-----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, CQ7hMWpzNROcMv6gSZX+NXMUUX5R+mhyWaiq2lLMAODxOOIW4s5O9d25tejOhexj IKJYnm6isAVl8xX0ccmzwg== /in/edgar/work/20000821/0000931763-00-002073/0000931763-00-002073.txt : 20000922 0000931763-00-002073.hdr.sgml : 20000922 ACCESSION NUMBER: 0000931763-00-002073 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000821 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBAL E TUTOR INC CENTRAL INDEX KEY: 0001114898 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] IRS NUMBER: 880444539 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-30743 FILM NUMBER: 706158 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 10QSB 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2000 Date of Report August 18, 2000 GLOBAL E TUTOR, INC. (Exact Name of Registrant as Specified in Charter) DELAWARE State or other jurisdiction of incorporation or organization 000-30743 Commission File No. 88-0444539 I.R.S. Employer I.D. No. 3340 PEACHTREE ROAD, SUITE 1800 ATLANTA, GA (Address of Principal Executive Offices) 30326 (Zip Code) Registrant's telephone number, including area code: (404) 978-1640 GLOBAL E TUTOR, INC. FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 INDEX PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets--June 30, 2000 (unaudited) and December 31, 1999 Condensed Consolidated Statements of Operations (unaudited) Consolidated Statements of Stockholders' Equity--from Inception on December 10, 1999 through June 30, 2000 Consolidated Statements of Cash Flows (unaudited)--Six months ended June 30, 2000 (unaudited) and Period From Inception Through June 30, 2000 (unaudited) Notes to consolidated Financial Statements (unaudited)--June 30, 2000 and December 31, 1999 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Risk Factors ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK--not applicable PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K SIGNATURES PART I FINANCIAL INFORMATION............................................ Item 1. Financial Statements GLOBAL E TUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS ------ Subsidiary June 30, December 31, 2000 1999 ------------------- ------------------ Current assets - -------------- Cash $ 74,240 $ 774,911 Other current assets 6,026 20,000 ------------------- ------------------ Total current assets 80,266 794,911 ------------------- ------------------ Property and equipment, at cost - ------------------------------- Furniture and equipment 19,478 - Computer equipment 30,043 5,369 Software 2,208 - Leasehold improvements 15,386 - Web site development costs 387,653 - ------------------- ------------------ 454,768 5,369 Allowance for depreciation (30,271) (79) ------------------- ------------------ Net property and equipment 424,497 5,290 ------------------- ------------------ Other assets - ------------ Employee advances 169,999 - Intangibles, net of accumulated amortization 102,346 132 Other assets 18,078 75,000 ------------------- ------------------ Total other assets 290,423 75,132 ------------------- ------------------ $ 795,186 $ 875,333 =================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities - ------------------- Accounts payable $ 214,464 $ 98,500 Accrued expenses 76,368 11,606 Due to related parties 339,129 923,890 ------------------- ------------------ Total current liabilities 629,961 1,033,996 ------------------- ------------------ Stockholders' equity - -------------------- Common stock 27,568 9,640 Additional paid in capital 2,483,985 15,360 Deferred compensation, net of accumulated amortization (474,422) - Accumulated deficit (1,871,906) (183,663) ------------------- ------------------ Total stockholders' equity 165,225 (158,663) ------------------- ------------------ $ 795,186 $ 875,333 =================== ==================
Note: The balance sheet at December 31, 1999 was taken from the audited financial statements at that date and condensed See notes to unaudited condensed consolidated financial statements GLOBAL E TUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Period For the Six For the Three From inception Months Ended Months Ended on December 10, June 30, June 30, 1999 Through 2000 2000 June 30, 2000 -------------- ---------------- ------------------- Revenue $ - $ - $ - - ------- -------------- ---------------- ------------------- Costs of goods sold - - - - ------------------- -------------- ---------------- ------------------- Gross profit - - - - ------------ -------------- ---------------- ------------------- Expenses - -------- General and administrative 1,081,290 689,128 1,216,178 Depreciation/Amortization 220,044 50,969 220,044 Research and development 43,073 6,773 43,073 Sales and marketing 355,519 198,216 395,811 -------------- ---------------- ------------------- Total expenses 1,699,926 945,086 1,875,106 -------------- ---------------- ------------------- Loss from operations (1,699,926) (945,086) (1,875,106) - -------------------- -------------- ---------------- ------------------- Other income (expense) - ---------------------- Interest income 17,605 9,938 17,605 Misc. income 1,200 1,200 1,200 Interest expense (7,122) (5,149) (15,605) -------------- ---------------- ------------------- Total other income (expense) 11,683 5,989 3,200 -------------- ---------------- ------------------- Loss before income taxes (1,688,243) (939,097) (1,871,906) - ------------------------ Income tax expense - - - - ------------------ -------------- ---------------- ------------------- Net loss $ (1,688,243) $ (939,097) $ (1,871,906) - -------- ============== ================ =================== Loss per common Share $ (0.06) $ (0.03) $ (0.07) - --------------------- ============== ================ ===================
