-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TIGBPTxJ2uSGtC1PNkWL5iMJ9fIlUEnW1ZenA4nXWMDuRvEAyRdERqpKtN0qeVWq RSyGABJ3TY8O6Y5dP0HnoQ== /in/edgar/work/20000601/0000912057-00-027084/0000912057-00-027084.txt : 20000919 0000912057-00-027084.hdr.sgml : 20000919 ACCESSION NUMBER: 0000912057-00-027084 CONFORMED SUBMISSION TYPE: 8-K12G3 PUBLIC DOCUMENT COUNT: 26 CONFORMED PERIOD OF REPORT: 20000525 ITEM INFORMATION: FILED AS OF DATE: 20000601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBAL E TUTOR INC CENTRAL INDEX KEY: 0001114898 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 880444539 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K12G3 SEC ACT: SEC FILE NUMBER: 000-30743 FILM NUMBER: 647974 BUSINESS ADDRESS: STREET 1: 3340 PEACHTREE ROAD STREET 2: SUITE 1800 CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 4049781640 MAIL ADDRESS: STREET 1: 3340 PEACHTREE ROAD STREET 2: SUITE 1800 CITY: ATLANTA STATE: GA ZIP: 30326 8-K12G3 1 a8-k12g3.txt FORM 8-K12G3 Page 1 of 30 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) May 23, 2000 GLOBAL E TUTOR, INC. (Exact Name of Registrant as Specified in Charter) DELAWARE 0-29765 88-0444539 State or other jurisdiction of Commission File No. I.R.S. Employer I.D. No. incorporation or organization 3340 PEACHTREE ROAD, SUITE 1800, ATLANTA, GA 30326 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (404) 978-1640 Former name and former address: Kilimanjaro Group.com Inc., 1601 Fifth Avenue, Suite 2100, Seattle, Washington 98101-1686. ITEM 1. Changes in Control of Registrant. On May 23, 2000, we entered into an Agreement and Plan of Merger with Kilimanjaro Group.com Inc., a Nevada corporation ("Kilimanjaro"). The agreement provided that Kilimanjaro would merge into our company, Global e Tutor, Inc., and we would issue 50,000 common shares pro rata to the three shareholders of Kilimanjaro and pay $75,000 pro rata to such shareholders, in exchange for all of the outstanding shares of Kilimanjaro. Merger documents were filed with the States of Nevada and Delaware and the merger became effective May 25, 2000. As a result of the merger, Kilimanjaro was merged into Global e Tutor, Inc. and we were the surviving entity and assumed Kilimanjaro's reporting obligations as a successor issuer Page 2 of 30 pursuant to Section 12(g)(3) of the Securities Exchange Act. The information contained in this report pertains to the successor issuer, Global e Tutor, Inc., unless otherwise designated. The merger agreement was adopted by the unanimous consent of Kilimanjaro's Board of Directors and approved by the unanimous consent of its shareholders on May 24, 2000. The merger agreement was adopted by the unanimous consent of our Board of Directors also on May 24, 2000. Prior to the effectiveness of the merger, we had an aggregate of 27,467,747 shares of common stock issued and outstanding. As a result of the merger, we currently have a total of 27,517,747 shares outstanding. The officers, directors, and bylaws of Global e Tutor, Inc. shall remain unchanged as a result of the merger and shall be the officers, directors, and bylaws of the successor issuer. None of the officers or directors of Kilimanjaro succeeded to any positions with our company. Thus, James L. Vandeberg, the sole director and executive officer of Kilimanjaro, no longer controls the registrant. The certificate of incorporation of Global e Tutor, Inc., as amended, remains unchanged and shall be the certificate of incorporation of the successor issuer. The following table sets forth certain information furnished by the named shareholders and others concerning the ownership of our common stock as of May 18, 2000, of (i) each person who is known to us to be the beneficial owner of more than 5 percent of the common stock; (ii) all directors and executive officers; and (iii) directors and executive officers as a group:
Amount and Nature Name and Address of Beneficial of Beneficial Owner Ownership (1) Percent of Class - ------------------- ------------- ---------------- Executive officers and directors: Thomas E. McMurrain(2) 9,660,725(3) 35.14% 3340 Peachtree Rd. Suite 1800 Atlanta, GA 30326 Claes Nobel 160,667(4) * Vincent A. Riggio(2) 133,333(5) * Leslie Ennis(2) 61,667(6) * Shawn Cartmill(2) 61,667(7) * Page 3 of 30 Robert V. Willison(2) 549,333(8) 1.96% Lara Stegman(2) 61,667(9) * Executive Officers and 10,689,059 37.48% Directors as a Group (5 Persons) Other 5% shareholders: The Lancer Group and 9,525,000(10) 34.68% Michael Lauer(10) 200 Park Avenue Suite 3900 New York, NY Globalepartners, LLC 9,158,000(11) 33.34% 3340 Peachtree Rd. NE Suite 1800 Atlanta, GA 30326
- ------------------- * Represents less than 1%. (1) Unless otherwise indicated, this column reflects amounts as to which the beneficial owner has sole voting power and sole investment power. (2) Each of these persons is a member of Globalepartners, LLC which is a principal shareholder. See footnote (11) below. (3) Of the shares listed, Mr. McMurrain is the direct owner of 482,000 which are held in his own name. He also beneficially owns 9,158,000 shares which are held in the name of Globalepartners, LLC. Mr. McMurrain is the managing partner of the limited liability company. Mr. McMurrain holds options to purchase 62,174 shares. Of these options, 20,725 are immediately exercisable. For purposes of computing Mr. McMurrain's total shares beneficially owned and his percentage ownership, the options which are currently exercisable are deemed to have been exercised and the shares are deemed to be outstanding. (4) Mr. Nobel holds options to purchase 482,000 shares. Of these options, 160,667 are immediately exercisable. For purposes of computing Mr. Nobel's total shares beneficially owned and his percentage ownership, the options which are currently exercisable are deemed to have been exercised and the shares are deemed to be outstanding. (5) Mr. Riggio holds option to purchase 400,000 shares. Of these options, 133,333 are immediately exercisable. For purposes of computing Mr. Riggio's total shares beneficially owned and his percentage ownership, these options are deemed to have been exercised and the shares are deemed to be outstanding. (6) Ms. Ennis holds option to purchase 185,000 shares. Of these options, 61,667 are immediately exercisable. For purposes of computing Ms. Ennis' total shares beneficially owned Page 4 of 30 and her percentage ownership, these options are deemed to have been exercised and the shares are deemed to be outstanding. (7) Mr. Cartmill holds option to purchase 185,000 shares. Of these options, 61,667 are immediately exercisable. For purposes of computing Mr. Cartmill's total shares beneficially owned and his percentage ownership, these options are deemed to have been exercised and the shares are deemed to be outstanding. (8) Mr. Willison holds option to purchase 816,000 shares. Of these options, 549,333 are immediately exercisable. For purposes of computing Mr. Willison's total shares beneficially owned and his percentage ownership, these options are deemed to have been exercised and the shares are deemed to be outstanding. (9) Ms. Stegman holds option to purchase 185,000 shares. Of these options, 61,667 are immediately exercisable. For purposes of computing Ms. Stegman' total shares beneficially owned and her percentage ownership, these options are deemed to have been exercised and the shares are deemed to be outstanding. (10) The Lancer Group is composed of Lancer Offshore, Inc., Lancer Partners, LP, The Orbiter Fund, and Michael Lauer. Mr. Lauer is the sole general partner of Lancer Partners LP and is the sole investment manager of all three entities. Of the total shares, 5,320,000 are held directly by Lancer Offshore, Inc.; 2,100,000 are held directly by Lancer Partners LP; and 500,000 are held directly by The Orbiter Fund. Mr. Lauer is believed to control the voting and disposition of these shares by virtue of being the investment manager for these entities. Also, 690,000 of these shares are held in the name of the Lancer Group. Also, 500,000 shares are held by The Viator Fund Ltd, a fund controlled by Mr. Lauer. The remaining 415,000 shares are held directly by Mr. Lauer in his name. (11) Globalepartners, LLC is a Georgia limited liability of which Thomas E. McMurrain, one of our officers and directors, is the sole managing partner. These shares are also included in the shares designated as being beneficially owned by Mr. McMurrain. Mr. McMurrain controls approximately 64.74% of the ownership interest of the limited liability company by virtue of his control of Thomas E. McMurrain Family, LLLP, Global Funding Group, Inc., and TDV Consulting. The initial capital contributions of the members of the limited liability company were the outstanding shares of GLOBALETUTOR.COM, INC. Prior to the reorganization with us, all of the shares of GLOBALETUTOR.COM, INC., except the shares held personally by Mr. McMurrain, were transferred to the limited liability company. Set forth below are the names and percentage interests held by the members of the limited liability company:
Name of Member Percentage of Ownership Interest -------------- -------------------------------- Thomas E. McMurrain Family, LLLP 45.09% Global Funding Group, Inc. 13.10% Mandalay Sports Action Entertainment, LLC 10.52% Robert Willison 9.08% TDV Consulting 6.55% Ray Story 5.26.% Shawn Cartmill 2.18% Lara Stegman 2.18% Page 5 of 30 Leslie Ennis 1.09% Don Ruttenberg 0.55% Bob Cohn 0.55% Steve Martin 0.55% Gary Hill 0.55% Barry Morris 0.55% Amanda Anderson 0.55% Lloyd Skidmore 0.55% Karen Lennon 0.55% Samuel Sykes 0.55%
We are not aware of any arrangements which may result in a change of control of the registrant. ITEM 2. Acquisition or Disposition of Assets. The consideration exchanged pursuant to the merger agreement with Kilimanjaro was negotiated between Kilimanjaro and us. In evaluating our company as a candidate for the proposed merger, Kilimanjaro used criteria such as the value of our assets, our current business operations and anticipated operations, and our business name and reputation. Kilimanjaro determined that the consideration for the merger was reasonable. We intend to continue the business of Global e Tutor, Inc. and enhance shareholder value through the identification, acquisition and or development and commercialization of proprietary technology, both hardware and software, in the online tutoring industry. FORWARD LOOKING STATEMENTS This report contains statements that plan for or anticipate the future. Forward-looking statements include statements about the future of operations involving the on-line tutoring industry, statements about our future business plans and strategies, and most other statements that are not historical in nature. In this report forward-looking statements are generally identified by the words "anticipate," "plan," "believe," "expect," "estimate," and the like. Although we believe that any forward-looking statements we make in this report are reasonable, because forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results to differ materially from those expressed or implied. For example, a few of the uncertainties that could affect the accuracy of forward-looking statements, include the following: - Subscription to our ISP may not accelerate as quickly as we have predicted. The plethora of existing ISP's with similar value propositions could slow growth if the differentiated features are not communicated clearly to the target market. Page 6 of 30 - Our personal sanctuary databases may not be as secure or meeting the minimum requirements of COPA, which could subject our information to Internet hackers. - The value of click-through rates may decline faster than projected. - Our system may receive more volume than it can handle. - Potential competitors may impart an interest in our market prior to our being fully operational. - We may experience delays in web site or database design. - Our youth foundation may be unable to secure funding for its ongoing operations. In light of the significant uncertainties inherent in the forward-looking statements made in this report, particularly in view of our early stage of operations, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. DESCRIPTION OF BUSINESS History and Organization Our company was incorporated under the laws of the State of Delaware on May 9, 1995, under the name Essex Enterprises, Inc. On December 12, 1996, the company changed its name to Veronique, Inc. and on April 13, 1999, it changed its name to Digital Launch, Inc. Finally, on February 3, 2000, the name was changed to Global e Tutor, Inc. We were originally organized to engage in the television marketing of hair products, but abandoned this business in approximately 1996. In December 1996 we acquired Veronique, Inc. as a wholly owned subsidiary and control of our company was transferred to the shareholders of Veronique. Also, in connection with such transaction, we forward split the outstanding stock at the rate of two shares for each one share outstanding. Prior to this forward split we had outstanding 800,000 common shares; following the forward split we had approximately 1,600,000 shares outstanding. We issued 3,012,500 shares to the shareholders of Veronique. Veronique was incorporated on September 28, 1995, and was engaged in the business of developing, packaging, marketing and distributing skincare and beauty products. After its acquisition, it was renamed VI Sub, Inc. On September 29, 1997, we merged VI Sub, Inc., a wholly owned subsidiary, into our parent corporation because there was no benefit to maintaining both a holding company and the operating subsidiary. In 1999 we determined it was no longer feasible to finance our skincare business under the prevailing corporate structure. We reached an agreement in principle to transfer the assets of the Page 7 of 30 skincare business, subject to the assumption of the related liabilities, and started the search for a new business venture. In contemplation of a proposed transaction with GLOBALETUTOR.COM, INC., in December 1999 we transferred all of our assets to Veronique Europe Ltd, our wholly owned subsidiary which was not conducting any business operations, in exchange for the assumption of all of our outstanding liabilities. The subsidiary has agreed to indemnify us from these liabilities. Subsequent to this transaction we transferred all of the outstanding stock of Veronique Europe Ltd., which has been renamed to Veronique, Inc., to Alford S.A. for nominal consideration. Alford S.A. is an entity whose beneficiaries are relatives of Terrence O. McGrath, our former chairman and CEO. In December 1999 we entered into an agreement with GLOBALETUTOR.COM, INC., a Nevada corporation, to exchange all of the issued and outstanding shares of this entity for 9,640,000 shares of our common stock. The reorganization agreement was closed by the parties on January 21, 2000. GLOBALETUTOR.COM, INC. was incorporated in the State of Nevada on December 10, 1999, to provide educational services over the Internet. The company has not yet commenced its principal operations. In connection with the reorganization transaction we assumed all of the outstanding options of GLOBALETUTOR.COM, INC. to acquire 3,964,174 shares of our common stock at prices ranging from $0.25 to $0.275 per share. We also granted to Thomas E. McMurrain, an officer, director and principal shareholder, options to purchase 6,584,000 shares. These options were subsequently canceled. At this time we also granted 416,000 options to Robert V. Willison, an executive officer, outside of our stock option plan. We also issued warrants to Finn Partners, an entity controlled by Thomas E. McMurrain, to purchase 3,000,000 shares. These warrants were subsequently canceled. We also converted an outstanding promissory note payable to Lancer Offshore, Inc., an entity for which Michael Lauer, one of our principal shareholders, acts as investment manager, in the principal amount of $750,000 into 3,000,000 shares of common stock. These funds had been loaned to us in December 1999 by Lancer Offshore, Inc. and were in turn loaned to GLOBALETUTOR.COM, INC. pending closing. We also privately placed 500,000 shares at $0.20 per share and 5,000,000 shares at $0.25 per share. We presently have one wholly owned subsidiary, GLOBALETUTOR.COM, INC., through which we propose to conduct our principal business. Proposed Business Our company is in the development stage and our efforts have been focused primarily on the start-up of our proposed business. We are in the process of creating an Internet destination for global education through Internet-based, interactive, video-on-demand tutoring services for kindergarten through 12th grade students with the goal of making learning fun, convenient, and affordable. Currently we do not have an on-line product, but we are working on its development. Our web site, upon its completion, is expected to have five distinct areas for children: a virtual community for children; our top ten tutorials; a global educational broadcast network; a global Page 8 of 30 entertainment network; and a nonprofit foundation. We have engaged the firm of Comstar.net, Inc. to provide us with our Internet access for our web site. - The children's community. We are in the process of creating the content for the community, although it is in the initial development stage. Its purpose will be to give children a positive, filtered site, free from pornography and profanity, that parents will feel comfortable allowing their children to use. At present, we intend to offer live, monitored chats for children, Saturday night chats with celebrities, an educational game, short video clips that provide positive reinforcement like "stay off drugs", "don't smoke", etc. - Top ten tutorials. The purpose of this site will be to identify and define the most common difficulties that students have by grade level and by subject. We have contracted with individuals who have twenty years' experience teaching elementary, middle and/or high school to design the site. At present, there are no tutorials for this site on-line, but we have created, or are in the process of creating, 40 tutorials. Each tutorial will be approximately 10 minutes in length. We expect to have 300 tutorials completed by the time our web site is launched, which is tentatively scheduled for September 2000. All tutorial material developed for us will be our property and the educators developing it will not be paid royalties for the material. They will, however, be paid a flat fee. - The global educational broadcast network. Aside from the "top ten" tutorials, we do not intend to create educational content. We recognize that content already exists on the world wide web and students are using it to supplement their educational process. The purpose of the broadcast network will be to create a sortal for existing educational content. By "sortal" we mean a virtual catalog system for existing content. We want to make it simple for children to find quality educational content, as well as easy for them to use the web sites they find. We will do this by providing each content provider that joins our network with the same tool set, and, much like the television networks create a standardized "look" and "feel" for their affiliates, we will be doing the same with the content providers that join our network. We call this uniform look and feel strategy "wrapping." This gives each of our partners the same technology and functionality. This means that the function buttons for each site will be in the same places so it will be very easy for children to navigate. The vocabulary we use will be easy for a kindergarten through 12th grade student to understand. The computer commands for all of the content providers who join our network will be standardized. At present, we have two sites wrapped and we are currently in discussions with several other content providers, determining their interest in becoming part of our network. It is our long-term intention to wrap from 800 to 1,000 existing web Page 9 of 30 sites. By creating a common forum for existing content providers, we will be combining their existing audiences. We feel that the sum of the combined audiences will be of value to corporations that may be interested in marketing to these audiences. All affiliates' information will be filtered, screened and held accountable to standard criteria which we are developing in conjunction with the United Nations, National Education Association, and state education boards. Dr. Noel Brown, a 40-year employee of the United Nations who created Agenda 21, the global blueprint for environmental sustainment, has agreed to chair our international advisory board. Dr. Brown will be working to create strategic relationships with areas of the United Nations that help us with distribution of our services. The relationships have yet to be established and their natures are still unknown. We are working with MRESA, formally known as the Metropolitan Regional Education Strategic Alliance. This relationship will allow us to place our tutorials in the public schools with which they are affiliated. Terms of the agreement are still being discussed. At present, we are in the research and development stage of creating standard criteria. Our nonprofit foundation has employed a director of strategic development to create these relationships with funding and education partners. These relationships have yet to be established and therefore, their nature has not been determined. The terms of each affiliation with content providers will be different, depending upon the amount of material provided by the affiliate, whether they already have an audience which they will bring to our web site, and the amount of web site upgrades we will provide to them. Another consideration will be the percentages, both volume and dollar amount, of their e-commerce revenue generated through the site, which has yet to be determined. The terms of any such partnerships will be mutually determined by us and the partnering company. - The global entertainment network. This location on our web site is still in the design phase. Its focus will be to provide entertaining educational materials and games for children. We intend to create a Hollywood-type environment that attracts and retains a child's attention. We are currently working with Mandalay Sports Entertainment in Hollywood, California, to totally design our web site. They will provide introductions to celebrities and special effects web designers. We are currently in discussions regarding the scope of their relationship with us. - Our nonprofit foundation. The foundation is an independent and separate corporation from our company. The separate corporation was filed with the Secretary of State of Georgia under the name Global Youth Foundation, Inc on Page 10 of 30 May 15, 2000. The 501-(c)3 determination status will be filed with the Internal Revenue Service in May 2000. The mission of the foundation will be to introduce and foster a global education community through tutoring, mentoring and environmental awareness activities for youth ages 5 through 18 from all social, racial, ethnic, and economic backgrounds. The foundation and its officers will operate as a separate corporate organization with a separate board of directors and the assets of the foundation will be acquired, held, and managed independently of our company. No officer or board member of the foundation will benefit monetarily from any foundation program or fund raising activities. As stated above, none of these services is currently being offered on-line by us, but we are in the process of developing each of these areas. We do anticipate that all of them will be offered at the time of our expected launch in September 2000. We intend to provide our services to children worldwide by offering them in several different languages. We are currently in discussions with several companies that specialize in language translation, but at present we have not determined which one we will use. Additionally, we are working with the United Nations to make sure educational services will be culturally sensitive. It is our intention to work with corporate sponsors that will provide financial support to the programs we offer children. In return, we will provide them with marketing opportunities on the web site. At present, we do not have any corporate sponsors. Rather than focusing on developing educational content, we intend to concentrate on marketing and distribution. This means that we are interested in creating and growing an audience for ourselves and for our five major areas of focus described above. As a marketing company we will use traditional and non-traditional marketing, advertising and public relations strategies to attract students worldwide to our web site. By increasing the audience for our foundation, we anticipate increasing the marketing value for our associates, both corporate sponsors and educational content providers. We have entered into an agreement with OneWeb Systems, Inc., an Atlanta, Georgia, based software design company, to create original designs, artwork, and engineering specifications for our web site using systems created by OneWeb. The agreement also grants to us a perpetual, non-exclusive, non-transferable license to use these products. Any modifications to these products for our application will be owned by OneWeb, subject to our license rights. All of the work performed by OneWeb, including the license fee, will be on a flat-fee basis. OneWeb will not be entitled to any royalty payments for the license. Market Overview The world wide web is the fastest growing technology in history, achieving 25% penetration in less than seven years. Over 700,000 students are now taking some form of distributed learning courses, including online classes. Since 1994, education and training Page 11 of 30 companies have raised more than $3.4 billion in equity capital through more than 38 initial public offerings and 30 follow-up offerings. The power of technology provides greater access of tutorial services at a lower cost, largely enabled by growing access to personal computers and the Internet, as well as expanding bandwidth. In the United States alone, there are 55 million children in kindergarten through 12th grade schools, 14 million students in post-secondary institutions and 136 million working adults. Globally, over 20 percent of the world's six billion people are currently enrolled in a kindergarten through 12th grade or post-secondary education system. As the result of technological innovations like the Internet, video-conferencing and satellite systems, a new economy has emerged driven by knowledge and information. Management believes that creating an education-focused gateway to the Internet is a huge opportunity. (Statistical information provided by the Wit Capital, "E Knowledge Industry Report," August 11, 1999 and the Merrill Lynch "Book of Knowledge," April 9, 1999.) Research and Development We have spent approximately $302,000, which was raised in our private funding in December 1999, on the research and development of our proprietary technology from the date of the inception of our current business on December 10, 1999, through April 14, 2000. The money has been spent on our web based educational content distribution. This technology allows us to take traditional education materials and re-engineer them for the web. The revenues we may achieve will be primarily from strategic alliances and subscriber fees. Investment monies generated, while paying directly for research and technology costs accrued to date, will fund our operations, which include funding on-going technological development. None of the cost of our research and development is expected to be borne directly by our customers. Competition The market for children's educational products and services is highly competitive. Competition is generally based on the quality and range of educational materials made available, price, promotion, and customer service. However, we believe that we are the first Internet based tutorial services company that will consolidate educational content provider web-sites in a standardized format. Other web sites that offer educational content and are candidates to join our network, include: - Distributed learning content companies such as Kaplan and Sylvan Learning Systems; - Distance enabling companies such as Caliber Learning Center Network and eCollege.com; and - Online communities such as Classroom connect, FamilyEducation Company, and The Lightspan Partnership. Page 12 of 30 Very few of our current competitors focuses on distribution. For the most part they are content providers. We believe that our global focus to aggregate demand and current service options gives us a decided advantage over the industry's current fragmented approach. We have also identified that most children currently use their parent's Internet service. Our mission to provide a community for them provides a distinguishing feature to our business plan. Additionally, we intend to be a global marketing company affiliating with existing content providers and localizing their educational material into seven languages for our students. This localization makes us unique in understanding cultures, languages, and lifestyles as they relate to global users. Additionally, we have found that many providers in the market currently do not have their content repurposed for the Internet, that is, that the information has not been put into a format such that the content would be available on the Internet. We are in negotiations with technology companies that can provide the ability to do this. We would act as the marketing arm for the technology company, acquiring the content accounts. We would repurpose the content for the providers while retaining the use of the content for ourselves and the technology organization. As a result, we believe our model has the opportunity to become the most complete, well-rounded educational service in the industry. We also believe that our strategic corporate alliances will play a role in differentiating us from the competition. We intend to use their support, both financial and intellectual, to create joint marketing ventures and to supplement the cost to consumers and maintain a technological advantage. Additionally, we are creating a software delivery system that sorts and organizes content providers whose service is then wrapped with our branding. Our technology team is currently working to create the system we will use. Marketing Management believes that a strong marketing effort is crucial to our success. Our mission is to attract students to our web site to use our services and retain their loyalty throughout their education process. Our marketing plan focuses on distribution of educational content and the entertainment aspect our on-line community, and concentrates on succeeding in the following categories: - traffic - the number of users; - branding - global recognition of products and services for us and our partners; - stickiness - how long a user stays at the destination once there; and - bonding - loyalty of the user over the long term. During the first years following the launch of our services, our marketing efforts will be dedicated to the four following areas: Page 13 of 30 - Traditional print and broadcast - We intend to implement an advertising campaign to create brand awareness through traditional advertising mediums such as print, radio, television and billboards. - Co-branding sponsorship model - As an inherent part of the relationship with our strategic partners, such as international companies that market to the kindergarten through 12th grade demographic, we anticipate cooperative marketing, branding, advertising and public relations efforts. - Grass roots - We intend to engage in web-site and community-based awareness programs designed to interact with students, parents, and educators directly to achieve our goals, as well as those of our affiliates and corporate sponsors. Some ideas for student interaction, live and on-line, include live Saturday night celebrity chats, a traveling road show, complete with a specially equipped touring bus, a network-televised game show, sponsored concerts, music videos, and brand merchandising. - Public Relations - As a part of an intensive public relations campaign, both traditional and non-traditional methods will be utilized. We intend to select a celebrity spokesperson by second quarter 2000. We have engaged the firm of 360 Thinc Ltd. Of Atlanta, Georgia, to assist us in developing a marketing and communications program to attract corporate affiliates. We have also engaged the firm of Cohn & Wolfe of Atlanta, Georgia, to assist us in developing a public relations plan. Government Regulation Among the regulatory measures directly applicable to our business model are those concerning the collection, use, and dissemination of personal information. As a routine part of our operations it will be necessary for us to collect individually-identifying information about consumers of our services and to use that information both in the delivery of services and for certain marketing and other purposes. We intend to implement appropriate privacy policies informing our users about the information we collect and how we use it; how and to what extent we may disclose it to third parties; what choices our users have in these matters, and how we protect this information from unauthorized use and disclosure. Specific laws will apply to our information practices with respect to certain consumers those twelve years of age and younger and those located in the countries composing the European Union. The Child Online Privacy Protection Act of 1998, 15 U.S.C. Sections 6501-6506, also known as COPPA, applies to the online collection of personal information from persons twelve and under. In general, COPPA requires obtaining verifiable parental consent to the collection, maintenance and disclosure of information about children; gives parents the right at any time to stop further use or collection of information from their children, and also gives parents the right to Page 14 of 30 access stored information about their children. The law also imposes specific requirements for the content and placement of a web site's privacy policy, and requires web sites to use reasonable procedures to protect the confidentiality, security, and integrity of personal information collected from children. "The European Union Privacy Directive (Counsel Directive 95/46, 1995 O.J.(L281) 31) similarly imposes restrictions on the collection, use and disclosure of information about residents of EU member states. In addition to operating within the borders of those nations, the EU Privacy Directive prohibits the export of personal data concerning Europeans to countries considered not to have "adequate" privacy protection. At this time the United States has not been recognized as providing adequate protection, but enforcement of the embargo on exportation of data to the U.S. has been postponed pending completion of negotiations between the United States and the European Union concerning "Safe Harbor" principles that would enable U.S. persons to collect this information if they agree to comply with the Safe Harbor principles. We anticipate that in connection with our business in Europe, we will ultimately be required to comply with the substance of the EU Privacy Directive, either by virtue of acceding to the Safe Harbor principles or by virtue of direct application of the EU Privacy Directive and implementing national legislation to our operations in Europe. We do not anticipate that compliance with the EU Privacy Directive or with COPPA will have a material adverse effect upon our operations; however, it should be noted that there is a great deal of ongoing legislative, regulatory, and lobbying activity in the area of privacy and information practices, with new measures being introduced frequently, and there can be no assurance that our business will not be materially adversely impact by future regulations in this field. Intellectual Property Rights To protect the rights to our intellectual property, we will rely on a combination of trademark and copyright law, patent, trade secret protection, confidentiality agreements, and other contractual arrangements with our employees, affiliates, clients, strategic partners, and others. The protective steps we have taken may be inadequate to deter misappropriation of our proprietary information. We may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. We intend to register certain of our trademarks in the United States. Our corporate counsel is currently performing the trademark search for 10 brands associated with globaletutor. Effective trademark, copyright, patent, and trade secret protection may not be available in every country in which we offer, or intend to offer, our services. In addition, although we are taking steps to protect us from infringing on the intellectual property rights of others, other parties may assert infringement claims against us or claim that we have violated a patent or infringed a copyright, trademark, or other proprietary right belonging to them. These claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources on Page 15 of 30 our part, which could materially adversely affect our business, results of operations, and financial condition. We currently incorporate certain licensed third-party technology developed by OneWeb Services, Inc. in some of our services. In the license agreements with OneWeb, they have generally agreed to defend, indemnify, and hold us harmless with respect to any claim by a third party that the licensed software infringes any patent or other proprietary right. We are also negotiating with and intend to use other third-party technology providers in connection with our services, the licenses for which should also contain provisions to defend us against potential infringement. We cannot assure that these provisions will be adequate to protect us from infringement claims. The loss or inability to obtain or maintain any of these technology licenses could result in delays in introduction of new services. Employees At April 1, 2000, we employed 15 persons on a full-time basis, including our executive officers. Approximately 60% of the compensation of two of our employees, Lara Stegman and Shawn Cartmill, is paid by Emergency One Cash Card, Inc., a company controlled by Thomas E. McMurrain. Ms. Stegman devotes essentially all of her time to our company and Mr. Cartmill devotes approximately 60% of his time to our company. We hire independent contractors on an as-needed basis only. We have no collective bargaining agreements with our employees. We believe that our employee relationships are satisfactory. In the long term, we will attempt to hire additional employees as needed based upon our growth rate. DESCRIPTION OF PROPERTY We lease approximately 410 square feet of office space in Atlanta, Georgia, from Emergency One Cash Card, Inc., a company controlled by Thomas E. McMurrain. This space is used for the corporate headquarters. The lease can be terminated by either party at any time upon 60 days' prior notice. Monthly lease payments are $1,200. LEGAL PROCEEDINGS On February 22, 2000, counsel for a company called E-Tutor sent a letter to us demanding that we cease and desist all use of our "GlobaleTutor" name. The demand letter claimed that our use of that name violated E-Tutor's service mark rights in the federally registered trademark "E-TUTOR." We denied that E-Tutor has service mark rights in E-TUTOR and denied that our use of the GlobaleTutor name is confusingly similar to or otherwise infringes the E-TUTOR mark. We have responded to E-Tutor's demand through correspondence by our counsel dated March 7, 2000. In addition to denying infringement on the grounds stated above, our counsel noted that the term "E-TUTOR is likely a generic term that, although federally registered, may be subject to cancellation. Although we suggested the possibility of cancellation, we did not indicate Page 16 of 30 an intent to initiate such cancellation proceedings. No formal proceedings have been filed by either party to date. We intend to vigorously defend any claims asserted by E-Tutor, if necessary. It is possible that E-Tutor will not pursue any claims against us or will seek to compromise our claims. While there is some possibility of an adverse outcome for us, at this stage of the matter, our counsel cannot fairly determine either the likelihood of an adverse outcome or the extent of any possible loss. PLAN OF OPERATION During the next year we plan to launch four phases of our website. In June 2000 we plan to begin our launch with the opening of our website/portal including "edutainment" offerings and a catalog offering education related products. Mandalay Sports Entertainment will co-brand the site with us at this time. In August 2000 we will add ISP and web site hosting services to our portal, and begin receiving advertising revenue from advertisers on our site. Also in August Phase III of our site will include the roll-out of our education foundation which will be headed by Claes Nobel, one of our directors. At year-end and into the first quarter of 2001 we will launch Phase IV - our interactive tutoring modules, which include live online learning, collaborative learning and will include different tutoring sessions for grades kindergarten through grade 12. Revenues We anticipate that our revenues will come from several sources: - Corporate site sponsorships; - Advertising revenue; - ISP subscription fees; - Tutorial sales; and - Exchange membership fees and transactions fees. Expenses We expect marketing, product development and our information technology infrastructure will make up the largest portion of our operational expenses at approximately 45% of revenue. Capital Requirements We estimate that we can satisfy our current cash requirements for approximately the next two months. During that time we intend to seek equity financing of from $3,000,000 to $5,000,000 to meet our cash requirements for the remainder of the year and to accomplish the objectives of our business plan described below. Page 17 of 30 The use of these proceeds will be invested to accomplish the objectives of the business plan. Specifically, we plan to create a sponsorship revenue model, acquire strategic partners, extend our reach, brand and growth strategy, create avenues for our affiliates to extend their reach, establish the foundation, and provide a unique means of distribution of assets for our virtual philanthropists. To achieve these goals, we require capital investment for the following purposes: - developing and executing a brand-building awareness campaign, with sufficient budget to fund the campaign; - developing the web site and then continually adding new features and enhancements to the site; - expanding corporate office facilities, including appropriate staffing and equipment to support our business plans; - augmenting our staff to support and sustain rapid growth; - acquiring strategic partnerships; and - increasing unique visitors to our site by marketing and advertising and other creative promotions for our web site. During the next six months we intend to perform product research and development in the following areas: - a free filtered ISP and premium services; - personalized tutorials and assessment; - content and technology development; - affiliated products and services; and - licensing and promotions. We expect that the number of employees will increase from the current fifteen to approximately thirty persons over the next twelve months. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The following table sets forth as of May 18, 2000, the name, age, and position of each of our executive officers and directors, and the term of office of such director:
Name Age Position(s) Director Since - ---- --- ----------- -------------- Thomas E. McMurrain 32 Co-Chairman, President, CEO, & Director 2000 Claes Nobel 69 Co-Chairman, Senior
Page 18 of 30
Name Age Position(s) Director Since - ---- --- ----------- -------------- Vice-President, & Director 2000 Vincent A. Riggio 37 Director 2000 Leslie Ennis 44 Vice-President -- Shawn Cartmill 36 Treasurer -- Robert V. Willison 46 Director of Corporate Finance and Chief Financial Officer -- Lara Stegman 28 Secretary and Director of Operations --
Directors are elected for a term of one year and until their successors are elected and qualified. Annual meetings of the stockholders, for the selection of directors to succeed those whose terms expire, are to be held at such time each year as designated by the Board of Directors. The Board of Directors has not selected a date for the next annual meeting of shareholders. Officers are chosen by the Board of Directors. Each officer holds his office for one year and until his successor is chosen and qualified. Set forth below is certain biographical information regarding our executive officers and directors: THOMAS E. MCMURRAIN has been the president, CEO, and co-chairman of GLOBALETUTOR.COM, INC. since December 1999. Since February 1999 he has been the president, chief executive officer, and sole owner of Emergency One Holding Corporation, Inc., a commercial holding company providing funding to private subsidiaries. Since September 1997 Mr. McMurrain has been the president, chief executive officer, and sole owner of Emergency One Cash Card, Inc., a financial lending company. From March 1993 until July 1997 he worked as an independent contractor to World Marketing Alliance, a broker of insurance and securities. CLAES NOBEL has been the co-chairman of GLOBALETUTOR.COM, INC. since January 2000. Since 1973 he has been the chairman of United Earth NGO, a not-for-profit corporation engaged in educating people about environmental issues. VINCENT A. RIGGIO has been the vice-president of RAM Development Group, a commercial real estate development company, since December 1996. From January 1996 until December 1996 he was the president of Riggio Restaurant Management which managed a seafood restaurant. From December 1990 until July 1995 Mr. Riggio was the acting president and owner of Checkers Hamburgers which sold hamburgers, fries, and colas to the public through retail stores. LESLIE ENNIS has been a vice-president of GLOBALETUTOR.COM, INC. since January 2000. From June 1999 until February 2000 she was the executive director of Brain Injury Family Assistance Center a not-for-profit corporation providing social services to families that have a member with a brain injury. From October 1998 until June 1999 she was employed as an assistant to the president of the Caring Institute, a not-for-profit corporation engaged in recognition of humanitarian excellence. From 1996 until 1998 she was employed by Wings Page 19 of 30 Service as a site manager of Peachtree DeKalb Airport location. In 1994 Ms. Ennis filed personal bankruptcy. SHAWN CARTMILL has been the treasurer and director of accounting for GLOBALETUTOR.COM, INC. since January 2000. Since December 1998 he has been the chief information officer for Emergency One Cash Card, Inc. From August 1997 until December 1998 he worked as a driver for Pizza K. From October 1996 until July 1997 Mr. Cartmill was employed as a regional director of sales for Digital Music Express, Inc., a provider of background music to retail establishments. He received bachelor of science degrees in finance management in December 1986, and in marketing in May 1989, from Clemson University. He also received a masters degree in business administration in May 1996 from The Citadel, Charleston, South Carolina. ROBERT V. WILLISON has been the director of corporate finance for GLOBALETUTOR.COM, INC. and our company since January 2000 and he has been chief financial officer of our company since April 2000. Since February 1998 he has been the president and chief executive officer of Bristol Capital, a sole proprietorship investment banking company. From January 1995 until January 1998 he was president and chief operating officer of Teledata World Services, Inc., a telecommunications company. LARA STEGMAN has been the director of operations, assistant to the president, and corporate secretary for GLOBALETUTOR.COM, INC. since January 2000. Since November 1998 she has been the chief operating officer for Emergency One Cash Card, Inc. From July until October 1998 she was employed as a sales associate for Eclipse Telecommunications, Inc., a company engaged in the commercial sales of telecommunications service products. From December 1996 through October 1997 Ms. Stegman was employed as a sales associate with Peachtree Nissan and Troncalli Motors Inc. Ms. Stegman received a bachelor of arts degree in elementary education in May 1994 from Duquesne University, Pittsburgh, Pennsylvania. The table below sets forth as of May 18, 2000, the name, age, and position of our significant employee who is not otherwise an executive officer but who makes, or is expected to make, significant contributions to our business. Dr. Morris accepted employment with our parent company effective January 31, 2000.
Name Age Position ---- --- -------- Dr. Barry Morris 44 Chief Knowledge Officer
Set forth below is certain biographical information regarding this significant employee: DR. BARRY MORRIS has been the chief knowledge officer for GLOBALETUTOR.COM, INC. since January 2000. Since August 1997 he has been the director of development, the dean of advancement, and a vice-president of Whitefield Academy, Inc., a college preparatory school. From 1991 until 1997 he was an assistant professor at Georgia State Page 20 of 30 University. Dr. Morris received a bachelor of arts degree in political science and Russian in May 1977 from Tulane University, New Orleans, Louisiana. He received a bachelor of arts degree in political economy in December 1989 from Emory University, Atlanta, Georgia. He received his doctorate in international political economy in August 1998 from Emory University. EXECUTIVE COMPENSATION Compensation The following table sets forth the aggregate executive compensation awarded to, earned by, or paid to the named executive officer by any person for all services rendered in all capacities to Global e Tutor, Inc. and its subsidiaries for the fiscal years ended December 31, 1999, 1998, and 1997:
Annual Compensation Long-Term Compensation ------------------------------------ ------------------------------------ Awards Payouts ------------------------- ------- Other Restricted All Name and Principal Annual Stock Options/ LTIP Other Positions Year Salary Bonus Compensation Award(s) SARs Payouts Compensation - ------------------ ---- -------- ----- ------------ ---------- ---------- ------- ------------ Terrence O. 1999 $120,000 -- -- -- -- -- -- McGrath, CEO(1) 1998 $120,000 -- -- -- 1,000,000 -- -- options(2) 1997 $105,000 -- -- -- -- -- --
- ------------------- (1) Mr. McGrath resigned as an officer and a director effective January 21, 2000. (2) These options were canceled in January 2000 in connection with the reorganization with GLOBALETUTOR.COM, INC. Stock Option and Incentive Plans 1996 INCENTIVE PLAN On December 12, 1996, we adopted an incentive plan, pursuant to which we are authorized to issue up to 900,000 shares of common stock, either as options to purchase such shares or as restricted stock awards, to certain employees, officers, directors, and consultants. Awards of stock options under the plan consist of both non-qualified options and options intended to qualify as "Incentive Stock Options" under Section 422 of the Internal Revenue Code of 1986, as amended. Awards of restricted stock will be subject to the terms of forfeiture and other terms, conditions, and restrictions as may be established by the Board or committee granting the award. Page 21 of 30 Awards of restricted stock will be forfeited if the participant ceases to be an employee, director, or consultant during the restricted period set by the Board or committee. However, if the participant's relationship to the company ceases because of death or disability, he will be entitled to the percentage of the restricted shares equal to the percentage of the restriction period that has lapsed. In connection with qualified stock options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of grant (or 110% of the fair market value in the case of a grantee holding more than 10% of our outstanding stock). The aggregate fair market value of shares for which qualified stock options are exercisable for the first time by such employee (or 10% shareholder) during any calendar year may not exceed $100,000. Non-qualified stock options granted under the plan may be granted at a price determined by the Board of Directors, not to be less than the fair market value of the common stock on the date of grant. The plan is administered by the Board of Directors which will determine the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof and restriction periods, subject to the provisions of the plan. The plan may also be administered by a compensation committee of the Board if one were created. At May 18, 2000, there were no outstanding options granted under this plan and 17,740 restricted shares had been issued. 1999 STOCK OPTION PLAN On December 27, 1999, we adopted, and on January 21, 2000, the shareholders approved, an employee stock option plan, pursuant to which we are authorized to grant up to 5,000,000 options to our key employees, officers, directors, and consultants. Awards under the plan will consist of both non-qualified options and options intended to qualify as "Incentive Stock Options" under Section 422 of the Internal Revenue Code of 1986, as amended. The plan is administered by the Board of Directors which will determine the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan. Following the filing of this report, the plan, as it pertains to insiders, will be administered by a committee composed of at least two non-employee directors. In connection with qualified stock options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of grant (or 110% of the fair market value in the case of a grantee holding more than 10% of our outstanding stock). The aggregate fair market value of shares for which qualified stock options are exercisable for the first time by such employee (or 10% shareholder) during any calendar year may not exceed $100,000. Page 22 of 30 Non-qualified stock options granted under the plan may be granted at a price determined by the Board of Directors, not to be less than the fair market value of the common stock on the date of grant. The plan also contains certain change in control provisions which could cause options and other awards to become immediately exercisable. Payment of the exercise price may be in cash, certified check, our common stock, or cancellation of indebtedness. Stock Option Grants As of May 18, 2000, we had a total of 3,964,174 options which remained outstanding under our 1999 stock option plan and 443,500 options which were outstanding outside of our 1999 stock option plan, for a total of 4,407,674 outstanding options. The following table sets forth information concerning individual grants of stock options made through the date of this table to each of the named executive officers and significant employees, each of which option grant was made under our 1999 stock option plan, unless otherwise noted, and vests one-third on January 21, 2000, one-third on January 21, 2001, and one-third on January 21, 2002, unless otherwise noted:
Number of Percent Securities of Total Underlying Outstanding Exercise Expiration Name Options Options Price Date - ---- ---------- ----------- -------- ---------- Thomas E. McMurrain 62,174 1.4% $0.275 1/31/03 Claes Nobel 482,000 10.9% $0.25 1/31/03 Vincent A. Riggio 400,000 9.1% $0.25 1/31/03 Leslie Ennis 185,000 4.2% $0.25 1/31/03 Shawn Cartmill 185,000 4.2% $0.25 1/31/03 Robert V. Willison 816,000(1) 18.5% $0.25 1/31/03 Lara Stegman 185,000 4.2% $0.25 1/31/03 Dr. Barry Morris 185,000 4.2% $0.25 1/31/03
- ------------------- (1) Of these options, 416,000 were granted outside of our 1999 stock option plan and vested immediately upon the date they were granted on January 21, 2000. Compensation of Directors The bylaws provide that directors, as such, are not entitled to receive any stated salary for their services. However, they may receive a fixed sum and expenses for attendance at meetings of the Board. We have not adopted a policy with regard to establishing any fixed sum for attendance at special or regular meetings of the board, but we do intend to reimburse directors for out-of-pocket expenses related to such meetings. Page 23 of 30 Employment Contracts Effective January 31, 2000, we entered into three-year full-time employment contracts with our executive officers and our significant employee. The following table sets forth the base salary for each of these contracts:
Annual Name Base Salary ---- ----------- Thomas E. McMurrain $ 60,000 Claes Nobel $150,000 Leslie Ennis $ 60,000 Shawn Cartmill $ 24,000 Robert V. Willison $ 24,000 Lara Stegman $ 24,000 Dr. Barry Morris $ 60,000
As additional compensation, each of the employees is entitled to participate in all bonus programs generally available to all executive officers. He or she is also entitled to receive stock options as determined by the Board of Directors under our stock option plans. Each employee is entitled to vacation and sick leave in accordance with the company's policy. Each of the employment contracts contains similar provisions for reimbursing the employee for business related expenses in accordance with the policies of the company. Each employee is entitled to benefits as generally may be made available to all other employees of the company from time to time. The employment contracts are automatically renewable for additional one-year terms unless terminated by either party ninety days before the end of the relevant term of employment. The agreements may be terminated at any time with or without cause by either party. If terminated without cause, the employee is entitled to two weeks of base salary, provided the employee shall continue to work during such period. In the case of termination for cause or the death of the employee, base salary payments shall terminate immediately. If the employment agreement is terminated for disability of the employee, we shall continue to pay base salary tot he extent the employee has any unpaid sick leave. The contracts also contain provisions preventing the employees from disclosing any proprietary information. Each of the contracts also includes provisions which restrict the employee from certain actions during and after termination of the agreement. During the term of the contract and for a period of two years following termination, the employee may not attempt to divert or solicit any person employed by the company. During the term of the contract and for a period of one year following termination, the employee may not divert or solicit to a competing business any individual or entity who is a customer, or prospective customer, of ours during the two years prior to termination. Also during the contract and for a period of one year following termination, the employee may not engage in a competing business in any territory in which we were engaged in a similar business. Page 24 of 30 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In December 1999 our wholly owned subsidiary, GLOBALETUTOR.COM, INC., entered into an agreement with Bristol Capital Limited, a company controlled by Robert V. Willison, a significant employee of ours, to assist us in locating investment capital financing. If Bristol is successful in locating financiers or investors which provide financing to us, we are obligated to pay a fee to Bristol equal to 10% of the amount received by us, plus warrants for 10% of the stock in our company. We have also agreed to grant a first right of refusal to Bristol for any subsequent financing. The agreement expires on December 21, 2000, but we can terminate the contract upon 30 days' written notice beginning June 22, 2000. In connection with the acquisition of GLOBALETUTOR.COM, INC. by us in January 2000, we paid Mr. Willison's company $200,000 pursuant to the terms of this agreement for locating the company and the financing for the transaction. In December 1999 we borrowed $750,000 from Lancer Offshore, Inc., an entity for which Michael Lauer, one of our principal shareholders, acts as investment manager. The note was converted in December 1999 at the rate of $0.25 per share into 3,000,000 shares of common stock. The initial expenses of GLOBALETUTOR.COM, INC. were advanced by Emergency One Holding Corporation, a company controlled by Thomas E. McMurrain, our president, co-chairman, and principal shareholder. These advances were evidenced by a promissory note dated December 31, 1999, in the principal amount of $173,890.43, and bearing interest at 10% per annum beginning December 10, 1999. The promissory note is due on or before December 31, 2000. During December 1999, our parent company sold off the operations of the company to the former majority shareholder, Terrence O. McGrath. All of the assets and liabilities were transferred to a company controlled by the relatives of Mr. McGrath for nominal consideration of $1.00 and an agreement to indemnify us against any liabilities relating to the former operations. Mr. McMurrain, who founded GLOBALETUTOR.COM, INC., paid $25,000 for 4,820,000 shares in that entity. All but 241,000 of these shares were subsequently sold to Globalepartners, LLC for approximately 64.74% interest in such entity. The limited liability company beneficially owns approximately 9,158,000 shares of our company. Mr. McMurrain owes the company approximately $158,000 as of May 31, 2000, for an employee loan. The loan is due on demand and does not accrue interest. Page 25 of 30 DESCRIPTION OF SECURITIES Common Stock We are authorized to issue 50,000,000 shares of common stock, par value $.001 per share. As of May 18, 2000, we had outstanding 27,467,747 shares of common stock. All common shares are equal to each other with respect to voting rights. They are also equal to each other with respect to dividend rights and with respect to liquidation rights, subject to any preferential rights of any then-outstanding preferred stock. Special meetings of the shareholders may be called by the Board of Directors, the president, or the holders of not less than one-fifth of all the shares entitled to vote at the meeting. Holders of shares of common stock are entitled to one vote at any meeting of the shareholders for each share of common stock they own as of the record date fixed by the Board of Directors. At any meeting of shareholders, one-third of the outstanding shares of common stock entitled to vote, represented in person or by proxy, constitutes a quorum. A vote of the majority of the shares of common stock represented at a meeting will govern, even if this is substantially less than a majority of the shares of common stock outstanding. Holders of shares are entitled to receive such dividends as may be declared by the Board of Directors out of funds legally available therefor, and upon liquidation are entitled to participate pro rata in a distribution of assets available for such a distribution to shareholders, subject to any preferential rights of any then-outstanding preferred stock. There are no conversion, pre-emptive, or other subscription rights or privileges granted by us with respect to any shares. Reference is made to our certificate of incorporation and bylaws, as well as to the applicable statutes of the State of Delaware for a more complete description of the rights and liabilities of holders of shares. The common shares do not have cumulative voting rights, which means that the holders of more than fifty percent of the shares of common stock voting for election of directors may elect all the directors if they choose to do so. Preferred Stock Our certificate of incorporation authorizes 500,000 shares of preferred stock, par value $.001 per share. Such shares may be issued in such series and have such rights, preferences, an designation as determined by the Board of Directors. No preferred shares are outstanding. Change of Control The creation and issuance of a series of preferred stock or the issuance of shares of common stock by the Board of Directors could be used to delay, defer, or prevent a change of control of the company in certain takeover attempts. Using such shares, the Board of Directors could create impediments to, or delay persons seeking to effect, a takeover or transfer of control by causing such additional authorized shares to be issued to a holder or holders who might side with the Board in opposing a takeover bid that the Board of Directors determines is not in the best interests of our company and its shareholders. Such an issuance could diminish the voting Page 26 of 30 power of existing shareholders who favor a change in control, and the ability to issue the shares could discourage an attempt to acquire control of our company. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS Market for Stock Our common stock was quoted on the OTC Electronic Bulletin Board (OTC BB: "GETT") through May 2000. The table below sets forth for the periods indicated the high and low bid quotations as reported by Nasdaq Trading & Market Services. These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
Quarter High Low FISCAL YEAR ENDED DECEMBER 31, 1998 First $3.00 $1.5625 Second $3.125 $2.00 Third $3.25 $1.50 Fourth $3.25 $2.25 FISCAL YEAR ENDED DECEMBER 31, 1999 First $3.00 $2.00 Second $2.50 $0.3125 Third $0.875 $0.2813 Fourth $7.00 $0.25 FISCAL YEAR ENDING DECEMBER 31, 2000 First $7.9375 $1.875
Outstanding Options, Warrants, and Convertible Instruments At May 18, 2000, we had outstanding options to purchase 4,407,674 shares. Of these options, 27,500 were granted prior to the year ended December 31, 1999, outside of any stock option or incentive plan; 3,964,174 were assumed from our subsidiary and granted by us on January 21, 2000, under our current 1999 stock option plan; and 416,000 were granted on January 21, 2000, outside of our 1999 stock option plan. At May 18, 2000, we had outstanding warrants to purchase 60,000 shares. In addition, pursuant to an agreement with HAW e-nvestments, LLC, our business management and financial services firm, we have agreed to issue 39,053 shares and warrants to purchase 156,208 shares for work performed during February, March, and April 2000. The warrants will be exercisable at Page 27 of 30 prices ranging from $0.25 to $0.50 per share. The agreement provides that 20% of fees earned by this firm for its services will be compensated in equity, up to $100,000 annually. We have also entered into a six-month agreement dated May 9, 2000, with Trinity Investment Services Corp. To provide marketing and consulting services. This agreement that we will issue 100,000 shares to them, issuable 20,000 as of May 9, 2000, and 20,000 each 30 days thereafter. It also provides that we will grant options to them to purchase up to 300,000 shares at prices ranging from $4.00 to $8.00 per share, to be issued beginning in June 2000 through November 2000. Shares Eligible for Future Sale under Rule 144 We had 27,467,747 shares of our common stock outstanding at May 18, 2000. Of these shares, 19,669,675 are believed to be restricted securities pursuant to Rule 144 promulgated by the Securities and Exchange Commission. Management believes that as of May 18, 2000, approximately 1,140,833 of these shares may have met the one year holding requirement of Rule 144, that approximately 1,220,025 may be eligible for immediate sale under Rule 144(k), and that approximately 935,000 which are held by affiliates may be eligible for immediate sale under Rule 144. Record Holders of Stock; Transfer Agent At May 18, 2000, we had approximately 113 shareholders of record as reported by our transfer agent. The transfer agent is Interwest Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117. Dividends Since our inception, we have not paid any cash dividends on its common stock and we do not anticipate that it will pay dividends in the foreseeable future. The Board of Directors has not adopted a policy regarding dividends. ITEM 5. Other Events SUCCESSOR ISSUER ELECTION Upon effect of the merger, pursuant to Rule 12g-3(a) of the General Rules and Regulations of the Securities and Exchange Commission, Global e Tutor, Inc. became the successor issuer to Kilimanjaro for reporting purposes under the Securities Exchange Act of 1934 and elected to report under the Act effective May 25, 2000. Page 28 of 30 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS On or about March 13, 2000, we engaged Prichett, Siler & Hardy, P.C., Certified Public Accountants, as our independent auditors for the year ended December 31, 1999. The decision to retain Pritchett, Siler & Hardy, and not to re-engage Raines And Fischer, the former independent auditor, was made by the Board of Directors on such date. The decision not to re-engage Raines And Fischer did not involve a dispute with us over accounting policies or practices. The report of Raines And Fischer on our financial statements for the years ended December 31, 1998, did not contain an adverse opinion or disclaimer of opinion, nor was it modified as to uncertainty, audit scope, or accounting principals. In connection with the audit of our financial statements for the years ended December 31, 1998, there were no disagreements with Raines And Fischer for the annual period and for the period up to the date of dismissal on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of Raines And Fischer, would have caused the firm to make reference to the matter in its report. Neither we, nor anyone on our behalf, has consulted Prichett, Siler & Hardy regarding the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on our financial statements, and neither written nor oral advice was provided by Prichett, Siler & Hardy that was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue. CHANGE IN FISCAL YEAR. The year-end of Kilimanjaro was January 31st. As a result of the merger of Kilimanjaro into our company, the year-end will be changed to December 31st. The report on which the transition period will be filed is the Form 10-KSB for the year ending December 31, 2000. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) The following financial statements are included in this report:
GLOBAL E TUTOR, INC. Page Report of Auditor for Year-end Financial Statements F-1 Balance Sheet as of December 31, 1999 F-2 Statements of Operations for the years ended December 31, 1999 and 1998 F-3 Statement of Stockholders' Equity for the years ended December 31, 1999 and 1998 F-4 Statements of Cash Flows for the years ended December 31, 1999 and 1998 F-5 Notes to Financial Statements F-7 Page 29 of 30 Balance Sheet as of March 31, 2000 F-1 Statements of Operations for the three months ended March 31, 2000 and 1999 F-2 Statements of Cash Flows for the three months ended March 31, 2000 and 1999 F-3 Notes to Unaudited Financial Statements F-4 GLOBALETUTOR.COM, INC. Report of Auditor for Year-end Financial Statements F-1 Balance Sheet as of December 31, 1999 F-2 Statements of Operations from inception through December 31, 1999 F-3 Statement of Stockholders' Equity from inception through December 31, 1999 F-4 Statements of Cash Flows from inception through December 31, 1999 F-5 Notes to Financial Statements F-6
(b) The pro forma financial statements for the merger of Kilimanjaro into Global e Tutor, Inc. are included in this report. (c) Exhibits. The following exhibits are included as part of this report:
Exhibit No. Description 2.1 Reorganization Agreement dated December 28, 1999 2.2 Reorganization Agreement dated May 23, 2000 3.1 Certificate of Incorporation, as amended, of GlobaleTutor, Inc. 3.2 Certificate of Merger with Kilamanjaro Group.com, Inc. 3.3 Current Bylaws of GlobaleTutor, Inc. 4.1 Form of Common Stock Certificate 10.1 1996 Incentive Plan 10.2 Non-Statutory Stock Option Plan and Certificate for Jeffrey Brinn 10.3 1999 Stock Option Plan 10.4 Form of 1999 Stock Option Plan Certificate, with schedule of option holders 10.5 Form of Non-Plan Stock Option Grant for Robbie Willison, with schedule of option prices 10.6 Senior Secured Note for $750,000 dated December 27,1999 10.7 Investment Agreement with Lancer Offshore, Inc. dated December 31, 1999 10.8 Convertible Promissory Note for $750,000 dated December 31, 1999 Page 30 of 30 10.9 Asset Transfer Agreement dated December 31, 1999 10.10 OneWeb Systems Software License dated December 6, 1999 10.11 OneWeb Systems Agreement to Proceed dated February 15, 2000 10.12 360 Degrees Project Fee Agreement dated January 10, 2000 10.13 Cohn & Wolfe Agreement dated November 19, 1999 10.14 Bristol Capital Limited Agreement dated December 22, 1999 10.15 Comstar Service Level Agreement dated January 31, 2000 10.16 Office Lease 10.17 Employment Agreement, with schedule 10.18 Promissory Note to Emergency One Holding Company dated December 31, 1999 18.1 Letter re change of accountants
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. Global e Tutor, Inc. Date: May 31, 2000 By /s/ Thomas McMurrain, President Date: May 31, 2000 By /s/ Robert V. Willison, Director of Corporate Finance and Chief Financial Officer INDEPENDENT AUDITORS' REPORT Board of Directors GLOBALETUTOR, INC. (Formerly Digital Launch, Inc.) (Formerly Veronique, Inc.) Atlanta, GA We have audited the accompanying balance sheet of GLOBALETUTOR, Inc. [A Development Stage Company] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) at December 31, 1999, and the related statements of operations, stockholders' equity and cash flows for the year ended December 31, 1999 and for the period from re-entering of the development stage on December 31, 1999 through December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of GLOBALETUTOR, Inc. for the period from January 1, 1998 through December 31, 1998 were audited by other auditors whose report dated March 14, 2000, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements audited by us present fairly, in all material respects, the financial position of GLOBALETUTOR, Inc. (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.), as of December 31, 1999, and the results of its operations and its cash flows for the year ended December 31, 1999 and for the period form the re-entering of the development stage on December 31, 1999 through December 31, 1999 in conformity with generally accepted accounting principles. /s/ Pritchett, Siler & Hardy, P.C. PRITCHETT, SILER & HARDY, P.C. March 16, 2000 Salt Lake City, Utah GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) BALANCE SHEET ASSETS
December 31, 1999 ----------- CURRENT ASSETS: Cash $ 1 ----------- Total current assets 1 NOTE RECEIVABLE - RELATED PARTY 750,000 ----------- $ 750,001 =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ -- ----------- Total Current Liabilities -- ----------- COMMITMENTS AND CONTINGENCIES -- ----------- STOCKHOLDERS' EQUITY: Preferred stock, $.001 par value 500,000 shares authorized; no shares issued and outstanding -- Common stock, $.001 par value 50,000,000 shares authorized, 12,827,747 shares issued and outstanding 12,828 Capital in excess of par 4,627,150 Retained Deficit (3,889,977) Deficit accumulated during the development stage -- ----------- Total Stockholders' Equity 750,001 ----------- $ 750,001 ===========
The accompanying notes are an integral part of this financial statement. -2- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) STATEMENTS OF OPERATIONS
From the re-entering of the Development Stage on December 31, December 31, 1999 Through -------------------------------- December 31, 1999 1998 1999 ----------- ----------- ----------- REVENUES $ -- $ -- $ -- COST OF GOODS SOLD -- -- -- ----------- ----------- ----------- GROSS PROFIT -- -- -- ----------- ----------- ----------- EXPENSES: General and administrative expenses -- -- -- ----------- ----------- ----------- LOSS BEFORE INCOME TAXES -- -- -- CURRENT TAX EXPENSE -- -- -- DEFERRED TAX EXPENSE -- -- -- ----------- ----------- ----------- LOSS FROM CONTINUING OPERATIONS -- -- -- ----------- ----------- ----------- DISCONTINUED OPERATIONS: Loss from operations of discontinued skin care and cosmetic product operations, net of no taxes (423,741) (1,379,312) -- Gain on disposal of skin care and cosmetic product operations net of no taxes 284,455 -- -- ----------- ----------- ----------- LOSS FROM DISCONTINUED OPERATIONS $ (139,286) $(1,379,312) $ -- ----------- ----------- ----------- NET LOSS $ (139,286) $(1,379,312) $ -- ----------- ----------- ----------- LOSS PER COMMON SHARE: Loss from continuing operations $ -- $ -- $ -- Loss from discontinued operations (.04) (.16) -- Gain on disposal of operations .03 -- -- ----------- ----------- ----------- Net Loss Per Common Share (.01) (.16) -- ----------- ----------- ----------- WEIGHTED AVERAGE SHARES OUTSTANDING: 9,297,391 8,667,768 12,827,747 ----------- ----------- -----------
The accompanying notes are an integral part of these financial statements. -3- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) STATEMENT OF STOCKHOLDERS' EQUITY FROM JANUARY 1, 1998 THROUGH DECEMBER 31, 1999
Deficit Accumulated Common Stock Capital in During the ------------------------- Excess of Retained Development Shares Amount Par Value Deficit Stage ---------- -------- ----------- ----------- ----------- BALANCE, January 1, 1998 8,361,840 $ 8,362 $ 2,685,493 $(2,371,379) $-- Shares issued for services valued at $.91 per share 8,400 9 7,428 -- -- Shares issued for cash at $1.00 to $1.50 per share, Net of deferred offering cost of $5,009 543,333 543 754,448 -- -- Net loss for the period ended December 31, 1998 -- -- -- (1,379,312) -- ----------- -------- ----------- ----------- --- BALANCE, December 31, 1998 8,913,573 8,914 3,447,369 (3,750,691) -- Shares issued for services and payment of accounts payable valued at $.20 to $1.53 per share 122,925 123 47,322 -- -- Shares issued for cash at $.20 to $.75 791,249 791 344,209 -- -- Shares issued upon conversion of a convertible note payable at $.25 per share 3,000,000 3,000 747,000 -- -- Shares issued for a subscription receivable at $.75 per share 200,000 200 149,800 -- -- Shares previously issued at $.75 per share, cancelled upon the cancellation of subscription receivable (200,000) (200) (149,800) -- -- Granting of options to acquire common stock at below market value in relation to services rendered. Compensation expense calculated in accordance with APB No. 25 -- -- 41,250 -- -- Net loss for the year ended December 31, 1999 -- -- -- (139,286) -- ----------- -------- ----------- ----------- --- BALANCE, December 31, 1999 12,827,747 $ 12,828 $ 4,627,150 $(3,889,977) $-- =========== ======== =========== =========== ===
The accompanying notes are an integral part of these financial statements. -4- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) STATEMENTS OF CASH FLOWS
From the re-entering of The Development Stage For the Years Ended on December 31, December 31, 1999 Through --------------------------------- December 31, 1999 1998 1999 ----------- ----------- ----------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (139,286) $(1,379,312) $-- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation & amortization 13,900 10,748 -- Issuance of stock for services 47,445 7,437 -- APB 25 expenses for options and warrants Issued at below market value 41,250 -- -- Gain on sale of subsidiary (284,455) -- -- Change in assets and liabilities: (Increase) decrease in accounts receivable 62,260 (43,311) -- (Increase) decrease in inventory 29,714 (39,313) -- (Increase) in other current assets (37,270) 50,619 -- (Decrease) in accounts payable 4,136 203,417 -- (Decrease) in accrued liabilities (97,790) 33,775 -- ----------- ----------- --- Net Cash (Used) by Operating Activities (360,096) (1,155,940) -- ----------- ----------- --- CASH FLOWS FROM INVESTING ACTIVITIES: Amounts loaned on note receivable (750,000) -- -- Additions of property and equipment -- (4,315) -- Payments for web site -- (24,630) -- Payment for trademarks (490) (1,412) -- Proceeds from sale of subsidiary 1 -- -- ----------- ----------- --- Net Cash (Used) by Investing Activities (750,489) (30,357) -- ----------- ----------- --- CASH FLOWS FROM FINANCING ACTIVITIES: Proceed from notes payable 810,000 -- -- Payments on note payable (60,000) -- -- Proceeds from stock issuance 345,000 760,000 -- Payment of stock offering costs -- (5,009) -- ----------- ----------- --- Net Cash Provided by Financing Activities 1,095,000 754,991 -- ----------- ----------- --- NET INCREASE (DECREASE) IN CASH (15,585) (431,306) -- CASH AT BEGINNING OF PERIOD 15,586 446,892 -- ----------- ----------- --- CASH AT END OF PERIOD $ 1 $ 15,586 $-- ----------- ----------- ---
[Continued] -5- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) STATEMENTS OF CASH FLOWS
From the re-entering of The Development Stage For the Years Ended on December 31, December 31, 1999 Through --------------------------------- December 31, 1999 1998 1999 ----------- ----------- ----------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 3,869 $ 169 $-- Income taxes $ -- $ -- $-- SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: For the period ended December 31, 1999: The Company issued 200,000 shares for a $150,000 subscription receivable. The Company subsequently received back and cancelled the 200,000 shares upon cancellation of the $150,000 subscription. The Company issued 3,000,000 common shares in payment of a $750,000 note payable. The Company issued 122,925 common shares in payment of approximately $47,445 of accounts payable and consulting services. The Company transferred all of the assets and liabilities related to the skin and hair care products operations to a wholly owned subsidiary and sold the related subsidiary to the former management of the Company for $1 and the indemnification of the Company against any liabilities related to the operations, resulting in a gain on disposal of $284,129. For the period ended December 31, 1998: None.
