest in their children's education for services
such as that offered by the Company.
o HOME-SCHOOLED STUDENTS
Today, home schooling is an increasingly popular method of education
for K-12 children, and Tutornet/TM/ is there to provide support when
needed. In the chat room public mode, Tutornet/TM/ can provide some of
the peer-to-peer academic interaction that many home-schooled students
lack.
The convenience and low cost of on-line tutoring make Tutornet/TM/ an
appealing and affordable educational supplement for home-schooled
students.
o PRIVATE SCHOOLS
Tutornet/TM/ also offers services to private elementary, middle, and
high schools as a product that they can resell to their students.
Tutornet/TM/ will co-brand with schools that buy the service at a
wholesale price and, in turn, retail it to students.
The Company expects a percentage of students exposed to Tutornet/TM/
in school will also subscribe for afternoon and evening service
directly with the Company, providing additional revenue. This strategy
allows the schools to customize the service in order to fit their
needs, and allows the Company to increase its exposure to the
kindergarten through college student base.
o COMMUNITY AND JUNIOR COLLEGES
Studies have shown that many community or junior college students
require remedial math or science courses in order to graduate with a
2-year degree or to transfer to a traditional 4-year college or
university. Tutornet/TM/ offers its services to students who require
those additional math and science subjects. The majority of courses at
these institutions are taught just above the high school level, a good
fit with the Company's staff of experienced Netucators/TM/.
o FOREIGN LANGUAGE MARKETS
Tutornet/TM/ recognizes that many international students and
immigrants in the US, the UK, and Australia need to learn English and
are looking for affordable help. In July 1999, Tutornet/TM/ began
offering courses in Spanish, and expects to offer its service in
different languages based on customer growth and demand.
o INTERNATIONAL MARKETS
Most parents recognize the importance of science and technology, and
see the US as the leader in these fields. Consequently, they seek to
ensure that their children have access to the American education
system. On-line tutoring, through Tutornet/TM/, universally answers
this need.
By the first half of Year 2000, Tutornet/TM/ intends to focus on the following
segments:
14
<PAGE>
o COLLEGE STUDENTS
There is a strong requirement for tutoring, test preparation, and
language services among college/university students. For example,
recent articles in national newspapers and magazines point to an
increasing number of beginning college students who need extensive
tutoring or are required to take remedial math, science, and English
courses to meet college standards. College athletes, because of the
time spent away from direct instruction, need the availability of
Tutornet/TM/ to maintain required grade point averages. Tutornet/TM/
addresses this market segment with a strong and effective suite of
products.
o ADULT EDUCATION
Continuing education is an exploding market and Tutornet/TM/ believes
it is well placed to address the requirements of this market. General
Education Degree (GED) programs are scheduled for Summer 2000 through
Tutornet, with more programs in development. Tutornet's/TM/ 24/7
delivery model, using the Internet, fits the demographics of this
working market.
o PROFESSIONALS
Professionals in sectors such as accounting, nursing, law, health
care, insurance, real estate, etc. constantly need to update their
credentials and skills or must meet continuing education or re-
certification requirements. Tutornet/TM/ believes this market segment
is a significant sales opportunity. Tutornet's/TM/ recent acquisition
in the UK of LisaNet, an industry-approved accounting accreditation
coursework program in the British Commonwealth, will assist opening
this marketing segment globally using Tutornet's/TM/ unique platform.
To take advantage of the requirements in emerging markets, the Company, from its
business base in the US, the UK, and Australia, is marketing aggressively in the
following areas:
. Europe, Middle East, & Africa
. Asia, Pacific Rim
. North America
. Caribbean, Central, and South America
Currently, industry data regarding market potential and competitive analysis is
limited in these emerging areas. Nonetheless, experts have predicted rapid
growth in Internet usage over the next few years on a global scale.
Tutornet's/TM/ business performance in these areas will, of course, be affected
by factors such as competition, government regulations, and public acceptance.
Risk Factors
------------
Forward-Looking Statements. This current report on Form 8-K contains, in
addition to historical information, forward-looking statements that involve
risks and uncertainties. The words "anticipate", "believe", "expect", "plan",
"intend", "estimate", "will", "project", "could", "may", "foresee", and similar
expressions are intended to identify forward-looking statements. You should not
place undue reliance on forward-looking statements contained in this report
because they are inherently uncertain. The actual results could differ
materially from the discussion in the forward-looking statements. Factors that
could cause or contribute to such differences
15
<PAGE>
include those discussed below, as well as those discussed elsewhere in this
report. The following risk factors should be read in conjunction with the
financial information included in Item 7, and other financial information
included elsewhere in this report.
Tutornet is a Development/Growth Stage Company. Tutornet is young and in
its growth stage. Tutornet's likelihood of success must be considered in the
light of the problems, expenses, difficulties, complications, and delays
frequently encountered in connection with the startup and growth of a business
and the environment in which Tutornet will operate.
Tutornet Will Have a Limited Operating History. Because Tutornet has yet
to achieve its intended level of business operations, it is uncertain whether it
will be successful in overcoming the substantial risks of operating the
business. Tutornet has had only minimal net revenues to date and there can be
no assurance of adequate net revenues in the future. Tutornet may never become
profitable and if it does achieve profitability, it cannot be certain that it
will remain profitable nor that profits will increase in the future. Tutornet's
auditors have expressed doubt about the ability of Tutornet to continue as a
going concern.
Tutornet Faces Intense Competition From a Multitude of Competitors.
Tutornet will be in direct competition with established companies in the same
market. Additionally, other companies not presently in competition with
Tutornet's business may enter the market targeted by Tutornet. Tutornet can
anticipate competition in its efforts to establish itself in targeted markets
and to expand into new markets. There can be no assurance that Tutornet will be
able to compete successfully with existing or new competitors, some of which may
possess more financial resources and name recognition than the surviving entity.
Tutornet May Not Be Able to Maintain a Competitive Position Due to the
Pace at Which the Marketplace is Changing. The demand for Tutornet's products
and services may rapidly decline if the marketplace for its products and
services changes. Tutornet's success is dependent on its ability to adjust to
change and meet new demands. Since the marketplace for Tutornet's services is
relatively new, it may not be able to predict the changes that will occur and
may not be able to modify or update its services in time to prevent a decline in
its share of the market.
Need for a Broad Customer Base in Order to Grow. Tutornet will need to
build and sustain a large customer base. Failure to do so may result in smaller
profit margins or losses.
Saturated Marketplace and Obsolescence. The marketplace for on-line
tutoring may become saturated or alternative methods of tutoring may make
Tutornet's technology obsolete. Predicting the level of demand for Tutornet's
services is difficult and is dependent on its ability to adjust to change and
meet new demands.
The Instability of the Internet May Impact Customers' Abilities to
Utilize Tutornet's Services. The Internet may not be able to support the demands
placed on it by continued growth. Tutornet is highly dependent on the Internet
to provide its products and services to the marketplace. Users who employ the
Internet for tutoring services could experience service degradation or latency
because of overworked search engines which could slow the distribution of the
tutor session over the Internet and interfere with a user's access. In this
case, the tendency of a dissatisfied customer might be to blame Tutornet rather
than the ISP.
Government Regulation of the Internet May Negatively Affect Tutornet's
Ability to Provide the Marketplace With Its Products and Services. The laws and
regulations applicable to the Internet will directly affect Tutornet because its
products and services are heavily dependent on use of the Internet as a means of
delivery. These laws and regulations are still evolving and unclear and have
the potential of damaging Tutornet's business. No specific laws are pending
that will have a negative impact on the Internet. However, any laws pertaining
to the Internet, if enacted, could potentially have a negative impact on the
marketplace for Tutornet's services due to either an impact on the Internet
audience or an impact on users of Tutornet's products and services.
Tutornet Will Be Dependent Upon a Small Number of Key Persons to
Implement Its Business Plan. Tutornet is dependent on a relatively small number
of key employees to implement its business plan, the loss of any of whom may
affect its ability to provide the required quality of service and technical
support necessary to achieve and maintain a competitive market position.
16
<PAGE>
Tutornet May Not Be Able to Retain Key Personnel If It Is Unable to
Adequately Compensate Them. Tutornet may not generate sufficient revenue to
adequately compensate its highly skilled employees and thereby may not be able
to maintain its competitive position.
Inability to Manage Growth. If Tutornet obtains the volume of business
necessary to achieve its revenue goals, it may not be able to manage the growth
that would be required. If Tutornet can not hire and retain enough talented
management personnel and netucators, it may be unable to capitalize on its
business opportunities and may waste resources in the process.
No Liability Insurance. Tutornet has not acquired liability insurance
with respect to provision of its products and services. Without insurance to
cover damages resulting from liability claims stemming from its services,
Tutornet must shoulder any award of damages against it which could significantly
affect its business operations if the award is substantial.
Tutornet Will Require Additional Capital to Sustain Its Operations.
Tutornet will need more capital than it has available to it or can expect to
generate through sales of its services. Tutornet will need to continually expand
and upgrade its infrastructure and systems to ensure high levels of service.
General Factors. The Surviving Corporation's business may be affected
from time to time by such matters as changes in general economic conditions,
changes in laws and regulations, taxes, tax laws, prices and costs, and other
factors of a general nature which may have an adverse effect on its business.
Properties.
-----------
Tutornet's offices are located at 11410 Isaac Newton Square, Suite 105, Reston,
Virginia 20190, where Tutornet leases approximately 7,200 square feet of space
at a monthly cost of $12,300 for a period of 5 years commencing July 7, 1999.
Tutornet maintains insurance on its offices that it believes are adequate for
its business. If necessary, Tutornet believes that it could relocate its offices
without significant disruption.
LEGAL PROCEEDINGS
-----------------
On February 23, 2000, a suit (Handelman et al v. Tutornet.com Inc., et al, U.S.
District Court for the Central, District of California, c/a #00-01941) was filed
against Tutornet.com Inc., its president Euburn Forde, its Chief Financial
Officer Mr. Rajiv Dalal, its Chief Operating Officer Mr. Tam, and other unnamed
defendants. Plaintiffs are shareholders of Tutornet.com Inc. The complaint
alleges breach of contract, securities fraud, fraud, negligent
misrepresentation, and seeks an accounting, general and specified damages in
excess of $75,000, and attorneys fees. Plaintiffs are represented by the Law
Offices of Ronald Jason Palmieri.
The Company has engaged Laurence D. Strick & Associates as defense counsel. The
Company has not yet filed an answer to the complaint. On March 30, 2000 the
Company filed a Motion to Dismiss for Improper Venue or Alternatively to
Transfer for Convenience, on which the court has not yet ruled.
PLAN OF OPERATION
-----------------
Tutornet is a development stage company. All of Tutornet's resources will now be
focused on developing the business of Tutornet Sub. Since its inception,
Tutornet Sub has accumulated losses of $14,366,513. For the quarter ended March
31, 2000 and the year ended December 31, 1999, Tutornet Sub reported net losses
of $3,748,440 and $11,744,764, respectively. Tutornet anticipates that it will
begin producing significant revenues 3rd quarter 2000. Tutornet Sub's
significant expenses for the quarter ended March 31, 2000 and the year ended
December 31, 1999 have consisted of salary, travel, marketing, technical
operations. Tutornet anticipates that it will continue to operate at a loss
until such time as it can achieve quarterly revenues of approximately
$3,000,000, which Tutornet believes may occur 4th quarter, 2000.
In their report on Tutornet Sub's financial statements, its auditors expressed
their doubt as to Tutornet Sub's (and by virtue of the subsequent
reorganization, Tutornet's) ability to continue as
17
<PAGE>
a going concern. At March 31, 2000 and December 31, 1999, Tutornet Sub had net
working capital deficits of $(8,544,999) and $(6,714,566), respectively.
Tutornet is in the process of obtaining a $30,000,000 investment from an
accredited investor for which it will issue 5,000,000 shares of its Class A and
5,000,000 Class B common stock. Management expects the investment will close in
the very near future. See Exhibit 99.1 to this Form 8-K. Although this
investment may remove an imminent threat to Tutornet's liquidity, it does not
represent an amount adequate to fully implement Tutornet's business plan. With
these capital resources Tutornet believes that it can continue operations for
approximately 10 to 12 months. At that point, Tutornet will require additional
capital resources of approximately $40,000,000 to continue to implement its
business plan through March 31, 2001. Additional capital resources may not be
available to Tutornet at that time on terms acceptable to Tutornet, or at all.
Tutornet expects to make capital expenditures of approximately $12,000,000
through the balance of 2000. For the quarter ended March 31, 2000 and the year
ended December 31, 1999, Tutornet Sub made capital expenditures of $1,006,741
and $1,786, respectively.
MANAGEMENT
----------
NAME TITLE
- - -------------------------------------------------------------------
Mr. Euburn Richard A. Forde Chairman, President, & CEO
Mr. Rajiv Dalal Executive Vice President, Chief
Financial Officer, Secretary,
Treasurer, Director
Mr. Andrew Tam Executive Vice President
MR. EUBURN RICHARD A. FORDE
Chief Executive Officer,
President, Chairman
Euburn R. A. Forde, 42, has been President and CEO of the Company, and its
predecessor, Globenet, since its founding in October 1997. From 1976 to 1980,
Mr. Forde was a Technical Officer with Guyana Telecom Corporation in Guyana,
South America, his native country, from which he emigrated in 1980. From 1980 to
1983, Mr. Forde was a Satellite Communications Engineer with American Satellite
Corporation in New York. From 1983 to 1985, Mr. Forde was Manager, Network
Engineering at Merrill Lynch, New York, where he designed and established
Merrill Lynchs' Direct Broadcast Satellite System, which connected 525 Merrill
Lynch branch offices worldwide. From 1985 to 1994, Mr. Forde served in various
management capacities at Citicorp, New York, starting as a Manager from 1985 to
1987. From 1987 to 1991, then a Citicorp Assistant Vice President, Mr. Forde
designed and developed the Citicorp National Network for the One Bank corporate
initiative, linking 1,980 Citicorp offices in the US. From 1991 to 1994 Mr.
Forde, as a Vice President at Citicorp, designed and established a new
international data and voice network, connecting
18
<PAGE>
105 data centers and 87 voice networks in 96 countries. This initiative resulted
in the formation of a new division at Citicorp, the Citicorp Global Information
Network. From 1994 to 1997, Mr. Forde served as President and CEO of Worldserv
Inc., a network outsourcing company he founded in 1994 to manage large corporate
networks. In October 1997, as consultant to Primus Telecommunications, Mr. Forde
assisted in the development of a global data network and business strategy.
Since October 1997, when he founded TutornetTM, Mr. Forde has been instrumental
in the organization, development, and promotion of the Company. Mr. Forde holds
a BS EE from Guyana Technical College. He attended the Chief Information Network
Program at the Sloan School at MIT, as well as several corporate management
seminars while at Merrill Lynch and at Citicorp.
MR. RAJIV DALAL
Chief Financial Officer
Executive Vice President
Secretary, Treasurer, Director
Rajiv Dalal, 36, has been Chief Financial Officer, Executive Vice President,
Secretary, Treasurer, and a Director of the Company and its predecessor,
Globenet, since its founding in October 1997. From 1987 to 1988, Mr. Dalal was
Senior Applications Development Manager for Northern Telecom PLC in London,
England. In 1988, Mr. Dalal emigrated to the US and subsequently enrolled in the
MBA program at New York University, graduating in 1990. From 1990 to 1993, Mr.
Dalal was both Executive Assistant to Citicorp's Chief Technology Officer in the
Citicorp Technology Office and Senior Technical Advisor for the Citicorp Global
Information Network at Citibank, NA, New York, where Mr. Dalal designed,
developed, and managed projects in emerging technologies, telecommunications,
financial technology costing, and regulatory issues. From 1993 to 1994, Mr.
Dalal was the first US-based Principal Consultant appointment to Cable &
Wireless Business Networks Division of Cable & Wireless PLC, where he was
responsible for the development and management of Cable & Wireless' top 50 North
American-based multinational customers seeking assistance with the development,
expansion and/or outsourcing of worldwide telecommunications needs. From 1994 to
1995, Mr. Dalal was Senior Director, Strategic Business Development, Ascom
Timeplex, Inc., New Jersey, where he was responsible for the identification and
development of new business ventures and strategic directions for Timeplex, a
$400 million multinational company. From 1995 to 1997, Mr. Dalal co-founded and
served as Senior Executive Vice-President, Corporate Business Development, of
WorldServ, a new business venture of GTECH Corporation, Rhode Island. His
responsibilities there included sales, sales force development, marketing, bid
development, finance, strategic partnerships and alliances, business process
development and improvement, and management information services. Mr. Dalal left
WorldServ in 1997 to help found Tutornet. Since 1997, Mr. Dalal has been
instrumental in the organization, development, and promotion of the Company. Mr.
Dalal holds an MBA in Finance and International Business from the Leonard N.
Stern School of Business, New York University, and a BSc in Engineering
(Computer Science) from Imperial College of Science and Technology, University
of London.
19
<PAGE>
MR. ANDREW TAM
Executive Vice President of Operations,
Director
Mr. Tam, 39, has been Executive Vice President and a Director of the Company and
its predecessor, Globenet, since its founding in October 1997. From 1979 to
1983, Mr. Tam was a Senior Communications Engineer with Exxon Corporation, where
he was trained in basic network operations, large scale project planning,
network engineering, and business management. From 1983 to 1985, Mr. Tam was a
Senior Analyst - Network Engineering for Merrill Lynch, New York, where he
designed a T1 backbone network serving 500 branch offices with over 20,000
terminals. From 1985 to 1987, Mr. Tam was a Senior Network Engineer for
Securities Industry Automation Corp (SIAC), New York, a company jointly owned by
the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX).
There, Mr. Tam was responsible for providing all computing and communications
systems between the data center and member firms, the exchanges, and data feeds.
From 1988 to 1990, Mr. Tam was Senior Communications Analyst, Network
Engineering, at Credit Suisse First Boston, New York. There he was in charge of
networking all data communications to/from market data feeds, NASD, SIAC,
between branch and regional offices, and with other firms. From 1990 to 1994,
Mr. Tam was Vice President, Network Planning and Design, for Citicorp/Citibank,
New York. He planned, designed, and implemented mission-critical networks for
Citicorp in 96 countries, which moved a total of $800 billion per day to the
Federal Reserve. From 1994 to 1997, Mr. Tam co-founded WorldServ/aTEMS of
Woodcliff, New Jersey, where he also served as Chief Operating Officer and
Executive Vice President, Engineering. These companies provided information
technology (IT) professional services, network integration, network management,
help-desk, and Internet services to the commercial and educational markets.
Clients included Xerox, Walt Disney, Bank of Australia, MasterCard, Worldcom,
and others. From 1997 to 1999, Mr. Tam was Vice President - Network Services,
Daiwa Securities America Inc. of New York, where he deployed Internet concentric
solutions for rapid product rollout, enterprise communications, and data
warehousing. Mr. Tam evaluated and implemented a variety of Internet
technologies including, among others, on-line training, multi-lingual browsers,
and near-toll quality voice transmissions. Since 1997, Mr. Tam has been
instrumental in the organization, development, and promotion of the Company. Mr.
Tam holds a BSEE from Northeastern University and an MBA from New York Institute
of Technology.
EQUITY SECURITIES
-----------------
The stock of the corporation is divided into two classes: common stock in the
amount of one billion (1,000,000,000) shares of the par value of $.00001 each
and preferred stock in the amount of ten million (10,000,000) shares of the par
value of $.00001 each. The common stock is divided into two series: nine hundred
fifty million (950,000,000) shares of Series A common stock and fifty million
(50,000,000) shares of Series B common stock. Except as otherwise required by
the certificate of incorporation, the bylaws, or law, each holder of shares of
Series A common stock has one vote per share on all matters voted upon by the
shareholders, and each holder of shares of Series B common stock has three votes
per share on all matters voted upon by the shareholders. The board of directors
shall have authority, by resolution or resolutions, to divide the preferred
stock into series, to establish and fix the distinguishing designation of each
such series and the number of shares thereof (which number, by like action of
the board
20
<PAGE>
of directors from time to time thereafter, may be increased except when
otherwise provided by the board of directors in creating such series, or may be
decreased but not below the number of shares thereof then outstanding) and,
within the limitations of applicable law of the State of Delaware or as
otherwise set forth in this article, to fix and determine the relative rights
and preferences of the shares of each series so established prior to the
issuance thereof.
Item 5. Other Events
SUCCESSOR ISSUER ELECTION
-------------------------
Upon effect of the merger, pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, Tutornet became the
successor issuer to the Company for reporting purposes under the Securities
Exchange Act of 1934 and elected to report under the Act effective May 16, 2000.
INDEPENDENT AUDITOR
-------------------
Tutornet's independent auditors, Cerasi Kraus and Associates, will continue as
auditors for Tutornet.
FISCAL YEAR
-----------
Tutornet's fiscal year will continue to be the calendar year, which is also the
same as that of the Company.
Item 7. Financial Statements, Pro Forma Information and Exhibits
Financial Statements
--------------------
Accompanying this Form 8-K are the financial statements of Tutornet
required by Regulation S-B, Item 310(c).
21
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
- - --------------------------------------------------------------------------------
Consolidated Comparative Financial Statements
Together With
Supplementary Financial Information
For the Years Ended
December 31, 1999 & 1998
Prepared By:
C E R A S I, K R A U S & A S S O C I A T E S, I N C.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
(440) 546 - 9359
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Consolidated Comparative Financial Statements
For the Years Ended December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
Table of Contents
-----------------
Independent Accountants' Opinion.......................................... 3
Consolidated Comparative Balance Sheets................................... 4
Consolidated Comparative Income Statements................................ 6
Consolidated Comparative Statements of Shareholders' Equity............... 7
Consolidated Comparative Statements of Cash Flow.......................... 8
Notes to Consolidated Comparative Financial Statements.................... 9
Comparative Supplemental Financial Information
For the Years Ended December 31, 1999 & 1998
Table of Contents
-----------------
Accountants' Report On Additional Information............................. 20
Consolidated Comparative Statements
of Selling, General & Administrative Expenses.......................... 21
Comparative Statements of Key Analytical Ratios........................... 22
<PAGE>
C E R A S I, K R A U S & A S S O C I A T E S, I N C.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
- - --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To Mr. Euburn R. A. Forde
Chief Executive Officer and President
Tutornet.com, Inc.
(A Development Stage Company)
We have audited the accompanying Consolidated Comparative Balance Sheets of
Tutornet.com, Inc. as of December 31, 1999 and 1998 and the related Consolidated
Statements of Income, Retained Earnings and Cash Flow for the years then ended.
These financial statements are the responsibility of the Company's management.
We conducted the audit in accordance with 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 this audit provides a reasonable basis for our opinion.
In our opinion, the comparative financial statements present fairly, in all
material respects, the consolidated financial position of Tutornet.com, Inc., as
of December 31, 1999 and 1998 and the results of its operations and cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying comparative financial statements have been prepared assuming
the Company will continue to operate as a going concern. As discussed in Note M
to the comparative consolidated financial statements, the Company's has an
accumulated deficit of $12,300,501 and a loss of $ 11,744,764 in 1999 and
$ 553,355 in 1998 together with a working capital deficiency of $6,711,953 in
1999 and $1,408,403 in 1998. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The Company is in the process
of seeking alternate sources of capital to satisfy these deficiencies. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Cerasi, Kraus & Associates, Inc. CPA's
May 7, 2000
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Consolidated Comparative Balance Sheets
As of
December 31,
<TABLE>
<CAPTION>
ASSETS
------
1999 1998
---------- ----------
<S> <C> <C>
Current Assets:
Cash $ 101,086 $ 66,128
Accounts Receivable, Net of Allowance for Doubtful Accounts 15,785 35,401
Marketable Securities, At Market Value 570,963 -
Prepaid Expenses 631,105 -
Deferred Taxes 336,130 68,928
----------- -----------
$1,655,069 $ 170,457
Fixed Assets:
Office Furniture & Fixtures 16,031 -
Office Equipment 127,717 12,531
Computer Hardware & Peripherals 829,738 1,790
Computer Network 12,873 -
Leasehold Improvements (Net of Accumulated Amortization) 33,531 -
----------- -----------
1,019,890 14,321
Less: Accumulated Depreciation 54,287 1,696
----------- -----------
$ 965,603 $ 12,625
Other Assets:
Computer Software, Net of Accumulated Amortization 1,071,365 383,500
Software Development Costs - 821,711
Goodwill, Net of Accumulated Amortization 424,196 380,847
Deposits 171,182
Other - 691
----------- -----------
$1,666,743 $1,586,749
----------- -----------
Total Assets $4,287,415 $1,769,831
==========================
</TABLE>
The Accompanying Notes are an integral part of These Financial Statements.
