<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to ____________ .
Commission File Number 0-6106
UNITED LEISURE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-2652243
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1990 Westwood Boulevard, Los Angeles, California 90025
(Address of Principal Executive Offices) (Zip Code)
310/441-0900
(Registrant's Telephone Number, Including Area Code)
Check whether the Issuer (1) filed all reports to be filed by Section 13 or
15(d) during the preceding 12 months (or for such shorter period that the
Registrant was required to file such Reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
YES [X] NO [__]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at August 11, 1999
- -------------------- --------------------------------
Common Stock, par 15,935,854 shares
value $.0l per share
Transitional Small Business Disclosure Format (check one):
YES [__] NO [X]
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,224,764 $ 799,369
Receivables 33,388 53,153
Prepaid expenses and other current assets 46,612 78,082
------------ ------------
TOTAL CURRENT ASSETS 1,304,764 930,604
------------ ------------
PROPERTY AND EQUIPMENT, NET 276,880 384,984
------------ ------------
INVESTMENTS
Investment in United Hotel at equity - related party 3,386,117 3,432,452
Investment in HEP II at equity - related party 700,000 700,000
Investment in Genisys at equity - related party - 210,133
Investment in Grand Havana at fair value - related party 38,667 38,667
------------ ------------
TOTAL INVESTMENTS 4,124,784 4,381,252
------------ ------------
OTHER ASSETS
Loan receivable from Grand Havana - related party 719,015 619,298
Due from former officer 420,263 332,627
Assets held for sale 1,616,387 1,663,857
Deposits and other assets 80,137 78,929
------------ ------------
2,835,802 2,694,711
------------ ------------
$ 8,542,230 $ 8,391,551
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 2,622,000 $ 1,900,000
Accrued interest 555,155 406,808
Accounts payable and accrued expenses 473,499 478,785
Due to related parties 108,587 107,535
Deferred revenues 114,525 28,060
Deposits and other 2,611 5,652
Litigation settlement 185,080 -
------------ ------------
TOTAL CURRENT LIABILITIES 4,061,377 2,926,840
LONG-TERM DEBT 120,000 842,000
COMMON STOCK SUBJECT TO REPURCHASE - 150,001 SHARES 132,000 78,000
STOCKHOLDERS' EQUITY
Preferred stock, $100 par value; authorized - 100,000 shares;
issued and outstanding - none - -
Common stock, $.01 par value; authorized - 30,000,000 shares;
issued and outstanding - 15,785,854 shares at June 30, 1999
and 13,918,849 shares at December 31, 1998 157,858 139,188
Additional paid-in capital 26,695,498 24,844,168
Accumulated deficit (22,624,503) (20,438,645
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,228,853 4,544,711
------------ ------------
$ 8,542,230 $ 8,391,551
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- -------------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUE
Licensing fees $ 200,000 $ 410,817 $ 200,000 410,817
Children's recreational activities 282,097 444,584 601,540 931,493
----------- ----------- ----------- -----------
TOTAL REVENUE 482,097 855,401 801,540 1,342,310
EXPENSES
Direct operating expenses 813,379 765,211 1,517,891 1,433,581
Selling, general and administrative expenses 496,376 164,071 774,741 301,241
Depreciation and amortization 40,989 44,391 85,827 85,514
----------- ----------- ----------- -----------
1,350,744 973,673 2,378,459 1,820,336
----------- ----------- ----------- -----------
LOSS BEFORE OTHER INCOME (EXPENSE) (868,647) (118,272) (1,576,919) (478,026)
OTHER INCOME (EXPENSE)
Legal costs - (108,504) - (250,450)
Equity in net income (loss) of United Hotel (96,476) 34,000 (46,335) (115,000)
Equity in net loss of Genisys - - (210,133) -
Realized loss from write-down of investment in Grand Havana - (946,131) - (946,131)
Interest income 41,806 34,263 80,001 68,708
Interest expense (96,766) (97,781) (212,501) (191,225)
Other, net 30,810 15,015 (34,971) 26,793
Litigation settlement (185,000) - (185,000) -
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) (305,626) (1,069,138) (608,939) (1,407,305)
----------- ----------- ----------- -----------
NET LOSS (1,174,273) (1,187,410) (2,185,858) (1,885,331)
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE LOSS
Unrealized holding loss on securities arising during the period - (22,700) - (203,725)
Less: reclassification adjustment for loss realized in net loss - 946,131 - 946,131
----------- ----------- ----------- -----------
- 923,431 - 742,406
----------- ----------- ----------- -----------
COMPREHENSIVE LOSS $(1,174,273) $ (263,979) $(2,185,858) $(1,142,925)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 15,525,854 13,918,949 14,462,851 13,302,182
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER SHARE $ (0.08) $ (0.09) $ (0.15) $ (0.14)
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------
June 30, June 30,
1999 1998
--------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,185,858) $(1,885,331)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 85,827 85,514
Loss on termination of lease 45,333 -
Issuance of common stock for services - 31,300
Fair value of options granted to non-employees 237,700 -
Write-down of investment in Grand Havana - 946,131
Licensing fees - (410,817)
Equity in net loss of United Hotel 46,335 115,000
Equity in net loss of Genisys 210,133 -
Accrual of interest income from related parties (24,717) (21,813)
Changes in operating assets and liabilities:
Receivables 19,765 1,328
Prepaid expenses and other current assets 31,470 (10,683)
Deposits - 2,338
Accrued interest 148,347 -
Accounts payable and accrued expenses 66,385 640,924
Accrued expenses due to related parties 61,821
Deposits and other liabilities (3,041) -
Deferred revenues 86,465 363,012
Litigation settlement (185,000) -
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,050,856) (81,276)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (37,257) (35,896)
Loans receivable from Grand Havana (75,000) -
Advances to former officer, net (87,636) -
Collection of loan receivable from Grand Havana - 130,000
Deposits and other (10,156) 1,501
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (210,049) 95,605
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 1,500,000 229,680
Common stock issued for warrants and options exercised 186,300 -
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,686,300 229,680
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS 425,395 244,009
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 799,369 152,770
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,224,764 $ 396,779
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
UNITED LEISURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
1. BASIS OF PRESENTATION
The interim consolidated financial statements presented have been prepared
by United Leisure Corporation (the "Company" or "ULC") without audit and,
in the opinion of the management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of (a) the consolidated
results of operations for the three and six months ended June 30, 1999 and
1998, (b) the consolidated financial position at June 30, 1999 and (c) the
consolidated cash flows for the six months ended June 30, 1999 and 1998.
Interim results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1998 has been
derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are condensed as permitted by Form 10-QSB and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated financial statements and notes
included herein should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-KSB.
2. LICENSING REVENUE
During the quarter ended March 31, 1999, United Internet Technologies, Inc.
("UIT"), a wholly-owned subsidiary of the Company, received $200,000 as a
non-refundable advance against royalties pursuant to a License Agreement
entered into by UIT and World Championship Wrestling, Inc. ("WCW") as of
February 23, 1999. UIT granted to WCW a limited non-exclusive license of
the Technology. WCW has the right to approve the application of the
Technology against certain indicated specifications and descriptions during
a testing period, which approval the Company obtained during the quarter
ended June 30, 1999.
3. STOCKHOLDERS' EQUITY
On April 13, 1999, the Company and Strata Equities Limited ("Strata")
amended the Warrant Agreement dated April 2, 1998 relating to the issuance
of a stock purchase warrant (the "Warrant") for 600,000 shares of the
Company's Common Stock at $.27 per share, to permit a cashless exercise of
the Warrant, and Strata exercised the Warrant on a cashless basis. Based on
an intraday trading price of $4.60 per share of the Company's Common Stock
on April 13, 1999, the Company issued to Strata 564,783 shares of the
Company's common stock. The Company received no proceeds from the issuance,
as a result of the cashless exercise .
On April 29, 1999, the Company sold 500,000 shares of Common Stock to one
individual, at a purchase price of $2.00 per share. Proceeds to the Company
in connection with the sale were $1,000,000.
In April 1999, the Company issued 82,222 shares of Common Stock to Mary
Jane Shapiro, upon the cashless exercise of a stock purchase warrant for
100,000 shares of the Company's Common Stock at $.75 per share. The Company
received no proceeds from the issuance, as a result of the cashless
exercise.
In April 1999, the Company issued 10,000 shares of Common Stock to Alvin
Alexander, a director of the Company, upon the exercise of a stock option
at an exercise price of $.30 per share. Proceeds to the Company in
connection with the exercise were $3,000.
On May 26, 1999, the Company granted options to Julie Lepere, Secretary of
the Company, to purchase an aggregate of 16,000 shares of the Company's
Common Stock, at various exercise prices and subject to vesting, as
follows:
(i) $1.00 per share as to 5,000 shares, which are immediately
exercisable;
(ii) $2.25 per share as to 6,500 shares, which are exercisable at any time
after May 26, 2000 and on or before May 26,2001;
(iii) $1.50 per share as to 4,500 shares, which are exercisable at any
time after May 26, 2001 and on or before May 26,2002;
provided, however, that in the event the employee's employment with the
Company is terminated prior to May 26, 2002, the vested portion of the
options become non-exercisable six months after such termination.
On May 26, 1999, the Company granted an option to purchase 100,000 shares
of the Company's Common Stock to Lou Pitt, a consultant to the Company, at
an exercise price of $1.00 per share. The option is exercisable immediately
upon grant and expires on May 26, 2002.
On June 24, 1999, the Company sold 250,000 shares of its Common Stock at a
purchase price of $2.00 per share, to the same individual who had purchased
500,000 shares of the Company's Common Stock on April 29, 1999. Proceeds to
the Company from the second sale were $500,000.
In June 1999, the Company issued 10,000 shares of its Common Stock to
Shannon Taylor, a consultant to the Company, in connection with her
exercise of options which were granted on January 4, 1999. Proceeds to the
Company in connection with such exercise were $2,300.
Subsequent to the end of the quarter ended June 30, 1999, the following
transactions took place:
On July 16, 1999, the Company granted an option to purchase 10,000 shares
of the Company's Common Stock to James Orr, a consultant to the Company, at
an exercise price of $1.00 per share. On the date of such grant, the
closing bid price of the Company's Common Stock as quoted on the OTC
Bulletin Board was $3.1875. The option is exercisable immediately upon
grant and expires on July 16, 2000.
On July 21, 1999, the Company and Media Group, Inc. ("MGI") entered into an
agreement (the "MGI Agreement") for the duplication of one million CD-ROM
shrink-wrapped packages for NBC. The total order is $380,000. Pursuant to
the MGI Agreement, the Company made a payment of $95,000 to MGI and
delivered 150,000 shares of its Common Stock (the "MGI Shares"). The
Company further agreed to include the MGI Shares in a registration
statement which the Company intends to file shortly with the Securities and
Exchange Commission for the benefit of certain selling stockholders (the
"Selling Stockholders' Registration Statement"). Until the Selling
Stockholders' Registration Statement is declared effective by the SEC, the
Company has agreed to make further payments to MGI under the MGI Agreement
until the full $380,000 is paid. Once the Selling Stockholders'
Registration Statement is declared effective by the SEC, the Company has
the right to have the MGI Shares returned to the Company within ten days
following the declaration of effectiveness by the SEC of the Selling
Stockholders' Registration Statement and to pay the $380,000 in full. If
the Company does not so elect, MGI has the right to (i) put the MGI Shares
to the Company and the Company will pay the balance then due under the MGI
Agreement, or (ii) retain the MGI Shares and sell them pursuant to the
prospectus forming a part of the Selling Stockholders' Registration
Statement, in which case any amounts received by MGI over the balance due
at that time shall be refunded to the Company. The Company has further
agreed to pay to MGI any shortfall between the net proceeds of any sale of
the MGI Shares and the balance owing under the MGI Agreement. There were no
proceeds to the Company in connection with this issuance.