The accompanying notes are an integral part of these financial statements. -6- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION - GLOBALETUTOR, Inc. (Formerly Digital Launch, Inc. [Digital] / Veronique, Inc. [Veronique] / Essex Enterprises, Inc. [Essex]) ("The Company") was organized under the laws of the State of Delaware on May 9, 1995. The Company (Essex) prior to December 12, 1996, had only nominal activities. On December 12, 1996, Essex entered into a reverse acquisition with Veronique, Inc. [Purchaser] pursuant to which the legal structure of Essex survived but in which the Purchaser was deemed to be the acquirer for accounting purposes and the Company was renamed Veronique, Inc. Purchaser marketed and distributed skin care and cosmetic products on a worldwide basis. Effective April 13, 1999 the Company, was renamed Digital Launch, Inc [Digital]. During December 1999, the Company sold off the operations of the Company to Alford S.A. by the transfer of all the Company's assets and liabilities to a newly organized wholly owned subsidiary Veronique, Inc. Veronique, Inc. was then sold to Alford S.A. for $1 and indemnification of the Company against any liabilities relating to the former operations. With the sale of Veronique, Inc., the Company, effectively discontinued its operations and re-entered the development stage. On December 28, 1999, Digital entered into a merger and plan of reorganization with Globaletutor.com, Inc. which was completed on January 21, 2000 with the exchange of 9,640,000 shares of the Company's common stock for all of the outstanding shares (4,820,000) of Globaletutor.com common stock. On February 2, 2000 the Company was renamed GLOBALETUTOR, Inc. and the OTCBB symbol was changed to GETTE. The Company has not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors. LOSS PER SHARE - The computation of basic and diluted earnings (loss) per share is based on the weighted average number of shares outstanding during the period presented, plus, when their effect is dilutive, additional shares assuming the exercise of certain vested stock option and warrants, reduced by the number of shares which could be repurchased from the proceeds of the exercised options or warrants assuming they were exercised; in accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share". [See Note 6] Diluted per share amounts have not been presented as their effect is anti-dilutive. STATEMENT OF CASH FLOWS - For purposes of the statement of cash flows, the Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. STOCK BASED COMPENSATION - The Company accounts for its stock-based compensation under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Effective from the date of inception, the Company adopted the disclosure only provision of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation ." SFAS No. 123 requires that companies which do not choose to account for stock-based compensation as prescribed by the statement shall disclose the pro forma effects on earnings and earnings per share as if SFAS No. 123 had been adopted. INCOME TAXES - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (See Note 7). -7- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] ACCOUNTING ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimated. RECENTLY ENACTED ACCOUNTING STANDARDS - Statement of Financial Accounting Standards (SFAS) No. 135, "Rescission of FASB Statement No. 75 and Technical Corrections", SFAS No. 136, "Transfer of Assets to a Not-for-Profit Organization or Charitable Trust that Raise or Hold Contributions for Others", SFAS No. 137 , "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date and Amendment of SFAS No. 133", were recently issued. SFAS No. 135, 136 and 137 have no current applicability to the Company or their effect on the financial statements would not have been significant. RECLASSIFICATION - The financial statements for the year ended December 31, 1998, have been reclassified to conform with the headings and classifications used in the December 31, 1999 financial statements. COMPREHENSIVE LOSS - Comprehensive loss from the date of inception until December 31, 1999 is the same as net loss presented in the accompanying statements of operations. NOTE 2 - DISCONTINUED OPERATIONS / SALE OF SUBSIDIARY During December 1999, the Company adopted a plan to discontinue it's skin care and cosmetic product operations. The operations were disposed of on December 28, 1999. The disposal was accomplished through the Company transferring all it's assets and liabilities to a newly formed subsidiary Veronique, Inc. At the time of the transfer liabilities exceeded assets by $284,454. Veronique, Inc., was then sold to Alford, S.A., for $1, effectively discontinuing the Company's skin care and cosmetic product operations. The Company recognized a gain on the sale of the subsidiary of $284,455. The operations of Veronique, Inc. are reported as a discontinued operation for the years ended December 31, 1999 and 1998. Net sales related to operations for 1999 and 1998 were $367,465 and $283,477, respectively. These amounts have been reclassified to the loss from operations of discontinued skin care and cosmetic product operations in the accompanying statement of operations. The discontinued operations have been segregated on the statements of operations. -8- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 2 - DISCONTINUED OPERATIONS / SALE OF SUBSIDIARY [CONTINUED] The following are condensed proforma statements of operations that reflect what the presentation would have been for the years ended December 31, 1999 and 1998 without the reclassifications required by "discontinued operations" accounting principles:
1999 1998 --------- ----------- Net Sales $ 367,465 $ 283,477 Cost of goods sold (98,102) (190,590) Other operating expenses (616,735) (1,474,796) Other income (expense) (76,369) 2,597 Provision for taxes -- -- --------- ----------- Net loss $(423,741) $(1,379,312) --------- ----------- Loss per common share $ (.04) $ (.16) --------- -----------
NOTE 3 - NOTES RECEIVABLE In connection with the merger and plan of reorganization agreement (See Note 9) the Company loaned GLOBALETUTOR.COM, Inc. $750,000, on December 27, 1999. The note accrues interest at prime plus 1% and matures December 31, 2002. NOTE 4 - NOTES PAYABLE During 1999, the Company issued and repaid $60,000 in short-term notes payable. In connection with short term loans the Company issued 10,000 warrants to purchase the Company's common stock at $1.00 per share, expiring July to September, 2002. On December 31, 1999, the Company entered into an investment agreement wherein the Company, issued a $750,000 convertible note payable. The note accrues interest at prime plus 1% and matures on December 31, 2000. The Note was immediately converted into 3,000,000 shares of common stock at $.25 per share (See Note 5). NOTE 5 - CAPITAL STOCK COMMON STOCK ISSUANCES - During January 1999, the Company entered into a consulting agreement to assist the Company in finding a company interested in acquiring the Company. In Connection with the agreement the consultant purchased 200,000 shares of the Company's common stock for $200 and a $149,800 subscription receivable. During June 1999, the Company signed a mutual release wherein the consultant returned the 200,000 shares previously issued for the return of the $200 and cancellation of the $149,800 subscription receivable. On December 31, 1999 the Company issued 3,000,000 shares of common stock in connection with the conversion of a $750,000 convertible promissory note at a rate of $.25 per share. -9- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 5 - CAPITAL STOCK [CONTINUED] During the years ended December 31, 1999 and 1998, the Company issued 122,925 and 8,400 shares, respectively, of common stock at prices ranging from $.20 to $1.53 per share, the average fair market value of the Company's stock at the time the services were provided, in payment of accounts payable and for legal, accounting and consulting services rendered valued at $47,445 and $7,644, respectively. During the years ended December 31, 1999 and 1998 the Company issued 791,249 and 543,333 shares of common stock at prices ranging from $.20 to $1.50 per share for $345,000 and $760,000, respectively. The Company granted 50,000 warrants to purchase the Company's common stock at $1.25 per share, expiring July 13, 2002 in connection with receiving $25,000 for 71,249 shares of common stock at $.35 per share, during 1999. PREFERRED STOCK - The Company is authorized to issue 500,000 shares of $.001 par value preferred stock with such rights and preferences and in such series as determined by the Board of Directors at the time of issuance. No shares are issued or outstanding as of December 31, 1999 and 1998. WARRANTS - At December 31, 1999, the Company had 10,000 and 50,000 warrants to purchase common stock outstanding at prices of $1.00 and $1.25 per share, and expiring in September 2002 and July 2002, respectively. The warrants were issued in connection with the Company obtaining short-term notes payable and equity investments. STOCK OPTIONS - During the periods presented in the accompanying financial statements the Company has granted options under the 1996 Stock Options Plan (the Plan) and executive and other employment agreements. The Corporation has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans or other agreements. The Board of Directors adopted the 1996 Stock Option Plan (the Plan) pursuant to which the Company may issue from time to time up to 900,000 shares of common stock pursuant to stock options and restricted stock grants, and pursuant to which the Company shall issue stock options to non-employee directors pursuant to a pre-determined formula. The exercise price of each option issued to persons other than non-employee directors shall not be less than 85% of the fair market value of the common stock on the date of grant. The maximum term of any stock option cannot exceed ten years from the date of grant. At December 31, 1999, total options available to be granted under the Plan amounted to 900,000. The Company issued 27,500 non-plan stock options, to a consultant, to purchase common stock at $.75 which was below the current market value of $2.25 per share. Total compensation expense of $41,250 was recorded in accordance with APB 25. -10- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 5 - CAPITAL STOCK [CONTINUED] A summary of the status of the options granted under the Company's stock option plan and other agreements at December 31, 1999 and 1998, and changes during the years then ended is presented below:
December 31, 1999 December 31, 1998 ----------------------------- ------------------------------ Weighted Average Weighted Average Shares Exercise Price Shares Exercise Price ---------- ---------------- --------- ---------------- Outstanding at beginning of period 2,409,192 $ .74 2,411,444 $ .40 Granted 200,000 $ 2.25 1,233,748 $ 1.11 Exercised -- -- -- -- Forfeited -- -- -- -- Expired (248,862) $ 2.10 (1,155,000) $ .42 ---------- -------- ---------- -------- Outstanding at end of Period 2,441,330 $ .73 2,409,192 $ .74 ---------- -------- ---------- -------- Weighted average fair value of options granted during the year 200,000 $ .00 ---------- --------
The fair value of each option granted is estimated on the date granted using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the year ended December 31, 1999: risk free interest rate of 5% expected dividend yields of zero, expected life of 3.9 years, and expected volatility 141%. A summary of the status of the options outstanding under the Company's stock option plans and employment agreements at December 31, 1999 is presented below:
Options Outstanding Options Exercisable ----------------------------------------------------- -------------------------------- Range of Weighted-Average Weighted Average Weighted-Average Exercise Number Remaining Exercise Number Exercise Prices Outstanding Contractual Life Price Exercisable Price - ------------- ----------- ---------------- --------------- ----------- ---------------- $.001 1,000,000 5.7 years $.001 -- -- $.75 627,500 3.5 years $.75 627,500 $.75 $1.13 - $1.62 613,830 3.5 years $1.46 613,830 $1.46 $2.00 - $2.25 200,000 2.1 years $2.06 200,000 $2.06 - ------------- ----------- ---------------- --------------- ----------- ---------------- 2,441,330 1,441,330
Subsequent to the year ended December 31, 1999 the Company had 2,413,830 stock options expire. The Company also issued 4,380,174 stock options at an exercise price of $.25 to $50 per share, expiring January 31, 2003. -11- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 6 - LOSS PER SHARE The following data shows the amounts used in computing loss per share for the periods presented:
From the re-entering of The Development Stage For the Years Ended on December 31, December 31, 1999 Through ----------------------------------- December 31, 1999 1998 1999 ----------- ----------- ----------- Loss from continuing operations available to common shareholders (numerator) $ -- $ -- $ -- ----------- ----------- ----------- Loss from discontinued operations available to common shareholders (numerator) (139,286) (1,379,312) -- ----------- ----------- ----------- Weighted average number of common shares outstanding used in loss per share for the period (denominator) 9,297,391 8,667,768 12,827,747 ----------- ----------- -----------
The Company had outstanding at December 31, 1999, options to purchase 2,441,330 common shares at prices ranging from $.001 to $2.25 and warrants to purchase 60,000 common shares that were not included in the computation of loss per share because their effect is anti-dilutive. Subsequent to December 31, 1999, the Company issued 9,679,053 common shares, granted options to purchase 4,380,174 common shares at $.25 per share and issued warrants to purchase 156,208 common shares at $.25 to $50 per share. The company also canceled 2,413,830 options to purchase common shares. NOTE 7 - INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB 109 requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards. At December 31, 1999, the Company has available unused operating loss carryforwards of approximately $3,850,000, which may be applied against future taxable income and which expire in various years from 2010 to 2019. The amount of the net operating loss carryforward which can be utilized by the Company will be subject to annual limitations due to the substantial change in ownership which has occurred in the Company. -12- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 7 - INCOME TAXES [CONTINUED] The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards the Company has established a valuation allowance equal to the amount of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards. The net deferred tax asset is approximately $1,500,000 as of December 31, 1999, with an offsetting valuation allowance at December 31, 1999 of the same amount. The change in the valuation allowance for 1999 is approximately $50,000. NOTE 8 - COMMITMENTS AND CONTINGENCIES Management believes that the Company is not liable for any existing liabilities or claims against the Company related to its former operations, as the amounts were assumed by Alford, S.A. who continues to operate the skin care and cosmetic products business which was sold by the Company [See Note 2]. At December 31, 1999, there is the possibility that creditors and others seeking relief, which if not paid by Alford, S.A., may cause the Company to be included in claims and or lawsuits. The Company is not currently named nor is it aware of any such claims or suits against the Company. No amounts have been reflected or accrued in these financial statements for any contingent liability. Among liabilities from the discontinued operations, assumed by Alford, S.A. is approximately $258,000 alleged to be due and owing to a vendor for goods manufactured and partially delivered pursuant to a purchase order. The Company has not obtained a release from the vender nor has the vender agreed to a novation substituting Alford, S.A. for the Company as debtor. Alford, S.A. is continuing to discuss the outstanding debt with the vender from time to time for a possible settlement. At December 31, 1999, the vender has not initiated or threatened any formal legal action and it is not possible to determine whether the supplier will pursue legal action against the Company. The Company intends to vigorously defend it interests in this matter and has not recorded an accrual for the outcome of this uncertainty as the outcome can not be reasonably estimated. During July 1999, a former consultant to the Company filed claims for breach of contract, seeking approximately $57,600 for unpaid consulting fees and breach of implied covenant of good faith, claiming the Company damaged the goodwill and business reputation of the consultant's business and is seeking $500,000 in damages. The Company intends to vigorously defend it interests in this matter and has not recorded an accrual for the outcome of this uncertainty as the outcome can not be reasonably estimated. -13- GLOBALETUTOR, INC. [A DEVELOPMENT STAGE COMPANY] (Formerly Digital Launch, Inc. / Formerly Veronique, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 8 - COMMITMENTS AND CONTINGENCIES [CONTINUED] During February 2000, a public relations agency used in the Company's discontinued operations filed a claim of breach of contract seeking approximately $20,800 for fees for services rendered. The Company has moved to dismiss the complaint on grounds that the summons and complaint were defective in form, in that the claim was filed in an improper venue. The Company also contends that the agency failed to perform services. The Company intends to vigorously defend it interests in this matter and has not recorded an accrual for the outcome of this uncertainty as the outcome can not be reasonably estimated. NOTE 9 - SUBSEQUENT EVENTS NAME CHANGE - Effective February 2, 2000, the Company, was renamed GLOBALETUTOR, INC., and the OTCBB symbol was changed to GETTE. MERGER AND PLAN OF REORGANIZATION - On December 28, 1999 the Company entered into a definitive merger and plan of reorganization agreement with GLOBALETUTOR.COM, Inc. a privately held Nevada Corporation. The merger qualifies as a tax-free transaction under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. On January 21, 2000, the Company issued 9,640,000 common shares in exchange for all of the outstanding stock of Global.com in a transaction accounted for as a recapitalization (reverse merger), wherein the Company will become a parent of a wholly owned subsidiary, GLOBALETUTOR.COM. In conjunction with the recapitalization the Company sold 5,000,000 additional common shares to outside investors in a private placement transaction at $.25 per share, and issued 4,380,174 options to purchase the GLOBALETUTOR.COM stock at $.25 to $.50 per share. STOCK / WARRANT ISSUANCES - The Company issued 39,053 shares of common stock for consulting services. The Company also granted 156,208 warrants to purchase one share of Company's common stock at $.25 to $.50 per share for consulting services. MERGER - On May 23, 2000, the Company entered into an Agreement and Plan of Merger Agreement with Kilimanjaro Group, Inc. ("Kilimanjaro"), a Nevada corporation, wherein Kilimanjaro would be merged with and into the Company. The Company will be the surviving corporation after the merger. The former shareholders of Kilimanjaro would receive 50,000 shares of restricted common stock of the Company and cash in the aggregate amount of $75,000 in exchange for all the issued and outstanding shares of capital stock of Kilimanjaro. -14- GLOBALETUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS March 31, 2000 ----------- Unaudited CURRENT ASSETS Cash $ 958,091 Employee advances 171,160 ----------- Total current assets 1,129,251 =========== PROPERTY AND EQUIPMENT, at cost Furniture and equipment 23,959 Computer equipment 10,478 Software 1,699 ----------- 36,136 Allowance for depreciation (810) =========== 35,326 ----------- OTHER ASSETS Intangibles, net of accumulated amortization 3,597 ----------- $ 1,168,174 =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 208,773 Accrued Expenses 55,003 Due to related parties 177,939 ----------- Total current liabilities 441,715 ----------- STOCKHOLDERS' EQUITY Common stock 27,468 Additional paid in capital 1,813,533 Accumulated deficit (1,114,542) ----------- 726,459 ----------- $ 1,168,174 ===========
See notes to unaudited condensed consolidated financial statements GLOBALETUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND STATEMENT OF OPERATIONS FOR VERONIQUE, INC., THE PREDECESSOR COMPANY FOR THE THREE MONTHS ENDED
Predecessor March 31, March 31, 2000 1999 ------------ ------------ Unaudited Unaudited REVENUE $ -- $ 80,044 ------------ ------------ COSTS OF GOODS SOLD Purchases -- 16,409 ------------ ------------ PROFIT MARGIN -- 63,634 EXPENSES General and administrative 415,588 -- Depreciation/Amortization 875 -- Research and development 362,997 -- Sales and marketing 157,114 -- Professional fees -- 19,632 Rent expense -- 16,293 Consultants -- 75,400 Salaries and wages -- 86,466 All othe expenses -- 93,174 ------------ ------------ 936,573 290,965 Loss from operations (936,573) (227,331) OTHER INCOME (EXPENSE) Interest income 7,665 -- Interst expense (1,970) -- ------------ ------------ 5,695 -- ------------ ------------ Loss before income taxes (930,878) -- Income taxes -- -- ------------ ------------ Net loss $ (930,878) $ (227,331) ============ ============ Net loss per share $ (0.03) $ (0.03) ------------ ------------ Weighted average shares outstanding 27,467,747 9,036,498 ------------ ------------
See notes to unaudited condensed consolidated financial statements GLOBALETUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS AND STATEMENT OF CASH FLOWS FOR VERONIQUE, INC., THE PREDECESSOR COMPANY Increase (Decrease) in Cash
Predecessor March 31, March 31, 2000 1999 ---------------- ---------------- Unaudited Unaudited CASH FLOW FROM OPERATING ACTIVITIES Net Income $ (930,878) $ (227,331) Adjustments to reconcile net loss to net cash (used) by operating activities Depreciation 731 1,402 Amortization 144 (3,533) Issuance of warrants 16,000 Changes in assets and liabilities Accounts Receivable 55,563 Inventories (3,522) Deposits 7,161 Pre-paid expenses 20,000 181 Employee advances (171,160) Accounts Payable/Accrued expenses 228,670 (72,189) ----------- ----------- Total adjustments 94,385 (14,937) ----------- ----------- Net cash (used) by operating activities (836,494) (242,268) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of fixed assets (30,767) -- (Acquisition) Disposal of intangible assets (3,609) 31,857 ----------- ----------- Net cash used by investing activities (34,376) 31,857 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from related party 4,049 Payments on short-term debt (68,386) Proceeds from sale of common stock 1,050,000 264,395 ----------- ----------- Net cash provided by financing activities 1,054,049 196,009 ----------- ----------- Net increase (decrease) in cash 183,179 (14,402) Cash, beginning of period 774,912 15,586 ----------- ----------- Cash, end of period $ 958,091 $ 1,184 =========== ===========
NON-CASH OPERATING TRANSACTIONS The Company issued 118,816 warrants in February and March, 2000, in exchange for services rendered. NON-CASH INVESTING TRANSACTIONS In accordance with the merger and plan of reorganization, on January 21, 2000, 9,640,000 common shares of Digital Launch, Inc. were exchanged for all of the outstanding common shares (4,820,000) of GlobaleTutor.com, Inc. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
March 31, March 31, 2000 1999 ---------------- ---------------- Cash paid during the periods for Interest - - Income Taxes - -
See notes to unaudited condensed consolidated financial statements GLOBALETUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999 Note A DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION: The consolidated financial statements of the Company (The "Successor") include the accounts of the parent, GLOBALETUTOR, INC., ("PARENT") and its wholly-owned subsidiary GLOBALETUTOR.COM, INC., ("SUBSIDIARY"). The Parent (formerly known as Digital Launch, Inc./Veronique, Inc./Essex Enterprises, Inc.) (the "Predecessor") was organized under the laws of the State of Delaware on May 9, 1995. The Subsidiary, a Nevada corporation, was incorporated on December 10, 1999. All significant intercompany balances and transactions have been eliminated in consolidation. The parent and its wholly-owned subsidiary are referred to as "The Company." The Company is developing a website for global education via web based, interactive, video-on-demand tutoring services for K-12. The company is considered a development stage company as defined in SFAS No.7. In a development stage company, management devotes most of its activities in investigating business opportunities. Planned principal activities have not yet begun. The ability of the Company to emerge from the development stage with respect to any planned principal business activity is dependent upon its successful efforts to raise additional equity financing. There is no guarantee that the Company will be able to raise any equity financing. There is substantial doubt regarding the Company's ability to continue as a going concern. INCOME TAXES: The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the temporary difference between the financial statement and tax basis of assets and liabilities using presently enacted tax rates in effect. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an asset are capitalized. The cost of assets sold, retired, or otherwise disposed of, and the related allowance for depreciation is eliminated from the accounts, and any resulting gain or loss is recognized. Depreciation for the Company is provided using the straight-line method, the predecessor used the double-declining method over the estimated useful lives of the assets which are as follows: Furniture and equipment 5-7 years Computer equipment 5 years Software 5 years GLOBALETUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999 INTERNAL USE SOFTWARE: In March 1998, the Financial Accounting Standards Board approved American Institute of Certified Public Accountants Statement of Position, ACCOUNTING FOR COMPUTER SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE (SOP 98-1), effective for fiscal years beginning December 15, 1998. The SOP requires the capitalization of certain costs incurred in connection with developing or obtaining software for internal use. The company adopted SOP 98-1 in December 1999 and has capitalized software costs during 2000. ORGANIZATION COSTS In accordance with SOP 98-5, "Reporting on the Costs of Start-up Activities", the Company expenses all organizational costs as incurred. LOSS PER SHARE The Company computes basic and diluted earnings per share in accordance with Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share". SFAS 128 requires the Company to report both basic earnings per share, which is based on the weighted average number of common shares outstanding, and diluted earnings per share, which is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Since the Company incurred losses for all periods presented, the inclusion of options and warrants in the calculation of weighted average common shares is anti-dilutive; and therefore there is no difference between basic and diluted earnings per share. CASH IN EXCESS OF FEDERALLY INSURED LIMITS As of March 31, 2000 and March 31, 1999 the Company and the Predecessor had deposits with a financial institution in the amounts of $906,099 and $0, respectively, in excess of federally insured limits. INTANGIBLE ASSETS: Intangible assets for the Company, consist of domain name registrations. Domain name registrations are amortized on a straight-line basis over two years. The predecessor had no intangible assets as of March 31, 2000. Amortization expense for the three months ended March 31, 2000 and 1999 was $144 and $-0- respectively. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION: For the predecessor, revenue is recognized when products are shipped. The Company's revenue recognition policies are in compliance with all applicable accounting regulations. The successor has earned no revenue to date. GLOBALETUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999 NON-EMPLOYEE EQUITY COMPENSATION The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services." All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty's performance is complete or the date on which it is probable that performance will occur. FAIR VALUE OF FINANCIAL INSTRUMENTS The book values of cash and cash equivalents, trade accounts receivable, trade accounts payable, investments, and other financial instruments approximate their fair values principally because of the short-term maturities of these instruments. The fair value of the Company's related-party debt is estimated based on current rates offered to the Company for debt with similar terms and maturities. Under this method, the Company's fair value of financial instruments was not materially different from the stated value at March 31, 2000. IMPAIRMENT OF LONG-LIVED ASSETS The Company evaluates the recoverability of its long-lived assets in accordance with Statement of Financial Accounting Standards "SFAS" No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. ADVERTISING: Advertising is expensed as incurred and totaled approximately $73,081 for the three months ended March 31, 2000 and $10,020 for the three months ended March 31, 1999. STOCK BASED COMPENSATION The Company accounts for (and the Predecessor accounted) its stock-based compensation plan under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Effective January 1, 1999, the Predecessor, and now the Company have adopted the disclosure option of SFAS 123, "Accounting for Stock-Based Compensation." SFAS 123 requires that companies which do not choose to account for stock-based compensation as prescribed by the statement shall disclose the pro forma effects on earnings and earnings per share as if SFAS 123 had been adopted. RECENTLY ENACTED ACCOUNTING STANDARDS Statement of Financial Accounting Standards (SFAS) No. 134, "Rescission of FASB Statement No. 75 and Technical Corrections", SFAS No. 136, "Transfer of Assets to a Not-for-Profit Organization or Charitable Trust that Raise or Hold Contributions for Others", SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date and Amendment of SFAS No. 133", were recently issued. SFAS No. 135, 136, and 137 have no current applicability to the Company or their effect on the financial statements would not have been significant. COMPREHENSIVE LOSS Comprehensive loss from January 1, 2000 until March 31, 2000 and January 1, 1999 until March 31, 1999 is the same as net loss presented in the accompanying statement of operations for the periods then ended. GLOBALE TUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999 RECLASSIFICATION Certain prior year amounts have been reclassified to conform with the current year presentation. NOTE B MERGER AND PLAN OF REORGANIZATION: On December 28, 1999 the Parent, (formerly Digital Launch, Inc.), entered into a definitive merger and plan of reorganization agreement with GLOBALETUTOR.COM, Inc., a privately held Nevada Corporation ("Global.Com"). The merger qualifies as a tax-free transaction under Section 386(a)(1)(B) of the Internal Revenue Code of 1986, as amended. The agreement requires the shareholders of the Parent to issue 9,640,000 shares of the parent company in exchange for all of the outstanding stock of Global.Com in a transaction accounted for as a recapitalization of the Parent Company, wherein Global.Com will become a wholly owned subsidiary of the Parent. Additionally, the agreement calls for the Parent to sell to outside investors in a private placement transaction, an additional 8,000,000 shares of stock at $.25 per share, and 500,000 shares of stock at $.20 per share, totaling $2,100,000. On January 21, 2000 the Company completed the merger with Global.com through the issuance of 9,640,000 common shares of the Company for Global.com common stock, the Company sold to outside investors in a private placement transaction an additional 5,000,000 common shares of the Company at $.25 per share, and issued 416,000 options to purchase common stock. NOTE C RELATED PARTY TRANSACTIONS EMPLOYEE ADVANCES: The Company has made employee advances totaling $171,160 during the first quarter 2000. The majority of the advance, $158,000, is due on demand from the Chief Executive Officer of the Company. DUE TO RELATED PARTIES: As of March 31, 2000, due to related parties consist of an unsecured, interest bearing, due on demand note payable to an affiliate in the amount of $177,939. Interest on the note to the affiliate is 10% per annum. Accrued interest on the affiliate note totaled $5,446 as of March 31, 2000 and is included in accrued expenses. OFFICE SPACE: The Company leases its facilities from a related party on a month to month basis. Because of the nature of these relationships, the amounts charged may have been different had the parties not been related. GLOBALE TUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999 NOTE D STOCKHOLDERS' EQUITY Common Stock - The Company is authorized to issue 50,000,000 shares of $.001 par value common stock. 12,827,747 shares were issued and outstanding as of March 31, 2000. Preferred Stock - The Company is authorized to issue 500,000 shares of $.001 par value preferred stock with such rights and preferences and in such series as determined by the Board of Directors at the time of issuance. No shares are issued or outstanding as of March 31, 2000. Warrants - At March 31, 2000, the Company had 178,816 warrants to purchase common stock outstanding at prices from $.25 to $1.25 per share, and from 2002 to 2005. The warrants were issued in connection with the Predecessor obtaining short-term notes payable and equity investments, and for professional services rendered. Options - See Note F NOTE E INCOME TAXES The components of income taxes are as follows: CURRENT TAXES: Federal income taxes $ - State income taxes - --------------- - DEFERRED TAXES: Federal income taxes - State income taxes - --------------- - --------------- $ -
OPERATING LOSS CARRY FORWARDS The company had available for carry forward net operating losses totaling $361,570 for the three months ended March 31, 2000. The carryforward is available to offset federal and state income taxes and will expire in 2019. The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and tax liabilities at March 31, 2000 are presented below:
NON-CURRENT: 2000 ---------- Deferred tax asset Net operating loss carryforward $ 361,570 Accumulated Depreciation 34 Accumulated Amortization 17 Research and Development Tax Credits 24,449 ---------- Deferred tax asset 386,070 Less valuation allowance (386,070) ---------- Net non-current deferred tax asset $ -0- ------
GLOBALE TUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999 NOTE F STOCK OPTION PLANS In December 1999, the Parent adopted the 1999 Stock Option Plan (the "1999 Plan"), and on January 21, 2000 the shareholders approved, an employee stock option plan, pursuant to which the Company is authorized to grant options to key employees, officers, directors, and consultants. Awards under the plan will consist of both non-qualified options and options intended to qualify as "Incentive Stock Options" under Section 422 of the Internal Revenue code of 1986, as amended. In addition, the Company had previously adopted the 1996 Omnibus Plan (the "1996 Plan"). The 1999 Plan and 1996 Plan provide for grants of options to purchase up to 5,000,000 and 900,000 shares of Common Stock, respectively, at a purchase price equal to the fair market value on the date of grant. Generally, options from both plans vest over three years from the date of grant. Compensation expense for options granted to non-employees, included in general and administrative, aggregated $0 and $0 during the periods ended March 31, 2000 and March 31, 1999, respectively. A summary of the status of the options granted under the Company's stock option plan and other agreements at March 31, 2000, and changes during the period then ended are presented below:
- ------------------------------------------------------------------------------------------------------ March 31, 2000 -------------- Weighted Average Shares Exercise Price ------ -------------- Outstanding at Beginning of period 2,441,330 $ .73 Granted 4,380,174 .25 Exercised -- -- Forfeited 2,413,830 .73 Expired -- -- --------- ----- Outstanding at end Of period 4,407,674 $ .25 --------- ----- Weighted average fair Value of options granted During the three months ended March 31, 2000 4,380,174 $1.89 --------- ----- - ------------------------------------------------------------------------------------------------------
The fair value of each option granted is estimated on the date granted using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the three months ended March 31, 2000: risk free interest rate of 5%, expected dividend yield of zero, expected life of 3.0 years, and expected volatility of 141%. A summary of the status of the options outstanding under the Company's stock option plans and employment agreements at March 31, 2000 is presented below:
Options Outstanding Options Exercisable ------------------------------------------------------------- ------------------------------------- Range of Weighted-Average Weighted-Average Weighted-Average Exercise Number Remaining Exercise Number Exercise Prices Outstanding Contractual Life Price Exercisable Price - ------------------- --------------- ----------------------- --------------------- -------------- --------------------- $.25-$.275 4,380,174 2.9 years $0.25 1,737,391 $0.25 $0.75 27,500 1.9 years $0.75 27,500 $0.75 --------------- -------------- 4,407,674 1,764,891
GLOBALE TUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999 Note G LOSS PER SHARE The following data shows the amounts used in computing loss per share for the periods presented:
For the Three Months Ended March 31, --------------------------------------- 2000 1999 ---- ---- Loss from operations available to common shareholders (numerator) (930,878) (227,331) ================= ================= Weighted average number of common shares outstanding used in loss per share for the period (denominator) 27,467,747 9,036,498 ----------------- -----------------
The Company had outstanding at March 31, 2000, and March 31, 1999, respectively, options to purchase 4,407,674 and 2,851,442 common shares at prices ranging from $.001 to $2.25 and warrants to purchase 118,816 and 0 common shares that were not included in the computation of loss per share because their effect is anti-dilutive. INDEPENDENT AUDITORS' REPORT Board of Directors GLOBALETUTOR.COM, INC. Atlanta, GA We have audited the accompanying balance sheet of GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] at December 31, 1999 and the related statements of operations, stockholders' equity (deficit) and cash flows for the period from inception on December 10, 1999 through December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements audited by us present fairly, in all material respects, the financial position of GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] as of December 31, 1999 and the results of its operations and its cash flows for the period from inception on December 10, 1999 through December 31, 1999 in conformity with generally accepted accounting principles. /s/ Pritchett, Siler & Hardy, P.C. PRITCHETT, SILER & HARDY, P.C. March 14, 2000 Salt Lake City, Utah GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] BALANCE SHEET ASSETS
December 31, 1999 ----------- CURRENT ASSETS: Cash in bank $ 774,911 Prepaid expenses 20,000 ----------- Total current assets 794,911 ----------- PROPERTY AND EQUIPMENT, net 5,290 ----------- OTHER ASSETS: Domain Registration, net 132 Deferred investment banking fees 75,000 ----------- Total other assets 75,132 ----------- $ 875,333 =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable $ 98,500 Accrued expenses 11,606 Note payable - related party 923,890 ----------- Total Current Liabilities 1,033,996 ----------- STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock, $.001 par value 5,000,000 shares authorized; no shares issued and outstanding -- Common stock, $.001 par value100,000,000 shares authorized, 4,820,000 shares issued and outstanding 4,820 Capital in excess of par 20,180 Deficit accumulated during the development stage (183,663) ----------- Total Stockholders' Equity (Deficit) (158,664) ----------- $ 875,333 ===========
The accompanying notes are an integral part of this financial statement. -2- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] STATEMENT OF OPERATIONS
From Inception on December 10, 1999 Through December 31, 1999 ----------- REVENUE $ -- ----------- EXPENSES: General and administrative 134,888 Selling expenses 40,292 ----------- Total expenses 175,180 ----------- LOSS FROM OPERATIONS (175,180) ----------- OTHER EXPENSE: Interest expense 8,483 ----------- Total other expenses 8,483 ----------- LOSS BEFORE INCOME TAXES (183,663) CURRENT TAX EXPENSE -- DEFERRED TAX EXPENSE -- ----------- NET LOSS $ (183,663) ----------- LOSS PER COMMON SHARE $ (.04) ----------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,820,000 ===========
The accompanying notes are an integral part of this financial statement. -3- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] STATEMENT OF STOCKHOLDERS' EQUITY FROM THE DATE OF INCEPTION ON DECEMBER 10, 1999 THROUGH DECEMBER 31, 1999
Deficit Accumulated Preferred Stock Common Stock Capital in During the ---------------------- ---------------------- Excess of Development Shares Amount Shares Amount Par Value Stage ---------- ---------- ---------- ---------- ---------- ---------- BALANCE, December 10, 1999 - $ - - $ - $ - $ - Issuance of 4,820,000 shares common stock for cash at approx. $.005 per share, December 1999 - - 4,820,000 4,820 20,180 - Net loss for the period ended December 31, 1999 - - - - - (183,663) -------------------------- ----------- ------------ ------------ ------------ BALANCE, December 31, 1999 - $ - $ 4,820,000 $ 4,820 $ 20,180 $ (183,663) -------------------------- ----------- ------------ ------------ ------------
The accompanying notes are an integral part of this financial statement. -4- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] STATEMENT OF CASH FLOWS NET INCREASE (DECREASE) IN CASH
From Inception on December 10, 1999 Through December 31, 1999 ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(183,663) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 87 Changes is assets and liabilities: (Increase) in prepaid expense (20,000) Increase in accounts payable 23,500 Increase in accrued expenses 11,606 --------- Net Cash Provided (Used) by Operating Activities (168,470) --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets (5,369) Purchase of intangible assets (140) --------- Net Cash Provided (Used) by Investing Activities (5,509) --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 25,000 Proceeds from note payable 923,890 --------- Net Cash Provided by Financing Activities 948,890 --------- NET INCREASE IN CASH 774,911 CASH AT BEGINNING OF PERIOD -- --------- CASH AT END OF PERIOD $ 774,911 ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ -- Income taxes $ -- SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: For the period ended December 31, 1999: The Company accrued $75,000 in deferred investment banking fees.