See notes to unaudited condensed consolidated financial statements GLOBAL E TUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FROM INCEPTION ON DECEMBER 10, 1999 THROUGH JUNE 30, 2000 (UNAUDITED)
Additional Total Common Stock Paid In Deferred Accumulated Stockholders' ----------------------------- Shares Amount Capital Compensation Deficit Equity -------------- ------------- ------------ --------------- ---------------- ------------- Balance, December 10, 1999 9,640,000 9,640 15,360 - - 25,000 Compensation for options and warrants issued at below market value - - - - - - Net loss for the period ended December 31, 1999 - - - (183,663) (183,663) -------------- ------------- ------------ --------------- ---------------- ------------- Balance, December 10, 1999 9,640,000 9,640 15,360 - (183,663) (158,663) Shares issued for cash at $.25 per share 5,000,000 5,000 1,245,000 - - 1,250,000 Effect of recapitalization of the subsidiary January 21, 2000 12,827,747 12,828 537,173 - 550,001 Share issued to purchase Kilimanjaro Group.com,Inc. at $.50 per share 50,000 50 24,950 - 25,000 Shares issued for services at $2.68 per share 49,520 50 132,560 132,610 Compensation for options and warrants issued at below market value - - 528,942 (474,422) - 54,520 Net loss for the period ended December 31, 1999 - - - (1,688,243) (1,688,243) -------------- ------------- ------------ --------------- ---------------- ------------- Balance, June 30, 2000 27,567,267 27,568 2,483,985 (474,422) (1,871,906) 165,225 ============== ============= ============ =============== ================ =============
See notes to unaudited condensed financial statements GLOBAL E TUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (Decrease) IN CASH (UNAUDITED)
For the Period For the Six From inception Months Ended on December 10, June 30, 1999 Through 2000 June 30, 2000 ------------ ------------- Cash flows from operating activities - ------------------------------------ Net loss $(1,688,243) $ (1,871,906) Adjustments to reconcile net loss to net cash (used) by operating activities Depreciation and amortization 32,916 33,002 Deferred compensation 54,520 54,521 Non-cash expense 132,610 132,610 Changes in assets and liabilities - Deposits (18,078) (18,078) Pre-paid expenses 13,974 (6,026) Accounts payable/accrued expenses 179,526 214,632 ------------ ------------- Total adjustments 395,468 410,661 ------------ ------------- Net cash (used) by operating activities (1,292,775) (1,461,245) ------------ ------------- Cash flows from investing activities - ------------------------------------ Employee advances (169,999) (169,999) (Acquisition) of fixed assets (449,399) (454,768) (Acquisition) of subsidiary (75,000) (75,000) (Acquisition) of intangible assets (3,737) (3,877) ------------ ------------- Net cash (used) by investing activities (698,135) (703,644) ------------ ------------- Cash flows from financing activities - ------------------------------------ Proceeds from related parties advances 165,239 1,089,129 Proceeds from sale of common stock 1,125,000 1,150,000 ------------ ------------- Net cash provided by financing activities 1,290,239 2,239,129 ------------ ------------- Net increase (decrease) in cash (700,671) 74,240 Cash, beginning of period 774,911 - ------------ ------------- Cash, end of period $ 74,240 $ 74,240 ============ =============
NON-CASH TRANSACTIONS - --------------------- The Company paid $75,000 in cash, assumed $1,200 in liabilities and issued 50,000 shares of common stock to purchase all the outstanding common shares of Kilimanjaro Group.Com, Inc., resulting in the Company recording goodwill of $101,200 The Company issued 49,520 restricted common shares, 36,782 non-qualified options, and 156,208 warrants during the months of February through June, 2000, in exchange for services, totaling $132,610, $26,391 and $502,552 respectively. In accordance with the merger and plan of reorganization, on January 21, 2000, 9,640,000 common shares of GlobalETutor, Inc. (formerly Digital Launch, Inc.) were exchanged for all of the outstanding common shares, 4,820,000, of GlobaleTutor.com, Inc. In accordance with an Agreement and Plan of Merger, on May 23, 2000, 50,000 common shares of GlobaleTutor, Inc. and $75,000 cash were exchanged for all of the outstanding shares of Kilimanjaro Group.com, Inc. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - ------------------------------------------------- June 30, 2000 --------- Cash paid during the periods for Interest $ - Income Taxes $ - See notes to unaudited condensed consolidated financial statements GLOBAL E TUTOR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDING JUNE 30, 2000 and DECEMBER 31, 1999 Note A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION: - --------------------------------------------------- The December 31, 1999 condensed financial statements include the accounts of GlobalETutor.Com, Inc. a Nevada corporation incorporated on December 10, 1999. On January 21, 2000 the GlobalETutor.Com completed the merger with Global e Tutor, Inc. ("Parent")(formerly known as Digital Launch, Inc./Veronique, Inc./EssexEnterprises, Inc.) that was organized under the laws of the State of Delaware on May 9, 1995. The merger was accounted for as a recapitalization of the Parent Company, wherein GlobalETutor.Com, Inc. ("Subsidiary") became a wholly owned subsidiary of the Parent. Effective May 25, 2000 the Parent entered into an Agreement and Plan of Merger with Kilimanjaro Group.com, Inc.("Kilimanjaro"), a Nevada corporation, wherein, Kilimanjaro merged into Parent with the Parent being the surviving entity and assuming Kilimanjaro's reporting obligations as its successor pursuant to Section 12(g)(3) of the Securities Exchange Act. The Consolidated condensed financial statements as of June 30, 2000, for the six and three months ended June 30, 2000, and from inception of December 10 through June 30, 2000 include the accounts of the Parent and its wholly-owned subsidiary after giving effect to the recapitalization and the merger. 