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Consolidated Comparative Balance Sheets
As of
December 31,
<TABLE>
<CAPTION>
LIABILITIES
-----------
1999 1998
------------ ----------
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 2,617,495 $ 149,137
Notes Payable CSR Stockholders 52,500 315,000
Accrued Gross Margin on Contract - 715,108
Accrued Wages - Shareholders/Officers - 278,729
Accrued Interest 5,422 44,177
Accrued & Withheld Payroll Taxes 39,187 -
Income Taxes Payable 29,691 6,913
Officer Loan Payable - 69,796
Shareholder Loan Payable 5,625,340 -
------------- -----------
Total Current Liabilities $ 8,369,635 $1,578,860
Long Term Liabilities:
Subordinated Shareholder Loans Payable $ 947,028 $ -
Deferred Income Taxes $ 29,450 $ 356
------------- -----------
Total Liabilities $ 9,346,113 $1,579,216
SHAREHOLDER'S EQUITY
--------------------
Common Stock,
Class A, ($ 0.001 Par Value; 95,000,000 Authorized,
10,133,376 Issued and Outstanding in 1998 and
28,307,050 outstanding in 1999) $ 28,307 $ 10,133
Class B, ($0.01 Par Value; 5,000,000 Authorized,
None Outstanding in 1998 and 4,750,000 in 1999) 47,500 -
------------- -----------
$ 75,807 $ 10,133
Additional Paid In Capital 7,165,996 736,219
Retained Earnings (Deficit) (12,300,501) (555,737)
------------- -----------
Total Shareholders' Equity (Deficit) $ (5,058,698) $ 190,615
------------- -----------
Total Liabilities & Shareholder's Equity $ 4,287,415 $1,769,831
============= ===========
</TABLE>
The Accompanying Notes are an integral part of These Financial Statements.
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Consolidated Comparative Income Statements
For the Years Ended December 31, 1999 & 1998
&
The Period from Inception (October 21, 1997 ) to December 31, 1999
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From Inception
October 21, 1997
Year Ended Year Ended to
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ---------------- -----------------
<S> <C> <C> <C>
Net Consulting Fees & Sales $ 132,126 $1,139,462 $ 1,487,456
------------- ---------- ------------
Cost Of Fees:
Consultants & Subcontractors 1,665,868 141,581 1,918,562
Computer Systems Support 76,361 16,143 92,504
Customer Service Expenses - 3,750 3,750
Amortization of Software Costs 247,091 6,500 253,591
Depreciation of Computer Equipment 47,136 1,153 48,289
Factoring Expense - 13,125 13,125
Gross Margin Expense - 622,193 715,108
Printing & Reproduction 176,478 11,530 188,008
------------- ---------- ------------
Total Costs Of Fees $ 2,212,934 $ 815,975 $ 3,232,937
Gross Profit $ (2,080,808) $ 323,487 $ (1,745,481)
------------- ---------- ------------
Selling, General & Administrative Expenses $ 9,853,225 $ 901,521 $ 10,766,756
------------- ---------- ------------
Operating Income (Loss) $ (11,934,033) $ (578,034) $(12,512,237)
Other Income (Expenses):
Interest & Dividend Income 44,035 67 44,102
Interest Expense (110,043) (43,213) (153,256)
Loss on Investment in Tutornet UK (680,000) (680,000)
Loss on Foreign Currency Exchange (1,503) - (1,503)
Realized Gains on Sales of Marketable Securities 754,908 - 754,908
Miscellaneous (Expense) (8,717) - (8,717)
------------- ---------- ------------
$ (1,320) $ (43,146) $ (44,466)
------------- ---------- ------------
Loss Before Income Taxes $ (11,935,353) $ (621,180) $(12,556,703)
Income Taxes $ (190,589) $ (67,825) $ (256,202)
------------- ---------- ------------
Net Loss $ (11,744,764) $ (553,355) $(12,300,501)
============= ========== ============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE>
Tutornet.com, Inc.
Consolidated Statement of Shareholder's Equity
For the Years Ended December 31, 1999 & 1998
&
The Period from Inception (October 21, 1997 ) to December 31, 1999
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Retained Total
------------------------ Additional Earnings Shareholder's
Class A Class B Paid In Capital (Deficit) Equity (Deficit)
----------- -------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance - October 21, 1997 $ - $ - $ - $ - $ -
Shareholder Contributions - - 40 - 40
Net Loss - - - (2,382) (2,382)
-------- -------- ------------ ------------- ------------
Balance - December 31, 1997 $ - $ - $ 40 $ (2,382) $ (2,342)
Shareholder Contributions 10,133 - 777,194 - 787,327
Net Loss - - - (553,355) (553,355)
Expense of Stock Issuance - - (41,015) - (41,015)
-------- -------- ------------ ------------- ------------
Balance - December 31, 1998 $10,133 $ - $ 736,219 $ (555,737) $ 190,615
Shareholder Contributions 18,174 47,500 12,080,117 - 12,145,791
Net Loss - - - (11,744,764) (11,744,764)
Expense of Stock Issuance - - (25,000) - (25,000)
Liability for Shareholder Lawsuit - (5,625,340) (5,625,340)
-------- -------- ------------ ------------- ------------
Balance - December 31, 1999 $28,307 $47,500 $ 7,165,996 $(12,300,501) $(5,058,698)
======== ======== ============ ============= ============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Consolidated Comparative Statement of Cash Flows
For the Years Ended December 31, 1999 and 1998
&
The Period from Inception (October 21, 1997 ) to December 31, 1999
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From Inception
October 21, 1997
Year Ended Year Ended to
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Loss $(11,744,764) $ (553,355) $(12,300,501)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities
Amortization 272,481 6,500 278,981
Depreciation 53,268 1,696 54,964
Deferred Taxes 29,094 356 29,450
Changes in Current Assets and Currrent Liabilities:
(Increase) Decrease in Accounts Receivable 19,616 153,373 (15,786)
(Increase) Decrease in Prepaid Expenses (631,105) 2,000 (631,105)
(Increase) Decrease in Deferred Taxes (267,202) (68,928) (336,130)
Increase (Decrease) in Accounts Payable 2,468,358 20,581 2,617,495
Increase (Decrease) in Accrued Gross Margin on Contract (715,108) 622,193 -
Increase (Decrease) in Accrued Wages (278,729) 229,229 -
Increase (Decrease) in Accrued Interest (38,755) 44,177 5,422
Increase (Decrease) in Accrued & Withheld Taxes 39,187 - 39,187
Increase (Decrease) in Income Tax Payable 22,778 4,701 29,691
------------- ------------ -------------
TOTAL ADJUSTMENTS 973,883 1,015,878 2,072,169
NET CASH (USED) BY OPERATING ACTIVITIES $(10,770,881) $ 462,523 $(10,228,332)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (1,006,741) (14,321) (1,021,062)
Purchase & Development of Computer Software (112,059) (1,120,573) (1,323,769)
Increase in Deposits (171,182) - (171,182)
Purchase of Goodwill (68,739) (380,847) (449,586)
Payments of Organization Expenses - (691) (691)
------------- ------------ -------------
NET CASH (USED) BY INVESTING ACTIVITIES $ (1,358,721) $(1,516,432) $ (2,966,290)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances From Officer - 69,796 69,796
Investments in Marketable Securities (Net) (570,963) - (570,963)
Payments on Note Payable (69,796) (11,707) (69,796)
Proceeds from Issuance of Stock 12,145,791 746,312 12,892,143
Cost of Issuance of Stock (25,000) - (25,000)
Proceeds from Borrowing - 400,000 400,000
Reclassification of Subordinated Shareholder Loans 947,028 - 947,028
Payments on CSR Note Payable (262,500) (85,000) (347,500)
------------- ------------ -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 12,164,560 $ 1,119,401 $ 13,295,708
NET INCREASE (DECREASE) IN CASH $ 34,958 $ 65,492 $ 101,086
CASH BALANCE, BEGINNING OF YEAR 66,128 636 -
------------- ------------ -------------
CASH BALANCE, END OF YEAR $ 101,086 $ 66,128 $ 101,086
============= ============ =============
SUPPLEMENTARY INFORMATION:
Cash Paid During the Year for:
Interest 110,043 43,213
Income Taxes - -
- - -----------------------------------------------------------------------------------------------------------------------------
$ 110,043 $ 43,213
- - --------------------------------------------------------------=========================================----------------------
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
A. NATURE OF BUSINESS
Business Organization
The company was incorporated on October 21, 1997 under the laws of the State of
Delaware. On July 23, 1998 the company changed its name to Tutornet.com, Inc.
and increased the number of authorized shares from 1,500 to 100,000,000. The
company is still in its development stage and is a provider of live tutoring
services over the internet. The Company performed telecommunication consulting
services in 1998.
Company Subsidiaries
The only active subsidiary during 1998 and 1999 is:
Nature of
Name Ownership Business
- - ---- ---------- --------
Nettutor, Pty. Ltd. 100.0% Australian Proprietary
The Company has the following other subsidiaries which were inactive during
1999 & 1998:
Tutornet US Limited 100.0% Corporation in
Trinidad & Tobago
Tutornet.com
Services, Inc. 100.0% Customer Service In U.S.
Tutornet.Nigeria LTD 100.0% Tutoring Services in
Nigeria
Tutornet.Morocco 51.0% Tutoring Services In
Morocco
Tutornet Marketing Inc. 19.9% Marketing Corporation in
U.S.
-7-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
B. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the company and
its subsidiaries. Inter-company balances and transactions have been eliminated
in consolidation.
Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on the accrual basis of
accounting. The accounting method recognizes revenues in the accounting period
in which they are earned and expenses when they are incurred regardless of when
cash is paid or received.
Investments
The equity method of accounting is used for all investments in associated
companies in which the Company's interest is 20% or more. Under the equity
method, the Company recognizes its share in the net earnings or losses of these
associated companies as they occur rather than as dividends are received.
Dividends received are accounted for as a reduction of the investment rather
than as dividend income. Losses from the equity investments reduce the
receivables from the associated companies.
Software Development Costs
Per the Statement of Financial Accounting Standards (SFAS) Number 86, as further
refined by Statement of Position (SOP) 98-1, the costs associated with
internally developed software costs can be capitalized and amortized over the
assets expected useful life. At December 31, 1998, the Company had $821,711 in
capitalized software development costs. These costs will be amortized over five
years using the straight-line method.
-8-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
C. INVESTMENTS AND MERGER:
Purchase of Collaborative Systems, Inc. (CSR)
On December 18, 1998, a plan and agreement of merger was adopted to be effective
December 21, 1998 by and between Tutornet.com, Inc and Collaborative Systems
Research, Inc. (CSR). Tutornet.com issued 50,000 shares of its common stock in
exchange for 100% of the shares of the outstanding stock of CSR. Tutornet.com,
Inc. also paid $35,000 cash at settlement and agreed to pay $315,000 over the
next twelve months to the CSR shareholders. The business of CSR was merged into
Tutornet.com, Inc. and CSR ceased to operate. The assets distributed to
Tutornet.com as a result of the merger and the liquidation of CSR was CSR's
specialized software and computer equipment. The purchase method was used to
account for the acquisition. At December 31, 1999 the Company was in default of
this agreement. The outstanding amount due the shareholders' of CSR is $52,500.
Purchase of Majority Interest in Subsidiary:
In August of 1998, Tutornet.com, Inc. purchased a fifty-percent interest in
Nettutor Pty. Ltd., a foreign Australian Proprietary Corporation, for $1,600.
Income and expenses were translated into dollars at average rates for the year.
On December 31, 1998 Tutornet.com, Inc. purchased an additional fifty percent
interest in Nettutor Pty. Ltd. from Powersys Ltd.. Powersys Ltd. is 100% owned
by an officer of Tutornet.com, Inc. The purchase was completed by Tutornet.com,
Inc. issuing 333,333 shares of its common stock to Powersys Ltd. and was
consolidated into the Company's Financial Statements using the purchase method
of accounting. The difference between the cost of the investment and the
underlying net (deficit) of the assets has been allocated to goodwill, which
will be amortized over fifteen years.
-9-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
D. FIXED ASSETS
Fixed Assets are carried at historical cost. The depreciation of the Property
and Equipment is provided using the straight-line method for financial reporting
purposes.
The estimated useful lives of the assets are as follows:
Computer Hardware
And Peripherals 5 Years
Office Furniture 7 Years
Office Equipment 7 Years
Computer Network Systems 5 Years
Leasehold Improvements 10 Years
Expenditures for maintenance and repairs are charged to expense as incurred.
E. DEVELOPMENT STAGE OPERATIONS:
The company was incorporated on October 21, 1997 and 1,500 shares of no par
value common stock were authorized and issued to the founding shareholder. Since
that time the company has devoted substantially all of its effort to developing
the live tutoring service, creating the internet delivery process to be used to
transmit the live tutoring to the end user, establishing supply sources,
recruiting and training personnel, developing markets and raising capital.
-10-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
F. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company has set up an allowance for uncollectible accounts. The following
summarizes the activity for the years 1999 and 1998.
1999 1998
---------- --------
Beginning Balance $ - -
Current Year Allowance 131,391 -
Chargeoffs - -
Less: Recoveries ( -) ( -)
---------- --------
Ending Balance $ 131,391 $ -
========== ========
G. STOCK ISSUED TO OFFICERS:
The company accounts for its stock-based compensation using the accounting
prescribed by Accounting Principles Board Opinion No. 25, accounting for stock
issued to employees.
The following number of shares were issued in 1998 to the officers and founders
of the company in exchange for services rendered in 1998:
Issue Share Price Compensation
Chief Executive Officer 3/31/98 $0.003 $2,000
Chief Financial Officer 3/31/98 $0.003 $3,050
Chief Operating Officer 3/31/98 $0.003 $1,200
-11-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
H. STOCK OPTIONS ISSUED TO OFFICERS:
As an incentive to the officers, stock options were granted in 1999 as follows:
Issue No. of Shares Strike Price
Date Granted
Chief Executive Officer 12/31/99 150,000 $6.00
Chief Financial Officer 12/31/99 175,000 $3.11
These options are non-cancellable, and expire five years from date of issue. No
Stock options were granted in 1998.
I. RELATED PARTY TRANSACTIONS:
Acquisition Of Nettutor Pty, Ltd. (Australia Operation)
During 1998, the company initially purchased a fifty percent interest in
Nettutor Pty. Ltd.. On December 31, 1998, the company purchased an additional
fifty percent interest in Tutornet Pty. Ltd. by issuing fifty thousand shares to
Powersys Ltd.. The purchase price included an assumption by Tutornet.com, Inc.
of a $69,796 loan made to Nettutor Pty. Ltd. by Powersys Ltd. This advance is
payable on demand without interest.
Employment Agreement with Majority Shareholder
The company has an employment agreement with the majority stockholder and chief
executive officer providing for annual compensation of $225,000 beginning
January 1, 1999. The agreement includes merit increases on anniversary dates and
a bonus payable in stock options as a percentage of salary if certain business
plan financial goals are met. The term of the employment contract will be for
six years, with automatic five-year renewals of the employment thereafter,
unless Tutornet's Board of Directors terminates the contract due to cause.
Should the contract be terminated for reasons other than cause, the stockholder
will be entitled to a severance payment equal to either thirty-six months of
salary or the remaining months of the then current employment term, whichever is
greater.
-12-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
Employment Agreement with Majority Shareholder (Cont.)
In 1998, the majority stockholder assigned certain telecommunication consulting
contracts to the company. The Board of Directors has agreed to compensate the
stockholder in an amount equal to the gross margin of the contract. Gross margin
is defined as the revenues received minus the direct costs of providing the
service. Each month, the gross margin will be calculated and a note issued to
the stockholder with a face amount equaled to the calculated gross margin,
carrying an interest rate of ten percent APY from the date of issue of the note.
All payments were due January 2, 1999. These amounts were not paid on their due
date. The company may pay these notes early without any penalty. The company
began operations in late October 1997 and no notes were issued to the
stockholder as of December 31, 1997, however an accrued expense of $92,915 was
recorded on December 31, 1997 for the amount due the shareholder based on the
accrued gross margin of the contract through December 31, 1997. During 1998, an
additional $622,193 was accrued to the shareholder for the 1998 gross margin,
resulting in a total balance due of $715,108. Interest of $42,757 is due the
shareholder on these amounts and was recorded as of December 31,1998. The
outstanding balance at December 31, 1999 is $193,950 including accrued interest
outstanding of $98,841. These amounts incorporated into a subordinated note
payable as of December 31, 1999.
J. SUBORDINATED SHAREHOLDER LOANS
The two executive officers of the Company have agreed to subordinate the amounts
due them in the form of a promissory note. These loans are comprised of the
following:
Accrued Compensation $753,079
Accrued Gross Margin 95,108
Accrued Interest 98,841
--------
Total $947,028
========
These loans are due January 1, 2001 and bear interest at 10.0%.
-13-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
K. INCOME TAXES
Deferred income taxes are provided for temporary differences in the recognition
of certain income and expense items for financial reporting and income tax
purposes. Such temporary differences relate primarily to the difference in the
recognition of the tax effects of operating losses for financial reporting and
income tax purposes. As of December 31, 1999 and 1998 respectively the Company
had a total deferred tax liability of $29,450 and $356, respectively. The
company had deferred tax assets of $336,130 as of December 31, 1999 and $ 68,928
as December 31, 1998.
The components of income tax expense for years ended December 31, 1999 and 1998:
1999 1998
----------- ----------
Current $ 47,519 $ 747
Deferred ( 238,108) ( 68,572)
---------- ---------
Provision (Benefit) for Income Taxes $( 190,589) $ (67,825)
========== =========
L. CONCENTRATION OF CREDIT:
The company's principal source of revenue and working capital is generated from
providing telecommunication consulting under contracts with two major clients
located in Atlanta, Georgia. Under provisions of Financial Accounting Standards
Board Statement 105, Tutornet.com, Inc. is exposed to a regional concentration
of credit risk.
-14-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
M. GOING CONCERN
The accompanying comparative financial statements have been prepared assuming
the Company will continue to operate as a going concern. The Company has an
accumulated deficit of $12,300,501 and losses of $11,744,764 in 1999 and
$553,355 in 1998, together with a working capital deficiency of $ 6,711,963 in
1999 and $1,408,403 in 1998. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
The Company is in the process of seeking alternate sources of capital to satisfy
these deficiencies. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
N. NOTE PAYABLE SHAREHOLDER
An action was filed by a group of investors asserting breach of contract, fraud,
and securities fraud under Rule 10b5 of the Securities and Exchange Act of 1934)
to recover their investment funds. The Company intends to aggressively defend
this claim. An accrual has been established in the amount of $5,625,340 to
cover the potential liability which would be created should an unfavorable
ruling occur.
O. LEGAL MATTERS
The company is involved in other litigation which although management feels will
be resolved in its favor an accrual has be established in the amount of
$ 170,409.
-15-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Notes to Consolidated Comparative Financial Statements
For the Years Ended
December 31, 1999 & 1998
- - --------------------------------------------------------------------------------
P. SUBSEQUENT EVENTS:
On March 24, 2000 the company borrowed $500,000 by executing two promissory
notes secured by the assets, technology and intellectual property of the company
including trademarks, copyrights, and proprietary software. This will be due and
payable on the earliest of the following events: a.) upon completion of the
current private placement b.) sale of other equity securities or c.) March 23,
2002. This note will bear interest at 8% due quarterly commencing July 1, 2000.
On April 18, 2000 a majority of the Company shareholders exchanged their stock
with Zycom, Inc. Over the Counter (OTCBB). As part of the exchange Zycom, Inc.
changed its name to Tutornet.com Group, Inc. pursuant to a planned
reorganization.
-16-
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
- - --------------------------------------------------------------------------------
Comparative Supplemental Financial Information
For the Years Ended
December 31, 1999 & 1998
<PAGE>
C E R A S I, K R A U S & A S S O C I A T E S, I N C.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
(440) 546-9359
- - --------------------------------------------------------------------------------
ACCOUNTANT'S OPINION
ON COMPARATIVE SUPPLEMENTAL INFORMATION
To Mr. Euburn R. A. Forde
Chief Executive Officer and President
Tutornet.com, Inc.
(A Development Stage Company)
Our report on the audited financial statements of Tutornet.com, Inc. (A
Development Stage Company) for the years ended December 31, 1999 and 1998
appears on Page 1. The Consolidated Comparative Statements of Selling, General
and Administrative Expenses and Comparative Statements of Key Analytical Ratios
are presented for the purposes of additional analysis and is not a required part
of the basic Financial Statements. The Consolidated Comparative Statements of
Selling, General and Administrative expenses have been compiled by us and, in
our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole. The Comparative Statements of Key
Analytical Ratios, which is of a non-accounting nature which have been compiled
by us during the audit of the basic consolidated financial statements, and we
express no opinion on it.
Cerasi, Kraus & Associates, Inc. CPA's
May 7, 2000
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Consolidated Statement of Selling, General & Administrative Expenses
For the Year Ended December 31, 1998
&
The Period from Inception (October 21, 1997 ) to December 31, 1999
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From Inception
October 21, 1997
Year Ended Year Ended to
December 31, 1999 December 31, 1998 December 31, 1999
----------------------- ----------------- -----------------
<S> <C> <C> <C>
Administrative Salaries $3,766,911 $331,735 $ 4,098,646
Payroll Taxes 229,272 - 229,272
Employee Benefits 34,472 5,100 39,572
Advertising 884,598 12,404 897,002
Amortization 25,390 - 25,390
Automobile Expenses 28,595 42 28,637
Bad Debt Expense 131,391 - 131,391
Bank Service Charges 127,099 978 128,234
Commissions 168,143 - 168,143
Customer Service Expenses - - -
Depreciation 6,132 543 6,675
Dues & Subscriptions 26,914 - 26,914
Insurance Expense 8,310 - 8,310
Licenses & Permits 238 2,675 2,913
Marketing 1,471,177 476,541 1,947,718
Office Supplies 277,279 1,301 278,593
Officer's Life Insurance 400 - 400
Professional Fees 383,332 38,286 421,618
Public Relations 304,877 - 304,877
Recruiting Fees 252,441 - 252,441
Rent Expense 576,828 6,502 584,060
Repairs & Maintenance 30,352 56 30,408
Research & Development 4,589 - 4,589
State & Local Taxes 18,356 3,954 22,310
Telephone Expenses 193,959 2,441 196,400
Training & Development (3,344) 5,668 2,324
Travel & Entertainment 887,786 7,356 906,252
Utilities 885 - 885
Miscellaneous 16,843 5,939 22,782
----------- --------- ------------
Total General & Administrative Expenses $9,853,225 $901,521 $10,766,756
=========== ========= ============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Consolidated Comparative Statement of Key Analytical Ratios
As of
December 31,
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Profitability Ratios:
Return on Equity 235.94% NMF
Return on Total Investment NMF NMF
Return on Total Assets -278.38% -35.10%
Return on Operating Profit to Net Worth 235.91% NMF
Liquidity Ratios:
Working Capital $(6,714,566) $(1,408,403)
Current Ratio 0.20 0.11
Asset Productivity Ratios:
Net Fixed Assets to Total Assets 22.52% 0.71%
Total Liabilities to Equity -1.85 8.28
Long Term Debt to Equity NMF NMF
Net Worth to Debt -0.54 NMF
Interest Coverage -108.45 NMF
Net Worth to Total Assets -1.18 NMF
Current Assets to Total Assets 38.60% 9.63%
Turnover Ratios:
Cash Turnover 279.25 Days 21.18 Days
Accounts Payable Turnover 431.7 Days 66.7 Days
NMF = Not a Meaningful Figure
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE>
Tutornet.com, Inc.
(A Development Stage Company)
Consolidated Comparative Statement of Key Analytical Ratios
As of
December 31,
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Efficiency Ratios:
Total Assets to Sales 32.45 1.55
Fixed Assets to Sales 7.31 0.01
Sales to Working Capital (0.02) (0.81)
Sales Per Day $ 362 $ 3,122
Contribution Ratios:
Gross Profit:
Dollars $(2,080,808) $323,487
Percent -1574.87% 28.39%
Sales Breakeven Point
Monthly NMF NMF
Annually NMF NMF
NMF = Not a Meaningful Figure
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE>
Tutornet.com Group, Inc.
(A Development Stage Company)
(Formerly Zycom, Inc.)
UNAUDITED
- - --------------------------------------------------------------------------------
Consolidated Financial Statements
Together With
Supplementary Financial Information
For the Three Months Ended March 31, 2000
&
For the Year Ended December 31, 1999
&
From Inception (May 24, 1983) to March 31, 2000
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.)
(A Development Stage Company)
P R O F O R M A F I N A N C I A L S
UNAUDITED
Consolidated Comparative Balance Sheets
As of
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
ASSETS
------
UNAUDITED Audited
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Current Assets:
Cash $ 208,559 $ 115,220
Accounts Receivable, Net of Allowance for Doubtful Accounts 13,424 15,785
Marketable Securities, At Market Value 570,963 570,963
Prepaid Expenses 473,329 631,105
Deferred Taxes 336,130 336,130
-------------- -------------
$ 1,602,405 $ 1,669,203
Fixed Assets:
Office Furniture & Fixtures 16,031 16,031
Office Equipment 127,717 127,717
Computer Hardware & Peripherals 829,798 829,738
Computer Network 13,248 12,873
Leasehold Improvements (Net of Accumulated Amortization) 32,663 33,531
-------------- -------------
1,019,457 1,019,890
Less: Accumulated Depreciation 101,396 54,287
-------------- -------------
$ 918,061 $ 965,603
Other Assets:
Computer Software, Net of Accumulated Amortization 1,006,298 1,071,365
Software Development Costs - -
Goodwill, Net of Accumulated Amortization 424,196 424,196
Deposits 171,182 171,182
Other - -
-------------- -------------
$ 1,601,676 $ 1,666,743
-------------- -------------
Total Assets $ 4,122,142 $ 4,301,549
============== =============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.)