The accompanying notes are an integral part of this financial statement. -5- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION - GLOBALETUTOR.COM, INC. (the Company) was incorporated in Nevada on December 10, 1999 and is developing a website for global education via web-based, interactive, video-on-demand tutoring services for K-12. The Company has not commenced planned principal operations and is considered a development stage company as defined in SFAS No. 7. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors. ORGANIZATION COSTS - In accordance with SOP 98-5, "Reporting on the Costs of Start-up Activities", the Company expenses all organizational costs as incurred. LOSS PER SHARE - The computation of loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". [SEE NOTE 11] CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows, the Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. CASH IN EXCESS OF FEDERALLY INSURED LIMITS - As of December 31, 1999 the Company had deposits with a financial institution in the amount of $ 674,911 in excess of federally insured limits. OTHER ASSETS - Other assets includes domain names in the amount of $140 that are being amortized on a straight-line basis over two years. Amortization expense for the period ended December 31, 1999 was $ 8. ADVERTISING - The Company's policy is to expense advertising costs as incurred. PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized, upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed for financial statement purposes on a straight-line method over the estimated useful life of the asset. STOCK BASED COMPENSATION - The Company accounts for its stock-based compensation plan under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Effective from the date of inception, the Company adopted the disclosure only option of SFAS No. 123, "Accounting for Stock-Based Compensation ." SFAS No. 123 requires that companies which do not choose to account for stock-based compensation as prescribed by the statement shall disclose the pro forma effects on earnings and earnings per share as if SFAS No. 123 had been adopted. -6- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] ACCOUNTING ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimated. RECENTLY ENACTED ACCOUNTING STANDARDS - Statement of Financial Accounting Standards (SFAS) No. 135, "Rescission of FASB Statement No. 75 and Technical Corrections", SFAS No. 136, "Transfer of Assets to a Not-for-Profit Organization or Charitable Trust that Raise or Hold Contributions for Others", SFAS No. 137 , "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date and Amendment of SFAS No. 133", were recently issued. SFAS No. 135, 136 and 137 have no current applicability to the Company or their effect on the financial statements would not have been significant. COMPREHENSIVE LOSS - Comprehensive loss from the date of inception until December 31, 1999 is the same as net loss presented in the accompanying statement of operations. NOTE 2 - MERGER AND PLAN OF REORGANIZATION On December 28, 1999 the Company entered into a definitive merger and plan of reorganization agreement with GLOBALETUTOR, Inc. (formerly Digital Launch, Inc.) a publicly held Delaware Corporation ("GLOBAL"). The merger qualifies as a tax-free transaction under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. The agreement requires the shareholders of the Company to exchange all of the outstanding stock of the Company to Global in exchange for 9,640,000 shares of Global in a transaction accounted for as a recapitalization of the Company, wherein the Company will become a wholly owned subsidiary of GLOBAL. Additionally, the agreement calls for GLOBAL to sell to outside investors in a private placement transaction, an additional 8,000,000 shares of stock at $.25 per share, and 500,000 shares of stock at $.20 per share, totaling $2,100,000. The Company received on December 30, 1999, $750,000 from GLOBAL in exchange for a senior secured note and a stock pledge, in anticipation of the acquisition (See Note 5). A separate agreement with an investor, an investment banking entity, provides for the payment of a 10% finders fee from the Company to the investor, for all cash raised resulting from the merger. A $75,000 finders fees was accrued as of December 31, 1999 and was recorded as deferred investment banking fee. On January 21, 2000 the Company completed the merger with Global through (1) the exchange of 4,820,000 shares of Company stock for 9,640,000 shares of Global common stock, (2) the offset of $75,000 deferred investment banking fees against additional paid in capital. -7- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] NOTES TO FINANCIAL STATEMENTS NOTE 2 - MERGER AND PLAN OF REORGANIZATION [CONTINUED] Additionally, in accordance with the merger agreement, Global authorized the issuance of options, each with a three-year term, to purchase shares of Global common stock: (1) options to purchase 2,500,000 shares at an exercise price of $0.25 per share to Tom McMurrain, an officer of the Company, (2) options to purchase 2,500,000 shares, at an exercise price of $0.50 per share to Tom McMurrain, and (3) options to purchase 2,000,000 shares, at an exercise price of $0.25 per share, to certain new members of management of Global to be designated by Tom McMurrain on or prior to the closing. These 7,000,000 options were subsequently canceled. The agreement also calls for Global to assume all current outstanding obligations of the Company to holders of options and warrants to purchase shares of capital stock of the Company, which had been committed to as of December 28, 1999. NOTE 3 - PROPERTY AND EQUIPMENT Property and Equipment consisted of the following at December 31, 1999:
Computer Equipment $ 5,369 Less accumulated depreciation (79) ----------- $ 5,290 ===========
During the period ended December 31, 1999 depreciation expense was $79. NOTE 4 - ACCRUED LIABILITIES Accrued liabilities include the following as of December 31, 1999:
Accrued salaries 3,123 Accrued interest 8,483 --------- $ 11,606 =========
NOTE 5 - NOTE PAYABLE - RELATED PARTY Notes payable - related parties as of December 31, 1999 consist of an unsecured, interest bearing, due on demand note payable to an affiliate in the amount of $173,890. Interest on the note to the affiliate accrues monthly at a rate of 5% per month, subsequently and retroactively revised to 10% per annum. Accrued interest on the affiliate note totaled $8,483 as of December 31, 1999 and is included in accrued expenses on the accompanying balance sheet. (See Note 4.) Notes payable - related parties as of December 31, 1999 also includes a $750,000 secured note payable to Global. The note payable to Global is secured by a stock pledge agreement with Tom McMurrain, the Company's president and a significant shareholder and accrues interest at Prime plus 1%. All 4,820,000 shares of the Company's common stock are pledged as security to the note. Effective with the reorganization, the note was converted to equity in Global (See Note 2). -8- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] NOTES TO FINANCIAL STATEMENTS NOTE 6 - CAPITAL STOCK PREFERRED STOCK - The Company has authorized 5,000,000 shares of preferred stock with such rights and preferences and in such series as determined by the Board of Directors at the time of issuance. No shares are issued or outstanding as of December 31, 1999 COMMON STOCK - During December 1999, in connection with its organization, the Company issued 4,820,000 shares of its previously authorized, but unissued common stock. The shares were issued for cash of $25,000 (or approx. $.001 per share). NOTE 7 - STOCK OPTION PLAN The Company's Stock Incentive Plan (the "Plan") was adopted by the Board of Directors on December 28, 1999. Incentive stock options may be granted to employees of the Company entitling them to purchase shares of common stock for a maximum of ten years (five years in the case of options granted to a person possessing more than 10% of the combined voting power of the Company as of the date of grant). The exercise price for incentive stock options may not be less than fair market value of the common stock on the date of the grant (110% of fair market value in the case of options granted to a person possessing more than 10% of the combined voting power of the Company). Nonqualified stock options may be granted to employees, officers, directors, independent contractors and consultants of the Company. The aggregate fair market value of the shares of common stock for which one or more options granted to any employee under the Plan may for the first time become exercisable as incentive options during any one calendar year shall not exceed $100,000. STOCK OPTIONS - During the periods presented in the accompanying financial statements the Company has granted options under the Plan. The Corporation has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans or other agreements. Had compensation cost for the Company's stock option plan and agreements been determined based on the fair value at the grant date for awards in 1999, consistent with the provisions of SFAS No. 123, there would have been no effect on the Company's net earnings and earnings per share would have had no effect on the net loss of the Company. The fair value of each option granted is estimated on the date granted using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the period ended December 31, 1999, risk-free interest rates of 5.1%, expected dividend yields of zero, expected life of 3 years, and expected volatility 141%. -9- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] NOTES TO FINANCIAL STATEMENTS NOTE 7 - STOCK OPTION PLAN [CONTINUED] A summary of the status of the options granted under the Company's stock option plan and other agreements at December 31, 1999 and changes from inception on December 10, 1999 is presented below:
December 31, 1999 ---------------------------- Weighted Average Shares Exercise Price -------- --------------- Outstanding at December 10, 1999 - - Granted 241,000 $.25 Exercised - - Forfeited - - Expired - - -------- ------------- Outstanding at December 31, 1999 241,000 $.25 -------- ------------- Weighted average fair value of options granted during the period 241,000 $.00 -------- -------------
A summary of the status of the options outstanding under the Company's stock option plans and employment agreements at December 31, 1999 is presented below:
Options Outstanding Options Exercisable ------------------------------------------------------- ------------------------------- Range of Weighted-Average Weighted Average Weighted-Average Exercise Number Remaining Exercise Number Exercise Prices Outstanding Contractual Life Price Exercisable Price ---------- ----------- ---------------- ---------------- ----------- ---------------- $.25 241,000 3 years $.25 241,000 $.25
-10- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] NOTES TO FINANCIAL STATEMENTS NOTE 8 - INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB 109 requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards. The Company has available at December 31, 1999, unused operating loss carryforwards of approximately $183,000 which may be applied against future taxable income and which expire in various years through 2019. The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards the Company has established a valuation allowance equal to the amount of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards. The net deferred tax assets are approximately $67,000 as of December 31, 1999, with an offsetting valuation allowance at year end of the same amount resulting in a change in the valuation allowance of approximately $67,000 during 1999. NOTE 9 - RELATED PARTY TRANSACTIONS OFFICE SPACE - The Company leases its facilities from a related party on a month to month basis. The Company has also borrowed money from several related entities as disclosed in Note 5. Because of the nature of these relationships, the amounts charged may have been different had the parties not been related. The rents paid to the related party amounted to $1,200 for the period ended December 31, 1999. NOTE 10 - GOING CONCERN The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company was only recently formed, has incurred losses since its inception, has current liabilities in excess of current assets and has not yet been successful in establishing profitable operations. These factors raised substantial doubt about the ability of the Company to continue as a going concern. In this regard, management has mitigated the doubt by raising additional funds through the subsequent merger with GLOBALETUTOR and the sales of 8,000,000 shares of common stock for total proceeds of $2,000,000 net of a 10% finders fee (See Note 2). There is no assurance that the Company will be successful in achieving profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. -11- GLOBALETUTOR.COM, INC. [A DEVELOPMENT STAGE COMPANY] NOTES TO FINANCIAL STATEMENTS NOTE 11 - LOSS PER SHARE The following data shows the amounts used in computing loss per share from inception on December 10, 1999 through December 31, 1999
Loss from continuing operations available to common shareholders (numerator) $(183,663) ----------- Weighted average number of common shares outstanding used in loss per share calculation for the period (denominator) 4,820,000 -----------
Subsequent to the year ended December 31, 1999, the Company effected a recapitalization and was acquired by Global (See Note 2). NOTE 12 - COMMITMENTS AND CONTINGENCIES INVESTMENT BANKING AGREEMENT - On December 22, 1999, the Company entered into an investment capital financing agreement. The agreement requires the Company to pay a ten percent finders fee for any financing, debt or other bridge loans as well as warrants for 10% of any stock issued by the Company. The term of the agreement is one year, unless the Company continues to use the funding sources provided to the Company. At December 31, 1999, the Company has accrued $75,000 in finders fees in connection with the $750,000 note payable (See Note 2). NOTE 13 - SUBSEQUENT EVENTS MERGER AND PLAN OF REORGANIZATION - On January 21, 2000 the Company completed the transaction under the Agreement and Plan of Reorganization dated December 28, 1999 with Digital and exchanged 4,820,000 shares of Company stock for 9,640,000 shares of Digital common stock. The Company is now a wholly owned subsidiary of GLOBALETUTOR, Inc. (formerly known as Digital Launch, Inc.) (SEE NOTE 2). -12- UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma combined condensed consolidated financial statements give effect to the KilimanjaroGroup.com, Inc. (Kilimanjaro) Merger. The Kilimanjaro merger was accounted for under the purchase method of accounting in accordance with APB Opinion No. 16. Under the purchase method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. Estimates of the fair values of the assets and liabilities of Kilimanjaro have been combined with the recorded values of the assets and liabilities of GlobaleTutor, Inc. in the unaudited GlobaleTutor, Inc. combined condensed consolidated financial statements. The unaudited pro forma combined condensed consolidated balance sheet has been prepared to reflect the Kilimanjaro Merger as if it occurred on January 1, 2000. The unaudited pro forma condensed consolidated statements of operations reflect the results of operation of GlobaleTutor, Inc. and Kilimanjaro for the three months ended March 31, 2000. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the combined condensed consolidated financial position or results of operations in future periods or the results that actually would have been realized had GlobaleTutor, Inc. and Kilimanjaro been a combined company during the specified periods. The unaudited pro forma combined condensed consolidated financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements of GlobaleTutor, Inc, and KilimanjaroGroup.com, Inc. included in this filing. GLOBALETUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 2000
ASSETS GlobaleTutor, Inc. and Subsidiay KilimanjaroGroup.com, Inc. (A Development (A Development Adjustments/ Consolidated Stage Company) Stage Company) Eliminations Statements ------------------- -------------------------- ------------ ------------ Current assets 1,129,251 - (75,000)(a) 1,054,251 ------------------- -------------------------- ------------ ------------ Property and equipment, net 35,326 - - 35,326 ------------------- -------------------------- ------------ ------------ Goodwill and other purchased intangibles, net 3,597 - 101,200 (a) 104,797 ------------------- -------------------------- ------------ ------------ 1,168,174 - 26,200 1,194,374 =================== ========================== ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities 441,715 1,200 - 442,915 ------------------- -------------------------- ------------ ------------ Stockholders' equity (2,655)(a) Common stock 27,468 2,655 50 (a) 27,518 Additional paid in capital 1,813,533 - 24,950 (a) 1,838,483 Deficit Accumulated During the Development Stage (1,114,542) (3,855) 3,855 (a) (1,114,542) ------------------- -------------------------- ------------ ------------ 726,459 (1,200) 26,200 751,459 ------------------- -------------------------- ------------ ------------ 1,168,174 - 26,200 1,194,374 =================== ========================== ============ ============
See notes to unaudited pro forma condensed consolidated financial statements GLOBALETUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000
Global e Tutor, Inc. and subsidiary (A Development KilimanjaroGroup.com, Inc. Adjustments/ Consolidated Stage Company) (A Development Stage Company) Eliminations Statements ------------------------- ---------------------------- ------------ ------------ REVENUE - - - ------------------------- ---------------------------- COSTS OF GOODS SOLD Purchases - - - ------------------------- ---------------------------- ------------ Profit margin - - - Operating Expenses General and administrative 415,588 - 5,000 (a) 420,588 Depreciation/Amortization 875 - 5,060 (b) 5,935 Research and development 362,997 - 362,997 Sales and marketing 157,114 - - ------------------------- ---------------------------- ------------ ------------ 936,573 - 10,060 789,519 Loss from operations (936,573) - (10,060) (946,633) Other income (expense) Interest income 7,665 - 7,665 Interst expense (1,970) - (1,970) ------------------------- ---------------------------- ------------ 5,695 - 5,695 ------------------------- ---------------------------- ------------ Loss before income taxes (930,878) - (940,938) Income taxes - - - ------------------------- ---------------------------- ------------ Net loss (930,878) - (940,938) ========================= ============================ ============ Net loss per share (0.03) (0.03) Weighted average shares outstanding 27,467,747 27,517,747
See notes to unaudited condensed consolidated financial statements GLOBALETUTOR, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO PRO FORMA COMBINED CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (UNAUDITED) BASIS OF PRESENTATION MARCH 31, 2000 The pro forma combined condensed consolidated financial statements reflect the issuance of 50,000 restricted shares of GlobaleTutor, Inc. common stock, $.001 par value. The Kilimanjaro Merger was accounted for under the purchase method of accounting in accordance with APB Opinion No. 15. Under the purchase method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. Estimates of the fair values of the assets and liabilities of Kilimanjaro have been combined with the recorded values of the assets and liabilities of GlobaleTutor, Inc. in the unaudited pro forma combined condensed consolidated financial statements. The operations and balance sheet of GlobaleTutor, Inc. and Subsidiary, Inc. include the pro forma effect of the reverse merger with Digital Launch, Inc. which occurred in January of 2000. PRO FORMA ADJUSTMENTS (a) To reflect issuance of 50,000 shares of GlobaleTutor, Inc. common stock and $75,000 cash in exchange for 100% of the outstanding common stock of Kilimanjaro. Management estimates the value of the 50,000 shares to be $.50 per share. Management has allocated the purchase price to the assets and liabilities acquired based upon their relative fair values. The transaction generated goodwill and other intangibles of $101,200, which will be amortized on a straight-line basis over a five-year life. Management continues to study the allocation of the purchase price; upon completion of such study, the allocation may change. (b) To reflect three months of amortization of goodwill and other intangibles. EX-2.1 2 ex-21.txt EXHIBIT 2.1 EXHIBIT 2.1 AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization (the " Agreement"), entered into this 28th day of December, 1999, by and among DIGITAL LAUNCH, INC., a publicly held Delaware corporation (hereinafter, the "Purchaser"), GLOBALETUTOR.COM, INC., a privately-held Nevada corporation (hereinafter, the "Private Company"), and the shareholders of the Private Company whose names and signatures are set forth upon the signature page of this Agreement (the "Shareholders"). RECITALS: -------- WHEREAS, the Purchaser wishes to acquire, and the Shareholders are willing to sell, all of the outstanding stock of the Private Company in exchange solely for a part of the voting stock of the Purchaser; and WHEREAS, the parties hereto intend to qualify such transaction as a tax-free exchange pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended; NOW, THEREFORE, based upon the stated premises, which are incorporated herein by reference, and for and in consideration of the mutual covenants and agreements set forth herein, the mutual benefits to the parties to be derived from this transaction, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Purchaser, the Private Company, and the Shareholders approve and adopt this Agreement and Plan of Reorganization and mutually covenant and agree with each other as follows: 1. SHARES TO BE TRANSFERRED AND SHARES TO BE ISSUED. 1.1 On the closing date the Shareholders shall transfer to the Purchaser certificates for the number of shares of the common stock of the Private Company described in SCHEDULE A. attached hereto and incorporated herein, which in the aggregate shall represent all of the issued and outstanding shares of the common stock of the Private Company. 1.2 In exchange for the transfer of the common stock of the Private Company pursuant to subsection 1.1 hereof, the Purchaser shall on the closing date and contemporaneously with such transfer of the common stock of the Private Company to it by the Shareholders issue and deliver to the Shareholders the number of shares of Common Stock of the Purchaser specified on SCHEDULE A hereof. 2. REPRESENTATIONS AND WARRANTIES OF THE PRIVATE COMPANV AND SHAREHOLDERS. The Private Company, and each of the Shareholders represents and warrants to the Purchaser as set forth below. These representations and warranties are made as an inducement for the Purchaser to enter into this Agreement and, but for the making of such representations and warranties and their accuracy, the Purchaser would not be a party hereto. 2.1 OWNERSHIP OF STOCK. a. Each of the Shareholders is the record and beneficial owner and holder of the number of fully paid and non assessable shares of the common stock of the Private Company listed in SCHEDULE A hereto as of the date hereof and will continue to own such shares of the common stock of the Private Company until the closing date and all such shares of common stock are or will be on the closing date owned free and clear of all liens, encumbrances, charges and assessments of every nature and subject to no restrictions with respect to transferability. b. Except for this Agreement, there are no outstanding options, contracts, calls, commitments, agreements, or demands of any character relating to the common stock of the Private Company listed in SCHEDULE A and owned by each of the Shareholders. The Private Company does have outstanding options and warrants against some of its unissued capital, however, totaling 241,000 shares in options and 3,000,000 shares in warrants. 2.2 ACCURACY OF ALL STATEMENTS MADE BY THE PRIVATE COMPANY AND THE SHAREHOLDERS. No representation or warranty by the Private Company or the Shareholders in this Agreement, nor any statement, certificate, schedule, or exhibit hereto furnished or to be furnished by or on behalf of the Shareholders pursuant to this Agreement, nor any document or certificate delivered to the Purchaser by the Shareholders pursuant to this Agreement or in connection with actions contemplated hereby, contains or shall contain any untrue statement of material fact or omits or shall omit a material fact necessary to make the statement contained therein not misleading. 3. REPRESENTATIONS AND WARRANTIES OF THE PRIVATE COMPANY. The Private Company represents and warrants to the Purchaser as set forth below. These representations and warranties are made as an inducement for the Purchaser to enter into this Agreement and, but for the making of such representations and warranties and their accuracy, the Purchaser would not be a party hereto. 3.1 ORGANIZATION AND AUTHORITY. The Private Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada with full power and authority to enter into and perform the transactions contemplated by this Agreement. 3.2 CAPITALIZATION. As of the closing date, the Private Company will have a total of no more than 4,820,000 shares of common stock issued and outstanding and no more than 3,241,000 unissued shares committed to options and warrants. All of the shares will have been duly authorized and validly issued and will be fully paid and nonassessable. The Private Company does not have issued or outstanding any other class or series of capital stock. Other than the options and warrants referred to in paragraph 2.1(b ), there are no options, warrants, conversion privileges, or other rights currently outstanding for the purchase of any authorized but unissued capital stock of the Private Company . 3.3 PERFORMANCE OF THIS AGREEMENT. The execution and performance of this Agreement and the transfer of stock contemplated hereby have been authorized by the board of directors of the Private Company. 3.4 FINANCIALS. The unaudited balance sheet of the Private Company as of November 30, 1999, a copy of which has been furnished to the Purchaser, is true and correct in all material respects. 3.5 LIABILITIES. Except as otherwise provided herein, there are no material liabilities of the Private Company, whether accrued, absolute, contingent or otherwise, which arose or relate to any transaction of the Private Company, its agents or servants occurring prior to November 30, 1999 which are not disclosed by or reflected in said financial statements. As of the date hereof, there are no known circumstances, conditions, happenings, events or arrangements, contractual or otherwise, which may hereafter give rise to liabilities, except in the normal course of business of thePrivate Company. 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in this Agreement, since November 30, 1999, there has not been (i) any material adverse change in the business, operations, properties, level of inventory, assets, or condition of the Private Company, or (ii) any damage, destruction, or loss to the Private Company (whether or not covered by insurance) materially and adversely affecting the business, operations, properties, assets, or conditions of the Private Company. 3.7 LITIGATION. There are no legal, administrative or other proceedings, investigations or inquiries, product liability or other claims, judgments, injunctions or restrictions, either threatened, pending, or outstanding against or involving the Private Company or its subsidiaries, if any, or their assets, properties, or business, nor does the Private Company or its subsidiaries know, or have reasonable grounds to know, of any basis for any such proceedings, investigations or inquiries, product liability or other claims, judgments, injunctions or restrictions. In addition, there are no material proceedings existing, pending or reasonably contemplated to which any officer, director, or affiliate of the Private Company or as to which any of the Shareholders is a party adverse to the Private Company or any of its subsidiaries or has a material interest adverse to the Private Company or any of its subsidiaries. 3.8 TAXES. All federal, state, foreign, county and local income, profits, franchise, occupation, property, sales, use, gross receipts and other taxes (including any interest or penalties relating thereto ) and assessments which are due and payable have been duly reported, fully paid and discharged as reported by the Private Company, and there are no unpaid taxes which are, or could become a lien on the properties and assets of the Private Company, except as provided for in the financial statements of the Private Company, or have been incurred in the normal course of business of the Private Company since that date. All tax returns of any kind required to be filed have been filed and the taxes paid or accrued. 3.9 ACCURACY OF ALL STATEMENTS MADE BY THE PRIVATE COMPANY. No representation or warranty by the Private Company in this Agreement, nor any statement, certificate, schedule, or exhibit hereto furnished or to be furnished by or on behalf of the Private Company pursuant to this Agreement, nor any document or certificate delivered to the Purchaser by the Private Company pursuant to this Agreement or in connection with actions contemplated hereby, contains or shall contain any untrue statement of material fact or omits or shall omit a material fact necessary to make the statement contained therein not misleading. 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and warrants to the Private Company and to the Shareholders as set forth below. These representations and warranties are made as an inducement for the Private Company and the Shareholders to enter into this Agreement and, but for the making of such representations and warranties and their accuracy, the Private Company and the Shareholders would not be parties hereto. 4.1 ORGANIZATION AND GOOD STANDING. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full power and authority to enter into and perform the transactions contemplated by this Agreement. 4.2 CAPITALIZATION. As of the closing of this Agreement, the Purchaser will have a total of no more than 13,732,000 shares of common stock issued and outstanding, and no shares of preferred stock issued and outstanding, after giving effect to (i) the issuance of the shares to the Shareholders under this Agreement, (ii) a 1-for-2 reverse split of all issued and outstanding shares to be effected prior to the Closing, (iii) the issuance of 4,000,000 (post-reverse split) shares of common stock to investors for an investment of $2 million in Purchaser, and (iv) the issuance of 250,000 (post-reverse split) shares of common stock to investors for an investment of $100,000 in Purchaser. All of the shares will have been duly authorized and validly issued and will be fully paid and nonassessable. Except for (a) the Purchaser's obligations hereunder with respect to the shares to be issued pursuant to subsection 1 .2 hereof and (b) currently outstanding options to purchase common stock of Purchaser, which options are to be terminated on or prior to the closing, there are no options, warrants, conversion privileges, or other rights currently outstanding for the purchase of any authorized but unissued stock of the Purchaser, and there are not any outstanding obligations under which any third party could assert that it is entitled to shares of capital stock of the Purchaser or any instruments which could be converted into or exercised for such capital stock. 4.3 PERFORMANCE OF THIS AGREEMENT. The execution and performance of this Agreement and the issuance of stock contemplated hereby have been authorized by the board of directors of the Purchaser, and the person executing this Agreement on behalf of the Purchaser is duly authorized to bind the Purchaser to the obligations hereunder. To the extent that any actions of the Purchaser in contemplation of or affecting this Agreement may have required or will require approval of the stockholders of the Purchaser under applicable law or the Purchaser's Charter or Bylaws, including without limitation the Purchaser's reverse split of its issued and outstanding shares, the Purchaser has received, or on or before the closing shall have received, all necessary stockholder approvals and such actions are, or as of the closing shall be, duly authorized, binding and enforceable. 4.4 FINANCIALS. The unaudited balance sheets, statements of income and cash flows of the Purchaser as of and for the period ending November 30, 1999, and as of and for the year ended December 31, 1998, and the audited balance sheets, statements of income and cash flows of the Purchaser as of and for the period ending December 31, 1997, copies of which have been furnished to the Private Company and the Shareholders, are true and correct in all material respects. 4.5 LIABILITIES. There are no material liabilities of the Purchaser, whether accrued, absolute, contingent or otherwise, which arose or relate to any transaction of the Purchaser , its agents or servants which are not disclosed by or reflected in the foregoing financial statements, other than normal year-end adjustments. As of the date hereof, there are no known circumstances, conditions, happenings, events or arrangements, contractual or otherwise, which may hereafter give rise to liabilities, except in the normal course of business of the Purchaser. 4.6 LITIGATION. There are no legal, administrative or other proceedings, investigations or inquiries, product liability or other claims, judgments, injunctions or restrictions, either threatened, pending, or outstanding against or involving the Purchaser or its subsidiaries, if any, or their assets, properties, or business. In addition, there are no material proceedings existing, pending or reasonably contemplated to which any officer, director, or affiliate of the Purchaser is a party adverse to the Purchaser or any of its subsidiaries or has a material interest adverse to the Purchaser or any of its subsidiaries. 4.7 TAXES. All federal, state, foreign, county and local income, profits, franchise, occupation, property, sales, use, gross receipts and other taxes (including any interest or penalties relating thereto) and assessments which are due and payable have been duly reported, fully paid and discharged as reported by the Purchaser, and there are no unpaid taxes which are or could become a lien on the properties and assets of the Purchaser. All tax returns of any kind required to be filed have been filed and the taxes paid or accrued. 4.8 LEGALITY OF SHARES TO BE ISSUED. The shares of Common Stock of the Purchaser to be issued by the Purchaser pursuant to this Agreement, when so issued and delivered, will have been duly and validly authorized and issued by the Purchaser and will be fully paid and nonassessable. 4.9 ACCURACY OF ALL STATEMENTS MADE BY THE PURCHASER. No representation or warranty by the Purchaser in this Agreement, nor any statement, certificate, schedule, or exhibit hereto furnished or to be furnished by the Purchaser pursuant to this Agreement, nor any document or certificate delivered to the Private Company or the Shareholders pursuant to this Agreement or in connection with actions contemplated hereby, contains or shall contain any untrue statement of material fact or omits to state or shall omit to state a material fact necessary to make the statement contained therein not misleading. 5 COVENANTS OF THE PARTIES. 5.1 CORPORATE RECORDS. a. Promptly following the execution of this Agreement by the Private Company, such entity shall deliver to the Purchaser copies of the certificate of incorporation, as amended, and the current bylaws of the Private Company, and copies of the resolutions duly adopted by the board of directors of the Private Company approving this Agreement and the transactions herein contemplated. b. Promptly following the execution of this Agreement by the Purchaser, such entity shall deliver to the Private Company copies of the certificate of incorporation, as amended, and the current bylaws of the Purchaser, and copies of the resolutions duly adopted by the board of directors of the Purchaser approving this Agreement and the transactions herein contemplated. 5.2 ACCESS TO INFORMATION. a. The Purchaser and its authorized representatives shall have full access during normal business hours to all properties, books, records, contracts, and documents of the Private Company, and the Private Company shall furnish or cause to be furnished to the Purchaser and its authorized representatives all information with respect to its affairs and business as the Purchaser may reasonably request. The Purchaser shall hold, and shall cause its representatives to hold, confidential all such information and documents, other than information that (i) is in the public domain at the time of its disclosure to the Purchaser; (ii) becomes part of the public domain after disclosure through no fault of the Purchaser; (iii) is known to the Purchaser or any ofits officers or directors prior to disclosure; or (iv) is disclosed in accordance with the written consent ofthe Private Company. In the event this Agreement is terminated prior to closing, the Purchaser shall, upon the written request of the Private Company. promptly return all copies of all documentation and information provided by the Private Company hereunder. b. The Private Company and its authorized representatives shall have full access during normal business hours to all properties, books, records, contracts, and documents of the Purchaser, and the Purchaser shall furnish or cause to be furnished to the Private Company and its authorized representatives all information with respect to its affairs and business the Private Company may reasonably request, including such information as may be reasonably required in order to conduct an audit of the financial statements of the Purchaser and the Private Company on a consolidated basis. The Private Company shall hold, and shall cause its representatives to hold, confidential all such information and documents, other than information that (i) is in the public domain at the time of its disclosure to the Private Company; (ii) becomes part of the public domain after disclosure through no fault of the Private Company; (iii) is known to the Private Company or any of its officers or directors prior to disclosure; or (iv) is disclosed in accordance with the written consent of the Purchaser. In the event this Agreement is terminated prior to closing, the Private Company shall, upon the written request of the Purchaser promptly return all copies of all documentation and information provided by the Purchaser hereunder. 5.3 ACTIONS PRIOR TO CLOSING. From and after the date of this Agreement and until the closing date: a. The Purchaser and the Private Company shall each carry on its business diligently and substantially in the same manner as heretofore, and neither party shall make or institute any unusual or novel methods of purchase, sale, management, accounting or operation. b. Neither the Purchaser nor the Private Company shall enter into any contract or commitment, or engage in any transaction, not in the usual and ordinary course of business and consistent with its business practices, except that the Purchaser shall continue to proceed diligently to consummate the sale of its entire skin-care assets and business to a third party for consideration consisting solely of such third party's agreement to assume all of the Company's liabilities and obligations relating to such skin-care business. c. Neither the Purchaser nor the Private Company shall amend its articles of incorporation or bylaws or make any changes in authorized or issued capital stock, except as provided or contemplated in this Agreement. d. The Purchaser and the Private Company shall each use its best efforts (without making any commitments on behalf of the company) to preserve its business organization intact, except as described in (b), above. e. Neither the Purchaser nor the Private Company shall do any act or-omit to do any act, or permit any act or omission to act, which will cause a material breach of any material contract, commitment, or obligation of such party. f. The Purchaser and the Private Company shall each duly comply with all applicable laws as may be required for the valid and effective issuance or transfer of stock contemplated by this Agreement. g. Neither the Purchaser nor the Private Company shall sell or dispose of any property or assets, except products sold in the ordinary course of business and as provided in (b), above. h. The Purchaser and the Private Company shall each promptly notify the other of any lawsuits, claims, proceedings, or investigations that may be threatened, brought, asserted, or commenced against it, its officers or directors involving in any way the business, properties, or assets of such party. 5.4 SHAREHOLDERS' MEETING OR CONSENT. If required under the law of Delaware, the Purchaser shall promptly submit this Agreement and the transaction contemplated hereby for the approval of its stockholders at a meeting of stockholders or for consent of the stockholders and, subject to the fiduciary duties of the Board of directors of the Purchaser under applicable law, shall use its best efforts to obtain stockholder approval and adoption of this Agreement and the transactions contemplated hereby. In connection with such meeting or consent of stockholders, the Purchaser shall prepare a proxy or information statement to be furnished to the stockholders of the Purchaser setting forth information about this Agreement and the transactions contemplated hereby. The Private Company shall promptly furnish to the Purchaser all information, and take such other actions, as may reasonably be requested in connection with any action to be taken by the Purchaser in connection with the immediately preceding sentence. The Private Company shall have the right to review and provide comments to the proxy or information statement prior to mailing to the stockholders of the Purchaser. 5.5 NO COVENANT AS TO TAX OR ACCOUNTING CONSEQUENCES. It is expressly understood and agreed that neither the Purchaser nor its officers or agents has made any warranty or agreement, expressed or implied, as to the tax or accounting consequences of the transactions contemplated by this Agreement or the tax or accounting consequences of any action pursuant to or growing out of this Agreement. 5.6 INDEMNIFICATION. The Private Company shall indemnify Purchaser for any loss, cost, expense, or other damage (including, without limitation, attorneys' fees and expenses) suffered by Purchaser resulting from, arising out of or incurred with respect to the falsity or the breach of any representation, warranty, or covenant made by the Private Company herein, and any claims arising from the operations of the Private Company prior to the closing date. Purchaser shall indemnify and hold the Private Company and the Shareholders harmless from and against any loss, cost, expense, or other damage (including, without limitation, attorneys' fees and expenses) resulting from, arising out of, or incurred with respect to, or alleged to result from, arise out of or have been incurred with respect to, the falsity or the breach of any representation, covenant, warranty, or agreement made by Purchaser herein, and any claims arising from the operations of Purchaser prior to the closing date. The indemnity agreement contained herein shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any party and shall survive the consummation of the transactions contemplated by this Agreement. 5.7 PUBLICITY. The parties agree that no publicity, release, or other public announcement concerning this Agreement or the transactions contemplated by this Agreement shall be issued by the Private Company or the Shareholders without the advance approval of both the form and substance of the same by the Purchaser and its counsel, which approval, in the case of any publicity, release, or other public announcement required by applicable law, shall not be unreasonably withheld or delayed. 5.8 EXPENSES. Except as otherwise expressly provided herein, each party to this Agreement shall bear its own respective expenses incurred in connection with the negotiation and preparation of this Agreement, in the consummation of the transactions contemplated hereby, and in connection with all duties and obligations required to be performed by each of them under this Agreement. 5.9 FURTHER ACTIONS. Each of the parties hereto shall take all such further action, and execute and deliver such further documents, as may be necessary to carry out the transactions contemplated by this Agreement. 6. Conditions Precedent to the Purchaser' s Obligations. Each and every obligation of the Purchaser to be performed on the closing date shall be subject to the satisfaction prior thereto of the following conditions: 6.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Private Company and the Shareholders in this Agreement or given on their behalf hereunder shall be substantially accurate in all material respects on and as of the closing date with the same effect as though such representations and warranties had been made or given on and as of the closing date. 6.2 PERFORMANCE OF OBLIGATIONS AND COVENANTS. The Private Company and the Shareholders shall have performed and complied with all obligations and covenants required by this Agreement to be performed or complied with by them prior to or at the closing. 6.3 OFFICER'S CERTIFICATE. The Purchaser shall have been furnished with a certificate (dated as of the closing date and in form and substance reasonably satisfactory to the Purchaser), executed by an executive officer of the Private Company, certifying to the fulfillment of the conditions specified in subsections 6.1 and 6.2 hereof. 6.4 NO LITIGATION OR PROCEEDINGS. There shall be no litigation or any proceeding by or before any governmental agency or instrumentality pending or threatened against any party hereto that seeks to restrain or enjoin or otherwise questions the legality or validity of the transactions contemplated by this Agreement or which seeks substantial damages in respect thereof. 6.5 NO MATERIAL ADVERSE CHANGE. As of the closing date there shall not have occurred any material adverse change, financially or otherwise, which materially impairs the ability of the Private Company to conduct its business or the earning power thereof on the same basis-as in the past. 6.6 SHAREHOLDERS' EXECUTION OF AGREEMENT. This Agreement shall have been duly executed and delivered by each of the parties owning in the aggregate all of the outstanding stock of the Private Company as of the closing date. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PRIVATE COMPANY AND THE SHAREHOLDERS. Each and every obligation of the Private Company and the Shareholders to be performed on the closing date shall be subject to the satisfaction prior thereto of the following conditions: 7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Purchaser in this Agreement or given on its behalf hereunder shall be substantially accurate in all material respects on and as of the closing date with the same effect as though such representations and warranties had been made or given on and as of the closing date. 7.2 PERFORMANCE OF OBLIGATIONS AND COVENANTS. The Purchaser shall have performed and complied with all obligations and covenants required by this Agreement to be performed or complied with by it prior to or at the closing. 7.3 OFFICER'S CERTIFICATE. The Private Company shall have been furnished with a certificate (dated as of the closing date and in form and substance reasonably satisfactory to the Private Company), executed by an executive officer of the Purchaser, certifying to the fulfillment of the conditions specified in subsections 7. 1 and 7.2 hereof. 7.4 NO LITIGATION OR PROCEEDINGS. There shall be no litigation or any proceeding by or before any governmental agency or instrumentality pending or threatened against any party hereto that seeks to restrain or enjoin or otherwise questions the legality or validity of the transactions contemplated by this Agreement or which seeks substantial damages in respect thereof. 7.5 NO MATERIAL ADVERSE CHANGE. As of the closing date there shall not have occurred any material adverse change, financially or otherwise, which materially impairs the ability of the Purchaser to conduct its business, except that it is agreed the Purchaser shall have sold its skin-care business in its entirety. 7.6 OTHER TRANSACTIONS. a. Purchaser's shareholders shall have duly authorized, and Purchaser shall have effected, a 1-for-2 reverse split of all of its issued and outstanding shares of capital stock, and the authorized common stock of the Company shall be 50 million shares. b. Purchaser shall have received for cancellation, and shall have cancelled, 700,000 pre-reverse split shares of its common stock, and Purchaser shall have issued and outstanding not more than 8,912,000 shares (post-reverse split) before the issuance of the shares to the Shareholders hereunder, but including all shares issued to investors in Purchaser's common stock after the date hereof and through the closing of this transaction. c. All outstanding options to purchase common stock of Purchaser shall have expired or terminated, or Purchaser shall have received written acknowledgment from the holders of such options that such holders agree to terminate such options effective not later than the closing of this transaction, except for amounts which, in the aggregate, are not material. d. Purchaser shall have authorized the issuance of the following new options, each with a three-year term, to purchase shares of Purchaser's common stock: (i) Option to purchase 1,250,000 shares, at an exercise price of$O.50 per share, to Thomas McMurrain, (ii) Option to purchase 1,250,000 shares, at an exercise price of $1.00 per share, to Thomas McMurrain, and (iii) Options to purchase 1,000,000 shares, at an exercise price of$O.50 per share, to certain new members of management of Purchaser designated by Thomas McMurrain on or prior to the closing. e. The officers and directors of Purchaser shall have tendered their written resignations, to be effective as of the closing of this transaction. f. Purchaser shall have consummated the sale of all of the assets relating to its skin-care business to a third party in consideration of the agreement by such third party to assume all of Purchaser's liabilities and obligations relating to such skin-care business. It is understood and acknowledged that as of the date hereof Purchaser has, and as of the Closing of the transaction contemplated by this agreement, notwithstanding the contemplated sale of all of the Purchaser's skin-care business assets, it is expected that the Company will continue to have, approximately $700,000 in current liabilities, consisting principally of accounts payable to vendors, suppliers, consultants and other third parties. The Purchaser has agreed to sell its entire skin-care business and related assets to a buyer ("Buyer") that will agree to assume all of such liabilities and indemnify the Purchaser against all liabilities and claims related to the Purchaser's skin-care business. However, the Purchaser has not consummated such transaction, and the purchaser has not obtained releases from the foregoing liabilities from such vendors and creditors. The Purchaser intends to work with the Buyer to obtain such releases, but no assurances can be made, and no representations have been made by the Purchaser, that any releases will be obtained. Therefore, the extent to which the Purchaser may be relieved of such liabilities likely will depend upon the Buyer's financial condition, about which no representations are made by the Purchaser, and its ability to honor its agreement to assume such liabilities. In addition, the sale of the skin-care business to the Buyer will require the approval of the Purchaser's shareholders. If such approval is not obtained, the transaction will not be consummated, and the Buyer will not assume the Purchaser's liabilities relating to the skin-care business. g. The Purchaser shall have raised, subject only to the release from escrow upon the closing of this Agreement, aggregate gross proceeds of $2,000,000 through one or more private placements of common stock, including any amounts advanced to Private Company by Purchaser prior to the Closing. 8. SECURITIES LAW PROVISIONS. 8.1 RESTRICTED SECURITIES. Each of the Shareholders, severally and not jointly, represents that he or it is aware that the shares issued or transferred to him or it will not have been registered pursuant to the Securities Act of 1933, as amended (the "1933 Act"), or any state securities act, and thus will be restricted securities as defined in Rule 144 promulgated by the Securities and Exchange Commission (the "SEC"). Therefore, under current interpretations and applicable rules, he or it likely will have to retain such shares for a period of at least one year and at the expiration of such one year period his or its sales may be confined to brokerage transactions of limited amounts requiring certain notification filings with the SEC and such disposition may be available only if the issuer is current in its filings with the SEC under the Securities Exchange Act of 1934, as amended, or other public disclosure requirements. 8.2 NON-DISTRIBUTIVE INTENT. Each of the Shareholders, severally and not jointly, covenants and warrants that the shares received are acquired for his or its own account and not with the present view towards the distribution thereof and he or it will not dispose of such shares except (i) pursuant to an effective registration statement under the 1933 Act, or (ii) in any other transaction which, in the opinion of counsel acceptable to the issuer, is exempt from registration under the 1933 Act, or the rules and regulations of the SEC thereunder. In order to effectuate the covenants of this subsection 8.2, an appropriate legend will be placed upon each of the certificates of common stock issued or transferred pursuant to this Agreement, and stop transfer instructions shall be placed with the transfer agent for the securities. 8.3 EVIDENCE OF COMPLIANCE WITH PRIVATE OFFERING EXEMPTION. Each of the Shareholders, severally and not jointly, hereby represents and warrants that he or it, either individually or together with his or its representative, has such knowledge and experience in business and financial matters that he or it is capable of evaluating the risks of this Agreement and the transactions contemplated hereby, and that the financial capacity of such party is of such proportion that the total cost of such person's commitment in the shares would not be material when compared with his or its total financial capacity. Upon the written request of the issuer of the securities issued or transferred pursuant to this Agreement, any party hereto shall provide such issuer with evidence of compliance with the requirements of any federal or state exemption from registration. The Purchaser and the Private Company shall each file, with the assistance of the other and its respective legal counsel, such notices, applications, reports, or other instruments as may be deemed by each of them to be necessary or appropriate in an effort to document reliance on such exemptions, unless an exemption requiring no filing is available in the particular jurisdiction, all to the extent and in the manner as may be deemed by such parties to be appropriate. 9. CHANGE OF MANAGEMENT. Upon and as a condition of closing this Agreement, the directors of the Purchaser shall appoint as directors and officers of Purchaser such persons as shall be designated in writing by Mr. Thomas McMurrain on or prior to the closing, and Purchaser's current directors and officers shall submit their written resignations, effective immediately following the closing of this Agreement. 10. CLOSING. 10.1 TIME AND PLACE. The closing of this transaction ("closing") shall take place at 10:00 a.m., on February 15, 2000, or at such other time as the parties hereto shall agree upon. Such date is referred to in this Agreement as the "closing date." 10.2 DOCUMENTS TO BE DELIVERED BY THE PRIVATE COMPANY AND THE SHAREHOLDERS. At the closing the Private Company and the Shareholders shall deliver to the purchaser the following documents: a. Certificates for the number of shares of common stock of the Private Company in the manner and form required by subsection 1.1 hereof. b. The certificate required pursuant to subsection 6.3 hereof. c. A certified copy of the duly adopted resolutions of the Private Company's board of directors authorizing the transaction contemplated by this Agreement. d. Such other documents of transfer, certificates of authority, and other documents as the Private Company and the Shareholders may reasonably request. 10.3 DOCUMENTS TO BE DELIVERED BY THE PURCHASER. At the closing the Purchaser shall deliver to the Private Company and the Shareholders the following documents: a. Certificates for the number of shares of common stock of the Purchaser as determined in sub-section 1.2 hereof. b. The certificate required pursuant to subsection 7.3 hereof. c. A certified copy of the duly adopted resolutions of the Purchaser's board of directors and, if applicable, stockholders, authorizing the transaction contemplated by this Agreement. d. Such other documents of transfer, certificates of authority, and other documents as the Private Company and the Shareholders may reasonably request. 11. TERMINATION. This Agreement may be terminated by the Purchaser or the Private Company, or by all of the Shareholders, by notice to the others if (i) at any time prior to the closing date any event shall have occurred or any state of facts shall exist that renders any of the conditions to its or their obligations to consummate the transactions contemplated by this Agreement incapable of fulfillment, or (ii) at 5.00 p.m., New York time, on March 1, 2000, if the closing shall not have occurred. Following termination of this Agreement no party shall have liability to another party relating to such termination, other than any liability resulting from the breach of this Agreement by a party prior to the date of termination. 12. MISCELLANEOUS. 12.1 NOTICES. All communications provided for herein shall be in writing and shall be deemed to be given or made when served personally or when deposited in the United States mail, certified return receipt requested, addressed as follows, or at such other address as shall be designated by any party hereto in written notice to the other party hereto delivered pursuant to this subsection: Purchaser: Digital Launch, Inc. 250 West 57th Street Suite 2032 New York, NY 10107 Attn: CEO Private Company: GlobaleTutor.Com, Inc. 3340 Peachtree Road NE Suite 1800 Atlanta. GA 30326 Attn: CEO Shareholders: Mr. Thomas McMurrain 3340 Peachtree Road NE Suite 1800 Atlanta, GA 30326 12.2 DEFAULT. Should any party to this Agreement default in any of the covenants, conditions, or promises contained herein, the defaulting party shall pay all costs and expenses, including a reasonable attorney's fee, which may arise or accrue from enforcing this agreement, or in pursuing any remedy provided hereunder or by applicable law. 12.3 ASSIGNMENT. This Agreement may not be assigned in whole or in part by the parties hereto without the prior written consent of the other party or parties, which consent shall not be unreasonably withheld. 12.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their heirs, executors, administrators, successors and assigns. 12.5 PARTIAL INVALIDITY. If any term, covenant, condition, or provision of this Agreement or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement or application of such term or provision to persons or circumstances other than those as to which it is held to be invalid or unenforceable shall not be affected thereby and each term, covenant, condition, or provision of this Agreement shall be valid and shall be enforceable to the fullest extent permitted by law. 12.6 ENTIRE AGREEMENT. This Agreement constitutes the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all negotiations, representations, prior discussions, and preliminary agreements between the parties hereto relating to the subject matter of this Agreement. 12.7 INTERPRETATION OF AGREEMENT. This Agreement shall be interpreted and construed as if equally drafted by all parties hereto. 12.8 SURVIVAL OF COVENANTS, ETC. All covenants, representations, and warranties made herein to any party, or in any statement or document delivered to any party hereto, shall survive the making of this Agreement and shall remain in full force and effect for a period of five years after the closing date. 12.9 FURTHER ACTION. The parties hereto agree to execute and deliver such additional documents and to take such other and further action as may be required to carry out fully the transactions contemplated herein. 12.10 AMENDMENT. This Agreement or any provision hereof may not be changed, waived, terminated, or discharged except by means of a written supplemental instrument signed by the party or parties against whom enforcement of the change, waiver; termination, or discharge is sought. 12.11 FULL KNOWLEDGE. BY THEIR SIGNATURES, THE PARTIES ACKNOWLEDGE THAT THEY HAVE CAREFULLY READ AND FULLY UNDERSTAND THE TERMS AND CONDITIONS OF THIS AGREEMENT, THAT EACH PARTY HAS HAD THE BENEFIT OF COUNSEL, OR HAS BEEN ADVISED TO OBTAIN COUNSEL, AND THAT EACH PARTY HAS FREELY AGREED TO BE BOUND BY THE TERMS AND CONDITIONS OF THIS AGREEMENT. IN P ARTICULAR, ALL PARTIES OTHER THAN THE PURCHASER ACKNOWLEDGE THAT THEY HAVE BEEN ADVISED BY COUNSEL TO THE PURCHASER THAT SUCH COUNSEL DOES NOT REPRESENT THE INTERESTS OF SUCH PARTIES IN CONNECTION WITH THIS AGREEMENT AND THE MATTERS RELATED HERETO, AS SUCH COUNSEL IS REPRESENTING SOLELY THE PURCHASER IN CONNECTION THEREWITH. EACH OF SUCH PERSONS AND ENTITIES AGREE THAT THEY WILL NOT RAISE THE ABSENCE OF LEGAL COUNSEL AS A DEFENSE TO THE ENFORCEMENT OF THIS AGREEMENT. 12.12 HEADINGS. The descriptive headings of the various sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 12.13 COUNTERPARTS. This Agreement may be executed in two or more partially or fully executed counterparts, each of which shall be deemed an original and shall bind the signatory, but al1 of which together shall constitute but one and the same instrument. 12.14 GOVERNING LAW. This Agreement shall be governed by the laws of the State of New York, without giving effect to the conflict of laws provisions thereof. IN WITNESS WHEREOF, the parties hereto executed the foregoing Agreement and Plan of Reorganization as of the day and year first above written. PURCHASER: DIGITAL LAUNCH, INC. By: /s/ Terence O. McGrath President PRIVATE COMPANY: GLOBALETUTOR.COM, INC. By: /s/ Thomas E. McMurrain President SHAREHOLDERS: /s/ Thomas McMurrain /s/ Robbie Willison /s/ Ray Story /s/ Leslie Ennis /s/ Shawn Cartmill /s/ Lara Stegman /s/ Don Ruttenberg /s/ Bob Cohn [signatures continued on next page] [signatures continued from previous page] /s/ Steve Martin /s/ Gary Hill /s/ Barry Morris /s/ Amanda Anderson /s/ Lloyd Skidmore /s/ Karen Lennon TDV CONSULTING /s/ Samuel Sykes By: /s/ Vincent A. Riggio Title: Manager THOMAS E. McMURRAIN FAMILY, LLLP GLOBAL FUNDING GROUP, INC. By: /s/ Thomas E. McMurrain By: /s/ Glenn Carver Title: General Partner Title: vice President Mandalay Sports Action Entertainment, Inc. By: /s/ David G. Salzberg II Title: Partner SCHEDULE A TO THE AGREEMENT AND PLAN OF REORGANIZATION ------------------------------------
NO. OF SHARES NO. OF SHARES NAME OF SHAREHOLDER OF THE PRIVATE OF COMMON COMPANY STOCK OF THE TO BE CANCELED PURCHASER TO BE ISSUED Thomas E. McMurrain 241,000 241,000 Thomas E. McMurrain Family, LLLP 2,065,000 2,065,000 Mandalay Sports Action Entertainment, Inc. 482,000 482,000 Global Funding Group, Inc. 600,000 600,000 TDV Consulting 300,000 300,000 Robbie Willison 416,000 416,000 Ray Story 241,000 241,000 Leslie Ennis 50,000 50,000 Shawn Cartmill 100,000 100,000 Lara Stegman 100,000 100,000 Don Ruttenberg 25,000 25,000 Bob Cohn 25,000 25,000 Steve Martin 25,000 25,000 Gary Hill 25,000 25,000 Barry Morris 25,000 25,000 Amanda Anderson 25,000 25,000 Lloyd Skidmore 25,000 25,000 Karen Lennon 25,000 25,000 Samuel Sykes 25,000 25,000 TOTAL 4,820,000 4,820,000
DIGITAL LAUNCH, INC. 250 West 57th Street Suite 2032 New York, NY 10107 January 21, 2000 Mr. Thomas McMurrain President & CEO GlobaleTutor.Com, Inc. 3340 Peachtree Road, NE Suite 1800 Atlanta, GA 30326 Re: AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION Dear Mr. McMurrain: This is to confirm the following clarifications and amendment to the Agreement and Plan of Reorganization, dated as of December 28, 1999 (the "Agreement"), by and among Digital Launch, Inc. (the "Company"), GlobaleTutor.Com, Inc. ("GET"), and the Shareholders of GET. For good and adequate consideration, the receipt and sufficiency of which is hereby acknowledged, the Company, GET and the GET Shareholders agree as follows: 1. In Section 4.2 [Capital Stock] of the Agreement, there is hereby added at the end of the Section the following: "except that a service provider to the Company is the beneficiary of a non-qualified stock option agreement, which vested in part in 1998-1999, under which he is entitled to exercise options on a total of up to 27,500 shares of Common Stock, at an exercise price of $0.75 per share." 2. In Section 7.6(c) of the Agreement, there is hereby added at the end of the sentence the following: ", it being agreed that the currently outstanding options to purchase 27,500 shares of the Company's Common Stock at an exercise price of $0.75 per share, as set forth in Section 4.2, shall not have expired or been terminated as of the Closing, and shall remain subject to exercise as provided in the related stock option agreement." 3. The parties have agreed and hereby confirm that the Company's outstanding Common Stock shall not be reverse split prior to the closing of the transaction described in the Agreement, and that notwithstanding anything to the contrary in the Agreement, there shall not be returned to the Company for cancellation, and the Company shall not have any obligation to cancel, 700,000 shares of its Common Stock. Therefore, the following changes shall be made in the Agreement to reflect such further agreements: (i) The first sentence of Section 4.2 shall be amended to read in its entirety as follows: "As of the closing of this Agreement, the Purchaser will have a total of no more than 28,164,000 shares of common stock issued and outstanding, and no shares of preferred stock issued and outstanding, after giving effect to (i) the issuance of the shares to the Shareholders under this Agreement, (ii) the issuance of 8,000,000 shares of common stock to investors for an investment of $2 million in Purchaser, and (iii) the issuance of 500,000 shares of common stock to investors for an investment of $100,000 in Purchaser. (ii) Paragraph (a) of Section 7.6 is hereby deleted. (iii) Paragraph (b) of Section 7.6 shall be amended to read as follows: "Purchaser shall have issued and outstanding not more than 18,524,000 shares before the issuance of the shares to the Shareholders hereunder, but including all shares issued to investors in Purchaser's common stock after the date hereof and through the closing of this transaction." (iv) Paragraph (d) of Section 7.6 shall be amended to read as follows: "Purchaser shall have authorized the issuance of the following new options, each with a three-year term, to purchase shares of Purchaser's common stock: (i) Option to purchase 2,500,000 shares, at an exercise price of $0.25 per share, to Thomas McMurrain, (ii) Option to purchase 2,500,000 shares, at an exercise price of $0.50 per share, to Thomas McMurrain, and (iii) Options to purchase 2,000,000 shares, at an exercise price of $0.25 per share, to certain new members of management of Purchaser designated by Thomas McMurrain on or prior to the closing." The foregoing changes are intended solely to reflect such changes to stock options as are customary in light of the cancellation of the Company's reverse split. The Company makes no representations or warranties of any kind as to the treatment or effect of such options with respect to the Company's income taxes or financial statements. (v) The Company hereby waives the requirement in paragraph 2.1(a) of the Agreement that the Shareholders continue to hold their shares of the common stock of GET to the extent that such Shareholders may transfer their respective shares to Globalepartners, LLC, a Georgia limited liability company. Attached hereto is an Addendum to SCHEDULE A of the Agreement to reflect the identity of the Shareholders of GET at the closing of the transaction, and the agreement not to reverse split the Company's shares 4. Notwithstanding anything to the contrary in the Agreement, the parties agree that as of the closing, the Company shall assume all currently outstanding obligations of GET to holders of options and warrants to purchase shares of capital stock of GET which had been committed to by GET as of the date of execution of the Agreement. On or prior to closing, GET shall provide to the Company a complete detail of these options and warrants obligations. 5. By its signature below, GlobalePartners, LLC, hereby agrees to all of the terms of the Agreement as though its signature were set forth thereon at and as of the original date of execution of the Agreement. 6. The Agreement is otherwise unmodified and continues in full force and effect. Please acknowledge your agreement to this Amendment by signing a copy of this letter and returning one signed copy to the undersigned. Sincerely yours, DIGITAL LAUNCH, INC. By /s/ Terrence O. McGrath President Accepted and agreed to as of the date set forth below. GLOBALETUTOR.COM, INC. By: /s/ Thomas E. McMurrain President and Chief Executive Officer Date: 1-21-00 SHAREHOLDERS OF GET: /s/ Thomas E McMurrain GLOBALEPARTNERS, LLC, a Georgia Limited Liability Company By: /s/ Thomas McMurrain Title: Manager Date: 1-21-00 ADDENDUM TO SCHEDULE A TO THE AGREEMENT AND PLAN OF REORGANIZATION ------------------------------------
- ------------------------------------------------------------------------------------------------------------------ No. of Shares of No. of Shares of the Private Common Stock of the PURCHASER NAME OF SHAREHOLDER COMPANY TO BE CANCELED TO BE ISSUED - ------------------------------------------------------------------------------------------------------------------ Globalepartners, LLC 4,579,000 9,158,000 - ------------------------------------------------------------------------------------------------------------------ Thomas E. McMurrain 241,000 482,000 - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ TOTAL 4,820,000 9,640,000 - ------------------------------------------------------------------------------------------------------------------