5
<PAGE>
UNITED LEISURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
4. LITIGATION
On November 12, 1996, Irvine Meadows, one of the Company's sublessees and
the operator of the Irvine Meadows Amphitheater, sued the Company and Harry
Shuster in Orange County, California Superior Court (Case No. 771509). The
plaintiff sought an injunction preventing the Company from removing certain
improvements from the property at the expiration of the lease. On January
3, 1997, Irvine Meadows filed a first amended complaint and sought an
injunction and declaratory relief but no money damages. On February 19,
1997, the trial judge granted Irvine Meadows' request for an injunction and
barred the Company from removing the leasehold improvements from the
property.
The plaintiffs won the suit on a motion for summary judgment in May 1998.
The Company appealed the decision of the court. On October 27, 1998, the
plaintiffs were awarded costs in the amount of approximately $545,000. The
Company also appealed this award.
On May 7, 1999, the Company settled this litigation. The Company agreed to
dismiss with prejudice the appeal of the trial court's judgment. The
Company also agreed to pay the plaintiffs not less than $225,000 in
principal amount, plus 6% interest compounded daily, in installments. Of
this amount, the Company's litigation counsel agreed to contribute
approximately $40,000. Concurrently with the signing of the settlement
agreement, $26,316.23 was paid, which includes principal of $25,000. On
July 1, 1999, an additional $26,841.61 was paid, which includes principal
of $25,000. The Company is required to make an additional payment of
$90,144.56, which includes principal of $87,500, on October 1, 1999, and a
final payment of $88,822.28, which includes principal of $87,500, on
December 31, 1999. If the Company fails to make any payment when it is due,
the Company can be held in default of the settlement agreement. In such
case, the plaintiffs could seek to enforce the original court's judgment in
an amount not to exceed $300,000, less any payments of principal the
Company has already made under the settlement agreement, plus 6% interest.
On June 7, 1999, the Company was sued by Hyperlock Technologies, Inc.
("Hyperlock") in the United States District Court for the Northern District
of Illinois, Eastern Division. Hyperlock alleges that the Company has
infringed United States Patent No. 5,892,825, (the "'825 patent") entitled,
"Method of Secure Server Control of Local Media Via a Trigger Through a
Network for Instant Local Access of Encrypted Data on Local Media."
Hyperlock is seeking an injunction against the Company and unspecified
damages. Hyperlock also seeks treble damages, court costs and reasonable
attorneys' fees and such other and further relief as the court may deem to
be just and proper. Based on a review of the '825 patent, the Company
believes that the suit is without merit. The Company believes that it has
not committed any acts of infringement, and intends to defend this suit
vigorously. Due to the inherent uncertainties regarding litigation, the
Company can make no prediction about the outcome of the litigation.
5. COMPUTATION OF LOSS PER SHARE
<TABLE>
<CAPTION>
For the Quarter Ended June 30, 1999
----------------------------------------------
Income Shares Per Share
(Numerator (Denominator) Amount
------------ ------------- -----------
<S> <C> <C> <C>
Basic loss per share:
Net loss $(1,174,273)
Less: accretion in the carrying amount
of common stock subject to
repurchase (27,000)
-----------
Net loss attributable to common
stockholders $(1,201,273) 15,525,854 $(0.08)
=========== ========== ======
<CAPTION>
For the Six Months Ended June 30, 1999
----------------------------------------------
Income Shares Per Share
(Numerator (Denominator) Amount
------------ ------------- -----------
<S> <C> <C> <C>
Basic loss per share:
Net loss $(2,185,858)
Less: accretion in the carrying amount
of common stock subject to
repurchase (54,000)
-----------
Net loss attributable to common
stockholders $(2,239,858) 14,462,851 $(0.15)
=========== ========== ======
</TABLE>
Options and warrants to purchase 9,862,950 shares were outstanding at June
30, 1999, but were not included in the computation of diluted loss per common
share because the effect would be antidilutive.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto appearing elsewhere in
this Quarterly Report on Form 1O-QSB. Certain statements contained herein that
are not related to historical results, including, without limitation, statements
regarding the Company's business strategy and objectives, future financial
position, expectations about pending litigation and estimated cost savings, are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and involve risks and
uncertainties. Although the Company believes that the assumptions on which these
forward-looking statements are based are reasonable, there can be no assurance
that such assumptions will prove to be accurate and actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
the risks, uncertainties, costs and outcome of pending litigation in which the
Company is involved, costs and uncertainties associated with future
developments, concerns regarding the Company's liquidity and financial
condition, regulatory policies, competition from other similar businesses, and
market and general economic factors. All forward-looking statements contained in
this Quarterly Report on Form 10-QSB are qualified in their entirety by this
statement.
Overview
Through its wholly-owned subsidiary, United Internet Technologies,
Inc.("UIT"), United Leisure Corporation (the "Company") is primarily engaged in
the development and licensure of the Company's proprietary Internet technology
(the "Technology") and sites on the World Wide Web (the "Web") incorporating the
Technology. The Company has developed two proprietary technologies, Parallel
Addressing Technology ("PAV") and Dynamic Integrated Video Overlay ("DIVO").
Primarily, the Company licenses the use of the Technology to others. The Company
has licensed an application of the Technology for television to National
Broadcasting Company, Inc. ("NBC"), an application of the Technology for
wrestling and related activities to World Championship Wrestling, Inc. ("WCW"),
and travel related applications to Genisys Reservation Systems, Inc.
("Genisys"). The Company's Technology utilizes proprietary program instruction
applications to provide a means of linking a full motion video on a user's CD-
ROM or DVD-ROM drive to a site on the Web. The Company intends to continue to
pursue licensing agreements with others and may develop its own Web sites.
7
<PAGE>
Subsequent to the end of the second quarter, the Company and NBC entered
into a Master Development Agreement dated July 1, 1999 (the "Development
Agreement"). Pursuant to the Development Agreement, NBC will pay the Company
either a fixed fee or on a time and material basis for each project, as
specified in the related Statement of Work. The Development Agreement is for a
term of one year; however, NBC may terminate the Development Agreement for any
reason upon 30 days' prior written notice to the Company. In addition, either
party may terminate the Development Agreement in the case of a material breach
of a Statement of Work by the other party, which is not cured by the breaching
party within 30 days. NBC has the right to test and approve any ordered
products.
Pursuant to the first order placed under the Development Agreement, NBC has
ordered and the Company has agreed to master, reproduce and distribute 1,000,000
CD-ROMs containing NBC video and other graphics showcasing the NBC Fall 1999
television season and incorporating an interactive game/contest. The CD-ROMs
will utilize the Company's PAV and DIVO technologies tied to a special NBC Web
site. It is anticipated that the CD-ROMs will be distributed free in newspapers
on September 7, 1999, in six major metropolitan areas. The Company will be paid
a fixed price of $100,000 upon newspaper delivery of 1,000,000 CD-ROMs to
1,000,000 homes.
Prior to February 1997, the primary business of the Company had been to act
as a developer and manager (rather than as an operator) under a ground lease
(the "Ground Lease") with the Irvine Company. The Ground Lease terminated in
February 1997. As part of management's decision to reorient the Company's
business to the development and licensure of the Technology, the Company's Camp
Frasiers and Frasier's Frontiers activities have been discontinued and the
Company has decided to dispose of its Planet Kids facilities. In connection
therewith, the Company will have significantly reduced employment requirements,
primarily part-time and seasonal employees, in 1999.
Results of Operations
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30,
1998.
The Company had total revenue of $482,097 in the quarter ended June 30,
1999, compared to total revenue of $855,401 for the quarter ended June 30, 1998,
a decrease of $373,304 or approximately 43.6%. This decrease results primarily
from a decrease in the total amount of licensing fees related to the Company's
Internet business. In the quarter ended June 30, 1998, the Company had licensing
fees of $410,817, which amount represents the book value of 2,000,000 shares of
unregistered common stock of Genisys, which the Company received in connection
with the licensing of
8
<PAGE>
the travel-related applications of the Company's interactive Internet technology
to a wholly-owned subsidiary of Genisys. In the quarter ended June 30, 1999, the
Company had licensing fees of $200,000, which the Company received in connection
with the licensing of the Company's interactive Internet technology to WCW in
connection with its wrestling Web site. WCW is a subsidiary of Turner
Broadcasting System Inc., a Time Warner company.
An additional contributing factor to the decrease in revenue for the
quarter ended June 30, 1999 is the decrease in revenue from children's
recreational activities, due primarily to declines in admissions in the
Company's three Planet Kids centers, as well as the fact that Frasier's Frontier
amusement park and Camp Frasier facilities did not operate at all during the
second quarter of 1999. All of the Company's revenue from children's
recreational activities in the quarter ended June 30,1999 was provided by Planet
Kids centers. Because the Company has reoriented its business to focus on the
Technology and move away from its historical emphasis on children's recreational
activities, the Company expects its revenue from children's recreational
activities to continue to decline in future periods.
Total operating expenses increased to $1,350,744 for the quarter ended June
30, 1999, from $973,673 for the quarter ended June 30, 1998, an increase of
$377,071 or approximately 38.7%. This increase was due primarily to increases in
operating expenses of UIT, specifically, increased salaries and consulting fees
for management, as well as for programmers, offset in part by decreased expenses
for personnel related to the Company's remaining children's recreational
facilities, Planet Kids.
Other expense decreased to $305,626 in the quarter ended June 30, 1999,
from $1,069,138 in the quarter ended June 30, 1998, a decrease of $763,512 or
approximately 71.4%. Included in other expense for the quarter ended June 30,
1998 is loss from the write-down of investment in Grand Havana Enterprises, Inc.
("GHEI") in the amount of $946,131. GHEI is an affiliate of the Company.
Included in other expense for the quarter ended June 30, 1999 is a charge of
$185,000 for litigation settlement.
For the quarter ended March 31, 1999, the Company had a net loss of
$(1,174,273) or ($0.07) per share, as compared to a net loss of $(1,187,410) or
($0.09) per share for the quarter ended June 30, 1998.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998.
The Company had total revenue of $801,540 for the six months ended June 30,
1999, compared to total revenue of $1,342,310 for the six months ended June 30,
1998, a decrease of $540,770 or approximately 40.3%. This decrease results
primarily from a decrease in the total amount of licensing fees related to the
9
<PAGE>
Company's Internet business. In the six months ended June 30, 1998, the Company
had licensing fees of $410,817, which amount represents the book value of
2,000,000 shares of unregistered common stock of Genisys, which the Company
received in connection with the licensing of the travel-related applications of
the Company's interactive Internet technology to a wholly-owned subsidiary of
Genisys. In the six months ended June 30, 1999, the Company had licensing fees
of $200,000, which the Company received in connection with the licensing of the
Company's interactive Internet technology to WCW in connection with its
wrestling Web site.
An additional contributing factor to the decrease in revenue for the six
months ended June 30, 1999 is the decrease in revenue from children's
recreational activities, due primarily to declines in admissions in the
Company's three Planet Kids centers, as well as the fact that Frasier's Frontier
amusement park and the Camp Frasier facilities did not operate at all during
1999. All of the Company's revenue from children's recreational activities for
the six months ended June 30,1999 was provided by Planet Kids centers. Because
the Company has reoriented its business to focus on the Technology and move away
from its historical emphasis on children's recreational activities, the Company
expects its revenue from children's recreational activities to continue to
decline in future periods.
Total operating expenses increased to $2,378,459 for the six months ended
June 30, 1999, from $1,820,336 for the six months ended June 30, 1998, an
increase of $558,123 or approximately 30.7%. This increase was due primarily to
increases in operating expenses of UIT, specifically, increased salaries and
consulting fees for management, as well as for programmers, offset in part by
decreased expenses for personnel related to the Company's remaining children's
recreational facilities, Planet Kids.
Other expense decreased to $608,939 in the six months ended June 30, 1999,
from $1,407,305 in the six months ended June 30, 1998, a decrease of $798,366 or
approximately 56.7%. Included in other expense for the six months ended June 30,
1998 is loss from the write-down of investment in GHEI in the amount of
$946,131. Included in other expense for the six months ended June 30, 1999 is a
charge of $185,000 for litigation settlement.