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 grades 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 to 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. The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, result of operations and cash flows at June 30, 2000 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statement be read in conjunction with the financial statements. The results of operations for the periods ended June 30, 2000 are not necessarily indicative of the operating results for the full year. 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 are 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 Leasehold improvements 5 years Web site development costs 3 years INTERNAL USE SOFTWARE: - ---------------------- The Company accounts for the costs of software and development cost in accordance with Statement of Position 98-1, "ACCOUNTING FOR COMPUTER SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE". The SOP requires the capitalization of certain costs incurred in connection with developing or obtaining software for internal use. RESEARCH AND DEVELOPMENT: - ------------------------- The Company expenses the cost of research and development for new products and components as the costs are incurred. 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 June 30, 2000 the Company had deposits with a financial institution in the amounts of $35,918 in excess of federally insured limits. INTANGIBLE ASSETS: - ------------------ Intangible assets for the Company, consist of domain name registrations and goodwill. Domain name registrations are amortized on a straight-line basis over two years. Goodwill is amortized on a straight-line basis over five years. Amortization expense for the six and three months ended June 30, 2000 totaled $2,731 and $2,579 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: - -------------------- The Company has earned no revenue to date. 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 June 30, 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. Advertising expense for the six and three months ended June 30, 2000 totaled approximately $147,104 and $74,023, respectively 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." The Company has 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. 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 for the six and three months ended 30, 2000 and from inception on December 10, 1999 through June 30, 2000 is the same as net loss presented in the accompanying statement of operations for the periods then ended. 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. The parent sold to outside investors in a private placement transaction, an additional 3,000,000 shares of stock at $.25 per share , and 500,000 shares of stock at $.20 per share, totaling $850,000. On January 21, 2000 the Company completed the merger with GlobalETutor.com, Inc. through the issuance of 9,640,000 common shares of the Company for GlobalETutor.com, Inc. 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. On May 25, 2000, the Company merger with Kilimanjaro Group.com, Inc. ("Kilimanjaro"), a Nevada corporation became effective. The agreement provided that Kilimanjaro would merge into GLOBAL E TUTOR, INC. It also provided that GLOBAL E TUTOR, INC. would issue 50,000 common shares pro rata to the three shareholders of Kilimanjaro and pay $75,000 pro rata to these shareholders in exchange for all of the outstanding shares of Kilimanjaro. As a result, Kilimanjaro was merged into GLOBAL E TUTOR, Inc. GLOBAL E TUTOR, Inc. was the surviving entity and assumed Kilimanjaro's reporting obligations as its successor pursuant to Section 12(g)(3) of the Securities Exchange Act. Prior to the merger, GLOBAL E TUTOR, Inc. had an aggregate of 27,467,747 shares of common stock issued and outstanding. As a result of the merger, the Company had a total of 27,517,747 shares outstanding. The officers, directors, bylaws, and the certificate of incorporation of GLOBAL E TUTOR, Inc. remain unchanged as a result of the merger, and the control of the successor entity rests with GLOBAL E TUTOR, Inc. NOTE C - RELATED PARTY TRANSACTIONS EMPLOYEE ADVANCES: - ------------------ The Company has made employee advances totaling $169,999 during the first and second quarter 2000. The majority of the advance, $168,099 is due on demand from the Vice-Chairman of the Board of the Company. DUE TO RELATED PARTIES: - ----------------------- As of June 30, 2000, due to related parties consists of an unsecured, interest bearing, due on demand note payable to an affiliate in the amount of $339,129. Interest on the note to the affiliate is 10% per annum. Accrued interest on the affiliate note totaled $10,595 as of June 30, 2000 and is included in accrued expenses. NOTE D - STOCKHOLDERS' EQUITY Common Stock - The Company is authorized to issue 50,000,000 shares of $.001 par value common stock. As of June 30, 2000, 27,567,267 shares were issued and outstanding. During the six months ended June 30, 2000 the Company issued 49,520 shares of common stock for professional services rendered valued at $132,610. 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 June 30, 2000. Warrants - At June 30, 2000, the Company had 216,208 warrants to purchase common stock outstanding at prices from $.25 to $1.00 per share, and expiring from 2002 to 2005. The warrants were issued prior to the recapitalization in connection with the Parent 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 $2,117,715 at June 30, 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 June 30, 2000 are presented below: NON-CURRENT: Deferred tax asset Net operating loss carryforward $ 720,023 Accumulated Depreciation 8,107 Accumulated Amortization 737 Deferred Tax Amortization 63,624 Research and Development Tax Credits 35,838 --------- Deferred tax asset 828,329 Less valuation allowance (828,329) --------- Net non-current deferred tax asset $ -0- ----------