EX-2.2 3 ex-22.txt EXHIBIT 2.2 EXHIBIT 2.2 AGREEMENT AND PLAN OF MERGER Agreement entered as of May 23, 2000 by and between Global E Tutor, Inc., a Delaware corporation (the "BUYER"), and Kilimanjaro Group.com Inc., a Nevada corporation (the "TARGET"). The Buyer and the Target are referred to collectively herein as the "PARTIES." This Agreement contemplates a merger of the Target with and into the Buyer. The Target Stockholders will receive 50,000 restricted shares of Buyer stock (the "Shares") and cash in the aggregate amount of $75,000 in exchange for their capital stock in the Target. The Parties expect that the Merger will further certain of their business objectives. Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. DEFINITIONS. "ACCREDITED INVESTOR has the meaning set forth in Rule 501 of the regulations promulgated under the Securities Act "AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. "ARTICLES OF MERGER" has the meaning set forth in Section 2(c) below. "BUYER" has the meaning set forth in the preface above. "CLOSING" has the meaning set forth in Section 2(b) below. "CLOSING DATE" has the meaning set forth in Section 2(b) below. "EFFECTIVE TIME" has the meaning set forth in Section 2(d)(i) below. "EXCHANGE AGENT" has the meaning set forth in Section 2(e) below. "MERGER" has the meaning set forth in Section 2(a) below. "MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 3(f) below. "PARTY" has the meaning set forth in the preface above. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "PUBLIC REPORTS" has the meaning set forth in Section 3(e) below. "REQUISITE TARGET STOCKHOLDER APPROVAL" means the unanimous written consent of the holders of Target Shares in favor of this Agreement and the Merger. "SEC" means the Securities and Exchange Commission. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic's, materialmen's, and similar liens, (b) liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings, (c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. "SURVIVING CORPORATION" has the meaning set forth in Section 2(a) below. "TARGET" has the meaning set forth in the preface above. "TARGET SHARE" means any share of the Common Stock of the Target. "TARGET STOCKHOLDER" means any Person who or which holds any Target Shares. 2. BASIC TRANSACTION. (a) THE MERGER. On and subject to the terms and conditions of this Agreement, the Target will merge with and into the Buyer (the "Merger") at the Effective Time. The Buyer shall be the corporation surviving the Merger (the "Surviving Corporation"). (b) THE CLOSING. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Ogden Murphy Wallace, PLLC, in Seattle, Washington, commencing at 9:00 a.m. local time on the first business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the Parties may mutually determine (the "Closing Date") (c) ACTIONS AT THE CLOSING. At the Closing, (i) the Target will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 6(a) below, (ii) the Buyer will deliver to the Target the various certificates, instruments, and documents referred to in Section 6(b) below, (iii) the Buyer and the Target will file with the Secretary of State of the States of Delaware and Nevada Articles of Merger (the "Articles of Merger"), and (iv) the Buyer will deliver to the Exchange Agent in the manner provided below in this Section 2 the certificates representing the Shares and the sum of $75,000 to be distributed to the Target Shareholders. (d) EFFECT OF MERGER. (i) GENERAL. The Merger shall become effective at the time (the "Effective Time") the Buyer and the Target file the Articles of Merger with the Secretary of State of the States of Delaware and Nevada. The Merger shall have the effect set forth in the laws of the States of Delaware and Nevada. The Surviving Corporation may, at any time after the Effective Time, take any action (including executing and delivering any document) in the name and on behalf of either the Buyer or the Target in order to carry out and effectuate the transactions contemplated by this Agreement. (ii) ARTICLES OF INCORPORATION. The Articles of Incorporation of the Buyer in effect at and as of the Effective Time will remain the Articles of Incorporation of the Surviving Corporation without any modification or amendment in the Merger. (iii) BYLAWS. The Bylaws of the Buyer in effect at and as of the Effective Time will remain the Bylaws of the Surviving Corporation without any modification or amendment in the Merger. (iv) DIRECTORS AND OFFICERS. The directors and officers of the Buyer in office at and as of the Effective Time will remain the directors and officers of the Surviving Corporation (retaining their respective positions and terms of office). (v) CANCELLATION OF TARGET SHARES. At and as of the Effective Time, each Target Share shall be canceled. (vi) BUYER SHARES. Each Buyer Share issued and outstanding at and as of the Effective Time will remain issued and outstanding. (e) PROCEDURE FOR PAYMENT. (i) Immediately after the Effective Time, the Buyer will furnish to Ogden Murphy Wallace, counsel for Target, as Exchange Agent, the sum of Seventy Five Thousand Dollars ($75,000). Each shareholder of Target, shall receive the amount of 03/1.00 Dollars ($0.03) per share. The Exchange Agent shall have the obligation to make the payments called for by this Section 2.(e)(i) to the shareholders of Target. (ii) Immediately after the Effective Time, the Buyer will issue a total of Fifty Thousand (50,000) shares of common stock of Buyer to the shareholders of Target. Every one (1) share of Buyer shall be exchanged for Fifty (50) shares of Target. Buyer shall instruct its transfer agent to issue stock certificates to in the appropriate amounts to the shareholders of Target, pursuant to the list of shareholders of Target provided by Target to Buyer prior closing. (iii) The Exchange Agent shall deduct all of its charges and expenses from the proceeds before distributing to the Target Shareholders. 3. REPRESENTATIONS AND WARRANTIES OF THE TARGET. The Target and each of its shareholders represent and warrant to the Buyer that the statements contained in this Section 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3) (a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Target is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. The Target is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required. The Target has full corporate power and authority to carry on the business in which it is engaged and to own and use the properties owned and used by it. (b) CAPITALIZATION. The entire authorized capital stock of the Target consists of 25,000,000 shares of Common Stock, of which 2,500,000 Target Shares are issued and outstanding. All of the issued and outstanding Target Shares have been duly authorized and are validly issued, fully paid, and nonassessable. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Target to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Target. (c) AUTHORIZATION OF TRANSACTION. The Target has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder; provided, however, that the Target cannot consummate the Merger unless and until it receives the Requisite Target Stockholder Approval. This Agreement constitutes the valid and legally binding obligation of the Target, enforceable in accordance with its terms and conditions. (d) NONCONTRAVENTION. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Target is subject or any provision of the charter or bylaws of Target or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which Target is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Security Interest upon any of its assets) Other than in connection with the provisions of Nevada law, Target does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement (e) FILINGS WITH THE SEC. The Target has made all filings with the SEC that it has been required to make under the Securities Exchange Act (collectively the "Public Reports") and has received from the SEC a letter to the effect that the SEC will have no further comment on Target's Form 10SB. Each of the Public Reports has complied with the Securities Exchange Act in all material respects. None of the Public Reports, as of their respective dates, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Target has delivered to the Buyer a correct and complete copy of each Public Report (together with all exhibits and schedules thereto and as amended to date). (f) FINANCIAL STATEMENTS. The Target has filed a Form 10-SB which contained the financial statements for the fiscal year ended January 31, 2000 ("Most Recent Fiscal Year End") and a Form 10-QSB which contained the financial statements for the fiscal quarter ended April 30, 2000. The financial statements included in or incorporated by reference into these Public Reports (including the related notes and schedules) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, and present fairly the financial condition of Target as of the indicated dates and the results of operations of Target for the indicated periods; provided, however, that the interim statements are subject to normal year-end adjustments. (g) EVENTS SUBSEQUENT TO MOST RECENT FISCAL QUARTER END. Since the Most Recent Fiscal Year End, there has not been any material adverse change in the business, financial condition, operations, results of operations, or future prospects of Target. (h) UNDISCLOSED LIABILITIES. Target does not have any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for taxes, except for (i) liabilities set forth on the face of the balance sheet dated as of the Most Recent Fiscal Year End (rather than in any notes thereto) and (ii) liabilities which have arisen after the Most Recent Fiscal Year End in the Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law). (i) BROKERS' FEES. Target does not have any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. (j) AFFILIATE AND ACCREDITED INVESTOR STATUS All shareholders of Target are Affiliates of Target and are Accredited Investors. 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Target that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4). (a) ORGANIZATION. The Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (b) AUTHORIZATION OF TRANSACTION. The Buyer has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions. (c) NONCONTRAVENTION. To the knowledge of any director or officer of the Buyer, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of the charter or bylaws of the Buyer or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is subject except where the violation, conflict, breach, default, acceleration, termination, modification, cancellation, or failure to give notice would not have a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement. To the Knowledge of any director or officer of the Buyer, and other than in connection with the provisions of Delaware law, the Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement, except where the failure to give notice, to file, or to obtain any authorization, consent, or approval would not have a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement. (d) BROKERS' FEES. The Buyer does not have any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Target could become liable or obligated. 5. COVENANTS. The Parties agree as follows with respect to the period from and after the execution of this Agreement: (a) GENERAL. Each of the Parties will use its best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 6 below). (b) NOTICES AND CONSENTS. The Target will give any notices to third parties, and will use its best efforts to obtain any third party consents, that the Buyer reasonably may request in connection with the matters referred to in Section 3(d) above. (c) REGULATORY MATTERS AND APPROVALS. Each of the Parties will give any notices to, make any filings with, and use its reasonable best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in Section 3(d) and Section 4(d) above. (ii) NEVADA LAW. The Target will obtain the unanimous written consent of its stockholders for the adoption of this Agreement and the approval of the Merger in accordance with Nevada Law. 6. CONDITIONS TO OBLIGATION TO CLOSE. (a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) this Agreement and the Merger shall have been approved by the unanimous written consent of the shareholders of Target; (ii) Target shall have procured all of the third party consents specified in Section 5(b) above; (iii) the representations and warranties set forth in Section 3 above shall be true and correct in all material respects at and as of the Closing Date; (iv) the Target shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (v) No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect adversely the right of the Surviving Corporation to own the former assets, to operate the former business of Target (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (vi) the Target shall have delivered to the Buyer a certificate to the effect that each of the conditions specified above in Section 6(a)(i)-(v) is satisfied in all respects; (vii) all actions to be taken by the Target in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer. The Buyer may waive any condition specified in this Section 6(a) if it executes a writing so stating at or prior to the Closing. (b) CONDITIONS TO OBLIGATION OF THE TARGET. The obligation of the Target to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 4 above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be satisfactory in form and substance to the Target; (iv) Buyer shall have delivered to Target its audited financial statements for the fiscal year ended December 31, 1999. The Target may waive any condition specified in this Section 6(b) if it executes a writing so stating at or prior to the Closing. 7. TERMINATION. (a) TERMINATION OF AGREEMENT. Either of the Parties may terminate this Agreement with the prior authorization of its board of directors (whether before or after stockholder approval) as provided below: (i) the Parties may terminate this Agreement by mutual written consent at any time prior to the Effective Time; (ii) the Buyer may terminate this Agreement by giving written notice to the Target at any time prior to the Effective Time (A) in the event the Target has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Target of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before June 30, 2000, by reason of the failure of any condition precedent under Section 6(a) hereof (unless the failure results primarily from the Buyer breaching any representation, warranty, or covenant contained in this Agreement); (iii) the Target may terminate this Agreement by giving written notice to the Buyer at any time prior to the Effective Time (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Target has notified the Buyer of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before June 30, 2000, by reason of the failure of any condition precedent under Section 6(b) hereof (unless the failure results primarily from the Target breaching any representation, warranty, or covenant contained in this Agreement); (b) EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant to Section 7(a) above, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach). 8. MISCELLANEOUS. (a) SURVIVAL. None of the representations, warranties, and covenants of the Parties (other than the provisions in Section 2 above concerning issuance of the Buyer Shares) will survive the Effective Time. (b) ENTIRE AGREEMENT. This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they are related in any way to the subject matter hereof. (c) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party. (d) COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (e) HEADINGS. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (f) NOTICES. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient at the last address give to the other party. Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the last address give to the other party using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. (g) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. (h) AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision of this Agreement at any time prior to the Effective Time with the prior authorization of their respective boards of directors; provided, however, that any amendment effected subsequent to stockholder approval will be subject to the restrictions contained in the laws of the State of Delaware. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by both of the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (i) SEVERABILITY. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (j) EXPENSES. Each of the Parties will bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. (k) CONSTRUCTION. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context otherwise requires. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. BUYER: By: /s/ Tom McMurrain Title: CEO/President TARGET: By: /s/ James L. Vandeberg Title: President EX-3.1 4 ex-31.txt EXHIBIT 3.1 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF ESSEX ENTERPRISES, INC. FIRST. The name of this corporation shall be: ESSEX ENTERPRISES, INC. SECOND. Its registered office in the State of Delaware is to be located at 1013 Centre Road, in the City of Wilmington, County of New Castle and its registered agent at such address is CORPORATION SERVICE COMPANY. THIRD. The purpose or purposes of the corporation shall be: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares of stock which this corporation is authorized to issue is: Fifty Million Five Hundred Thousand (50,500,000) shares of which Fifty Million (50,000,000) shares are with a par value of $.001 each, amounting to Fifty Thousand Dollars ($50,000.00) are Common Stock and Five Hundred Thousand (500,000) shares are with a par value of $.001 each, amounting to Five Hundred Dollars ($500.00) are Preferred Stock. FIFTH. The name and address of the incorporator is as follows: Debra M. Carll Corporation Service Company 1013 Centre Road Wilmington, DE 19805 SIXTH. The Board of Directors shall have the power to adopt, amend or repeal the by-laws. SEVENTH. No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article Seventh shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore named, has executed, signed and acknowledged this certificate of incorporation this ninth day of May, A.D., 1995. /s/ Debra M. Carll Incorporator CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF ESSEX ENTERPRISES, INC. Essex Enterprises, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation by the unanimous written consent of its members, filed with the minutes of the Board, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that Article I of the Certificate of Incorporation of the Company shall be amended to read as follows: "The name of this corporation shall be Veronique, Inc." SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given written consent to said amendment in accordance with the provisions of Section 228 of the General Law of the State of Delaware, and written notice of the adoption of the amendment has been given as provided in Section 228 of the General Corporation Law of the State of Delaware to every stockholder entitled to such notice. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Essex Enterprises, Inc. has caused this certificate to be signed by Lynn Dixon, its President and its Secretary, this 9th day of December 1996. Essex Enterprises, Inc. By /s/ Lynn Dixon, President and Secretary CERTIFICATE OF OWNERSHIP AND MERGER MERGING VI SUB, INC., A DELAWARE CORPORATION (Subsidiary) WITH AND INTO VERONIQUE, INC., A DELAWARE CORPORATION (Parent) This is to certify that pursuant to the provisions of Section 253 of the Delaware General Corporation Law, Veronique, Inc., a Delaware corporation, as the surviving corporation, hereby adopts the following Certificate of Ownership and Merger: FIRST: VI Sub, Inc., a Delaware corporation (the "Merging Corporation"), shall merge with and into Veronique, Inc., a Delaware corporation (the "Surviving Corporation"). SECOND: A resolution of the Board of Directors of the Surviving Corporation providing for the merger of the Merging Corporation with and into the Surviving Corporation on the terms described herein was duly approved and adopted on September 15, 1997, by unanimous written consent, a copy of which is attached hereto as Exhibit A. The Merging Corporation is a wholly-owned subsidiary of the Surviving Corporation. The Surviving Corporation is the corporation to survive the merger. THIRD: Both the Surviving Corporation and the Merging Corporation are incorporated under the laws of the State of Delaware. FOURTH: The Certificate of Incorporation and the Bylaws of the Surviving Corporation will not be amended as a result of the merger. FIFTH: Upon the Effective Time, the Merging Corporation shall be merged into the Surviving Corporation; and, thereupon, the Surviving Corporation shall possess any and all purposes and powers of the Merging Corporation; and all leases, licenses, property, rights, privileges, and powers of whatever nature and description of the Merging Corporation shall be transferred to, vested in, and devolved upon the Surviving Corporation, without further act or deed, subject to all of the debts and obligations of the Merging Corporation. Each share of capital stock of the Merging Corporation shall be canceled at the Effective Time, without the necessity of any action on the part of the holder thereof. The issued and outstanding shares of capital stock of the Surviving Corporation shall remain outstanding after the Effective Time and shall not be affected in any way by the merger. SIXTH: This Certificate of Ownership and Merger shall become effective as of the time and date on which it is accepted for filing by the Secretary of State of the State of Delaware (the "Effective Time"). IN WITNESS WHEREOF, each undersigned officer acknowledges this Certificate of Ownership and Merger to be the corporate act of the Surviving Corporation, and further, does make this certificate, hereby declaring and certifying that this is their act and deed and the facts herein stated are on behalf of the Surviving Corporation this 15th day of September, 1997. ATTEST: VERONIQUE, INC. (SEAL) /s/ P. Waltrous By: /s/ Terrence O. McGrath Secretary President EXHIBIT A VERONIQUE, INC. UNANIMOUS WRITTEN CONSENT OF DIRECTORS WHEREAS, the directors of Veronique, Inc. (the "Corporation") have determined that it would be in the best interest of the Corporation to Merge its wholly-owned subsidiary, VI Sub, Inc., with and into the Corporation; NOW, THEREFORE, BE IT RESOLVED, that VI Sub, Inc., the Corporation's wholly-owned subsidiary, shall be merged with and into the Corporation, and all of the shares of capital stock of VI Sub, Inc. shall be canceled and all of the shares of capital stock of the Corporation shall be unaffected and further on the terms set forth in the Certificate of Ownership and Merger attached hereto; and FURTHER RESOLVED, that the officers of the Corporation be, and each of them is hereby, authorized by and on behalf of the Corporation, to make, execute and deliver a Certificate of Ownership and Merger and such other related agreements, certificates, instruments and documents as such officer or officers acting on behalf of tho Corporation may approve in order to consummate the above-described merger, the execution of any of such further agreements, certificates, instruments or documents to be conclusive evidence of such approval; and FURTHER RESOLVED, that the officers of the Corporation be, and each of them is hereby, authorized and directed to take such action and to do all things which such officer or officers may deem necessary or appropriate to accomplish the above-described merger. Executed this 15th day of September, 1997. /s/ Stan Adler Director /s/ David L. Haselkorn Director /s/ Terrence O. McGrath Director CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF VERONIQUE, INC. Pursuant to Section 242 of the General Corporation Law of the State of Delaware Veronique, Inc. (hereinafter called the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows: Acting by consent in lieu of a meeting, in accordance with the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware setting forth amendments to the Certificate of Incorporation of the Corporation and declaring said amendments to be advisable. The stockholders of the Corporation duly approved said proposed amendments by written consent in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware, and written notice of such consent has been given to all stockholders who have not consented in writing to said amendments. The resolution setting forth the amendment is as follows: RESOLVED, that the Board of Directors of the Corporation hereby approves, and recommends that the shareholders of the Corporation approve the adoption of an amendment to the Certificate of Incorporation to delete Article FOURTH in its current form and insert in lieu thereof the following: FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) Fifty Million (50,000,000) shares of Common Stock, $.001 par value per share ("Common Stock") and (ii) Five Hundred Thousand (500,000) shares of Preferred Stock, $.001 par value per share ("Preferred Stock"). The following is a statement of the designations, and the powers, privileges and rights, and the qualifications, limitations or restrictions in respect of each class of capital stock of the Corporation: A. COMMON STOCK 1. GENERAL. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series. 2. VOTING. The holders of the Common Stock are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. 3. DIVIDENDS. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend right of any then-outstanding Preferred Stock. 4. LIQUIDATION. Upon the dissolution or liquidation of the Corporation whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then-outstanding Preferred Stock. 5. DESIGNATION OF CLASSES. Notwithstanding anything to the contrary in this Article Fourth, the Board of Directors is authorized to issue from time to time one or more classes of Common Stock and, in connection with the creation of any such class, to determine and fix, by resolution adopted by the Board of Directors, such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, and conversion rights as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of Delaware. The resolutions providing for issuance of any class of Common Stock may provide that such class shall be superior, or rank equally, or be junior to the Common Stock of any other class to the extent permitted by law. No vote of the holders of the Common Stock or the Preferred Stock shall be a prerequisite to the issuance of any shares of any class of the Common Stock authorized by and complying with the conditions of the Certificate of Incorporation, the right to have such vote being waived by all present and future holders of the capital stock of the Corporation. B. PREFERRED STOCK. 1. ISSUANCE IN SERIES. Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of Preferred Stock which may be redeemed, purchased, or acquired by the Corporation may be reissued except as otherwise provided by law. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided in the instrument designating the terms of any such series. 2. DESIGNATION OF SERIES. The Board of Directors is authorized to issue from time to time one or more series of Preferred Stock and, in connection with the creation of any such series, to determine and fix, by resolution adopted by the Board of Directors, such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges, and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of Delaware. The resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior, or rank equally, or be junior to the Preferred Stock of any other series to the extent permitted by law. No vote of the holders of the Common Stock or the Preferred Stock shall be a prerequisite to the issuance of any shares of any Series of the Preferred Stock authorized by and complying with the conditions of the Certificate of Incorporation, the right to have such vote being waived by all present and future holders of the capital stock of the Corporation. 3. VOTING. Unless otherwise provided in the instrument designating a series of Preferred Stock, each holder of outstanding shares of Preferred Stock shall be entitled to the number of votes equal to the number of whole shares pf Common Stock into which the shares of Preferred Stock held by such holder are convertible, at each meeting of stockholders of the Corporation (and written actions of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration. Except as provided by law, by the provisions of this Certificate, or by the provisions establishing any series of Preferred Stock, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this Certificate of Amendment to be signed by its President and attested to by its Secretary this 30 day of April, 1998. ATTEST: VERONIQUE, INC. /s/ P. J. Waltrous By: /s/ Terrence O. McGrath Secretary President [Corporate Seal] CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF VERONIQUE, INC. Pursuant to Section 242 of the General Corporation Law of the State of Delaware Veronique, Inc. (hereinafter called the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows: Acting by consent in lieu of a meeting, in accordance with the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware setting forth a proposed amendment to the Certificate Of Incorporation of the Corporation and declaring said amendment to be advisable. The stockholders of the Corporation entitled to vote on such amendment duly approved said proposed amendment by written consents in lieu of a meeting pursuant to Sections 242 and 228 of the General Corporation Law of the State of Delaware. The resolution setting forth the amendment is as follows: RESOLVED, that the Board of Directors of the Corporation hereby approves, and recommends that the shareholders of the Corporation approve, the adoption of an amendment to the Certificate of Incorporation providing in its entirety as follows: That Article FIRST of the Certificate of Incorporation of the Corporation be and hereby is deleted and the following Article FIRST is inserted in lieu thereof, FIRST: The name of the Corporation shall be: DIGITAL LAUNCH, INC. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this Certificate of Amendment to be signed by its President and attested to by its Secretary this 13th day of April, 1999. ATTEST: VERONIQUE, INC. /s/ Philip J. Watrous By: /s/ Terrence O. McGrath Secretary President [Corporate Seal] DIGITAL LAUNCH, INC. CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION Digital Launch, Inc., a Corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware. DOES HEREBY CERTIFY: 1st: That by unanimous written consent of the Board of Directors of Digital Launch, Inc., a resolution was duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and proposing approval by the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the FIRST article thereof so that, as amended, said Article shall read as set forth below. FIRST: The name of this corporation shall be: Global E Tutor, Inc. 2nd: That thereafter, pursuant to resolution of its Board of Directors, a written approval by majority consent of the stockholders of said Corporation was duly received in accordance with the General Corporation law of the State of Delaware, by which consent the necessary number of shares as required by statute were voted in favor of the amendment. 3rd: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware, and the necessary number of shares as required by statute were voted in favor of the amendment. IN WITNESS WHEREOF, said Digital Launch, Inc., has caused this certificate to be signed by its President and its Secretary-Treasurer, this 2nd day of February, 2000. By: /s/ Thomas E. McMurrain, President By: /s/ Lara Stegman, Secretary EX-3.2 5 ex-32.txt EXHIBIT 3.2 EXHIBIT 3.2 CERTIFICATE OF MERGER OF GLOBAL E TUTOR, INC. Pursuant to the provisions of the Delaware Corporation Code Annotated Sections 251(f), and 252, and the Nevada Revised Statutes Section 92A.200, the following Articles of Merger are executed for the purpose of merging Kilimanjaro Group.com Inc., a Nevada corporation (the "Disappearing Corporation"), with and into Global E Tutor, Inc., a Delaware corporation (the "Surviving Corporation"). 1. The Agreement and Plan of Merger, dated May 23, 2000, was approved, adopted, certified, executed and acknowledged by the Disappearing Corporation and the Surviving Corporation in accordance with Chapter 92A of the Nevada Revised Statutes and Section 252 of Delaware Corporation Code Annotated. 2. On May 23, 2000, the Agreement and Plan of Merger was submitted and duly approved by a unanimous written consent of all of the shareholders of the Disappearing Corporation pursuant to Sections 78.32 and 92A.120(7) of the Nevada Statutes. 3. The Agreement and Plan of Merger was submitted to and unanimously approved by the Board of Directors of the Surviving Corporation pursuant to Section 252 of the Delaware Corporation Code on April 19, 2000. 4. Pursuant to Section 251(f) of the Delaware Corporation Code shareholder approval of the Surviving Corporation was not required. 5. The executed Agreement and Plan of Merger is on file at the principal executive offices of the Surviving Corporation located at 3340 Peachtree Road, Suite 1800, Atlanta, GA 30326. A copy of the Agreement and Plan of Merger will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of the Disappearing Corporation or Surviving Corporation. 6. The Certificate of Incorporation of the Surviving Corporation, a Delaware corporation which is surviving the merger, shall be the Certificate of Incorporation of the surviving corporation. 7. Pursuant to the provision of Section 92A.190 of the Nevada Revised Statutes, the Surviving Corporation is deemed to have appointed the Secretary of State of the State of Nevada as its agent for service of process in a proceeding to enforce any obligation or the rights of dissenting shareholders of the Disappearing Corporation. The address where copies of process may be sent by the Secretary of State of the State of Nevada is as follows: Odgen Murphy Wallace, P.L.L.C. 1601 Fifth Avenue, Suite 2100 Seattle, Washington 98101 Attn: James L. Vandeberg 8. The authorized capital stock of the foreign Disappearing Corporation is as follows:
------------------------- ------------------------ ------------------------ CLASS NUMBER OF SHARES PAR VALUE ------------------------- ------------------------ ------------------------ Common Stock 25,000,000 $0.001 ------------------------- ------------------------ ------------------------
Dated this 24th day of May, 2000. GLOBAL E TUTOR, INC. By: /s/ Thomas McMurrain Its: President EX-3.3 6 ex-33.txt EXHIBIT 3.3 EXHIBIT 3.3 CERTIFICATE OF SECRETARY OF ESSEX ENTERPRISES, INC. The undersigned, constituting the duly-appointed and current secretary of Essex Enterprises, Inc. (the "Company"), does hereby certify that the attached copy of bylaws of the Company is a true and correct copy of the bylaws currently in effect for the Company. IN WITNESS WHEREOF, the undersigned has executed this document this 10th day of December 1996. /s/ Lynn Dixon, Secretary BY-LAWS OF ESSEX ENTERPRISES, INC. ARTICLE I - OFFICES Section 1. The registered office of the corporation in the State of Delaware shall be at 1013 Centre Road, Wilmington, Delaware 19805-1297. The registered agent in charge thereof shall be CSC Networks. Section 2. The corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II - SEAL Section 1. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". ARTICLE III - STOCKHOLDERS' MEETINGS Section 1. Meetings of stockholders shall be held at the registered office of the corporation in this state or at such place, either within or without this state, as may be selected from time to time by the Board of Directors. Section 2. ANNUAL MEETINGS: The annual meeting of the stockholders shall be held on such date as is determined by the Board of Directors for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting. Section 3. ELECTION OF DIRECTORS: Elections of the directors of the corporation shall be by written ballot. Section 4. SPECIAL MEETINGS: Special meetings of the stockholders may be called at any time by the President, or the Board of Directors, or stockholders entitled to cast at least one-fifth of the votes which all stockholders are entitled to cast at the particular meeting. At any time, upon written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary to fix the date of the meeting, to be held not more than sixty days after receipt of the request, and to give due notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so. Business transacted at all special meetings shall be confined to the objects stated in the call and matters germane thereto, unless all stockholders entitled to vote are present and consent. Written notice of a special meeting of stockholders stating the time and place and object thereof, shall be given to each stockholder entitled to vote thereat at least ten days before such meeting, unless a greater period of notice is required by statute in a particular case. Section 5. QUORUM: One-third of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares entitled to vote is represented at a meeting, a one-third of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Section 6. PROXIES: Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. All proxies shall be filed with the Secretary of the meeting before being voted upon. Section 7. NOTICE OF MEETINGS: Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. Section 8. CONSENT IN LIEU OF MEETINGS: Any action required to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Section 9. LIST OF STOCKHOLDERS: The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. No share of stock upon which any installment is due and unpaid shall be voted at any meeting. The list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. ARTICLE IV - DIRECTORS Section 1. The business and affairs of this corporation shall be managed by its Board of Directors, no less than one in number or such other minimum number as is required by law. The directors need not be residents of this state or stockholders in the corporation. They shall be elected by the stockholders of the corporation or in the case of a vacancy by remaining directors, and each director shall be elected for the term of one year, and until his successor shall be elected and shall qualify or until his earlier resignation or removal. Section 2. REGULAR MEETINGS: Regular meetings of the Board shall be held without notice other than this by-law immediately after, and at the same place as, the annual meeting of stockholders. The directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. Section 3. SPECIAL MEETINGS: Special Meetings of the Board may be called by the President or any director upon two day notice. The person or persons authorized to call special meetings of the directors may fix the place for holding any special meeting of the directors called by them. Section 4. QUORUM: A majority of the total number of directors shall constitute a quorum for the transaction of business. Section 5. CONSENT IN LIEU OF MEETING: Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. The Board of Directors may hold its meetings, and have an office or offices, outside of this state. Section 6. CONFERENCE TELEPHONE: One or more directors may participate in a meeting of the Board, of a committee of the Board or of the stockholders, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other; participation in this manner shall constitute presence in person at such meeting. Section 7. COMPENSATION: Directors as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board PROVIDED, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 8. REMOVAL: Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except that when cumulative voting is permitted, if less than the entire Board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which he is a part; ARTICLE V - OFFICERS Section 1. The executive officers of the corporation shall be chosen by the directors and shall be a President, Secretary and Treasurer. The Board of Directors may also choose a Chairman, one or more Vice Presidents and such other officers as it shall deem necessary. Any number of offices may be held by the same person. Section 2. SALARIES: Salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Section 3. TERM OF OFFICE: The officers of the corporation shall hold office for one year and until their successors are chosen and have qualified. Any officer or agent elected or appointed by the Board may be removed by the Board of Directors whenever in its judgment the best interest of the corporation will be served thereby. Section 4. PRESIDENT: The President shall be the chief executive officer of the corporation; he shall preside at all meetings of the stockholders and directors; he shall have general and active management of the business of the corporation, shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the corporation. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation. He shall be EX-OFFICIO a member of all committees, and shall have the general power and duties of supervision and management usually vested in the office of President of a corporation. Section 5. SECRETARY: The Secretary shall attend all sessions of the Board and all meetings of the stockholders and act as clerk thereof, and record all the votes of the corporation and the minutes of all its transactions in a book to be kept for that purpose, and shall perform like duties for all committees of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, and under whose supervision he shall be. He shall keep in safe custody the corporate seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it. Section 6. TREASURER: The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall keep the moneys of the corporation in a separate account to the credit of the corporation. He shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. ARTICLE VI - VACANCIES Section 1. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise, shall be filled by the Board of Directors. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of these By-Laws. Section 2. RESIGNATIONS EFFECTIVE AT FUTURE DATE: When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective. ARTICLE VII - CORPORATE RECORDS Section 1. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in this state or at its principal place of business. ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC. Section 1. The stock certificates of the corporation shall be numbered and registered in the share ledger and transfer books of the corporation as they are issued. They shall bear the corporate seal and shall be signed by the Section 2. TRANSFERS: Transfers of shares shall be made on the books of the corporation upon surrender of the certificates therefor, endorsed by the person named in the certificate or by attorney, lawfully constituted in writing. No transfer shall be made which is inconsistent with law. Section 3. LOST CERTIFICATE: The corporation may issue a new certificate of stock in the place of any certificate theretofore signed by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 4. RECORD DATE: In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. (c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (d) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5. DIVIDENDS: The Board of Directors may declare and pay dividends upon the outstanding shares of the corporation, from time to time and to such extent as they deem advisable, in the manner and upon the terms and conditions provided by statute and the Certificate of Incorporation. Section 6. RESERVES: Before payment of any dividend there may be set aside out of the net profits of the corporation such sum or sums as the directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may abolish any such reserve in the manner in which it was created. ARTICLE IX - MISCELLANEOUS PROVISIONS Section 1. CHECKS: All checks or demands for money and notes of the corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. Section 2. FISCAL YEAR: The fiscal year shall begin on the first day of January. Section 3. NOTICE: Whenever written notice is required to be given to any person, it may be given to such person, either personally or by sending a copy thereof through the mail, or by telegram, charges prepaid, to his address appearing on the books of the corporation, or supplied by him to the corporation for the purpose of notice. If the notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office for transmission to such person. Such notice shall specify the place, day and hour of the meeting and, in the case of a special meeting of stockholders, the general nature of the business to be transacted. Section 4. WAIVER OF NOTICE: Whenever any written notice is required by statute, or by the Certificate or the By-Laws of this corporation a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Except in the case of a special meeting of stockholders, neither the business to be transacted at nor the purpose of the meeting need be specified in the waiver of notice of such meeting. Attendance of a person either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. Section 5. DISALLOWED COMPENSATION: Any payments made to an officer or employee of the corporation such as a salary, commission, bonus, interest, rent, travel or entertainment expense incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer or employee to the corporation to the full extent of such disallowance. It shall be the duty of the directors, as a Board, to enforce payment of each such amount disallowed. In lieu of payment by the officer or employee, subject to the determination of the directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the corporation has been recovered. Section 6. RESIGNATIONS: Any director or other officer may resign at any time, such resignation to be in writing and to take effect from the time of its receipt by the corporation, unless some time be fixed in the resignation and then from that date. The acceptance of a resignation shall not be required to make it effective. ARTICLE X - ANNUAL STATEMENT Section 1. The President and the Board of Directors shall present at each annual meeting a full and complete statement of the business and affairs of the corporation for the preceding year. Such statement shall be prepared and presented in whatever manner the Board of Directors shall deem advisable and need not be verified by a Certified Public Accountant. ARTICLE XI - INDEMNIFICATION AND INSURANCE Section 1. (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition: provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) RIGHT OF CLAIMANT TO BRING SUIT: If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard or conduct. (c) Notwithstanding any limitation to the contrary contained in sub-paragraphs (a) and (b) of this section, the corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (d) INSURANCE: The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. ARTICLE XII - AMENDMENTS Section 1. These By-Laws may be amended or repealed by the vote of directors. /s/ Lynn Dixon, Secretary May 10, 1995 EX-4.1 7 ex-41.txt EXHIBIT 4.1 EXHIBIT 4.1 [Front of Certificate] Number Shares GET GLOBAL E TUTOR See reverse for Incorporated under the laws certain definitions of the State of Delaware Global e Tutor, Inc. CUSIP 379323 10 8 THIS CERTIFIES THAT IS THE OWNER OF Fully paid and non-assessable shares of common stock of - - - - - Global e Tutor, Inc. - - - - - transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Corporation and the facsimile signature of its duly authorized officers. Dated: /s/ Lara Stegman /s/ Thomas McMurrain Secretary President Global e Tutor, Inc. Corporate Seal Delaware Countersigned Continental Stock Transfer & Trust Company Transfer Agent By: [Back of Certificate] The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM as tenants in common UNI GIFT MIN ACT . . . Custodian . . . . TEN ENT as tenants by the entireties (Cust) (Minor) JT TEN as joint tenants with right of under Uniform Gifts to Minors survivorship and not as Act . . . . . . . . . . . tenants in common (State) Additional abbreviations may also be used though not in the above list. For Value Received, _____________________ hereby sell, assign and transfer unto Please insert social security or other identifying number of assignee ______________________________________________________________________________ (Please print or typewrite name and address, including zip code, of assignee) ______________________________________________________________________________ ______________________________________________________________________________ __________________________________________________________ Shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint _________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated Notice: The signature of this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement or any change whatever Signature(s) Guaranteed: ________________________________________________________________________________ The signatures(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. EX-10.1 8 ex-101.txt EXHIBIT 10.1 EXHIBIT 10.1 VERONIQUE, INC. 1996 INCENTIVE PLAN ------------------- ARTICLE I Purpose The purpose of this Incentive Plan (the "Plan") is to enable Veronique, Inc. (the "Company") to offer certain employees, directors and consultants of the Company equity interests in the Company and other incentive awards, thereby attracting, retaining and rewarding such persons, and strengthening the mutuality of interests between such persons and the Company's stockholders. ARTICLE II Definitions For purposes of this Plan, the following terms shall have the following meanings: 2.1 "AWARD" shall mean an award under this Plan of a Stock Option or Restricted Stock. 2.2 "BOARD" shall mean the Board of Directors of the Company. 2.3 "CHANGE OF CONTROL" shall mean the occurrence of any one of the following: (i) the Company enters into an agreement of reorganization, merger or consolidation pursuant to which it is not the surviving corporation, (ii) the Company sells substantially all its assets, or (iii) in excess of 50% of the issued and outstanding shares of Common Stock is acquired, in one transaction or a series of transactions, by a single purchaser or group of related purchasers, in any case other than in a transaction that has been approved by the Board. 2.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended. 2.5 "COMMITTEE" shall mean the Compensation Committee of the Board, if such a committee exists, or the Board if there is no Compensation Committee of the Board. 2.6 "COMMON STOCK" shall mean the Common Stock, par value $.001 per share, of the Company. 2.7 "DISABILITY" shall mean a disability due to any medically determinable physical or mental impairment that prevents a Participant from fulfilling the duties that such Participant was performing at the time of the occurrence of such disability and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of more than twelve months, as determined by the Committee in its sole discretion. 2.8 "FAIR MARKET VALUE" for purposes of this Plan, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, shall mean, as of any date, the closing sale price of a share of Common Stock as reported on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or traded on any such exchange, the Nasdaq Stock Market, or, if such closing sale price is not available, the average of the bid and asked price per share on such date as reported on the Nasdaq Stock Market or by the National Quotation Bureau or the Electronic Bulletin Board operated by the NASD, or, if such quotations are not available, the fair market value as determined by the Board, which determination shall be conclusive. 2.9 "INCENTIVE STOCK OPTION" shall mean any Stock Option awarded under this Plan intended to be and designated as an "Incentive Stock Option" within the meaning of Section 422 of the Code. 2.10 "NON-EMPLOYEE DIRECTOR" shall mean a director of the Company who is not an employee of the Company. 2.11 "NON-QUALIFIED STOCK OPTION" shall mean any Stock Option awarded under this Plan that is not an Incentive Stock Option. 2.12 "PARTICIPANT" shall mean an employee, a director or a consultant to whom an Award has been made pursuant to this Plan. 2.13 "RESTRICTED STOCK" shall mean an Award of shares of Common Stock under this Plan that is subject to restrictions under Article VII. 2.14 "RESTRICTION PERIOD" shall have the meaning set forth in Section 7.2(c). 2.15 "STOCK OPTION" or "OPTION" shall mean any option to purchase shares of Common Stock granted pursuant to Article VI or IX. 2.16 "TERMINATION OF SERVICE" shall mean a termination of an individual's employment, consulting relationship or directorship, as the case may be, with the Company for reasons other than a military or personal leave of absence granted by the Company. ARTICLE III Administration 3.1 THE COMMITTEE. The Plan shall be administered and interpreted by the Committee. 3.2 AWARDS. The Committee shall have full authority to grant Stock Options and Restricted Stock, pursuant to the terms of this Plan, to persons eligible under Article V. In particular, the Committee shall have the authority: (a) to select the persons to whom Stock Options and Restricted Stock may from time to time be granted hereunder; (b) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options and Restricted Stock, or any combination thereof, are to be granted hereunder to one or more persons eligible to receive Awards under Article V; (c) to determine the number of shares of Common Stock to be covered by each such Award granted hereunder; and (d) to determine the terms and conditions, not inconsistent with the terms of this Plan, of any Award granted hereunder (including, but not limited to, the option price, the term of the option, any restriction or limitation affecting the exercisability or delivery thereof, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, regarding any Award and the shares of Common Stock relating thereto, based on such factors as the Committee shall determine, in its sole discretion). 3.3 GUIDELINES. Subject to Articles VIII and IX hereof, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of this Plan and any Award issued under this Plan (and any agreements relating thereto); and to otherwise supervise the administration of this Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any Award granted in the manner and to the extent it shall deem necessary to carry this Plan into effect. Notwithstanding the foregoing, no action of the Committee under this Section 3.3 shall impair the rights of any Participant without the Participant's consent. 3.4 DECISIONS FINAL. Any decision, interpretation or other action made or taken in good faith by the Committee arising out of or in connection with the Plan shall be final, binding and conclusive on the Company, all Participants and their respective heirs, executors, administrators, successors and assigns. ARTICLE IV Share Limitation 4.1 SHARES. The maximum aggregate number of shares of Common Stock which may be issued under this Plan shall not exceed 900,000 shares (subject to any increase or decrease pursuant to Section 4.2) which may be either authorized and unissued Common Stock or issued Common Stock reacquired by the Company. If any Option granted under this Plan shall expire, terminate or be cancelled for any reason without having been exercised in full, the number of unpurchased shares shall again be available for the purposes of the Plan. If any Award of Restricted Stock granted under this Plan shall be forfeited without the delivery of such shares, the shares subject to the Award, to the extent of such forfeiture, shall again be available for the purposes of the Plan. 4.2 CHANGES. In the event of any merger, reorganization, consolidation, recapitalization, dividend (other than a dividend or its equivalent which is credited to a Plan Participant or a regular cash dividend), stock split, or other change in corporate structure affecting the Common Stock, such substitution or adjustment shall be made in the maximum aggregate number of shares which may be issued under this Plan, in the number and option price of shares subject to outstanding Options granted under this Plan, and in the number of shares subject to outstanding Awards of Restricted Stock granted under this Plan, as may be determined to be appropriate by the Committee, in its sole discretion, PROVIDED that the number of shares subject to any Award shall always be a whole number, and PROVIDED FURTHER that no such changes shall be made with respect to Options held by Participants who are Non-Employee Directors. ARTICLE V Eligibility 5.1 EMPLOYEES. Officers and other employees of the Company are eligible to be granted Awards under this Plan. 5.2 CONSULTANTS. Consultants of the Company are eligible to be granted Awards under this Plan. Consultants who are not employees of the Company may not be granted Incentive Stock Options. 5.3 DIRECTORS. Directors of the Company are eligible to be granted Awards under this Plan but Non-Employee Directors are eligible only to the extent set forth in Article IX. Non-Employee Directors may not be granted Incentive Stock Options. ARTICLE VI Stock Options 6.1 OPTIONS. Each Stock Option granted under this Plan shall be either an Incentive Stock Option or a Non-Qualified Stock Option. 6.2 GRANTS. The Committee shall have the authority to grant to any person eligible under Article V one or more Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options. To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof which does not qualify as an Incentive Stock Option shall constitute a separate Non-Qualified Stock Option. 6.3 INCENTIVE STOCK OPTIONS. Anything in the Plan to the contrary notwithstanding, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Stock Option under such Section 422. 6.4 TERMS OF OPTIONS. Options granted under this Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem desirable: (a) STOCK OPTION CERTIFICATE. Each Stock Option shall be evidenced by, and subject to the terms of, a Stock Option Certificate executed by the Company, in the form of Attachment I hereto. The Stock Option Certificate shall specify whether the Option is an Incentive Stock Option or a Non-Qualified Stock Option, the number of shares of Common Stock subject to the Stock Option, the option price, the option term, and the other terms and conditions applicable to the Stock Option. (b) OPTION PRICE. The option price per share of Common Stock purchasable upon exercise of a Stock Option shall be determined by the Committee at the time of grant but shall be not less than 100% of the Fair Market Value of the Common Stock on the date of grant if the Stock Option is intended to be an Incentive Stock Option and shall not be less than 85% of the Fair Market Value of the Common Stock on the date of grant if the Stock Option is intended to be a Non-Qualified Stock Option. (c) OPTION TERM. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten years after the date it is granted. (d) EXERCISABILITY. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant, provided that no Stock Option may be exercised within six months after the date of grant. The Committee may waive any installment exercise or waiting period provisions, in whole or in part, at any time, based on such factors as the Committee shall deem appropriate in its sole discretion. (e) METHOD OF EXERCISE. Subject to such installment exercise and waiting period provisions as may be imposed by the Committee, Stock Options may be exercised in whole or in part at any time during the option term, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased and the option price therefor. Such notice shall be accompanied by payment in full of the option price in such form as the Committee may accept and, if requested, by the representation described in Section 10.4. Unless otherwise determined by the Committee in its sole discretion at or after grant, payment in full or in part may be made in the form of Common Stock duly owned by the Participant (and for which the Participant has good title free and clear of any liens and encumbrances), based on the Fair Market Value of the Common Stock on the last trading date preceding payment. Upon payment in full of the option price, as provided herein, a stock certificate or stock certificates representing the number of shares of Common Stock to which the Participant is entitled shall be issued and registered in the name of and delivered to the Participant. (f) DEATH. Except for Incentive Stock Options subject to subsection (i) below, if a Participant's employment, consulting relationship or directorship, as the case may be, with the Company terminates by reason of death, any Stock Option held by such Participant which was exercisable at the date of death may be exercised by the legal representative of the Participant's estate at any time or times for a period of one year from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. (g) DISABILITY. Except for Incentive Stock Options subject to subsection (i) below, if a Participant's employment, consulting relationship or directorship, as the case may be, with the Company terminates as the result of a Disability, any Stock Option held by such Participant which was exercisable on the date of such Termination of Service may thereafter be exercised by the Participant at any time or times for a period of one year from the date of such Termination of Service or until the expiration of the stated term of such Stock Option, whichever period is the shorter; provided, however, that, if the Participant dies within such one-year period, any unexercised Stock Option held by such Participant shall thereafter be exercisable to the extent to which it was exercisable at the time of death, for a period of one year from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. If an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option. (h) TERMINATION OF SERVICE. If a Participant's employment, consulting relationship or directorship, as the case may be, with the Company ceases for any reason other than death or Disability, all Stock Options held by such Participant shall terminate as of the date of the Participant's Termination of Service, except as otherwise provided in Article IX. (i) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year under the Plan and/or any other stock option plan of the Company exceeds $100,000, such Options shall be treated as Options which are not Incentive Stock Options. Should the foregoing provisions not be necessary in order for the Stock Options to qualify as Incentive Stock Options, or should any additional provisions be required, the Committee may amend the Plan accordingly, without the necessity of obtaining the approval of the stockholders of the Company. (j) TEN-PERCENT STOCKHOLDER RULE. Notwithstanding any other provision of this Plan to the contrary, no Incentive Stock Option shall be granted to any person who, immediately prior to the grant, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company, unless the option price is at least 110% of the Fair Market Value of the Common Stock on the date of grant and the Option, by its terms, expires no later than five years after the date of grant. ARTICLE VII Restricted Stock 7.1 AWARDS OF RESTRICTED STOCK. The Committee shall have the authority to grant Restricted Stock to any person eligible under Article V. The Committee shall determine to whom, and the time or times at which, grants of Restricted Stock will be made, the number of shares to be awarded, the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and the other terms and conditions of the Awards, in addition to those set forth in Section 7.2. The provisions of Restricted Stock Awards need not be the same with respect to each Participant, and such Awards to individual Participants need not be the same in subsequent years. 7.2 TERMS AND CONDITIONS. Restricted Stock awarded pursuant to this Article VII shall be subject to the following terms and conditions and such other terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem desirable: (a) AWARD CERTIFICATE. Each Restricted Stock Award shall be evidenced by, and subject to the terms of, a Restricted Stock Award Certificate executed by the Company. The Restricted Stock Award Certificate shall specify the number of shares of Common Stock subject to the Award, the time or times within which such Restricted Stock is subject to forfeiture and the other terms, conditions and restrictions applicable to such Award. (b) STOCK CERTIFICATE. When the restrictions applicable to a Restricted Stock Award, or any portion thereof, lapse, a stock certificate or stock certificates representing the number of shares of Common Stock covered by such Restricted Stock Award, or portion thereof, shall be issued and registered in the name of and delivered to the Participant. (c) RESTRICTION PERIOD. Subject to the provisions of this Plan and the Restricted Stock Award Certificate, shares of Restricted Stock will be forfeited to the Company if the Participant ceases to be an employee or director of or consultant to the Company during a period set by the Committee commencing with the date of such Award (the "Restriction Period"). Subject to the provisions of this Plan, the Committee, in its sole discretion, may provide for the lapse of such restrictions in installments, provided that no such restrictions shall lapse within six months after the date of the Award. The Committee may waive such restrictions, in whole or in part, at any time, based on such factors as the Committee shall deem appropriate in its sole discretion. (d) TERMINATION OF SERVICE. Subject to the provisions of this Plan and the Restricted Stock Award Certificate, if a Participant's employment, consulting relationship or directorship, as the case may be, terminates during the Restriction Period due to death or Disability, restrictions will lapse with respect to a percentage of the Restricted Stock Award granted to the Participant that is equal to the percentage of the Restriction Period that has elapsed as of the date of the Participant's Termination of Service. If a Participant's employment, consulting relationship or directorship, as the case may be, terminates for any reason other than death or Disability, all outstanding Awards of Restricted Stock remaining subject to forfeiture shall be forfeited to the Company. ARTICLE VIII Termination or Amendment 8.1 TERMINATION OR AMENDMENT OF PLAN. The Board may at any time amend, discontinue or terminate this Plan or any part thereof (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to in Article XI); PROVIDED, HOWEVER, that, unless otherwise required by law, the rights of a Participant with respect to Awards granted prior to such amendment, discontinuance or termination, may not be impaired without the consent of such Participant; and, PROVIDED FURTHER, without the approval of the Company's stockholders, no amendment may be made that would (i) materially increase the aggregate number of shares of Common Stock that may be issued under this Plan (except by operation of Section 4.2); (ii) materially modify the requirements as to eligibility to participate in this Plan; or (iii) materially increase the benefits accruing to Participants; and, PROVIDED FURTHER, that Sections 9(a) and (c) of the Plan may not be amended more than once every six months other than to comport with changes in the Code, ERISA or the regulations thereunder. 8.2 AMENDMENT OF AWARDS. The Committee may amend the terms of any Award theretofore granted to a Participant other than a Non-Employee Director, prospectively or retroactively, but, subject to Article IV, no such amendment or other action by the Committee shall impair the rights of any holder without the holder's consent. The Committee may also substitute new Stock Options for previously granted Stock Options held by a Participant other than a Non-Employee Director having higher option exercise prices. ARTICLE IX Nondiscretionary Grants of Options to Non-Employee Directors 9.1 GRANTS OF OPTIONS. Notwithstanding any other provision of the Plan, Non-Employee Directors shall participate in the Plan to the extent set forth in this Article IX. (a) Options granted to Non-Employee Directors shall be immediately exercisable. In the first year of the Plan, at the end of each period of six months following each Non-Employee Director's election or re-election to the Board, and provided such Non-Employee Director is at such time still a director of the Company, the Non-Employee Director shall receive the grant of a Non-Qualified Stock Option to purchase that number of shares of Common Stock computed by dividing $13,000 by the "Exercise Price" determined below. In all subsequent years of the Plan, at the end of each period of six months, and provided such Non-Employee Director is at such time still a director of the Company, the Non-Employee Director shall receive the grant of a Non-Qualified Stock Option to purchase that number of shares of Common Stock computed by dividing $24,000 by the "Exercise Price" determined below. The number and nature of Shares subject to any Option held by a Non-Employee Director shall be subject to adjustment only to the extent set forth in Section 9.1(f). (b) The term of each Option granted to a Non-Employee Director shall be five years from its date of grant, unless sooner terminated or extended in accordance with Section 9.1(e). (c) The "Exercise Price" of the Shares subject to each Option granted to a Non-Employee Director shall be 50% of the daily average of the Fair Market Value for the thirty days preceding the date the Option is granted. (d) No Option shall be transferable by a Non-Employee Director other than by will or by the laws of descent and distribution and all Options shall be exercisable during a Non-Employee Director's lifetime only by the Non-Employee Director or his or her duly appointed guardian or personal representative. Stock Options granted to Non-Employee Directors may not be exercised within six months after the date of grant. (e) If a Non-Employee Director dies while serving as a Director, such Non-Employee Director's Options shall be exercisable by either his or her executor or administrator or, if not so exercised, by the legatees or the distributees of his or her estate, only during the twelve months following his or her death. If a Non-Employee Director's membership on the Board terminates for any reason other than death, such Non-Employee Director's Options shall be exercisable only during the three months following the date of termination. (f) In the event of a stock dividend, stock split or combination of shares of Common Stock, recapitalization or other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company, appropriate and proportionate adjustment shall be made in the number, kind and per share exercise price of shares subject to Options then outstanding and to be granted to Non-Employee Directors under this Article IX. (g) Each Option granted to a Non-Employee Director shall be evidenced by a writing signed by him or her specifying the terms and conditions thereof in accordance with this Article IX. ARTICLE X Unfunded Plan 10.1 UNFUNDED STATUS OF PLAN. This Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payment not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. ARTICLE XI General Provisions 11.1 NONASSIGNMENT. Except as otherwise provided in this Plan, Awards made hereunder and the rights and privileges conferred thereby shall not be sold, transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise), and shall not be subject to execution, attachment or similar process. Upon any attempt to sell, transfer, assign, pledge, hypothecate or otherwise dispose of such Award, right or privilege contrary to the provisions hereof, or upon the levy of any attachment or similar process thereon, such Award and the rights and privileges conferred hereby shall immediately terminate and the Award shall immediately be forfeited to the Company. 11.2 CHANGE OF CONTROL. In the event of a Change of Control, all outstanding Stock Options held by a Participant other than a Non-Employee Director which specifically provide for complete vesting upon a Change of Control shall immediately become fully exercisable and all outstanding Awards of Restricted Stock held by a Participant other than a Non-Employee Director which specifically provide for complete vesting upon a Change of Control shall immediately cease to be subject to forfeiture. Stock certificates representing the Common Stock covered thereby shall be issued and registered in the name of and delivered to the Participants as soon as practicable, subject to payment by the Participant of the option price in the case of Stock Options and, if requested, delivery of the representation described in Section 11.4. 11.3 RIGHTS AS STOCKHOLDER. A Participant shall not be deemed to be the holder of Common Stock, or to have the rights of a holder of Common Stock, with respect to any shares subject to an Award hereunder, unless and until a stock certificate or stock certificates representing such shares of Common Stock are issued to such Participant. 11.4 LEGEND. The Committee may require each person acquiring shares pursuant to an Award under the Plan to represent to the Company in writing that the Participant is acquiring the shares without a view to distribution thereof. The stock certificates representing such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. All certificates representing shares of Common Stock delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange or system upon which the Common Stock is then listed or traded, any applicable Federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 11.5 OTHER PLANS. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. 11.6 NO RIGHT TO CONTINUED SERVICE. Neither this Plan nor the grant of any Award hereunder shall give any Participant or other person any right with respect to continued employment, consulting relationship or directorship, as the case may be, with the Company, nor shall there be a limitation in any way on the right of the Company to terminate a Participant's services at any time. 11.7 WITHHOLDING OF TAXES. The Company shall have the right to reduce the number of shares of Common Stock otherwise deliverable pursuant to this Plan by an amount which would have a Fair Market Value equal to the amount of all Federal, state and local taxes required to be withheld, or to deduct the amount of such taxes from any cash payment otherwise to be made to a Participant. In connection with such withholding, the Committee may make such arrangements as are consistent with the Plan as it may deem appropriate. 11.8 LISTING AND OTHER CONDITIONS. (a) If the Common Stock is listed on a national securities exchange, the issuance of any shares of Common Stock pursuant to an Award shall be conditioned upon such shares being listed on such exchange. The Company shall have no obligation to issue such shares unless and until such shares are so listed, and the right to exercise any Option or to receive shares pursuant to any other Award shall be suspended until such listing has been effected. (b) If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock pursuant to an Award is or may in the circumstances be unlawful or result in the imposition of excise taxes under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act of 1933, as amended, or otherwise with respect to shares of Common Stock or Awards, and the right to exercise any Option or to receive shares pursuant to any other Award shall be suspended until, in the opinion of such counsel, such sale or delivery shall be lawful or shall not result in the imposition of excise taxes. (c) Upon termination of any period of suspension under this Section 11.8, any Award affected by such suspension which shall not then have expired or terminated shall be reinstated as to all shares available before such suspension and as to shares which would otherwise have become available during the period of such suspension, but no such suspension shall extend the term of any Option. 11.9 GOVERNING LAW. This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware. 11.10 CONSTRUCTION. Wherever any words are used in this Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. 11.11 LIABILITY OF COMMITTEE. No member of the Board or the Committee nor any employee of the Company shall be liable for any act or action hereunder, whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or, except in circumstances involving bad faith, gross negligence or fraud, for anything done or omitted to be done by himself. 11.12 OTHER BENEFITS. No payment pursuant to an Award under this Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company nor shall it affect any benefits under any other benefit plan now or hereafter in effect under which the availability or amount of benefits is related to the level of compensation. 11.13 COSTS. The Company shall bear all expenses incurred in administering this Plan, including expenses of issuing Common Stock pursuant to Awards hereunder. 11.14 SEVERABILITY. If any part of this Plan shall be determined to be invalid or void in any respect, such determination shall not affect, impair, invalidate or nullify the remaining provisions of this Plan which shall continue in full force and effect. 11.15 SUCCESSORS. This Plan shall be binding upon and inure to the benefit of any successor or successors of the Company. 11.16 HEADINGS. Article and section headings contained in this Plan are included for convenience only and are not to be used in construing or interpreting this Plan. ARTICLE XII Term of Plan 12.1 This Plan shall be effective as of the date of its approval by the Company's stockholders. 12.2 No Award shall be granted pursuant to this Plan on or after the tenth anniversary of its approval by the Company's stockholders, but Awards granted prior to such tenth anniversary may extend beyond that date. ATTACHMENT I VERONIQUE, INC. STOCK OPTION AWARD CERTIFICATE This certifies that, pursuant to the 1996 Incentive Plan (the "Plan") of Veronique, Inc. (the "Company"), the Compensation Committee or the Board of Directors, as the case may be, has granted an option to purchase shares of Common Stock of the Company as follows: Name and Address of Optionee: Position of Optionee: Number of Shares: Option Exercise Price: Date of Grant: Option Term (i.e., termination date): Type of Option: The option is subject to all the terms and conditions of the aforementioned Plan, a copy of which is attached to this Certificate, and to the following additional terms specified by the Compensation Committee or the Board of Directors, as the case may be: [INSERT ANY ADDITIONAL TERMS, E.G., CHANGE OF CONTROL, VESTING SCHEDULE, ETC.] Each election to exercise the option shall be in writing substantially in the form of EXHIBIT A hereto and delivered or mailed to the Company at its principal office. Witness the seal of the Company and the signature of its duly authorized officers. Dated: ------------------------------ (SEAL) - ------------------------------------ ------------------------------ Secretary President EXHIBIT A Veronique, Inc. Suite 502 16 East 52nd Street New York, NY 10022 Attention: President Re: ELECTION FORM The undersigned Optionee, pursuant to the provisions of that certain Stock Option Award Certificate dated __________________ , ____ (the "Certificate"), under the 1996 Incentive Plan (the "Plan") of Veronique, Inc. (the "Company"), elects to exercise the Option as follows: 1. Number of shares of Common Stock, no par value, of the Company (the "Shares"):__________________________________. 2. Manner of payment for such Shares: __________________________ The undersigned understands that the Company may, at its option, satisfy any withholding tax requirements under any federal, state or local law as set forth in the Plan. The undersigned represents that he or she is purchasing the Shares for investment and not with a view to their distribution or sale, and that he or she will not sell or transfer any Shares received upon the exercise of the option except in accordance with the Securities Act of 1933 and applicable state securities laws. The undersigned agrees that, upon any sale of Option Shares acquired pursuant to exercise of that portion of this Option constituting an Incentive Stock Option within two years from the date of grant of this Option, or within one year after transfer of such Option Shares to the Optionee's ownership, the Optionee shall immediately notify the Company in writing of such disposition and the amount realized by the Optionee upon such disposition. Date: By: ------------------------------- ----------------------------- ------------------------------ Print Name EX-10.2 9 ex-102.txt EXHIBIT 10.2 EXHIBIT 10.2 VERONIQUE, INC. NON-STATUTORY STOCK OPTION AGREEMENT ------------------------------------ 1. GRANT OF OPTION; VESTING. VERONIQUE, INC., a Delaware corporation (the "Company"), hereby grants to JEFFREY M. BRINN ("Optionee") a fully vested option to purchase an aggregate of Forty Thousand (40,000) shares of Common Stock, $.001 par value ("Common Stock"), of the Company at $0.75 per share (which the Company has determined to be one-half the current fair market value of the Company's Common Stock as of the grant date), purchasable as set forth in, and subject to the terms and conditions of, this option. This option is not intended to qualify as an incentive stock option within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"). This option initially will not be vested, but shall vest at the rate of two thousand five hundred (2,500) shares per month on the first day of each month that this Agreement remains in effect, beginning July 1, 1998. Any unvested portion of the option shall lapse in its entirety upon the earlier of the Expiration Date or the termination of the Consulting Agreement between the Company and Optionee dated June ___, 1998, but any portion of the option that has vested prior to termination shall remain exercisable until the Expiration Date. The option shall be transferable in whole or in part as to any vested portion. 