For the six months ended June 30, 1999, the Company had a net loss of
$(2,185,868) or ($0.15) per share, as compared to a net loss of $(1,885,331) or
($0.14) per share for the six months ended June 30, 1998.
10
<PAGE>
Liquidity and Financial Condition
The Company has experienced operating losses in recent years. For the
quarter ended June 30, 1999, the Company experienced a net loss of $(1,174,273).
The Company's working capital requirements have been and will continue to
be significant. As of June 30, 1999, the Company had cash and cash equivalents
of $1,224,764 and a working capital deficit of $2,756,613.
The Company's future capital requirements will depend on various factors,
including:
1. The number of applications utilizing the Company's Technology that the
Company wants to develop;
2. UIT's needs to hire additional technical and marketing personnel;
3. The length of time that it takes for the Company to dispose of its
children's recreation facilities and the manner of disposition, the
sale of a portion of which, the real property located in El Cajon,
California, closed in August 1999; and
4. The Company and other members of United Hotel & Casino, L.L.C.("UHC"),
an affiliate of the Company, have entered into an agreement to sell the
commercial property UHC owns in Las Vegas (the "Las Vegas Property")
for $31.5 million. The Company believes that the net amount estimated
to be realized from the sale, which is scheduled to close in August
1999, will be considerably more than the cost.
Due to the fact that the Company did not meet the new minimum bid listing
requirements for maintenance of the Company's Common Stock on the Nasdaq
SmallCap Market (the "Nasdaq Market"), effective the close of business on
December 1, 1998, the Company's Common Stock was delisted from the Nasdaq
Market. The Company's Common Stock is now quoted on the OTC Bulletin Board. The
delisting could result in the Company's having difficulty in offering and
selling its securities to prospective investors.
If the Company is unable to raise additional funds, when needed, through
the private placement of its securities, it may seek financing from affiliated
or unaffiliated third parties. There can be no assurance, however, that such
financing would be available to the Company when and if it is needed, or that if
it is available, that it will be available on terms acceptable to the Company.
If the Company is unable to sell its securities or obtain financing to meet its
working capital needs and to repay indebtedness as it becomes due, the Company
may have to consider such alternatives as selling or pledging portions of its
assets, among other possibilities, in order to meet such obligations.
11
<PAGE>
As of June 30, 1999, investments in and loans to certain affiliated
companies, GHEI, UHC and HEP II, L.P., totaled approximately $4,124,784, or
approximately 48.2% of total assets. These affiliated companies have had
substantial losses and have working capital deficits, creating liquidity risks
for the Company. If these losses continue, a substantial portion of the
Company's net worth would be impaired or at risk. Although Management believes
that it is more likely than not that the investments in and receivables from
related companies are not impaired, the cumulative losses and liquidity problems
of the affiliated companies create an inherent risk in these assets. In
addition, at June 30, 1999, the Company had a net receivable from Harry Shuster
of $420,263.
Although the Company believes that its current cash and revenue from
operations, distributions received by the Company as a result of its
investments, repayment to the Company of amounts previously advanced by the
Company to GHEI, proceeds from the recently completed sale of the Company's real
property located in El Cajon, California (previously used in connections with
children's recreational activities) and the Company's portion of the net
proceeds from the pending sale of the Las Vegas Property will provide the
Company with sufficient funds to meet the Company's anticipated need for working
capital and capital expenditures for at least the next 12 months, there can be
no assurance that this will be the case.
The Company wishes to expand its development and marketing capabilities for
the Technology. While development of certain applications currently under
development can be funded from internal sources, more aggressive development and
marketing may require additional financing from either public or private
sources. To this end, the Company might raise additional capital either by
borrowing money or a public or private sale of equity or both. There can be no
assurance that the Company will be able to acquire additional financing, or that
if such financing is available, that it will be available to the Company on
favorable terms.
Year 2000 Issues
The Company has a Year 2000 project designed to identify and assess the
risks associated with its information systems, operations, infrastructure and
technology products, and customers and suppliers, that are not Year 2000
compliant, and to develop, implement, and test remediation and contingency plans
to mitigate these risks. The project comprises four phases: (1) identification
of risks, (2) assessment of risks, (3) development of correction and contingency
plans, and (4) implementation and testing.
The Company's Year 2000 project is being overseen by a consultant to the
Company. The Company's Year 2000 project is currently in the development of
correction plans phase. Based on
12
<PAGE>
vendor-provided information, the Company believes that all primary software
applications being used within the Company are either Year 2000 compliant or,
with upgrades, can be made Year 2000 compliant. Based on testing of certain
hardware, it was determined to replace certain systems. Such upgrading or
replacement of software and hardware is expected to be completed by September
30, 1999. Based on current estimates, the Company does not believe that the cost
of upgrading or replacing such software and hardware will be material. After all
upgrading and replacement is complete, all new systems will be evaluated for
Year 2000 compliance. The Company's technical consultant will continue to
analyze the current software and hardware vendors for Year 2000 compliance as
issues may be discovered within the Company or within the industry.
The Company believes that software products currently produced by the
Company are Year 2000 compliant; however, additional testing is in progress. It
is not believed that there will be any adverse effects on the ability to use the
interactive products being developed by the Company. Upgrading to uniform
operating and accounting systems on a Company-wide basis is in process. In
addition, the hardware used in connection with the children's recreational
activities business conducted by the Company will have to be replaced, if the
remaining assets are not sold by the end of 1999. The costs of such assessments
and upgradings or replacements are not expected to be material. In addition, the
Company is in the process of obtaining Year 2000 compliance statements from the
manufacturers of the Company's hardware and software products.
The Company believes that its greatest potential risks are associated
with(i)its information systems and systems embedded in its operations and
infrastructure; and (ii) its reliance on Year 2000 compliance by the Company's
vendors and suppliers of operating systems and software applications. The
Company is continuing its assessments for its operations and infrastructure, and
cannot predict whether significant additional problems will be identified. The
company is asking its critical vendors and suppliers to provide information on
the status of the Year 2000 compliance in order to assess the effect it could
have on the Company. The Company has supplied all such requests to such vendors.
The Company has not yet determined the full extent of contingency planning that
may be required. Based on the status of the assessments made and remediation
plans developed to date, the Company is not in a position to state the total
cost of remediation of all Year 2000 Issues. Costs identified to date have not
been material. However, the Company has not yet completed its assessments,
developed remediations for all problems, developed any contingency plans, or
completely implemented or tested any of its remediation plans.
Based on the Company's current analysis and assessment of the state of its
Year 2000 compliance, the Company's most
13
<PAGE>
reasonably likely worst case scenario involves delays in shipping of products by
its vendors and suppliers. Such delays could cause the Company to experience
delays in delivering its own products. Specific contingency plans will be
formulated after the Company has received information on the status of vendor
and supplier Year 2000 compliance.
As the Year 2000 project continues, the Company may discover additional
Year 2000 problems, may not be able to develop, implement, or test corrections
or contingency plans, or may find that the costs of these activities exceed
current expectations and become material. In many cases, the Company is relying
on assurances from suppliers that new and upgraded information systems and other
products will be Year 2000 compliant. The Company plans to test such third-party
products, but cannot be sure that its tests will be adequate or that, if
problems are identified, they will be addressed in a timely and satisfactory
way. Because the Company uses a variety of information systems and has
additional systems embedded in its operational infrastructure, the Company
cannot be sure that all its systems will work together in a Year 2000 compliant
fashion. Furthermore, the Company cannot be sure that it will not suffer
business interruptions, either because of its own Year 2000 problems, or those
of its customers or suppliers whose Year 2000 problems may make it difficult or
impossible for them to fulfill their commitments to the Company. If the Company
fails to satisfactorily resolve Year 2000 issues related to its products in a
timely manner, it could be exposed to liability to third parties. The Company is
continuing to evaluate Year 2000 related risks and will take such further
corrective actions as may be required.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
On November 12, 1996, Irvine Meadows, one of the Company's sublessees and
the operator of the Irvine Meadows Amphitheater, sued the Company and Harry
Shuster in Orange County, California Superior Court (Case No. 771509). The
plaintiff sought an injunction preventing the Company from removing certain
improvements from the property at the expiration of the lease. On January 3,
1997, Irvine Meadows filed a first amended complaint and sought an injunction
and declaratory relief but no money damages. On February 19, 1997, the trial
judge granted Irvine Meadows' request for an injunction and barred the Company
from removing the leasehold improvements from the property.
The plaintiffs won the suit on a motion for summary judgment in May 1998.
The Company appealed the decision of the court. On October 27, 1998, the
plaintiffs were awarded costs in the amount of approximately $545,000. The
Company also appealed this award.
14
<PAGE>
On May 7, 1999, the Company settled this litigation. The Company agreed to
dismiss with prejudice the appeal of the trial court's judgment. The Company
also agreed to pay the plaintiffs not less than $225,000 in principal amount,
plus 6% interest compounded daily, in installments. Of this amount, the
Company's litigation counsel agreed to contribute approximately $40,000.
Concurrently with the signing of the settlement agreement, $26,316.23 was paid,
which includes principal of $25,000. On July 1, 1999, an additional $26,841.61
was paid, which includes principal of $25,000. The Company is required to make
an additional payment of $90,144.56, which includes principal of $87,500, on
October 1, 1999, and a final payment of $88,822.28, which includes principal of
$87,500, on December 31, 1999. If the Company fails to make any payment when it
is due, the Company can be held in default of the settlement agreement. In such
case, the plaintiffs could seek to enforce the original court's judgment in an
amount not to exceed $300,000, less any payments of principal the Company has
already made under the settlement agreement, plus 6% interest.
On June 7, 1999, the Company was sued by Hyperlock Technologies, Inc.
("Hyperlock") in the United States District Court for the Northern District of
Illinois, Eastern Division. Hyperlock alleges that the Company has infringed
United States Patent No. 5,892,825, (the "'825 patent") entitled, "Method of
Secure Server Control of Local Media Via a Trigger Through a Network for Instant
Local Access of Encrypted Data on Local Media." Hyperlock is seeking an
injunction against the Company and unspecified damages. Hyperlock also seeks
treble damages, court costs and reasonable attorneys' fees and such other and
further relief as the court may deem to be just and proper. Based on a review of
the '825 patent, the Company believes that the suit is without merit. The
Company believes that it has not committed any acts of infringement, and intends
to defend this suit vigorously. Due to the inherent uncertainties regarding
litigation, the Company can make no prediction about the outcome of the
litigation.
Item 2. Changes in Securities
On April 13, 1999, the Company and Strata Equities Limited ("Strata")
amended the Warrant Agreement dated April 2, 1998 relating to the issuance of a
stock purchase warrant (the "Warrant") for 600,000 shares of the Company's
Common Stock at $.27 per share, to permit a cashless exercise of the Warrant,
and Strata exercised the Warrant on a cashless basis. Based on an intraday
trading price of $4.60 per share of the Company's Common Stock on April 13,
1999, the Company issued to Strata 564,783 shares of the Company's common stock.
The Company received no proceeds from the issuance, as a result of the cashless
exercise.
15
<PAGE>
On April 29, 1999, the Company sold 500,000 shares of Common Stock to one
individual, at a purchase price of $2.00 per share. Proceeds to the Company in
connection with the sale were $1,000,000.
In April 1999, the Company issued 82,222 shares of Common Stock to Mary
Jane Shapiro, upon the cashless exercise of a stock purchase warrant for 100,000
shares of the Company's Common Stock at $.75 per share. The Company received no
proceeds from the issuance, as a result of the cashless exercise.
In April 1999, the Company issued 10,000 shares of Common Stock to Alvin
Alexander, a director of the Company, upon the exercise of a stock option at an
exercise price of $.30 per share. Proceeds to the Company in connection with the
exercise were $3,000.