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 June 30, 2000 and December 31, 1999, respectively. A summary of the status of the options granted under the Company's stock option plan and other agreements at June 30, 2000 and changes during the period then ended are presented below:
June 30, 2000 --------------------------- Weighted Average Shares Exercise Price --------- ---------------- Outstanding at Beginning of period 4,407,674 $ .25 Granted 36,782 .68 Exercised -- -- Forfeited 266,667 .25 Expired -- -- --------- ---- Outstanding at end Of period 4,177,789 $ .25 --------- ----- Weighted average fair Value of options granted During the six months ended June 30, 2000 36,782 $1.41 --------- -----
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 June 30, 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 June 30, 2000 is presented below: Options
Options Outstanding Options Exercisable - ----------------------------------------------- --------------------------------- Weighted Weighted Weighted Range of Average Average Average Exercise Number Remaining Exercise Number Exercise Prices Outstanding Contractual Life Price Exercisable Price $.25-$.275 4,113,507 2.6 years $0.25 1,648,502 $0.25 $0.50 23,687 2.9 years $0.50 7,896 $0.50 $0.75 27,500 3.0 years $0.75 27,500 $0.75 $1.00 13,095 3.0 years $1.00 4,365 $1.00 ----------- --------- 4,177,789 1,688,263
Note G - LOSS PER SHARE The following data shows the amounts used in computing loss per share for the periods presented:
For the Six For the Three From Inception Months Ended Months Ended on December 10 June 30, June 30, 1999 through 2000 2000 June 30, 2000 ------------ ------------- ------------- Loss from operations Available to common Shareholders (numerator) 1,688,243 939,097 1,871,906 ---------- ---------- ----------- Weighted average Number of common shares Outstanding used in Loss per share for the period (denominator) 26,900,714 27,487,747 26,442,131 ========== ========== ===========
The Company had outstanding at June 30, 2000, options to purchase 4,177,789 common shares at prices ranging from $.001 to $3.50 and warrants to purchase 216,208 common shares that were not included in the computation of loss per share because their effect is anti-dilutive. Note H - 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 has incurred losses since its inception, and has not yet been successful in establishing profitable operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regards management is proposing to raise any necessary additional funds not provided by operations through loans and/or through additional sales of its common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. These financial statements do not include any adjustments that might result from the outcome on these uncertainties. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview - -------- The following discussion and analysis should be read in conjunction with the balance sheets as of June 30, 2000 and December 31, 1999 and the statements of operations for the six months and the three months ended June 30, 2000 and for the period from inception through June 30, 2000 included with this Form 10-QSB. 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: - - We may not be able to raise money to continue operating. - - Our personal sanctuary databases may not be as secure or meeting the minimum requirements of COPA, which could subject our information to Internet hackers. - - 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 - - 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 statement 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. Mission Statement - ----------------- Our mission is to provide web-based access to educational services and tutorials that will personalize and focus the one-on-one virtual learning experience, create a personal database sanctuary for students within tutorials, and support parental and teacher involvement in the process. It is our goal to extend the reach of education to children outside the traditional education community and provide a multi-lingual, multi-cultural learning environment to children K-12 globally. 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 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. An Agreement and Plan of Merger with Kilimanjaro Group.com, Inc. ("Kilimanjaro"), a Nevada corporation became effective on May 25, 2000. The agreement provided that Kilimanjaro would merge into GLOBAL E TUTOR, INC. It also provided that GLOBAL E TUTOR, INC. would issue 50,000 common shares pro rata to the three shareholders of Kilimanjaro and pay $75,000 pro rata to these shareholders in exchange for all of the outstanding shares of Kilimanjaro. As a result, Kilimanjaro was merged into GLOBAL E TUTOR, Inc. GLOBAL E TUTOR, Inc. was the surviving entity and assumed Kilimanjaro's reporting obligations as its successor pursuant to Section 12(g)(3) of the Securities Exchange Act. Prior to the merger, GLOBAL E TUTOR, Inc. had an aggregate of 27,467,747 shares of common stock issued and outstanding. As a result of the merger, the Company had a total of 27,517,747 shares outstanding. The officers, directors, bylaws, and the certificate of incorporation of GLOBAL E TUTOR, Inc. remain unchanged as a result of the merger, and the control of the successor entity rests with GLOBAL E TUTOR, Inc. 