2. EXERCISE OF OPTION; AND PROVISIONS FOR TERMINATION. (a) EXPIRATION. Except as otherwise provided in this Agreement, this option may be exercised, in whole or in part, at any time prior to 5:00 p.m., New York City time, on June 30, 2003 (hereinafter the "Expiration Date"). The right of exercise shall be cumulative so that if the option is not exercised to the maximum extent permissible at any time it shall be exercisable, in whole or in part, with respect to all shares not so purchased at any time prior to the Expiration Date. This option may not be exercised at any time after the Expiration Date. (b) EXERCISE PROCEDURE. Subject to the conditions set forth in this Agreement, this option shall be exercised by the delivery of written notice of exercise to the Chief Financial Officer of the Company specifying the number of shares to be purchased and the purchase price to be paid therefor and accompanied by payment in full in accordance with Section 3. Such exercise shall be effective upon receipt by the Treasurer of the Company of such written notice together with the required payment. Optionee may purchase fewer than the total number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share or for fewer than ten whole shares. (c) EXERCISE PERIOD. Except as otherwise indicated by the context, the term "Optionee," as used in this option, shall be deemed to include the estate of the Optionee or any person who acquires the right to exercise this option by bequest or inheritance or otherwise by reason of the death of the Optionee. (d) CHANGES IN STOCK, ETC. In the event of a stock dividend, stock split or combination of shares of Common Stock, recapitalization or other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company, appropriate and proportionate adjustment shall be made in the number, kind and per share exercise price of shares subject to this Option. 3. PAYMENT OF PURCHASE PRICE. (a) METHOD OF PAYMENT. Payment of the purchase price for shares purchased upon exercise of this option shall be made by delivery to the Company of cash or a check to the order of the Company in an amount equal to the purchase price of such shares, or by delivery to the Company of shares of Common Stock of the Company then owned by the Optionee having a fair market value equal in amount to the purchase price of such shares, or by any combination of such methods of payment. (b) VALUATION OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE. For the purposes hereof, the fair market value of any share of the Company's Common Stock which may be delivered to the Company in exercise of this option shall be determined in good faith by the Board of Directors of the Company. (c) DELIVERY OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE. If the Company permits the Optionee to exercise options by delivery of shares of Common Stock of the Company, the certificate or certificates representing the shares of Common Stock of the Company to be delivered shall be duly executed in blank by the Optionee or shall be accompanied by a stock power duly executed in blank suitable for purposes of transferring such shares to the Company. Fractional shares of Common Stock of the Company will not be accepted in payment of the purchase price of shares acquired upon exercise of this option. (d) RESTRICTIONS UPON USE OF OPTION STOCK. Notwithstanding the foregoing, no shares of Common Stock of the Company may be tendered in payment of the purchase price of shares purchased upon exercise of this option if the shares to be so tendered were acquired within twelve (12) months before the date of such tender, through the exercise of an option granted under any stock option or restricted stock plan of the Company. (e) NET SPREAD UPON EXTRAORDINARY TRANSACTION. If at any time while this option, or any portion hereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property whether in the form of securities, cash or otherwise, or (iii) a sale or transfer of the Company's properties and assets as, or substantially as, an entirety to any other person resulting in a change of control of the Company, then as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this option may exercise the option without tendering any cash or securities and receive, in lieu of stock or any other securities, a "net spread" payment in cash equal to the implied per-share transaction price of the transaction effecting such change of control, as determined in good faith by the Company's Board of Directors, minus the exercise price per share of the option, if applicable. 4. DELIVERY OF SHARES; COMPLIANCE WITH SECURITIES LAW; ETC. (a) GENERAL. The Company shall, upon payment of the option price for the number of shares purchased and paid for, make prompt delivery of such shares to the Optionee, provided that if any law or regulation requires the Company to take any action with respect to such shares before the issuance thereof, then the date of delivery of such shares shall be extended for the period necessary to complete such action. (b) LISTING, QUALIFICATION, ETC. This option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject hereto upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares hereunder, this option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification. 5. NONTRANSFERABILITY OF OPTION. Except as provided in paragraph (c) of Section 2, this option is personal and no rights granted hereunder may be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) nor shall any such rights be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or of such rights contrary to the provisions hereof, or upon the levy of any attachment or similar process upon this option or such rights, this option and such rights shall, at the election of the Company, become null and void. 6. NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in this option shall be construed or deemed by any person under any circumstances to bind the Company to provide or continue any employment of the Optionee for the period within which this option may be exercised or otherwise. However, during the period of the Optionee's service to the Company, the Optionee shall render diligently and faithfully the services which are agreed to be provided and shall not take any action which directly or indirectly would be inconsistent with the best interests of the Company. 7. RIGHTS AS A SHAREHOLDER. The Optionee shall not have any rights as a shareholder with respect to any shares which may be purchased by exercise of this option unless and until a certificate representing such shares is duly issued and delivered to the Optionee. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 8. WITHHOLDING TAXES. The Company's obligation to deliver shares upon the exercise of this option shall be subject to the Optionee's satisfaction of all applicable federal, state and local income and employment tax withholding requirements. 9. INVESTMENT REPRESENTATIONS; LEGEND. (a) REPRESENTATIONS. The Optionee represents, warrants and covenants that: (i) Any shares purchased upon exercise of this option shall be acquired for the Optionee's account for investment only, and not with a view to, or for sale in connection with, any distribution of the shares in violation of the Securities Act of 1933 (the "Securities Act"), or any rule or regulation under the Securities Act. (ii) The Optionee has had such opportunity as he or she has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Optionee to evaluate the merits and risks of his or her investment in the Company. (iii) The Optionee is able to bear the economic risk of holding such shares acquired pursuant to the exercise of this option for an indefinite period. (iv) The Optionee understands that (A) the shares acquired pursuant to the exercise of this option will not be registered under the Securities Act and are "restricted securities" within the meaning of Rule 144 under the Securities Act; (B) such shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (C) in any event, the exemption from registration under Rule 144 will not be available for at least one year and even then will not be available unless a public market then exists for the Common Stock, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 are complied with; and (D) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register any shares acquired pursuant to the exercise of this option under the Securities Act. By making payment upon exercise of this option, the Optionee shall be deemed to have reaffirmed, as of the date of such payment, the representations made in this Section 9. (b) LEGEND ON STOCK CERTIFICATE. All stock certificates representing shares of Common Stock issued to the Optionee upon exercise of this option shall have affixed thereto a legend substantially in the following form, in addition to any other legends required by applicable law: "The shares of stock represented by this certificate have not been registered under the Securities Act of 1933 and may not be transferred, sold or otherwise disposed of in the absence of an effective registration statement with respect to the shares evidenced by this certificate, filed and made effective under the Securities Act of 1933, or an opinion of counsel satisfactory to the Company to the effect that registration under such Act is not required." 10. MISCELLANEOUS. (a) Except as provided herein, this option may not be amended or otherwise modified unless evidenced in writing and signed by the Company and the Optionee. (b) All notices under this option shall be mailed or delivered by hand to the parties at their respective addresses set forth beneath their names below or at such other address as may be designated in writing by either of the parties to one another. (c) This option shall be governed by and construed in accordance with the laws of the State of New York. Date of Grant: VERONIQUE, INC. July 1, 1998 By: /s/ Terrence O. McGrath Title: President & CEO OPTIONEE'S ACCEPTANCE The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. OPTIONEE /s/ Jeffrey M. Brinn (Signature) Jeffrey M. Brinn (Print Name) DIGITAL LAUNCH, INC. (f/k/a Veronique, Inc.) STOCK OPTION CERTIFICATE ------------------------ This certifies that, pursuant to that certain Non-Statutory Stock Option Agreement (the "Option Agreement"), dated July 1, 1998, by and between Digital Launch, Inc. (f/k/a Veronique, Inc.), a Delaware corporation (the "Company"), and Jeffrey M. Brinn ("Optionee"), the Optionee has vested in the following options: Name of Optionee: Jeffrey M. Brinn Number of Options Vested: Twenty-Seven Thousand Five Hundred (27,500) Exercise Price: $.75 per share Date of Initial Option Grant: July 1, 1998 Option Termination Date: June 30, 2003 As provided in the Option Agreement, the Option granted thereunder vested at the rate of two thousand five hundred (2,500) shares per month on the first day of each month that the Optionee's Consulting Agreement with the Company remained in effect, beginning July 1, 1998. This certifies that the Optionee's Consulting Agreement with the Company was terminated at the end of April, 1999, and that the final vesting installment was May 1, 1998. Each election to exercise the Option or a portion thereof shall be as provided in the Option Agreement, and the Option is otherwise subject to the terms of the Option Agreement. Witness the signature of the Company's duly authorized officers. Dated: January 19th, 2000 (SEAL) /s/ Philip J. Watrous /s/ Terrence O. McGrath Secretary President EX-10.3 10 ex-103.txt EXHIBIT 10.3 EXHIBIT 10.3 GLOBAL E TUTOR, INC. STOCK OPTION PLAN ARTICLE 1. GENERAL PROVISIONS ------------------ 1.1. PURPOSE OF THE PLAN This Stock Option Plan (the "Plan") is intended to promote the interests of GLOBAL E TUTOR, INC., a Delaware corporation, (the "Corporation") by providing eligible persons with the opportunity to acquire or increase their proprietary interest in the Corporation as an incentive for them to remain in the Service of the Corporation. Capitalized terms shall have the meanings assigned to such terms in the attached Appendix. 1.2. ADMINISTRATION OF THE PLAN a. Prior to the Section 12(g) Registration Date, the Plan shall be administered by the Board or a committee of the Board. b. Beginning with the Section 12(g) Registration Date, the Primary Committee shall have sole and exclusive authority to administer the Plan with respect to Section 16 Insiders. Administration of the Plan with respect to all other persons eligible under the Plan may, at the Board's discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer the Plan with respect to all such persons. c. Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also terminate the functions of any Secondary Committee at any time and reassume all powers and authority previously delegated to such committee. d. Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the provisions of the Plan and any outstanding options thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Plan under its jurisdiction or any option thereunder. e. Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants under the Plan. f. Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority (subject to the provisions of the Plan) to determine which eligible persons are to receive option grants, the time or times when such option grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times at which each option is to become exercisable, the vesting schedule (if any) applicable to the option shares, the acceleration of such vesting schedule, the maximum term for which the option is to remain outstanding, whether the option shares shall be subject to rights of repurchase and/or rights of first refusal, and all other terms and conditions of the option grants. 1.3. ELIGIBILITY The following persons shall be eligible to participate in the Plan: a. Employees, as to both Incentive and/or Non-Statutory Options, b. non-employee members of the Board or the board of directors of any Parent or Subsidiary as to Non-Statutory Options, and c. consultants and other independent advisors who provide Services to the Corporation or any Parent or Subsidiary, as to Non-Statutory Options. 1.4. STOCK SUBJECT TO THE PLAN a. The stock issuable under the Plan shall be shares of authorized but unissued Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed Five Million (5,000,000) shares, which number of shares may be changed from time to time in accordance with Section 3.4 below. b. Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent the options expire or terminate for any reason prior to exercise in full. However, should the Exercise Price be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an option under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised, and not by the net number of shares of Common Stock issued to the holder of such option. c. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities for which any one person may be granted options per calendar year, and (iii) the number and/or class of securities and the Exercise Price in effect under each outstanding option in order to prevent the dilution or enlargement of benefits thereunder. The adjustments determined by the Plan Administrator shall be final, binding, and conclusive. ARTICLE 2. OPTION GRANT PROGRAM -------------------- 2.1. OPTION TERMS Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of Section 2.2 of the Plan, below. a. EXERCISE PRICE (1) The Exercise Price shall be fixed by the Plan Administrator but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the Grant Date. (2) The Exercise Price shall become immediately due upon exercise of the option and shall, subject to the provisions of Article 3.1, and the documents evidencing the option, be payable in one or more of the forms specified below: (a) cash or check made payable to the Corporation, (b) shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or (c) to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written instructions to (a) a Corporation-designated brokerage firm to effect the immediate sale of the Purchased Shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the Purchased Shares plus all applicable federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the Purchased Shares directly to such brokerage firm in order to complete the sale. Except to the extent the sale and remittance procedure is utilized, payment of the Exercise Price for the Purchased Shares must be made on the Exercise Date. b. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the Grant Date. c. EFFECT OF TERMINATION OF SERVICE (1) The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service: (a) Any option outstanding at the time of the Optionee's cessation of Service for any reason except death, Permanent Disability or Misconduct shall remain exercisable for a three (3) month period thereafter, provided no option shall be exercisable after the Expiration Date. (b) Any option outstanding at the time of the Optionee's cessation of Service due to death or Permanent Disability shall remain exercisable for a twelve (12) month period thereafter, provided no option shall be exercisable after the Expiration Date. Subject to the foregoing, any option exercisable in whole or in part by the Optionee at the time of death may be exercised subsequently by the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution. (c) Should the Optionee's Service be terminated for Misconduct, then all outstanding options held by the Optionee shall terminate immediately and cease to be outstanding. (d) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of shares for which the option is exercisable on the date of the Optionee's cessation of Service; the option shall, immediately upon the Optionee's cessation of Service, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable. Upon the expiration of the applicable exercise period or (if earlier) upon the Expiration Date, the option shall terminate and cease to be outstanding for any shares for which the option has not been exercised. (2) The Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: (a) extend the period of time for which the option is to remain exercisable following the Optionee's cessation of Service from the period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the Expiration Date, and/or (b) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of shares of Common Stock for which such option is exercisable at the time of the Optionee's cessation of Service but also with respect to one or more additional shares that would have vested under the option had the Optionee continued in Service. d. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the Exercise Price, and become a holder of record of the Purchased Shares. e. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, Incentive Options may be exercised only by the Optionee, and shall not be assignable or transferable except by will or the laws of descent and distribution following the Optionee's death. Non-Statutory Options may be assigned or transferred in whole or in part only (i) during the Optionee's lifetime if in connection with the Optionee's estate plan to one or more members of the Optionee's immediate family (spouse and children) or to a trust established exclusively for the benefit of one or more such immediate family members, or (ii) by will or the laws of descent and distribution following the Optionee's death. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. 2.2. INCENTIVE OPTIONS The terms specified below shall apply to all Incentive Options. Except as modified by the provisions of this Section 2.2, all the provisions of this Plan shall apply to Incentive Options. Options specifically designated as Non-Statutory Options when issued under the Plan shall NOT be subject to the terms of this Section 2.2. a. ELIGIBILITY. Incentive Options may only be granted to Employees. b. EXERCISE PRICE. The Exercise Price shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the Grant Date. c. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one (1) calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied in the order in which such options are granted. d. 10% STOCKHOLDER. If an Employee to whom an Incentive Option is granted is a 10% Stockholder, then the Exercise Price shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the Grant Date, and the option term shall not exceed five (5) years measured from the Grant Date. e. HOLDING PERIOD. Shares purchased pursuant to an option shall cease to qualify for favorable tax treatment as Incentive Option Shares if and to the extent Optionee disposes of such shares within two (2) years of the Grant Date or within one (1) year of Optionee's purchase of said shares. 2.3. CORPORATE TRANSACTION/CHANGE IN CONTROL a. In the event of any Corporate Transaction, the Board of Directors shall have the sole discretion to elect that each outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. The Board may exercise its discretion to accelerate the vesting of options whether or not (i) such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or Parent thereof or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation or Parent thereof, (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested option shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option, except to the extent that the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, whose determination shall be final, binding and conclusive. b. In the event of any Corporate Transaction, the Board of Directors shall have sole discretion to elect that all outstanding repurchase rights may also be terminated automatically whether or not those repurchase rights are to be assigned to the successor corporation (or Parent thereof) in connection with such Corporate Transaction. c. The Plan Administrator's discretion under Sections 2.3.a. and b. above shall be exercisable either at the time the option is granted or at any time while the option remains outstanding, whether or not those options are to be assumed or replaced (or those repurchase rights are to be assigned) in the Corporate Transaction. The Plan Administrator shall also have the discretion to grant options which do not accelerate whether or not such options are assumed (and to provide for repurchase rights that do not terminate whether or not such rights are assigned) in connection with a Corporate Transaction. d. If the Board of Directors elects the automatic acceleration of some or all of the outstanding options upon the occurrence of a Corporate Transaction, all such outstanding options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) immediately following the consummation of the Corporate Transaction. e. Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities that would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to (i) the number and class of securities available for issuance under the Plan following the consummation of such Corporate Transaction, (ii) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same and (iii) the maximum number of securities and/or class of securities for which any one person may be granted stock options. f. The Plan Administrator shall have the discretion, exercisable at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of any options assumed or replaced in a Corporate Transaction that do not otherwise accelerate at that time (and the termination of any of the Corporation's outstanding repurchase rights that do not otherwise terminate at the time of the Corporate Transaction) in the event the Optionee's Service should subsequently terminate by reason of an Involuntary Termination within eighteen (18) months following the effective date of such Corporate Transaction. Any options so accelerated shall remain exercisable for shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination. g. The Plan Administrator shall have the discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to (i) provide for the automatic acceleration of one or more outstanding options (and the automatic termination of one or more outstanding repurchase rights) upon the occurrence of a Change in Control or (ii) condition any such option acceleration (and the termination of any outstanding repurchase rights) upon the subsequent Involuntary Termination of the Optionee's Service within a specified period (not to exceed eighteen (18) months) following the effective date of such Change in Control. Any options accelerated in connection with a Change in Control shall remain fully exercisable until the expiration or sooner termination of the option term. h. The portion of any Incentive Option accelerated in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the federal tax laws. i. The grant of options under the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. ARTICLE 3. MISCELLANEOUS ------------- 3.1. FINANCING a. The Plan Administrator may permit any Optionee to pay the option Exercise Price by delivering a promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. Promissory notes may be authorized with or without security or collateral. In all events, the maximum credit available to the Optionee may not exceed the sum of (i) the aggregate option Exercise Price payable for the Purchased Shares plus (ii) the amount of any federal, state and local income and employment tax liability incurred by the Optionee in connection with the option exercise. b. The Plan Administrator may, in its discretion, determine that one or more such promissory notes shall be subject to forgiveness by the Corporation in whole or in part upon such terms as the Plan Administrator may deem appropriate. 3.2. TAX WITHHOLDING a. The Corporation's obligation to deliver shares of Common Stock upon the exercise of options under the Plan shall be subject to the satisfaction of all applicable federal, state and local income and employment tax withholding requirements. b. The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options under the Plan with the right to use shares of Common Stock in satisfaction of all or part of the Taxes incurred by such holders in connection with the exercise of their options. Such right may be provided to any such holder in either or both of the following formats: (1) STOCK WITHHOLDING: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed one hundred percent (100%)) designated by the holder. (2) STOCK DELIVERY: The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed one hundred percent (100%)) designated by the holder. 3.3. EFFECTIVE DATE AND TERM OF THE PLAN a. The Plan shall become effective on the Plan Effective Date. However, no shares shall be issued under the Plan pursuant to Incentive Options until the Plan is approved by the Corporation's stockholders. If such stockholder approval is not obtained within twelve (12) months after the Plan Effective Date, then all Incentive Options previously granted under this Plan shall automatically convert into Non-Statutory Options. b. The Plan shall terminate upon the earliest of (i) January 31, 2003, (ii) the date on which all shares available for issuance under the Plan shall have been issued, or (iii) the termination of all outstanding options in connection with a Corporate Transaction. Upon such Plan termination, all outstanding options shall continue to have force and effect in accordance with the provisions of the documents evidencing such options. 3.4. AMENDMENT OF THE PLAN a. The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect any rights and obligations with respect to options at the time outstanding under the Plan unless each affected Optionee consents to such amendment or modification. In addition, amendments to the Plan shall be subject to approval of the Corporation's stockholders to the extent required by applicable laws or regulations. b. Options to purchase shares of Common Stock may be granted under the Plan that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued are held in escrow until there is obtained Board approval (and shareholder approval if required by applicable laws or regulations) of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. 3.5. USE OF PROCEEDS Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. 3.6. REGULATORY APPROVALS a. The implementation of the Plan, the granting of any option under the Plan, and the issuance of any shares of Common Stock upon the exercise of any option shall be subject to the Corporation's obtaining all approvals and permits required by regulatory authorities having jurisdiction over the Plan and the options granted under it, and the shares of Common Stock issued pursuant to the Plan. b. No shares of Common Stock shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of federal and state securities laws and all applicable listing requirements of any stock exchange (or the Nasdaq market, if applicable) on which Common Stock is then listed for trading. 3.7. NO EMPLOYMENT/SERVICE RIGHTS Nothing in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee, which rights are hereby expressly reserved by each, to terminate such person's Service at any time for any reason, with or without cause. IN WITNESS WHEREOF the Corporation has executed this Plan effective as of the Effective Date. GLOBAL E TUTOR, INC. By: /s/ Thomas E. McMurrain, President APPENDIX -------- The following definitions shall be in effect under the Plan and the Plan Documents: 1. Board shall mean the Corporation's Board of Directors. 2. Change in Control shall mean a change in ownership or control of the Corporation effected through either of the following transactions: (i) the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders, which the Board does not recommend such stockholders to accept, or (ii) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. 3. Code shall mean the Internal Revenue Code of 1986, as amended. 4. Common Stock shall mean the Corporation's common stock. 5. Corporate Transaction shall mean either of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction; or (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. 6. Eligible Director shall mean a non-employee Board member eligible to participate in the Plan. 7. Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. 8. Exercise Date shall mean the date on which the Corporation shall have received written notice of the option exercise. 9. Exercise Price shall mean the exercise price per share as specified in the Stock Option Grant. 10. Expiration Date shall mean the date on which the option expires as specified in the Stock Option Grant. 11. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Common Stock is traded at the time on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (iii) If the Common Stock is not listed on any Stock Exchange nor traded on the Nasdaq National Market, then the Fair Market Value shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate. (iv) For purposes of any option grants made on the Underwriting Date, the Fair Market Value shall be deemed to be equal to the price per share at which the Common Stock is sold in the initial public offering pursuant to the Underwriting Agreement. (v) In all instances the determination of Fair Market Value shall be made in accordance with Regulation Sections 1.421-7(e)(2) and 20.2031-2(f)(2) as promulgated under Sections 421 and 2031 of the Code, as then in effect. 12. Grant Date shall mean the date on which the option is granted to Optionee as specified in the Stock Option Grant. 13. Incentive Option shall mean an option which satisfies the requirements of Code Section 422. 14. Involuntary Termination shall mean the termination of the Service of any individual which occurs by reason of: (i) such individual's involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or (ii) such individual's voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her level of responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and participation in corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual's place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual's consent. 15. Market Stand Off shall mean the market stand off restriction on disposition of the Purchased Shares as specified in Section D of the Stock Option Exercise Notice and Purchase Agreement. 16. Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any Optionee or other person in the Service of the Corporation (or any Parent or Subsidiary). 17. 1933 Act shall mean the Securities Act of 1933, as amended. 18. 1934 Act shall mean the Securities Exchange Act of 1934, as amended. 19. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422. 20. Optionee shall mean any person to whom an option is granted under Plan. 21. Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Stock Option Grant. 22. Owner shall mean Optionee and all subsequent holders of the Purchased Shares who derive their chain of ownership through a Permitted Transfer from Optionee. 23. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one or the other corporations in such chain. 24. Permanent Disability or Permanently Disabled shall mean the inability of the Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. 25. Permitted Transfer shall mean (i) a gratuitous transfer of the Purchased Shares, provided and only if Optionee obtains the Corporation's prior written consent to such transfer, (ii) a transfer of title to the Purchased Shares effected pursuant to Optionee's will or the laws of intestate succession following Optionee's death, or (iii) a transfer to the Corporation in pledge as security for any purchase-money indebtedness incurred by Optionee in connection with the acquisition of the Purchased Shares. 26. Plan Administrator shall mean the particular entity, whether the Board or a committee of the Board, which is authorized to administer the Plan with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under the Plan with respect to the persons under its jurisdiction. 27. Plan Documents shall mean the Plan, the Stock Option Grant, and Stock Option Exercise Notice and Purchase Agreement, collectively. 28. Plan Effective Date shall mean December 27, 1999, the date as of which the Plan was adopted by the Board. 29. Primary Committee shall mean the committee of two (2) or more non-employee Board members (as defined in the regulations to Section 16 of the 1934 Act) appointed by the Board to administer the Plan with respect to Section 16 Insiders. 30. Purchased Shares shall mean the shares purchased upon exercise of the Option. 31. Recapitalization shall mean any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other charge affecting the Corporation's outstanding Common Stock as a class without the Corporation's receipt of consideration. 32. Reorganization shall mean any of the following transactions: (i) a merger or consolidation in which the Corporation is not the surviving entity; (ii) a sale, transfer, or other disposition of all or substantially all of the Corporation's assets; (iii) a reverse merger in which the Corporation is the surviving entity but in which the Corporation's outstanding voting securities are transferred in whole or in part to a person or persons different from the persons holding those securities immediately prior to the merger; or (iv) any transaction effected primarily to change the state in which the Corporation is incorporated or to create a holding company structure. 33. SEC shall mean the Securities Exchange Commission. 34. Secondary Committee shall mean a committee of two (2) or more Board members appointed by the Board to administer the Plan with respect to eligible persons other than Section 16 Insiders. 35. Section 12(g) Registration Date shall mean the date on which the Common Stock is first registered under Section 12(g) of the 1934 Act. 36. Section 16 Insider shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. 37. Service shall mean the performance of services to the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant. 38. Stock Exchange shall mean either the American Stock Exchange, the New York Stock Exchange, or another regional stock exchange. 39. Stock Option Exercise Notice and Purchase Agreement shall mean the agreement of said title in substantially the form of Exhibit A to the Stock Option Grant, pursuant to which Optionee gives notice of his intent to exercise the option and purchase Shares. 40. Stock Option Grant shall mean the Stock Option Grant document, pursuant to which Optionee has been informed of the basic terms of the option granted under the Plan. 41. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 42. Taxes shall mean the Federal, state and local income and employment tax liabilities incurred by the holder of Non-Statutory Options in connection with the exercise of those options. 43. 10% Stockholder shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). EX-10.4 11 ex-104.txt EXHIBIT 10.4 EXHIBIT 10.4 Grant No._________ GLOBAL E TUTOR, INC. STOCK OPTION GRANT Optionee: ------------------------------------------- Address: ------------------------------------------- Grant Date: ------------------------------------------- Exercise Price: $_______ per share Number of Option Shares: ________ shares Expiration Date: ------------------------------------------- Type of Option: ______ Incentive Option ______ Non-Statutory Option This Stock Option Grant is made, as of the Grant Date set forth above, by and between Global e Tutor, Inc., a Delaware corporation (the "Corporation") and the Optionee named above. This Stock Option Grant includes the terms of the Stock Option Exercise Notice and Purchase Agreement attached hereto as Exhibit A, and is subject to the terms of the Corporation's Stock Option Plan (the "Plan"), a copy of which is attached hereto as Exhibit B. All capitalized terms not defined herein shall have the meaning set forth in the Appendix to the Plan. 1. Grant of Option. The Corporation hereby grants to Optionee named above, as of the Grant Date, an option to purchase up to the total number of Option Shares specified above. The Option Shares shall be purchasable from time to time during the option term specified in paragraph 2 below at the Exercise Price. 2. Option Term. The option term shall be measured from the Grant Date and shall accordingly expire at the close of business on the Expiration Date specified above, unless sooner terminated in accordance with paragraph 5 below. 3. Limited Transferability. This option shall be neither transferable nor assignable, in whole or in part, by Optionee other than by will or by the laws of descent and distribution following Optionee's death and may be exercised, during Optionee's lifetime, only by Optionee. However, if this option is designated a Non-Statutory Option above, then this option may also, in connection with Optionee's estate plan, be assigned in whole or in part during Optionee's lifetime to one or more members of Optionee's immediate family (spouse or children) or to a trust established exclusively for the benefit of one or more such immediate family members. Optionee shall give written notice of any such assignment during Optionee's lifetime to the Corporation within 20 days of assignment. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for this option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. 4. Exercisability. This option shall become vested or exercisable for the Option Shares 1/3 upon grant, 1/3 one year after grant and the final 1/3 two years after grant. 5. Cessation of Service. The option term specified in paragraph 2 above shall terminate, and this option shall cease to be outstanding prior to the Expiration Date, upon Optionee's ceasing to be in the Service of the Corporation. In such event, the following provisions shall apply: a. Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Misconduct) while this option is outstanding, then Optionee shall have a period of three (3) months (commencing with the date of such cessation of Service) during which to exercise this option as to vested Option Shares. b. Should Optionee die while this option is outstanding, then the personal representative of Optionee's estate (or the person or persons to whom the option is transferred pursuant to Optionee's will or in accordance with the laws of descent and distribution) shall have a period of twelve (12) months (commencing with the date of such cessation of service) during which to exercise this option as to vested Option Shares. c. Should Optionee cease Service by reason of Permanent Disability while this option is outstanding, then Optionee shall have a period of twelve (12) months (commencing with the date of such cessation of Service) during which to exercise this option as to vested Option Shares. d. Should Optionee's Service be terminated for Misconduct, then this option shall terminate immediately and cease to remain outstanding. e. During the limited post-Service exercise period, this option may not be exercised in the aggregate for more than the number of vested Option Shares for which the option is exercisable on the date of the Optionee's cessation of Service. Upon the expiration of such limited post-Service exercise period or upon the Expiration Date (if earlier), this option shall terminate and cease to be outstanding for any vested Option Shares for which the option has not been exercised. In no event shall this option be exercisable at any time after the Expiration Date. To the extent this option is not otherwise exercisable for vested Option Shares at the time of Optionee's cessation of Service, this option shall immediately terminate and cease to be outstanding with respect to those shares. 6. Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or class of securities subject to this option, and (ii) the Exercise Price, in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 7. Stockholder Rights. The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Exercise Price, and become a holder of record of the Purchased Shares. 8. Manner of Exercising Options a. In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or persons exercising this option) must take the following actions: (1) Execute and deliver to the Corporation a Stock Option Exercise Notice and Purchase Agreement (Exhibit A) for the Option Shares for which the option is exercised. (2) Pay the aggregate Exercise Price for the Purchased Shares in one or more of the following forms: (a) Cash or check made payable to the Corporation; or (b) A promissory note payable to the Corporation, but only to the extent authorized by the Plan Administrator in accordance with paragraph 13. Upon prior written approval of the Plan Administrator, the Exercise Price may also be paid as follows: (c) In shares of Common Stock held by Optionee (or any other person or persons exercising the option) for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or (d) Through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable written instructions (1) to a Corporation-designated brokerage firm to effect the immediate sale of the Purchased Shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the Purchased Shares plus all applicable federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (2) to the Corporation to deliver the certificates for the Purchased Shares directly to such brokerage firm in order to complete the sale. Except to the extent the sale and remittance procedure is utilized in connection with the option exercise, payment of the Exercise Price must accompany the Stock Option Exercise Notice and Purchase Agreement delivered to the Corporation in connection with the option exercise. (3) Furnish to the Corporation appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option. (4) Execute and deliver to the Corporation such written representations as may be requested by the Corporation in order for it to comply with the applicable requirements of federal and state securities laws. (5) Make appropriate arrangements with the Corporation (or Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all federal, state and local income and employment tax withholding requirements applicable to the option exercise. b. As soon as practical after the Exercise Date, the Corporation shall issue to, or, on behalf of Optionee (or any other person or persons exercising this option), a share certificate for the Purchased Shares, with the appropriate legends affixed thereto. c. In no event may this option be exercised for any fractional shares. 9. Compliance with Laws and Regulations a. The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or Nasdaq, if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance. b. The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation, however, shall use its best efforts to obtain all such approvals. 10. Successors and Assigns. Except to the extent otherwise provided in paragraph 3 above, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee's permitted assigns and the legal representatives, heirs and legatees of Optionee's estate. 11. Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated on the Stock Option Grant. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified. 12. Financing. The Plan Administrator may, in its absolute discretion and without any obligation to do so, permit Optionee to pay the Exercise Price for the purchase Option Shares by delivering a full-recourse promissory note payable to the Corporation. The terms of any such promissory note (including the interest rate, the requirements for collateral and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. 13. Construction. This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan and the Stock Option Exercise Notice and Purchase Agreement. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option. 14. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to its conflict-of-laws rules. 15. Additional Terms Applicable to an Incentive Option. In the event this option is designated an Incentive Option above, the following terms and conditions shall also apply to the grant: a. This option shall cease to qualify for favorable tax treatment as an Incentive Option if (and to the extent) this option is exercised for one or more Option Shares: (1) more than three (3) months after the date Optionee ceases to be an Employee or in the Service of the Corporation for any reason other than death or Permanent Disability or (2) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of death or Permanent Disability. b. No installment under this option shall qualify for favorable tax treatment as an Incentive Option if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or dates of grant) of any earlier installments of the Common Stock and any other securities for which this option or any other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this option shall nevertheless become exercisable for the excess shares in such calendar year as a Non-Statutory Option. c. Should the Board elect to accelerate the exercisability of this option upon a Corporate Transaction, then this option shall qualify as an Incentive Option only to the extent the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which this option first becomes exercisable in the calendar year in which the Corporate Transaction occurs does not, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or one or more other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the calendar year of such Corporate Transaction, the option may nevertheless be exercised for the excess shares in such calendar year as a Non-Statutory Option. d. Should Optionee hold, in addition to this option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this option, then the foregoing limitations on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. e. The grant of this option is subject to approval of the Plan by Corporation's stockholders within twelve (12) months after the adoption of the Plan by the Board. In the event that such stockholder approval is not obtained, then this option shall not qualify as an Incentive Option. f. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this option shall cease to qualify as an Incentive Option unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan. g. If Optionee is a 10% Stockholder, then the Exercise Price shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the Grant Date, and the option term shall not exceed five (5) years measured from the Grant Date. h. Shares purchased pursuant to this option shall cease to qualify for favorable tax treatment as Incentive Option shares if and to the extent Optionee disposes of such shares within two (2) years from the Grant Date or within one (1) year of Optionee's purchase of said shares. i. Optionee acknowledges that the rules regarding Incentive Options as contained in the Internal Revenue Code are subject to amendment in the future. Optionee should consult his or her tax advisor prior to taking any action with respect to this option or the shares purchased hereunder. IN WITNESS WHEREOF, this Agreement is executed as of the Grant Date first noted above. GLOBAL E TUTOR, INC. By: /s/ Thomas E. McMurrain, President ACKNOWLEDGEMENT Optionee understands and agrees that the option is granted subject to and in accordance with the terms of the Corporation's Stock Option Plan (the "Plan"). Optionee further agrees to be bound by the terms of the Plan and the terms of the option as set forth in this Agreement. Optionee understands that any Option Shares purchased under the option shall be subject to the terms set forth in the Stock Option Exercise Notice and Purchase Agreement attached hereto as Exhibit A. Optionee hereby acknowledges receipt of a copy of the Plan in the form attached hereto as Exhibit B, and represents that Optionee has read and understands the Plan, and accepts this option subject to all terms and provisions of the Plan and the Plan documents. Optionee hereby agrees to accept as binding, conclusive and final, all decisions and interpretations of the Board of Directors upon any questions arising under the Plan. Optionee acknowledges that there may be adverse tax consequences upon exercise of this option and/or upon disposition of the Purchased Shares, and that Optionee should consult a tax advisor prior to such exercise or disposition. OPTIONEE ------------------------- Optionee ------------------------- Date EXHIBIT A STOCK OPTION EXERCISE NOTICE AND PURCHASE AGREEMENT EXHIBIT B STOCK OPTION PLAN SCHEDULE OF OPTION HOLDERS
Number Exercise Type of Grant No Name of Shares Price Option - -------- ---- --------- ----- ------ 1 Robbie Willison 400,000 $0.25 Incentive 2 Shawn Cartmill 185,000 $0.25 Incentive 3 Lara Stegman 185,000 $0.25 Incentive 4 Glenn Carver 185,000 $0.25 Incentive 5 John Miller 185,000 $0.25 Incentive 6 Douglas McMurrain 400,000 $0.25 Non-Statutory 7 Steve Martin 185,000 $0.25 Non-Statutory 8 Amanda Anderson 185,000 $0.25 Non-Statutory 9 Lloyd Skidmore 185,000 $0.25 Non-Statutory 10 Karen Lennon 185,000 $0.25 Non-Statutory 11 Barry Morris 185,000 $0.25 Incentive 12 Thomas McMurrain 62,174 $0.275 Incentive 13 Leslie Ennis 185,000 $0.25 Incentive 14 Rebecca Bidwell 185,000 $0.25 Incentive 15 Curtis Robinson 185,000 $0.25 Incentive 16 Claes Nobel 482,000 $0.25 Incentive and Non-Statutory 17 Vincent Riggio 400,000 $0.25 Non-Statutory
EX-10.5 12 ex-105.txt EXHIBIT 10.5 EXHIBIT 10.5 ROBBIE WILLISON GLOBAL E TUTOR, INC. STOCK OPTION GRANT Optionee: Robbie Willison ----------------------------------------------------- Address: ----------------------------------------------------- Grant Date: January 21, 2000 ----------------------------------------------------- Exercise Price: $ ______ per share Number of Option Shares: 208,000 shares ------------ Expiration Date: JANUARY 31, 2003 ----------------------------------------------------- This Stock Option Grant is made, as of the Grant Date set forth above, by and between Global e Tutor, Inc., a Delaware corporation (the "Corporation") and the Optionee named above. This Stock Option Grant includes the terms of the Stock Option Exercise Notice and Purchase Agreement attached hereto as Exhibit A. 1. Grant of Option. The Corporation hereby grants to Optionee named above, as of the Grant Date, an option to purchase up to the total number of Option Shares specified above. The Option Shares shall be purchasable from time to time during the option term specified in paragraph 2 below at the Exercise Price. 2. Option Term. The option term shall be measured from the Grant Date and shall accordingly expire at the close of business on the Expiration Date specified above. 3. Exercisability. This option shall become vested or exercisable for the Option Shares immediately upon grant. 4. Adjustment in Option Shares. Should any change be made to the Common Stock of the Corporation by reason of any split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or class of securities subject to this option, and (ii) the Exercise Price, in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 5. Stockholder Rights. The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Exercise Price, and become a holder of record of the Purchased Shares. 6. Manner of Exercising Options a. In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or persons exercising this option) must take the following actions: (1) Execute and deliver to the Corporation a Stock Option Exercise Notice and Purchase Agreement (Exhibit A) for the Option Shares for which the option is exercised. (2) Pay the aggregate Exercise Price for the Purchased Shares in Cash or check made payable to the Corporation. (3) Execute and deliver to the Corporation such written representations as may be requested by the Corporation in order for it to comply with the applicable requirements of federal and state securities laws. b. As soon as practical after the Exercise Date, the Corporation shall issue to a share certificate for the Purchased Shares, with the appropriate legends affixed thereto. c. In no event may this option be exercised for any fractional shares. 7. Compliance with Laws and Regulations a. The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or Nasdaq, if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance. b. The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation, however, shall use its best efforts to obtain all such approvals. 8. Successors and Assigns. Except to the extent otherwise provided the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee and the legal representatives, heirs and legatees of Optionee's estate. 9. Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated on the Stock Option Grant. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified. 10. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to its conflict-of-laws rules. IN WITNESS WHEREOF, this Agreement is executed as of the Grant Date first noted above. GLOBAL E TUTOR, INC. By: /s/ Thomas E. McMurrain, President ACKNOWLEDGEMENT Optionee acknowledges that there may be adverse tax consequences upon the granting of this option, the exercise of this option and/or upon disposition of the Purchased Shares, and that Optionee should consult a tax advisor. OPTIONEE /s/ Robbie Willison Date EXHIBIT A --------- STOCK OPTION EXERCISE NOTICE AND PURCHASE AGREEMENT --------------------------------------------------- ROBBIE WILLISON GLOBAL E TUTOR, INC. STOCK OPTION EXERCISE NOTICE AND PURCHASE AGREEMENT This Stock Option Exercise Notice and Purchase Agreement ("Agreement") is made as of this ____ day of ___________, _________, by and between GLOBAL E TUTOR, INC., a Delaware corporation and ROBBIE WILLISON, Optionee under the terms of a Stock Option Grant granted to Optionee. A. EXERCISE OF OPTION 1. Exercise. Optionee hereby elects to exercise Optionee's option to purchase ________________ (____) shares of Common Stock (the "Purchased Shares") of the Corporation, pursuant to that certain option (the "Option") granted Optionee on January 21, 2000 (the "Grant Date") at the exercise price of $0.25 per share (the "Exercise Price"). 2. Payment. Concurrent with the delivery of this Agreement to the Corporation, Optionee shall pay the Exercise Price for the Purchased Shares and shall deliver whatever additional documents may be required by the Stock Option Grant as a condition for exercise with respect to the Purchased Shares. B. SECURITIES LAW COMPLIANCE 1. Restricted Securities. The Purchased Shares have not been registered under the 1933 Act and are being issued to Optionee in reliance upon the exemption from such registration as noted below. Optionee hereby confirms that Optionee has been informed that the Purchased Shares are restricted securities under the 1933 Act and may not be resold or transferred unless the Purchased Shares are first registered under the Federal securities laws or unless an exemption from such registration is available. Accordingly, Optionee acknowledges that Optionee is prepared to hold the Purchased Shares for an indefinite period and that Optionee is aware that SEC Rule 144 of the 1933 Act, which exempts certain resales of unrestricted securities, is not presently available to exempt the resale of the Purchased Shares from the registration requirements of the 1933 Act. The Option Shares are being issued under the Act pursuant to (check the applicable box): / / the exemption in Rule 504; / / the exemption in Rule 505; / / the exemption in Rule 506; / / the exemption in Section 4(2); / / a Regulation A Offering Circular, dated ____________; / / the exemption in Rule 701; / / other: _____________________________________________. 2. Restrictions on Disposition of Purchased Shares. Optionee shall make no disposition of the Purchased Shares (other than a Permitted Transfer) unless and until there is compliance with all of the following requirements: (a) Optionee shall have provided the Corporation with a written summary of the terms and conditions of the proposed disposition. (b) Optionee shall have complied with all requirements of this Agreement applicable to the disposition of the Purchased Shares. (c) Optionee shall have provided the Corporation with written assurances, in form and substance satisfactory to the Corporation, that (1) the proposed disposition does not require registration of the Purchased Shares under the 1933 Act, or (2) all appropriate action necessary for compliance with the registration requirements of the 1933 Act or any exemption from registration available under the 1933 Act (including Rule 144) has been taken. The Corporation shall NOT be required (i) to transfer on its books any Purchased Shares which have been sold or transferred in violation of the provisions of this Agreement, OR, (2) to treat as the owner of the Purchased Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to whom the Purchased Shares have been transferred in contravention of this Agreement. 3. Restrictive Legends. The stock certificates for the Purchased Shares shall be endorsed with restrictive legends substantially similar to the following: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS OR UNTIL REGISTERED UNDER THE SECURITIES ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THE SECURITIES SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. C. MISCELLANEOUS PROVISIONS 1. No Employment or Service Contract. Nothing in this Agreement shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionee's Service at any time for any reason with or without cause. 2. Notices. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice at the address indicated below such party's signature line on this Agreement or at such other address as such party may designate by ten (10) days' advance written notice under this paragraph to all other parties to this Agreement. 3. Amendments and Waivers. No waiver or amendment of this Agreement shall be effective unless agreed to in writing by the parties hereto. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. 4. Optionee Undertaking. Optionee hereby agrees to take whatever additional action and execute whatever additional documents the Corporation may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Optionee or the Purchased Shares pursuant to the provisions of this Agreement. 5. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without resort to that State's conflict-of-laws rules. 6. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and upon Optionee, Optionee's permitted assigns and the legal representatives, heirs and legatees of Optionee's estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms hereof. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above. GLOBAL E TUTOR, INC. BY: ------------------------------------- TITLE: ---------------------------------- OPTIONEE: ---------------------------------------- ROBBIE WILLISON Address: -------------------------------- ---------------------------------------- SCHEDULE OF OPTION PRICES Exercise Price Shares $0.50 208,000 $0.25 208,000 EX-10.6 13 ex-106.txt EXHIBIT 10.6 EXHIBIT 10.6 Notice: This Instrument contains a confession of judgment clause. SENIOR SECURED NOTE $750,000.00 December 27, 1999 New York, NY FOR VALUE RECEIVED, GLOBALETUTOR.COM, INC., a Nevada corporation ("Maker"), promises to pay to DIGITAL LAUNCH, INC. or its assigns ("Holder"), or to order, the principal sum of SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($750,000), together with interest on the unpaid principal balance hereof from time to time outstanding at the rate of one percent (1%) over the Prime Rate as reported in The Wall Street Journal, Eastern Edition, until the Note is paid in full. The entire unpaid principal balance of this Note, together with all unpaid interest, shall be paid not later than December 31, 2002, and it may be prepaid at Maker's option in whole or in part without penalty or premium. Any amounts due hereunder and not paid when due shall accrue interest at a rate equal to the greater of the interest rate set forth above and 14% per annum. Repayment of this Note is secured by a security interest in certain shares of capital stock (the "Collateral") owned by Thomas McMurrain (the "Shareholder") pursuant to a security agreement of even date herewith among the Shareholder and Holder (the "Security Agreement"). Upon the occurrence of an Event of Default the Holder shall have then, or at any time thereafter, all of the remedies provided in the Investment Agreement, including accelerating all amounts then owed, and all of the remedies afforded by the Uniform Commercial Code as from time to time in effect in the State of New York or afforded by other applicable law. "Event of Default" when used herein, whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law pursuant to any judgment, decree, or order of any court or any order, rule, or regulation of any administration or government body or be caused by the provisions of any paragraph herein, means any one of the following events: (a) Default in the payment of any interest on this Note when it becomes due and payable, and continuance of such default for a period of 30 days; or (b) Default in the payment of the principal amount of this Note when due, whether at maturity, upon prepayment, or otherwise; or (c) Default in the performance or breach of any covenant or warranty of Maker in this Note (other than a covenant or warranty the breach or default in performance of which is elsewhere in this section specifically dealt with), and continuation of such default or breach for a period of 60 days after there has been given to Maker by certified mail, by the holder of this Note, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a notice of default hereunder; or (d) The entry of a decree or order by a court having jurisdiction in the premises adjudging Maker a bankrupt or insolvent under the Federal Bankruptcy Act or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, trustee (or other similar official) of Maker or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (e) The institution by Maker of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or a filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Act or any other applicable federal or state law; or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee (or other similar official) of Maker or of any substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by Maker in furtherance of any such action. If an Event of Default occurs and is continuing, then, in every such case, the holder of this Note may declare the principal of this Note to be due and payable immediately, by a notice in writing to Maker of such default, and upon any such declaration, such principal shall become immediately due and payable. At such time after such declaration of acceleration has been made, and before a judgment or decree for payment of money due has been obtained by the holder, the holder of this Note, by written notice to Maker, may rescind and annul such declaration and its consequences, if all Events of Default, other than the nonpayment of the principal of this Note which has become due solely by such acceleration, has been cured or waived. No such rescission shall affect any subsequent default or impair any right consequent thereon. So long as any amounts remain unpaid and outstanding under this Note, Maker agrees with Holder as follows, except as otherwise agreed or consented to in writing by Holder: (1) INSPECTION. The Maker shall permit the Holder, or any authorized representative thereof, to visit and inspect the properties of Maker, including its corporate and financial records, and to discuss its business and finances with officers of the Maker, without prior notice and as often as may be reasonably requested. (2) FINANCIAL STATEMENTS AND OTHER INFORMATION. Maker will deliver to the Holder: (a) within 90 days after the end of each fiscal year of the Maker, a balance sheet of the maker as at the end of such year and statements of income and of changes in financial condition of the Maker for such year, reviewed by certified public accountants, and prepared in accordance with generally accepted accounting principles; (b) within 45 days after the end of each fiscal quarter of the Maker, a balance sheet of the maker as at the end of such quarter, and statements of income and of changes in financial condition of the Maker for such fiscal quarter and for the current fiscal year to the end of such fiscal quarter; and (c) within 30 days after the end of each month, a balance sheet of the maker as at the end of such month and statements of income of the Maker for such month and for the current fiscal year to the end of such month, setting forth in comparative form the Maker's projected financial statements for the corresponding periods for the current fiscal year. (3) MATERIAL CHANGES AND LITIGATION. The Maker will promptly notify the Holder of any material adverse change in the business, properties, assets or condition, financial or otherwise, of the Maker and of any litigation or governmental proceeding or investigation pending or, to the best knowledge of the Maker, threatened against the Maker, or against any officer, director, key employee or principal stockholder of the Maker materially affecting or which, if adversely determined, would materially adversely affect its present or proposed business, properties, assets or condition taken as a whole. (4) MERGERS AND OTHER TRANSFERS. The Maker will not merge or consolidate with any person, firm, association or corporation, (ii) transfer, sell, assign, lease or otherwise abandon or dispose of (whether in one transaction or a series of transactions) any material part of its assets except in the normal course of business, (iii) change the nature of its business, (iv) create any subsidiaries, or (v) liquidate, dissolve or cease active business operations. (5) ARTICLES OF INCORPORATION AND BYLAWS. The Maker will not amend its Articles of Incorporation or Bylaws. (6) JUDGMENTS AND LIENS. The Maker shall not create, incur, assume or permit to exist any mortgage, lien, security interest, charge or encumbrance on any property or assets now owned or hereafter acquired by it except: (a) Liens arising out of judgments or awards (A) which have been in force less than the applicable appeal period so long as execution is not levied thereunder, or (B) in respect of which the Maker shall in good faith be prosecuting an appeal or proceedings for review and in respect of which the Maker shall have secured a subsisting stay of execution pending such appeal or proceedings for review; (b) Liens for taxes, assessments or governmental charges or levies, provided payment thereof shall not at the time be required; (c) Deposits, liens, bonds or pledges to secure payment of worker's compensation, unemployment insurance, pensions, regulatory obligations or other social obligations, surety, stay or appeal bonds, or other similar obligations arising in the ordinary course of business; (d) Mechanic's, worker's, repairmen's, warehousemen's, vendor's, or carrier's liens, or other similar liens arising in the ordinary course of business and securing sums which are not past due, or deposits or pledges to obtain the release of any such liens; (e) Liens arising by operation of law under lease agreements made in the ordinary course of business and confined to the property rented; (f) Liens on property securing the purchase price of property acquired after the date hereof provided that each of such liens (A) is given solely to secure indebtedness not exceeding one hundred percent (100%) of the lesser of the cost or fair market value of such property, (B) does not extend to any other property and (C) is given at the time of acquisition of the property; (g) Currently outstanding liens; and (h) Extension, renewal or refunding of indebtedness secured by liens permitted by the foregoing, provided that the then outstanding amount of such indebtedness is not increased and such liens do not extend to property not then encumbered thereby. (7) PURCHASE OF SECURITIES. The Maker will not purchase the outstanding equity securities of any other person, firm, association or corporation, except obligations issued or guaranteed by the United States government or any state or political subdivision thereof or other short-term instruments normally marketed by banks and nationally recognized brokerage firms, provided nothing herein shall restrict the Maker from maintaining accounts with federally insured banking institutions or money market funds. (8) DECLARATION OF DIVIDENDS, ETC. The Maker will not (i) make, pay or declare any distributions or dividends of cash or property with respect to its issued shares of Common or Preferred Stock; (ii) directly or indirectly redeem, repurchase or otherwise reacquire any shares of its Common or Preferred Stock; or (iii) make any other payments outside the ordinary course. The Maker is further prohibited from declaring or distributing, without the prior written approval of Holder in its sole discretion, any executive bonus or other form of additional compensation considered to be unusual or excessive by industry standards. (9) PAYMENTS TO OFFICERS. The Maker shall not loan or advance any amount to, or sell, transfer or lease any properties or assets (real, personal or mixed, tangible or intangible), to, or enter into any agreement or arrangement with, any of the Maker's officers or directors, except for compensation to officers pursuant to existing agreements and reimbursement of expenses incurred by employees of the Maker in connection with their employment. The Maker shall not increase the salary or other compensation payable to any officer, employee or consultant of the Maker without the prior written approval of the Holder. (10) INDEBTEDNESS. Except for the existing indebtedness reflected on the balance sheets delivered previously to Holder, and indebtedness, whenever incurred, which is subordinate to the Note, provided such subordinated debtholder has signed an intercreditor agreement acceptable to Holder, the Maker shall not incur any indebtedness for borrowed money, including pension fund loans or purchase money indebtedness, or guarantee any such indebtedness or issue or sell any debt securities of the Maker or guarantee in any manner (including, without limitation, by agreeing to maintain the financial condition of another person) any debt securities of others. (11) EXPENDITURES. The Maker shall deliver to holder a reasonably detailed written use of proceeds description not later than the date of this Note, and shall conform its expenditures and investments to such description, except as the holder may otherwise consent. The covenants of the Maker contained above shall terminate, and be of no further force or effect, upon the repayment in full of all amounts due under the Note. Maker represents and warrants that this Note evidences one or more loans made to the Maker for the purpose of carrying on a business or commercial enterprise. All parties to the transaction evidenced by this Note, whether Maker, guarantor, surety or endorser, hereby jointly and severally waive all exemption rights, whether under any state constitution, homestead exemption or otherwise, and also severally waive demand, presentment for payment, notice of dishonor, valuation and appraisement and expressly agree that the maturity date hereof may be extended from time to time without in any way affecting the liability of Maker, any guarantor, surety or endorser. The obligations evidenced by this Note shall be the joint and several obligations of all makers, sureties, guarantors and endorsers and shall be binding upon them and their heirs, successors and permitted assigns. This Note is subject to the express condition that at no time shall Maker be obligated to pay interest hereunder at a rate which could subject the Holder to either criminal or civil liability as a result of being in excess of the maximum rate which Maker is permitted by law to contract or agree to pay. If, by the terms of this Note, Maker is at any time obligated to pay interest at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and interest payable hereunder shall be computed at such maximum rate, and the portion of all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of this Note. If this Note is not paid when due, Maker hereby irrevocably authorizes any clerk of any court of record or any attorney to enter in any court of competent jurisdiction in the State of New York or the State of Georgia, or any other State or Territory of the United States, judgment by confession against the Maker and in favor of the holder of this Note for the entire amount of this Note then remaining unpaid (including principal, accrued interest and late charges), together with attorney's fees equal to fifteen percent (15%) of the unpaid balance of this Note and court costs, without issuance or service of process, stay of execution or right of appeal, and expressly waiving the benefit of all exemption laws (whether by state constitution, homestead exemption or otherwise) and all irregularity or error in entering said judgment or the execution thereon. No single exercise of the foregoing power to confess judgment shall be deemed to exhaust the power, whether or not any such exercise shall be held by any court to be invalid, voidable or void, but the power shall continue undiminished, and it may be exercised from time to time as often as the holder of this Note shall elect, until such time as the holder of this Note shall have received payment in full of all indebtedness of the Maker to the holder of this Note under the terms hereof. THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR ARISING OUT OF, OR IN CONNECTION WITH, THIS NOTE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER TO ENTER INTO THE CONTEMPLATED TRANSACTION. THE HOLDER HEREBY WAIVES ITS RIGHT TO JURY TRIAL TO THE SAME EXTENT AS SUCH RIGHT IS WAIVED BY THE MAKER. None of the terms or provisions of this Note may be excluded, modified, or amended except by a written instrument duly executed on behalf of the Holder expressly referring hereto and setting forth the provision so excluded, modified or amended. This Note shall be governed by the laws of the State of New York. ATTEST: GLOBALETUTOR.COM, INC. - ---------------------------- By: /s/ Thomas McMurrain Name: Title: Vice President SECURITY AGREEMENT This SECURITY AGREEMENT is dated as of December 28, 1999, and is executed by THOMAS MCMURRAIN ("Shareholder"), with an address at ________________________, pursuant to the terms of that certain Senior Secured Note ("Note"), dated this same date, executed and delivered by GLOBALETUTOR.COM, INC., a Nevada corporation ("Global"), to DIGITAL LAUNCH, INC., a Delaware corporation, and pursuant to that certain Agreement and Plan of Reorganization (the "Acquisition Agreement"), entered into as of this same date by and among Shareholder, Global and Digital. In consideration of the promises, covenants and agreements herein and therein, Shareholder hereby agrees that Digital shall have the rights, remedies and benefits hereinafter set forth. 1. For the purposes of this Agreement: (a) The term "Liabilities" shall include any and all obligations and liabilities of any kind arising in any way of Global to Digital, now existing or hereafter created, under the Note, the Acquisition Agreement or otherwise; all liabilities and obligations of Global hereunder; as well as all costs, expenses, advances and liabilities which may be made or incurred by Digital in any way in connection with any of the Liabilities or any collateral security therefor. The term also includes specifically, but not by way of limitation, any damages, costs or expenses suffered by Digital or to which they may become subject (1) as a result of the failure of Global to perform any material obligation or term of the Note or the Acquisition Agreement, (2) in the event that any of Global's representations in the Note or the Acquisition Agreement are materially breached or untrue, regardless of when such breach may be discovered, and (3) in the event of any challenge by any other person or party to the authority of Global or the Shareholder to enter into the acquisition transaction contemplated by the Acquisition Agreement or to take any of the actions contemplated thereunder. (b) The term "Collateral" shall mean all of the issued and outstanding shares of capital stock of Global, all of which are owned by Shareholder effective as of the date of the Note and of closing under the Acquisition Agreement, consisting of 4,820,000 shares of common stock of Global. (c) The term "Agent" shall mean such person or firm that shall be appointed by Digital to take and retain possession of the Collateral in order to perfect the security interest granted hereunder, and Digital shall promptly notify the Shareholder of the name and address of the Agent and of any change of Agent. 