On May 26, 1999, the Company granted options to Julie Lepere, Secretary of
the Company, to purchase an aggregate of 16,000 shares of the Company's Common
Stock, at various exercise prices and subject to vesting, as follows:
(i) $1.00 per share as to 5,000 shares, which are immediately
exercisable;
(ii) $2.25 per share as to 6,500 shares, which are exercisable at any time
after May 26, 2000 and on or before May 26,2001;
(iii) $1.50 per share as to 4,500 shares, which are exercisable at any
time after May 26, 2001 and on or before May 26,2002;
provided, however, that in the event the employee's employment with the Company
is terminated prior to May 26, 2002, the vested portion of the options become
non-exercisable six months after such termination.
On May 26, 1999, the Company granted an option to purchase 100,000 shares
of the Company's Common Stock to Lou Pitt, a consultant to the Company, at an
exercise price of $1.00 per share. The option is exercisable immediately upon
grant and expires on May 26, 2002.
On June 24, 1999, the Company sold 250,000 shares of its Common Stock at a
purchase price of $2.00 per share, to the same individual who had purchased
500,000 shares of the Company's Common Stock on April 29, 1999. Proceeds to the
Company from the second sale were $500,000.
In June 1999, the Company issued 10,000 shares of its Common Stock to
Shannon Taylor, a consultant to the Company, in connection with her exercise of
options which were granted on
16
<PAGE>
January 4, 1999. Proceeds to the Company in connection with such exercise were
$2,300.
Subsequent to the end of the quarter ended June 30, 1999, the following
transactions took place:
On July 16, 1999, the Company granted an option to purchase 10,000 shares
of the Company's Common Stock to James Orr, a consultant to the Company, at an
exercise price of $1.00 per share. On the date of such grant, the closing bid
price of the Company's Common Stock as quoted on the OTC Bulletin Board was
$3.1875. The option is exercisable immediately upon grant and expires on July
16, 2000.
On July 21, 1999, the Company and Media Group, Inc. ("MGI") entered into an
agreement (the "MGI Agreement") for the duplication of one million CD-ROM
shrink-wrapped packages for NBC. The total order is $380,000. Pursuant to the
MGI Agreement, the Company made a payment of $95,000 to MGI and delivered
150,000 shares of its Common Stock (the "MGI Shares"). The Company further
agreed to include the MGI Shares in a registration statement which the Company
intends to file shortly with the Securities and Exchange Commission for the
benefit of certain selling stockholders (the "Selling Stockholders' Registration
Statement"). Until the Selling Stockholders' Registration Statement is declared
effective by the SEC, the Company has agreed to make further payments to MGI
under the MGI Agreement until the full $380,000 is paid. Once the Selling
Stockholders' Registration Statement is declared effective by the SEC, the
Company has the right to have the MGI Shares returned to the Company within ten
days following the declaration of effectiveness by the SEC of the Selling
Stockholders' Registration Statement and to pay the $380,000 in full. If the
Company does not so elect, MGI has the right to (i) put the MGI Shares to the
Company and the Company will pay the balance then due under the MGI Agreement,
or (ii) retain the MGI Shares and sell them pursuant to the prospectus forming a
part of the Selling Stockholders' Registration Statement, in which case any
amounts received by MGI over the balance due at that time shall be refunded to
the Company. The Company has further agreed to pay to MGI any shortfall between
the net proceeds of any sale of the MGI Shares and the balance owing under the
MGI Agreement. There were no proceeds to the Company in connection with this
issuance.
Each of the foregoing offerings (i) was made directly by the officers and
directors of the Company and no underwriting discounts or commissions were paid,
and (ii) was exempt from the registration provisions of the Securities Act
pursuant to Section 4(2) thereof, for transactions by an issuer not involving
any public offering; or did not involve the "sale" of a security.
17
<PAGE>
Item 3. Other Information
The Company and Harry Shuster entered into a consulting agreement dated as
of June 1, 1994 (the "1994 Consulting Agreement"). Under the 1994 Consulting
Agreement, Harry Shuster served as President, Chief Executive Officer and a
director of the Company at an initial base compensation of $208,984 per year.
The 1994 Consulting Agreement provides for annual 10% increases in Harry
Shuster's base compensation. In 1998, the Company accrued base compensation to
Mr. Shuster of $300,663. Harry Shuster is also provided with the use of a car or
a $300 per month car allowance. The 1994 Consulting Agreement also provides for
certain disability payments to be made for up to three years. The 1994
Consulting Agreement provides for a rolling five-year term. This is accomplished
by extending the initial five-year term of the 1994 Consulting Agreement
automatically for successive one-year periods unless one party provides a
written notice of termination at least 60 days before to the end of the first
year of the current five-year period. As of June 1, 1999, the 1994 Consulting
Agreement was amended to provide that Harry Shuster will be paid $5,000 per
month and the balance of his then-current compensation will be applied to offset
the net amount he owes the Company. As of June 30, 1999, that amount was
$420,263, including interest. The 1994 Consulting Agreement terminates on Mr.
Shuster's death or in the event of a breach of the 1994 Consulting Agreement by
Mr. Shuster.
In addition, UIT and Harry Shuster have entered into a Consulting Agreement
dated as of January 1, 1999 (the "1999 Consulting Agreement"), pursuant to the
terms of which Harry Shuster is retained as a consultant to UIT at an initial
compensation of $60,000 per year. The 1999 Consulting Agreement provides for
annual 10% increases in Harry Shuster's compensation. The 1999 Consulting
Agreement provides for a rolling five-year term. This is accomplished by
extending the initial five-year term of the 1999 Consulting Agreement
automatically for successive one-year periods unless written notice of
termination is given at least 60 days prior to the end of the completion of the
first year of the then-current five-year period. Harry Shuster is permitted to
engage in outside business activities to the extent that such obligations do not
interfere with his duties to UIT.
18
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10-49 Option Agreement dated as of January 4, 1999 between United
Leisure Corporation and Brian Shuster
10-50 Option Agreement dated as of January 4, 1999 between United
Leisure Corporation and Alvin Cassel
10-51 Option Agreement dated as of January 4, 1999 between United
Leisure Corporation and J. Brooke Johnston, Jr.
10-52 Option Agreement dated as of February 1, 1999 between United
Leisure Corporation and Brian Shuster
10-53 Employment Agreement, dated as of January 1, 1999, between the
Company and Brian Shuster, together with supplemental agreement
between the Company, United Internet Technologies, Inc. and Brian
Shuster
10-54 Consulting Agreement, dated as of January 1, 1999, between United
Internet Technologies, Inc. and Harry Shuster
10-55 Agreement dated July 21, 1999 between the Company and Media
Group, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 16, 1999 UNITED LEISURE CORPORATION
By: /s/ Brian Shuster
-------------------------
Chairman of the Board and
Chief Executive Officer
(Principal Financial Officer)
20
<PAGE>
Exhibit 10.49
-------------
OPTION AGREEMENT
AGREEMENT, dated as of January 4, 1999, between UNITED LEISURE CORPORATION,
a Delaware corporation (the "Company"), and BRIAN SHUSTER (the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Optionee is a director of the Company and is considered by the
Board of Directors of the Company to have made substantial contributions to the
Company over many years;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants hereinafter contained, the Company and the Optionee hereby agree
as follows:
1. Grant of Option. The Company hereby grants to the Optionee the
---------------
irrevocable option (the "Option") to purchase, on the terms and conditions
herein set forth, up to 100,000 of the Company's fully paid and nonassessable
shares of Common Stock, par value $.01 per share, at an option price determined
as set forth in Section 2 of this Agreement.
2. Option Price. The option price for any shares of Common Stock of the
------------
Company to be purchased pursuant to the Option by valid exercise from time to
time during the term thereof by the Optionee shall be $.23 per share, the
estimated fair market value of such Common Stock on the date hereof.
3. Period of Option. The Option is exercisable at any time during a
----------------
period of five years commencing January 4, 1999 and ending January 3, 2004. The
Option may be exercised from time to time during the option period as to the
total number of shares covered thereby or any lesser amount thereof. The Option
is nonexercisable after January 3, 2004. Termination of the Optionee's
relationship with the Company shall not affect the Optionee's ability to
exercise the Option.
4. Adjustments. If each of the outstanding shares of Common Stock of the
-----------
Company (other than shares held by dissenting stockholders) shall be changed
into or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether by reason of
agreement, consolidation, recapitalization, reclassification, split-up,
combination of the shares or otherwise), then there shall be substituted for
each share covered by the Option, the number and kind of shares of stock or
other securities into which each outstanding share of Common Stock of the
Company (other than shares held by dissenting stockholders) shall be so changed
or for which each such share shall be changed. If there shall be any other
<PAGE>
change in the number or kind of the outstanding shares of Common Stock of the
Company, or any stock or securities into which such Common Stock shall have been
changed, or for which it shall have been exchanged, then if the Board of
Directors of the Company shall, in its sole discretion, determine that such
change equitably requires an adjustment in the number or kind or option price of
the shares covered by the Option, or an adjustment in the number or kind of
other shares subject, or which may be subject, to the Option, such adjustment
shall be made in accordance with such determination. Fractional shares
resulting from any adjustment in the Option pursuant to this Section 4 may be
settled in cash or otherwise as the Board of Directors of the Company shall
determine. Notice of any adjustment shall be given by the Company to the
Optionee and such adjustment (whether or not such notice is given or received)
shall be effective and binding for all purposes of the Option.
5. Reservation of Shares. The Company covenants and agrees that it has
---------------------
reserved and shall at all time, so long as the Option is outstanding, reserve
and keep available out of its authorized but unissued Common Stock, par value
$.01 per share, solely for the purpose of issuing Common Stock upon the exercise
of the Option, the full number of shares of Common Stock deliverable upon the
exercise of the Option.
6. Stockholder's Rights. The Optionee shall not, based on his being
--------------------
Optionee hereunder, be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other security of the Company which may at any
time be issuable on the exercise of the Option for any purpose, nor shall
anything contained herein be construed to confer upon the Optionee, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of Directors on any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Option shall have been exercised and
the Common Stock purchasable upon the exercise hereof shall have become
deliverable as provided herein.
7. Transferability. The Option is not transferable by the Optionee
---------------
otherwise than by will or the laws of descent or distribution, and is
exercisable during the Optionee's lifetime only by the Optionee.
8. Method of Exercise of Option. The Option may be exercised in whole or
----------------------------
in part by the Optionee's giving written notice, specifying the number of shares
which the Optionee elects to purchase and the date on which such purchase is to
be made, to the Company by mail, postage prepaid, or delivering such notice
addressed to the Company, at its principal office in Fountain Valley,
California, attention of the President, at least ten and not more than thirty
days prior to the date specified in such notice as the date on which such
purchase is to be made. Such notice shall contain (if
2
<PAGE>
required by the Company so that the Company, on issuing the shares to the
Option, will comply with the applicable securities laws) a written
representation by the Optionee that (i) he is acquiring the shares to be so
purchased for investment and not with a view to distribution to the public and
(ii) he will not dispose of the shares so purchased except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations (such as
Rule 144) promulgated thereunder applicable at the time to such disposition. The
Company may require further assurances that the acquisition of the shares will
not involve any violations of law.
If such exercise shall be in accordance with the provisions of the Option,
the Company shall, on the date specified in the notice and against receipt from
the Optionee of the option price, deliver, at its principal office in Fountain
Valley, California, a certificate or certificates for the shares of Common Stock
so purchased and shall pay all stamp taxes payable in connection therewith. For
purposes of this Section 8, a person to whom the Option is transferred by will
or the laws of descent and distribution, as contemplated by Section 7, shall be
deemed the Optionee.
Each stock certificate for shares issued on exercise of the Option shall
bear a legend substantially as follows:
"The Shares represented by this Certificate have not been registered
under the Securities Act of 1933. The Shares may not be sold or offered
for sale in the absence of an effective Registration Statement for the
Shares under the Securities Act of 1933 or an option of counsel of the
Company that such registration is not required."
9. Binding Agreement. This Option Agreement shall be binding upon and
-----------------
shall inure to the benefit of any successor or assign of the Company and the
Optionee's legal representatives.
10. Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties with respect to the Option and may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
change, modification or extension is sought.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the day and year first above written.
UNITED LEISURE CORPORATION
By /s/ Harry Shuster
----------------------------------
Harry Shuster
Chairman of the Board, President and
Chief Executive Officer
AGREED TO AND ACCEPTED:
/s/ Brian Shuster
- ---------------------------------
Brian Shuster
4
<PAGE>
Exhibit 10.50
-------------
OPTION AGREEMENT
AGREEMENT, dated as of January 4, 1999, between UNITED LEISURE CORPORATION,
a Delaware corporation (the "Company"), and ALVIN CASSEL (the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Optionee is a director of the Company and is considered by the
Board of Directors of the Company to have made substantial contributions to the
Company over many years;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants hereinafter contained, the Company and the Optionee hereby agree
as follows:
1. Grant of Option. The Company hereby grants to the Optionee the
---------------
irrevocable option (the "Option") to purchase, on the terms and conditions
herein set forth, up to 50,000 of the Company's fully paid and nonassessable
shares of Common Stock, par value $.01 per share, at an option price determined
as set forth in Section 2 of this Agreement.
2. Option Price. The option price for any shares of Common Stock of the
------------
Company to be purchased pursuant to the Option by valid exercise from time to
time during the term thereof by the Optionee shall be $.23 per share, the
estimated fair market value of such Common Stock on the date hereof.
3. Period of Option. The Option is exercisable at any time during a
----------------
period of five years commencing January 4, 1999 and ending January 3, 2004. The
Option may be exercised from time to time during the option period as to the
total number of shares covered thereby or any lesser amount thereof. The Option
is nonexercisable after January 3, 2004. Termination of the Optionee's
relationship with the Company shall not affect the Optionee's ability to
exercise the Option.
4. Adjustments. If each of the outstanding shares of Common Stock of the
-----------
Company (other than shares held by dissenting stockholders) shall be changed
into or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether by reason of
agreement, consolidation, recapitalization, reclassification, split-up,
combination of the shares or otherwise), then there shall be substituted for
each share covered by the Option, the number and kind of shares of stock or
other securities into which each outstanding share of Common Stock of the
Company (other than shares held by dissenting stockholders) shall be so
<PAGE>
changed or for which each such share shall be changed. If there shall be any
other change in the number or kind of the outstanding shares of Common Stock of
the Company, or any stock or securities into which such Common Stock shall have
been changed, or for which it shall have been exchanged, then if the Board of
Directors of the Company shall, in its sole discretion, determine that such
change equitably requires an adjustment in the number or kind or option price of
the shares covered by the Option, or an adjustment in the number or kind of
other shares subject, or which may be subject, to the Option, such adjustment
shall be made in accordance with such determination. Fractional shares resulting
from any adjustment in the Option pursuant to this Section 4 may be settled in
cash or otherwise as the Board of Directors of the Company shall determine.
Notice of any adjustment shall be given by the Company to the Optionee and such
adjustment (whether or not such notice is given or received) shall be effective
and binding for all purposes of the Option.
5. Reservation of Shares. The Company covenants and agrees that it has
---------------------
reserved and shall at all time, so long as the Option is outstanding, reserve
and keep available out of its authorized but unissued Common Stock, par value
$.01 per share, solely for the purpose of issuing Common Stock upon the exercise
of the Option, the full number of shares of Common Stock deliverable upon the
exercise of the Option.
6. Stockholder's Rights. The Optionee shall not, based on his being
--------------------
Optionee hereunder, be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other security of the Company which may at any
time be issuable on the exercise of the Option for any purpose, nor shall
anything contained herein be construed to confer upon the Optionee, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of Directors on any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Option shall have been exercised and
the Common Stock purchasable upon the exercise hereof shall have become
deliverable as provided herein.
7. Transferability. The Option is not transferable by the Optionee
---------------
otherwise than by will or the laws of descent or distribution, and is
exercisable during the Optionee's lifetime only by the Optionee.
8. Method of Exercise of Option. The Option may be exercised in whole or
----------------------------
in part by the Optionee's giving written notice, specifying the number of shares
which the Optionee elects to purchase and the date on which such purchase is to
be made, to the Company by mail, postage prepaid, or delivering such notice
addressed to the Company, at its principal office in Fountain Valley,
California, attention of the President, at least ten and not more than thirty
days prior to the date specified in such
2
<PAGE>
notice as the date on which such purchase is to be made. Such notice shall
contain (if required by the Company so that the Company, on issuing the shares
to the Option, will comply with the applicable securities laws) a written
representation by the Optionee that (i) he is acquiring the shares to be so
purchased for investment and not with a view to distribution to the public and
(ii) he will not dispose of the shares so purchased except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations (such as
Rule 144) promulgated thereunder applicable at the time to such disposition. The
Company may require further assurances that the acquisition of the shares will
not involve any violations of law.
If such exercise shall be in accordance with the provisions of the Option,
the Company shall, on the date specified in the notice and against receipt from
the Optionee of the option price, deliver, at its principal office in Fountain
Valley, California, a certificate or certificates for the shares of Common Stock
so purchased and shall pay all stamp taxes payable in connection therewith. For
purposes of this Section 8, a person to whom the Option is transferred by will
or the laws of descent and distribution, as contemplated by Section 7, shall be
deemed the Optionee.
Each stock certificate for shares issued on exercise of the Option shall
bear a legend substantially as follows:
"The Shares represented by this Certificate have not been registered
under the Securities Act of 1933. The Shares may not be sold or offered
for sale in the absence of an effective Registration Statement for the
Shares under the Securities Act of 1933 or an option of counsel of the
Company that such registration is not required."
9. Binding Agreement. This Option Agreement shall be binding upon and
-----------------
shall inure to the benefit of any successor or assign of the Company and the
Optionee's legal representatives.
10. Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties with respect to the Option and may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
change, modification or extension is sought.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the day and year first above written.
UNITED LEISURE CORPORATION
By /s/ Harry Shuster
----------------------------------------
Harry Shuster
Chairman of the Board, President and
Chief Executive Officer
AGREED TO AND ACCEPTED:
/s/ Alvin Cassel
- -----------------------
Alvin Cassel
4
<PAGE>
Exhibit 10.51
-------------
OPTION AGREEMENT
AGREEMENT, dated as of January 4, 1999, between UNITED LEISURE CORPORATION,
a Delaware corporation (the "Company"), and J. BROOKE JOHNSTON, JR. (the
"Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Optionee is a director of the Company and is considered by the
Board of Directors of the Company to have made substantial contributions to the
Company over many years;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants hereinafter contained, the Company and the Optionee hereby agree
as follows:
1. Grant of Option. The Company hereby grants to the Optionee the
---------------
irrevocable option (the "Option") to purchase, on the terms and conditions
herein set forth, up to 50,000 of the Company's fully paid and nonassessable
shares of Common Stock, par value $.01 per share, at an option price determined
as set forth in Section 2 of this Agreement.
2. Option Price. The option price for any shares of Common Stock of the
------------
Company to be purchased pursuant to the Option by valid exercise from time to
time during the term thereof by the Optionee shall be $.23 per share, the
estimated fair market value of such Common Stock on the date hereof.
3. Period of Option. The Option is exercisable at any time during a
----------------
period of five years commencing January 4, 1999 and ending January 3, 2004. The
Option may be exercised from time to time during the option period as to the
total number of shares covered thereby or any lesser amount thereof. The Option
is nonexercisable after January 3, 2004. Termination of the Optionee's
relationship with the Company shall not affect the Optionee's ability to
exercise the Option.
4. Adjustments. If each of the outstanding shares of Common Stock of the
-----------
Company (other than shares held by dissenting stockholders) shall be changed
into or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether by reason of
agreement, consolidation, recapitalization, reclassification, split-up,
combination of the shares or otherwise), then there shall be substituted for
each share covered by the Option, the number and kind of shares of stock or
other securities into which each outstanding share of Common Stock of the
Company (other than shares held by dissenting stockholders) shall be so
<PAGE>
changed or for which each such share shall be changed. If there shall be any
other change in the number or kind of the outstanding shares of Common Stock of
the Company, or any stock or securities into which such Common Stock shall have
been changed, or for which it shall have been exchanged, then if the Board of
Directors of the Company shall, in its sole discretion, determine that such
change equitably requires an adjustment in the number or kind or option price of
the shares covered by the Option, or an adjustment in the number or kind of
other shares subject, or which may be subject, to the Option, such adjustment
shall be made in accordance with such determination. Fractional shares resulting
from any adjustment in the Option pursuant to this Section 4 may be settled in
cash or otherwise as the Board of Directors of the Company shall determine.
Notice of any adjustment shall be given by the Company to the Optionee and such
adjustment (whether or not such notice is given or received) shall be effective
and binding for all purposes of the Option.
5. Reservation of Shares. The Company covenants and agrees that it has
---------------------
reserved and shall at all time, so long as the Option is outstanding, reserve
and keep available out of its authorized but unissued Common Stock, par value
$.01 per share, solely for the purpose of issuing Common Stock upon the exercise
of the Option, the full number of shares of Common Stock deliverable upon the
exercise of the Option.
6. Stockholder's Rights. The Optionee shall not, based on his being
--------------------
Optionee hereunder, be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other security of the Company which may at any
time be issuable on the exercise of the Option for any purpose, nor shall
anything contained herein be construed to confer upon the Optionee, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of Directors on any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Option shall have been exercised and
the Common Stock purchasable upon the exercise hereof shall have become
deliverable as provided herein.
7. Transferability. The Option is not transferable by the Optionee other
---------------
than by will or the laws of descent or distribution, and is exercisable during
the Optionee's lifetime only by the Optionee.
8. Method of Exercise of Option. The Option may be exercised in whole or
----------------------------
in part by the Optionee's giving written notice, specifying the number of shares
which the Optionee elects to purchase and the date on which such purchase is to
be made, to the Company by mail, postage prepaid, or delivering such notice
addressed to the Company, at its principal office in Fountain Valley,
California, attention of the President, at least ten and not more than thirty
days prior to the date specified in such
2
<PAGE>
notice as the date on which such purchase is to be made. Such notice shall
contain (if required by the Company so that the Company, on issuing the shares
to the Option, will comply with the applicable securities laws) a written
representation by the Optionee that (i) he is acquiring the shares to be so
purchased for investment and not with a view to distribution to the public and
(ii) he will not dispose of the shares so purchased except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations (such as
Rule 144) promulgated thereunder applicable at the time to such disposition. The
Company may require further assurances that the acquisition of the shares will
not involve any violations of law.
If such exercise shall be in accordance with the provisions of the Option,
the Company shall, on the date specified in the notice and against receipt from
the Optionee of the option price, deliver, at its principal office in Fountain
Valley, California, a certificate or certificates for the shares of Common Stock
so purchased and shall pay all stamp taxes payable in connection therewith. For
purposes of this Section 8, a person to whom the Option is transferred by will
or the laws of descent and distribution, as contemplated by Section 7, shall be
deemed the Optionee.
Each stock certificate for shares issued on exercise of the Option shall
bear a legend substantially as follows:
"The Shares represented by this Certificate have not been
registered under the Securities Act of 1933. The Shares may not
be sold or offered for sale in the absence of an effective
Registration Statement for the Shares under the Securities Act
of 1933 or an option of counsel of the Company that such
registration is not required."
9. Binding Agreement. This Option Agreement shall be binding upon and
-----------------
shall inure to the benefit of any successor or assign of the Company and the
Optionee's legal representatives.
10. Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties with respect to the Option and may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
change, modification or extension is sought.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the day and year first above written.
UNITED LEISURE CORPORATION
By /s/ Harry Shuster
-------------------------------------
Harry Shuster
Chairman of the Board, President and
Chief Executive Officer
AGREED TO AND ACCEPTED:
/s/ J. Brooke Johnston, Jr.