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 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. - - 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 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. - - 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 May 15, 2000. The 501-(c)3 determination status is scheduled to be filed with the Internal Revenue Service by the end of 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 are 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/October 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. 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. We are currently re-evaluating this relationship. 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 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 $517,500, 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 June 30, 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. We do not expect our customers to bear the cost of our research and development. 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 service 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. The Company has chosen to focus on the development of distribution channels that would utilize other providers' content. It is our opinion that potential competitors are developing content and are now searching for distribution channels. 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: - - 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 during 2000. We anticipate that Dr. Nobel will tour the country in a specially designed bus and will speak at schools. 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 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 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 August 9, 2000, we employed 14 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 and availability of funds. Description of Property - ----------------------- On July 1, 2000 we moved our offices to 3565 Piedmont Road, Suites 715 and 707, Atlanta, GA 30305. The total square footage for both suites is 5,165. Our mailing address is still 3340 Peachtree Road, Suite 1800, Atlanta, GA 30326. The space is sublet until November 2000. We intend to continue the lease after that time. The monthly lease payments total $6,025.83. Plan of Operation - ----------------- In September- October 2000, our launch is planned with the opening of our website including "edutainment" offerings and a catalog offering education related products. Also at this time, we will begin a roll out of interactive tutoring modules that include collaborative learning and tutoring sessions for grades 4-8. During the initial launch phase (developing throughout the final quarter of 2000), the Company will incorporate virtual ISP elements into the site, some examples of which are email, chatrooms, and a calendar. Initial revenues will be generated through subscription sales of online course curriculums, corporate sponsorships, and government funding. 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. Capital Requirements - -------------------- We have been out of cash for approximately two months and are being funded by a related party entity. We do not have cash to continue operations. We are currently negotiating the terms of an equity financing which will satisfy a substantial portion of our cash requirements through the end of 2000. We are seeking a bridge loan of one million dollars from a current investor. 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. 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 filtered virtual ISP and premium services; - - personalized tutorials and assessment; - - content and technology development; - - affiliated products and services; and - - licensing and promotions. If we are able to raise capital we expect that the number of employees will increase from the current fourteen to approximately thirty persons over the next twelve months. Directors, Executive Officers, Promoters and Control Persons - ------------------------------------------------------------ The following table sets forth as of August 9, 2000, the name, age, and position of each of our executive officers and directors: Name Age Position(s) - ----------------------------------------------------------- Thomas E. McMurrai 32 Founder, Vice Chairman Claes Nobel 70 Senior Chairman, Senior Jerry Barton 62 CEO, President, Director Leslie Ennis 44 Vice-President Shawn Cartmill 36 Treasurer Robert Willisn 46 Director of Corporate Finance, Chief Financial Officer Lara Stegman 28 Secretary, Director of Operations James Lewis 45 Board Member Directors are elected for a term of one year or 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 or until his successor is chosen and qualified. Set forth below is certain biographical information regarding our executive officers and directors: THOMAS E. MCMURRAIN is currently the Founder and Vice-Chairman of GLOBAL E TUTOR, INC. He was the president, CEO, and co-chairman of GLOBALETUTOR.COM, INC. from December 1999 to July 7, 2000. 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. Mr. McMurrain's Company, Emergency Cash Card One, Inc., is currently funding the day-to-day operations of GLOBAL E TUTOR, INC. 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. JERRY BARTON is the new CEO and President of GLOBAL E TUTOR, INC. He was voted in on July 7, 2000. Mr. Barton was self-employed from May 1995, prior to becoming President of GET in July 2000. He became a board member of GLOBAL E TUTOR on June 2, 2000. From January 1994 to May 1995, Barton served as President of Parts Central, Inc., an automotive parts and retail distribution company in Macon, Georgia. Barton is a member of the Board of Directors of Parts Central, Macon, Georgia. 