(A Development Stage Company)
P R O F O R M A F I N A N C I A L S
UNAUDITED
Consolidated Comparative Balance Sheets
As of
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------
LIABILITIES
-----------
UNAUDITED Audited
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 4,138,596 $ 2,617,495
Notes Payable CSR Stockholders 52,500 52,500
Accrued Gross Margin on Contract - -
Accrued Salaries & Wages 490,392 -
Accrued Interest 5,422 5,422
Accrued & Withheld Payroll Taxes 136,211 39,187
Income Taxes Payable 29,691 29,691
Officer Loan Payable - -
Shareholder Loan Payable 5,625,340 5,625,340
--------------- ---------------
Total Current Liabilities $ 10,478,152 $ 8,369,635
Long Term Liabilities:
Subordinated Shareholder Loans Payable $ 977,703 $ 947,028
Deferred Income Taxes $ 29,450 $ 29,450
--------------- ---------------
Total Liabilities $ 11,485,305 $ 9,346,113
--------------- ---------------
Minority Interest In Net Assets $ (3,776,767) $ (2,477,750)
--------------- ---------------
SHAREHOLDER'S EQUITY
Common Stock,
Class A, ($ 0.00001 Par Value; 950,000,000 Authorized, 16,306,356
Issued and Outstanding as of March 31, 2000 and
28,307,050 outstanding in 1999) $ 163 $ 163
Class B, ($0.00001 Par Value; 50,000,000 Authorized,
4,750,000 Outstanding as of March 31, 2000 ) 48 48
Preferred Stock
(10,000,0000 Authorized with a Par Value of $ 0.00001
and none iissued at March 31, 2000) - -
--------------- ---------------
$ 211 $ 211
Additional Paid In Capital 6,230,641 3,708,691
Retained Earnings (Deficit) (9,817,248) (6,275,716)
--------------- ---------------
Total Shareholders' Equity (Deficit) $ (3,586,396) $ (2,566,814)
--------------- ---------------
Total Liabilities & Shareholder's Equity $ 4,122,142 $ 4,301,549
=============== ===============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.)
(A Development Stage Company)
P R O F O R M A F I N A N C I A L S
UNAUDITED
Consolidated Comparative Income Statements
For the Three Months Ended, March 31, 2000
&
For the Year Ended December 31, 1999
&
The Period from Inception (May 24, 1983 ) to March 31, 2000
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Unaudited
UNAUDITED From Inception
Three Months Audited March 24, 1983
Ended Year Ended to
March 31, 2000 December 31, 1999 March 31, 2000
-------------- ----------------- --------------
<S> <C> <C> <C>
Net Consulting Fees & Sales $ 27,376 $ 132,126 $ 1,514,832
------------- -------------- --------------
Cost Of Fees:
Consultants & Subcontractors 504,645 1,665,868 2,423,207
Computer Systems Support 3,959 76,361 96,463
Customer Service Expenses - - 3,750
Amortization of Software Costs 66,468 247,091 320,059
Depreciation of Computer Equipment - 47,136 48,289
Factoring Expense - - 13,125
Gross Margin Expense - - 715,108
Printing & Reproduction 49 176,478 188,057
------------- -------------- --------------
Total Costs Of Fees $ 575,121 $ 2,212,934 $ 3,808,058
Gross Profit $ (547,745) $ (2,080,808) $ (2,293,226)
------------- -------------- --------------
Selling, General & Administrative Expenses $ 2,875,023 $ 9,873,218 $ 14,002,497
------------- -------------- --------------
Income (Loss) From Operations $ (3,422,768) $ (11,954,026) $ (16,295,723)
Discontinued Operations
Loss on Disposal of Subsidiary - - (841,046)
Loss on Disposal of Subsidiary -
Abacus II of Colorado - - (1,346,620)
------------- -------------- --------------
$ (3,422,768) $ (11,954,026) $ (18,483,389)
Other Income (Expenses):
Interest & Dividend Income 4,812 44,035 55,807
Interest Expense (26,454) (110,043) (179,710)
Loss on Investment in Tutornet UK (39,375) (680,000) (719,375)
Loss on Foreign Currency Exchange (98) (1,503) (1,601)
Realized Gains on Sales of Marketable Securities - 754,908 754,908
Miscellaneous (Expense) (745) (8,717) (7,576)
------------- -------------- --------------
$ (61,860) $ (1,320) $ (97,547)
------------- -------------- --------------
Net Loss Before Extraordinary Item $ (3,484,628) $ (11,955,346) $ (18,580,936)
Extraordinary Item
Gain From Extinguishment of Debt $ - $ - $ 28,748
------------- -------------- --------------
Loss Before Income Taxes $ (3,484,628) $ (11,955,346) $ (16,393,270)
Income Taxes $ - $ (190,589) $ (256,202)
------------- -------------- --------------
Net Loss $ (3,484,628) $ (11,764,757) $ (16,137,068)
Minority Interest in Net Loss $ 1,706,897 $ 5,762,378 $ 7,903,936
------------- -------------- --------------
Net Loss $ (1,777,731) $ (6,002,379) $ (8,233,132)
============= ============== ==============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.
(A Development Stage Company)
UNAUDITED
Notes to Consolidated Comparative Financial Statements
For the Three Months Ended
March 31, 2000
- - --------------------------------------------------------------------------------
A. NATURE OF BUSINESS
Business Organization
Tutornet.com Inc was incorporated in the state of Delaware on October 21, 1997,
under the name Globenet Communication Services, Inc. It subsequently changed its
name to Tutornet.com Inc. Tutornet.com is a pioneer provider of live,
personalized tutoring services over the internet for students in kindegarten
through college. By combining interactive technology with a growing cadre of
specially trained tutors called Netucators tm, Tutornet.com is attempting to
provide better educational opportunities on-demand and on-line to students
worldwide. Zycom Inc. (the company) was incorporated May 24, 1983 in the State
of Colorado.
Company Subsidiaries
The only active subsidiary during three months of 2000 and 1999 is:
<TABLE>
<CAPTION>
Nature of
Name Ownership Business
- - ------------------------------------------------------------------ --------- ------------------------
<S> <C> <C>
Nettutor, Pty. Ltd. 100.0% Australian Proprietary
The Company has the following other subsidiaries which were
inactive during 2000 & 1999:
Tutornet US Limited 100.0% Corporation in
Trinidad & Tobago
Tutornet.com
Services, Inc. 100.0% Customer Service In U.S.
Tutornet.Nigeria LTD 100.0% Tutoring Services in
Nigeria
Tutornet.Morocco 51.0% Tutoring Services In
Morocco
Tutornet Marketing Inc. 19.9% Marketing Corporation in U.S.
</TABLE>
-7-
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.
(A Development Stage Company)
UNAUDITED
Notes to Consolidated Comparative Financial Statements
For the Three Months Ended
March 31, 2000
- - --------------------------------------------------------------------------------
B. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the company and
its subsidiaries. Inter-company balances and transactions have been eliminated
in consolidation. The Minority interest represents 48.98% ownership.
Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on the accrual basis of
accounting. The accounting method recognizes revenues in the accounting period
in which they are earned and expenses when they are incurred regardless of when
cash is paid or received.
Investments
The equity method of accounting is used for all investments in associated
companies in which the Company's interest is 20% or more. Under the equity
method, the Company recognizes its share in the net earnings or losses of these
associated companies as they occur rather than as dividends are received.
Dividends received are accounted for as a reduction of the investment rather
than as dividend income. Losses from the equity investments reduce the
receivables from the associated companies.
Software Development Costs
Per the Statement of Financial Accounting Standards (SFAS) Number 86, as further
refined by Statement of Position (SOP) 98-1, the costs associated with
internally developed software costs can be capitalized and amortized over the
assets expected useful life. These costs are amortized over five years using the
straight-line method.
-8-
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.
(A Development Stage Company)
UNAUDITED
Notes to Consolidated Comparative Financial Statements
For the Three Months Ended
March 31, 2000
- - --------------------------------------------------------------------------------
C. INVESTMENTS AND MERGER:
Purchase of Collaborative Systems, Inc. (CSR)
On December 18, 1998, a plan and agreement of merger was adopted to be effective
December 21, 1998 by and between Tutornet.com, Inc and Collaborative Systems
Research, Inc. (CSR). Tutornet.com issued 50,000 shares of its common stock in
exchange for 100% of the shares of the outstanding stock of CSR. Tutornet.com,
Inc. also paid $35,000 cash at settlement and agreed to pay $315,000 over the
next twelve months to the CSR shareholders. The business of CSR was merged into
Tutornet.com, Inc. and CSR ceased to operate. The assets distributed to
Tutornet.com as a result of the merger and the liquidation of CSR was CSR's
specialized software and computer equipment. The purchase method was used to
account for the acquisition. At December 31, 1999 the Company was in default of
this agreement. The outstanding amount due the shareholders' of CSR is $52,500.
Purchase of Majority Interest in Subsidiary:
In August of 1998, Tutornet.com, Inc. purchased a fifty-percent interest in
Nettutor Pty. Ltd., a foreign Australian Proprietary Corporation, for $1,600.
Income and expenses were translated into dollars at average rates for the year.
On December 31, 1998 Tutornet.com, Inc. purchased an additional fifty percent
interest in Nettutor Pty. Ltd. from Powersys Ltd.. Powersys Ltd. is 100% owned
by an officer of Tutornet.com, Inc. The purchase was completed by Tutornet.com,
Inc. issuing 333,333 shares of its common stock to Powersys Ltd. and was
consolidated into the Company's Financial Statements using the purchase method
of accounting. The difference between the cost of the investment and the
underlying net (deficit) of the assets has been allocated to goodwill, which
will be amortized over fifteen years.
-9-
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.
(A Development Stage Company)
UNAUDITED
Notes to Consolidated Comparative Financial Statements
For the Three Months Ended
March 31, 2000
- - --------------------------------------------------------------------------------
D. FIXED ASSETS
Fixed Assets are carried at historical cost. The depreciation of the Property
and Equipment is provided using the straight-line method for financial reporting
purposes.
The estimated useful lives of the assets are as follows:
Computer Hardware
And Peripherals 5 Years
Office Furniture 7 Years
Office Equipment 7 Years
Computer Network Systems 5 Years
LeaseholdImprovements 10 Years
Expenditures for maintenance and repairs are charged to expense as incurred.
E. DEVELOPMENT STAGE OPERATIONS:
The company continues to be in the development stage. Tutornet.co has devoted
substantially all of its effort developing the live tutoring service, creating
the internet delivery process, to be used to transmit the live tutoring to the
end user, establishing supply sources, recruiting and training personnel,
developing markets and raising capital
-10-
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.
(A Development Stage Company)
UNAUDITED
Notes to Consolidated Comparative Financial Statements
For the Three Months Ended
March 31, 2000
- - --------------------------------------------------------------------------------
F. STOCK ISSUED TO OFFICERS:
The company accounts for its stock-based compensation using the accounting
prescribed by Accounting Principles Board Opinion No. 25, accounting for stock
issued to employees.
The following number of shares were issued in 1998 to the officers and founders
of the company in exchange for services rendered in 1998:
Issue Share Price Compensation
Chief Executive Officer 3/31/98 $0.003 $2,000
Chief Financial Officer 3/31/98 $0.003 $3,050
Chief Operating Officer 3/31/98 $0.003 $1,200
G. STOCK OPTIONS ISSUED TO OFFICERS:
As an incentive to the officers, stock options were granted in 1999 as follows:
Issue No. of Shares Strike Price
Date Granted
Chief Executive Officer 12/31/99 150,000 $6.00
Chief Financial Officer 12/31/99 175,000 $3.11
These options are non-cancellable, and expire five years from date of issue.
-11-
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.
(A Development Stage Company)
UNAUDITED
Notes to Consolidated Comparative Financial Statements
For the Three Months Ended
March 31, 2000
- - --------------------------------------------------------------------------------
H. RELATED PARTY TRANSACTIONS:
Acquisition Of Nettutor Pty, Ltd. (Australia Operation)
During 1998, the company initially purchased a fifty percent interest in
Nettutor Pty. Ltd.. On December 31, 1998, the company purchased an additional
fifty percent interest in Tutornet Pty. Ltd. by issuing fifty thousand shares to
Powersys Ltd.. The purchase price included an assumption by Tutornet.com, Inc.
of a $69,796 loan made to Nettutor Pty. Ltd. by Powersys Ltd. This advance is
payable on demand without interest.
Employment Agreement with Majority Shareholder
The company has an employment agreement with the majority stockholder and chief
executive officer providing for annual compensation of $225,000 beginning
January 1, 1999. The agreement includes merit increases on anniversary dates and
a bonus payable in stock options as a percentage of salary if certain business
plan financial goals are met. The term of the employment contract will be for
six years, with automatic five-year renewals of the employment thereafter,
unless Tutornet's Board of Directors terminates the contract due to cause.
Should the contract be terminated for reasons other than cause, the stockholder
will be entitled to a severance payment equal to either thirty-six months of
salary or the remaining months of the then current employment term, whichever is
greater.
In 1998, the majority stockholder assigned certain telecommunication consulting
contracts to the company. The Board of Directors has agreed to compensate the
stockholder in an amount equal to the gross margin of the contract. Gross margin
is defined as the revenues received minus the direct costs of providing the
service. Each month, the gross margin will be calculated and a note issued to
the stockholder with a face amount equaled to the calculated gross margin,
carrying an interest rate of ten percent APY from the date of issue of the note.
All payments were due January 2, 1999. These amounts were not paid on their due
date. The company may pay these notes early without any penalty. The company
began operations in late October 1997 and no notes were issued to the
stockholder as of December 31, 1997, however an accrued expense of $92,915 was
recorded on December 31, 1997 for the amount due the shareholder based on the
accrued gross
-12-
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.
(A Development Stage Company)
UNAUDITED
Notes to Consolidated Comparative Financial Statements
For the Three Months Ended
March 31, 2000
- - --------------------------------------------------------------------------------
margin of the contract through December 31, 1997. During 1998, an additional
$622,193 was accrued to the shareholder for the 1998 gross margin, resulting in
a total balance due of $715,108. Interest of $42,757 is due the shareholder on
these amounts and was recorded as of December 31,1998. The outstanding balance
at December 31, 1999 is $193,950 including accrued interest outstanding of
$98,841. These amounts incorporated into a subordinated note payable as of
December 31, 1999.
I. SUBORDINATED SHAREHOLDER LOANS
The two executive officers of the Company have agreed to subordinate the amounts
due them in the form of a promissory note. The loan amounts outstanding at March
31, 2000 is $ 977,703. These loans are due January 1, 2001 and bear interest at
10.0%.
J. COMMON STOCK TRANSACTIONS
On December 17, 1999, the stockholders of Zycom, Inc. approved: (I) a 250-1
reverse stock split of the common stock and (ii) a change in the par value of
the common stock to $.0001 per share. As a part of the foregoing stockholder
resolutions, which became effective on December 17,1999 to the stockholders of
record on January 11, 2000, the holders of the $4,000 10% convertible promissory
note issued on December 31, 1996 agreed to convert their note, accrued interest
and other cash advances made to the Zycom, Inc. into 92,529 post reverse-split
shares of the common stock.
-13-
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.
(A Development Stage Company)
UNAUDITED
Notes to Consolidated Comparative Financial Statements
For the Three Months Ended
March 31, 2000
- - --------------------------------------------------------------------------------
K. GOING CONCERN
The accompanying comparative financial statements have been prepared assuming
the Company will continue to operate as a going concern. The Company has an
accumulated deficit of $ 9,817,248 and losses of $ 1,777,731 for the three
months ended March 31, 2000 and $6,002,379 in 1999, together with a working
capital deficiency of $8,875,747as of March 31, 2000 and $6,700,432 as of
December 31, 1999. These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
The Company is in the process of seeking alternate sources of capital to satisfy
these deficiencies. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
L. NOTE PAYABLE SHAREHOLDER
An action was filed by a group of investors asserting breach of contract, fraud,
and securities fraud under Rule 10b5 of the Securities and Exchange Act of 1934)
to recover their investment funds. The Company intends to aggressively defend
this claim. An accrual has been established in the amount of $5,625,340 to cover
the potential liability which would be created should an unfavorable ruling
occur.
M. SUBSEQUENT EVENTS:
On March 24, 2000 the company borrowed $500,000 by executing two promissory
notes secured by the assets, technology and intellectual property of the company
including trademarks, copyrights, and proprietary software. This will be due
and payable on the earliest of the following events: a.) upon completion of the
current private placement b.) sale of other equity securities or c.) March 23,
2002. This note will bear interest at 8% due quarterly commencing July 1, 2000.
-14-
<PAGE>
Tutornet.com Group, Inc.
(Formerly Zycom, Inc.
(A Development Stage Company)
UNAUDITED
Notes to Consolidated Comparative Financial Statements
For the Three Months Ended
March 31, 2000
- - --------------------------------------------------------------------------------
M. SUBSEQUENT EVENTS (Cont.)
On April 18, 2000 a majority of the Company shareholders exchanged their stock
with Zycom, Inc. Over the Counter (OTCBB). As part of the exchange Zycom, Inc.
changed its name to Tutornet.com Group , Inc. pursuant to a planned
reorganization.
-15-
<PAGE>
Exhibits
--------
Exhibit No. Description
- - ----------- ----------------------------------------------------------------
2.1 Agreement and Plan of Merger
2.2 Agreement and Plan of Reorganization
2.3 Amendment to Agreement and Plan of Merger
3.1 Articles of Incorporation
3.2 Bylaws
3.3 Certificate of Amendment to Articles of Incorporation
4.1* Specimen Share Certificate
4.2 Stock Option Plan
4.3 Warrant ($0.50)
4.4 Warrant ($0.50)
4.5 Warrant ($9.15)
27.1 Financial Data Schedule
99.1 Investment Letter
- - -----------
* Filing by Amendment
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TUTORNET.COM GROUP, INC.
By: /s/ Euburn R.A. Forde 5/17/2000
--------------------- ---------
Name: Euburn R.A. Forde (Date)
Title: President
23
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- - ----------- ----------------------------------------- --------
2.1 Agreement and Plan of Merger
2.2 Agreement and Plan of Reorganization
2.3 Amendment to Agreement and Plan of Merger
3.1 Articles of Incorporation
3.2 Bylaws
3.3 Certificate of Amendment to Articles of Incorporation
4.1* Specimen Share Certificate
4.2 Stock Option Plan
4.3 Warrant ($0.50)
4.4 Warrant ($0.50)
4.5 Warrant ($9.15)
27.1 Financial Data Schedule
99.1 Investment Letter
- - -----------
* Filing by Amendment
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered as of May
16, 2000 by and between Tutornet.com Group, Inc., a Delaware corporation (the
"Buyer"), and Segway Corp., a New Jersey corporation (the "Target"). The Buyer
and the Target are referred to collectively herein as the "Parties."
RECITAL
This Agreement contemplates a merger of the Target with and into the Buyer.
The Target Stockholders will receive Five Thousand (5,000) restricted shares of
Buyer's common stock and cash in the aggregate amount of One Hundred Twenty Five
Thousand Dollars ($125,000) in exchange for all of the capital stock in the
Target. The Parties expect that the Merger will further certain of their
business objectives.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Rule 501 of the regulations
promulgated under the Securities Act.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Certificate of Merger" has the meaning set forth in Section 2.3 below.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in Section 2.2 below.
"Closing Date" has the meaning set forth in Section 2.2 below.
"Effective Time" has the meaning set forth in Section 2.5.1 below.
"Exchange Agent" has the meaning set forth in Section 2.6 below.
"Merger" has the meaning set forth in Section 2.1 below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3.6 below.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Public Reports" has the meaning set forth in Section 3.5 below.
"Requisite Target Stockholder Approval" means the unanimous written consent of
the holders of Target Shares in favor of this Agreement and the Merger.
1
<PAGE>
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge, or
other security interest, other than (a) mechanic's, materialmen's, and similar
liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Subsidiary" means any corporation with respect to which a specified Person (or
a Subsidiary thereof) owns a majority of the common stock or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Surviving Corporation" has the meaning set forth in Section 2.1 below.
"Target" has the meaning set forth in the preface above.
"Target Share" means any share of the Common Stock of the Target.
"Target Stockholder" means any Person who or which holds any Target Shares.
2. Basic Transaction.
2.1 The Merger. On and subject to the terms and conditions of this
Agreement, the Target will merge with and into the Buyer (the "Merger") at the
Effective Time. The Buyer shall be the corporation surviving the Merger (the
"Surviving Corporation").
2.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Ogden Murphy
Wallace, P.L.L.C., in Seattle, Washington, commencing at 9:00 a.m. local time on
the first business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the Parties may mutually
determine (the "Closing Date").
2.3 Actions at the Closing. At the Closing, (i) the Target will deliver
to the Buyer the various certificates, instruments, and documents referred to in
Section 6.1, (ii) the Buyer will deliver to the Target the various certificates,
instruments, and documents referred to in Section 6.2, (iii) the Buyer and the
Target will file with the Secretary of State of the States of Delaware and New
Jersey Certificate of Merger (the "Certificate of Merger"), and (iv) the Buyer
will deliver to the Exchange Agent in the manner provided below in Section 2.6
the certificates representing the shares and the sum of Seventy Five Thousand
Dollars ($75,000) to be distributed to the Target Shareholders.
2.4 New Jersey Tax Clearance Certificate. Notwithstanding Section 2.3,
the Secretary of State for the State of New Jersey will not accept the
Certificate of Merger for filing until the Target receives a tax clearance
certificate from State of New Jersey Division of
2
<PAGE>
Taxation. Within ten (10) days of Closing, the Exchange Agent shall file an
application for a tax clearance certificate with State of New Jersey Division of
Taxation.
2.5 Effect of Merger.
2.5.1 General. The Merger shall become effective at the time (the
"Effective Time") the Buyer and the Target sign Certificate of Merger and file
the Certificate of Merger with the Secretary of State of the State of Delaware.
The Merger shall have the effect set forth in the laws of the States of Delaware
and New Jersey. The Surviving Corporation may, at any time after the Effective
Time, take any action (including executing and delivering any document) in the
name and on behalf of either the Buyer or the Target in order to carry out and
effectuate the transactions contemplated by this Agreement.
2.5.2 Articles of Incorporation. The Articles of Incorporation of
the Buyer in effect at and as of the Effective Time will remain the Articles of
Incorporation of the Surviving Corporation without any modification or amendment
in the Merger.
2.5.3 Bylaws. The Bylaws of the Buyer in effect at and as of the
Effective Time will remain the Bylaws of the Surviving Corporation without any
modification or amendment in the Merger.
2.5.4 Directors and Officers. The directors and officers of the
Buyer in office at and as of the Effective Time will remain the directors and
officers of the Surviving Corporation (retaining their respective positions and
terms of office).
2.5.5 Cancellation of Target Shares. At and as of the Effective
Time, each Target Share shall be canceled.
2.5.6 Buyer Shares. Each Buyer Share issued and outstanding at and
as of the Effective Time will remain issued and outstanding.
2.6 Procedure for Payment.
2.6.1 Immediately after the Effective Time, the Buyer will furnish to
Richard I. Anslow and Associates, counsel for Target, as Exchange Agent, the sum
of Seventy Five Thousand Dollars ($75,000). Target hereby acknowledges the
previous receipt of Fifty Thousand Dollars ($50,000) from Buyer as a deposit
paid in advance and anticipation of the Closing of this Agreement (the
"Deposit"). Each shareholder of Target, shall receive the amount of 225/10,000
Dollars ($0.0225) per share. The Exchange Agent shall have the obligation to
make the payments called for by this Section 2.6.1 to the shareholders of
Target.
2.6.2 Immediately after the Effective Time, the Buyer will issue a
total of Five Thousand (5,000) shares of restricted common stock of Buyer to the
shareholders of the Target. Every one (1) share of Buyer shall be exchanged for
One Thousand One Hundred Eleven and 1112/10,000 (1111.1112) shares of Target.
2.6.3 The Exchange Agent shall deduct all of its charges and expenses
of the from the proceeds before distributing to the Target Shareholders.
3
<PAGE>
3. Representations and Warranties of the Target. The Target and each of its
shareholders represent and warrant to the Buyer that the statements contained in
this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3).
3.1 Organization, Qualification, and Corporate Power. Each of the Target
and its Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each of
the Target and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required Each of the Target and its Subsidiaries has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
3.2 Capitalization. The entire authorized capital stock of the Target
consists of Twenty Million (20,000,000) shares of Preferred Stock and One
Hundred Million (100,000,000) shares of Common Stock, of which Five Million Five
Hundred Fifty Five Thousand Five Hundred Fifty Six (5,555,556) Target Shares are
issued and outstanding. All of the issued and outstanding Target Shares have
been duly authorized and are validly issued, fully paid, and nonassessable.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Target to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Target.
3.3 Authorization of Transaction. The Target has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder; provided, however, that the
Target cannot consummate the Merger unless and until it receives the Requisite
Target Stockholder Approval. This Agreement constitutes the valid and legally
binding obligation of the Target, enforceable in accordance with its terms and
conditions.