- ------------------------------
J. Brooke Johnston, Jr.
4
<PAGE>
Exhibit 10.52
-------------
OPTION AGREEMENT
AGREEMENT, dated as of February 1, 1999, between UNITED LEISURE
CORPORATION, a Delaware corporation (the "Company"), and BRIAN SHUSTER (the
"Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Optionee has rendered extraordinary services to the Company
throughout 1988, in developing the Parallel Addressing Video (PAV) technology
and Dynamic Interactive Video Overlay (DIVO) technology, and helping to exploit
those technologies with specific application license agreements;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants hereinafter contained, the Company and the Optionee hereby agree
as follows:
1. Grant of Option. The Company hereby grants to the Optionee the
---------------
irrevocable option (the "Option") to purchase, on the terms and conditions
herein set forth, up to 200,000 of the Company's fully paid and nonassessable
shares of Common Stock, par value $.01 per share, at an option price determined
as set forth in Section 2 of this Agreement.
2. Option Price. The option price for any shares of Common Stock of the
------------
Company to be purchased pursuant to the Option by valid exercise from time to
time during the term thereof by the Optionee shall be $.35 per share, the
estimated fair market value of such Common Stock on the date hereof.
3. Period of Option. The Option is exercisable at any time during a
----------------
period of five years commencing February 1, 1999 and ending January 31, 2004.
The Option may be exercised from time to time during the option period as to the
total number of shares covered thereby or any lesser amount thereof. The Option
is nonexercisable after January 31, 2004. Termination of the Optionee's
relationship with the Company shall not affect the Optionee's ability to
exercise the Option.
4. Adjustments. If each of the outstanding shares of Common Stock of the
-----------
Company (other than shares held by dissenting stockholders) shall be changed
into or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether by reason of
agreement, consolidation, recapitalization, reclassification, split-up,
combination of the shares or otherwise), then there shall be substituted for
each share covered by the Option, the number and kind
<PAGE>
of shares of stock or other securities into which each outstanding share of
Common Stock of the Company (other than shares held by dissenting stockholders)
shall be so changed or for which each such share shall be changed. If there
shall be any other change in the number or kind of the outstanding shares of
Common Stock of the Company, or any stock or securities into which such Common
Stock shall have been changed, or for which it shall have been exchanged, then
if the Board of Directors of the Company shall, in its sole discretion,
determine that such change equitably requires an adjustment in the number or
kind or option price of the shares covered by the Option, or an adjustment in
the number or kind of other shares subject, or which may be subject, to the
Option, such adjustment shall be made in accordance with such determination.
Fractional shares resulting from any adjustment in the Option pursuant to this
Section 4 may be settled in cash or otherwise as the Board of Directors of the
Company shall determine. Notice of any adjustment shall be given by the Company
to the Optionee and such adjustment (whether or not such notice is given or
received) shall be effective and binding for all purposes of the Option.
5. Reservation of Shares. The Company covenants and agrees that it has
---------------------
reserved and shall at all time, so long as the Option is outstanding, reserve
and keep available out of its authorized but unissued Common Stock, par value
$.01 per share, solely for the purpose of issuing Common Stock upon the exercise
of the Option, the full number of shares of Common Stock deliverable upon the
exercise of the Option.
6. Stockholder's Rights. The Optionee shall not, based on his being
--------------------
Optionee hereunder, be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other security of the Company which may at any
time be issuable on the exercise of the Option for any purpose, nor shall
anything contained herein be construed to confer upon the Optionee, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of Directors on any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Option shall have been exercised and
the Common Stock purchasable upon the exercise hereof shall have become
deliverable as provided herein.
7. Transferability. The Option is not transferable by the Optionee
---------------
otherwise than by will or the laws of descent or distribution, and is
exercisable during the Optionee's lifetime only by the Optionee.
8. Method of Exercise of Option. The Option may be exercised in whole or
----------------------------
in part by the Optionee's giving written notice, specifying the number of shares
which the Optionee elects to purchase and the date on which such purchase is to
be made, to the Company by mail, postage prepaid, or delivering such notice
addressed
2
<PAGE>
to the Company, at its principal office in Fountain Valley, California,
attention of the President, at least ten and not more than thirty days prior to
the date specified in such notice as the date on which such purchase is to be
made. Such notice shall contain (if required by the Company so that the Company,
on issuing the shares to the Option, will comply with the applicable securities
laws) a written representation by the Optionee that (i) he is acquiring the
shares to be so purchased for investment and not with a view to distribution to
the public and (ii) he will not dispose of the shares so purchased except in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations (such as Rule 144) promulgated thereunder applicable at the time to
such disposition. The Company may require further assurances that the
acquisition of the shares will not involve any violations of law.
If such exercise shall be in accordance with the provisions of the Option,
the Company shall, on the date specified in the notice and against receipt from
the Optionee of the option price, deliver, at its principal office in Fountain
Valley, California, a certificate or certificates for the shares of Common Stock
so purchased and shall pay all stamp taxes payable in connection therewith. For
purposes of this Section 8, a person to whom the Option is transferred by will
or the laws of descent and distribution, as contemplated by Section 7, shall be
deemed the Optionee.
Each stock certificate for shares issued on exercise of the Option shall
bear a legend substantially as follows:
"The Shares represented by this Certificate have not been
registered under the Securities Act of 1933. The Shares may
not be sold or offered for sale in the absence of an effective
Registration Statement for the Shares under the Securities Act
of 1933 or an option of counsel of the Company that such
registration is not required."
9. Binding Agreement. This Option Agreement shall be binding upon and
-----------------
shall inure to the benefit of any successor or assign of the Company and the
Optionee's legal representatives.
10. Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties with respect to the Option and may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
change, modification or extension is sought.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the day and year first above written.
UNITED LEISURE CORPORATION
By /s/ Harry Shuster
------------------------------------
Harry Shuster
Chairman of the Board, President and
Chief Executive Officer
AGREED TO AND ACCEPTED:
/s/ Brian Shuster
- --------------------------------------
Brian Shuster
4
<PAGE>
Exhibit 10.53
-------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
this 1st day of January, 1999, by and between UNITED INTERNET TECHNOLOGIES,
INC., a Delaware corporation (the "Company"), and BRIAN SHUSTER ("Employee"),
with reference to the following facts:
A. Employee has been serving as a consultant to the Company in a
satisfactory and capable manner pursuant to an oral agreement between Employee
and the Company.
B. The Company has requested that Employee enter into a written
employment agreement with the Company with respect to matters relating to
employment with the Company, and Employee has agreed to do so, upon the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions and the
mutual agreements and covenants set forth herein, the parties hereto agree as
follows:
1. SCOPE OF EMPLOYMENT.
-------------------
1.1 Capacity. Company hereby continues to employ Employee and
--------
Employee hereby accepts continued employment as President of the Company.
Employee shall report to the Board of Directors of Company and perform the
services and duties customarily incident to such office and as otherwise decided
upon by the Board of Directors.
1.2 Devotion of Services. Employee shall devote his entire
--------------------
productive time, ability and attention exclusively to the business of Company,
including the needs of the licensees of the Company's technology, as reasonably
required from time to time, during the term of this Agreement, except for
passive investments, charitable and non-profit enterprises and any other
business investments which do not interfere with his duties hereunder and which
are not competitive with Employer's activities (except as the owner of less than
2% of the issued and outstanding capital stock of a publicly traded
corporation), and except for involvement in United Leisure Corporation, the
parent of the Company, and United Film Distributors, Inc., for which Employee
may devote such time as necessary, provided that it does not interfere with his
duties to the Company hereunder. Employee shall perform and discharge well and
faithfully those duties assigned him by the Company. Employee shall perform his
services under this Agreement in Los Angeles County, California, or such other
location as is acceptable to Employee.
2. TERM. Subject to Section 6 herein, the initial term of this
----
Agreement shall commence as of the date of this Agreement and shall continue and
remain in full force and effect for a period of five (5) years. The term of
this Agreement shall be extended at the end of each year of its term for an
additional one-year period unless either party gives the other written notice of
intention to terminate the Agreement at the end of its then current five-year
term, such notice to be
<PAGE>
given at least 60 days prior to the end of the completion of the first year of
the five-year term then in effect. For example, if no notice of termination is
given by either party during the first full year of this Agreement, but it is
intended by one party that this Agreement terminate at the earliest possible
date, written notice of such termination must be given at least 60 days before
December 31, 2000 in order that this Agreement terminate on December 31, 2005.
3. COMPENSATION.
------------
3.1 Salary and Bonus. In consideration of the services to be
----------------
rendered by Employee hereunder, including without limitation any services
rendered as an officer or director of the Company or any subsidiary or affiliate
thereof, during the term of this Agreement, the Company shall pay to Employee
the following:
(a) A salary in the initial amount of $240,000.00 per annum (the
"Base Salary"). Employee shall be entitled to an increase in Base Salary of 10%
per annum, effective on January 1 of each year of the term of this Agreement.
(b) The Board of Directors may, in its sole and absolute
discretion, grant Employee a bonus from time to time, in such amount and in such
form, as the Board of Directors shall determine.
(c) All payments to Employee shall be subject to the regular
withholding requirements of all appropriate governmental taxing authorities.
(d) If the Company's Board of Directors and/or any committee
thereof grants options to senior members of management of the Company and/or its
subsidiaries, the Board of Directors and/or such committee shall consider in
good faith granting a reasonable amount of options to Employee.
3.2 Other Benefits. Employee shall be entitled to participate
--------------
in any medical and insurance plan which the Company is presently providing or
may provide to its senior executives. Employee acknowledges that the terms of
such plans may change from time to time. Furthermore, Employee shall be entitled
to receive the same automobile, life insurance policy and all other benefits
which he presently is receiving.
3.3 Expenses. The Company will advance to or reimburse Employee
--------
for all reasonable travel and entertainment required by the Company and other
reasonable expenses incurred by the Employee in connection with the performance
of his services under this Agreement in accordance with Company policy as
established from time to time.
4. INVENTIONS.
----------
4.1 Right to Inventions. Employee agrees that any discoveries,
-------------------
inventions or improvements of whatever nature (collectively "Inventions") made
or conceived by Employee, solely or jointly with others, during the term of his
employment with the Company, that are made with the Company's equipment,
supplies, facilities, trade secrets or time; or that relate, at the time
2
<PAGE>
of conception of or reduction to practice, to the business of the Company or the
Company's actual or demonstrably anticipated research or development; or that
result from any work performed by Employee for the Company, shall belong to the
Company. Employee also agrees that the Company shall have the right to keep any
such Inventions as trade secrets, if the Company so chooses. In order to permit
the Company to claim rights to which it may be entitled, Employee agrees to
disclose to the Company in confidence all Inventions that Employee makes during
the course of his employment and all patent applications filed by Employee
within three (3) years after termination of his employment. Employee shall (a)
assist the Company in obtaining patents on all Inventions deemed patentable by
the Company in the United States and in all foreign countries and (b) execute
all documents and do all things necessary to obtain letters patent to vest the
Company with full and extensive titles thereto and to protect the same against
infringement by others. For the purposes of this Agreement, an Invention is
deemed to have been made during the period of Employee's employment if the
Invention was conceived or first actually reduced to practice during that
period, and Employee agrees that any patent application filed within three (3)
years after termination of his employment with the Company shall be presumed to
relate to an Invention made during the term of Employee's employment unless
Employee can provide evidence to the contrary.
4.2 Assignment of Inventions and Patents. In furtherance of,
------------------------------------
and not in contravention, limitation and/or in place of, the provisions of
Section 4.1 above, the Company hereby notifies Employee of California Labor Code
Section 2870, which provides:
"Any provision in an employment agreement which provides that an
employee shall assign or offer to assign any of his or her rights in an
invention to his or her employer shall not apply to an invention for which
no equipment, supplies, facility, or trade secret information of the
employer was used and which was developed entirely on the employee's own
time, and (a) which does not relate (1) directly or indirectly to the
business of the employer or (2) to the employer's actual or demonstrably
anticipated research or development, or (b)which does not result from any
work performed by the employee for the employer. Any provision which
purports to apply to such an invention is to that extent against the public
policy of this state and is to that extent void and unenforceable."