2. As security for the payment of all Liabilities, the Shareholder hereby grants to Digital a continuing security interest in all the Collateral referenced in 1(b) above and any part thereof. 3. The Shareholder represents, warrants and covenants that: (a) The Collateral constitutes all of the issued and outstanding capital stock of Global as of the date hereof, and Global will not, and Shareholder will take all necessary action such that Global does not, issue any other shares of capital stock while the Note is outstanding, except with the prior written approval of Digital. (b) Shareholder has good title to the Collateral, free and clear of any liens and encumbrances, excepting the security interests granted hereby. (c) This Agreement creates a valid and enforceable security interest in the Collateral securing the payment of the Liabilities, and upon the filing of the necessary financing statements, or the taking of possession of the Collateral which consists of securities, such security interest will be a valid and perfected first priority security interest. (d) No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the grant by the Shareholder of the security interest granted hereby or for the execution, delivery or performance of this Agreement by the Shareholder or (ii) for the perfection of or the exercise by Digital of its rights and remedies hereunder except, if required, the filing of financing statements. 4. At any time and from time to time, upon the request of Digital, the Shareholder will, at its own expense: (a) Defend the Collateral against the claims and demands of all persons. (b) Deliver and pledge to Digital, endorsed or accompanied by instruments of assignment or transfer satisfactory to Digital, any instruments, documents and chattel paper which they may specify. (c) Give, execute, deliver and file or record in the proper governmental offices, any instrument, paper or document, including but not limited to one or more financing statements under the Uniform Commercial Code, satisfactory to Digital or Agent, or take any action, which Digital or Agent may deem necessary or desirable in order to create, preserve, perfect, extend, modify, terminate or otherwise affect any security interest granted pursuant hereto, or to enable Digital or Agent to exercise or enforce any of the rights of Digital hereunder. (d) Keep, and stamp or otherwise mark, any of its documents, instruments and chattel paper and its individual books and records relating to any of the Collateral in such manner as Digital or Agent may require. (e) Pay, or reimburse Digital or Agent in the amount of, all expenses (including reasonable fees and expenses of attorneys, experts and agents) incurred in any way in connection with the exercise, defense or assertion of any rights or interests of Digital hereunder, the enforcement of any provisions hereof, or the management, preservation, use, operation, maintenance, collection, possession, disposition or enforcement of any of the Collateral (all such expenses to be Liabilities hereunder). 5. Without the prior written consent of Digital or Agent, Shareholder shall not (i) transfer, sell or assign any of the Collateral; (ii) allow or permit any other security interest or lien to attach thereto; (iii) file, or authorize or permit to be filed, in any jurisdiction any financing statement relating to any of the Collateral unless Digital is named as sole secured party; (iv) permit any of the Collateral to be levied upon under any legal process; or (v) permit anything to be done that may impair the value of any of the Collateral or the security intended to be afforded hereby. 6. Agent is hereby appointed Digital's attorney-in-fact to do all acts and things which Digital may deem necessary to perfect and continue perfected the security interest created hereby and to protect and preserve the Collateral. 7. With this Agreement and the Collateral, the Shareholder shall deliver to Digital an executed stock power, duly endorsed in blank, to facilitate any foreclosure or transfer of the Collateral that may be required. 8. (A) Upon default by Shareholder or Global in the performance of any covenant or agreement herein, in the Note, or in the Acquisition Agreement, or any other agreement or document covering any of the Liabilities, or in the discharge, payment or performance of any of the Liabilities, or if any representation or warranty herein should prove untrue, or (B) in the event (1) any of Shareholder's or Global's representations in the Acquisition Agreement are materially breached or untrue, regardless of when such breach may be discovered, or (2) there may be any challenge by any other person or party to the authority of the Shareholder or Global to enter into the acquisition transaction contemplated by the Acquisition Agreement or to take any of the actions contemplated thereunder, Digital and the Agent shall have with respect to the Collateral all of the rights and remedies of a secured party under the Uniform Commercial Code or any other applicable law and all rights provided herein or in any other applicable security or other agreement, all of which rights and remedies shall, to the full extent permitted by law, be cumulative. Digital or the Agent may sell the Collateral or any part thereof in one or more parcels at public or private sale, at any place, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Digital may deem commercially reasonable. Any notice of sale, disposition or other intended action by Digital or the Agent, sent to the Shareholder at the address specified above, or such other address of Shareholder as Shareholder may have notified Digital and the Agent from time to time, at least five days prior to such action, shall constitute reasonable notice to the Shareholder. 9. The powers conferred on Digital and the Agent hereunder are solely to protect the interest of Digital in the Collateral and shall not impose any duty upon them to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for monies actually received by it hereunder, Digital and the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve any right of or against other parties pertaining to any Collateral. Shareholder agrees to indemnify Digital and the Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement) or Digital's interest in the Collateral, except claims, losses or liabilities resulting from Digital's or the Agent's gross negligence or willful misconduct. 10. No provision hereof shall be modified except by a writing signed by Digital or the Agent, on behalf of Digital, and the Shareholder expressly referring to the provision hereof so modified. 11. This Agreement shall be binding upon and shall inure to the benefit of the assigns or successors of the Shareholder and Digital. 12. No delay, failure to enforce, or single or partial exercise on the part of Digital in connection with any of its rights hereunder shall constitute an estoppel or waiver thereof, or preclude other or further exercise or enforcement thereof and no waiver of any default hereunder shall be a waiver of any subsequent default. 13. This Agreement shall be governed as to its validity, interpretation and effect in accordance with the laws of the State of New York, except as required by mandatory provisions of law and except if the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Collateral are governed by the laws of a jurisdiction other than New York. Unless the context otherwise requires, all terms used herein which are defined in the Uniform Commercial Code as enacted in New York shall have the meanings therein stated. This Agreement has been executed at New York, NY, as of the date first set forth above. SHAREHOLDER: By /s/ Thomas McMurrain EX-10.7 14 ex-107.txt EXHIBIT 10.7 EXHIBIT 10.7 INVESTMENT AGREEMENT This Investment Agreement is made this 31st day of December, 1999, by and between DIGITAL LAUNCH, INC., a Delaware corporation with its principal office at 250 West 57th Street, Suite 2032, New York, NY 10107 (the "Company"), and Lancer Offshore Inc. with its principal office at Kaya Flamboyan 9, Curacao, Netherlands Antillies ("Lender"). In consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows: 1. AUTHORIZATION AND SALE OF NOTE. 1.1 AUTHORIZATION. The Company has duly authorized the borrowing of $750,000 and the sale and issuance of its convertible promissory note, in the original principal amount of $750,000 (the "Note"), with interest accruing thereon. 1.2 SALE OF NOTE. Subject to the terms and conditions of this Agreement, at the Closing the Company will sell and issue to the Lender, and the Lender will purchase, the Note. The purchase price of the Note shall be $750,000 (the "Purchase Price"). The form of the Note is attached hereto as EXHIBIT A. 1.3 USE OF PROCEEDS. It is understood and agreed that the Company will use all of the Purchase Price to make a loan to GlobaleTutor.Com Inc., a Nevada corporation with offices at 3340 Peachtree Road NE, Suite 1800, Atlanta, GA 30326 ("Global"), in advance of a proposed acquisition of Global by the Company. It is further understood and acknowledged that, in the event such acquisition is not consummated, none of the Purchase Price will be available to the Company for its business or operations because it shall have been loaned to Global. 2. THE CLOSING. The closing ("Closing") of the sale and purchase of the Note under this Agreement shall take place on the date first set forth above, or on such other date as is mutually agreeable to the Company and the Lender. At the Closing, Lender will deliver to the Company $750,000 by wire transfer, and the Company will deliver to the Lender the executed Note. 3. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and warrants to the Lender as follows: 3.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has full corporate power and authority to conduct its business as presently conducted and to enter into and perform this Agreement and to carry out the transactions contemplated by this Agreement. 3.2 ISSUANCE OF NOTE. The issuance, sale and delivery of the Note in accordance with this Agreement, have been, or will be on or prior to the Closing, duly authorized by all necessary corporate action on the part of the Company, and the Note when so issued, sold and delivered against payment therefor in accordance with the provisions of this Agreement, will be duly and validly issued, sold and delivered. 3.3 AUTHORITY FOR AGREEMENT. The execution, delivery and performance by the Company of this Agreement and the Note have been duly authorized by all necessary corporate action, and this Agreement, and the Note as of the time of its delivery, have been duly executed and delivered by the Company. This Agreement and, when executed and delivered, the Note, constitute valid and binding obligations of the Company enforceable in accordance with their respective terms. The execution of and performance of the transactions contemplated by this Agreement and the Note and compliance with their provisions by the Company will not violate any provision of law and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, its Certificate of Incorporation or Bylaws or any indenture, lease, agreement or other instrument to which the Company is a party or by which it or any of its properties is bound, or any decree, judgment, order, statute, rule or regulation applicable to the Company. 4. REPRESENTATIONS BY THE LENDER. Lender represents and warrants to the Company as follows: (a) Lender has had an opportunity to discuss the Company's business, management and financial affairs with directors, officers and management of the Company and has had the opportunity to review the Company's operations and facilities. Lender has also had the opportunity to ask questions of and receive answers from, the Company and its management regarding the terms and conditions of this investment. Lender also has received and reviewed a copy of Global's Business Plan dated November 1999. Lender has been provided access to all information requested in evaluating its investment. The Lender has relied solely on the independent investigations made by the Lender in making this investment. Without limiting the foregoing, Lender specifically acknowledges that if the acquisition of Global is consummated, the Company will be launching an entirely new line of business and will be exiting the skin-care business. Therefore, the Company's historical financial statements and results do not provide any indication of the Company's future prospects, costs, margins, risks or potential. (b) Lender is making its investment without being furnished any offering literature or prospectus, and Lender has not been the subject of any general solicitation. Lender has received and reviewed the Company's unaudited financial statements for the years ended December 31, 1998 and 1997, and for the period through September 30, 1999. It is understood and acknowledged by Lender that as of the date hereof the Company has approximately $700,000 in current liabilities, consisting principally of accounts payable to vendors, suppliers, consultants and other third parties. The Company has agreed to sell its entire skin-care business and related assets to a purchaser ("Purchaser") that will agree to assume all of such liabilities and indemnify the Company against all liabilities and claims related to the Company's skin-care business. However, the Company has not consummated such transaction, and the Company has not obtained releases from the foregoing liabilities from such vendors and creditors. The Company intends to work with the Purchaser to obtain such releases, but no assurances can be made, and no representations have been made by the Company, that any releases will be obtained. Therefore, the extent to which the Company may be relieved of such liabilities likely will depend upon the Purchaser's financial condition, about which no representations are made by the Company, and its ability to honor its agreement to assume such liabilities. In addition, the sale of the skin-care business to the Purchaser will require the approval of the Company's shareholders. If such approval is not obtained, the transaction will not be consummated, and the Purchaser will not assume the Company's liabilities relating to the skin-care business. (c) Lender recognizes that the Note, and any shares received on conversion of the Note, are being offered and sold pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Act"), afforded by Section 4(2), and that the Note and such shares have not been registered under the Act or under the securities laws of any state and, therefore, cannot be sold or otherwise transferred unless they are registered under the Act and applicable state securities laws, or unless an exemption from registration is available. The Lender has no right to require such registration. Lender recognizes that no public agency has passed upon the accuracy or adequacy of the information received by the Lender, or the fairness of the terms of the offering. (d) Lender is acquiring the Note, and the shares which may be delivered upon conversion of the Note, for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and Lender has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof. (e) Lender is an "accredited investor" as defined in Rule 501 under the Act. (f) Lender recognizes that the Company is a high-risk, speculative venture, and that the total amount of funds tendered are placed at the risk of the business and may be completely lost. Lender acknowledges and understands that the Company will need to raise additional capital to survive, and that if it fails to do so Lender's entire investment likely will be lost. (g) Lender confirms and represents that it (i) is able to bear the economic risk of its investment, (ii) is able to hold the Note, and any shares which may be delivered upon conversion of the Note, for an indefinite period of time, and (iii) can afford a complete loss of its investment without any material change in lifestyle, and has available other personal liquid assets to insure that the investment will not cause any undue financial difficulties or affect its ability to provide for its current needs and possible personal financial contingencies. (h) Lender understands that any transfer of the Note and any shares which may be delivered upon conversion of the Note will be restricted by applicable U.S. law and may be restricted by applicable state securities laws (including investment suitability standards). Lender understands that any transferee may be required to represent to the Company that such transferee meets the suitability standards required of an initial subscriber and, under the circumstances, the transfer would not violate applicable laws. Lender acknowledges that the Note and certificates representing any shares which may be delivered upon conversion of the Note will bear a restrictive legend to the effect that the Note and shares have been issued and sold under an exemption from registration under federal and state law, and that the Note and shares may not be transferred in the absence of an opinion of counsel satisfactory to the Company that such transfer is in compliance with all applicable laws. (i) All information which the Lender has provided to the Company concerning the Lender's financial position and knowledge of financial and business matters is correct and complete as of the execution date hereof. If there should be any material change in such information prior to the Closing, the Lender will immediately provide the Company with such information. 4. INDEMNIFICATION. Lender agrees to indemnify and hold harmless the Company from and against all damages, losses, costs and expenses (including reasonable attorneys' fees) which may be incurred by reason of the inaccuracy or breach of any representations or warranties made by the Lender herein or in connection with the purchase of the Note or any shares which may be delivered upon conversion of the Note, or in any document provided by the Lender to the Company. 5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon, and inure to the benefit of, the respective successors and assigns of the parties hereto. 6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements, representations and warranties contained herein shall survive the execution and delivery of this Agreement and the closing of the transactions contemplated hereby. 7. EXPENSES. Each party shall bear its own expenses in connection with the preparation of this Agreement and the closing of the transactions contemplated hereby. 8. ENTIRE AGREEMENT. This Agreement, together with the Note, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. 9. AMENDMENTS AND WAIVERS. Except as otherwise expressly set forth in this Agreement, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Lender. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. 10. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11. HEADINGS. The headings of the sections, subsections, and paragraphs of this Agreement have been added for convenience only and shall not be deemed to be a part of this Agreement. 12. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision. 13. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the day and year first above written. DIGITAL LAUNCH, INC. By /s/ Terrence O. McGrath Title: CEO LENDER: /s/ Michael Lauer By: Lancer Offshore Inc. Name: Michael Lauer Title: Investment Manager EXHIBIT A FORM OF CONVERTIBLE PROMISSORY NOTE EX-10.8 15 ex-108.txt EXHIBIT 10.8 EXHIBIT 10.8 DIGITAL LAUNCH, INC. CONVERTIBLE PROMISSORY NOTE Convertible into Common Stock of Digital Launch, Inc. $750,000.00 December 31, 1999 New York, New York -------------------- THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE NOTE UNDER SUCH ACT AND SUCH LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. --------------------- For Value Received, DIGITAL LAUNCH, INC., a Delaware corporation ("Maker"), with an address at 250 West 57th Street, Suite 2032, New York, NY 10107, promises to pay to the following registered holder hereof, at the address stated, Lancer Offshore Inc. Kaya Flamboyan 9 Curacao, Netherlands Antillies the principal sum of SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($750,000.00) in such lawful money of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, on the terms and at the time hereinafter provided. This Note is subject to the following terms and provisions: 1. PAYMENT AND INTEREST. This Note shall be due and payable one year from the date hereof. The Maker shall pay to the holder of this Note interest on the principal amount of this Note at the rate of one percent (1%) over the Prime Rate as reported in The Wall Street Journal, Eastern Edition. Interest shall be due and payable one year from the date hereof (unless this Note shall be converted as provided herein). 2. CONVERSION. (a) OPTIONAL CONVERSION. Subject to and in compliance with the provisions contained herein, the holder of this Note is entitled, at the holder's option, at any time prior to maturity, or in case this Note or any portion hereof shall have been called for prepayment prior to such date, then, in respect of this Note or such portion hereof, until and including, but not after, the close of business within 30 days of the date of notice of prepayment, to convert this Note (or any portion hereof) into fully paid and nonassessable shares (calculated as to each conversion to the nearest whole number of shares) of common stock (the "Shares") of Maker by surrender of this Note, duly endorsed (if so required by Maker) or assigned to Maker or in blank, to Maker at its offices, accompanied by written notice to Maker, in the form set forth below, that the holder hereof elects to convert this Note or, if less than the entire principal amount hereof is to be converted, the portion hereof to be converted. Such conversion shall be effected at the rate of one share of Maker's common stock for each TWENTY-FIVE CENTS ($0.25) of principal amount of this Note, all subject to such adjustment in such conversion price, if any, as may be required by the provisions of this Note. No fractional Shares will be issued on conversion, but instead of any fractional interest, Maker will pay cash adjustments as provided herein. (b) MANDATORY CONVERSION. This Note shall be converted into Shares of Maker's common stock automatically at the then effective conversion rate pursuant to Section 8, without any further action by the holder or the Maker, upon the consummation of the acquisition by Maker of all of the outstanding capital stock of GlobaleTutor.com Inc. The holder of record of the Note will be given at least 10 days' prior written notice of the date fixed and the place designated for mandatory conversion of the Note. Such notice will be sent by first class or registered mail, postage prepaid, to the record holder at such holder's address last shown on the records of the Maker. On or before the date fixed for conversion, the holder shall surrender the Note at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Note. On the date fixed for conversion, all rights with respect to the Note so converted, including the rights, if any, to receive notices, will terminate, except only the rights of the holder thereof, upon surrender of the Note therefor, to receive certificates for the number of shares of Common Stock into which such Note has been converted, and payment of any accrued but unpaid dividends thereon. As soon as practicable after the date of such mandatory conversion and the surrender of the Note, the Maker shall cause to be issued and delivered to such holder, or on its written order, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and cash as provided herein in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion. The Note required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the date such Note is so required to be surrendered, be deemed to have been retired and cancelled and converted into Common Stock for all purposes, notwithstanding the failure of the holder thereof to surrender such Note on or prior to such date. 3. PREPAYMENT. This Note is subject to prepayment, in whole or in part, at any time upon not less than 30 days' notice by first-class mail at the election of Maker. Prepayment shall be effected by paying the amount equal to the outstanding principal amount of this Note, plus all interest accrued to the date of prepayment. During the 30 days following the date of any notice of prepayment, the holder shall have the right to convert this Note into the common stock of Maker on the terms and conditions provided in paragraph 2 above. 4. LIMITATIONS ON RIGHT OF CONVERSION.Following receipt of the written election to convert the Note, Maker shall take such steps as it deems appropriate to permit conversion of the Note as specified in the election notice and to issue such Shares without registration or qualification under applicable federal and state securities laws. In order to comply with an exemption from the registration requirements of the Act and certain state securities laws, Maker required the original holder of this Note to make certain representations. In any event, any Shares delivered shall be subject to applicable restrictions on transfer under federal and state securities laws. 5. SATISFACTION AND DISCHARGE OF NOTE.This Note shall cease to be of further force and effect (except as to any surviving rights of conversion, transfer or exchange of the Note herein expressly provided for) when: (a) Maker has paid or caused to be paid all sums payable hereunder by Maker, including all principal amounts and interest accrued under the Note; and (b) All the conditions precedent herein provided relating to the satisfaction and discharge of this Note have been complied with. 6. EVENTS OF DEFAULT. "Event of Default" when used herein, whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law pursuant to any judgment, decree, or order of any court or any order, rule, or regulation of any administration or government body or be caused by the provisions of any paragraph herein, means any one of the following events: (a) Default in the payment of any interest on this Note when it becomes due and payable, and continuance of such default for a period of 30 days; or (b) Default in the payment of the principal amount of this Note when due, whether at maturity, upon prepayment, or otherwise; or (c) Default in the performance or breach of any covenant or warranty of Maker in this Note (other than a covenant or warranty the breach or default in performance of which is elsewhere in this section specifically dealt with), and continuation of such default or breach for a period of 60 days after there has been given to Maker by certified mail, by the holder of this Note, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a notice of default hereunder; or (d) The entry of a decree or order by a court having jurisdiction in the premises adjudging Maker a bankrupt or insolvent under the Federal Bankruptcy Act or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, trustee (or other similar official) of Maker or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (e) The institution by Maker of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or a filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Act or any other applicable federal or state law; or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee (or other similar official) of Maker or of any substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by Maker in furtherance of any such action. 7. ACCELERATION OF MATURITY. If an Event of Default occurs and is continuing, then, in every such case, the holder of this Note may declare the principal of this Note to be due and payable immediately, by a notice in writing to Maker of such default, and upon any such declaration, such principal shall become immediately due and payable. At such time after such declaration of acceleration has been made, and before a judgment or decree for payment of money due has been obtained by the holder, the holder of this Note, by written notice to Maker, may rescind and annul such declaration and its consequences, if all Events of Default, other than the nonpayment of the principal of this Note which has become due solely by such acceleration, has been cured or waived. No such rescission shall affect any subsequent default or impair any right consequent thereon. 8. ADJUSTMENT IN CONVERSION. The conversion price and number of shares issuable upon conversion of this Note shall be subject to adjustment from time to time as follows: (a) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If Maker shall at any time effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased. If the Maker shall at any time combine the outstanding shares of its Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (b) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event the Maker at any time shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion then in effect by a fraction: (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions. (c) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the event the Maker at any time shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Maker other than shares of Common Stock, then and in each such event provision shall be made so that the holder of the Note shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Maker that they would have received had the Note been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period, under this paragraph with respect to the rights of the holder of the Note. (d) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR SUBSTITUTION. If the Common Stock issuable upon the conversion of the Note shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of the Note shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such Note might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein. (e) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of any consolidation or merger of the Maker with or into another corporation, the Note shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of the Note would have been entitled upon such consolidation or merger; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 8 set forth with respect to the rights and interest thereafter of the holder of the Note, to the end that the provisions set forth in this Section 8 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Note. (f) Neither the purchase nor other acquisition by Maker of any shares, nor the sale or other disposition by Maker of any shares, shall affect any adjustment of the conversion price or be taken into account in computing any subsequent adjustment of the conversion price. (g) If at any time: (1) Maker proposes to pay any dividend payable in shares of common stock upon its shares or make any distribution, including cash or property dividend, out of earnings or earned surplus, to the holders of such shares; (2) Maker proposes to enter into any plan of capital reorganization or reclassification of the shares of such entity; or (3) Maker proposes to merge, consolidate, encumber or sell all or substantially all of its assets other than in the ordinary course of business; then, in any one or more of said cases, Maker shall cause a notice to be mailed to the registered holder of this Note at the address of such holder set forth in the registration records of the Maker. Such notice shall be solely for the convenience of such registered holder and shall not be a condition precedent to, nor shall any defect therein or failure in connection therewith affect the validity of, the action proposed to be taken by Maker. Such notice shall be mailed at least 10 days prior to the date on which the books of Maker shall close or a record date shall be taken for such share dividend, share split, reclassification, consolidation, merger, or sale of properties and assets, as the case may be. Such notice shall specify such record date or the date of closing of the transfer books. 9. RESTRICTIONS. The holder of this Note, by acceptance hereof, both with respect to the Note and the Shares to be issuable upon conversion of the Note, represents and warrants as follows: (a) The Note and the Shares are being acquired for the holder's own account to be held for investment purposes only and not with a view to, or for, resale in connection with any distribution of such Note or Shares or any interest therein without registration or other compliance under the Act, and the holder hereof has no direct or indirect participation in any such undertaking or in underwriting such an undertaking. (b) The holder hereof has been advised and understands that the Note and the Shares have not been registered under the Act, and the Maker is under no obligation to register the Note and/or the Shares under the Act. 10. DEFAULT COSTS. Should the Maker or the holder of this Note default in any of the covenants, conditions or promises contained herein, the defaulting party shall pay all costs and expenses, including a reasonable attorney's fee, which may arise or accrue therefrom, or in pursuing any remedy provided hereunder or by the statutes of any state. 11. RIGHTS CUMULATIVE. The rights and remedies granted to the parties hereunder shall be in addition to and cumulative of any other rights or remedies either may have under any document or documents executed in connection herewith or available under applicable law. No delay or failure on the part of a party in the exercise of any power or right shall operate as a waiver thereof nor as an acquiescence in any default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right. 12. WAIVER AND AMENDMENT. None of the terms or provisions of this Note may be excluded, modified, terminated or amended except by a written instrument duly executed on behalf of the party against which enforcement of the exclusion, modification, termination or amendment is sought. 13. NOTICES. All communications provided for herein shall be in writing and shall be deemed to be given or made when served personally or when deposited in the United States mail addressed, if to the Maker, to the attention of the President at the address of Maker set forth on the first page hereof, or if to the holder of this Note, at the address furnished to Maker by such holder, or at such other address as shall be designated by any party hereto in written notice to the other party hereto delivered pursuant to this paragraph. 14. NEGOTIABILITY AND TRANSFERABILITY. This Note is negotiable and transferable, subject to compliance with the provisions of paragraph 9 hereof. 15. PRESENTMENT WAIVER. The makers, guarantors and endorsers hereof, if any, severally waive presentment for payment, protest, and notice of protest and of nonpayment of this Note. 16. GOVERNING LAW. This Note shall be governed by the laws of the State of New York. ATTEST: DIGITAL LAUNCH, INC. /s/ Philip J. Watrous By: /s/ Terrence O. McGrath Title: Secretary Title: President Digital Launch, Inc. 250 West 57th Street Suite 2032 New York, NY 10107 Re: CONVERSION OF NOTE Gentlemen: The undersigned owner of the attached Note hereby irrevocably exercises the option to convert the Note, or the portion thereof designated, into shares of common stock of Digital Launch, Inc., in accordance with the terms of the Note, and directs that the shares issuable and deliverable upon the conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned unless a different name has been indicated below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay any transfer taxes payable with respect thereto. Date: 12/31/99 /s/ Michael Lauer (Signature) FILL IN FOR REGISTRATION OF SHARES LANCER OFFSHORE INC. - ------------------------------- --------------------------------------------- (Printed Name) (Social Security or other identifying number) KAYA FLAMBOYAN 9 - ------------------------------- --------------------------------------------- (Street Address) CURACAO, NETHERLAND ANTILLIES - ------------------------------- --------------------------------------------- (City, State and ZIP Code) Portion to be converted (if less than all) EX-10.9 16 ex-109.txt EXHIBIT 10.9 EXHIBIT 10.9 ASSET TRANSFER AGREEMENT THIS ASSET TRANSFER AGREEMENT is made as of the 31st day of December, 1999, by and between DIGITAL LAUNCH, INC., a Delaware corporation ("Transferor"), and VERONIQUE, INC., a Delaware corporation which is a wholly-owned subsidiary of Transferor ("Transferee"). In consideration of the premises and the mutual agreements as hereinafter set forth and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. TRANSFER OF ASSETS. (a) Transferor agrees to and does hereby sell, transfer and assign to Transferee, and Transferee agrees to and does hereby purchase from Transferor, all right, title and interest in and to the "Assets" (as defined below) as they exist as of the date hereof, it being understood and agreed that the Assets shall be conveyed to Transferee subject to all liens and encumbrances to which the Assets were and may have become subject. Transferee and Transferor agree that the Assets are transferred, conveyed and assigned to Transferee "AS IS, WHERE IS, WITH ALL FAULTS," and without representations, warranties or covenants of any kind or for any purpose whatsoever. (b) In this agreement "Assets" means, as of the date hereof (1) all accounts receivable of Transferor, (2) all tangible assets of Transferor, consisting of inventory, equipment, furniture and fixtures, but excluding cash and cash equivalents, and (3) all of Transferor's interest in intellectual property and other intangible assets relating to its skin-care business, including without limitation all trademark registrations and applications pending, trademark rights, trade names, trade dress, copyrights, Internet domain names, Web site designs, graphic designs, product formulas, distribution agreements, and other intangible rights relating to "Veronique", "DeChine" and Transferor's skin-care products and business. 2. PURCHASE PRICE; ASSUMPTION OF LIABILITIES. (a) In consideration for the transfer of the Assets to Transferee, Transferee agrees to and does hereby assume all of the "Liabilities" of Transferor (as defined below). The parties agree that, in connection with the transfer of the Assets and assumption of the Liabilities, they will execute such documents and deliver such instruments as may be reasonably necessary to effect such conveyance and assumption. (b) In this agreement "Liabilities" means all liabilities of Transferor reflected on its unaudited balance sheet dated as of the date hereof, a copy of which is attached hereto, together with any liabilities not disclosed thereon but which arose out of Transferor's skin-care business conducted at any time prior to or through the date hereof. 3. INDEMNIFICATION. Transferee agrees to indemnify, defend and hold harmless Transferor from and against any and all claims, demands, suits, actions, losses, costs and expenses of any nature whatsoever, incurred or suffered by Transferor, from or arising out of the Assets, the ownership or operation of the Assets before or after the transfer of the Assets, or the conduct of Transferor's skin-care business through the date of the transfer. 4. MISCELLANEOUS. (a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. (b) This Agreement embodies the entire agreement and understanding of the parties concerning the subject matter hereof. Any modifications or amendments to this Agreement must be reduced to writing and must be signed by both parties. (c) Should any section or any part of any section of this Agreement be rendered void, invalid, or unenforceable by any court of law, for any reason, such a determination shall not render void, invalid, or unenforceable any other section or any part of any section in this Agreement. (d) The validity and interpretation of this Agreement shall be governed by the laws of the State of New York. (e) The waiver of any one breach of the provisions of this Agreement shall not be deemed a waiver of any other breach of the same or any other provision of this Agreement. (f) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first set forth above. TRANSFEROR: DIGITAL LAUNCH, INC. By: /s/ Terrence O. McGrath Title: President TRANSFEREE: VERONIQUE, INC. By: Philip J. Watrous Title: Secretary Digital Launch, Inc. Liabilities as of December 31, 1999
DEC. 31, 1999 ------------- A.D.M. Delivery Service, Inc. 250.00 AJ Credit Corp. 8,817.08 Airborne Express 25.00 Arbus Corporation 11,241.59 AT&T Universal Business 3,912.25 BAM-TOM 1,338.18 Bell Atlantic Mobile -5.66 Business Wire 510.00 Cabral, Cunha Ferreira & Associados, Lda 670.00 Capricorn 787.80 Carpmaels & Ransford 166.50 CCL Pastic Packaging 5,559.49 Charles H. Brassard 1,750.00 Charles Snyderman, Esq. 282.33 City of New York 357.00 Corwood Laboratories Inc. 2,086.30 CSC 185.00 CUSIP Service Bureau 130.00 Daniel & CIA 400.00 David L. Haselkorn, Esq. -2,246.04 Deacons Graham & James 774.85 Diamond Truck 54.79 Direct Network 15,571.12 Eden Temporary Services, Inc. 5,875.00 F.N. BURT Company Inc. 17,771.35 FEDEX 1,855.89 Ferster - Jack Most 9,590.58 Flood Marketing Resources 7,500.00 G.O.D. 552.68 Global 1,200.00 Grant Industries 197.10 GSB of DC Inc. 83.00 Helmsley-Spear, Inc. -2,611.17 Hibernia 12.95 Innovative Liners 11,664.90 Isadora's Cafe 898.69 Jean S. Mateyka 900.00 Jeffrey M. Brinn 3,050.00 Joe DiNardo 3,000.00 Josef von Habsburg 500.80 Digital Launch, Inc. Liabilities as of December 31, 1999 Just Packaging, Inc. 53.00 Lucent 660.90 Mack/Corr Industries 2,057.62 Markham/Novell 14,463.10 Marty R. Engineering 6,657.02 MCI 36.69 MetraCom 887.01 Nadel Industries 1,927.30 New York State Sales Tax 57.73 Overnite Transportation Co. 2,002.04 Pegasus Internet, Inc. 16,372.86 Piedmont Trans. Group 342.53 Pierce Leahy 715.73 Priminter, Inc. 219,218.69 Raines & Fischer 6,000.00 Robert N. Waxman 510.00 Simone B. Hoffman 57,585.32 Sogecos Srl 2,474.79 STADCO Lithographers, Inc. 47,132.33 Stan Adler Associates 105,310.30 Staples 179.41 State of New York 250.00 T.O. McGrath - Salary 50,000.00 T.O.McGrath - Loan 3,000.00 Thacher, Vendig & Company, Inc. 218.00 The Depository Trust Company 85.00 The State Insurance Fund 274.77 Thomson & Thomson 400.53 Transmart 2,065.00 Treehouse Media 2,004.92 U.S. Express 188.40 UniDial - 10902300 1,401.73 Vegia Packaging Co. Inc. 12,868.60 Walter P. Smith, Ph.D. 18,300.00 Winner Printing & Packaging Ltd. 1,350.00 Wuesthoff & Wuesthoff 130.09 ------------- TOTAL 691,840.76 -------------
EX-10.10 17 ex-1010.txt EXHIBIT 10.10 EXHIBIT 10.10 SOFTWARE LICENSE This Software License and Services Agreement (hereinafter "Agreement") is entered into as of December 6, 1999 by and between OneWeb Systems, Inc. (hereinafter, "OWS"), a Georgia corporation, having its principal place of business at 6195 Barfield Road, Suite 170, Atlanta, GA 30328, and GlobaleTutor (hereinafter "Licensee"), having its principal place of business at 3340 Peachtree Road N.E., Suite 1800, Atlanta, GA 30326. W I T N E S S E T H: WHEREAS, OWS has created the OneWeb software development platform and the family of products created with the OneWeb software development platform, specifically the OneWeb Advantage application server (hereinafter "Software") to manage internet based information and services that Licensee wishes to utilize as part of an internet/intranet/extranet or TCP/IP based business solution; and WHEREAS, Licensee wishes to obtain a license for the Software and any custom configurations or custom development (hereinafter "Modifications"), including original designs, artwork and/or engineering specific to the Licensee, (hereinafter collectively called "Products") for use as part of the internet/intranet/extranet or TCP/IP based business solution; NOW THEREFORE, for and in consideration of the above premises, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties agree as follows: 1. GRANT OF LICENSE. OWS grants to Licensee a perpetual, non-exclusive, non-transferable application-based license to use the Products (in executable, compiled code) for a single application on a single server PC, subject to earlier termination as provided in paragraph 8 hereof. The Product may only be used as described in this Agreement. 2. CUSTOM MODIFICATIONS. OWS will develop the Modifications as outlined in EXHIBIT A. Licensee acknowledges that OWS shall own all right, title and interest in and to, and all proprietary rights in, the Modifications which are licensed to Licensee pursuant to paragraph 1 hereof. Notwithstanding the foregoing, Licensee shall own that portion of the final executable/compiled code of the Modifications which are specific to Licensee's business. 3. DELIVERY OF PRODUCTS. Upon completion of the Modifications, OWS will provide a copy of the Products to the Licensee along with related documentation as specified in the scope of work and applicable user manuals (collectively, "Documents"). 4. COMPENSATION. (a) PAYMENT. As full payment to OWS, Licensee will pay to OWS the fees set forth. All payments are due within thirty (30) days of invoice date. (b) LATE PAYMENTS. Licensee agrees to pay a late payment charge at the rate of 1 1/2% per month or the maximum late payment charge permitted by law, whichever is less, on any unpaid amount for each calendar month (or fraction thereof) that such payment is in default. (c) TAXES. The fees listed or referenced in this Agreement do not include taxes. If OWS is required to pay or collect any sales, use, property, value-added, duty or other similar federal, country, state or local taxes based on the licenses granted or the services to be provided pursuant to this Agreement or on the use of Products or Documents by Licensee, then such taxes shall be billed to and paid by Licensee. This provision shall not apply to taxes based on OWS's income. 5. PROTECTION OF PROPRIETARY RIGHTS. (a) OWNERSHIP. The Products are and shall remain the property of OWS. Licensee acknowledges that it has no right to use, distribute, assign, sublicense or resell any of the Products except as herein specifically provided. (b) PRODUCT REVERSE ENGINEERING. Licensee shall not reverse engineer, disassemble, or reverse compile the Products, in whole or in part, or otherwise derive any source code therefrom. (c) TRADEMARKS AND TRADE NAMES. Licensee recognizes that the marks "OneWeb", "OneWeb Advantage" and "OneWeb Backdoor" are trademarks owned solely and exclusively by OWS. Licensee recognizes the value of these marks to OWS and the good will and reputation associated with the marks. 6. SUPPORT. OWS will provide Technical Support to Licensee's designated and trained administrative personnel during OWS's then standard published support hours and in accordance with the then current fee schedule. Routine training questions and questions related to how to use the Products will not be provided as a part of the Technical Support but will be provided for as training in accordance with the fee schedule provided in EXHIBIT B. 7. UPGRADES AND ENHANCEMENTS. OWS may from time to time release corrections, modifications, upgrades and enhancements of the Software and related documentation. OWS will make these releases available to the Licensee as they are generally made available to OWS's other customers if the Licensee at the time of the release has contracted for such maintenance. Such releases will be provided "AS IS" without any warranty except as provided in paragraphs10. The provisions of Paragraph 4 will govern the compensation for such maintenance. 8. TERMINATION. (a) TERMINATION BY OWS. OWS may terminate the license granted herein: (i) If for any reason Licensee does not make any payment when due as provided for in EXHIBIT B and such default continues for ten (10) days after receipt of written notice of such default; or (ii) If the Licensee fails to comply with any of the other material terms or conditions of this Agreement or of its obligations herein and such default continues for thirty (30) days after receipt of written notice of such default. (b) TERMINATION BY LICENSEE. In addition, Licensee may terminate this Agreement at any time after delivery of the Products upon the breach of any of the material terms and conditions by OWS and such default continues for thirty (30) days after receipt of written notice of default. In which event, Licensee shall pay OWS all Services Fees performed up to termination and the total of all License Fees included in EXHIBIT B. (c) EFFECT OF TERMINATION. If for any reason this Agreement is terminated, the termination does not relieve the Licensee of the responsibility to pay any outstanding payments due at the time of termination. If this Agreement is terminated, the Licensee will immediately stop using the Products, destroy all copies of the Products and will certify to OWS in writing that no copies of the Products are still in use or in the possession or control of the Licensee. 9. CONFIDENTIALITY. Licensee acknowledges that the Products contain valuable trade secrets and other proprietary property and confidential information of OWS. Each party acknowledges that all proprietary property and confidential marketing, financial and business information of the other party (hereinafter "Owner") made available to the other party (hereinafter "Recipient") may represent proprietary property and/or confidential information of the Owner that constitutes valuable commercial assets of the Owner. Recipient agrees to hold in confidence all such proprietary property and confidential information of the Owner provided pursuant to this Agreement and Recipient further agrees that it shall not disclose same to any third party for any reason without the prior written consent of the Owner or use it except as herein permitted. The Recipient shall take reasonable security precautions to prevent the unauthorized use and disclosure of the confidential information and proprietary property of the Owner to any person or entity and shall use not less than the same degree of care to avoid unauthorized use and disclosure of such information and property as Recipient employs with respect to its own proprietary property and confidential information of like importance, which shall not be less than what a prudent business person would employ to safeguard its own proprietary property and confidential information of like importance from unauthorized use and disclosure. 10. AUTHORITY AND TITLE. (a) WARRANTY OF TITLE. OWS does hereby represent and warrant to and covenant with Licensee that: (i) OWS owns all right, title and interest in and to the Products or has obtained all necessary rights to grant the rights granted herein to Licensee; (ii) the Products as delivered by OWS infringes no patent, copyright, trademarks, or trade secrets of any other party enforceable in the United States; and (iii) OWS has full power and authority to enter into this Agreement and to grant the license herein granted. (b) INDEMNIFICATION. OWS shall indemnify , defend and hold harmless Licensee and its officers, directors, shareholders, agents and employees from and against any claim, demand, liability, loss, and reasonable costs and expenses including, but not limited to, attorney's fees, incurred by such indemnified party as a result of a breach of the foregoing warranties and covenants, provided that: (i) Licensee promptly notifies OWS in writing of any such claim; (ii) Licensee permits OWS to control the defense and settlement of the claim; and, (iii) Licensee provides to OWS reasonable assistance in defending and settling any such claim. Reasonable out-of-pocket expenses incurred by Licensee in providing such assistance will be reimbursed by OWS. (iv) Licensee may, at its own cost, participate in the defense and settlement of any such claim using counsel selected by Licensee. (c) NO LIABILITY. OWS shall have no liability for any claim of infringement based on: (i) use of a superseded or altered release of the Product or Document if such infringement would have been avoided by the use of a current unaltered release of the Product or Document; or, (ii) the combination, operation, or use of the Product with programs or data not furnished by OWS if such infringement would have been avoided by the use of the Product without such other programs or data. (d) REMEDIES. Following such infringement claim, OWS shall have the option, at its sole expense, to: (i) modify the Products or Documents to be non-infringing; (ii) obtain for Licensee a license to continue using the Products or Documents; or (iii) if the foregoing are not commercially reasonable, terminate the license for the infringing Products and refund a portion of the license fees paid for such infringing Products, determined by pro-rating such fees over a five (5) year term. Such refund shall be equal to the product of such license fees paid times the fraction, the numerator of which is sixty (60) less the number of months such Products have been licensed hereunder, and the denominator of which is sixty (60). (e) ENTIRE LIABILITY. This paragraph 10 states the entire liability of OWS for infringement. 11. WARRANTY. (a) GENERAL. OWS warrants that the Products during the sixty (60) day period from the date of the delivery of the Products to Licensee (hereinafter "Warranty Period") will perform substantially in accordance with the specifications as set forth in the scope of work. (b) OBLIGATIONS OF OWS. If within the Warranty Period Licensee notifies OWS in writing of a failure of the Product to perform as warranted in any material respect and if OWS is able to reproduce such non-conformity, Licensee agrees that its sole and exclusive remedy and OWS's sole obligation is for OWS to do the following: (i) use commercially reasonable efforts to correct the non-conformity; (ii) if OWS is unable to provide necessary corrections promptly, provide a workaround for such non-conformity and provide an estimate of time at which it will be able to provide a correction; and (iii) use commercially reasonable efforts to assist Licensee in repairing or recovering any Product related data that may have been damaged or lost as a result of such non-conformity. However, with respect to non-conformities that OWS reasonably determines are caused by third party components of the Products, its obligations are limited to using commercially reasonable efforts to procure corrective code or workarounds from the third party licensor to OWS and, upon receipt, promptly providing such corrections to Licensee. (c) EXCLUSIONS. Non-conformities resulting from the following are excluded from the scope of OWS's obligations: (i) misuse or neglect; (ii) failure to install or use the Products in accordance with the related Documents; (iii) alteration or modification of the Products (excluding modifications made by any utility program provided by OWS); or (iv) use with or on computers, peripherals, or operating system programs not approved by OWS. (d) ALTERNATIVE. If, after a reasonable number of attempts, OWS is unable to correct the non-conformity of the Products, OWS or Licensee may elect to terminate the license granted pursuant to this Agreement (on a date not later than sixty (60) days after the expiration of the Warranty Period) and OWS's sole liability will be to refund to Licensee all license fees paid under this Agreement for such Products upon the return of the Products, Documents, and all copies, in whole or in part, thereof. 12. EXCLUSION OF OTHER WARRANTIES. OWS does not warrant that the Products will meet Licensee's requirements, or will operate in combination with other programs that Licensee selects, or that the operation of the Products will be uninterrupted or error-free or that all non-conformities will be corrected. EXCEPT AS SET FORTH IN PARAGRAPHS 10 AND 11 ABOVE, THERE ARE NO WARRANTIES, REPRESENTATIONS, OR CONDITIONS OF ANY NATURE, EXPRESS OR IMPLIED, RESPECTING THE PRODUCTS AND DOCUMENTS, THEIR USE, OR ANY SERVICES TO BE PROVIDED HEREUNDER, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTIES ARISING BY STATUTE OR OTHERWISE BY LAW OR FROM A COURSE OF DEALING OR USAGE OF THE TRADE. 13. LIMITATION OF LIABILITY. (a) EXCEPT AS SET FORTH IN PARAGRAPH 10, IN NO EVENT SHALL OWS BE LIABLE TO LICENSEE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, REVENUE OR DATA, HOWEVER INCURRED, WHETHER IN AN ACTION IN CONTRACT OR IN TORT OR OTHERWISE, EVEN IF OWS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. (b) Except as set forth in paragraph 10, the liability of OWS for damages hereunder shall in no event exceed the amount of fees paid by Licensee under this Agreement during the preceding twelve (12) months. (c) The provisions of this paragraph 13 allocate the risks under this Agreement between OWS and Licensee. OWS's pricing reflects this allocation of risk and the limitation of liability specified hereunder. 14. GOVERNING LAW; VENUE. This Agreement will be governed by and construed in accordance with the laws of the State of Georgia. The parties consent to venue and jurisdiction of the applicable courts of the State of Georgia and the Federal District Court for the Northern District of Georgia for actions relating to this Agreement in addition to any other appropriate jurisdictions. 15. FORCE MAJEURE. Neither party shall be responsible for delays nor failure of performance resulting from acts beyond the reasonable control of such party. Such acts shall include, but are not limited to, acts of God, strikes, walkouts, riots, acts of war, terrorist actions, epidemics, failure of suppliers to perform, governmental regulations, power failures, earthquakes, or other disasters. 16. ARBITRATION. Any disputes arising under this Agreement shall be settled by binding arbitration between the parties hereto in accordance with the commercial arbitration rules of the American Arbitration Association. Such arbitration shall be administrated by the Atlanta office of the American Arbitration Association. 17. CONSENT TO BREACH NOT WAIVER. No term or provision hereof shall be deemed waived and no breach excused, unless such waiver or consent is in writing and signed by the party claimed to have waived or consented thereto. No consent by any party to, or waiver of, a breach by the other party shall constitute consent to, waiver of, or excuse of any other different or subsequent breach. 18. NOTICES. All notices, requests, demands, and other communications required or permitted hereunder shall be in writing and, (a) if mailed, shall be sent by prepaid certified or registered mail, return receipt requested, and shall be deemed to have been received on the earlier of the date shown on the receipt or three (3) business days after the postmarked date thereof; (b) if by facsimile, shall be followed on the same day by a written notice sent by prepaid certified or registered mail, return receipt requested, and shall have been deemed to have been received on the next business day following transmission and acknowledgment of receipt by the recipient's facsimile machine; (c) if by hand delivery, the notice shall be deemed to have been received when delivered to the recipient, or if by overnight courier, in which event the notice shall be deemed to have been received upon delivery by such courier. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses (a) If to Licensee, at the address above to the President's attention; (b) If to OWS: OneWeb Systems, Inc., Attention: President Suite 170 6195 Barfield Road Atlanta, Georgia 30328 Any party may change the person or addresses specified for notices by designating a new person or address by notice in accordance with this section. 19. COMMENCEMENT OF ACTIONS. No action arising out of any claimed breach of this Agreement or the services to be provided hereunder may be brought by either party more than one (1) year after the cause of action has occurred except that a claim for payments due hereunder may be brought within the period of the statute of limitations. 20. U.S. GOVERNMENT RESTRICTIVE RIGHTS. Use, duplication and disclosure by the U.S. Government, including any agency thereof, is subject to the restrictions as set forth in subparagraph (c)(1)(ii) of the Rights in Technical Data and Computer Software clause at DFARS 252.227-7015(b) and 227.7202 and FAR-52.227.19 and 52.227-14(g)(2). Contractor/Manufacturer is OWS at 6195 Barfield Road, Atlanta, Georgia 30328. 21. ENTIRE AGREEMENT. This Agreement constitutes the complete and entire agreement between OWS and Licensee related to the subject matter herein. There are no verbal or written representations, inducements, promises or agreements upon which any party relied or which induced any party to enter into this Agreement which is not embodied herein. This Agreement may only be modified, amended or otherwise changed in writing signed by both parties. The terms of this Agreement will prevail and supersede any and all prior agreements, oral or written, pertaining to the subject matter herein. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the day and year first set forth above. For Licensee By: /s/ Thomas McMurrain Date: 12-8-99 Name: Thomas McMurrain Title: President OneWeb Systems, Inc. By: /s/ George C. Welborn, Jr. Date: 12-8-99 Name: George C. Welborn, Jr. Title: President Exhibit A SCOPE OF WORK GLOBALETUTOR Introduction GlobaleTutor would like to establish an education related portal providing tutoring related content aimed initially at forth through eight grade students and their parents. This project consists of an interim registration site and public and password protected sections for the live site. The registration site and the live site will utilize the same graphic and interface design components. The visitor will be able to locate the available content for the grade, course and section they desire. The content will be offered in 5 available languages and cookies will be set to determine the default language. Limited personalization will be provided initially. The visitor will pay for use of this service on a fee per user per month basis. The site will allow the client's staff to manage the content and users of the site through the OneWeb BackDoor Administrative Interface. GlobaleTutor Project Overview Public Site - - What we do - general information and examples about the services provided - - Who we are - information about the organization, purpose, target audience - - How to sign up (Registration) - Collect user and demographic information - - FAQ's - frequently asked questions related to the costs and services provided - - Sponsor Organizations - information and links to sponsor organizations - - Contact us - provide address, phone and email contact information - - Members Only - asks for user name and password Password Protected Site Identify appropriate tutorial content - Allow the visitor to locate the specific information they desire, grade, course, section, etc. - - Downloadable Content - provides the ability to download tutorial content. The content and specific navigational requirements will be included in the content development process. - - Assessment - delivers an educational assessment for parents and children. Creation of the assessment criteria is included in the content development process. - - Interactive On-line Content - Creation of the interactive content is included in the content development process. - - BackDoor - the administrative interface included with OneWeb Advantage that provides content and user administration capabilities. - - Chat (Help) - allows users to exchange information in a live chat environment - - Scoreboard - utilization reports or meter comparing use by language. - - Customer Service - provides for the user to change registration, discontinue service, contact customer service, provide feedback, etc. - - Resources - provides text and links to additional resources such as books - - E-Commerce - Ability for users to sign up and securely pay for services - on-line Items not Included in the GlobaleTutor Project - - Interface to accounting system other than exported ASCII file - - Banner Advertising - includes targeted display advertising and email related - - Reports on demographics - not yet defined - - Development of assessment process - - Development and population of tutorial content - - Hardware and hosting services - - On-going site and content maintenance services - - Server Setup - - Telephone Support Capabilities and Functions of OneWeb Advantage(-TM-) BackDoor Administrative Interface - The OneWeb Backdoor provides an administrative interface that allows non-technical personnel to maintain and expand the content of OneWeb Advantage sites. The general capabilities of the Backdoor Administrative Interface consist of the following: General Preferences - Allows the system-wide definition of user and site preferences including company contact information, list publishing, etc. Multiple Levels of Security - Provides the ability to assign users different rights and privileges in order to control who can access which sites and what each user can do within each site. Text Publishing Maintenance - Allows for the modification of all text, articles, graphics, newsletters, corporate information, and links through the browser. Catalog and Order Maintenance - Allows browser access to create, modify and maintain catalog contents including credit card verification and shopping cart capabilities. Complete order maintenance and reporting capabilities are provided to simplify e-commerce and catalog maintenance. Database Maintenance - Allows browser access to modify database contents and reporting options. Creation of Forms - Allows for forms to be easily created by non-technical staff and automatically creates the underlying databases as the form is created. Create Reports - Allows for a wide variety of custom reports to be defined by the system administrator and the information presented to the appropriate users via dynamically created reports. SQL Reports - Allows for the creation of reports based on information stored in existing SQL databases. This provides for the Web enabling of corporate information stored in ODBC compliant databases without undertaking costly extensive engineering projects. The information can be presented to the appropriate users dynamically through a user controlled reporting interface. Image and Document Library - A complete library system is provided for maintaining all kinds of files and information. This includes the maintenance of images, documents, spreadsheets, PDF files, and multi-media files for use in the publishing interface. List Management - Allows for simple maintenance of the complete navigational structure of the site. Forums - Allows establishment of forums to facilitate exchange of ideas and information on specific topics between site visitors. Exhibit B Compensation Terms The project development cost is $100,000.00 including the license fee, discovery, design, development, delivery, and project management costs as described below. Other additional costs, if applicable, are also included below. B-1 License Fees A one-time License fee of $40,000 for OneWeb is included in the cost of this project as outlined in Exhibit A. If in the future additional projects require additional sites created or additional instances of OneWeb to be installed, additional licensee fees will be required. Licensee may modify the scope of the Custom Modifications but all modifications must be authorized in writing and the Licensee agrees to pay for all custom modifications made on the behalf of the Licensee whether or not the requested custom work performed by OWS is used. It is understood by both parties that any modification of the scope will have an impact upon the project's delivery schedule and that both parties will work to minimize the impact on the project's delivery schedule. License Fee: $ 40,000.00 B-2 Discovery Fees The first phase in the OneWeb Systems Development Process is the Discovery Meeting. The purpose of this meeting is to clarify and document design, navigational and functional requirements before work on the project begins. A OneWeb Systems Project Manager, Developer and Designer will meet with you to ensure a clear understanding of business needs and project goals. Data collected in this meeting will be used to develop a detailed site map. Discovery Fee: $ 5,000.00 B-3 Design Fees The Design Phase begins upon approval of Discovery. The purpose of the Design Phase is to develop final site design and navigation. Design is a collaborative process between the customer and a Designer. The Design Phase begins with a meeting between the customer and the Project Manager. Topics discussed in this meeting are site "look and feel", navigation and business requirements. This is a creative session. Any preconceived or preexisting graphical concepts that the customer has will be considered for incorporation into the site design. Customer expectations should allow for a minimum two-week Design phase. This phase will be longer if corporate image and branding, character development or animation is a project requirement. The Designer develops initial sketches from input received in the Design meeting. Upon customer approval of initial sketches, the Designer develops design "comps." The customer has the opportunity to select from these design choices and make adjustments to the design as needed. The Designer will then develop a final site design from the customer's selection. The Design Phase concludes when the customer showing acceptance of the final design signs the OneWeb Systems Design Approval form. Changes to the design from this point forward are mutually agreed upon by OneWeb Systems and the customer and are documented using the OneWeb Systems Change Control form. Design Phase Deliverables include: - - Design Meeting - - Initial Sketches - - Three Design Comps - - One Final Site Design Design Fee: $25,000.00 B-4 Development Fees The Development Phase begins upon approval of the final site design. During this phase the OneWeb Systems Development Team will enable the design including the required navigational elements and business functionality for the Web site using OneWeb Advantage(-TM-) software. The OneWeb Systems Project Manager communicates with the Developer and at agreed upon project milestones, updates the customer on project status. Customer expectations should allow for a minimum four-week Development Phase, allowing adequate time for quality assurance. The actual length of the Development Phase is dependent on project complexity. Custom development or integration of a third-party product will also add to project complexity. Upon completion of the Development Phase deliverables, the OneWeb Systems Project Manager will work with the customer to confirm all project requirements have been met. The Development Phase concludes when the customer accepts the final design by signing the OneWeb Systems Development Approval form. Changes to the site functionality from this point forward are mutually agreed upon by OneWeb Systems and the customer and are documented using the OneWeb Systems Change Control form. Development Phase Deliverables include: - - Working Prototype of Client Web Site - - Activation of All Required Site Functionality - - Custom Development and Integration of Third Party Products (if required) - - Complete and Functional Final Web Site Development Fee: $ 10,000.00 B-5 Delivery Fees The Delivery Phase begins upon receipt of the signed Development Approval Form. During this phase the customer will receive training on the operation of their site and on the use of OneWeb Advantage(-TM-) software. All proprietary information supplied by the customer to aid in creation of the site will be returned to the customer. Final hardware configuration and installation at the customer site will take place, or hosting at OneWeb Systems will begin, upon completion of the Delivery Phase. The Delivery Phase concludes when the customer showing acceptance of the delivery of project signs the OneWeb Systems Project Approval form. Changes to the site design or functionality from this point forward are mutually agreed upon by OneWeb Systems and the customer and are documented using the OneWeb Systems Change Control form. Delivery Fee: $ 10,000.00 B-6 Project Management Fees One (1) OneWeb Systems Project Manager will be assigned to your project upon acceptance of the "Terms" within this document. Their technical advice pertinent to the execution of this project is included in this proposal. Project Management Fee: $ 10,000.00 B-7 Annual Maintenance Fee OWS provides annual Maintenance Services for $8,000 which includes free upgrades as OneWeb is upgraded and access to technical support by your technical staff to assist in resolving any technical or interface issues that arise. The initial Annual Maintenance fee is payable upon delivery of site and will be billed each year during the month the software was delivered. Licensee is not expected to pay the next Annual Maintenance fee until March 1, 2001. Annual Maintenance Fee: $ 8,000.00 B-8 Training Services All training to be provided by an third party firm. Any training services provided by OWS will be billed in accordance with the then current price schedule for training. B-9 Technical Support No technical support for end users is provided under the terms of this Agreement. Should the Licensee desire additional technical support services for its agents or clients, OWS will negotiate the fees and responsibilities for the additional services separately. B-10 Payment Terms Upon execution of this agreement, $ 70,000.00 of the Total Project Cost is due. $ 5,000.00 of the Total Project Cost is due upon completion of the Registration Site. At delivery of Final Site, the remaining $25,000.00 of the Total Project Cost plus annual Software License Maintenance is due. Any additional work entered into and agreed upon by both parties is due 30 days after invoicing. B-11 Payment Schedule
task 12/06/1999 01/01/2000 03/01/2000 ---------------------------------------------- license fee Included ---------------------------------------------- discovery Included ---------------------------------------------- Design Included included included ---------------------------------------------- Development included included included ---------------------------------------------- Delivery included ---------------------------------------------- Project management included included included ---------------------------------------------- Maintenance (annual) included ---------------------------------------------- ---------------------------------------------- Total project cost $70,000.00 $5,000.00 $33,000.00 ----------------------------------------------
B-12 Additional Work Any work not covered within this proposal will be entered into as separate agreement or project and priced either on a project basis or on the then current OneWeb Systems hourly rate. Our current hourly rate is $200. EX-10.11 18 ex-1011.txt EXHIBIT 10.11 EXHIBIT 10.11 OneWeb Systems, Inc. February 15, 2000 Mr. Tom McMurrain GlobalETutor 3340 Peachtree Road, Suite 1800 Atlanta, GA 30326 Authorization to Proceed This interim Agreement between GlobalETutor, Inc. ("Client") and One Web Systems, Inc. ("OneWeb") authorizes One Web to perform content-specific work on the Client's Web Site. A Master Service Agreement is being prepared and will supersede all prior agreements. By signing below, Client authorizes OneWeb to proceed with the creation of the initial tutorial content required for the initial Web site launch. In order to create the initial content, OneWeb will contract with NIIT to supply OneWeb with 7 educational staff members to work under the direction of One Web. These staff members will under contract with OneWeb for 4-6 weeks, and their services will be billed weekly per the schedule provided below. The estimated cost of the first 4 weeks of the content development effort is $216,000. The content work covered under this Agreement is in addition to the OneWeb development efforts previously authorized. The Client understands that this is only an estimate and that the Client will be billed for the actual costs on a time an materials basis. After the initial 4-6 week engagement, the content pricing will be reviewed and a fixed price fee proposal for content development will be prepared as an option to replace the time and materials methodology. OneWeb requires an up-front payment of half of the estimated cost of the content creation effort. OneWeb will bill the client weekly for the actual services provided. A prorated portion of the up-front will be credtied to each weekly invoice and the balance will be due 15 days from the billing date.