3.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Target and its Subsidiaries is
subject or any provision of the charter or bylaws of any of the Target and its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
any of the Target and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Other than in connection with the provisions
of New Jersey law, none of the Target and its Subsidiaries needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
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3.5 Filings with the SEC. The Target has made all filings with the SEC
that it has been required to make under the Securities Act and the Securities
Exchange Act (collectively the "Public Reports") and has received from the SEC a
letter to the effect that the SEC will have no further comment on Target's Form
10SB. Each of the Public Reports has complied with the Securities Act and the
Securities Exchange Act in all material respects. None of the Public Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The Target has delivered to the Buyer a correct and complete copy of
each Public Report (together with all exhibits and schedules thereto and as
amended to date).
3.6 Financial Statements. The Target has filed audited financial
statements for the fiscal year ended December 31, 1999 ("Most Recent Fiscal Year
End") in its registration statement on Form 10-SB filed January 5, 2000. The
financial statements included in or incorporated by reference into these Public
Reports (including the related notes and schedules) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, and present fairly the financial condition of the Target and
its Subsidiaries as of the indicated dates and the results of operations of the
Target and its Subsidiaries for the indicated periods; provided, however, that
the interim statements are subject to normal year-end adjustments.
3.7 Events Subsequent to Most Recent Fiscal Quarter End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Target and its Subsidiaries taken as a whole.
3.8 Undisclosed Liabilities. None of the Target and its Subsidiaries has
any liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
taxes, except for (i) liabilities set forth on the face of the balance sheet
dated as of the Most Recent Fiscal Year End (rather than in any notes thereto)
and (ii) liabilities which have arisen after the Most Recent Fiscal Year End in
the Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement, or violation of law).
3.9 Brokers' Fees. Except as set forth in the following sentence, none of
the Target and its Subsidiaries has any liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement. Target has an agreement with Leon Kline, as a
broker, to pay Kline a finders fee upon the Closing of this transaction.
Target's obligation to Kline is personally and solely the responsibility of
Target which shall be satisfied by the Exchange Agent upon Closing.
3.10 Affiliate and Accredited Investor Status. All shareholders of Target
are Affiliates of Target and are Accredited Investors.
4. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Target that the statements contained in this Section 4 are
correct and complete as of the date
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of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 4).
4.1 Organization. The Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation.
4.2 Authorization of Transaction. The Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Buyer, enforceable in accordance
with its terms and conditions.
4.3 Noncontravention. To the knowledge of any director or officer of the
Buyer, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Buyer is subject or any provision of the charter or bylaws of
the Buyer or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, or failure to give notice would not
have a material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement. To the knowledge of any director or
officer of the Buyer, and other than in connection with the provisions of
Delaware law, the Buyer does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not have a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement.
4.4 Brokers' Fees. The Buyer does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any of the Target and its
Subsidiaries could become liable or obligated.
5. Covenants. The Parties agree as follows with respect to the period from and
after the execution of this Agreement.
5.1 General. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 6 below).
5.2 Notices and Consents. The Target will give any notices (and will
cause each of its Subsidiaries to give any notices) to third parties, and will
use its best efforts to obtain any
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third party consents, that the Buyer reasonably may request in connection with
the matters referred to in Section 3.4 above.
5.3 Regulatory Matters and Approvals. Each of the Parties will give any
notices to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3.4 and Section
4.3 above.
5.4 New Jersey Law. The Target will obtain the unanimous written consent
of its stockholders for the adoption of this Agreement and the approval of the
Merger in accordance with New Jersey Law.
6. Conditions to Obligation to Close.
6.1 Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
6.1.1 this Agreement and the Merger shall have been approved by the
unanimous written consent of the shareholders of Target;
6.1.2 Target and its Subsidiaries shall have procured all of the
third party consents specified in Section 5.2 above;
6.1.3 the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the Closing
Date;
6.1.4 the Target shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
6.1.5 no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Surviving
Corporation to own the former assets, to operate the former businesses, and to
control the former Subsidiaries of the Target, or (D) affect adversely the right
of any of the former Subsidiaries of the Target to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
6.1.6 the Target shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Sections 6.1.1 through
6.1.5 is satisfied in all respects;
6.1.7 the Buyer shall have received from counsel to the Target an
opinion in form and substance satisfactory addressed to the Buyer, and dated as
of the Closing Date; and
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6.1.8 all actions to be taken by the Target in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
The Buyer may waive any condition specified in this Section 6.1 if it executes a
writing so stating at or prior to the Closing.
6.2 Conditions to Obligation of the Target. The obligation of the Target
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
6.2.1 the representations and warranties set forth in Section 4 above
shall be true and correct in all material respects at and as of the Closing
Date; 6.2.2 the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
6.2.3 all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to the Target;
The Target may waive any condition specified in this Section 6.2 if it executes
a writing so stating at or prior to the Closing.
7. Termination.
7.1 Termination of Agreement. Either of the Parties may terminate this
Agreement with the prior authorization of its board of directors (whether before
or after stockholder approval) as provided below:
7.1.1 the Parties may terminate this Agreement by mutual written
consent at any time prior to the Effective Time;
7.1.2 the Buyer may terminate this Agreement by giving written notice
to the Target at any time prior to the Effective Time (A) in the event the
Target has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, the Buyer has notified the Target of
the breach, and the breach has continued without cure for a period of 30 days
after the notice of breach or (B) if the Closing shall not have occurred on or
before May 31, 2000, by reason of the failure of any condition precedent under
Section 6.1 hereof (unless the failure results primarily from the Buyer
breaching any representation, warranty, or covenant contained in this
Agreement);
7.1.3 the Target may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Effective Time (A) in the event the
Buyer has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, the Target has notified the Buyer of
the breach, and the breach has continued without
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cure for a period of 30 days after the notice of breach or (B) if the Closing
shall not have occurred on or before May 31, 2000, by reason of the failure of
any condition precedent under Section 6.2 hereof (unless the failure results
primarily from the Target breaching any representation, warranty, or covenant
contained in this Agreement);
7.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 7.1 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided however, that
Target shall not be required to refund the Deposit for any reason.
8. Miscellaneous.
8.1 Survival. Except for Target's and Exchange Agents to a submit an
application for a tax clearance certificate pursuant to Section 2.4, Buyer's
obligation to issue shares pursuant to Section 2.6, and Target's and Exchange
Agent's obligation to pay Kline pursuant to Section 3.9, none of the
representations, warranties, and covenants of the Parties will survive the
Effective Time.
8.2 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
8.3 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
8.5 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.6 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient at the last
address give to the other party.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the last address give to the other party
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other
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communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
8.8 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time with the prior
authorization of their respective boards of directors; provided, however, that
any amendment effected subsequent to stockholder approval will be subject to the
restrictions contained in the laws of the State of Delaware. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by both of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
8.9 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
8.10 Expenses. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
8.11 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the
date first above written.
BUYER:
Tutornet.com Group, Inc.
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By:
--------------------------------
Title:
-----------------------------
TARGET:
Segway Corp.
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By: Richard Anslow
Title: President
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Exhibit 2.2
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), entered into
effective the 4th day of April 2000, is by, between, and among Zycom, Inc., a
Colorado corporation (hereinafter "Zycom"), Tutornet.com, Inc., a Delaware
corporation (hereinafter "Tutornet.com"), and the shareholders of Tutornet.com
who are listed on Schedule "A" hereto and have executed Subscription Agreements
in the form attached in Schedule "B" hereto (the "Shareholders").
RECITALS:
---------
WHEREAS, Zycom wishes to acquire, and the Shareholders, by executing
Schedule "B" hereto, are willing to sell, at least a majority of the outstanding
stock of Tutornet.com in exchange solely for a part of the voting stock of Zycom
whereby the Shareholders would acquire a controlling interest of Zycom;
WHEREAS, the parties wish to provide for the acquisition of the remaining
outstanding shares of Tutornet.com following the closing of this transaction
pursuant to the same terms and conditions set forth herein; and
WHEREAS, the parties hereto intend to qualify such transaction as a tax-
free exchange pursuant to Section 351 or 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended;
NOW, THEREFORE, based upon the stated premises, which are incorporated
herein by reference, and for and in consideration of the mutual covenants and
agreements set forth herein, the mutual benefits to the parties to be derived
herefrom, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto approve and adopt this
Agreement and Plan of Reorganization and mutually covenant and agree with each
other as follows:
1. Reverse Acquisition Transaction
1.1 Transfer of Tutornet.com Shares. On the Closing Date the
Shareholders shall transfer to Zycom certificates for the number of shares of
the class A common stock of Tutornet.com described in Schedule "A," attached
hereto and incorporated herein, which in the aggregate shall represent not less
than a majority of the issued and outstanding shares of the class A common stock
of Tutornet.com. at Closing. In addition, on the Closing Date Shareholders
shall transfer to Zycom certificates representing all of the outstanding shares
of class B common stock of Tutornet.com.
1.2 Issuance of Zycom Shares.
a. Series A Common Stock. In exchange for the transfer of the
class A common stock of Tutornet.com pursuant to subsection 1.1. hereof, Zycom
shall on the Closing Date, and contemporaneously with such transfer of the class
A common stock of Tutornet.com to it by the
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Shareholders, issue and deliver to the Shareholders certificates representing
one share of series A common stock of Zycom for each outstanding share of class
A common stock of Tutornet.com to be exchanged at Closing. Such shares of Zycom
shall only be issued and delivered to persons who are accredited investors as
defined in Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission.
b. Series B Common Stock. In exchange for the transfer of
the class B common stock of Tutornet.com pursuant to subsection 1.1. hereof,
Zycom shall on the Closing Date, and contemporaneously with such transfer of the
class B common stock of Tutornet.com to it by the Shareholders, issue and
deliver to the Shareholders certificates representing one share of series B
common stock of Zycom for each outstanding share of class B common stock of
Tutornet.com to be exchanged at Closing. Such shares of Zycom shall only be
issued and delivered to persons who are accredited investors as defined in Rule
501 of Regulation D promulgated by the Securities and Exchange Commission.
c. Aggregate Shares to be Issued. The aggregate number of
shares of common stock of Zycom to be delivered at Closing is set forth in
Schedule "A" hereof.
d. Filing of Registration Statement. As soon as practical
following the funding pursuant to subsection 1.7 below and the acquisition of a
reporting company pursuant to subsection 1.8 below, Zycom shall prepare and file
a registration statement with the Securities and Exchange Commission, and the
appropriate state securities agencies, to offer to exchange shares of Zycom with
the remaining shareholders of Tutornet.com at the same exchange rate as set
forth in this Agreement. Zycom shall include in such registration statement (i)
the shares to be issued to the shareholders of Tutornet.com pursuant to this
Agreement, (ii) the shares received upon exercise of the options set forth in
subsection 1.3 below and exercised twenty days before the filing of the
registration statement, (iii) the shares to be issued in the private offering as
set forth in subsection 1.7 below, (iv) the shares to be issued pursuant to
subsection 1.7 below, and (v) any outstanding shares of Zycom for which Zycom
has granted registration rights.
1.3 Assumption of Stock Options. Effective as of the Closing Date,
each outstanding option of Tutornet.com shall be converted into and thereafter
constitute an option to acquire shares of Zycom common stock pursuant to Zycom's
stock option plan existing at Closing, on the same terms and conditions as were
applicable under the option plan of Tutornet.com based on the same number of
shares of Zycom common stock as the holder of such option would have been
entitled to receive pursuant to the exchange ratio set forth in subsection 1.2
above had such holder exercised such stock option in full immediately prior to
the Closing of this Agreement. At Closing Tutornet.com shall deliver a
conversion document from each option holder converting such options as set forth
in this subsection.
1.4 Stock Dividend. On or before the Closing Date Zycom shall
authorize a stock dividend of the common stock of Zycom at the rate of six
shares for each one share outstanding at
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the time of Closing, excluding the shares to be issued pursuant to this
Agreement. All shares to be issued pursuant to this Agreement shall be post-
forward split shares, unless otherwise designated.
1.5 Name Change and Change of Domicile. On or before the Closing
Date Zycom shall authorize an amendment to the articles of incorporation to
change the name of Zycom to Tutornet.com Group, Inc. and shall authorize a
change of domicile of Zycom to the State of Delaware.
1.6 Call for Meeting of Shareholders. On or before the Closing Date
the Board of Directors of Zycom shall hold a special meeting of the shareholders
of Zycom to seek approval of the items set forth in subsections 1.4 and 1.5
above.
1.7 Private Funding. Tutornet.com hereby acknowledges receipt of
$500,000 as bridge financing provided from Business Development Corporation
pursuant to a written agreement dated March 24, 2000. Such agreement is
incorporated herein as Schedule "C" attached hereto. Effective as of the
Closing Date, each outstanding warrant to purchase class A common stock of
Tutornet.com issued in connection with such bridge financing transaction shall
be converted into and thereafter constitute warrants to acquire shares of Zycom
class A common stock, on the same terms and conditions as were applicable under
the existing warrant certificate, based on the same number of shares of Zycom
common stock as the holder of such option would have been entitled to receive
pursuant to the exercise ratio set forth in such warrant certificate. At
Closing Zycom shall deliver a warrant certificate and a conversion document from
each warrant holder converting such warrants as set forth in this subsection.
1.8 Reporting Company Agreement. At Closing Zycom shall deliver a
reporting company agreement to Zycom in the form set forth in Schedule "D"
attached hereto, to provide for the acquisition of a company subject to the
reporting requirements of Section 13 of the Securities Exchange Act.
1.9 Facilitation Fee. At Closing Zycom shall deliver a certificate
representing 31,682 shares of restricted common stock of Zycom, and a warrant to
purchase 31,682 shares of common stock of Zycom at $9.15 per share, to Business
Development Corporation, a company controlled by Van R. Perkins, an officer and
director of Zycom, as a fee in connection with the facilitation of the
transaction set forth in this Agreement. A copy of the form of warrant
certificate to be delivered pursuant to this subsection is set forth in Schedule
"E" attached hereto.
2. Representations and Warranties of Tutornet.com. Tutornet.com
represents and warrants to Zycom as set forth below. These representations and
warranties are made as an inducement for Zycom to enter into this Agreement and,
but for the making of such representations and warranties and their accuracy,
Zycom would not be a party hereto.
2.1 Organization and Authority. Tutornet.com is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full power and
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authority to enter into and perform the transactions contemplated by this
Agreement. Set forth in Schedule "F" attached hereto is a list of each and every
subsidiary of Tutornet.com and any other entity in which Tutornet.com owns any
interest. Each such subsidiary or other entity is validly existing and in good
standing under the laws of its state or other jurisdiction of incorporation or
formation.
2.2 Capitalization. As of the date of the Closing, Tutornet.com will
have a total of no more than 31,898,644 shares of class A common stock and
4,750,000 shares of class B common stock issued and outstanding. All of the
shares will have been duly authorized and validly issued and will be fully paid
and nonassessable. There is, and at Closing there shall be, no other class or
series of equity securities authorized or outstanding. Except as set forth in
Schedule "G" attached hereto, there are presently, and will be at Closing, no
options, warrants, debentures, conversion privileges, or other rights,
agreements, or commitments obligating Tutornet.com to issue or to transfer from
treasury any additional shares of capital stock of any class. Except as set
forth in this Agreement, and in the agreement between the Company and Primus
Telecommunications, Inc. dated June 10, 1999, there are presently, and will be
at Closing, no other rights of any person to demand registration of his, her, or
its shares, shares which may be issuable, or the shares to be received pursuant
to this Agreement. As of the Closing, the Articles of Incorporation, as
amended, of Tutornet.com and as currently in effect shall remain unchanged,
except as provided herein.
2.3 Directors and Officers. The names and titles of all directors
and officers of Tutornet.com as of the date of this Agreement are as follows:
Euburn R.A. Forde Chairman, President, and CEO
Rajiv Dalal Executive Vice-president, secretary, and
treasurer
2.4 Performance of This Agreement; Existing Agreements.
a. Board Approval. The execution and performance of this
Agreement and the transfer of stock contemplated hereby have been authorized by
the board of directors of Tutornet.com.
b. Noncontravention. The execution and delivery of this
Agreement does not, and the consummation of the transaction contemplated hereby
will not, violate any provision of the certificate of incorporation or by-laws
of Tutornet.com, or any provisions of, or result in the acceleration of any
obligation under, any mortgage, lien, lease, agreement, instrument, court order,
arbitration award, judgment or decree to which Tutornet.com, or any of its
subsidiaries, is a party, or by which it is bound, and will not violate any
other restriction of any kind or character to which it is subject.
c. Material Contracts; No Defaults. Each material agreement,
contract, arrangement, or commitment of Tutornet.com is, and after the Closing
on identical terms will be,
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legal, valid, binding, enforceable, and in full force and effect. No event or
condition has occurred or become known to Tutornet.com, or is alleged to have
occurred, that constitutes or, with notice or the passage of time, or both,
would constitute a default or other claim of excusable delay, termination,
nonperformance, or accelerated or increased rights by Tutornet.com or any other
person under any material contract, agreement, arrangement, commitment, or other
understanding, written or oral. No person with whom Tutornet.com has such a
contract, agreement, arrangement, commitment or other understanding is in
default thereunder or has failed to perform fully thereunder by reason of claim
of excusable delay, termination, or nonperformance thereunder, the delay,
termination, or nonperformance of which, or default under which, has had or may
have a material adverse effect on Tutornet.com
2.5 Financials. True copies of the unaudited financial statements
of Tutornet.com for the years ended December 31, 1998 and 1999, have been
furnished to Zycom, or will be furnished prior to Closing. Said financial
statements are prepared in accordance with generally accepted accounting
principles applied on a consistent basis, are true and correct in all material
respects, and present an accurate and complete disclosure of the financial
condition of Tutornet.com as of December 31, 1999, and the earnings for the
periods covered. Tutornet.com has good and marketable title to all of its
assets, business and properties including, without limitation, all such
properties reflected in the aforementioned balance sheet as of December 31,
1999, except as disposed of in the normal course of business, free and clear of
any mortgage, lien, pledge, charge, claim or encumbrance, except as shown on
said balance sheet as of December 31, 1999, and, in the case of real properties,
except for rights-of-way and easements which do not adversely affect the use of
such property.
2.6 Liabilities. There are no material liabilities of Tutornet.com,
whether accrued, absolute, contingent or otherwise, which arose or relate to any
transaction of Tutornet.com, its agents or servants occurring prior to December
31, 1999, which are not disclosed by or reflected in said financial statements.
As of the date hereof, there are no known circumstances, conditions, happenings,
events or arrangements, contractual or otherwise, which may hereafter give rise
to liabilities, except in the normal course of business of Tutornet.com.
2.7 Absence of Certain Changes or Events. Except as set forth in
this Agreement, since December 31, 1999, there has not been (i) any material
adverse change in the business, operations, properties, level of inventory,
assets, or condition of Tutornet.com, or (ii) any damage, destruction, or loss
to Tutornet.com (whether or not covered by insurance) materially and adversely
affecting the business, operations, properties, assets, or conditions of
Tutornet.com.
2.8 Litigation. To the best knowledge and reasonable belief of
Tutornet.com, there are no legal, administrative or other proceedings,
investigations or inquiries, product liability or other claims, judgments,
injunctions or restrictions, either threatened, pending, or outstanding against
or involving Tutornet.com or its subsidiaries, if any, or their assets,
properties, or business, nor does Tutornet.com or its subsidiaries know, or have
reasonable grounds to know, of any basis for any such proceedings,
investigations or inquiries, product liability or other claims, judgments,
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injunctions or restrictions, except as follows: Chism vs. Tutornet.com; Cason
vs. Tutornet.com; and Handleman vs. Tutornet.com. In addition, there are no
material proceedings existing, pending or reasonably contemplated to which any
officer, director, or affiliate of Tutornet.com or as to which any of the
Shareholders is a party adverse to Tutornet.com or any of its subsidiaries or
has a material interest adverse to Tutornet.com or any of its subsidiaries.
2.9 Taxes. All federal, state, foreign, county and local income,
profits, franchise, occupation, property, sales, use, gross receipts and other
taxes (including any interest or penalties relating thereto) and assessments
which are due and payable have been duly reported, fully paid and discharged as
reported by Tutornet.com, and there are no unpaid taxes which are, or could
become a lien on the properties and assets of Tutornet.com, except as provided
for in the financial statements of Tutornet.com, or have been incurred in the
normal course of business of Tutornet.com since that date. All tax returns of
any kind required to be filed have been filed and the taxes paid or accrued.
There are no disputes as to taxes of any nature payable by Tutornet.com.
2.10 Hazardous Materials. No hazardous material has been released,
placed, stored, generated, used, manufactured, treated, deposited, spilled,
discharged, released, or disposed of on or under any real property currently or
previously owned or leased by Tutornet.com or any of its subsidiaries.
2.11 Accuracy of All Statements Made by Tutornet.com. No
representation or warranty by Tutornet.com in this Agreement, nor any statement,
certificate, schedule, or exhibit hereto furnished or to be furnished by or on
behalf of Tutornet.com pursuant to this Agreement, nor any document or
certificate delivered to Zycom by Tutornet.com pursuant to this Agreement or in
connection with actions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading.
3. Representations and Warranties of Zycom. Zycom represents and
warrants to Tutornet.com as set forth below. These representations and
warranties are made as an inducement for Tutornet.com to enter into this
Agreement and, but for the making of such representations and warranties and
their accuracy, Tutornet.com would not be parties hereto.
3.1 Organization and Good Standing. Zycom is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado with full power and authority to enter into and perform the
transactions contemplated by this Agreement. Zycom does not have any
subsidiaries or own any interest in any other entity.
3.2 Capitalization. As of the date of the Closing, Zycom will have a
total of no more than 1,793,505 shares of series A common stock issued and
outstanding and no shares of series B common shares (excluding the shares to be
issued pursuant to this Agreement). All of the shares will have been duly
authorized and validly issued and will be fully paid and nonassessable. Except
for Zycom's obligations hereunder with respect to the shares to be issued
pursuant to subsection 1.2
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hereof, there are no options, warrants, debentures, conversion privileges, or
other rights, agreements, or commitments obligating Zycom to issue or to
transfer from treasury any additional shares of capital stock of any class. Of
the total shares outstanding, Zycom has granted registration rights to
shareholders owning 1,570,023 of such shares.
3.3 Performance of This Agreement. The execution and performance of
this Agreement and the issuance of stock contemplated hereby have been
authorized by the board of directors of Zycom.
3.4 Financials. True copies of the financial statements of Zycom
consisting of the balance sheets as of the fiscal years ended December 31, 1999
and 1998 (audited), and statements of income, cash flow and changes in
stockholder's equity for each of the periods from inception until December 31,
1999, have been delivered by Zycom to Tutornet.com. These statements have been
examined and certified by Larry Legal, Certified Public Accountant. Said
financial statements are true and correct in all material respects and present
an accurate and complete disclosure of the financial condition of Zycom as of
December 31, 1999, and the earnings for the periods covered, in accordance with
generally accepted accounting principles applied on a consistent basis.
3.5 Liabilities. There are no material liabilities of Zycom, whether
accrued, absolute, contingent or otherwise, which arose or relate to any
transaction of Zycom, its agents or servants which are not disclosed by or
reflected in said financial statements. As of the date hereof, there are no
known circumstances, conditions, happenings, events or arrangements, contractual
or otherwise, which may hereafter give rise to liabilities, except in the normal
course of business of Zycom.
3.6 Litigation. To the best knowledge and reasonable belief of
Zycom, there are no legal, administrative or other proceedings, investigations
or inquiries, product liability or other claims, judgments, injunctions or
restrictions, either threatened, pending, or outstanding against or involving
Zycom, its assets, properties, or business, nor does Zycom know, or have
reasonable grounds to know, of any basis for any such proceedings,
investigations or inquiries, product liability or other claims, judgments,
injunctions or restrictions. In addition, there are no material proceedings
existing, pending or reasonably contemplated to which any officer, director, or
affiliate of Zycom is a party adverse to Zycom or has a material interest
adverse to Zycom.
3.7 Taxes. All federal, state, foreign, county and local income,
profits, franchise, occupation, property, sales, use, gross receipts and other
taxes (including any interest or penalties relating thereto) and assessments
which are due and payable for the years commencing 1996 have been duly reported,
fully paid and discharged as reported by Zycom, and there are no unpaid taxes
which are, or could become a lien on the properties and assets of Zycom, except
as provided for in the financial statements of Zycom, or have been incurred in
the normal course of business of Zycom since that date. All tax returns of any
kind required to be filed for the years commencing 1996 have been filed and the
taxes paid or accrued. There are no disputes as to taxes of any nature payable
by Zycom.
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3.8 Hazardous Materials. No hazardous material has been released,
placed, stored, generated, used, manufactured, treated, deposited, spilled,
discharged, released, or disposed of on or under any real property currently or
previously owned or leased by Zycom or any of its subsidiaries.
3.9 Legality of Shares to be Issued. The shares of common stock of
Zycom to be issued by Zycom pursuant to this Agreement, when so issued and
delivered, will have been duly and validly authorized and issued by Zycom and
will be fully paid and nonassessable.
3.10 Accuracy of All Statements Made by Zycom. No representation or
warranty by Zycom in this Agreement, nor any statement, certificate, schedule,
or exhibit hereto furnished or to be furnished by Zycom pursuant to this
Agreement, nor any document or certificate delivered to Tutornet.com pursuant to
this Agreement or in connection with actions contemplated hereby, contains or
shall contain any untrue statement of material fact or omits to state or shall
omit to state a material fact necessary to make the statements contained therein
not misleading.