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 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 for a food retailer. 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. JAMES W. LEWIS is the founder and Executive Director of Golden Key National Honor Society, a non-profit organization located in Atlanta, Georgia honoring academic achievement in universities worldwide. He has held this position for the past 23 years. He currently serves on the Board of Directors of Friend's Health Connection, a not for profit organization based in New York City, New York, and the non-profit Advisory Board of the Georgia State University Alumni Association based in Atlanta, Georgia. Lewis became a member of the Board of Directors of Global e Tutor on June 2, 2000. The table below sets forth as of August 9, 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 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 six months ended June 30, 2000 and the fiscal years ended December 31, 1999, 1998, and 1997: Terrence O. McGrath, CEO 1999 $120,000 1998 $120,000 1,000,000 options (2) 1997 $105,000 Thomas E. McMurrain, CEO 1999 $ 3,123 62,174 options 2000 $ 30,000 (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. 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 June 30, 2000, there were no outstanding options granted under this plan and 29,225 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. 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. 2000 STOCK OPTION PLAN Subsequent to June 30, 2000 we adopted the 2000 Stock Option Plan pursuant to which we are authorized to issue 2,000,000 shares 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. 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 June 30, 2000, we had a total of 3,697,507 options which remained outstanding under our 1999 stock option plan and 480,282 options which were outstanding outside of our 1999 stock option plan, for a total of 4,177,789 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 Securities Percent of Total Name Underlying Options Outstanding Options Exercise Price Expiration Date - ----------------------------------------------------------------------------------------------------- Thomas E. McMurrain 62,174 0.027837 $ 0.275 1/31/03 Claus Nobel 482,000 0.215804 $ 0.25 1/31/03 Vincent A. Riggio 133,333 0.059697 $ 0.25 1/31/03 Leslie Ennis 185,000 0.082829 $ 0.25 1/31/03 Shawn Cartmill 185,000 0.082829 $ 0.25 1/31/03 Robert Willison 816,000 (1) 0.365345 $ 0.25 1/31/03 Lara Stegman 185,000 0.082829 $ 0.25 1/31/03 Dr. Barry Morris 185,000 0.082829 $ 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 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: Name Annual 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. 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. The principal balance of this note at June 30, 2000 is $339,129. 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 $168,000 as of June 30, 2000, for an employee loan. The loan is due on demand and accrues 10% interest per annum. Description of Securities - ------------------------- Common Stock We are authorized to issue 50,000,000 shares of common stock, par value $.001 per share. As of June 30, 2000, we had outstanding 27,567,267 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 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 June 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 Second $2.5469 $1.0625 Outstanding Options, Warrants, and Convertible Instruments At June 30, 2000, we had outstanding options to purchase 4,177,789 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, of which 266,667 were forfeited when an officer left the Board by mutual consent on June 28, 2000. 416,000 were granted during first quarter and 36,782 were granted during second quarter 2000, outside of our 1999 stock option plan. At June 30, 2000, we had outstanding warrants to purchase 60,000 shares. In addition, pursuant to an agreement with Habif, Arogeti & Wynne, LLP, we have agreed to issue 49,520 shares and warrants to purchase 156,208 shares for work performed during February through June 2000. The warrants will be exercisable at 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 27,567,267 shares of our common stock outstanding at June 30, 2000. Of these shares, 19,649,675 are believed to be restricted securities pursuant to Rule 144 promulgated by the Securities and Exchange Commission. Management believes that as of June 30, 2000, approximately 1,165,833 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 970,000 which are held by affiliates may be eligible for immediate sale under Rule 144. Record Holders of Stock; Transfer Agent At June 30, 2000, we had approximately 119 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. 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. 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. Risks - ----- As with any new venture, there are risks associated with Global e Tutor's plans. Recognition of these risks, evaluation of their severity and proper contingency planning of outcomes must be considered. The following are a list of potential risks, although not all inclusive: Slower than predicted subscription rates; the Global e Tutor Personal Sanctuary Databases are not viewed as secure or meeting the minimum requirements of COPA; eroding value of click-through rates; scalability of IT structure; potential competitors impart an interest in the market prior to Global e Tutor reaching its critical mass; delays in website or database development; our youth foundation may be unable to secure funding for its ongoing operations. Results of Operations - --------------------- For the six and three months ended June 30, 2000 we did not generate any operating revenues and incurred a cumulative net loss of $1,688,243 and $939,097 respectively. Our