Hourly Staffing Rates Instructional Designer $270 Designers $180 Educational Writer $180 Educational Developers $180
Please sign below to indicate your acceptance of this Authorization to Purchase and send the original copy back to OneWeb Systems, Inc. In order to proceed, the initial payment must be received by OneWeb. Accepted on behalf of: OneWeb Systems, Inc. GlobalETutor.com /s/ Art Bottoms /s/ Thomas McMurrain VP of Finance Chief Executive Officer EX-10.12 19 ex-1012.txt EXHIBIT 10.12 EXHIBIT 10.12 PROJECT FEE AGREEMENT FOR GlobaleTutor.com This Agreement is between GlobaleTutor.com (Client) and 360 thinc ltd., (Agency). Your signature on this agreement will confirm your acceptance of the following terms of service and your appointment of Agency to perform certain and specific marketing related services. Agency shall develop a blueprint for your marketing & communications program. Upon approval of this project fee agreement, Client will pay Agency a fee of $95,000. This fee will be paid in cash (two installments, with the first half due with approval of this project fee agreement, and final payment due 60 days from the signed agreement). 360's Project Development's process includes the following: The fee will cover: 1. Management time for the following 360 team members: - Agency Principals - Creative Director - Director of Consumer Strategy - Promotions Director - Client Manager - Project Coordinator - Creative Concepting Teams - Traffic Manager - Support Staff 2. Project development: - Conduct secondary usage and attitude research as required, but subject to expense approval - Develop overall strategic direction - Formulate positioning platform - Define target segments - Formulate opportunities to bundle consumer benefits - Develop creative platform - Develop media approach - Develop promotional platform - Construct budget allocation analysis 3. Marketing Blueprint: - Discovery Overview - Development Overview - Opportunities Review - Strategic Conclusions - Positioning Summary - Targeting Rationale - Program and Creative Concepts - Tactical Approach - Promotional Approach - Media Plan Recommendations - Budget Allocations - Implementation Timetable - Pro Forma Business Rationale The Blueprint will focus on developing a corporate partnership program; a well-defined plan to establish, grow and promote relationships with key targets. This does not include time for our Research and Discovery Phase. Client will provide to Agency all previous research prepared by Cohn & Wolfe. This project fee does not include fee to implement program, promotion execution, production supervision, production preparation (final layouts and mechanical), production estimating, copywriting or any production work. It also does not include media placement. Once client has approved a concept for production, Agency will present a project fee to manage the process. Client agrees to pay Agency for all reasonable and out-of-pocket costs such as research (if approved), overnight delivery or courier services, long distance phone, long distance FAX, four color output, color copies, local mileage and travel costs. Agency will bill these expenses at net cost. These invoices are due within 30 days of receipt. The ideas and/or concepts prepared by Agency for Client as well as any production of materials pertaining thereto, which are presented to Client, shall constitute the Agency's property until fee and all miscellaneous expenses are paid in full. For any breach of this Agreement by Client, Client agrees to pay Agency's reasonable fee for any further use of the ideas and/or concepts prepared by Agency for Client. Furthermore, once Client has breached this Agreement, Client promises not to utilize any ideas, concepts or materials presented by Agency without Agency's prior express permission, unless previously paid for by Client. In the event that a legal action or proceeding is initiated by either party to enforce this contract, the prevailing party shall be entitled to receive the reasonable attorney's fees, costs, AND expenses incurred in connection with the action or proceeding to enforce this contract. Agency agrees to exercise our best judgment in the preparation of all advertising, publicity and marketing materials for Client, with a non-lawyer's view to avoiding claims, proceedings, or suits being made or instituted against Agency or Client. It is mutually agreed, however, that except for negligence of Agency, Client will indemnify Agency against any loss Agency may incur as the result of any claim, suit, or proceeding made or brought against Agency based upon any advertising or publicity that Agency prepared for Client and that Client approved before its publication or broadcast. Agency agrees to give Client prompt notice and sole control of the defense of any such claim, suit or proceeding. With regard to any such claim, suit or proceeding made or brought against Client attributable to the negligence or any improper actions of Agency which subjects Client to any liability (regardless of whether Client has approved any advertising or publicity that Agency has prepared before the publication or broadcast of such advertising or publicity), Agent will indemnify Client against any loss Client may incur as the result of any claim, suit or proceeding made or brought against Client based upon any such advertising or publicity Client shall give Agency prompt notice and sole control of the defense of any such claim, suit or proceeding. The provisions of this paragraph shall survive any termination of this Agreement. Client may, in connection with this Agreement, disclose or make available for inspection and use by Agency certain information relating directly or indirectly to Client's business, including but not limited to sales data, marketing programs and concepts, and internal procedures (collectively, the "Confidential Information"). Agency agrees that during the term of this Agreement, and a period not to exceed one year beyond this agreement, it shall keep all Confidential Information in strict confidence, that it shall use the Confidential Information only for purposes of performing its obligations hereunder and that it shall only disclose the Confidential Information to those of its employees with a need to know and who have agreed to keep the Confidential Information confidential. Agency agrees that Client retains all right, title and interest in and to the Confidential Information. Client acknowledges that, in the course of its engagement with Agency, it will learn about the Agency's business and its employees and will develop working relationships with such employees. Client acknowledges the time and effort Agency has spent to train and develop its employees. Therefore, during the term of Client's engagement with Agency, and for a period of eighteen (18) months following termination of such engagement for any reason, Client agrees not to hire any employee of Agency or to solicit or in any manner encourage any such employee to leave his or her employment with Agency. This restriction is limited to employees of Agency with which Client had contact during the one-year period immediately preceding the termination of Client's engagement with Agency. This agreement will be governed by Georgia law, and will not be construed as establishing a joint venture. Waiver of any breach will not be construed as a waiver of any subsequent breach. If any paragraph is held unenforceable the remainder of the agreement is enforceable. AGREED TO AND ACCEPTED BY: GlobaleTutor.com 360, INC. Tom McMurrian By: /s/ Tom McMurrian By: /s/ Mark Goldman Title: President Title: President Date: 1-10-00 Date: 1-7-00 EX-10.13 20 ex-1013.txt EXHIBIT 10.13 EXHIBIT 10.13 COHN & WOLFE November 19, 1999 Mr. Tom McMurrain CEO & Founder GlobaleTutor.com 3340 Peachtree Road Suite 1800 Atlanta, GA 30326 Dear Mr. McMurrain: This letter constitutes the agreement between GlobaleTutor.com ("Client"), and Cohn & Wolfe ("C&W"), regarding communications services provided to Client by C&W. 1. SERVICES a. PROFESSIONAL SERVICES. As requested by Client, C&W will provide professional services, including but not limited to: - counseling; - developing public relations plans; - preparing news releases, feature articles, public - announcements and background information for - distribution to communications media; - representing the Client before legislative and regulatory - organizations and other publics; - writing and producing films, videotapes, flip charts, direct - mail materials, and; - staging and conducting meetings and other events. b. SPECIAL SERVICES. In addition to the professional services specified in Section 1(a) above, C&W may provide additional services for projects and products as requested by Client. Before special services are undertaken, Client and C&W will agree on how C&W will be compensated. 2. COMPENSATION Client agrees to pay C&W for all costs incurred by C&W in providing services requested by Client, as set forth in this section and according to the billing procedures in Section 3. a. MONTHLY BILLING CYCLE. C&W will base its invoices on a monthly billing cycle. b. TIME CHARGES. Services rendered by C&W employees for Client will be applied at C&W's standard hourly rates in effect at the time in which services are rendered. c. OUT-OF-POCKET EXPENSES. Client will reimburse C&W without markup for out-of-pocket expenses, including travel-related expenses and the entertainment of editorial and other parties whom Client has requested C&W to entertain. If C&W uses services of an outside supplier in providing production-related services to Client, Client will pay C&W the cost of such services plus a 17.65 percent markup. Production-related services are items such as mechanical and art costs for printing, including typography and comprehensive layouts, and audio visual production costs, including talent, props, scenery, sound and lighting, rights, license fees and producers' fees. d. INTERNAL EXPENSES. Client agrees to pay C&W for internal expenses incurred in servicing Client's account. Such expenses include, but are not limited to, photocopies, long distance telephone, bulk mailings, supplies, and faxes. e. SUPPORT SERVICE EXPENSES. Support services rendered by C&W employees for Client will be billed at the hourly rates in effect during the Billing Month in which services are rendered. Such services include, but are not limited to, word processing and secretarial. f. ADMINISTRATIVE CHARGE. Client will pay C&W three percent (3%) of time charges incurred during the previous Billing Month to cover certain administrative costs, such as local telephone and routine postage, that are necessarily incurred in providing services to Client. 3. BILLING PROCEDURES a. PAYMENT OF MONTHLY CHARGES. For the services rendered under Section 1(a) of this Agreement, on or about the beginning of each month, C&W will send Client an invoice for the agreed upon monthly charges. b. MONTHLY RECONCILIATION. At or about the end of each month, C&W will send Client a statement reconciling actual costs incurred during the month with the charges paid by Client. If the payments of monthly charges exceed actual costs, the statement will show a credit due Client which Client may apply to reduce the next monthly invoice. If actual costs exceed the payments of monthly charges made by Client, the statement will invoice Client for the amount due C&W and Client will pay such amount on or before the due date specified on the invoice. c. PAYMENT DUE DATE. Client will pay C&W the amount of each invoice on or before the due date specified on each invoice, unless advance and/or significant payments to third parties are required. In the case of advance and/or significant payments to third parties, Client will pay C&W immediately upon presentation to Client of any third party invoice. d. LATE CHARGES. If Client fails to make any payment due under this Agreement within thirty (30) days after it is due, Client will pay interest on the amount due at the prime rate of interest charged by The Chase Manhattan Bank, N.A., as of the day the payment is due. 4. OWNERSHIP OF MATERIALS All slogans and publicity materials submitted to Client by C&W while this Agreement is in effect are as between C&W and Client, the Client's property exclusively (subject to certain third party limited rights, such as licenses), provided that the Client pays for the materials and, before this Agreement is terminated, the Client either uses the materials at least once or indicates in writing to C&W its intention to use them. Otherwise, these materials are as between C&W and Client, C&W's property exclusively. 5. INDEMNIFICATION a. CLIENT'S RESPONSIBILITY. Client is responsible for the accuracy, completeness and propriety of information that it provides to C&W concerning Client's products, services, organization and industry. Client is responsible for reviewing all publicity or other materials prepared by C&W under this Agreement to confirm that all representations, direct or implied, are supportable by objective data then possessed by Client, and to confirm the accuracy and legality of the descriptions and depictions of the products and services of Client and its competitors. Client will indemnify and hold C&W harmless from and against all losses, damages, liabilities, claims, demands, lawsuits and expenses, including reasonable attorney's fees, that C&W may incur or be liable for arising out of or in connection with any of the following: - any publicity or other materials prepared or placed by C&W for Client, or other service performed by C&W for Client; - any alleged or actual defects in Client's products or services (including, without limitation, any claim for bodily injury or death); or - allegations that Client's activities violate or infringe upon the copyright, trademark, patent or other rights of any third party, or that Client's activities induce, promote or encourage the violation of or infringement upon the rights of any third party. Client's obligations under this section 5 include payment for all time charges and expenses (including reasonable attorney's fees) incurred by C&W in connection with any subpoena, discovery demand or other directive having the force of law or governmental inquiry the response to which Client does not object, served upon C&W or any of its affiliates that relate to Client, its business or its industry that arises out of any litigation, proceedings or investigations involving Client. The terms and conditions of this section shall survive the termination of this Agreement. b. COHN & WOLFE'S RESPONSIBILITIES. It will be the responsibility of C&W to make certain that the necessary contracts or releases have been obtained with or from those whose name and likenesses, testimonials, scripts, musical compositions, or similar materials or rights are used in the materials prepared under this Agreement, and C&W agrees to indemnify the Client against any liabilities and expense the Client may incur as a result of C&W's failure to obtain the above-mentioned contracts or releases. It is expressly understood that the foregoing indemnification by C&W shall not apply in situations where the Client directly arranges or signs such contracts or release or agreements with third parties nor shall it apply where the claim arises from matters as to which C&W has advised Client of the risks involved and Client has agreed to accept those risks in which cases Client shall indemnify C&W. c. USE OF INFORMATION BY THIRD PARTIES. C&W has no control over information once it has been issued to the media or another third party. C&W cannot assure the use of any material by any medium print or electronic, nor the accuracy of what any third party publishes. 6. CONFIDENTIALITY C&W, on behalf of itself and its employees, hereby covenants and agrees that it: a. shall exercise reasonable care and caution to keep confidential any and all proprietary information concerning Client's business and operation which becomes known to C&W by reason of the performance of its services on Client's behalf, and which information is clearly marked "confidential" or specifically identified in writing as confidential. Proprietary information includes, but is not limited to, corporate plans and strategies, new product samples, specifications, formulations, and pricing information; b. shall not disclose any marked or identified information to any person outside of the employ of C&W, unless to do so is required in connection with the performance of its services, and in such event C&W hereby agrees to advise said third parties of the confidential nature of said material; and c. shall return to Client all such information then in its possession at the termination of C&W's services, except that C&W shall be entitled to keep evidence of its work product. It is further agreed that none of the above shall apply to the following: a. information that is in the public domain at the time of disclosure to C&W or that enters the public domain through no fault of C&W, or its employees; b. information that is in the possession of C&W or its employees at the time of disclosure to C&W; c. information that C&W, or its employees, receive from a third party under no obligation of confidentiality to Client; and d. information required to be released by C&W in compliance with any court order or other directive having the force of law. 7. OTHER RULES GOVERNING THIS AGREEMENT a. DURATION. This Agreement begins as of December 1, 1999, and continues until terminated by either Client or C&W. To terminate, written notice must be given at least 60 days before the effective date of termination. Client will pay for all charges incurred under this Agreement up to the effective date of termination. On that date, C&W will give or otherwise transfer to Client all property in C&W's possession that belongs to Client, as provided by Section 4, and all contracts for materials and services entered into by C&W for Client. b. AGENT/CLIENT RELATIONSHIP. In purchasing materials or services on Client's behalf, C&W acts as Client's agent, and may state this relationship in contracts and orders. c. JURISDICTION. This Agreement is governed by the laws of the State of New York and will be construed accordingly. d. HEADINGS. Headings in this Agreement are for reference only. In case of a conflict between a heading and the content of a section, the content controls the meaning. e. ENTIRE AGREEMENT. This letter constitutes the entire agreement with respect to the matters it contains. It can be modified or amended only by a written document, which is enforceable only if signed by the party against whom enforcement is sought. C&W and Client indicate their acceptance of this Agreement by having their respective duly authorized representatives sign in the spaces provided below. Sincerely yours, COHN & WOLFE By: /s/ Kim Hardy Date: 11-19-99 Vice President, Business Manager AGREED: By: /s/ Thomas McMurrain Date: 11-29-99 EX-10.14 21 ex-1014.txt EXHIBIT 10.14 EXHIBIT 10.14 BRISTOL CAPITAL LIMITED 3015 WINDWARD PLAZA SUITE 550 ALPHARETTA, GA 30005 678-393-3926 December 22, 1999 PERSONAL AND CONFIDENTIAL Mr. Thomas McMurrain GlobalETutor.com 3340 Peachtree Road Suite 1800 Atlanta, GA 30326 Dear Tom, This letter outlines the manner in which Bristol Capital, LLC ("Bristol Capital") proposes to assist you in obtaining investment capital financing for GlobalETutor.com, and its successors in interest, affiliates, partners and related business entities (the "Business"). Please review the terms of this agreement and, if acceptable, return a signed copy to us. TERMS SUCCESS FEE. Bristol Capital shall receive a fee Contingent upon, the completion of a transaction involving Financing as defined below. If the financing of the Business or any interest of the Business is effectuated with financiers or investors presented by Bristol Capital, Bristol shall be paid in cash at closing or at each subsequent closing and if accomplished in multiple transactions, a success fee equal to 10 percent for any Financing related to equity, debt or other bridge loans as well as warrants for 10% of stock in the Business. Additionally, as part of the Success Fee, the Business will grant to Bristol Capital a First Right of Refusal for any subsequent financing on terms to be negotiated. In the event public financing is included in any subsequent financing, where Bristol Capital is involved, Bristol reserves the right to require warrants or stock options as part of its fee. Finally, it is agreed that Mr. Robert Willison will compensate Crescent Capital out of the Success Fee received by Bristol Capital. FINANCING. The term "Financing" as used herein is total invested monies including equity, debt or other financing paid in connection with the investment or financing of the Business in any form which may or may not include the purchase or acquisition of various other corporations, intellectual property rights and other business entities. TERM. The contract period (the "Contract Period ") shall be one year, (unless GlobalETutor continuea to use the funding sources provided by Bristol) during which time Bristol Capital agrees to perform the activities outlined above. However, the Business has the right to terminate ("Termination") the Project at any time after the sixth month following the commencement of the project, upon thirty (30) days written notice. TERMINATION. Termination does not relieve the Business of its responsibility regarding the Success Fee owed to Bristol Capital or the other associated costs or expenses as defined herein. At the end of the Contract Period (if Financing has not been effectuated), or after Termination, Bristol shall submit to the Business a list of all potential investors/financiers who have been contacted by Bristol, or with whom Bristol is actively working in connection with this agreement. If any investors/financiers on the contact list actually invest in, lend to or otherwise provide Financing to the Business within twelve (12) months of the end of the Contract Period, after Termination, or at any time in the future for the purpose of funding, expanding or constructing new or existing call centers, the Success Fee shall be due to Bristol Capital, regardless of the fact that the contract Period may have expired or been Terminated. Bristol Capital recognizes that time is of the essence regarding this project, and will do its utmost to assist the Business in effectuating a transaction as soon as possible. CONFIDENTIALITY. When engaged, Bristol Capital agrees to maintain the confidentiality of all information concerning the Business. Bristol Capital will also maintain as confidential the existence of the overall project. CONSTRUCTION. The terms of this agreement shall be construed under the laws of the State of Georgia. LEGAL ADVICE. Bristol Capital does not provide legal advice and recommends that the Business retain counsel of its own choosing as needed for any legal advice. SECURITIES. Bristol Capital is not in the business of and does not sell securities as defined under Federal and State law regulations. The hiring of Bristol involves the finding of private funding and Financing not associated with the sale of securities and disclosure requirements. By entering into this Agreement, the business agrees and stipulates that it is not hiring Bristol to engage in the sale of securities. Finally, as we discussed, we are excited about the prospects for the Business. Beyond this initial arrangement, we look forward to working with you to help make your business a great success. Sincerely, /s/ Robert V. Willison ROBERT V. WILLISON, for BRISTOL CAPITAL BY YOUR SIGNATURE BELOW YOU INDICATE: (1) YOUR WILLINGNESS AND AGREEMENT TO BE BOUND BY THE TERMS AND CONDITIONS CONTAINED IN THIS ENGAGEMENT LETTER; AND (2) YOUR AUTHORITY TO ENTER INTO AND BIND THE LEGAL ENTITIES FOR WHOM YOU SIGN THIS AGREEMENT. ACCEPTED /s/ Thomas McMurrain, CEO DATE 12-22-99 GlobalETutor.com ACCEPTED /s/ Robert V. Willison DATE 12-22-99 /s/ Alan Smith EX-10.15 22 ex-1015.txt EXHIBIT 10.15 EXHIBIT 10.15 NETWORK SERVICE COMSTAR AGREEMENT Thank you for doing business with Comstar Communications, Inc. (us or we). We are committed to providing you with the highest quality Network Services (Services). If, at any time, you have questions or problems, or are not completely satisfied, please let us know. Our goal is to do our very best for you. This Comstar Network Services Agreement (Agreement) covers the following major Service we may provide to you: (a) Internet Access; (b) Connectivity Services; (c) Equipment Rental; (d) Standard Colocation; and (e) Dedicated Server Colocation. ACCEPTANCE By signing below, you acknowledge your review and acceptance of the terms and conditions contained in this document or any applicable Service Addenda. This Agreement can only be modified in a written document executed by both parties. Any attempts to make modifications to these terms and conditions are void, and will not be enforceable. Our entire agreement consists of this Agreement, an accepted Service Quote, our corporate Acceptable Use Policy, and any applicable Service Addenda. In the event of a conflict between any of these documents, the terms and conditions of the applicable Addendum shall prevail. Accepted By: /s/ Curtis Robinson Customer Signature 1-31-2000 Date Curtis Robinson Customer Name VP of OPPS Title Globaletutor Company RATES The rates that we charge for Services are as specified in the accepted Sales Quote. That document also specifies the length of the term of the Agreement between us. If you terminate a contract before the end of the agreed upon term, you will be required to pay seventy-five percent (75%) of the remaining value of this Agreement. In addition, if we provide Services via a third-party, you will be charged all costs we incur for such early termination with our service provider. UPGRADES If you upgrade your current Services before the end of the agreed upon term, no early termination penalty will be charged. You will be required to purchase the upgrade under a new term commitment with a minimum of twelve (12) months and early termination penalties apply to the upgraded Services as stated in the Rates section of this Agreement. PAYMENT You will be billed on a cycle billing period. Your first bill will include all non-recurring charges, charges for the first full month of Service, and the pro-rated amount for Services provided during the month of installation. You agree to pay all charges within thirty (30) days of the date of our invoice to you. You shall pay us interest on overdue payments at the rate of one and one-half percent (1-1/2%) or the maximum-rate allowable by law, whichever is greater. If you do not pay an invoice within thirty (30) days, we reserve the right to disconnect Services. If your check is returned by your bank, you will be billed a twenty-five dollar ($25) return check fee. We reserve the right to bill you retroactively for any Services for which we previously had not billed, provided such retroactive billing occurs within one year after the Service is provided. You also agree to pay all applicable taxes resulting from any transaction under this Agreement. This does not include taxes based on our net income. - Customer will be Invoice on the last weekly billing cycle of each month for the term of the contract USE OF FACILITIES AND EQUIPMENT Along with the Services, we may rent to you Standard Comstar-provided Customer Premise Equipment (Standard CPE). The Standard CPE will either be located at our facility or directly on your premises. Standard CPE only includes equipment manufactured by Comstar-approved vendors. All equipment that you rent from us will be our property, and will be made available for your use only for the term of this Agreement. You have no property rights in the rented equipment. We reserve the right to replace any rented equipment at our expense and with minimal interruption to Services. If you purchase Colocation services from us, such Services will be provided to you under the terms and conditions of the Colocation Addendum which is hereby incorporated herein. You agree to: (1) refrain from modifying rented equipment, or authorizing others to do the same; (2) obtain authorization from your landlord, as we may request, in order to protect our rights in the rented equipment; and (3) provide us with sufficient, free, and safe access to your facilities for us to fulfill our obligations including retrieval of rented equipment upon termination or expiration of this Agreement. USE OF SERVICES You agree to fully comply with our corporate Acceptable Use Policy ("AUP"), which is attached hereto and hereby made a part of this Agreement. Violation of our corporate AUP by you or any of your customers may result in immediate termination of Services. You agree to independently assess your need for the Services. You also agree to indemnify us and to hold us harmless for any and all claims resulting from any use of the Services that cause damage to us, our other customers, or any third party. This indemnification also extends to any utility company that we may use to provide Services. LETTERS OF AGENCY In cases in which you ask us to act as your authorized agent for ordering and coordinating local and long distance access circuits for services outside of this Agreement, you will execute a Letter of Agency. BANDWIDTH We do not guarantee bandwidth or port speed for circuits and connections outside of our network. PATENTS & COPYRIGHT If a third party claims that equipment we provide to you infringes that party's patent or copyright, we will defend you against that claim at our expense and pay all costs, damages, and attorney's fees that a court finally awards, provided that you: (1) promptly notify us in writing of the claim; and (2) allow us to control, and cooperate with us in, the defense and any related settlement negotiations. If such a claim is made or appears likely to be made, you agree to permit us to enable you to continue to use the equipment, or to modify it, or replace it with equipment that is at least functionally equivalent. This is our entire obligation to you regarding any claim of intellectual property right infringement. TERM RENEWAL At the end of the Term of this Agreement, this Agreement will automatically continue on a month-to-month basis, at the then current Comstar Service List Price, until the Agreement is terminated by either party giving the other at least 30 days prior written notice of its intent to terminate. LIMITS ON LIABILITY Your sole remedy for any failure or non-performance of the Services shall be outlined in the Comstar Service Level Agreement, attached and made part of this Agreement. For any other claim for damages concerning our performance, we are liable only for: (1) payments referred to in our patent and copyright terms described herein; (2) bodily injury, including death, and damage to real property and tangible personal property; and (3) the amount of any other actual loss or damage, up to the lesser of $100,000 or the actual charges (if monthly recurring, 12 months' charges apply) for the Service that is the subject of the claim. This limit also applies to any of our subcontractors. It is the maximum for which we are collectively responsible. Under no circumstances are we, the utility companies we use to provide Service, or our subcontractors, liable for any of the following: (1) the content of the information passing over our network; (2) unauthorized access to your transmission facilities or to equipment you own; (3) unauthorized access or damage to, alteration, theft, destruction or loss of, your records or data; (4) economic consequential damages (including lost profits or savings) or incidental damages, even if we are informed of their possibility; (5) claims for damages caused by you, through fault, negligence or failure to perform your responsibilities; (6) claims against you by any other party; or (7) any act or omission of any other party furnishing services and/or products, or the installation and/or removal of any and all equipment supplies by any other service provider. WARRANTIES For each Service, we warrant that we perform it in a competent manner. WE DO NOT WARRANT UNINTERRUPTED OPERATION OF THE SERVICE AND SPECIFICALLY DISCLAIM ANY OTHER WARRANTIES, EITHER EXPRESSED OR IMPLIED, INCLUDING THE WARRANTIES OF TITLE, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. WE WILL NOT BE LIABLE TO EACH OTHER FOR ANY CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES WITH RESPECT TO ANY CLAIMS REGARDING THE SERVICES TO BE PROVIDED HEREUNDER. CREDIT Your execution of this Agreement signifies your acceptance of our initial and continuing credit approval procedures and policies. We reserve the right to withhold initiation or full implementation of Service until we are satisfied with our initial credit review and approval. We may require a security deposit before Services are provided. If there is a material adverse change in your creditworthiness we may: (1) interrupt Service; (2) deny requests for additional Services; or (3) require a deposit. TRANSFER AND ASSIGNMENT You may not sell, assign or transfer any of your rights or obligations under this Agreement without our prior written consent. We reserve the right to transfer Services we provide to you via a third-party network to Comstar-based facilities at any time during the term of this Agreement. FORCE MAJEURE We are not responsible for performing our obligations when they are delayed or hindered by war, riots, embargoes, strikes or Acts of God. GOVERNING LAW This Agreement shall be governed by the laws of the State of Georgia. SEVERABILITY If any terms of this Agreement are held to be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining terms will not be in any way affected. NOTICES Notice to either party shall be delivered by first-class, pre-paid US mail to the respective address. For Comstar: Comstar Communications, Inc. 2812 Spring Road Suite 200 Atlanta, GA 30339 Attention: For Customer: Globaletutor Company Name 3340 Peachtree Road Suite 1800 Address Atlanta, Georgia 30326 City, State, Zip Curtis Robinson Attention COMSTAR Corporate Acceptable Use Policy Addendum to the NETWORK SERVICES AGREEMENT This document, when executed by you, is incorporated into the Comstar Network Services Agreement. In the event of any conflict between the terms of this Addendum, and the terms of the Comstar Network Services Agreement, the terms of this Addendum shall control. This Addendum, the Comstar Network Services Agreement, an accepted Sales Quote represent the entire agreement between us for the Services described in the Service Addendum(s). Accepted By: /s/ Curtis Robinson Customer Signature 1-31-2000 Date Curtis Robinson Customer Name Director of IT Title Globaletutor.com, Inc. Company INTRODUCTION Our Internet Access Service (Service) provides high-speed dedicated Internet connectivity. We have certain legal and ethical responsibilities regarding the use of its computer network and equipment involved in these services. System abuse is strictly prohibited. We may terminate your Service immediately and may bill you for any resulting charges if you, your employees or contractor(s) engage in system abuse. This Acceptable Use Policy Addendum was created to help you understand our definition of system abuse. The examples listed here is not exclusive of all possible actions that may be deemed as abuse. You are asked only to use your best judgement. ABUSE OF SERVICE Actions which constitute system abuse include, but are not limited to: Utilizing any service in the commission of a crime; Attempting to circumvent user authentication of any host, network, or account on our systems or the Internet at large ("cracking"); Attempting in any way to interfere with or deny service to any user or any host on the Internet; Forging Email or USENET header information to conceal your identity as the author, conceal the origination address of the Email, or conceal the host from which the Email was originated; Sending of unsolicited mail messages, either commercial or non-commercial ("junk mail"); Forwarding or multiple posting of chain letters of any type; Posting of inappropriate messages to USENET newsgroups e.g., posting large numbers of unsolicited Email indiscriminately ("spamming"); Attempt to cancel, supersede, or otherwise interfere with Email or USENET posts other than one's own; and Engaging in harassment whether through language, frequency, or size of messages. This Acceptable Use Policy is subject to revision at anytime that we determine a change is necessary. We will inform you of those changes by whatever means we deem most effective. It is your responsibility to ensure that the use of our network conforms to the policies currently in effect. COOPERATION WITH LAW ENFORCEMENT We will cooperate with Law Enforcement officials by providing whatever information they require, so long as they present authorization from a United States Court that has jurisdiction over the territory and subject matter that they are seeking. COMSTAR SERVICE LEVEL AGREEMENT Thank you for doing business with Comstar Communications, Inc. (us or we). We are committed to providing you with the highest quality Network Services (Services). If, at any time, you have questions or problems, or are not completely satisfied, please let us know. Our goal is to do our very best for you. This Comstar Network Services Agreement (Agreement) covers the following major Service we may provide to you: (a) Internet Access; (b) Connectivity Services; (c) Equipment Rental; (d) Standard Colocation; and (e) Dedicated Server Colocation. ACCEPTANCE By signing below, you acknowledge your review and acceptance of the terms and conditions contained in this document or any applicable Service Addenda. This Agreement can only be modified in a written document executed by both parties. Any attempts to make modifications to these terms and conditions are void, and will not be enforceable. Our entire agreement consists of the Network Services Agreement, an accepted Service Quote, our corporate Acceptable Use Policy, this Service Level Agreement, the Colocation Service Addendum with attached Colocation Schedule, the Internet Access Service Addendum and the Nexchange Addendum. In the event of a conflict between any of these documents, the terms and conditions of the applicable Addendum shall prevail. Comstar.net agrees to allow customer to move equipment from colocation space in data center anytime during 12 month contract. However, customer agrees to purchase local loop and move Full T1 to said customer location. Customer agrees to the full term of contract for internet bandwith. Accepted By: /s/ Curtis Robinson Customer Signature 1-31-2000 Date Curtis Robinson Customer Name Director IT Title Globaletutor Company NETWORK AVAILABILITY GUARANTEE This Service Level Agreement (SLA) is to provide you with Internet access 100% of the time. You will be credited one day for each hour we fail to meet this Network Availability Guarantee up to the maximum of your monthly fee for the Service suffering interruption. If we fail to sustain higher than 99.9% availability for 2 consecutive months for the facilities and network contracted for usage by you under this agreement, it will constitute unacceptable network/facilities availability and entitle you to terminate this agreement without further penalty. If we fail to sustain higher than 99% uptime within any 30-day period for the facilities and network contracted for usage by you under this agreement, it will constitute unacceptable network/facilities availability and entitle you to terminate this agreement without further penalty. Said guarantee does not apply if the network is unavailable due to (a) our standard network maintenance, (b) your applications, equipment, or facilities, (c) acts or omissions by you, your supplier, or any use or user of the Service you authorize, or (d) reasons of catastrophic network outages beyond our reasonable control. NETWORK LATENCY GUARANTEE Comstar's Backbone Latency Guarantee is average round-trip transmissions of 100 milliseconds or less between our designated transit backbone routers ("Hub Routers"). If we fails to meet the Backbone Latency Guarantee, your account will be credited for the pro-rated charges for one day of our monthly fee for service to you with respect to which this Guarantee has not been met. No credits will be made if failure to meet the Backbone Latency Guarantee is attributable to reasons beyond our reasonable control. Failure to meet the above state latency metrics at least 99.9% of the time for two consecutive months constitutes unacceptable network performance and entitles you to terminate this agreement without further penalty or any additional payment requirement. Failure to meet the above state latency metrics at least 99% of the time for any 30-day period constitutes unacceptable network performance and entitles you to terminate this agreement without further penalty or any additional payment requirement. INSTALLATION GUARANTEE Our Circuit Install Guarantee is to have installation of the telephone company circuit and activation of a Comstar port completed within 20 business days for 56K leased line services, 40 business days for fractional T1 services. Services above T1 will be installed within the scheduled installation date provided in writing by a Comstar Sales Manager. These dates shall be counted from the date we receive your fully executed copy of this entire agreement, completed customer contact information form credit application. The Circuit Install Guarantee is not available if installation delay is attributable to your equipment or facilities or acts or omissions by you, your employees or agents, you not passing our credit check, or reasons beyond our reasonable control. If we determine in our reasonable commercial judgement that we have failed to meet this Circuit Installation Guarantee, your account shall be credited 50% of our Installation fee for the service with respect to which this Guarantee has not been met. GENERAL Our terms and conditions apply to the provision of the Services and the Service Levels herein outlined, including but without prejudice to the generality of the foregoing any clauses relating to Improper Use and Limitation of liability. The regular Scheduled Maintenance Period is the 3-hour period from 3 am to 6 am every day, in the local time zone, for the network concerned. We reserve the right to carry out emergency maintenance work at any time on the network, or at our Points of Presence, giving the Customer as much warning as is reasonably possible. Any period of time for which connections are unavailable during scheduled or emergency maintenance will be included in calculations of network availability. For Comstar: Comstar.net, Inc. 2812 Spring Road Suite 210 Atlanta, GA 30339 Attention For Customer: Globaletutor.com, Inc. Company Name 3340 Peachtree Road Suite 1800 Address Atlanta, Georgia 30326 City, State, Zip Curtis Robinson Attention COMSTAR SALES QUOTATION Comstar Communications Corporation 2812 Spring Road, Suite 200, Atlanta, Georgia 30339 telephone: 1.800.4comstar, facsimile: 770.485.6100 Service Address Company Globaletutor.com Inc. Address 3340 Peachtree Road Suite 1800 City Atlanta State GA ZIP 30326 Contact Curtis Robbinson Email stable1@bellsouth.net Phone 678-522-1055 Fax Quote No. 36556.56913 Issue Date 31-Jan-00 Valid Until 01-Mar-00 Sales ID ohl Sales Rep Oliver LebLANC Telephone 770.485.6030 Referral ID
Non-Recurring Installation Fees Qty Svc-ID Description Discount Taxable Price Amount 1,000 COLOHC Colocation, 3.5' x 19" Cabinet 0.0% No 1,000.00 1,000.00 1,000 LLT1P Leased Line, T1 (Promo 0.0% No Subtotal 1,000.00 Term Discounts - Applicable Sales - Total Installation Fees 1,000.00
Recurring Monthly Fees Qty Svc-ID Description Term Discount Price Amount 1,000 COLOHC Colocation, 3.5' x 19" Cabinet 12 0.0% 445.00 445.00 1,000 LLT1P Leased Line, T1 (Promo 12 0.0% 1,250.00 1,250.00 Subtotal 1,695.00 Term Discounts - Applicable Sales - Total Monthly Recurring Fees 1,695.00
Accepted By Customer /s/ Curtis Robinson 1-31-2000 Customer's Authorization Date NOTE: Term is show in number of months. EX-10.16 23 ex-1016.txt EXHIBIT 10.16 EXHIBIT 10.16 STATE OF GEORGIA COUNTY OF OFFICE SPACE LEASE THIS LEASE, made this 1st day of DECEMBER, 1999, between Township Residential, Inc., Agent for 3131 Piedmont Road having its principle office at 3131 Piedmont Road, N.E., Atlanta, GA 30305 (herein called "Landlord") and Tom McMurrain Global E-Tutor (herein called "Tenant"). 1. PREMISES AND TERM. Landlord hereby rents and leases to Tenant and Tenant hereby rents and leases from Landlord the following described space (hereby called "Premises") being approximately 410 square feet located on the 2nd Floor in 3131 Piedmont Road, Building located at __________________, ____________, Georgia, the Land Lot 61 of the 17th District of Fulton County, Georgia (herein called "Building"); premises being more particularly shown and outlined on the plan attached hereto as Exhibit "A" and made a part hereof, FOR A TERM to commence on the 1 day of December, 1999 , and to end at 6:00 P.M. on the ______ day of on a month to month. **, (herein called the "Term"). No easement for light and air is granted hereunder. **60 day notice is required by both parties to terminate this lease. 2. RENTAL AND COVENANTS TO PAY RENT. (a) As consideration for this Lease and the services provided Tenant hereunder, Tenant agrees to pay to Landlord at Landlord's address above or at such other place or to such other party as Landlord designates in writing, without demand, deduction or set-off, rental at the rate of: $1,200.00 PER MONTH ($_____) per year (hereinafter called "Base Rental"), payable in equal monthly installments of $1,200.00 in advance, on the first day of each calendar month during Term. (A prorata monthly installment shall be due for the first and last month of Term should Term begin or end on other than the first or last day of the calendar month). (b) It is understood that the Base Rental does not anticipate economic inflation in the cost of goods and services necessary for the proper operation and maintenance of the Building that could occur during Term. Therefore, in order that rental paid hereunder during the Term reflects any economic inflation, Tenant agrees that the Base Rental stated herein shall be increased but not decreased as provided below. (c) Lessor and Lessee agree that the Base Rental stated herein shall be adjusted as soon as practicable after January 1st of each year during the term of this lease (hereinafter called the "Adjustment Dates") to reflect any increase in cost of goods and services necessary to the operation and maintenance of the Building in which the Premises are located. The Base Rental shall be adjusted on each adjustment date to reflect such increases, if any, as are reflected by changes in the "All-Items" figures In the "Consumer Price Index - - U. S. City Average for All Urban Consumers" (1967=100) of the Bureau of Labor Statistics of the United States Department of Labor. On each Adjustment Date the adjusted Base Rental shall be determined by dividing the original Base Rental by the index number published in the issue of "Monthly Labor Review" for the December preceding the date of execution hereof, and subsequently multiplying that amount by the index number published in the "Monthly Labor Review" for the December immediately preceding each annual Adjustment Date. If the "Consumer Price Index" published by the Bureau of Labor Statistics is discontinued, then the "Consumer Price Index" published by the United States Department of Commerce shall be used (with proper adjustment) and if the Department of Commerce Index is discontinued then the Landlord shall select a suitable substitute. In no event shall the rental payable hereunder be reduced by any such adjustment. (d) If during any calendar year during the term of this Lease or any renewal or extension thereof, the cost and expenses paid or incurred by or on behalf of Landlord on account of the operation, maintenance and repair of the Building (herein the "O&M Expenses") exceed the amount of such O&M Expenses for the calendar year ending December 31st of the year during which this Lease is executed (herein the "Base Year"), then Tenant shall pay to Landlord a monthly additional payment (herein the "Additional Rent") based on Tenant's proportionate share of the increase in O&M Expenses over the Base Year. Landlord shall furnish to Tenant within three (3) months after the end of any calendar year a statement of O&M Expenses incurred during said year and during the Base Year. Tenant's annual share of such increase shall be the excess of the O&M Expenses for the year prior to the rendition of the statement over the O&M Expenses for the Base Year multiplied by a fraction, the numerator of which is the area of the Premises leased to Tenant and the denominator of which is the total rentable area of the Building (________ square feet). Commencing the first (1st) day of the month following the tender of the above statement, Tenant shall pay to Landlord as Additional Rent an amount equal to one-twelfth (1/12th) of Tenant's annual share of the increased O&M Expenses as determined above. Such Additional Rent is in addition to Base Rent and all other payments due Landlord under this Lease and shall continue in effect monthly thereafter until the earlier of the end of the term of this Lease or the rendition of a statement for increase in the O&M Expenses for a subsequent year or years. Upon written request, Tenant shall be permitted to examine Landlord's books and records relating to the operation and maintenance of the Building at the Building Management Office during regular office hours in order to verify any increase in O&M Expenses; provided, however, that no such examination shall excuse or reduce the payment of Additional Rent unless and until it is finally determined that Landlord's statement of increased O&M Expenses was erroneous, and provided further that Tenant and its agents and accountants shall agree in writing to retain all such information confidential. The term "O&M Expenses" shall include all costs of operation, maintenance and repairs of the building as determined by generally accepted accounting practices, including, but not limited to: utility service cost (water, sewer, telephone, gas, electricity and fuel); sanitary charges and trash removal; insurance premiums; license, permit and inspection fees; janitorial and security services; labor; materials; supplies, equipment and tools; management fees and all other costs of operating, maintenance and repair of the Building and its equipment, fixtures, ground and parking areas; except for taxes, depreciation, interest expense or executive salaries. (e) If during any calendar year during the term of this Lease or any renewal or extension thereof the taxes and assessments paid or incurred by or on behalf of Landlord on account of Landlord's ownership of the Building (herein the "Tax Expenses") exceed the amount of such Tax Expenses for the calendar year ending December 31 of the year during which this Lease is executed (herein the "Base Year"), then Tenant shall pay to Landlord a monthly additional payment (herein the "Additional Tax Rent") based on Tenant's proportionate incurred during said year and during the Base Year. Tenant's Expenses for the Year prior to Landlord's rendering of the statement over the Tax Expenses for the Base Year multiplied by a fraction, the numerator of which is the area of the Premises leased to Tenant and the denominator of which is the total rentable area of the Building ( _______ square feet). Commencing the first (1st) day of the month following Landlord's rendering of the above statement, Tenant shall pay to Landlord as Additional Tax Rent an amount equal to one twelfth (1/12th) of Tenant's annual share of the increased Tax Expenses as determined above. Such Additional Tax Rent is in addition to Base Rent and all other payments due Landlord under this Lease and shall continue in effect monthly thereafter until the earlier of the end of the term of this Lease or the rendering by Landlord of a statement for increase in Tax Expenses for a subsequent year or years. Upon written request, Tenant shall be permitted to examine Landlord's books and records relating to taxes and assessments on the Building at the Building Management Office during regular office hours in order to verify any increase in Tax Expenses; provided, however, that no such examination shall excuse or reduce the payment of Additional Tax Rent unless and until it is finally determined that Landlord's statement of increased Tax Expenses was erroneous, and provided further that Tenant and its agents and accountants shall agree in writing to retain all such information confidential. The term "Tax Expenses" shall include all taxes and assessments levied on the Building by any governmental entity, including, but not limited to: real and personal property taxes; gross receipts taxes; and any and all other governmental assessments related to the Building, except for income taxes. (f) Any rental due Landlord under this Lease shall be considered past due for purposes hereon on the fifth day of any month, and shall incur a monthly service charge of 1-1/2% per month for that and each subsequent month past due. Any other amounts payable to Landlord under this Lease, with the exception of rent, shall be considered past due thirty (30) days from Landlord's billing date and shall incur a monthly service charge of 1-1/2% for that and each subsequent month past due. (A monthly rate of 1-1/2% is equivalent to an annual percentage rate of 18%). No delay by Landlord in tendering the Index Comparative Statement, increase of costs statement, or statement of tax increase shall affect the accrual of Tenant's obligations to pay increased rent from the first day of each calendar year. Tenant shall continue to pay the base in effect for the preceding year until the Comparative Statements are delivered; however, upon the delivery of the statements, Tenant shall pay the excess rent which has accrued between the first of the year and the date of receipt of the Comparative Statements. (g) Tenant agrees any increase in rentals payable by Tenant under the provisions of this Paragraph 2 shall, for purposes of the default provisions hereof, be deemed as additional rental due from Tenant and shall entitle Landlord to all remedies provided for herein and at law or equity on account of Tenant's failure to pay rent. It is further understood and agreed that Tenant's payments of increased rentals under this Paragraph 2 shall not be deemed payments of rental as that term is construed relative to governmental wage and price controls or analogous governmental options affecting the amount of rental which Landlord may charge Tenant. 3. DELIVERY OF POSSESSION TO TENANT BY LANDLORD. If Landlord for any reason whatsoever cannot deliver possession of Premises to Tenant at the commencement of the Term as above specified, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom; but in that event, there shall be a proportionate reduction of rent covering the period between the commencement of the Term and the time when Landlord can deliver possession. Moreover, the Term of this Lease shall be proportionately extended for an additional period of time to the end that this Lease shall provide for a full Term as herein provided. However, if for any reason, other than strikes or acts of God beyond the control of the Landlord, possession of Premises is not delivered to Tenant within one hundred and twenty (120) days of the beginning of Term as specified in Paragraph 1 hereof, then this Lease shall be voidable by either party giving written notice to the other and, in such event, any monies advanced by Tenant to Landlord shall be returned and the parties hereto shall have no further obligation one to the other. Notwithstanding anything herein stated to the contrary, in the event that Landlord cannot deliver possession of Premises to Tenant at the commencement of the Term, as above specified, because of Tenant's failure to perform the items or pay the amount specified in the Work Letter attached hereto as Exhibit "B" and incorporated herein by the provisions of Paragraph 34 infra, this Lease shall be voidable at the option of the Landlord, only, at any time after the commencement of said Term, and should Landlord so elect to void this Lease, all monies advanced by Tenant to Landlord shall be retained by Landlord as liquidated damages (the parties here recognizing and acknowledging the difficulty of determining such damages), and thereafter the parties hereto shall have no further right, claim or obligation one to the other. 4. REPAIRS BY TENANT AND REMOVAL OF IMPROVEMENTS ALTERATIONS (a) Tenant accepts Premises in their present condition as suited for the use intended by Tenant. Tenant will, at Tenant's expense, take good care of Premises and the fixtures and appurtenances therein, and will suffer no active or permissive waste or injury thereof; and Tenant shall, at Tenant's expense, but under the direction of Landlord, promptly repair any injury or damage to Premises or Building caused by the misuse or neglect thereof by Tenant, or by persons permitted on Premises by Tenant, or Tenant moving in or out of Premises. (b) Tenant will not, without Landlord's written consent, make any alterations, additions or improvements in or about Premises and will not do anything to or on the Premises which will increase the rate of fire insurance on the Building. All alterations, additions or improvements (including, but not limited to, carpets, drapes and drape hardware) made or installed by Tenant to the Premises shall become the property of Landlord at the expiration of this Lease. Landlord reserves the right to require Tenant to remove any improvements or additions made to the Premises by Tenant; Tenant further agrees to do so prior to the expiration of Term or within thirty (30) days after notice from Landlord, whichever shall be later, provided that Landlord gives such notice no later than thirty (30) days after expiration of this Lease. (c) No later than the last day of Term, Tenant will remove all Tenant's personal property and repair all injury done by or in connection with installation or removal of said property and surrender Premises (together with all keys to Premises) in as good condition as they were at the beginning of Term, reasonable wear and damage by fire, the elements of casualty excepted. All property of Tenant remaining on Premises after expiration of Term shall be deemed conclusively abandoned and may be removed by Landlord, and Tenant shall reimburse Landlord for the cost of removing the same, subject however, to Landlord's right to require Tenant to remove any improvements or additions made to Premises by Tenant pursuant to the preceding sub-paragraph (b). (d) In doing work of any nature in, to or about Premises, Tenant will use only contractors or workmen approved by Landlord. Tenant shall promptly remove any lien for material or labor claimed to be furnished to Premises on Tenant's or any subtenant's behalf. 