4. Covenants of the Parties.
4.1 Corporate Records.
a. Simultaneous with the execution of this Agreement by
Tutornet.com, if not previously furnished, such entity shall deliver to Zycom
copies of the articles of incorporation, as amended, and the current bylaws of
Tutornet.com, and copies of the resolutions duly adopted by the board of
directors of Tutornet.com approving this Agreement and the transactions herein
contemplated.
b. Simultaneous with the execution of this Agreement by Zycom,
if not previously furnished, such entity shall deliver to Tutornet.com copies of
the articles of incorporation, as amended, and the current bylaws of Zycom, and
copies of the resolutions duly adopted by the board of directors of Zycom
approving this Agreement and the transactions herein contemplated.
4.2 Access to Information.
a. Zycom and its authorized representatives shall have full
access during normal business hours to all properties, books, records,
contracts, and documents of Tutornet.com, and Tutornet.com shall furnish or
cause to be furnished to Zycom and its authorized representatives all
information with respect to its affairs and business as Zycom may reasonably
request. Zycom shall hold, and shall cause its representatives to hold
confidential, all such information and documents, other than information that
(i) is in the public domain at the time of its disclosure to Zycom; (ii) becomes
part of the public domain after disclosure through no fault of Zycom; (iii) is
known to Zycom or any of its officers or directors prior to disclosure; or (iv)
is disclosed in accordance with the written consent of Tutornet.com. In the
event this Agreement is terminated
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prior to Closing, Zycom shall, upon the written request of Tutornet.com,
promptly return all copies of all documentation and information provided by
Tutornet.com hereunder.
b. Tutornet.com and its authorized representatives shall
have full access during normal business hours to all properties, books, records,
contracts, and documents of Zycom, and Zycom shall furnish or cause to be
furnished to Tutornet.com and its authorized representatives all information
with respect to its affairs and business Tutornet.com may reasonably request.
Tutornet.com shall hold, and shall cause its representatives to hold
confidential, all such information and documents, other than information that
(i) is in the public domain at the time of its disclosure to Tutornet.com; (ii)
becomes part of the public domain after disclosure through no fault of
Tutornet.com; (iii) is known to Tutornet.com or any of its officers or directors
prior to disclosure; or (iv) is disclosed in accordance with the written consent
of Zycom. In the event this Agreement is terminated prior to Closing,
Tutornet.com shall, upon the written request of Zycom, promptly return all
copies of all documentation and information provided by Zycom hereunder.
4.3 Actions Prior to Closing. From and after the date of this
Agreement and until the Closing Date:
a. Zycom and Tutornet.com shall each carry on its business
diligently and substantially in the same manner as heretofore, and neither party
shall make or institute any unusual or novel methods of purchase, sale,
management, accounting or operation.
b. Neither Zycom nor Tutornet.com shall enter into any
contract or commitment, or engage in any transaction not in the usual and
ordinary course of business and consistent with its business practices.
c. Neither Zycom nor Tutornet.com shall amend its articles of
incorporation or bylaws or make any changes in authorized or issued capital
stock, except as provided in this Agreement.
d. Neither Zycom nor Tutornet.com shall grant any options,
warrants, or other rights to purchase stock of such entity, except as provided
in this Agreement.
e. Zycom and Tutornet.com shall each use its best efforts
(without making any commitments on behalf of the company) to preserve its
business organization intact.
f. Neither Zycom nor Tutornet.com shall do any act or omit to
do any act, or permit any act or omission to act, which will cause a material
breach of any material contract, commitment, or obligation of such party.
g. Zycom and Tutornet.com shall each duly comply with all
applicable laws as may be required for the valid and effective issuance or
transfer of stock contemplated by this Agreement.
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h. Neither Zycom nor Tutornet.com shall sell or dispose of any
property or assets, except products sold in the ordinary course of business.
i. Zycom and Tutornet.com shall each promptly notify the other
of any lawsuits, claims, proceedings, or investigations that may be threatened,
brought, asserted, or commenced against it, its officers or directors involving
in any way the business, properties, or assets of such party.
4.4 No Covenant as to Tax or Accounting Consequences. It is
expressly understood and agreed that neither Zycom nor its officers or agents
has made any warranty or agreement, expressed or implied, as to the tax or
accounting consequences of the transactions contemplated by this Agreement or
the tax or accounting consequences of any action pursuant to or growing out of
this Agreement.
4.5 Indemnification. Tutornet.com shall indemnify Zycom for any
loss, cost, expense, or other damage (including, without limitation, attorneys'
fees and expenses) suffered by Zycom resulting from, arising out of, or incurred
with respect to the falsity or the breach of any representation, warranty, or
covenant made by Tutornet.com herein, and any claims arising from the operations
of Tutornet.com prior to the Closing Date. Zycom shall indemnify and hold
Tutornet.com harmless from and against any loss, cost, expense, or other damage
(including, without limitation, attorneys' fees and expenses) resulting from,
arising out of, or incurred with respect to, or alleged to result from, arise
out of or have been incurred with respect to, the falsity or the breach of any
representation, covenant, warranty, or agreement made by Zycom herein, and any
claims arising from the operations of Zycom prior to the Closing Date. The
indemnity agreement contained herein shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any party
and shall survive the consummation of the transactions contemplated by this
Agreement.
4.6 Publicity. The parties agree that no publicity, release, or
other public announcement concerning this Agreement or the transactions
contemplated by this Agreement shall be issued by any party hereto without the
advance approval of both the form and substance of the same by the other parties
and their counsel, which approval, in the case of any publicity, release, or
other public announcement required by applicable law, shall not be unreasonably
withheld or delayed.
4.7 Expenses. Except as otherwise expressly provided herein, each
party to this Agreement shall bear its own respective expenses incurred in
connection with the negotiation and preparation of this Agreement, in the
consummation of the transactions contemplated hereby, and in connection with all
duties and obligations required to be performed by each of them under this
Agreement.
4.8 Further Actions. Each of the parties hereto shall take all such
further action, and execute and deliver such further documents, as may be
necessary to carry out the transactions contemplated by this Agreement.
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4.9 Finders. Except as provided herein, no finder's fees or other
compensation has been paid or is due or payable in connection with this
transaction by either party.
5. Conditions Precedent to Zycom's Obligations. Each and every
obligation of Zycom to be performed on the Closing Date shall be subject to the
satisfaction prior thereto of the following conditions:
5.1 Truth of Representations and Warranties. The representations and
warranties made by Tutornet.com in this Agreement or given on its behalf
hereunder shall be substantially accurate in all material respects on and as of
the Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date.
5.2 Performance of Obligations and Covenants. Tutornet.com shall
have performed and complied with all obligations and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing.
5.3 Officer's Certificate. Zycom shall have been furnished with a
certificate (dated as of the Closing Date and in form and substance reasonably
satisfactory to Zycom), executed by an executive officer of Tutornet.com,
certifying to the fulfillment of the conditions specified in subsections 5.1 and
5.2 hereof.
5.4 No Litigation or Proceedings. There shall be no litigation or
any proceeding by or before any governmental agency or instrumentality pending
or threatened against any party hereto that seeks to restrain or enjoin or
otherwise questions the legality or validity of the transactions contemplated by
this Agreement or which seeks substantial damages in respect thereof.
5.5 No Material Adverse Change. As of the Closing Date there shall
not have occurred any material adverse change, financially or otherwise, which
materially impairs the ability of Tutornet.com to conduct its business or the
earning power thereof on the same basis as in the past.
5.6 Shareholders' Execution of Subscription Agreement. Each of the
Shareholders shall have duly executed and delivered a Subscription Agreement in
the form as set forth in Schedule "B" as of the Closing Date and shall have
represented therein that he, she, or it is an accredited investor as set forth
in such form.
6. Conditions Precedent to Obligations of Tutornet.com. Each and every
obligation of Tutornet.com to be performed on the Closing Date shall be subject
to the satisfaction prior thereto of the following conditions:
6.1 Truth of Representations and Warranties. The representations and
warranties made by Zycom in this Agreement or given on its behalf hereunder
shall be substantially accurate
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in all material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on and as of
the Closing Date.
6.2 Performance of Obligations and Covenants. Zycom shall have
performed and complied with all obligations and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing.
6.3 Officer's Certificate. Tutornet.com shall have been furnished
with a certificate (dated as of the Closing Date and in form and substance
reasonably satisfactory to Tutornet.com), executed by an executive officer of
Zycom, certifying to the fulfillment of the conditions specified in subsections
6.1 and 6.2 hereof.
6.4 No Litigation or Proceedings. There shall be no litigation or
any proceeding by or before any governmental agency or instrumentality pending
or threatened against any party hereto that seeks to restrain or enjoin or
otherwise questions the legality or validity of the transactions contemplated by
this Agreement or which seeks substantial damages in respect thereof.
6.5 No Material Adverse Change. As of the Closing Date there shall
not have occurred any material adverse change, financially or otherwise, which
materially impairs the ability of Zycom to conduct its business.
6.6 No Liabilities. As of the Closing Date Zycom shall not have
aggregate liabilities in excess of $1,000.
7. Change of Management. Upon and as a condition of Closing this
Agreement:
7.1 At Closing Zycom will present the resignations of each and every
officer and director of Zycom effective as of the completion of the Closing,
together with a duly adopted appointment of Euburn Richard A. Forde and Rajiv
Dalal as directors of Zycom effective immediately following the Closing of this
Agreement. Prior to Closing Tutornet.com will furnish material information of
Euburn Richard A. Forde and Rajiv Dalal as nominees to be appointed by the Board
of Directors of Zycom. Zycom reserves the right to refuse to cause the
appointment of any or all such persons as directors of Zycom if, after review of
the foregoing information concerning said persons, it is the opinion of Zycom
that the election of such persons would not be in the best interests of Zycom.
7.2 Tutornet.com reserves the right to terminate this Agreement if
nominees selected by it are not appointed as set forth above.
8. Closing.
8.1 Time and Place. The Closing of this transaction ("Closing")
shall take place at 57 West 200 South, Suite 310, Salt Lake City, Utah, at 10:00
am, on Monday, April 24, 2000, or
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at such other time and place as the parties hereto shall agree upon. Such date
is referred to in this Agreement as the "Closing Date."
8.2 Documents To Be Delivered by Tutornet.com. At the Closing
Tutornet.com shall deliver to Zycom the following documents:
a. Copies of Schedule "B" executed by each of the Shareholders
of Tutornet.com and the certificates for the number of shares of class A and B
common stock of Tutornet.com in the manner and form required by subsection 1.1
hereof.
b. Stock certificates in the name of Zycom representing all of
the outstanding class A and B common shares of stock of Tutornet.com. tendered
by the Shareholders.
c. The certificate required pursuant to subsection 5.3 hereof.
d. A certificate of good standing from the State of Delaware
dated not more than twenty days prior to Closing.
e. A signed consent and/or minutes of Tutornet.com's directors
approving this Agreement and each matter to be approved under this Agreement.
f. Stock option conversion forms required pursuant to
subsection 1.3 hereof.
g. Such other documents of transfer, certificates of authority,
and other documents as Zycom may reasonably request.
8.3 Documents To Be Delivered by Zycom. At the Closing Zycom shall
deliver to Tutornet.com the following documents:
a. Certificates for the number of shares of series A and B
common stock of Zycom as determined in subsection 1.2 hereof, or a single
certificate in the name of Tutornet.com for the aggregate number of shares.
b. The certificate required pursuant to subsection 6.3 hereof.
c. A certificate of good standing from the State of Colorado
dated not more than twenty days prior to Closing, provided that if the change of
domicile shall be effected prior to Closing, a copy of the certificate of
incorporation and certificate of merger shall be sufficient.
d. A signed consent and/or minutes of Zycom's directors
approving this Agreement, and each matter to be approved under this Agreement,
approving the stock dividend and
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change of domicile as required by subsection 1.4 hereof, approving the amendment
to the articles of incorporation as required pursuant to subsection 1.5 hereof,
calling a meeting of the shareholders as required pursuant to subsection 1.6
hereof, and appointing new directors as required pursuant to subsection 7.1
hereof.
e. The resignations of each and every officer and director of
Zycom as required pursuant to subsection 7.1 hereof.
f. A duly adopted and executed stock option plan and such stock
option conversion documents as required pursuant to subsection 1.3 hereof.
g. A form of the reporting company agreement as required
pursuant to subsection 1.8 hereof.
h. Warrant certificates for 2,500,000 shares each to Business
Development Corporation and GJM Trading Partners Ltd. as required pursuant to
subsection 1.7 hereof.
i. A stock certificate and warrant certificate for 31,682
shares each to Business Development Corporation as required pursuant to
subsection 1.9 hereof.
j. Such other documents of transfer, certificates of authority,
and other documents as Tutornet.com may reasonably request.
9. Termination. This Agreement may be terminated by Zycom or
Tutornet.com by notice to the other if, (i) at any time prior to the Closing
Date any event shall have occurred or any state of facts shall exist that
renders any of the conditions to its or their obligations to consummate the
transactions contemplated by this Agreement incapable of fulfillment, or (ii) on
April 28, 2000, if the Closing shall not have occurred.
10. Liquidated Damages. Notwithstanding anything in this Agreement to the
contrary, if, on the Closing Date, either Zycom or Tutornet.com (i) has complied
with all of the conditions to Closing contained in this Agreement; (ii) has
notified the other party of the intention to consummate the transactions
contemplated under this Agreement; and (iii) is ready and able to close the
transactions and furnishes evidence to that effect to the other party, and if
the Closing does not then occur due to the refusal of the other party to so
consummate the transactions contemplated under this Agreement, then the party
refusing to Close shall immediately pay to the other party liquidated damages of
$100,000.
11. Miscellaneous.
11.1 Notices. All communications provided for herein shall be in
writing and shall be deemed to be given or made when served personally or when
deposited in the United States mail, certified return receipt requested,
addressed as follows, or at such other address as shall be
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designated by any party hereto in written notice to the other party hereto
delivered pursuant to this subsection:
Zycom: Van R. Perkins, President
340 Sunset Drive
Suite 1203
Ft. Lauderdale, FL 33301
With Copy to: Ronald N. Vance, P.C.
Attorney at Law
57 West 200 South
Suite 310
Salt Lake City, UT 84101
Tutornet.com Euburn R.A. Forde, President
11410 Isaac Newton Square North
Suite 105
Reston, VA 20190
11.2 Default. Should any party to this Agreement default in any of
the covenants, conditions, or promises contained herein, the defaulting party
shall pay all costs and expenses, including a reasonable attorney's fee, which
may arise or accrue from enforcing this Agreement, or in pursuing any remedy
provided hereunder or by the statutes of any state.
11.3 Assignment. This Agreement may not be assigned in whole or in
part by the parties hereto without the prior written consent of the other party
or parties, which consent shall not be unreasonably withheld.
11.4 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and assigns.
11.5 Partial Invalidity. If any term, covenant, condition, or
provision of this Agreement or the application thereof to any person or
circumstance shall to any extent be invalid or unenforceable, the remainder of
this Agreement or application of such term or provision to persons or
circumstances other than those as to which it is held to be invalid or
unenforceable shall not be affected thereby and each term, covenant, condition,
or provision of this Agreement shall be valid and shall be enforceable to the
fullest extent permitted by law.
11.6 Entire Agreement. This Agreement, including the schedules
attached hereto and incorporated herein, constitutes the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all negotiations, representations, prior discussions, letters
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of intent, and preliminary agreements between the parties hereto relating to the
subject matter of this Agreement.
11.7 Interpretation of Agreement. This Agreement shall be
interpreted and construed as if equally drafted by all parties hereto.
11.8 Survival of Covenants, Etc. All covenants, representations, and
warranties made herein to any party, or in any statement or document delivered
to any party hereto, shall survive the making of this Agreement and shall remain
in full force and effect until the obligations of such party hereunder have been
fully satisfied.
11.9 Further Action. The parties hereto agree to execute and deliver
such additional documents and to take such other and further action as may be
required to carry out fully the transactions contemplated herein.
11.10 Amendment. This Agreement or any provision hereof may not be
changed, waived, terminated, or discharged except by means of a written
supplemental instrument signed by the party or parties against whom enforcement
of the change, waiver, termination, or discharge is sought.
11.11 Full Knowledge. By their signatures, the parties acknowledge
that they have carefully read and fully understand the terms and conditions of
this Agreement, that each party has had the benefit of counsel, or has been
advised to obtain counsel, and that each party has freely agreed to be bound by
the terms and conditions of this Agreement.
11.12 Headings. The descriptive headings of the various sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
11.13 Counterparts. This Agreement may be executed in two or more
partially or fully executed counterparts, each of which shall be deemed an
original and shall bind the signatory, but all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto executed the foregoing Agreement and
Plan of Reorganization on the _____ day of April 2000, to be effective as of the
day and year first above written.
Zycom, Inc.
By /s/ Van R. Perkins
-----------------------------
Van R. Perkins, President
Tutornet.com, Inc.
By /s/ Euburn R.A. Forde
-----------------------------
Euburn R.A. Forde, President
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INDEX OF SCHEDULES
Schedule "A" List of Tutornet.com Shareholders exchanging shares
Schedule "B" Form of Subscription Agreement
Schedule "C" Bridge financing agreement dated March 24, 2000
Schedule "D" Form of reporting company agreement
Schedule "E" Form of warrant certificate
Schedule "F" List of Tutornet.com subsidiaries
Schedule "G" List of outstanding Tutornet.com options, warrants,
etc.
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<PAGE>
SCHEDULE "A"
TO THE
AGREEMENT AND PLAN OF REORGANIZATION
<TABLE>
<CAPTION>
NO. OF CLASS A SHARES NO. OF SERIES A SHARES
NAME OF OF TUTORNET.COM OF ZYCOM
SHAREHOLDER TO BE TRANSFERRED TO BE ISSUED
- - ----------- ---------------------- --------------------
<S> <C> <C>
Mary Jo Basurto 49,509 49,509
Paul Blank 325,000 325,000
Marvin M. Brown 200,000 200,000
Egan Conway 75,000 75,000
Rajiv Dalal 1,516,666 1,516,666
Wendy Dates 150,000 150,000
Euburn Richard A. Forde 8,000,000 8,000,000
Barton Gold 652,000 652,000
Charlotte Haley 35,000 35,000
Brenda Lasker 180,000 180,000
Lost Lake Enterprises Trust 720,452 720,452
Lynnwood Leasing Services 662,650 662,650
Alan K. & Stephanie R. Melvin 205,000 205,000
Hanah Metias 50,000 50,000
Joseph J. Meuse 647,579 647,579
Barry M. Meuse 1,027,600 1,027,600
National Security Analysts, Inc. 198,218 198,218
Jessica A. Priselac 100,000 100,000
Ken Schwartz 180,000 180,000
Andrew Tam 1,000,000 1,000,000
Isabel Trimper-Borton 300,000 300,000
---------- ----------
TOTAL 16,274,674 16,274,674
NO. OF CLASS B SHARES NO. OF SERIES B SHARES
NAME OF OF TUTORNET.COM OF ZYCOM
SHAREHOLDER TO BE TRANSFERRED TO BE ISSUED
- - ----------- ------------------- --------------
Euburn R.A. Forde 3,500,000 3,500,000
Rajiv Dalal 1,250,000 1,250,000
---------- ----------
TOTAL 4,750,000 4,750,000
---------- ----------
</TABLE>
-18-
<PAGE>
EXHIBIT 2.3
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This First Amendment ("Amendment") is to the Agreement and Plan of Merger
dated May 16, 2000 (the "Original Agreement") is dated May 17, 2000 by and
between Tutornet.com Group, Inc., a Delaware corporation (the "Buyer"), and
Segway Corp., a New Jersey corporation (the "Target"). The Buyer and the Target
are referred to collectively herein as the "Parties."
RECITALS
WHEREAS, the Original Agreement was entered by the parties on May 16, 2000;
and
WHEREAS, the parties wish to amend the consideration provisions of the
Original Agreement in order to effect certain business purposes,
NOW, THEREFORE, the parties hereby agree as follows:
1. The recital is hereby amended to read as follows:
This Agreement contemplates a merger of the Target with and into the
Buyer. The Target Stockholders will receive Five Thousand (5,000)
restricted shares of Buyer's common stock and cash in the aggregate amount
of One Hundred Seventy Five Thousand Dollars ($175,000) in exchange for all
of the capital stock in the Target. The Parties expect that the Merger will
further certain of their business objectives.
2. Section 2.3 is hereby amended to read as follows:
2.3 Actions at the Closing. At the Closing, (i) the Target will deliver
to the Buyer the various certificates, instruments, and documents referred
to in Section 6.1, (ii) the Buyer will deliver to the Target the various
certificates, instruments, and documents referred to in Section 6.2, (iii)
the Buyer and the Target will file with the Secretary of State of the
States of Delaware and New Jersey Certificate of Merger (the "Certificate
of Merger"), and (iv) the Buyer will deliver to the Exchange Agent in the
manner provided below in Section 2.6 the certificates representing the
shares and the sum of Twenty Five Thousand Dollars ($25,000) to be
distributed to the Target Shareholders. Within three (3) weeks of the
Effective Time, or when Buyer receives the funding from its recently closed
Ten Million Dollar ($10,000,000) financing, whichever occurs first, Buyer
will deliver to Exchange Agent an additional One Hundred Thousand Dollars
($100,000).
<PAGE>
3. Section 2.6.1 is hereby amended to read as follows:
2.6.1 Immediately after the Effective Time, the Buyer will furnish to
Richard I. Anslow and Associates, counsel for Target, as Exchange Agent,
the sum of Twenty Five Thousand Dollars ($25,000). Target hereby
acknowledges the previous receipt of Fifty Thousand Dollars ($50,000) from
Buyer as a deposit paid in advance and anticipation of the Closing of this
Agreement. The Twenty Five Thousand Dollars ($25,000) paid at the Effective
Time and the previously paid Fifty Thousand Dollars ($50,000) shall
collectively be referred to herein as the "Deposit". Within three (3) weeks
of the Effective Time, or when Buyer receives the funding from its recently
closed Ten Million Dollar ($10,000,000) financing, whichever occurs first,
Buyer will deliver to Exchange Agent an additional One Hundred Thousand
Dollars ($100,000). Each shareholder of Target, shall receive the amount of
315/10,000 Dollars ($0.0315) per share. The Exchange Agent shall have the
obligation to make the payments called for by this Section 2.6.1 to the
shareholders of Target.
4. Section 8.1 is amended to read as follows:
8.1 Survival. Except for Target's and Exchange Agents to a submit an
application for a tax clearance certificate pursuant to Section 2.4,
Buyer's obligation to issue shares and make payments pursuant to Section
2.6, and Target's and Exchange Agent's obligation to pay Kline pursuant to
Section 3.9, none of the representations, warranties, and covenants of the
Parties will survive the Effective Time.
5. All capitalized terms used in this Amendment not defined herein shall have
the meanings given them in the Original Agreement. References in this Amendment
and in the Original Agreement to "this Agreement", herein, hereto and words of
similar import shall mean the Original Agreement as amended by this Amendment.
6. This Amendment amends the Original Agreement. The Original Agreement, as
amended by this Amendment, is in full force and effect, and the parties hereto
hereby ratify and affirm the same.
IN WITNESS WHEREOF, the parties hereto have entered into this Amendment as
of the date first set forth above.
<PAGE>
BUYER:
Tutornet.com Group, Inc.
/s/ Euburn Forde
- - -------------------------------
By: Euburn Forde
---------------------------
Title: President
------------------------
TARGET:
Segway Corp.
/s/ Richard Analow
- - -------------------------------
By: Richard Anslow
---------------------------
Title: President
------------------------
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
ZYCOM, INC.
The undersigned, in order to form a corporation for the purposes
hereinafter stated under and pursuant to the General Corporation Law of the
State of Delaware, does hereby certify as follows:
ARTICLE I
---------
Name
----
The name of this corporation is Zycom, Inc.
ARTICLE II
----------
Purposes
--------
The purpose of this corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State Delaware.
ARTICLE III
-----------
Duration
--------
This corporation shall exist perpetually unless sooner dissolved by law.
ARTICLE IV
----------
Stock
-----
(a) The aggregate number of shares which the corporation shall have
authority to issue is one hundred ten million (110,000,000). One hundred
million (100,000,000) shares shall have a par value of $.0001 and shall be
designated as common stock. Ten million (10,000,000) shares shall have a par
value of $.0001 per share and shall be designated as preferred stock.
(b) Dividends in cash, property, or shares of the corporation may be paid
upon the common stock, as and when declared by the board of directors, out of
funds of the corporation to the extent and in the manner permitted by law.
(c) The board of directors may, from time to time, distribute to the
shareholders in partial liquidation, out of stated capital, or capital surplus
of the corporation, a portion of its assets, in cash or property, subject to the
limitations contained in the statutes of the State of Delaware.
<PAGE>
ARTICLE V
---------
Pre-emptive Rights
------------------
The shareholders shall have no pre-emptive rights to acquire additional
shares of the corporation.
ARTICLE VI
----------
Cumulative Voting
-----------------
There shall be no cumulative voting.