operating expense consisted of general and administrative costs, depreciation, sales and marketing expenses and research and development. General and administrative costs consist primarily of payroll totaling $279,273 and $137,474 respectively, professional fees totaling $521,477 and $405,051 respectively, travel and entertainment totaling $117,302 and $54,156 respectively and other general and administrative expense totaling $163,239 and $92,447 respectively. Depreciation and amortization expense for the six and three months ended June 30, 2000 totaled $220,044 and $50,969, respectively. Research and development costs totaled $43,073 and $6,773 respectively. These costs are discussed above. Sales and marketing expenses consist primarily of advertising totaling $147,104 and $74,023, public relations totaling $120,000 and $60,000 and other selling expenses totaling $88,415 and $64,192. The results of operations for the six and three months ended June 30, 2000 are not necessarily indicative of the results for any future interim periods or for the year ending December 31, 2000. We expect to expand our personnel, continue research and development and continue to develop content, which will result in increasing expenses. Liquidity and Capital Resources Our operating and capital requirements have exceeded our cash flow from operations as we have been building our business. Operating activities during the six months ended June 30, 2000 created a net cash use of $700,671, which has primarily been funded by cash on hand, a related party loan, and sales of common stock. At June 30, 2000 we had cash and cash equivalents of $74,240. 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. The related party loan is payable upon demand and accrues 10% interest annually. During the six months ended June 30, 2000, GLOBAL E TUTOR, INC. increased this payable by $165,238. Subsequent Event - ---------------- On July 27, 2000 GLOBAL E TUTOR, INC. entered into an Affiliate Agreement with Phoenix Multimedia, Inc. The Agreement is for a term of twelve months and is renewable on an annual basis thereafter. It may be terminated by written notice after the initial twelve months. GLOBAL E TUTOR, INC. will participate in Phoenix Multimedia, Inc.'s E-learning program "e-Mapp" in order to link to the Phoenix world wide web. Phoenix will pay a 20% commission on the retail sale of courses or course modules, based on sales of Products and Services through GLOBAL's web link to Phoenix's web site. Item 3. Quantitative and Qualitative Disclosures about Market Risk - Not Applicable PART II. OTHER INFORMATION Item 1. 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 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. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Exhibit Title - ------ ------------- 2.1 Appointment of Thomas E. McMurrain to be Vice Chairman and Founder and Appointment of Jerry L. Barton to be Chief Executive Officer and President. 2.2 Affiliate Agreement, dated as of July 27, 2000, by and among Global e Tutor, Inc. and Phoenix Multimedia, Inc. 2.3 Consent Action of the Board of Directors of Global E Tutor, Inc., Effective July 24, 2000 2.4 Global E Tutor, Inc. 2000 Stock Incentive Plan 2.5 Form of Sample Award Certificates Under 2000 Stock Option Plan 2.6 Form of Terms and Conditions to the Incentive Stock Option Award Pursuant to the Global E Tutor, Inc. 2000 Stock Incentive Plan 2.7 Form of Terms and Conditions to the NonQualified Stock Option Award Pursuant to the Global E Tutor, Inc. 2000 Stock Incentive Plan (b) Reports on Form 8-K. 1. Current Report on Form 8-K, dated March 31, 2000, filed May 23, 2000, disclosing the acquisition of Kilimanjaro Group.com, Inc. 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 thereunto duly authorized. GLOBAL E TUTOR, INC. Date: August 14, 2000 /s/ Jerry Barton President and CEO Date: August 14, 2000 /s/ Robbie Willison Chief Financial Officer EX-2.1 2 0002.txt WRITTEN CONSENT UNANIMOUS WRITTEN CONSENT IN LIEU OF A SPECIAL MEETING OF THE BOARD OF DIRECTORS OF GLOBAL E TUTOR, INC., a Delaware corporation June 7, 2000 Pursuant to Section 141(f) of the General Corporation Law of Delaware and the Bylaws of GLOBAL E TUTOR, INC., a Delaware corporation (the "Company"), the undersigned being all of the members of the Board of Directors of the Company, by their signatures below, hereby consent to and authorize the following actions in lieu of a meeting of the Board of Directors of the Company: Appointment of Thomas E. McMurrain to be Vice Chairman and Founder ----------------------------------------------------------------- WHEREAS, the Board of Directors of the Company has considered the experience, leadership and talents of various individuals and potential candidates for the position of Vice Chairman, and the contributions, experience, leadership and talents of Thomas E. McMurrain with regard to the title of Founder, and has determined that Thomas E. McMurrain should be elected and appointed to serve as Vice Chairman and that he should be awarded the title of Founder; NOW THEREFORE BE IT RESOLVED THAT Thomas E. McMurrain be appointed Vice Chairman of the Company until such time as he resigns or his replacement is appointed by the Board of Directors of the Company and that he should be awarded the title of Founder. Appointment of Jerry L. Barton to be Chief Executive Officer and President -------------------------------------------------------------------------- WHEREAS, the Board of Directors of the Company has considered the experience, leadership and talents of various individuals and potential candidates for the position of President and Chief Executive Officer of the Company, and determined that Jerry L. Barton should be elected and appointed to serve as President and