Employee acknowledges that he has been notified by the Company of this
law, and understands that this Agreement does not apply to Inventions which are
otherwise fully protected under the provisions of said Labor Code Section 2870.
Therefore, Employee agrees to promptly disclose in writing to the Company all
Inventions, whether Employee personally considers them patentable or not, which
Employee alone, or with others, conceives or makes during his employment with
the Company or as is otherwise required and set forth under Section 4.1 above.
The Company shall hold said information in strict confidence to determine the
applicability of California Labor Code Section 2870 to said Invention and, to
the extent said Section 2870 does not apply, Employee hereby assigns and agrees
to assign all his right, title and interest in and to those Inventions which
relate to business of the Company and Employee agrees not to disclose any of
these Inventions to others without the prior written express consent of the
Company. Employee agrees to notify the Company in writing prior to making any
disclosure or performing any work during the term of his employment with the
Company which may conflict with any proprietary rights or technical know-how
claimed by Employee as his property. In the event that Employee fails to give
the Company
3
<PAGE>
notice of such conflict, Employee agrees that Employee shall have no further
right or claim with respect to any such conflicting proprietary rights or
technical know-how.
5. CONFIDENTIALITY.
---------------
5.1 Restrictions on Use of Trade Secrets and Records. During
------------------------------------------------
the term of his employment, Employee will have access to and become acquainted
with various trade secrets of the Company, consisting of formulas, patterns,
devices, secret Inventions, processes, compilations of information, records and
specifications (collectively "Trade Secrets"), all of which are owned by the
Company and used in the operation of the Company's business. Additionally,
Employee will have access to and may become acquainted with various files,
records, customer lists, documents, drawings, specifications, equipment and
similar items relating to the business of the Company (collectively
"Confidential Information"). All such Trade Secrets and Confidential
Information, whether they are designed, conceived or prepared by Employee or
come into Employee's possession or knowledge in any other way, are and shall
remain the exclusive property of the Company and shall not be removed from the
premises of the Company under any circumstances whatsoever without the prior
written consent of the Company. Employee promises and agrees that he will not
use for himself or for others, or divulge or disclose to any other person or
entity, directly or indirectly, either during the term of his employment by the
Company or at any time thereafter, for his own benefit or for the benefit of any
other person or entity or for any reason whatsoever, any of the Trade Secrets or
Confidential Information described herein, which he may conceive, develop,
obtain or learn about during or as a result of his employment by the Company
unless specifically authorized to do so in writing by the Company.
5.2 Non-Interference. Employee recognizes that the Company has
----------------
invested substantial effort in developing its technology and a list of present
and potential licensees and customers therefor. As a result, and particularly
because of the Company's many types of confidential business information,
Employee understands that any solicitation of a customer or employee of the
Company, in an effort to get them to change business affiliations, would
presumably involve a misuse of the Company's confidences, Trade Secrets and
Confidential Information. Employee therefore agrees that, for a period of one
(1) year from the later of the date of termination of Employee's employment with
the Company for any reason whatsoever or the receipt by Employee of any
compensation paid to Employee by the Company, Employee will not influence, or
attempt to influence, existing employees or customers of the Company in an
attempt to divert, either directly or indirectly, their services or business
from the Company.
6. TERMINATION OF AGREEMENT.
------------------------
6.1 Termination by the Company. The Company may terminate
--------------------------
Employee's employment hereunder at any time for cause without payment of
severance or similar benefits. For purposes of this Section 6.1, "cause" shall
mean the following events: any willful breach of duty by Employee in the
course of his employment, the breach of any provision of this Agreement or any
misrepresentation by Employee hereunder, misconduct, neglect or negligence in
the performance of Employee's duties and obligations, disloyal, dishonest,
willful misconduct, illegal, immoral or unethical conduct by Employee, such
carelessness or inefficiency in the performance of his duties that Employee is
unfit to continue in the service of the Company, failure
4
<PAGE>
of Employee to comply with the policies or directives of the Company and/or
failure to take direction from the Company's Board of Directors, or such other
conduct which is substantially detrimental to the best interests of the Company.
Any such termination shall become effective upon delivery of written notice to
Employee.
6.2 Termination by Employee. Employee may terminate his
-----------------------
employment hereunder at any time for cause. For purposes of this Section 6.2,
"cause" shall mean the breach of any provision of this Agreement by the Company
which is not cured within thirty (30) days after Employee delivers written
notice to the Company's Board of Directors describing such breach. If the
breach is not so cured within such thirty (30) days after delivery of such
notice, the termination of employment shall become effective after the
expiration of such cure period.
6.3 Death or Disability. Employee's employment with the Company
-------------------
shall cease upon the date of Employee's death and the Company shall be obligated
to pay to Employee's estate compensation only through the date of death. In the
event Employee becomes physically or mentally disabled so as to become unable
for more than one hundred eighty (180) days in the aggregate in any twelve (12)
month period to perform his duties on a full-time basis with reasonable
accommodations, the Company may, at its sole and absolute discretion, terminate
this Agreement, Employee's employment and its obligation to pay Employee from
and after the date of termination.
6.4 Effect of Termination. Upon the termination of Employee's
---------------------
employment hereunder or the expiration or termination of the Agreement, the
Company shall pay Employee all compensation accrued and outstanding as of the
date of such termination or expiration, and notwithstanding anything to the
contrary contained herein, the rights and obligations of each party under
Paragraphs 4, 5 and 8 herein shall survive such termination or expiration.
Notwithstanding anything to the contrary contained in this Agreement if, prior
to the end of any five (5) year term, Employer terminates this Agreement without
cause or Employee terminates this Agreement with cause, Employee shall continue
to receive all of the compensation and other benefits provided for in Paragraph
3 for the remainder of said then-current five (5) year term.
7. EMPLOYEE'S REPRESENTATIONS. As an inducement for the Company to
--------------------------
execute this Agreement, Employee represents and warrants to the Company that the
negotiation, execution and delivery of this Agreement by Employee together with
the performance of his obligations hereunder does not breach or give rise to a
breach under any employment, confidentiality, non-disclosure, non-competition or
any other agreement, written or oral, to which Employee is a party.
8. EQUITABLE REMEDIES.
------------------
8.1 Injunctive Relief. Employee acknowledges and agrees that
-----------------
the covenants set forth in Paragraphs 4 and 5 herein are reasonable and
necessary for protection of the Company's business interests, that irreparable
injury will result to the Company if Employee breaches any of the terms of said
covenants and that, in the event of Employee's actual or threatened breach of
said covenants, the Company will have no adequate remedy at law. Employee
accordingly agrees that in the event of actual or threatened breach of any of
such covenants, the Company shall be entitled to immediate injunctive and other
equitable relief, without bond and without the necessity
5
<PAGE>
of showing actual monetary damages. Nothing contained herein shall be construed
as prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovering of any damages which
it is able to prove. Each of the covenants in Paragraphs 4 and 5 shall be
construed as independent of any other covenants or provisions of this Agreement.
In the event of any judicial determination that any of the covenants set forth
in Paragraphs 4 and 5 herein or any other provisions of the Agreement are not
fully enforceable, it is the intention and desire of the parties that the court
treat said covenants as having been modified to the extent deemed necessary by
the court to render them reasonable and enforceable and that the court enforce
them to such extent.
8.2 Specific Enforcement. Employee agrees and acknowledges
--------------------
that he is obligated under this Agreement to render services of a special,
unique, unusual, extraordinary and intellectual character, thereby giving this
Agreement peculiar value, so that the loss thereof could not be reasonable or
adequately compensated in damages in an action at law. Therefore, in addition to
other remedies provided by law, the Company shall have the right, during the
term of this Agreement, to obtain specific performance hereof by Employee and to
obtain injunctive relief against the performance of service elsewhere by
Employee during the term of this Agreement.
9. GENERAL.
-------
9.1 Entire Agreement. This Agreement contains the entire
----------------
understanding between the parties hereto and supersedes all other oral and
written agreements or understandings between them.
9.2 Amendment. This Agreement may not be modified, amended,
---------
altered or supplemented except by written agreement between Employee and the
Company.
9.3 Counterparts. This Agreement may be executed in two (2) or
------------
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.4 Jurisdiction. Each party hereby consents to the exclusive
------------
jurisdiction of the state and federal courts sitting in Los Angeles County,
California, in any action on a claim arising out of, under or in connection with
this Agreement or the transactions contemplated by this Agreement. Each party
further agrees that personal jurisdiction over him may be effected by service of
process by registered or certified mail addressed as provided in Section 9.9
herein, and that when so made shall be as if served upon him personally within
the State of California.
9.5 Expenses. In the event an action at law or in equity is
--------
required to enforce or interpret the terms and conditions of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees and costs in
addition to any other relief to which that party may be entitled.
9.6 Interpretation. The headings herein are inserted only as a
--------------
matter of convenience and reference, and in no way define, limit or describe the
scope of this Agreement or
6
<PAGE>
the intent of any provisions thereof. No provision of this document is to be
interpreted for or against any party because that party or party's legal
representative drafted it.
9.7 Successors and Assigns. This Agreement shall be binding
----------------------
upon, and inure to the benefit of, the parties hereto and their heirs,
successors, assigns and personal representatives. As used herein, the
successors of the Company shall include, but not be limited to, any successor by
way of merger, consolidation, sale of all or substantially all of its assets or
similar reorganization. In no event may Employee assign any rights or duties
under this Agreement.
9.8 Controlling Law; Severability. The validity and
-----------------------------
construction of this Agreement or of any of its provisions shall be determined
under the laws of the State of California. Should any provision of this
Agreement be invalid either due to the duration thereof or the scope of the
prohibited activity, such provision shall be limited by the court to the extent
necessary to make it enforceable and, if invalid for any other reason, such
invalidity or unenforceability shall not affect or limit the validity and
enforceability of the other provisions hereof.
9.9 Notices. Any notice required or permitted to be given under
-------
this Agreement shall be sufficient if in writing and if personally received by
the party to whom it is sent or delivered, or if sent by registered or certified
mail, postage prepaid, to Employee's residence in the case of notice to
Employee, or to its principal office if to the Company. A notice is deemed
received or delivered on the earlier of the day received or three (3) days after
being sent by registered or certified mail in the manner described in this
Section.
9.10 Waiver of Breach. The waiver by any party hereto of a
----------------
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNITED INTERNET TECHNOLOGIES, INC.
By: /s/ Harry Shuster
---------------------------
Title: Chief Executive Officer
------------------------
/s/ Brian Shuster
------------------------------
BRIAN SHUSTER
7
<PAGE>
AGREEMENT
---------
AGREEMENT dated as of January 1, 1999, by and among United Leisure
Corporation, a Delaware corporation ("ULC"), United Internet Technologies, Inc.,
a Delaware corporation ("UIT") and a wholly-owned subsidiary of ULC, and Brian
Shuster ("Shuster").
WHEREAS, UIT and Shuster have entered into that certain Employment
Agreement dated as of January 1, 1999 (the "Employment Agreement"); and
WHEREAS, Shuster is the President of UIT, and a director and principal
stockholder of ULC; and
WHEREAS, the parties wish to provide for certain other matters related to
Shuster's employment and compensation;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Pursuant to Section 1.2 of the Employment Agreement, Shuster is
permitted to engage in certain business activities other than his obligations to
serve as President of UIT, including involvement in ULC. Consistent with that
provision, UIT agrees to make available Shuster's services to consult for ULC on
a variety of matters. Shuster consents to this arrangement.
2. For making available the services of Shuster as contemplated by
Paragraph 1 above, ULC agrees to pay to UIT the sum of $5,000 per month. No
portion of this amount shall be paid to Shuster, which Shuster expressly
acknowledges.
3. Shuster further agrees that UIT may credit against his salary under the
Employment Agreement any amounts he actually receives from Genisys Reservation
Systems, Inc. and its affiliates, including its wholly-owned subsidiary,
Netcruise Interactive, Inc. ("NII"), pursuant to that certain Agreement dated as
of July 23, 1998, for consulting services rendered by Shuster to NII from and
after January 1, 1999.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above written.