ARTICLE VII
-----------
Registered Office and Agent
---------------------------
The registered office in the State of Delaware is to be located at 1209
Orange Street, in Wilmington, County of New Castle. The registered agent in
charge thereof at such address is CT Corporation.
ARTICLE VIII
------------
Bylaws
------
The directors shall have power to make and to alter or amend bylaws, but
the holders of common stock may also alter, amend, or repeal bylaws or adopt new
bylaws. The bylaws may contain any provisions for the regulation and management
of the affairs of the corporation not inconsistent with the laws of the State of
Delaware or this certificate of incorporation.
ARTICLE IX
----------
Incorporator
------------
The name and mailing address of the incorporator is as follows: Van R.
Perkins 340 Sunset Drive, Suite 1203, Ft. Lauderdale, FL 33301.
ARTICLE X
---------
Directors
---------
The powers of the incorporator shall terminate upon the filing of this
certificate of incorporation, and the name and mailing address of the person to
serve as the initial director until the first annual meeting of stockholders and
until his successor is elected and qualified is: Van R. Perkins 340 Sunset
Drive, Suite 1203, Ft. Lauderdale, FL 33301.
-2-
<PAGE>
Article XI
----------
Indemnification
---------------
The Corporation shall, to the fullest extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
Article XII
-----------
Shareholder Voting
------------------
One third of the shares entitled to vote represented in person or by proxy,
shall constitute a quorum at a meeting of the shareholders.
The undersigned, for the purpose of forming a corporation under the laws of
the State of Delaware, does make, file and record this certificate, and does
certify that the facts herein stated are true; and has accordingly hereunto set
his hand this 4th day of April 2000.
/s/ Van R. Perkins
-----------------------------------------
Van R. Perkins, Incorporator
-3-
<PAGE>
Exhibit 3.2
BYLAWS
OF
ZYCOM, INC.
----------------------------
ARTICLE I
OFFICES
Section 1. The principal office in the State of Delaware shall be in the
City of Wilmington, County of New Castle.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from time
to time determine as the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such place as may be fixed from time to time by the board of
directors, either within or without the State of Delaware. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at times
designated by the board of directors, and at such meetings the stockholders
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting shall be given to each
stockholder entitled to vote thereat at least ten days and not more than sixty
days before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, during ordinary business hours, for a
period of at least ten days prior to the election, either at a place within the
city, town or village where the election is to be held and which place shall be
specified in the notice of the meeting, or if not specified, at the place where
said meeting is to be held, and the list shall be produced and kept at the time
and place of election during the whole time thereof, and subject to the
inspection of any stockholder who may be present.
<PAGE>
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of the board of directors, or
at the request in writing of stockholders of not less than one-tenth of all the
shares entitled to vote at the meeting. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting of stockholders, stating
the time, place and object thereof, shall be given to each stockholder entitled
to vote thereat, at least ten days before the date fixed for the meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business, except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless the certificate of incorporation shall designate other
voting rights, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by any
provisions of the statutes or of the certificates of incorporation, the meeting
and vote of stockholders may be dispensed with, if all the stockholders who
would have been entitled to vote upon the action if such meeting were held,
shall consent in writing to such corporate action being taken.
-2-
<PAGE>
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than one and not more than nine. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, and the directors so chosen shall hold office
until the next annual election and until their successors are duly elected and
shall qualify, unless sooner displaced.
Section 3. The business of the corporation shall be managed by its board
of directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the certificate of
incorporation or by these bylaws directed or required to be exercised or done by
the stockholders.
Meetings of the Board of Directors
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held immediately following the final adjournment of the annual meeting
of the stockholders. No notice of such a meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and such place as shall from time to time be determined by
the board.
Section 7. Special meetings of the board may be called by the president on
forty-eight hours notice to each director, either personally or by mail or by
telegram setting forth the time and place thereat; special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of a majority of the directors.
Section 8. At all meetings of the board a majority of the directors then
in office shall constitute a quorum for the transaction of business and the act
of a majority of the directors, except as may be otherwise specifically provided
by statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the board of directors the directors present
-3-
<PAGE>
thereat may adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these bylaws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if prior to such action a written consent thereto is signed by all
members of the board or of such committee as the case may be, and such written
consent is filed with the minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation of these bylaws, members of the board of directors or any
committee designed by the board may participate in a meeting of such board or
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other
and participation in a meeting in this manner shall constitute presence in
person at such meeting.
Committees of Directors
Section 11. The directors may appoint an executive committee from their
number. The executive committee may make its own rules of procedure and shall
meet where and as provided by such rules, or by a resolution of the directors.
A majority shall constitute a quorum, and in every case the affirmative vote of
a majority of all the members of the committee shall be required for the
adoption of any resolution.
Section 12. During the intervals between the meetings of the directors,
the executive committee may exercise all the powers of the directors in the
management and direction of the business of the corporation, in such manner as
such committee shall deem best for the interest of the corporation, and in all
cases in which specific directions shall not have been given by the directors.
Section 13. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more other committees, each committee to
consist of two or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors.
Compensation of Directors
Section 14. Directors shall not receive any stated salary for their
services as directors, but by resolution of the board, a fixed fee and expenses
of attendance may be allowed for attendance at each meeting. Nothing herein
contained shall be construed to preclude any director
-4-
<PAGE>
from serving the corporation in any capacity as an officer or otherwise and
receiving compensation therefor.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing in the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice-president, a secretary and treasurer.
The board of directors may also choose additional vice-presidents, and one or
more assistant secretaries and assistant treasurers. Two or more offices may be
held by the same person.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers of the corporation shall be fixed
by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
The President
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and
-5-
<PAGE>
active management of the business of the corporation and shall have power to
call meetings of the directors and stockholders in accordance with these bylaws,
appoint and remove, subject to the approval of the directors, servants, agents
and employees of the corporation and fix their compensation, make and sign
contracts and agreements in the name and on behalf of the corporation; he shall
see that the books, reports, statements and certificates required by the statute
under which the corporation is organized or any other laws applicable thereto
are properly kept, made and filed according to law; and he shall generally do
and perform all acts incident to the office of president, or which are
authorized or required by law.
The Vice-Presidents
Section 7. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the board of directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
The Secretary and Assistant Secretaries
Section 8. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and the board of directors in a book to be kept
for that purpose and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the board of directors, and shall perform
such other duties as may be prescribed by the board of directors or president,
under whose supervision he shall be. He shall have custody of the corporate
seal of the corporation and he, or an assistant secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such assistant secretary. The
board of directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 9. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform such other duties and
exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
The Treasurer and Assistant Treasurers
Section 10. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all monies
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
-6-
<PAGE>
Section 11. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meeting, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 12. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 13. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or a vice-president or a vice-president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation.
Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent (other than the corporation or a transfer clerk who is
an employee of the corporation) or (2) by a registrar (other than the
corporation or its employee), all other signatures may be a facsimile. In case
any officer or officers, transfer agent, or registrar, who has signed or whose
facsimile signature or signatures have been used on a certificate shall cease to
be such officer, transfer agent or registrar, whether because of death,
resignation, or otherwise, before such certificate or certificates have been
delivered by the corporation, such certificate or certificates may nevertheless
be adopted by the corporation and be issued and delivered as though the person
or persons who signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to be such
officer, transfer agent or registrar.
Transfer Agent and Registrar
Section 3. The corporation may have such transfer agents and registrars as
the board of directors may designate and appoint.
-7-
<PAGE>
Lost Certificates
Section 4. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of the fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
Transfers of Stock
Section 5. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Closing of Transfer Books
Section 6. The board of directors may close the stock transfer books of
the corporation for a period not exceeding forty-five days preceding the date of
any meeting of stockholders or the date for payment of any dividend or the date
for the allotment of rights or the date when any change or conversion or
exchange of capital stock shall go into effect or for a period of not exceeding
forty-five days in connection with obtaining the consent of stockholders for any
purpose. In lieu of closing the stock transfer books as aforesaid, the board of
directors may fix in advance a date, not exceeding forty-five days preceding the
date of any meeting of stockholders, or the date for payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, or to give such consent and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, or
to give such consent, as the case may be notwithstanding any transfer of any
stock on the books of the corporation after any such record date fixed as
aforesaid.
-8-
<PAGE>
Registered Stockholders
Section 7. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
Dividends
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Resignations
Section 3. Any director, member of any committee or other officer may
resign at any time. Such resignation shall be made in writing, and shall take
effect at the time specified therein, and if no time be specified therein at the
time of its receipt by the president or secretary, the acceptance of a
resignation shall not be necessary to make it effective.
Checks
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
Fiscal Year
Section 5. The fiscal year of the corporation shall be as determined by
the Board of Directors.
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<PAGE>
Seal
Section 6. The corporation may, but need not have, a corporate seal. The
corporate seal shall have inscribed thereon the name of the corporation, the
year of its organization and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered or repealed at any regular meeting
of the stockholders or of the board of directors or at any special meeting of
the stockholders or of the board of directors if notice of such alteration or
repeal be contained in the notice of such special meeting.
CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby certify that the undersigned is the
secretary of Zycom, Inc., a corporation duly organized and existing under and by
virtue of the laws of the State of Delaware; that the above and foregoing Bylaws
of said corporation were duly and regularly adopted as such by the Board of
Directors of said corporation by unanimous consent dated April 4, 2000; and that
the above and foregoing Bylaws are now in full force and effect.
Dated this 4th day of April 2000.
/s/ Van R. Perkins
----------------------------------------
Van R. Perkins, Secretary
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<PAGE>
CERTIFICATE OF MERGER
of
ZYCOM, INC.
(A Colorado Corporation)
into
ZYCOM, INC.
(A Delaware Corporation)
The undersigned officers, the respective presidents and secretaries of
Zycom, Inc., a Colorado corporation ("Zycom (CO)"), and Zycom, Inc., a Delaware
corporation ("Zycom (DE)"), hereby certify that the Plan and Agreement of Merger
dated April 4, 2000, (hereinafter the "Plan") was approved by the shareholders
of Zycom (CO) at a duly called meeting held on April 14, 2000, after due notice
was given, and was approved by the sole shareholder of Zycom (DE) by unanimous
consent action of such sole shareholder.
1. The number of shares outstanding of each class of each corporation
which were entitled to vote on the Plan, and the number of shares of each class
of each corporation consenting and not consenting to the Plan, is as follows:
<TABLE>
<CAPTION>
Number of Number of Shares
Shares ---------------------------
Class Outstanding Consenting Not Consenting
----------------- ----------- ---------- --------------
<S> <C> <C> <C> <C>
Zycom (CO) Common Stock 256,215 226,012 -0-
($.0001 par value)
Zycom (DE) Common Stock 10 10 -0-
($.00001 par)
</TABLE>
2. The Plan has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with
subsection (c) of Section 252 of the General Corporation Law of the State of
Delaware.
3. All of the presently outstanding shares of Zycom (DE) are owned and
held by Zycom (CO).
4. The effective date of the merger shall be at the time of the latter of
the completion of filing of the Certificate of Merger in the State of Colorado
and the State of Delaware.
5. A copy of the complete executed Plan, including exhibits and
schedules, is on file at the principal offices of Zycom (DE) at 340 Sunset
Drive, Suite 1203, Ft. Lauderdale, FL 33301. A copy of the entire Plan will be
furnished by Zycom (DE), on request and without cost, to any owner of Zycom (DE)
or Zycom (CO).
<PAGE>
6. The authorized capital stock of Zycom (CO) consists of 110,000,000
shares, of which 100,000,000 are designated as common stock, par value $.0001,
and 10,000,000 are designated as preferred stock, par value $1.00.
7. The following amendments to the Articles of Incorporation of Zycom
(DE) were duly approved by the shareholders of each constituent entity and are
hereby made to the Certificate of Incorporation of Zycom (DE):
1. Article I shall be amended to read as follows: "The name of this
corporation is Tutornet.com Group, Inc."
2. Paragraph (a) of Article IV shall be amended to read as follows:
(a) The stock of the corporation is divided into two classes,
namely: common stock in the amount of one billion (1,000,000,000)
shares of the par value of $.00001 each and preferred stock in
the amount of ten million (10,000,000) shares of the par value of
$.00001 each. The common stock shall be divided into two series,
namely: nine hundred fifty million (950,000,000) shares of Series
A common stock and fifty million (50,000,000) shares of Series B
common stock. Except as otherwise required by the certificate of
incorporation, the bylaws, or law, each holder of shares of
common stock shall have one vote per share on all matters voted
upon by the shareholders, and each holder of shares of Series B
common stock shall have three votes per share on all matters
voted upon by the shareholders. The board of directors shall have
authority, by resolution or resolutions, to divide the preferred
stock into series, to establish and fix the distinguishing
designation of each such series and the number of shares thereof
(which number, by like action of the board of directors from time
to time thereafter, may be increased except when otherwise
provided by the board of directors in creating such series, or
may be decreased but not below the number of shares thereof then
outstanding) and, within the limitations of applicable law of the
State of Delaware or as otherwise set forth in this article, to
fix and determine the relative rights and preferences of the
shares of each series so established prior to the issuance
thereof.
3. Article XIII shall be added to read as follows:
A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of
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<PAGE>
Delaware, or (iv) for any transaction from which the director
derived any improper personal benefit.
Any repeal or modification of the foregoing paragraph by the
stockholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at
the time of such repeal or modification.
IN WITNESS WHEREOF, Zycom, Inc., a Delaware corporation, and Zycom, Inc., a
Colorado corporation, have caused this Certificate of Merger to be executed in
their respective corporate names by their respective presidents and their
respective secretaries this 14th day of April 2000.
Attest: Zycom, Inc.
A Colorado Corporation
By
-------------------------------------
Van R. Perkins, Secretary Van R. Perkins, President
Attest: Zycom, Inc.
A Delaware Corporation
By
-------------------------------------
Van R. Perkins, Secretary Van R. Perkins, President
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<PAGE>
Exhibit 4.2
ZYCOM, INC.
STOCK OPTION PLAN
ARTICLE 1.
GENERAL PROVISIONS
------------------
1.1. PURPOSE OF THE PLAN
This Stock Option Plan (the "Plan") is intended to promote the interests of
Zycom, Inc., a Delaware corporation, (the "Corporation") by providing eligible
persons with the opportunity to acquire or increase their proprietary interest
in the Corporation as an incentive for them to remain in the Service of the
Corporation.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
1.2. ADMINISTRATION OF THE PLAN
a. Prior to the Section 12(g) Registration Date, the Plan shall be
administered by the Board or a committee of the Board.
b. Beginning with the Section 12(g) Registration Date, the Primary
Committee shall have sole and exclusive authority to administer the Plan with
respect to Section 16 Insiders. Administration of the Plan with respect to all
other persons eligible under the Plan may, at the Board's discretion, be vested
in the Primary Committee or a Secondary Committee, or the Board may retain the
power to administer the Plan with respect to all such persons.
c. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also terminate the functions of any
Secondary Committee at any time and reassume all powers and authority previously
delegated to such committee.
d. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Plan and to make such determinations under, and issue such
interpretations of, the provisions of the Plan and any outstanding options
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the Plan under
its jurisdiction or any option thereunder.
e. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable
<PAGE>
for any act or omission made in good faith with respect to the Plan or any
option grants under the Plan.
f. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine which eligible persons are to receive
option grants, the time or times when such option grants are to be made, the
number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting schedule (if
any) applicable to the option shares, the acceleration of such vesting schedule,
the maximum term for which the option is to remain outstanding, whether the
option shares shall be subject to rights of repurchase and/or rights of first
refusal, and all other terms and conditions of the option grants.
1.3. ELIGIBILITY
The following persons shall be eligible to participate in the Plan:
a. Employees, as to both Incentive and/or Non-Statutory Options,
b. non-employee members of the Board or the board of directors of any
Parent or Subsidiary as to Non-Statutory Options, and
c. consultants and other independent advisors who provide Services to
the Corporation or any Parent or Subsidiary, as to Non-Statutory Options,
provided that such consultants or other independent advisors meet the following
requirements:
(i) They are natural persons;
(ii) They provide bona fide Services;
(iii) The Services are not in connection with the offer or sale
of securities in a capital raising transaction, and do not directly or
indirectly promote or maintain a market for the Corporation's securities.
1.4. STOCK SUBJECT TO THE PLAN
a. The stock issuable under the Plan shall be shares of authorized
but unissued Common Stock, including shares repurchased by the Corporation on
the open market. The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed three million (3,000,000)
shares, which number of shares may be changed from time to time in accordance
with Section 3.4 below.
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<PAGE>
b. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent the options
expire or terminate for any reason prior to exercise in full. However, should
the Exercise Price be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised, and not by the net number of shares of Common
Stock issued to the holder of such option.
c. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities for which any one
person may be granted options per calendar year, and (iii) the number and/or
class of securities and the Exercise Price in effect under each outstanding
option in order to prevent the dilution or enlargement of benefits thereunder.
The adjustments determined by the Plan Administrator shall be final, binding,
and conclusive.
ARTICLE 2.
OPTION GRANT PROGRAM
--------------------
2.l. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of Section 2.2
of the Plan, below.
a. Exercise Price
(1) The Exercise Price shall be fixed by the Plan Administrator
but shall not be less than one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the Grant Date.
(2) The Exercise Price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Article 3. 1, and the
documents evidencing the option, be payable in one or more of the forms
specified below:
(a) cash or check made payable to the Corporation;
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<PAGE>
(b) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date;
(c) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable written instructions to (a)
a Corporation designated brokerage firm to effect the immediate sale of the
Purchased Shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the Purchased Shares plus all applicable
federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the Purchased Shares directly
to such brokerage firm in order to complete the sale; or
(d) Options to purchase Common Stock valued at the amount by
which the Fair Market Value of the Common Stock subject to options exceeds
the Exercise Price provided on such options.
Except to the extent set forth in (c) and (d) above, payment of
the Exercise Price for the Purchased Shares must be made on the Exercise Date.
b. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the Grant Date.
c. Effect of Termination of Service
(1) The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service:
(a) Any option outstanding at the time of the Optionee's
cessation of Service for any reason except death, Permanent Disability or
Misconduct shall remain exercisable for a three (3) month period
thereafter, provided no option shall be exercisable after the Expiration
Date.
(b) Any option outstanding at the time of the Optionee's
cessation of Service due to death or Permanent Disability shall remain
exercisable for a twelve (12) month period thereafter, provided no option
shall be exercisable after the Expiration Date. Subject to the foregoing,
any option exercisable in whole or in part by the Optionee at the time of
death may be exercised subsequently by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
-4-
<PAGE>
transferred pursuant to the Optionee's will or in accordance with the laws
of descent and distribution.
(c) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(d) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
shares for which the option is exercisable on the date of the Optionee's
cessation of Service; the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the extent
the option is not otherwise at that time exercisable. Upon the expiration
of the applicable exercise period or (if earlier) upon the Expiration Date,
the option shall terminate and cease to be outstanding for any shares for
which the option has not been exercised.
(2) The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(a) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
period otherwise in effect for that option to such greater period of time
as the Plan Administrator shall deem appropriate, but in no event beyond
the Expiration Date, and/or
(b) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of shares
of Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more
additional shares that would have vested under the option had the Optionee
continued in Service.
d. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the Exercise Price, and become a
holder of record of the Purchased Shares.
e. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options may be exercised only by the Optionee, and shall not
be assignable or transferable except by will or the laws of descent and
distribution following the Optionee's death. Non-Statutory Options may be
assigned or transferred in whole or in part only (i) during the Optionee's
lifetime if in connection with the Optionee's estate plan to one or more members
of the Optionee's immediate family (spouse and children) or to a trust
established exclusively for the benefit of one or more such immediate family
members, or (ii) by will or the laws of descent and distribution following the
Optionee's death. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment.
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<PAGE>
The terms applicable to the assigned portion shall be the same as those in
effect for the option immediately prior to such assignment and shall be set
forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
2.2. INCENTIVE OPTIONS
The terms specified below shall apply to all Incentive Options. Except as
modified by the provisions of this Section 2.2, all the provisions of this Plan
shall apply to Incentive Options. Options specifically designated as Non-
Statutory Options when issued under the Plan shall not be subject to the terms
of this Section 2.2.
a. Eligibility. Incentive Options may only be granted to Employees.
b. Exercise Price. The Exercise Price shall not be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
Grant Date.
c. Dollar Limitation. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied in the
order in which such options are granted.
d. 10% Stockholder. If an Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the Exercise Price shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the Grant Date, and the option term shall not exceed five (5) years measured
from the Grant Date.
e. Holding Period. Shares purchased pursuant to an option shall
cease to qualify for favorable tax treatment as Incentive Option Shares if and
to the extent Optionee disposes of such shares within two (2) years of the Grant
Date or within one (1) year of Optionee's purchase of said shares.
2.3. CORPORATE TRANSACTION/CHANGE IN CONTROL
a. In the event of any Corporate Transaction, the Board of Directors
shall have the sole discretion to elect that each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
The
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<PAGE>
Board may exercise its discretion to accelerate the vesting of options whether
or not (i) such option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation or Parent thereof or to be replaced
with a comparable option to purchase shares of the capital stock of the
successor corporation or Parent thereof, (ii) such option is to be replaced with
a cash incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option, except to the extent that the acceleration of such
option is subject to other limitations imposed by the Plan Administrator at the
time of the option grant. The determination of option comparability under clause
(i) above shall be made by the Plan Administrator, whose determination shall be
final, binding and conclusive.
b. In the event of any Corporate Transaction, the Board of Directors
shall have sole discretion to elect that all outstanding repurchase rights may
also be terminated automatically whether or not those repurchase rights are to
be assigned to the successor corporation (or Parent thereof) in connection with
such Corporate Transaction.
c. The Plan Administrator's discretion under Sections 2.3.a. and b.
above shall be exercisable either at the time the option is granted or at any
time while the option remains outstanding, whether or not those options are to
be assumed or replaced (or those repurchase rights are to be assigned) in the
Corporate Transaction. The Plan Administrator shall also have the discretion to
grant options which do not accelerate whether or not such options are assumed
(and to provide for repurchase rights that do not terminate whether or not such
rights are assigned) in connection with a Corporate Transaction.
d. If the Board of Directors elects the automatic acceleration of
some or all of the outstanding options upon the occurrence of a Corporate
Transaction, all such outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) immediately following the consummation of the Corporate
Transaction.
e. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities that would have been
issuable to the Optionee in consummation of such Corporate Transaction had the
option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted stock
options.
f. The Plan Administrator shall have the discretion, exercisable at
the time the option is granted or at any time while the option remains
outstanding, to provide for the
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<PAGE>
automatic acceleration of any options assumed or replaced in a Corporate
Transaction that do not otherwise accelerate at that time (and the termination
of any of the Corporation's outstanding repurchase rights that do not otherwise
terminate at the time of the Corporate Transaction) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (l)-year period measured from the effective date of the
Involuntary Termination.
g. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights) upon the occurrence of a Change in Control or (ii) condition
any such option acceleration (and the termination of any outstanding repurchase
rights) upon the subsequent Involuntary Termination of the Optionee's Service
within a specified period (not to exceed eighteen (18) months) following the
effective date of such Change in Control. Any options accelerated in connection
with a Change in Control shall remain fully exercisable until the expiration or
sooner termination of the option term.
h. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a Non-
Statutory Option under the federal tax laws.
i. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
ARTICLE 3.
MISCELLANEOUS
-------------
3.1. FINANCING
a. The Plan Administrator may permit any Optionee to pay the option
Exercise Price by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. Promissory notes may be authorized with or without
security or collateral. In all events, the maximum credit available to the
Optionee may not exceed the sum of (i) the aggregate option Exercise Price
payable for the Purchased Shares plus (ii) the amount of any federal, state and
local income and employment tax liability incurred by the Optionee in connection
with the option exercise.
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<PAGE>
b. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.
3.2. TAX WITHHOLDING
a. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options under the Plan shall be subject to the satisfaction
of all applicable federal, state and local income and employment tax withholding
requirements.
b. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options under the Plan with the right to use shares of
Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options. Such right may be
provided to any such holder in either or both of the following formats:
(1) Stock Withholding: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such Non-Statutory Option, a portion of those shares with an
aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
(2) Stock Delivery: The election to deliver to the Corporation,
at the time the Non-Statutory Option is exercised, one or more shares of
Common Stock previously acquired by such holder (other than in connection
with the option exercise triggering the Taxes) with an aggregate Fair
Market Value equal to the percentage of the Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
3.3. EFFECTIVE DATE AND TERM OF THE PLAN
a. The Plan shall become effective on the Plan Effective Date.
However, no shares shall be issued under the Plan pursuant to Incentive Options
until the Plan is approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the Plan
Effective Date, then all Incentive Options previously granted under this Plan
shall automatically convert into Non-Statutory Options.
b. The Plan shall terminate upon the earliest of (i) December 31,
2009, (ii) the date on which all shares available for issuance under the Plan
shall have been issued, or (iii) the termination of all outstanding options in
connection with a Corporate Transaction. Upon such Plan termination, all
outstanding options shall continue to have force and effect in accordance with
the provisions of the documents evidencing such options.
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<PAGE>
3.4. AMENDMENT OF THE PLAN
a. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect any rights and obligations with respect to
options at the time outstanding under the Plan unless each affected Optionee
consents to such amendment or modification. In addition, amendments to the Plan
shall be subject to approval of the Corporation's stockholders to the extent
required by applicable laws or regulations.
b. Options to purchase shares of Common Stock may be granted under
the Plan that are in each instance in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued are held in escrow until there is obtained Board approval (and
shareholder approval if required by applicable laws or regulations) of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan.