5. FOOD OR DRINK MACHINES. Tenant shall maintain no food or drink coin operating or vending machines within Premises or Building without the written consent of Landlord; such consent shall not preclude Landlord from charging Tenant for utility costs therefor under Paragraph 9 (c). 6. TENANT RISK. Tenant agrees that all personal property brought into the Premises by Tenant, its employees, licensees and invitees shall be at the sole risk of Tenant and Landlord shall not be liable for theft thereof or of any money deposited therein or for any damages thereto; such theft or damage being the sole responsibility of Tenant. 7. REPAIRS BY LANDLORD. Landlord shall not be required to make any repairs to Premises except repairs necessary for safety and tenantability. 8. PURPOSE. Tenant shall use and occupy Premises as office and related purposes only. Tenant's use of Premises shall not violate any ordinance, law or regulation of any governmental body or the "Rules and Regulations" of Landlord, as made a part hereof. Moreover, Tenant agrees to conduct its business in the manner and according to the generally accepted written or unwritten code of ethics or business principles of the business or profession in which Tenant is engaged, and in case of breach of this covenant, Tenant agrees that Landlord may terminate this Lease by giving Tenant sixty (60) days notice to vacate. 9. SERVICES - ELEVATOR, WATER, CLEANING & ELECTRICITY. (a) Landlord shall furnish the following services without charge, at the proper season, during reasonable hours (8:00 a.m. to 6:00 p.m. on Mondays through Fridays, inclusive, and 8:30 a.m. to 1:00 p.m. on Saturdays) on normal business days, except holidays observed by national banks in Atlanta, Georgia, as legal holidays: (ii) Air conditioning in Landlord's judgment sufficient to reasonably cool or heat the Premises; (iii) Water for lavatory purposes without charge; (iv) Common use restrooms, toilets; (v) Cleaning services except Saturdays and where the Premises consist of a store or stores on the ground floor. (b) Landlord shall also furnish electric current on Premises for lighting and for small business machines only (e.g., typewriters and other small office equipment) using 110 volt, 20 AMP circuits. Tenant will not use any electrical wiring installations or interfere with the reasonable use thereof by other uses in the Building. Tenant will not, without Landlord's prior written consent in each instance (which shall not be unreasonably withheld) connect any additional items (such as electric heaters, data processing equipment or copy machines) to the Building's electrical distribution system, or make any alterations or addition to such system. Should Landlord grant such consent, all additional circuits or equipment required therefore shall be provided by Landlord and the reasonable cost thereof shall be paid by Tenant upon Landlord's demand. (c) If Tenant uses any of the services enumerated in this Paragraph in an amount or for a period in excess of that provided for herein, then Landlord reserves the right to charge Tenant as additional rent a reasonable sum as reimbursement for the direct cost of such added services. In the event of disagreement as to reasonableness of such charge, the opinion of the appropriate local utility company or a local independent professional engineer shall prevail. (d) Landlord shall in no way be liable for cessation of any of the above services caused by strike, accident or reasonable breakdown, nor shall Landlord be liable for damages from the stopping of elevators or elevator service, or any of the fixtures or equipment in the Building being out of repair or for injury to person or property, caused by any defects in the electrical equipment, heating, ventilating and air conditioning system, elevators or water apparatus, or for any damages arising out of failure to furnish the services enumerated in this Paragraph 9. (e) Landlord's obligation to furnish light, heat and power shall be conditioned upon the availability of adequate energy sources. Landlord shall have the right to reduce heat and lighting within the Common Areas as required by any mandatory or voluntary fuel or energy saving, allocation or similar statute, order or program. 10. DESTRUCTION OR DAMAGE TO PREMISES. (a) If less than twenty-five percent (25%) of the rental area of the Premises is destroyed or rendered untenantable by any casualty, Landlord shall rebuild and repair the Premises and the Base Rental only shall abate by the same proportion as the floor area of the Premises destroyed or rendered untenantable bears to the entire floor area of the Premises. Landlord's obligation to rebuild and repair the Premises is limited to restoring the Premises to substantially the condition in which the same existed prior to the casualty, and any obligation of Landlord's to rebuild and repair is hereby expressly conditioned upon the receipt by Landlord of insurance proceeds for such purposes. Full rent shall recommence when the Premises is rebuilt and repaired. (b) If at least twenty-five percent (25%) of the rental area of the Premises is destroyed or rendered untenantable by any casualty, then Landlord may either elect to terminate this Lease (rent being prorated as of the date of such termination) or to rebuild and repair the Premises. Landlord shall give written notice to Tenant of such election within ninety (90) days after the occurrence of such casualty. Should Landlord elect to rebuild and repair the Premises, rental shall abate by the same proportion as the floor area of the Premises destroyed or rendered untenantable bears to the entire floor area of the Premises. Landlord's obligation to rebuild and repair the Premises is limited to restoring the Premises to substantially the condition in which the same existed prior to the casualty, and any obligation of Landlord's to rebuild and repair is hereby expressly conditioned upon the receipt by Landlord of insurance proceeds for such purposes. Full rent shall recommence when the Premises is rebuilt and repaired. (c) If at least twenty-five percent (25%) of the gross rental area of the Building in which the Premises is located is destroyed or substantially damaged by any casualty, notwithstanding that the Premises may be unaffected by such casualty, Landlord may terminate this Lease by giving to Tenant thirty (30) days prior written notice of Landlord's election so to do, which notice shall be given, if at all, within ninety (90) days following the date of said occurrence. Rent shall be prorated as of the date of such termination. 11. RULES AND REGULATIONS. Tenant will observe and comply with the "Rules and Regulations" attached hereto and made a part hereof, and such further reasonable rules and regulations as Landlord may prescribe, on written notice to Tenant, for the safety, care and cleanliness of the Building, and the comfort, quietness and convenience of other occupants of the Building. 12. DEFAULT CLAUSE. If rent is not paid within five (5) days after the date same is due (no demand for rent or notice to Pay being required); or if Tenant defaults for thirty (30) days after written notice thereof in performing any other of Tenant's obligations hereunder; or if Tenant is adjudicated as bankrupt; or if a permanent receiver is appointed for Tenant's property, including Tenant's interest in Premises, and such receiver is not removed within sixty (60) days after written notice from Landlord to Tenant to obtain such removal; or if, whether voluntarily or involuntarily, Tenant takes advantage of any debtor relief proceedings under any present or future law, whereby the rent or any part thereof is, or is proposed to be, reduces or payment thereof deferred; or if Tenant makes an assignment for benefit of creditors; of if Premises or Tenant's effects or interest therein should be levied upon or attached under process against Tenant, not satisfied or dissolved within thirty (30) days after written notice from Landlord to Tenant to obtain satisfaction thereof; then, and in any of said events, Landlord at its option may at once, or within six (6) months thereafter (but only during continuance of such default or condition) terminate this Lease by written notice to Tenant. After an authorized assignment or subletting the occurring of any of the foregoing defaults or events shall affect this Lease only if caused by or happening to the assignee or sublessee. Upon such termination by Landlord, Tenant will at once surrender possession of Premises to Landlord and remove all of Tenant's effects therefrom; and Landlord may forthwith re-enter the Premises and repossess himself thereof, and remove all persons and effects therefrom, using such force as may be necessary without being guilty of trespass, forcible entry or detainer or other tort. 13. RELETTING BY LANDLORD. Landlord, as Tenant's agent, without termination of this Lease, upon Tenant's breach or default of this Lease, may at Landlord's option enter upon and rent Premises at the best price obtainable by reasonable effort, without advertisement, and by private negotiations and for any term Landlord deems proper. Tenant shall be liable to Landlord for the deficiency if any, between all rent reserved hereunder and the total rental applicable to the Term hereof obtained by Landlord on re-letting after deducting Landlord's expenses in restoring Premises and all cost incident to such re-letting. 14. EARLY TERMINATION. No termination of this Lease prior to the normal ending thereof by lapse of time or otherwise shall affect Landlord's right to collect rent for the period prior to termination thereof. 15. ASSIGNMENT AND SUBLETTING. Tenant may not, without the prior written consent of Landlord endorsed hereon (such consent may be granted or withheld in the sole and absolute discretion of Landlord) assign this Lease or any interest hereunder, or sublet Premises or any part thereof, or permit the use of Premises by any party other than Tenant. Consent to one assignment or sublease shall not destroy or waive this provision, and all later assignments and subleases shall likewise be made only upon prior written consent of Landlord. Subtenants or assignees shall become liable directly to Landlord for all obligations of Tenant hereunder without relieving Tenant's liability. Landlord may at its option lease the whole or any portion of the Premises directly to Tenant's prospective subtenant or assignee in which event Tenant shall be released from all liability with respect to the portion of the Premises so leased. 16. EMINENT DOMAIN. (a) If any part of the Premises is taken under the power of eminent domain (such term as used herein includes friendly acquisition or deed in lieu of condemnation), then this Lease shall terminate on the date Tenant is required to yield possession thereof to the condemning or acquiring authority. (b) If any portion of the Building in which the Premises is located is taken under eminent domain, then Landlord at its option may terminate this Lease as of the date possession is required to be surrendered to the condemning or acquiring authority by giving Tenant ninety (90) days prior written notice of Landlord's election to terminate this Lease. (c) No other taking under the power of eminent domain, including, but not limited to, road widening, a taking of the real property surrounding the Building, or a taking of any portion of the parking area shall affect this Lease. (d) Tenant shall have no right to any award or compensation in connection with any exercise of the power of eminent domain, except that Tenant may claim and receive awards for moving expense, removal of trade fixtures, or damage to Tenant's business if the same are allowed by law. 17. ENTRY. Landlord may enter Premises at reasonable hours with prospective purchasers or tenants or to inspect Premises or to make repairs required of Landlord under the terms hereof or repairs to, adjoining space within the building; such entry by Landlord shall not entitle Tenant to any rent abatement. 18. TRANSFER OF TENANTS. In the event the rooms and offices rented to Tenant are less than 1,490 square feet in area, Landlord reserves the right, at its option and upon giving 30 days written notice in advance to the Tenant to transfer and remove the Tenant from Premises to any other available rooms and offices of substantially equal size and area and equivalent rental in the Building of which Premises are a part. Landlord shall bear the expense of said removal as well as the expense of any renovations or alterations necessary to make the new space substantially conform in layout and appointment with the original Premises. Landlord may exercise the right to so relocate Tenant under this paragraph at any time including but not limited to, the period before Tenant takes possession of Premises. 19. SUBORDINATION. This Lease shall be subject and subordinate to any first priority deed to secure debt or security deed which may now or hereafter affect the real property of which Premises form a part, and also to all renewals, modifications, extensions, consolidations, and replacements of such first priority deed to secure debt or security deed. Although no instrument of act on the part of Tenant shall be necessary to effectuate such subordination, Tenant will, nevertheless, execute and deliver such further instruments confirming such subordination of this Lease as may be desired by the holders of any first priority deed to secure debt or security deed. Tenant hereby appoints Landlord its attorney in fact, irrevocably, to execute and deliver any such instrument for Tenant. Notwithstanding the subordination of this Lease as referred to in the preceding paragraph, upon a foreclosure of any deed to secure debt or security deed or other instrument given to secure an indebtedness, which instrument is prior to this Lease, the holder of said instrument or the purchaser at foreclosure sale may, at its election, foreclose subject to this Lease or elect to continue this Lease in full force and effect on and after such foreclosure, notwithstanding the fact that such instrument is prior to this Lease. Unless Tenant is notified in writing by the holder of such instrument or purchaser at foreclosure sale that this Lease is terminated as a result of foreclosure, this Lease shall continue in full force and effect notwithstanding any such foreclosure. 20. INDEMNITY AND HOLD HARMLESS. Notwithstanding that joint or concurrent liability may be imposed upon Landlord by law, Tenant shall indemnify, defend and hold harmless the Landlord and Premises, at Tenant's expense, against: (i) any default by Tenant or sub-tenant hereunder; of (ii) any act of negligence of Tenant or its agents, contractors, employees, invitees or licensees; or (iii) all claims for damages to persons or property by reason of the use or occupancy of Premises unless resulting from affirmative acts of negligence by Landlord or its representatives. Moreover, Landlord shall not be liable for any damage or injury to Premises, to Tenant's property, to Tenant, its agents, contractors, employees, invitees or licensees, arising from any use of condition of Premises, the Building, or any sidewalk or entranceway serving the Building, or the act of neglect of co-tenants or the malfunction of any equipment or apparatus serving the Building. Any and all claims for any damage referred to in this Paragraph are hereby waived by Tenant. 21. FIRE AND EXTENDED COVERAGE AND WAIVER OF SUBROGATION THEREUNDER. Tenant shall carry fire and extended coverage insurance insuring its interest in Tenant's improvements in Premises and its interest in its office furniture, equipment and supplies, and Tenant hereby waives any rights of action against Landlord for loss or damage covered by such insurance and Tenant covenants and agrees with Landlord that it will obtain a waiver from the carrier of such insurance releasing such carrier's subrogation rights as against Landlord. Landlord shall carry fire and extended coverage insurance insuring its interest in Premises, and Landlord hereby waives any rights of action against Tenant for loss or damage covered by such insurance and Landlord covenants and agrees with Tenant that it will obtain a waiver from the carrier of such insurance releasing such carrier's subrogation rights as against Tenant. 22. REMEDIES CUMULATIVE. The rights given to Landlord herein are in addition to any rights that may be given to Landlord by any statute or otherwise. 23. HOLDING OVER. If Tenant remains in possession after expiration of Term hereof, with Landlord's acquiescence and without any distinct agreement between the parties, Tenant shall be a tenant at will and such tenancy shall be subject to all the provisions hereof, except that the monthly portion of the Base Rental shall be doubled for the entire hold-over period and there shall be no renewal of this Lease by operation of law. Nothing in this Paragraph shall be construed as a consent by Landlord to the possession of Premises by Tenant after the expiration of the Term. 24. NO WAIVER OR CHANGES. The failure of either party to insist in any instance on strict performance of any covenant or condition hereof, or to exercise any option herein contained shall not be construed as a waiver of such covenant, condition or option in any other instance. This Lease cannot by changed or terminated orally. 25. TENANT'S ESTOPPEL. Tenant shall, from time to time, upon not less than ten (10) days prior written request by Landlord, execute, acknowledge and deliver to Landlord a written statement certifying that this Lease is unmodified and in full force and effect (or if there have been modifications that the same is in full force and effect as modified and stating the modifications), the dates to which the rent and other charges have been paid, and whether or not to the best of Tenant's knowledge Landlord is in default hereunder (and if so, specifying the nature of the default), it being intended that any such statement delivered pursuant to this Paragraph may be relied upon by a prospective purchaser of Landlord's interest or mortgagee of Landlord's interest or assignee of any security deed upon Landlord's interest in the Premises. 26. MARGINAL NOTATIONS. The marginal notations in this Lease are included for convenience only and shall not be taken into consideration in any construction or interpretation of this Lease or any of it provisions. 27. NOTICE. (a) Any notice by either party to the other shall be, valid only if in writing and shall be deemed to be duly given only if delivered personally or sent by registered or certified mail addressed (a) if to Tenant, at the Building, and (b) if to Landlord, at Landlord's address set forth above, or at such other address for either party as that party may designate by notice to the other; notice shall be deemed given, if delivered personally, upon delivery thereof, and if mailed, upon the mailing thereof. (b) Tenant hereby appoints as its agent to receive of all dispossessory or distraint proceedings, the person occupying Premises; and if there is no person occupying same, then such service may be made by attachment thereof on the main entrance to Premises. 28. HEIRS AND ASSIGNS. The provisions of the Lease shall bind and enure to the benefit of Landlord and Tenant, and their respective successors, heirs, legal representatives and assigns; it being understood that the term "Landlord", as used in this Lease, means only the owner, or the lessee for the time being of the land and Building of which Premises are a part, so that in the event of any sale or sales of said property or of any lease thereof, the Landlord named herein shall be and hereby is entirely freed and relieved of all covenants and obligations of Landlord hereunder accruing thereafter, and it shall be deemed without further agreement that the purchaser, or the lessee, as the case may be, has assumed and agreed to carry out any and all covenants and obligations of Landlord hereunder during the period such party has possession of the land and Building. Should the land and the entire Building be severed as to ownership by sale and/or lease, then the owner of the entire Building or lessee of the entire Building that has the right to lease space in the Building to tenants shall be deemed the "Landlord". Tenant shall be bound to any succeeding party "Landlord" for all the terms, covenants and conditions hereof and shall execute any attornment agreement not in conflict herewith at the request of any succeeding party landlord. 29. ENTIRE AGREEMENT. This Lease contains the entire agreement of the parties hereto and no representations, inducements, promises or agreements, oral or otherwise between the parties not embodied herein, shall be of any force or effect. 30. SECURITY DEPOSIT. Tenant has this day deposited with Landlord the sum of $ _______ as security for the performance by Tenant of all the terms, covenants and conditions of the Lease upon Tenant's part to be performed, which sum shall be returned to Tenant after the expiration of the Term hereof, provided Tenant has fully performed hereunder. Landlord shall have the right to apply any part of said deposit to cure any default of Tenant and if Landlord does so, Tenant shall upon demand deposit with Landlord the amount so applied so that Landlord shall have the full deposit on hand at all times during the Term of this Lease. In the event, of a sale of the Building or a lease of the Building, subject to this Lease, Landlord shall have the right to transfer the security to the vendee or lessee, and Landlord shall thereupon be released from all liability for the return of such security and Tenant shall look to the new landlord solely for the return of said security and this provision shall apply to every transfer or assignment made of the security to a new landlord. The security deposited under this Lease shall not be assigned or encumbered by Tenant without the written consent of Landlord and any such assignment or encumbrance shall be void. 31. ATTORNEY'S FEES AND HOMESTEAD. If any rent owing under this Lease is collected by or through an attorney at law, Tenant agrees to pay ten percent (10%) thereof as attorney's fees. Tenant waives all homestead rights and exemptions which he may have under any law as against any obligation owing under this Lease. Tenant hereby assigns to Landlord his homestead and exemption. The parties "Landlord" and "Tenant" and pronouns relating thereto, as used herein, shall include male, female, singular and plural, corporation, partnership or individual, as may fit the particular parties. 32. NO ESTATE. Tenant has only a usufruct under this Agreement not subject to levy and sale; no estate shall pass out of Landlord. 33. TIME OF ESSENCE. Time is of the essence of this Agreement. 34. WORK LETTER. Attached hereto as Exhibit "B", and by this reference made a part hereof, is a Work Letter indicating the items to be performed by Landlord to prepare Premises for occupancy by Tenant. Said Work Letter also sets forth those items to be performed by Tenant prior to occupancy and the amount of money due from Tenant prior to occupancy for those items of work performed by Landlord in excess of Building Standards. 35. SPECIAL STIPULATIONS. Special Stipulations, as set forth below, shall control if in conflict with any of the foregoing provisions of this Lease and by reference are made a part hereof. (a) Any renewal or extension of this Lease shall be subject to all the terms and conditions hereof, including, but not limited to Paragraph 2, supra, unless such renewal or extension shall specifically and affirmatively state otherwise. (b) In the event a lender comes in possession of the Building in which the Premises are located through foreclosure or deed in lieu thereof, the Tenant shall not look to said lender for return of security deposit unless Tenant has proved that such security deposit has been transferred to said lender by Landlord. (c) Tenant shall not undertake to regulate thermostats located within Premises. Maintenance personnel only are authorized to do so. IN WITNESS WHEREOF, the parties herein have hereunto set their hands and seals, in quadruplicate, the day and year first above written. ** Signed, sealed and * TENANT delivered in the presence of: /s/ Lara Stegman /s/ Tom McMurrain (SEAL) Witness Authorized Signature Title: /s/ Victoria Sasser /s/ Billy Bauman (SEAL) Notary Public Authorized Signature My Commission Expires: May 8, 2001 Title Signed, sealed and delivered in the presence of: /s/ Lara Stegman /s/ Billy Bauman (SEAL) Witness By Landlord (or its authorized agent) /s/ Victoria Sasser Notary Public My Commission Expires: May 8, 2001 FOLLOWING EXECUTION, THE ORIGINAL AND ONE COPY HEREOF SHALL BE RETURNED TO THE LANDLORD NOTE: * If Tenant is a corporation, two authorized corporate officers must execute this Lease in their appropriate capacity for Tenant, affixing the corporate seal. ** Two witnesses are required, one of whom must be a notary public, who must affix his notarial seal and stamp indicating the expiration date of his commission. RULES AND REGULATIONS (Which are referred to the Within Lease and Made a Part Thereof) 1. The sidewalk, entry passages, corridors, halls, elevators and stairways shall not be obstructed by tenants, or used by them for any purpose other than of ingress and egress. 2. The water closets and other water apparatus shall not be used for any other purpose than those for which they were constructed, and no sweeping, rubbish, or other obstructing substances shall be thrown therein. 3. No advertisement, sign or other notice ("sign") shall be inscribed, painted or affixed on any part of the outside or inside of the Building without the Lessor's express written consent to the sign and its location. Window shades, blinds or, curtains of a uniform color and pattern only shall be used throughout the Building to give a uniform color exposure through exterior windows. No awnings shall be placed upon the Building. 4. No tenant shall do or permit to be done in Building, or bring or keep anything thereon, which shall in any way obstruct or interfere with the rights of other tenants, or in any part thereof, or conflict with any of the rulers and ordinances of the Board of Health. Tenants, their invitees and employees shall maintain order in the Building, shall not make or permit any improper noise in Building or interfere in any way with other tenants or those having business with them. No rooms shall be occupied or used as sleeping or lodging apartments at any time without permission of Landlord. No part of Building shall be used or in any way appropriated for gambling, immoral or other unlawful practices. No intoxicating liquor or liquors shall be sold in Building by Tenant without Landlord's permission. 5. Tenants shall not employ any persons other than the janitors of Landlord (who will be provided with pass keys into the offices) for the purpose of cleaning or taking care of Premises. 6. No animals, birds, bicycles, or other vehicles shall be allowed into the offices, halls, corridors, elevators, or elsewhere in the Building. 7. All tenants and occupants shall observe strict care not to leave their windows open when it rains or snows and for any fault or carelessness in any of these respects, shall make good any injury substained by other tenants, and to Landlord for damage to paint, plastering or other parts of Building resulting from such default or carelessness. No painting shall be done, nor shall any alterations be made, to any part of Building by painting up or changing any particulars, doors or windows, nor shall there be any nailing, boring, or screwing into the woodwork or plastering, nor shall any connection be made to the electric wires or gas or electric fixtures, without the consent in writing on each occasion of Landlord or its agent. All glass, locks and trimmings in or upon the doors and windows of Building shall be kept whole, and when any part thereof shall be broken, the same shall immediately be replaced or repaired and put in order under the direction and to the satisfaction of Landlord, or its agents, and shall be left whole and in good repair. Tenants shall not deface Building, the woodwork or the walls of the Premises. 8. Not more than two keys for each office (or the equivalent of one key for each approximately 500 square feet) will be furnished tenants without charge. Tenants shall not, under any circumstances, have any duplicate keys made. No additional locks or latches shall be put upon any door without the written consent of Landlord. Tenants, at the termination of their Lease of the Premises shall return to Landlord all keys to doors in Building. 9. Landlord in all cases retains the power to prescribe the weight and position of iron safes or other heavy articles. Tenants must make arrangements with the superintendent of Building when the elevator is required for the purpose of the carrying of any kind of freight. 10. If tenants require wiring for a bell or buzzer system, such wiring shall be done by the electrician of Building only, and no outside wiring men shall be allowed to do work of this kind unless by the written permission of Landlord. If telegraphic or telephonic services are desired, the wiring for same shall be done as directed by the electrician of Building or by some employee of Landlord who may be instructed by the superintendent of Building to supervise them, and no boring or cutting for wiring shall be done unless approved by Landlord or its agents. 11. Parking facilities supplied by Landlord for tenants, if any, shall be used for vehicles that may occupy a standard parking area only (i.e., 8' x 10'). Moreover, the use of such parking facilities shall be limited to normal business parking and shall not be used for a continuous parking of any vehicle or trailer regardless of size. 12. Landlord reserves all vending rights. 13. The Landlord shall not be responsible to any tenant for the non-observance of violation of any of these Rules and Regulations by any other tenants. The Landlord reserves the right to make such other reasonable rules and regulations as in his judgment may from time to time be needed for the safety, care and cleanliness of the premises, and for the preservation of good order therein. Regulations shall be binding upon the parties hereto the same as if they had been inserted at time of execution. 14. Comply with all laws, ordinances and regulations of the United States and the State and County wherein the Premises lies, or any agencies thereof, and further to comply with all recommendations of any public or private agency having authority over insurance rates with respect to the use of occupancy of the Premises by Tenant. 15. Landlord may require that automobiles owned by Tenant, its licensees, concessionaires and employees be parked in specific portions of the parking area. 16. Tenant shall not place or maintain merchandise or other articles in any vestibule or entry of the Premises, on the sidewalks adjacent thereto, or elsewhere in the exterior or common area. 17. Tenant shall not solicit business in the parking area or other common areas. 18. Tenant shall not distribute handbills or other advertising matter to, in or upon any automobiles parked in the parking areas or in any other common area. 19. Tenant shall not use or permit the use of any apparatus for sound reproduction or transmission, including, but not limited to, loud speakers, phonographs, public address systems, sound amplifiers and radios, or any musical instrument, in any manner that sounds so produced are audible or visible outside the Premises. 20. Tenant shall not cause or permit the loading or unloading of merchandise, supplies or other property outside the area designated therefor, or permit the parking or standing outside of said area by delivery vehicles or other vehicles or equipment engaged in loading or unloading. EX-10.17 24 ex-1017.txt EXHIBIT 10.17 EXHIBIT 10.17 EXECUTIVE EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of the ____ day of _________, 2000, between Global e Tutor.com, Inc., a corporation (the "Company"), and ___________________ (the "Executive"). INTRODUCTION The Company and the Executive desire to enter into an employment agreement embodying the terms and conditions of the Executive's employment. This agreement will replace any prior employment agreement between the Company and the Executive. NOW, THEREFORE, the parties agree as follows: 1. DEFINITIONS (a) "AFFILIATE" means any person, firm, corporation, partnership, association or entity that, directly or indirectly or through one or more intermediaries, controls, is controlled by or is under common control with the Company, as determined by the Company. (b) "AREA" means the State of Georgia. (c) "BOARD OF DIRECTORS" means the Board of Directors of the Company. (d) "BUSINESS OF THE COMPANY" means the business of providing an Internet-based educational services community including web-based, interactive tutoring services for K-12 students. (e) "CAUSE" means the occurrence of any of the following events: (1) willful and continued failure (other than such failure resulting from his incapacity during physical or mental illness) by the Executive to substantially perform his duties with the Company or an Affiliate; (2) conduct by the Executive that amounts to willful misconduct or gross negligence; (3) any act by the Executive of fraud, misappropriation, dishonesty, embezzlement or similar conduct against the Company or an Affiliate; (4) commission by the Executive of a felony or any other act involving dishonesty or moral turpitude; (5) illegal drug use; or (6) material breach of the Agreement by the Executive. (f) "COMMENCEMENT DATE" is defined in Section 4(a). (g) "COMPETING BUSINESS" means any person, firm, corporation, joint venture or other business entity which is engaged in the Business of the Company (or any aspect thereof) within the Area. (h) "DISABILITY" means the inability of the Executive to perform any of his duties hereunder due to a physical, mental, or emotional impairment, as determined by an independent qualified physician (who may be engaged by the Company) for a ninety (90) consecutive day period or for an aggregate of one hundred eighty (180) days during any three hundred sixty-five (365) day period. (i) "PROPRIETARY INFORMATION" means confidential information and trade secrets related to the business of the Company or its Affiliates, or to third parties who have entrusted the information to the Company. (j) "TERM" is defined in Section 4(a). (k) "TERMINATION DATE" means the date that corresponds to the first to occur of (i) the death or Disability of the Executive; (ii) the last day of the Term as provided in Section 4(a) below or (iii) the date set forth in a notice given pursuant to Section 4(b) below. 2. TERMS AND CONDITIONS OF EMPLOYMENT. (a) EMPLOYMENT. The Company hereby employs the Executive as its _____________________________ . The Executive accepts such employment with the Company in such capacity. The Executive shall report to _________________ and shall have such authority and responsibilities and perform such duties as shall reasonably be assigned to the Executive from time to time by the Company. (b) EXCLUSIVITY. Throughout the Executive's employment hereunder, the Executive shall devote substantially all the Executive's time, energy and skill during regular business hours to the performance of the duties of the Executive's employment (vacations and reasonable absences due to illness excepted), shall faithfully and industriously perform such duties, and shall diligently follow and implement all management policies and decisions of the Company. The Company recognizes and accepts that Executive has other business ownership interests outside of the Company, which interests he may pursue without violating this Agreement. 3. COMPENSATION. (a) BASE SALARY. In consideration for the Executive's services hereunder, the Company shall pay to the Executive an annual base salary in the amount of $___________ initially. The Company may increase the Executive's annual base salary from time to time. The Company shall pay annual base salary in accordance with the normal payroll payment practices of the Company and subject to such deductions and withholdings as law or policies of the Company require. (b) BONUS. In addition to the annual base salary payable under Section 3(a) hereof, the Executive shall be entitled to participate in all bonus programs generally available to all executive officers of the Company (c) STOCK-BASED COMPENSATION. Stock options or other stock-based compensation will be awarded to the Executive at the discretion of the Board of Directors, or a committee thereof, pursuant to the Company's stock incentive plan. (d) VACATION AND SICK LEAVE. The Executive shall be entitled to vacation and sick leave in accordance with Company policy. (e) EXPENSES. The Executive shall be entitled to be reimbursed in accordance with the policies of the Company, as adopted and amended from time to time, for all reasonable and necessary expenses incurred by the Executive in connection with the performance of the Executive's duties of employment hereunder; provided, however, the Executive shall, as a condition of such reimbursement, submit verification of the nature and amount of such expenses in accordance with the reimbursement policies adopted by the Company from time to time. (f) BENEFITS. In addition to the benefits payable to the Executive specifically described herein, the Executive shall be entitled to such benefits as generally may be made available to all other employees of the Company from time to time; provided, however, that nothing contained herein shall require the establishment or continuation of any particular plan or program. 4. TERM, TERMINATION AND TERMINATION PAYMENTS. (a) TERM. The term of this Agreement (the "Term") shall commence as of the date of this Agreement (the "Commencement Date") and shall expire on the third anniversary of the Commencement Date. Ninety (90) days before the end of the Term and ninety (90) days before the end of each year thereafter, the Agreement is automatically extended for an additional one-year period unless either party gives prior notice of nonrenewal. In the event prior notice of nonrenewal is given, this Agreement shall terminate at the end of the remaining Term then in effect. (b) TERMINATION. This Agreement and the Executive's employment by the Company hereunder may only be terminated before expiration of the Term: (1) by mutual agreement of the Executive and the Company; (2) by the Company without Cause; (3) by the Company for Cause; and (4) by the Company or the Executive due to the Disability of the Executive. This Agreement shall also terminate immediately upon the death of the Executive. Notice of termination by either the Company or the Executive shall be given in writing and shall specify the basis for termination and the effective date of termination; provided, however, that if the Company does not specify an effective date, termination shall be immediate. (c) EFFECT OF TERMINATION. Upon termination of this Agreement and the Executive's employment hereunder, the Company shall have no further obligation to the Executive or the Executive's estate with respect to this Agreement, except for payment of salary and bonus amounts, if any, accrued pursuant to Section 3(a) or 3(b) hereof and unpaid at the Termination Date, and payments, if any, set forth in Section 4(d), or 4(e) hereof, as applicable, subject to the provisions of Section 8 hereof. Nothing contained herein shall limit or impinge any other rights or remedies of the Company or the Executive under any other agreement or plan to which the Executive is a party or of which the Executive is a beneficiary. If this Agreement terminates because of the expiration of the Term, Executive will not be entitled to any severance. (d) TERMINATION WITHOUT CAUSE. Except as set forth in Section 4(b)(i) hereof, upon termination of the Executive's employment by the Company without Cause, the Company shall be obligated to continue to pay the Executive his annual base salary at the time of termination of employment for two (2) weeks provided that the Executive continues to provide services to the Company during the two (2) week period. If the Executive ceases to provide services without the consent of the Company, the Executive shall only be due such salary accrued through the date that the Executive ceases to provide services. (e) TERMINATION WITH CAUSE. If the Company terminates the Executive with Cause, the Executive will be entitled to no compensation other than that accrued pursuant to Section 3(a) or 3(b). (f) PAYMENT UPON A DISABILITY. If the Executive's employment under this Agreement is terminated because of the Disability of the Executive, the Company shall be obligated to continue to pay the Executive his annual base salary to the extent that the Executive has any unpaid sick leave. 5. PROPRIETARY INFORMATION. (a) All Proprietary Information and all physical embodiments thereof are confidential to the Company. All Proprietary Information, and all physical embodiments thereof, are and will remain the sole and exclusive property of the Company and Executive hereby assigns to the Company any right, title or interest Executive may have in such Proprietary Information. Except to the extent necessary to perform the Business Services, Executive may not reproduce, use, distribute, disclose or otherwise disseminate the Proprietary Information or any physical embodiments thereof and may in no event take any action causing, or fail to take the action necessary in order to prevent, any Proprietary Information disclosed to or developed by Executive to lose its character or cease to qualify as Proprietary Information. Each reproduction of any of the Proprietary Information must prominently contain a legend identifying its confidential or proprietary nature. (b) Executive represents and warrants that any information disclosed by Executive to the Company is not confidential or proprietary to Executive or to any third party. Accordingly, no obligation of any kind is assumed by or to be implied against the Company by virtue of any information received (in whatever form or whenever received) from Executive relating to the subject matter hereof, and the Company is free to reproduce, use and disclose to others such information without limitation. (c) Upon request by the Company, and in any event upon termination of the engagement of Executive with the Company for any reason, Executive will promptly deliver to the Company all property belonging to the Company, including without limitation all Proprietary Information (and all physical embodiments thereof) then in its custody, control or possession. 6. RESTRICTIVE COVENANTS. (a) Executive agrees that during the term of Executive's employment under this Agreement and for a period of two (2) years following termination of such employment for any reason, Executive will not, either directly or indirectly, on Executive's own behalf or in the service of or on behalf of any other individual or entity, divert or solicit, or attempt to divert or solicit any person employed by the Company, whether or not such employee is a full-time or temporary employee of the Company and whether or not such employment is pursuant to a written agreement, for a determined period or at will. (b) Executive agrees that during the term of Executive's employment under this Agreement and for a period of one (1) year following termination of such employment for any reason, Executive will not, either directly or indirectly, on Executive's own behalf or in the service of or on behalf of any other individual or entity, divert or solicit, or attempt to divert or solicit, to a Competing Business any individual or entity who is a customer or actively sought prospective customer of the Company at any time during the two (2) year period prior to the termination of Executive's employment with the Company with whom Executive had contact during his or her employment under this Agreement or regarding whom Executive has Proprietary Information. (c) Executive agrees that during the term of Executive's employment under this Agreement and for a period of one (1) year following termination of such employment for any reason, Executive will not, either directly or indirectly, on Executive's own behalf or in the service of or on behalf of any other individual or entity, engage in a Competing Business in the Territory in the same or similar capacity in which Executive was engaged by the Company, or own, individually or collectively, a controlling beneficial interest in a Competing Business in the Territory. 7. CONTRACTS OR OTHER AGREEMENTS WITH FORMER EMPLOYER OR BUSINESS. The Executive hereby represents and warrants that he is not subject to any employment agreement or similar document, except as previously disclosed and delivered to the Company, with a former employer or any business with which the Executive has been associated for which Executive's employment by the Company and provision of services in the capacity contemplated would be a breach. For that reason, Executive hereby represents and warrants that he is not subject to any Agreement which on its face prohibits the Executive during a period of time which extends through the Commencement Date from any of the following: (i) providing services for the Company in the capacity contemplated by this Agreement; (ii) competing with, or in any way participating in a business which competes with the Executive's former employer or business; (iii) soliciting personnel of such former employer or business to leave such former employer's employment or to leave such business; or (iv) soliciting customers of such former employer or business on behalf of another business. Executive represents and warrants to the Company that complying with the terms of this Agreement will not violate or in any way infringe upon the rights of third parties, (including without limitation contractual, employment, proprietary information and nondisclosure rights) or be in violation of any applicable law, rule or regulation. 8. REMEDIES. (a) The Executive agrees that the covenants and agreements contained in Sections 5 and 6 hereof are of the essence of this Agreement; that each of such covenants is reasonable and necessary to protect and preserve the interests and properties of the Company and the Business of the Company; that the Company is engaged in and throughout the Area in the Business of the Company; that irreparable loss and damage will be suffered by the Company should the Executive breach any of such covenants and agreements; that each of such covenants and agreements is separate, distinct and severable not only from the other of such covenants and agreements but also from the other and remaining provisions of this Agreement; that the unenforceability of any such covenant or agreement shall not affect the validity or enforceability of any other such covenant or agreements or any other provision or provisions of this Agreement; and that, in addition to other remedies available to it, the Company shall be entitled to specific performance of this Agreement and to both temporary and permanent injunctions to prevent a breach or contemplated breach by the Executive of any of such covenants or agreements. (b) In addition to any other rights the Company may have pursuant to this Agreement, if Executive breaches any of his obligations under Sections 5 or 6, Executive will forfeit any amounts owed to Executive under Section 4(d) or 4(e), as applicable, which have not been paid to Executive by the Company and Executive shall immediately repay to the Company all amounts previously paid to Executive pursuant to Section 4(d) or 4(e), as applicable. (c) By virtue of the duties, responsibilities and special knowledge of the affairs and operations of the Company that Executive will have as a result of its relationship with the Company under this Agreement, great loss and irreparable damage would be suffered by the Company if Executive should breach or violate any of the covenants and agreements set forth in Section 5 or 6 hereof. The parties agree that each such covenant and agreement is reasonably necessary to protect and preserve the interests of the Company, and that, therefore, in addition to all of the remedies provided at law or in equity, the Company will be entitled to a temporary restraining order and a permanent injunction to prevent a breach of any of such covenants or agreements. The Company will have the right to set off against any sums due from the Company to Executive for damages incurred or suffered by the Company as a result of any breach of this Agreement and any application as a set-off of any such sums will not be considered in full satisfaction of or as liquidated damages for any such breach. The existence of any claim, demand, or cause of action of Executive against the Company, whether predicated upon this Agreement or otherwise, will not constitute a defense to the enforcement by the Company of any of the covenants or agreements herein. 8. PROHIBITION ON INSIDER TRADING. The Executive acknowledges that, in the course of his employment, he may receive material non-public information regarding the Company or the Company's business partners. The Executive understands that the United States securities laws prohibit any person who has material non-public information about a company from purchasing or selling the securities of the company and further prohibit any person with material non-public information from transmitting that information to any other person under circumstances in which it is reasonably foreseeable that such other person is likely to purchase or sell securities. The Executive agrees not to purchase or sell securities of the Company or the Company's business partners based on material non-public information and further agrees not to transmit any material non-public information to other persons under circumstances in which it is reasonably foreseeable that such other person is likely to purchase or sell securities. 9. NO SET-OFF. The existence of any claim, demand, action or cause of action by the Executive against the Company, or any Affiliate of the Company, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any of its rights hereunder. The existence of any claim, demand, action or cause of action by the Company against the Executive, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Executive of any of his rights hereunder. 10. NOTICE. All notices, requests, demands and other communications required hereunder shall be in writing and shall be deemed to have been duly given if delivered or if mailed, by United States certified or registered mail, prepaid to the party to which the same is directed at the following addresses (or at such other addresses as shall be given in writing by the parties to one another): If to the Company: President Global e Tutor.com, Inc. 3340 Peachtree Road, Suite 1800 Atlanta, Georgia 30326 If to the Executive: ______________________ ______________________ ______________________ Notices delivered in person shall be effective on the date of delivery. Notices delivered by mail as aforesaid shall be effective upon the third calendar day subsequent to the postmark date hereof. 11. MISCELLANEOUS. (a) ASSIGNMENT. Except for assignment of this Agreement to an Affiliate, neither this Agreement nor any right of the parties hereunder may be assigned or delegated by any party hereto without the prior written consent of the other party. (b) MODIFICATION AND WAIVER. Any term or condition of this Agreement may be waived in writing at any time by the party hereto which is entitled to the benefit of such term or condition. Any waiver on one occasion shall not be deemed to be a waiver of the same or of any other breach on any future occasion. This Agreement may be modified or amended only by a writing signed by all of the parties hereto. (c) SURVIVAL. Executive's obligations under Section 6(a)-(c) shall survive termination of this Agreement according to their respective terms. Executive's obligations with respect to Proprietary Information under Section 5 shall survive termination of this Agreement for a period of three (3) years, and, with respect to Proprietary Information that constitutes trade secrets under applicable law, shall continue to survive thereafter for so long as such trade secrets remain entitled to protection under applicable law. (d) APPLICABLE LAW. This Agreement shall be construed and enforced under and in accordance with the laws of the State of Georgia. (e) VENUE. Any action, suit or proceeding arising out of or in connection with this Agreement (collectively "Proceeding") shall be brought exclusively in the U.S. District court for the Northern District of Georgia or a state court of competent jurisdiction in Fulton County, Georgia. Each party hereto irrevocably waives, to the fullest extent permitted by law, any object in which such party may have to the laying of venue for any Proceeding in any such court. (f) ENTIRE AGREEMENT. Except as to the terms of stock options, which shall be governed by a separate stock option agreement, this Agreement, when executed, embodies the entire agreement of the parties on the subject matter thereof. No amendment or modification of this Agreement will be valid or binding upon the Company or Executive unless made in writing and signed by the parties. Notwithstanding the foregoing terms of any stock option granted pursuant to this Agreement shall be governed by the terms of a separate stock option agreement. (g) AMENDMENT. This Agreement may not be modified, amended, supplemented or terminated except by a written instrument executed by the parties hereto. (h) SEVERABILITY. This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations. If any provision of this Agreement, or the application thereof to any person or particular circumstance, shall, for any reason and to any extent, be invalid or unenforceable, it is the intention of the parties to this Agreement that the remainder of this Agreement and the application of such provisions to other persons or particular circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law. (i) CAPTIONS AND SECTION HEADINGS. Except as set forth in Section 1 hereof, captions and section headings used herein are for convenience only and are not a part of this Agreement and shall not be used in construing it. [REMAINDER OF PAGE IS INTENTIONALLY BLANK] [SIGNATURES ARE ON THE FOLLOWING PAGE] IN WITNESS WHEREOF, the Company and the Executive have each executed and delivered this Agreement as of the date first shown above. THE COMPANY: By:________________________ Title:_____________________ ATTEST: ________________________________ Title:__________________________ [CORPORATE SEAL] EXECUTIVE: ___________________________________________ Schedule of Employee Agreements
Date of Signed By Attested to Name and Address Agreement Position Salary Report to and Title and Title - ---------------- --------- -------- ------ --------- --------- --------- Thomas E. McMurrain 1/21/00 CEO, President, $60,000 Board of Lara Stegman Deborah Ward 3340 Peachtree Road and Co-Chairman Directors Secretary Notary Public Suite 1800 Atlanta, GA 30326 Claes Nobel 1/31/00 Co-Chairman and $150,000 Board of Tom McMurrain Lara Stegman Senior Vice President Directors CEO/President Secretary Leslie Ennis 1/31/00 Vice President $60,000 Tom McMurrain Tom McMurrain Shawn Cartmill 1700 Ranch Valley Dr. CEO/President Dir Accounting Roswell, GA 30075 Shawn Cartmill 1/31/00 Treasurer and $24,000 Tom McMurrain Tom McMurrain Lara Stegman P.O. Box 450523 Director of Accounting CEO/President Secretary Atlanta, GA 31145 Robert Willison 1/21/00 Investor Relations $24,000 Tom McMurrain Tom McMurrain Lara Stegman 1599 Bayhill Drive CEO/President Secretary Duluth, GA 30097 Lara Stegman 1/31/00 Secretary and $24,000 Jerry Barton Tom McMurrain Deborah Ward P.O. Box 550616 Director of Operations CEO/President Notary Public Atlanta, GA 30355
EX-10.18 25 ex-1018.txt EXHIBIT 10.18 EXHIBIT 10.18 PROMISSORY NOTE December 31, 1999 FOR VALUE RECEIVED, the undersigned promises to pay to Emergency One Holding Company and it's subsidiaries within a twelve month period ending 12/31/2000 the principal sum of 173,890.43 ($) in legal tender of the United States, In the following terms: Beginning 12/10/00 interest and principal shall commence at the rate of 10(%) per annum. The undersigned may prepay all of any part of the interest or principal at any time, and from time to time, without penalty and with interest adjusted through date of payment. Should the payment of principal or interest not be paid when due, the entire unpaid sum evidenced by this note, with all accrued interest, shall, at the option of the holder, and without notice to the undersigned, become due and may be collected forthwith, time being of the essence of this contract. It is further agreed that failure of the holder to exercise this right of accelerating the maturity of the debt, of indulgence granted from time to time, shall in no event be considered as a waiver of such right of acceleration or estop the holder from exercising such rights. Should this Note, or any part of the indebtedness evidenced hereby, be collected by law or through an Attorney-At-Law, the holder shall be entitled to collect Attorney's fees in an amount equal to fifteen percent (15%) of the principal and interest and all costs of collection. /s/ Tom McMurrain Recipient /s/ Witness 05-16-00 Date EX-18.1 26 ex-181.txt EXHIBIT 18.1 EXHIBIT 18.1 RAINES AND FISCHER Certified Public Accountants 535 FIFTH AVENUE TEL. 212 953 9200 25TH FLOOR FAX. 212 953 9366 NEW YORK, NY 10017 May 30, 2000 Board of Directors Globaletutor.com, Inc. 3340 Peachtree Road N.E. Suite 1800 Atlanta, GA 30326 Gentlemen: I acknowledge receipt of a copy of the disclosures set forth in your current report on Form 8-K dated May 23, 2000, under the heading "Change of Accountant," made in response to Item 304 of Regulation S-B promulgated by the Securities and Exchange Commission. This letter will confirm that I agree with the statements made by you in this section. There were no disagreements with the Company for the annual periods or for the period up to the date of dismissal. Sincerely, /s/ Raines & Fischer -----END PRIVACY-ENHANCED MESSAGE-----