UNITED LEISURE CORPORATION UNITED INTERNET TECHNOLOGIES, INC.
By /s/ Harry Shuster By /s/ Harry Shuster
--------------------------- -------------------------------
Harry Shuster Harry Shuster
Title: Chief Executive Officer Title: Chief Executive Officer
By /s/ Brian Shuster
-------------------------------
Brian Shuster
<PAGE>
Exhibit 10.54
-------------
CONSULTING AGREEMENT
AGREEMENT entered into as of January 1, 1999, by and between UNITED
INTERNET TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and HARRY
SHUSTER ("Consultant").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, Consultant has been highly valuable in the development of the
Company's business, heretofore provided through its parent, United Leisure
Corporation, a Delaware corporation ("ULC");
WHEREAS, the Company deems Consultant's services to be important to the
Company's success;
WHEREAS, the Company desires to assure itself that the experience and skill
of Consultant will remain available to the Company and will not compete with the
Company;
WHEREAS, Consultant is prepared to assure the Company of the continuation
of his services and of his agreement not to compete with it under certain
conditions;
NOW THEREFORE, on the terms and conditions hereinafter set forth, it is
hereby mutually agreed as follows:
1. The Company agrees to retain Consultant as an independent
contractor, and Consultant agrees to so serve, for the term specified in Section
2 hereof, and for the purpose of Consultant providing the Company with the
benefit of his advice and counsel concerning the overall operations of the
Company. Consultant shall act as the Chairman and Chief Executive Officer of
the Company. Consultant shall have general superintendence and direction over
all
<PAGE>
other officers, agents and employees of the Company and shall operate and
conduct its business and affairs, all in accordance with the Bylaws and
resolutions of the Board of Directors, and, whenever and wherever it is not so
expressly limited by such Bylaws and resolutions, in accordance with his own
discretion. Consultant shall also hold such other offices with the Company and
its subsidiaries to which he shall be appointed from time to time during the
term of this Agreement. Consultant agrees that, during the term of this
Agreement, he will faithfully render his services hereunder, at such times and
to such extent as may be mutually agreed upon by Consultant and the Board of
Directors of the Company. Nothing herein contained shall preclude or prohibit
Consultant from engaging in activities or employment in connection with any
business venture substantially dissimilar to that of the Company (as the same
may from time to time change and develop) as a consultant, employee or otherwise
provided such other activities and/or employment are not inconsistent with and
do not interfere with the performance by the Company of his responsibilities
hereunder.
2. The base term of this Agreement shall be from January 1, 1999
through and until May 31, 2004, and shall be extended at the end of each year of
its term for an additional one-year period unless either party gives the other
written notice of intention to terminate the Agreement at the end of its then
five-year term at least 60 days prior to the end of the completion of the first
year of the five-year term then in effect. For example, if no notice of
termination is given by either party during the first full year of this
Agreement, but is intended by one party that this Agreement terminate at the
earliest possible date, written notice of such termination must be given at
least 60 days before December 31, 2000 in order that this Agreement terminate on
December 31, 2005.
3. Consultant agrees that he will not at any time in any manner during
the term of this Agreement or thereafter, either directly or indirectly, except
in the course of carrying out the business of the Company or as previously
authorized in writing on behalf of the Company, or otherwise as required by law,
disclose or communicate to any person, individual, firm or corporation, any
information of any kind concerning any matters affecting or relating to the
2
<PAGE>
business of the Company, including, without limitation, any of the customers,
prices, sales, manner of operation, plans, trade secrets, processes or other
data of the Company or any of its subsidiaries, without regard, to whether any
or all of such information would otherwise be deemed confidential or material;
provided, however, that in the event of the termination of this Agreement prior
to the expiration date, Consultant shall not be prohibited from making such
disclosure or communication with respect to non-confidential information.
4. Effective January 1, 1999 and through and until the termination of
this Agreement, the Company shall pay to Consultant, either biweekly or at such
other times as the Company and Consultant shall agree, a consulting fee
("Consulting Fee") as may be from time to time determined by the Company's Board
of Directors, but at a rate of not less than $60,000 per annum ("Annual Minimum
Base Consulting Fee"). The Annual Minimum Base Consulting Fee payable to
Consultant shall be increased 10% annually effective January 1 of each year of
the term of this Agreement.
5. In the event of the substantial disability of Consultant prior to
the expiration of the term of this Agreement as specified in Section 2, the
Company shall have the option either to (i) continue this Agreement of all of
its terms and conditions for the balance of the then five-year term specified in
Section 2 hereof, with Consultant being obligated to render his services
pursuant to Section 1 hereof only to the extent he deems himself capable of so
doing; or (ii) terminate this Agreement and pay to Consultant in equal monthly
installments over the period of the succeeding three years, an amount in each
such year equal to one-half of Consultant's Base Consulting Fee with respect to
the contract year in which his substantial disability occurs ("Disability
Benefit"), without offset for any other payments which may be made to Consultant
by or on behalf of the Company.
6. (a) In the event Consultant dies during the term of this
Agreement, such shall terminate all obligations of Consultant under this
Agreement and the Company shall be obligated only to pay Consultant (through his
estate) compensation up to the date of death.
3
<PAGE>
(b) In the event Consultant violates any of the provisions of this
Agreement resulting in material damages or detriment of the Company, the Company
may terminate this Agreement and shall be under no obligation to Consultant
except to pay him such compensation as he may be entitled to receive at the time
of termination.
7. For all purposes of this Agreement, Consultant shall be deemed to be
substantially disabled if, because of illness or other physical or mental
incapacity, he is unable to render for six successive months, or for shorter
periods aggregating over six months in any 12 successive calendar months,
services under this Agreement.
8. Consultant agrees that during the term of this Agreement, and,
unless the Company shall have breached this Agreement, for a period of two years
thereafter, he will not engage or participate directly or indirectly, either as
principal, agent, employee, employer, consultant, stockholder, director, co-
partner, or any other individual or representative capacity whatever, in the
conduct or management of, or own any stock or other proprietary interest in, any
business which at the time directly competes with the business of the Company or
any then subsidiary of the Company unless he shall have obtained the prior
written consent thereof of the Company, except that Consultant shall be free
without such consent to make reasonable investments in any such publicly-owned
company so long as he does not come to be a controlling party in such company
and so long as such investments are not significant in amount in relation to
other assets of Consultant.
9. Nothing in this Agreement shall be construed as limiting or
restricting any benefit to Consultant, his legal representative or beneficiaries
under any pension, profit sharing, or similar retirement plan of the Company or
under any group life or group health or accident or other similar plan of the
Company for the benefit of its employees or independent contractors generally or
a group of them, now or hereafter in existence (Consultant being entitled,
except as hereinafter provided, to participate therein to the extent any such
plan is made available generally to or for independent contractors of the
Company), nor shall any payment made in accordance with this
4
<PAGE>
Agreement be deemed to constitute payment to Consultant, his legal
representatives or beneficiaries in lieu of or in reduction of any benefit under
such plan. In the event of the termination of this Agreement at any time after
the date hereof, Consultant shall be entitled to continue to participate for the
period commencing on the date of such termination and ending two years after the
expiration of the term of this Agreement or any renewal thereof, in any group
life, group health, group accident plan or similar plan maintained at such time
by the Company for the benefit of its employees or independent contractors
("Welfare Plans"), to the extent that the terms of such Welfare Plan or Plans
permit continued participation by former independent contractors of the Company
of Consultant's then age.
10. The Company shall reimburse Consultant against vouchers covering
the same for all reasonable, ordinary and necessary expenses incurred by him in
the rendering of his services under this Agreement. [In connection therewith the
Company shall provide Consultant with an automobile and reimburse him therefor.
If Consultant provides his own automobile, as is presently the case, the Company
shall pay to Consultant an allowance of $300 per month in lieu of the Company's
obligation to provide the automobile in terms hereof.]
11. Notice to Consultant shall be deemed to have been given if and
when delivered to him in person or if and when mailed by registered or certified
mail to Consultant at the address of his residence as shown in the first
paragraph hereof or at such other address as Consultant instead may from time to
time designate in writing by notice to the Company in the same manner as herein
set forth. Notice to the Company shall be deemed to have been given if and when
delivered in person, or, if and when mailed by registered or certified mail, to
the Secretary of the Company at the principal office of the Company.
12. This Agreement shall be binding on the Company and any successor
company into or with which the Company may be merged or consolidated or to which
the Company may sell, transfer or distribute by way of liquidation or otherwise
all or substantially all of its assets.
5
<PAGE>
13. In case any one or more of the provisions of this Agreement should
be determined to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
14. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
UNITED INTERNET TECHNOLOGIES, INC.
By: /s/ Brian Shuster
------------------------------------
Brian Shuster
Title: President
/s/ Harry Shuster
----------------------------------------
HARRY SHUSTER
6
<PAGE>
Exhibit 10.55
-------------
[LOGO]
UNITED INTERNET TECHNOLOGIES INC. OF NEVADA
8433 Desert Quail Drive
Las Vegas, Nevada 89128
July 21, 1999
Mr. Tom Cheng
Media Group, Inc.
1051 S. East Street
Anaheim, California 92805
VIA FACSIMILE: (714) 781-8686
- -----------------------------
Dear Tom:
This letter constitutes the revised agreement between us for the
duplication of one million CD shrink-wrapped packages for our client, NBC. You
agreed to a price of $.33 per CD plus an additional $.05 per disc for the
shrink-wrap packaging. Total order, $380,000. This is a time sensitive
requirement since the product contains video of the up and coming fall season
for NBC and needs to be delivered to Valassis Communications' Distribution
Station in Calexico, Mexico, on the morning of August 13, 1999. As time is of
the essence in this contract, your failure to meet the delivery deadline could
result in a cancellation of our contract.
Based on our discussion, we will make an immediate payment of $95,000 (25%
of contract) and we are delivering to you 150,000 shares of unregistered common
stock of United Leisure Corporation. United Leisure's stock is currently
trading at approximately $2.50 per share. We will include your shares in the
registration statement which we are filing with the Securities and Exchange
Commission ("SEC") on or before August 31, 1999. The registration procedure
should take approximately sixty (60) days after filing. However, until the SEC
approves the registration statement so that the shares are freely tradeable, we
will continue to pay to you the amount of $95,000 per month commencing on
November 1, 1999, until the full $380,000 is paid. As soon as the shares become
freely tradeable, you will have the right to return the shares back to us, and
we will pay the full balance due or you can keep the shares and sell them in the
open market. Any sums received by you over the full balance due at that time
will be refunded to us. In any event, you agree that we have the right to have
the shares tendered back to us at our option at any time within ten (10) days
after the SEC approves the registration statement and to pay the contract in
full at that time, or, should we choose not to exercise that option, we will pay
to you in cash any shortfall between the net proceeds form sale of the shares
made immediately after said ten (10) day period and the balance owing under the
contract.
<PAGE>
This document outlines our agreement and will supplement the purchase order for
your services.
Sincerely,
Brian Shuster
President
United Internet Technologies of Nevada, Inc.
Please indicate your acceptance of these terms by your signature below.
(Print name)
By: /s/ Chin-Liang-Chan 7-28-99
-------------------------------------------
President Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,224,764
<SECURITIES> 0
<RECEIVABLES> 33,388
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,304,764
<PP&E> 276,880
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,542,230
<CURRENT-LIABILITIES> 4,061,377
<BONDS> 0
0
0
<COMMON> 157,658
<OTHER-SE> 26,695,498
<TOTAL-LIABILITY-AND-EQUITY> 8,542,230
<SALES> 0
<TOTAL-REVENUES> 801,540
<CGS> 0
<TOTAL-COSTS> 1,576,919
<OTHER-EXPENSES> 396,438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 212,501
<INCOME-PRETAX> (2,185,858)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,185,858)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,185,858)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