3.5. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
3.6. REGULATORY APPROVALS
a. The implementation of the Plan, the granting of any option under
the Plan, and the issuance of any shares of Common Stock upon the exercise of
any option shall be subject to the Corporation's obtaining all approvals and
permits required by regulatory authorities having jurisdiction over the Plan and
the options granted under it, and the shares of Common Stock issued pursuant to
the Plan.
b. No shares of Common Stock shall be issued or delivered under the
Plan unless and until there shall have been compliance with all applicable
requirements of federal and state securities laws and all applicable listing
requirements of any stock exchange (or the Nasdaq market, if applicable) on
which Common Stock is then listed for trading.
3.7. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining such person) or of the Optionee, which rights are hereby
expressly reserved by each, to terminate such person's Service at any time for
any reason, with or without cause.
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<PAGE>
IN WITNESS WHEREOF the Corporation has executed this Plan effective as of
the Effective Date.
Zycom, Inc.
By: /s/ Van R. Perkins
-------------------------------------
Van R. Perkins, President
APPENDIX
--------
The following definitions shall be in effect under the Plan and the Plan
Documents:
1. Board shall mean the Corporation's Board of Directors.
2. Change in Control shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
a. the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders, which
the Board does not recommend such stockholders to accept, or
b. a change in the composition of the Board over a period of thirty-
six (36) consecutive months or less such that a majority of the Board members
ceases, by reason of one or more contested elections for Board membership, to be
comprised of individuals who either (i) have been Board members continuously
since the beginning of such period or (ii) have been elected or nominated for
election as Board members during such period by at least a majority of the Board
members described in clause (i) who were still in office at the time the Board
approved such election or nomination.
3. Code shall mean the Internal Revenue Code of 1986, as amended.
4. Common Stock shall mean the Corporation's common stock.
5. Corporate Transaction shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:
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<PAGE>
a. a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction; or
b. the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
6. Eligible Director shall mean a non-employee Board member eligible to
participate in the Plan.
7. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
8. Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.
9. Exercise Price shall mean the exercise price per share as specified in
the Stock Option Grant.
10. Expiration Date shall mean the date on which the option expires as
specified in the Stock Option Grant.
11. Fair Market Value per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
a. If the Common Stock is traded at the time on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per share
of Common Stock on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market or any
successor system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
b. If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
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<PAGE>
c. If the Common Stock is not listed on any Stock Exchange nor traded
on the Nasdaq National Market, then the Fair Market Value shall be determined by
the Plan Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
d. For purposes of any option grants made on the Underwriting Date,
the Fair Market Value shall be deemed to be equal to the price per share at
which the Common Stock is sold in the initial public offering pursuant to the
Underwriting Agreement.
e. In all instances the determination of Fair Market Value shall be
made in accordance with Regulation Sections 1.421-7(e)(2) and 20.2031-2(f)(2) as
promulgated under Sections 421 and 2031 of the Code, as then in effect.
12. Grant Date shall mean the date on which the option is granted to
Optionee as specified in the Stock Option Grant.
13. Incentive Option shall mean an option which satisfies the requirements
of Code Section 422.
14. Involuntary Termination shall mean the termination of the Service of
any individual which occurs by reason of:
a. such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
b. such individual's voluntary resignation following (i) a change in
his or her position with the Corporation which materially reduces his or her
level of responsibility, (ii) a reduction in his or her level of compensation
(including base salary, fringe benefits and participation in corporate-
performance based bonus or incentive programs) by more than fifteen percent (15
%) or (iii) a relocation of such individual's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation without the individual's consent.
15. Market Stand Off shall mean the market stand off restriction on
disposition of the Purchased Shares as specified in Section D of the Stock
Option Exercise Notice and Purchase Agreement.
16. Misconduct shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee, any unauthorized use or disclosure by such person
of confidential information or trade secrets of the Corporation (or any Parent
or Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent
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<PAGE>
or Subsidiary) may consider as grounds for the dismissal or discharge of any
Optionee or other person in the Service of the Corporation (or any Parent or
Subsidiary).
17. 1933 Act shall mean the Securities Act of 1933, as amended.
18. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
19. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
20. Optionee shall mean any person to whom an option is granted under
Plan.
21. Option Shares shall mean the number of shares of Common Stock subject
to the option as specified in the Stock Option Grant.
22. Owner shall mean Optionee and all subsequent holders of the Purchased
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.
23. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one or the other corporations
in such chain.
24. Permanent Disability or Permanently Disabled shall mean the inability
of the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.
25. Permitted Transfer shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death, or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
26. Plan Administrator shall mean the particular entity, whether the Board
or a committee of the Board, which is authorized to administer the Plan with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under the Plan with respect to the
persons under its jurisdiction.
27. Plan Documents shall mean the Plan, the Stock Option Grant, and Stock
Option Exercise Notice and Purchase Agreement, collectively.
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<PAGE>
28. Plan Effective Date shall mean April 4, 2000, the date as of which the
Plan was adopted by the Board.
29. Primary Committee shall mean the committee of two (2) or more non-
employee Board members (as defined in the regulations to Section 16 of the 1934
Act) appointed by the Board to administer the Plan with respect to Section 16
Insiders.
30. Purchased Shares shall mean the shares purchased upon exercise of the
Option.
31. Recapitalization shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other charge
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
32. Reorganization shall mean any of the following transactions:
a. a merger or consolidation in which the Corporation is not the
surviving entity;
b. a sale, transfer, or other disposition of all or substantially all
of the Corporation's assets;
c. a reverse merger in which the Corporation is the surviving entity
but in which the Corporation's outstanding voting securities are transferred in
whole or in part to a person or persons different from the persons holding those
securities immediately prior to the merger; or
d. any transaction effected primarily to change the state in which
the Corporation is incorporated or to create a holding company structure.
33. SEC shall mean the Securities Exchange Commission.
34. Secondary Committee shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Plan with respect to eligible
persons other than Section 16 Insiders.
35. Section 12(g) Registration Date shall mean the date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.
36. Section 16 Insider shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
37. Service shall mean the performance of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board
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<PAGE>
of directors or a consultant or independent advisor, except to the extent
otherwise specifically provided in the documents evidencing the option grant.
38. Stock Exchange shall mean either the American Stock Exchange, the New
York Stock Exchange, or another regional stock exchange.
39. Stock Option Exercise Notice and Purchase Agreement shall mean the
agreement of said title in substantially the form of Exhibit A to the Stock
Option Grant, pursuant to which Optionee gives notice of his intent to exercise
the option and purchase Shares.
40. Stock Option Grant shall mean the Stock Option Grant document,
pursuant to which Optionee has been informed of the basic terms of the option
granted under the Plan.
41. Subsidiary shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
42. Taxes shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options in connection
with the exercise of those options.
43. 10% Stockholder shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
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<PAGE>
Exhibit 4.3
TUTORNET.COM GROUP, INC.
(A Delaware Corporation)
WARRANT CERTIFICATE
WARRANT NUMBER SERIES A-2 NUMBER OF WARRANTS: 2,500,000
SERIES "A" WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF THE $.00001
PAR VALUE COMMON STOCK OF TUTORNET.COM GROUP, INC.
THE ISSUE OF THESE WARRANTS HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE ACT OR
THE LAWS OF THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, AND ITS COUNSEL, TO THE EFFECT THAT ANY PROPOSED
SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND SUCH STATE
STATUTES.
FOR VALUE RECEIVED, Tutornet.com Group, Inc. (the "Company"), a Delaware
corporation, hereby certifies that GJM Trading Partners Ltd., a Colorado limited
partnership, the registered holder hereof, or registered assigns (in either case
the "Holder") is entitled to purchase, subject to the terms and conditions
hereinafter set forth, at any time before March 24, 2004, and not thereafter,
one (1) share of the Common Stock of the Company for each one (1) Warrant
exercised at a price of $0.50 per share of Common Stock and receive a
certificate(s) for the number of shares of Common Stock so purchased upon
presentation and surrender of this Warrant Certificate together with the Form of
Subscription, constituting a part hereof, to the transfer agent of the Company
duly executed and accompanied by payment of the purchase price for all shares
purchased, either by certified check or bank draft, payable to the order of the
Company. Fractions of shares of the Common Stock of the Company will not be
issued. Any denominations of money less that $1.00 paid by the Holder will be
retained by the Company.
During the period that this Warrant is exercisable, the Holder may, in lieu
of paying the cash exercise price, convert this Warrant, in whole or in part,
into the number of shares determined by dividing (a) the aggregate Fair Market
Value (determined on the date of exercise) of the shares of the Company's Common
Stock issuable upon exercise of this Warrant minus the aggregate Warrant Price
of such shares by (b) the Fair Market Value (determined on the date of exercise)
of one share. For purposes of this paragraph, "Fair Market Value" shall be the
value determined in accordance with the following provisions:
<PAGE>
(a) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the Nasdaq National
Market System or SmallCap Market, or is quoted on the OTC Bulletin
Board, the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through, in
order of preference, the Nasdaq National Market System, the SmallCap
Market, or the OTC Bulletin Board, or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(b) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
stock exchange determined by the Board of Directors of the Company to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on the
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(c) If the Common Stock is at the time neither listed nor admitted to
trading on any exchange nor traded on the Nasdaq National Market
System or the SmallCap Market, or traded on the OTC Bulletin Board,
then such Fair Market Value shall be determined by the Board of
Directors of the Company after taking into account such factors as the
Board of Directors of the Company shall deem appropriate.
The Company covenants and agrees that all shares of Common Stock which may
be delivered upon the exercise of this Warrant will, upon delivery, be free from
all taxes, liens and charges with respect to the purchase thereof. This Warrant
shall not be exercised by Holder in any state where such exercise would be
unlawful such as a state in which the shares of common stock of the Company are
not registered or qualified as the case requires.
The Company agrees at all times to reserve or hold available a sufficient
number of shares of its Common Stock to cover the number of shares issuable upon
the exercise of this and all other Series "A" Warrants then outstanding.
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company, or to any other rights whatsoever except
the rights herein set forth, and no dividend shall be payable or accrue in
respect to this Warrant or the interest represented hereby, or the shares
purchasable hereunder, until or unless, and except to the extent that this
Warrant shall be exercised, and the Common Stock purchasable upon exercise
thereof shall become deliverable.
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<PAGE>
The Warrants are not redeemable and my not be canceled by the Company.
This Warrant is exchangeable upon the surrender hereof by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of shares as may be
designated by the registered owner at the time of such surrender.
The Company may deem and treat the Holder at any time as the absolute owner
hereof for all purposes and shall not be affected by any notice to the contrary.
The number of shares of Common Stock purchasable upon the exercise of this
Warrant and the purchase price shall be subject to adjustment from time to time
as follows:
(1) If the Company shall at any time subdivide its outstanding shares of
Common Stock by recapitalization, reclassification or split-up thereof, or if
the Company shall declare a stock dividend or distribute shares of Common Stock
to its stockholders, the number of shares of Common Stock purchasable upon
exercise of this Warrant immediately prior to such subdivision shall be
proportionately increased in each instance, and if the Company shall at any time
reduce the then outstanding shares of Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such
recapitalization, reclassification or combination shall be proportionately
decreased in each instance.
(2) If the Company shall distribute to all of the holders of its shares of
Common Stock any security (except as provided in the preceding paragraph) or
other assets (other than a distribution made as a dividend payable out of
earnings or out of any earned surplus legally available for dividends under the
laws of the jurisdiction of incorporation of the Company), the Board of
Directors of the Company shall make such equitable adjustment in the Warrant
Price in effect immediately prior to the record date of such distribution as may
be necessary to preserve to the Holder of this Warrant rights substantially
proportionate to those enjoyed hereunder by such Holder immediately prior to the
happening of such distribution. Any such adjustment shall become effective as
of the day following the record date for such distribution.
(3) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is required to be adjusted as herein provided, the
Warrant Price shall be adjusted (to the nearest cent) in each instance by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of the Warrants immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares of
Common Stock so purchasable immediately thereafter.
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<PAGE>
(4) In case of any reclassification of the outstanding shares of Common
Stock, other than a change covered by paragraph (1) above or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
that a consolidation merger in which the Company is the continuing corporation
and which does not result in any reclassification or capital reorganization of
the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expirations of the respective rights of exercise of the Warrant) to receive upon
the exercise thereof, for the same aggregate Warrant Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, which a holder of the number of shares of Common Stock
of the Company would obtain upon exercise of the Warrants immediately prior to
such event; and if any classification also results in a change in shares of
Common Stock covered by paragraph (1) above, then such adjustment shall be made
pursuant to both paragraph (1) above and this paragraph (4). The provisions of
this paragraph (4) shall similarly apply to successive reclassifications, or
capital reorganizations, mergers or consolidations, sales or other transfers.
(5) In case of the dissolution, liquidation or winding-up of the Company,
all rights under any of the Warrants outstanding and not expired by their terms
shall terminate on a date fixed by the Company, such date so fixed to be not
earlier than the date of the commencement of the proceedings for such
dissolution, liquidation or winding-up and not later than thirty (30) days after
such commencement date. Notice of such termination of purchase rights shall be
given to the registered Holder of this Warrant Certificate as the same shall
appear on the books of the Company, by certified or registered mail at least
thirty (30) days prior to such termination date.
(6) In case the Company shall, at any time prior to the Expiration Date of
the Warrants, and prior to the exercise thereof, offer to the holders of its
Common Stock any right to subscribe for additional shares of any class of
securities of the Company, then the Company shall give written notice thereof to
the registered Holder of this Warrant Certificate not less than thirty (30) days
prior to the date on which the books of the Company are closed or a record date
fixed for the determination of stockholders entitled to such subscription
rights. Such notice shall specify the date as to which the books shall be
closed or record date be fixed with respect to such offer or subscription, and
the rights of the Holder of this warrant to participate in such offer or
subscription shall terminate if this Warrant shall not be exercised on before
one day prior to the date of such closing of the books or such record date.
(7) In the case the Company shall, at any time prior to the Expiration
Date of the Warrants, and prior to the exercise thereof, offer or sell any
shares of Common Stock, or securities convertible into Common Stock, at a price
per share which is less than the exercise
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<PAGE>
price of these Warrants, then such exercise price shall be reduced to the lowest
offer or sale price of such shares.
The Holder of this Warrant shall have the registration rights pertaining to
the shares underlying the Warrants as set forth in this paragraph:
(1) Certain Definitions. As used in this paragraph, the following
definitions shall apply:
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registerable Securities" means the shares underlying this Warrant,
provided, however, that Registerable Securities shall not include any such
shares which have previously been registered or sold to the public.
"Registration Expenses" means all expenses incurred by the Company in
complying with this paragraph including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits incident to or required in connection
with any such registration. Registration Expenses shall not include
selling commissions, discounts or other compensation paid to underwriters
or other agents or brokers to effect the sale or the fees and expenses of
the Holder's counsel.
The terms "register", "registered" and "registration" refer to a
registration affected by preparing and filing a registration statement in
compliance with the Securities Act of 1933 (the "Securities Act"), and any
post-effective amendments filed in connection therewith, and the
declaration of the effectiveness of such registration statement
(2) Registration.
(i) Demand Registration. If Holders owning a majority of the
Registerable Securities shall so request in writing prior to March 24,
2004, the Company shall promptly proceed at its own expense to prepare and
file with the Commission one registration statement under the Securities
Act, with respect to the Registerable Securities. Within 15 days following
receipt of such request, the Company shall:
(aa) promptly give to the other Holders written notice thereof:
and
(bb) include in such registration (and any related qualification
under blue sky laws or other compliance), all the additional
Registerable Securities specified in a written request from the
Holders received by the Company within 15 days after the Company gives
such written notice, subject to the provisions below.
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<PAGE>
(ii) Piggy-back Registration. If at any time, or from time to
time, but prior to March 24, 2004, the Company shall determine to register
any equity securities, either for its own account or the account of a
security holder or holders, other than (i) a registration relating solely
to employee benefit plans, or (ii) a registration relating solely to a Rule
145 transaction, using a form that would permit inclusion of Registerable
Securities, the Company shall:
(aa) promptly give to the Holder or Holders written notice
thereof: and
(bb) include in such registration (and any related
qualification under blue sky laws or other compliance), all the
Registerable Securities specified in a written request from the Holder
or Holders received by the Company within 15 days after the Company
gives such written notice, subject to the provisions below.
(iii) Underwriting. If the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the registration of
Registerable Securities held by the Holder in such manner as the
managing underwriter may determine. Priority shall be given by such
managing underwriter to shares being registered by the Company for its
own account and for the account of any shareholders requiring the
Company to proceed with such registration.
(iv) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under
this paragraph prior to the effectiveness of such registration,
whether or not any Holder has elected to include securities in such
registration.
(3) Expenses of Registration. All Registration Expenses incurred in
connection with the registration, qualification or compliance pursuant to this
paragraph shall be borne by the Company.
(4) Registration Procedures. If and whenever the Company effects the
registration of Registerable Securities, the Company shall employ reasonable
efforts to:
(i) Furnish to each Holder such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents, as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Registerable Securities.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of Registerable Securities
-6-
<PAGE>
covered by such registration statement, including such amendments and
supplements as may be necessary to reflect the Holder's intended method of
disposition of such Registerable Securities; provided that Company shall
have no obligation to keep such registration statement effective and
current for any particular period.
(5) Indemnification. In order to include Registerable Securities in a
registration statement under this paragraph, a Holder will be required to
indemnify the Company, each of its directors and officers, its legal counsel and
independent accountants, each underwriter, if any, of the Company's securities
covered by such registration statement, each person who controls the Company or
such underwriter within the meaning of Section 15 of the Securities Act, and
each other selling shareholder, each of its officers and directors and partners
and each person controlling such selling shareholder within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading and will reimburse the Company, such holders, such directors,
officers, counsel, accountants, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, lose, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by the Holder
for use therein.
(6) Information by Holder. The Holder shall furnish to the Company such
information regarding such Holder, the Registerable Securities and the
distribution proposed by the Holder as the Company may request in writing.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer effective this 25th day of April 2000.
Tutornet.com Group, Inc.
By /s/ Van R. Perkins
--------------------------------------
Van R. Perkins, President
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<PAGE>
TUTORNET.COM GROUP, INC.
ASSIGNMENT FORM
(To be executed by the registered Holder to effect a
Transfer of the Within Warrant)
For Value Received ______________________________ hereby sells, assigns, and
transfer unto
________________________________________________________________________________
(Please print or typewrite name and address, including postal zip code of
assignee)
___________________ of the Warrants and the rights represented thereby to
purchase Common Stock in accordance with the terms and conditions thereof, and
does hereby irrevocable constitute and appoints Tutornet.com Group, Inc.
attorney to transfer this Warrant in whole or in part on the books of
Tutornet.com Group, Inc. with full power of substitution. If such number of
Warrants to be assigned shall not be all of the Warrants represented by this
certificate, a new Warrant of like tenor for the balance of the remaining shares
purchasable hereunder shall be delivered to the undersigned.
Date:_______________________ Signed_________________________
<PAGE>
TUTORNET.COM GROUP, INC.
SUBSCRIPTION FORM
(To Be Executed by the Registered Holder to Exercise The Rights
To Purchase Common Stock Evidenced By The Within Warrant)
The undersigned hereby irrevocably subscribes for ______________________________
shares of the Common Stock of Tutornet.com Group, Inc. pursuant and in
accordance with the terms and conditions of the Warrant and hereby makes payment
of $ _______________________therefor, and requests that certificate(s) for such
shares be issued in the name of the undersigned and be delivered to the address
stated below, and if such number of shares shall not be all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be delivered to the undersigned.
Date:_______________________ Signed_________________________
SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED
NATIONAL STOCK EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK), OR A TRUST
COMPANY. THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE WARRANT. IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
<PAGE>
TUTORNET.COM GROUP, INC.
CONVERSION FORM
(To Be Executed by the Registered Holder to Convert the Warrants
Evidenced by this Warrant Certificate into Shares of Common Stock)
The undersigned hereby irrevocably converts _____________ warrants into
______________________________ shares of the Common Stock of Tutornet.com Group,
Inc. pursuant and in accordance with the terms and conditions of this Warrant
based upon the Fair Market Value of the Common Stock on the date of exercise,
and requests that certificate(s) for such shares be issued in the name of the
undersigned and be delivered to the address stated below, and if such number of
shares, together with the warrants canceled, shall not be all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be delivered to the undersigned.
Date:_______________________ Signed_________________________
SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED
NATIONAL STOCK EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK), OR A TRUST
COMPANY. THE SIGNATURE TO THIS CONVERSION FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WARRANT. IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
<PAGE>
Exhibit 4.4
TUTORNET.COM GROUP, INC.
(A Delaware Corporation)
WARRANT CERTIFICATE
WARRANT NUMBER SERIES A-1 NUMBER OF WARRANTS: 2,500,000
SERIES "A" WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF
THE $.00001 PAR VALUE COMMON STOCK OF TUTORNET.COM GROUP, INC.
THE ISSUE OF THESE WARRANTS HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE ACT OR
THE LAWS OF THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, AND ITS COUNSEL, TO THE EFFECT THAT ANY PROPOSED
SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND SUCH STATE
STATUTES.
FOR VALUE RECEIVED, Tutornet.com Group, Inc. (the "Company"), a Delaware
corporation, hereby certifies that Business Development Corporation, a Colorado
corporation, the registered holder hereof, or registered assigns (in either case
the "Holder") is entitled to purchase, subject to the terms and conditions
hereinafter set forth, at any time before March 24, 2004, and not thereafter,
one (1) share of the Common Stock of the Company for each one (1) Warrant
exercised at a price of $0.50 per share of Common Stock and receive a
certificate(s) for the number of shares of Common Stock so purchased upon
presentation and surrender of this Warrant Certificate together with the Form of
Subscription, constituting a part hereof, to the transfer agent of the Company
duly executed and accompanied by payment of the purchase price for all shares
purchased, either by certified check or bank draft, payable to the order of the
Company. Fractions of shares of the Common Stock of the Company will not be
issued. Any denominations of money less that $1.00 paid by the Holder will be
retained by the Company.
During the period that this Warrant is exercisable, the Holder may, in lieu
of paying the cash exercise price, convert this Warrant, in whole or in part,
into the number of shares determined by dividing (a) the aggregate Fair Market
Value (determined on the date of exercise) of the shares of the Company's Common
Stock issuable upon exercise of this Warrant minus the aggregate Warrant Price
of such shares by (b) the Fair Market Value (determined on the date of exercise)
of one share. For purposes of this paragraph, "Fair Market Value" shall be the
value determined in accordance with the following provisions:
<PAGE>
(a) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the Nasdaq National
Market System or SmallCap Market, or is quoted on the OTC Bulletin
Board, the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through, in
order of preference, the Nasdaq National Market System, the SmallCap
Market, or the OTC Bulletin Board, or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(b) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
stock exchange determined by the Board of Directors of the Company to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on the
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(c) If the Common Stock is at the time neither listed nor admitted to
trading on any exchange nor traded on the Nasdaq National Market
System or the SmallCap Market, or traded on the OTC Bulletin Board,
then such Fair Market Value shall be determined by the Board of
Directors of the Company after taking into account such factors as the
Board of Directors of the Company shall deem appropriate.
The Company covenants and agrees that all shares of Common Stock which may
be delivered upon the exercise of this Warrant will, upon delivery, be free from
all taxes, liens and charges with respect to the purchase thereof. This Warrant
shall not be exercised by Holder in any state where such exercise would be
unlawful such as a state in which the shares of common stock of the Company are
not registered or qualified as the case requires.
The Company agrees at all times to reserve or hold available a sufficient
number of shares of its Common Stock to cover the number of shares issuable upon
the exercise of this and all other Series "A" Warrants then outstanding.
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company, or to any other rights whatsoever except
the rights herein set forth, and no dividend shall be payable or accrue in
respect to this Warrant or the interest represented hereby, or the shares
purchasable hereunder, until or unless, and except to the extent that this
Warrant shall be exercised, and the Common Stock purchasable upon exercise
thereof shall become deliverable.
-2-
<PAGE>
The Warrants are not redeemable and my not be canceled by the Company.
This Warrant is exchangeable upon the surrender hereof by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of shares as may be
designated by the registered owner at the time of such surrender.
The Company may deem and treat the Holder at any time as the absolute owner
hereof for all purposes and shall not be affected by any notice to the contrary.
The number of shares of Common Stock purchasable upon the exercise of this
Warrant and the purchase price shall be subject to adjustment from time to time
as follows:
(1) If the Company shall at any time subdivide its outstanding shares of
Common Stock by recapitalization, reclassification or split-up thereof, or if
the Company shall declare a stock dividend or distribute shares of Common Stock
to its stockholders, the number of shares of Common Stock purchasable upon
exercise of this Warrant immediately prior to such subdivision shall be
proportionately increased in each instance, and if the Company shall at any time
reduce the then outstanding shares of Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such
recapitalization, reclassification or combination shall be proportionately
decreased in each instance.
(2) If the Company shall distribute to all of the holders of its shares of
Common Stock any security (except as provided in the preceding paragraph) or
other assets (other than a distribution made as a dividend payable out of
earnings or out of any earned surplus legally available for dividends under the
laws of the jurisdiction of incorporation of the Company), the Board of
Directors of the Company shall make such equitable adjustment in the Warrant
Price in effect immediately prior to the record date of such distribution as may
be necessary to preserve to the Holder of this Warrant rights substantially
proportionate to those enjoyed hereunder by such Holder immediately prior to the
happening of such distribution. Any such adjustment shall become effective as
of the day following the record date for such distribution.
(3) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is required to be adjusted as herein provided, the
Warrant Price shall be adjusted (to the nearest cent) in each instance by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of the Warrants immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares of
Common Stock so purchasable immediately thereafter.
-3-
<PAGE>
(4) In case of any reclassification of the outstanding shares of Common
Stock, other than a change covered by paragraph (1) above or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
that a consolidation merger in which the Company is the continuing corporation
and which does not result in any reclassification or capital reorganization of
the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expirations of the respective rights of exercise of the Warrant) to receive upon
the exercise thereof, for the same aggregate Warrant Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, which a holder of the number of shares of Common Stock
of the Company would obtain upon exercise of the Warrants immediately prior to
such event; and if any classification also results in a change in shares of
Common Stock covered by paragraph (1) above, then such adjustment shall be made
pursuant to both paragraph (1) above and this paragraph (4). The provisions of
this paragraph (4) shall similarly apply to successive reclassifications, or
capital reorganizations, mergers or consolidations, sales or other transfers.
(5) In case of the dissolution, liquidation or winding-up of the Company,
all rights under any of the Warrants outstanding and not expired by their terms
shall terminate on a date fixed by the Company, such date so fixed to be not
earlier than the date of the commencement of the proceedings for such
dissolution, liquidation or winding-up and not later than thirty (30) days after
such commencement date. Notice of such termination of purchase rights shall be
given to the registered Holder of this Warrant Certificate as the same shall
appear on the books of the Company, by certified or registered mail at least
thirty (30) days prior to such termination date.
(6) In case the Company shall, at any time prior to the Expiration Date of
the Warrants, and prior to the exercise thereof, offer to the holders of its
Common Stock any right to subscribe for additional shares of any class of
securities of the Company, then the Company shall give written notice thereof to
the registered Holder of this Warrant Certificate not less than thirty (30) days
prior to the date on which the books of the Company are closed or a record date
fixed for the determination of stockholders entitled to such subscription
rights. Such notice shall specify the date as to which the books shall be
closed or record date be fixed with respect to such offer or subscription, and
the rights of the Holder of this warrant to participate in such offer or
subscription shall terminate if this Warrant shall not be exercised on before
one day prior to the date of such closing of the books or such record date.
(7) In the case the Company shall, at any time prior to the Expiration Date
of the Warrants, and prior to the exercise thereof, offer or sell any shares of
Common Stock, or securities convertible into Common Stock, at a price per share
which is less than the exercise
-4-
<PAGE>
price of these Warrants, then such exercise price shall be reduced to the lowest
offer or sale price of such shares.
The Holder of this Warrant shall have the registration rights pertaining to
the shares underlying the Warrants as set forth in this paragraph:
(1) Certain Definitions. As used in this paragraph, the following
definitions shall apply:
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registerable Securities" means the shares underlying this Warrant,
provided, however, that Registerable Securities shall not include any such
shares which have previously been registered or sold to the public.
"Registration Expenses" means all expenses incurred by the Company in
complying with this paragraph including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits incident to or required in connection
with any such registration. Registration Expenses shall not include
selling commissions, discounts or other compensation paid to underwriters
or other agents or brokers to effect the sale or the fees and expenses of
the Holder's counsel.
The terms "register", "registered" and "registration" refer to a
registration affected by preparing and filing a registration statement in
compliance with the Securities Act of 1933 (the "Securities Act"), and any
post-effective amendments filed in connection therewith, and the
declaration of the effectiveness of such registration statement
(2) Registration.
(i) Demand Registration. If Holders owning a majority of the
Registerable Securities shall so request in writing prior to March 24,
2004, the Company shall promptly proceed at its own expense to prepare and
file with the Commission one registration statement under the Securities
Act, with respect to the Registerable Securities. Within 15 days following
receipt of such request, the Company shall:
(aa) promptly give to the other Holders written notice thereof:
and
(bb) include in such registration (and any related qualification
under blue sky laws or other compliance), all the additional
Registerable Securities specified in a written request from the
Holders received by the Company within 15 days after the Company gives
such written notice, subject to the provisions below.
-5-
<PAGE>
(ii) Piggy-back Registration. If at any time, or from time to time,
but prior to March 24, 2004, the Company shall determine to register any
equity securities, either for its own account or the account of a security
holder or holders, other than (i) a registration relating solely to
employee benefit plans, or (ii) a registration relating solely to a Rule
145 transaction, using a form that would permit inclusion of Registerable
Securities, the Company shall:
(aa) promptly give to the Holder or Holders written notice
thereof: and
(bb) include in such registration (and any related qualification
under blue sky laws or other compliance), all the Registerable
Securities specified in a written request from the Holder or Holders
received by the Company within 15 days after the Company gives such
written notice, subject to the provisions below.
(iii) Underwriting. If the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the registration of
Registerable Securities held by the Holder in such manner as the
managing underwriter may determine. Priority shall be given by such
managing underwriter to shares being registered by the Company for its
own account and for the account of any shareholders requiring the
Company to proceed with such registration.
(iv) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under
this paragraph prior to the effectiveness of such registration,
whether or not any Holder has elected to include securities in such
registration.
(3) Expenses of Registration. All Registration Expenses incurred in
connection with the registration, qualification or compliance pursuant to this
paragraph shall be borne by the Company.
(4) Registration Procedures. If and whenever the Company effects the
registration of Registerable Securities, the Company shall employ reasonable
efforts to:
(i) Furnish to each Holder such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents, as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Registerable Securities.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of Registerable Securities
-6-
<PAGE>
covered by such registration statement, including such amendments and
supplements as may be necessary to reflect the Holder's intended method of
disposition of such Registerable Securities; provided that Company shall
have no obligation to keep such registration statement effective and
current for any particular period.
(5) Indemnification. In order to include Registerable Securities in a
registration statement under this paragraph, a Holder will be required to
indemnify the Company, each of its directors and officers, its legal counsel and
independent accountants, each underwriter, if any, of the Company's securities
covered by such registration statement, each person who controls the Company or
such underwriter within the meaning of Section 15 of the Securities Act, and
each other selling shareholder, each of its officers and directors and partners
and each person controlling such selling shareholder within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading and will reimburse the Company, such holders, such directors,
officers, counsel, accountants, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, lose, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by the Holder
for use therein.
(6) Information by Holder. The Holder shall furnish to the Company such
information regarding such Holder, the Registerable Securities and the
distribution proposed by the Holder as the Company may request in writing.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer effective this 25th day of April 2000.
Tutornet.com Group, Inc.
By /s/ Van R. Perkins
--------------------------------------
Van R. Perkins, President
-7-
<PAGE>
TUTORNET.COM GROUP, INC.
ASSIGNMENT FORM
(To be executed by the registered Holder to effect a
Transfer of the Within Warrant)
For Value Received______________________hereby sells, assigns, and transfer unto
________________________________________________________________________________
(Please print or typewrite name and address, including postal zip code of
assignee)
___________________ of the Warrants and the rights represented thereby to
purchase Common Stock in accordance with the terms and conditions thereof, and
does hereby irrevocable constitute and appoints Tutornet.com Group, Inc.
attorney to transfer this Warrant in whole or in part on the books of
Tutornet.com Group, Inc. with full power of substitution. If such number of
Warrants to be assigned shall not be all of the Warrants represented by this
certificate, a new Warrant of like tenor for the balance of the remaining shares
purchasable hereunder shall be delivered to the undersigned.
Date:________________________ Signed________________________
<PAGE>
TUTORNET.COM GROUP, INC.
SUBSCRIPTION FORM
(To Be Executed by the Registered Holder to Exercise The Rights
To Purchase Common Stock Evidenced By The Within Warrant)
The undersigned hereby irrevocably subscribes for ______________________________
shares of the Common Stock of Tutornet.com Group, Inc. pursuant and in
accordance with the terms and conditions of the Warrant and hereby makes payment
of $ _______________________therefor, and requests that certificate(s) for such
shares be issued in the name of the undersigned and be delivered to the address
stated below, and if such number of shares shall not be all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be delivered to the undersigned.
Date:________________________ Signed________________________
SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED
NATIONAL STOCK EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK), OR A TRUST
COMPANY. THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE WARRANT. IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
<PAGE>
TUTORNET.COM GROUP, INC.
CONVERSION FORM
(To Be Executed by the Registered Holder to Convert the Warrants
Evidenced by this Warrant Certificate into Shares of Common Stock)
The undersigned hereby irrevocably converts _____________ warrants into
___________________ shares of the Common Stock of Tutornet.com Group, Inc.
pursuant and in accordance with the terms and conditions of this Warrant based
upon the Fair Market Value of the Common Stock on the date of exercise, and
requests that certificate(s) for such shares be issued in the name of the
undersigned and be delivered to the address stated below, and if such number of
shares, together with the warrants canceled, shall not be all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be delivered to the undersigned.
Date:________________________ Signed ________________________
SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED
NATIONAL STOCK EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK), OR A TRUST
COMPANY. THE SIGNATURE TO THIS CONVERSION FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WARRANT. IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
<PAGE>
Exhibit 4.5
TUTORNET.COM GROUP, INC.
(A Delaware Corporation)
WARRANT CERTIFICATE
WARRANT NUMBER SERIES B-1 NUMBER OF WARRANTS: 31,682
SERIES "B" WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF
THE $.00001 PAR VALUE COMMON STOCK OF TUTORNET.COM GROUP, INC.
THE ISSUE OF THESE WARRANTS HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE ACT OR
THE LAWS OF THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, AND ITS COUNSEL, TO THE EFFECT THAT ANY PROPOSED
SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND SUCH STATE
STATUTES.
FOR VALUE RECEIVED, Tutornet.com Group, Inc. (the "Company"), a Delaware
corporation, hereby certifies that Business Development Corporation, a Colorado
corporation, the registered holder hereof, or registered assigns (in either case
the "Holder") is entitled to purchase, subject to the terms and conditions
hereinafter set forth, at any time before April 25, 2004, and not thereafter,
one (1) share of the Common Stock of the Company for each one (1) Warrant
exercised at a price of $9.15 per share of Common Stock and receive a
certificate(s) for the number of shares of Common Stock so purchased upon
presentation and surrender of this Warrant Certificate together with the Form of
Subscription, constituting a part hereof, to the transfer agent of the Company
duly executed and accompanied by payment of the purchase price for all shares
purchased, either by certified check or bank draft, payable to the order of the
Company. Fractions of shares of the Common Stock of the Company will not be
issued. Any denominations of money less that $1.00 paid by the Holder will be
retained by the Company.
During the period that this Warrant is exercisable, the Holder may, in lieu
of paying the cash exercise price, convert this Warrant, in whole or in part,
into the number of shares determined by dividing (a) the aggregate Fair Market
Value (determined on the date of exercise) of the shares of the Company's Common
Stock issuable upon exercise of this Warrant minus the aggregate Warrant Price
of such shares by (b) the Fair Market Value (determined on the date of exercise)
of one share. For purposes of this paragraph, "Fair Market Value" shall be the
value determined in accordance with the following provisions:
<PAGE>
(a) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the Nasdaq National
Market System or SmallCap Market, or is quoted on the OTC Bulletin
Board, the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through, in
order of preference, the Nasdaq National Market System, the SmallCap
Market, or the OTC Bulletin Board, or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(b) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
stock exchange determined by the Board of Directors of the Company to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on the
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(c) If the Common Stock is at the time neither listed nor admitted to
trading on any exchange nor traded on the Nasdaq National Market
System or the SmallCap Market, or traded on the OTC Bulletin Board,
then such Fair Market Value shall be determined by the Board of
Directors of the Company after taking into account such factors as the
Board of Directors of the Company shall deem appropriate.
The Company covenants and agrees that all shares of Common Stock which may
be delivered upon the exercise of this Warrant will, upon delivery, be free from
all taxes, liens and charges with respect to the purchase thereof. This Warrant
shall not be exercised by Holder in any state where such exercise would be
unlawful such as a state in which the shares of common stock of the Company are
not registered or qualified as the case requires.
The Company agrees at all times to reserve or hold available a sufficient
number of shares of its Common Stock to cover the number of shares issuable upon
the exercise of this and all other Series "A" Warrants then outstanding.
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company, or to any other rights whatsoever except
the rights herein set forth, and no dividend shall be payable or accrue in
respect to this Warrant or the interest represented hereby, or the shares
purchasable hereunder, until or unless, and except to the extent that this
Warrant shall be exercised, and the Common Stock purchasable upon exercise
thereof shall become deliverable.
-2-
<PAGE>
The Warrants are not redeemable and my not be canceled by the Company.
This Warrant is exchangeable upon the surrender hereof by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of shares as may be
designated by the registered owner at the time of such surrender.
The Company may deem and treat the Holder at any time as the absolute owner
hereof for all purposes and shall not be affected by any notice to the contrary.
The number of shares of Common Stock purchasable upon the exercise of this
Warrant and the purchase price shall be subject to adjustment from time to time
as follows:
(1) If the Company shall at any time subdivide its outstanding shares of
Common Stock by recapitalization, reclassification or split-up thereof, or if
the Company shall declare a stock dividend or distribute shares of Common Stock
to its stockholders, the number of shares of Common Stock purchasable upon
exercise of this Warrant immediately prior to such subdivision shall be
proportionately increased in each instance, and if the Company shall at any time
reduce the then outstanding shares of Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such
recapitalization, reclassification or combination shall be proportionately
decreased in each instance.
(2) If the Company shall distribute to all of the holders of its shares of
Common Stock any security (except as provided in the preceding paragraph) or
other assets (other than a distribution made as a dividend payable out of
earnings or out of any earned surplus legally available for dividends under the
laws of the jurisdiction of incorporation of the Company), the Board of
Directors of the Company shall make such equitable adjustment in the Warrant
Price in effect immediately prior to the record date of such distribution as may
be necessary to preserve to the Holder of this Warrant rights substantially
proportionate to those enjoyed hereunder by such Holder immediately prior to the
happening of such distribution. Any such adjustment shall become effective as
of the day following the record date for such distribution.
(3) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is required to be adjusted as herein provided, the
Warrant Price shall be adjusted (to the nearest cent) in each instance by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of the Warrants immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares of
Common Stock so purchasable immediately thereafter.
-3-
<PAGE>
(4) In case of any reclassification of the outstanding shares of Common
Stock, other than a change covered by paragraph (1) above or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
that a consolidation merger in which the Company is the continuing corporation
and which does not result in any reclassification or capital reorganization of
the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expirations of the respective rights of exercise of the Warrant) to receive upon
the exercise thereof, for the same aggregate Warrant Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, which a holder of the number of shares of Common Stock
of the Company would obtain upon exercise of the Warrants immediately prior to
such event; and if any classification also results in a change in shares of
Common Stock covered by paragraph (1) above, then such adjustment shall be made
pursuant to both paragraph (1) above and this paragraph (4). The provisions of
this paragraph (4) shall similarly apply to successive reclassifications, or
capital reorganizations, mergers or consolidations, sales or other transfers.
(5) In case of the dissolution, liquidation or winding-up of the Company,
all rights under any of the Warrants outstanding and not expired by their terms
shall terminate on a date fixed by the Company, such date so fixed to be not
earlier than the date of the commencement of the proceedings for such
dissolution, liquidation or winding-up and not later than thirty (30) days after
such commencement date. Notice of such termination of purchase rights shall be
given to the registered Holder of this Warrant Certificate as the same shall
appear on the books of the Company, by certified or registered mail at least
thirty (30) days prior to such termination date.
(6) In case the Company shall, at any time prior to the Expiration Date of
the Warrants, and prior to the exercise thereof, offer to the holders of its
Common Stock any right to subscribe for additional shares of any class of
securities of the Company, then the Company shall give written notice thereof to
the registered Holder of this Warrant Certificate not less than thirty (30) days
prior to the date on which the books of the Company are closed or a record date
fixed for the determination of stockholders entitled to such subscription
rights. Such notice shall specify the date as to which the books shall be
closed or record date be fixed with respect to such offer or subscription, and
the rights of the Holder of this warrant to participate in such offer or
subscription shall terminate if this Warrant shall not be exercised on before
one day prior to the date of such closing of the books or such record date.
(7) In the case the Company shall, at any time prior to the Expiration Date
of the Warrants, and prior to the exercise thereof, offer or sell any shares of
Common Stock, or securities convertible into Common Stock, at a price per share
which is less than the exercise
-4-
<PAGE>
price of these Warrants, then such exercise price shall be reduced to the lowest
offer or sale price of such shares.
The Holder of this Warrant shall have the registration rights pertaining to
the shares underlying the Warrants as set forth in this paragraph:
(1) Certain Definitions. As used in this paragraph, the following
definitions shall apply:
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registerable Securities" means the shares underlying this Warrant,
provided, however, that Registerable Securities shall not include any such
shares which have previously been registered or sold to the public.
"Registration Expenses" means all expenses incurred by the Company in
complying with this paragraph including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits incident to or required in connection
with any such registration. Registration Expenses shall not include
selling commissions, discounts or other compensation paid to underwriters
or other agents or brokers to effect the sale or the fees and expenses of
the Holder's counsel.
The terms "register", "registered" and "registration" refer to a
registration affected by preparing and filing a registration statement in
compliance with the Securities Act of 1933 (the "Securities Act"), and any
post-effective amendments filed in connection therewith, and the
declaration of the effectiveness of such registration statement
(2) Registration.
(i) Demand Registration. If Holders owning a majority of the
Registerable Securities shall so request in writing prior to March 24,
2004, the Company shall promptly proceed at its own expense to prepare and
file with the Commission one registration statement under the Securities
Act, with respect to the Registerable Securities. Within 15 days following
receipt of such request, the Company shall:
(aa) promptly give to the other Holders written notice thereof:
and
(bb) include in such registration (and any related qualification
under blue sky laws or other compliance), all the additional
Registerable Securities specified in a written request from the
Holders received by the Company within 15 days after the Company gives
such written notice, subject to the provisions below.
-5-
<PAGE>
(ii) Piggy-back Registration. If at any time, or from time to time,
but prior to March 24, 2004, the Company shall determine to register any
equity securities, either for its own account or the account of a security
holder or holders, other than (i) a registration relating solely to
employee benefit plans, or (ii) a registration relating solely to a Rule
145 transaction, using a form that would permit inclusion of Registerable
Securities, the Company shall:
(aa) promptly give to the Holder or Holders written notice
thereof: and
(bb) include in such registration (and any related qualification
under blue sky laws or other compliance), all the Registerable
Securities specified in a written request from the Holder or Holders
received by the Company within 15 days after the Company gives such
written notice, subject to the provisions below.
(iii) Underwriting. If the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the registration of
Registerable Securities held by the Holder in such manner as the
managing underwriter may determine. Priority shall be given by such
managing underwriter to shares being registered by the Company for its
own account and for the account of any shareholders requiring the
Company to proceed with such registration.
(iv) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under
this paragraph prior to the effectiveness of such registration,
whether or not any Holder has elected to include securities in such
registration.
(3) Expenses of Registration. All Registration Expenses incurred in
connection with the registration, qualification or compliance pursuant to this
paragraph shall be borne by the Company.
(4) Registration Procedures. If and whenever the Company effects the
registration of Registerable Securities, the Company shall employ reasonable
efforts to:
(i) Furnish to each Holder such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents, as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Registerable Securities.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of Registerable Securities
-6-
<PAGE>
covered by such registration statement, including such amendments and
supplements as may be necessary to reflect the Holder's intended method of
disposition of such Registerable Securities; provided that Company shall
have no obligation to keep such registration statement effective and
current for any particular period.
(5) Indemnification. In order to include Registerable Securities in a
registration statement under this paragraph, a Holder will be required to
indemnify the Company, each of its directors and officers, its legal counsel and
independent accountants, each underwriter, if any, of the Company's securities
covered by such registration statement, each person who controls the Company or
such underwriter within the meaning of Section 15 of the Securities Act, and
each other selling shareholder, each of its officers and directors and partners
and each person controlling such selling shareholder within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading and will reimburse the Company, such holders, such directors,
officers, counsel, accountants, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, lose, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by the Holder
for use therein.
(6) Information by Holder. The Holder shall furnish to the Company such
information regarding such Holder, the Registerable Securities and the
distribution proposed by the Holder as the Company may request in writing.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer effective this 25th day of April 2000.
Tutornet.com Group, Inc.
By /s/ Van R. Perkins
--------------------------------------
Van R. Perkins, President
-7-
<PAGE>
TUTORNET.COM GROUP, INC.
ASSIGNMENT FORM
(To be executed by the registered Holder to effect a
Transfer of the Within Warrant)
For Value Received ____________________ hereby sells, assigns, and transfer unto
________________________________________________________________________________
(Please print or typewrite name and address, including postal zip code of
assignee)
___________________ of the Warrants and the rights represented thereby to
purchase Common Stock in accordance with the terms and conditions thereof, and
does hereby irrevocable constitute and appoints Tutornet.com Group, Inc.
attorney to transfer this Warrant in whole or in part on the books of
Tutornet.com Group, Inc. with full power of substitution. If such number of
Warrants to be assigned shall not be all of the Warrants represented by this
certificate, a new Warrant of like tenor for the balance of the remaining shares
purchasable hereunder shall be delivered to the undersigned.
Date:_________________________ Signed_________________________
<PAGE>
TUTORNET.COM GROUP, INC.
SUBSCRIPTION FORM
(To Be Executed by the Registered Holder to Exercise The Rights
To Purchase Common Stock Evidenced By The Within Warrant)
The undersigned hereby irrevocably subscribes for ______________________________
shares of the Common Stock of Tutornet.com Group, Inc. pursuant and in
accordance with the terms and conditions of the Warrant and hereby makes payment
of $ _______________________ therefor, and requests that certificate(s) for such
shares be issued in the name of the undersigned and be delivered to the address
stated below, and if such number of shares shall not be all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be delivered to the undersigned.
Date:_________________________ Signed_________________________
SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED
NATIONAL STOCK EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK), OR A TRUST
COMPANY. THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE WARRANT. IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
<PAGE>
TUTORNET.COM GROUP, INC.
CONVERSION FORM
(To Be Executed by the Registered Holder to Convert the Warrants
Evidenced by this Warrant Certificate into Shares of Common Stock)
The undersigned hereby irrevocably converts _____________ warrants into
______________________________ shares of the Common Stock of Tutornet.com Group,
Inc. pursuant and in accordance with the terms and conditions of this Warrant
based upon the Fair Market Value of the Common Stock on the date of exercise,
and requests that certificate(s) for such shares be issued in the name of the
undersigned and be delivered to the address stated below, and if such number of
shares, together with the warrants canceled, shall not be all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of the
remaining shares purchasable hereunder be delivered to the undersigned.
Date:_________________________ Signed_________________________
SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED
NATIONAL STOCK EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK), OR A TRUST
COMPANY. THE SIGNATURE TO THIS CONVERSION FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WARRANT. IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 DEC-31-1999
<CASH> 208,559 115,220
<SECURITIES> 570,963 570,963
<RECEIVABLES> 144,815 147,176
<ALLOWANCES> 131,391 131,391
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,602,405 1,669,203
<PP&E> 918,061 965,603
<DEPRECIATION> 47,977 6,132
<TOTAL-ASSETS> 4,122,142 4,301,549
<CURRENT-LIABILITIES> 10,478,152 8,369,635
<BONDS> 0 0
0 0
0 0
<COMMON> 211 211
<OTHER-SE> 6,230,641 3,708,691
<TOTAL-LIABILITY-AND-EQUITY> 4,122,142 4,301,549
<SALES> 27,376 132,126
<TOTAL-REVENUES> 27,376 132,126
<CGS> 575,121 2,212,934
<TOTAL-COSTS> 3,450,144 12,086,152
<OTHER-EXPENSES> 61,860 1,320
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 26,454 110,043
<INCOME-PRETAX> (3,484,628) (11,955,346)
<INCOME-TAX> 0 (190,589)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,777,731) (6,002,379)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
Exhibit 99.1
[LETTERHEAD OF PRINCETON INVESTMENTS, LTD.]
May 17, 2000
Euburn Forde, President & CEO
Tutornet.com Group, Inc.
11410 Isaac Newton Square North
Reston, Va. 20190
Dear Mr. Forde:
Princeton Investments, Ltd. has completed its due-diligences on
Tutornet.com Group, Inc. and will proceed with its investment of $30 million in
your company. We will wire this money into Tutornet bank account as specified in
your letter by May 19th 2000.
Please write Princeton Investments, Ltd. on the 5 million Class A and 5 million
Class B stock certificates. The shares must be free-trading and Tutornet is
responsible for registering them with the SEC. You have our consent to use this
letter as an exhibit in your SEC 8-K filing.
Sincerely Yours,
/s/ Jane Grace
Jane Grace, President & CEO
Princeton Investments, Ltd.