Chief Executive Officer; NOW THEREFORE BE IT RESOLVED THAT Jerry L. Barton be appointed President and Chief Executive Officer of the Company until such time as he resigns or his replacement is appointed by the Board of Directors of the Company. IN WITNESS WHEREOF, the undersigned have executed this Written Consent to be effective as of the date first written above. /s/ Jerry L. Barton ----------------------------- Jerry L. Barton, Director /s/ James W. Lewis ----------------------------- James W. Lewis, Director /s/ Thomas E. McMurrain ----------------------------- Thomas E. McMurrain, Director /s/ Clacs Nobel ----------------------------- Clacs Nobel, Chairman /s/ Vincent A. Riggio ----------------------------- Vincent A. Riggio, Director EX-2.2 3 0003.txt AFFILIATE AGREEMENT AFFILIATE AGREEMENT ------------------- Following comprises the Agreement and the Terms and Conditions of sale and use that apply to an Affiliate's participation in Phoenix Multimedia, Inc.'s (Phoenix)-E-learning program(s) entitled "e-Mapp" (powered by Phoenix Multimedia's "e-leap" software that is provided by Phoenix at their World Wide Web site or by any site that an Affiliate may use to link to the Phoenix world wide web site. The following terms and conditions cover the use of Products and Services offered by Phoenix. Phoenix products and services are available only to individuals and businesses that can form legally binding contracts under applicable law, and therefore, exclude minors. Correspondence regarding this Agreement and Terms and Conditions may be made by electronic mail to the e-mail addresses supplied by Affiliate to Phoenix. Affiliate certifies that they have the right to use said e-mail address. 1. Use of Products and Services. The affiliate may use the Products and Services provided by Phoenix Multimedia, Inc., for personal and business purposes. The Affiliate may not use Phoenix Products or Services in violation of any applicable law, regulation or policy. 2. Affiliate Participation. To become a Phoenix Affiliate, please complete the affiliate application via our web site or telefax a completed Affiliate Application form to Phoenix Multimedia, Inc., Attn: Affiliate Sales, Telefax number 256-772-6551 (USA Country Code is 1). Phoenix will evaluate the application in good faith and will notify the prospective affiliate via e-mail or telefax of acceptance or rejection. Phoenix may reject an affiliate application if it is determined (in Phoenix's sole discretion) that the prospective affiliate's site is unsuitable for Phoenix Products or Services. Unsuitability may include but not be limited to: . The promotion of sexually explicit materials. . The promotion of violence. . The promotion of discrimination based on race, religion, nationality, disability, sexual orientation or age . The promotion of illegal activities. . The violation of intellectual property rights. Should Phoenix reject the prospective affiliate's application, the prospective affiliate is welcome to reapply at any time. 3. Ownership. Phoenix has and shall retain all right, title, and interest in and to any software or technology used in providing Products and Services, and all intellectual property rights therein. 4. Product and Service Links. The Affiliate may select one or more Products or Services to display in a custom manufactured "storefront" or to link to the existing Phoenix Products and Services site. "Products" and "Services" is any product or service listed on the Phoenix web site or described in any relevant marketing material or correspondence. 5. Ordering Processing. Phoenix will process orders placed by Affiliates who follow the instructions for order processing from the Affiliate's site to Phoenix. Phoenix reserves the right to reject orders that do not comply with any requirements that Phoenix may periodically establish. Phoenix will be responsible for all aspects of order processing and fulfillment. Note: All sales of Phoenix Products and Services are final. Phoenix will track sales made to customers who purchase Products and Services using links from the Affiliate's site to the Phoenix site and Phoenix will make available to the Affiliate reports summarizing the Affiliates' sales activity. The form, content and frequency of the reports may vary from time to time. 6. Commissions. Phoenix will pay a commission on the sale of Products and Services to affiliates based on sales of Products and Services through the Affiliates web store or through the web link to Phoenix's web site. For Products and Services to be eligible to earn a commission, the Affiliate must utilize the link from Affiliate's site to the Phoenix system or site. The Affiliate or the Affiliate's customer must accept delivery of the Products and remit full payment to Phoenix. The commission structure is as follows: 20% of the retail price of any Phoenix course or course modules sold. NOTE: Phoenix Multimedia, Inc. reserves the right to modify the pricing structure on any or all developed Products and Services. 7. Policies and Pricing. Affiliates who buy Products and Services will be deemed to be customers of Phoenix Multimedia, Inc. Accordingly all Phoenix rules, policies and operating procedures concerning Affiliate orders, Affiliate services and Product and Service sales will apply to those customers. Phoenix may change its policies and operating procedures at any time. Product and Service prices and availability may vary from time to time. Because price changes may affect the Products and Services that are listed on Affiliate's site the Affiliate may not customize pricing for Products and Services offered. 8. Identification as an Affiliate. Phoenix will make available to the Affiliate at a nominal cost of $500.00, either a custom designed graphic image or a direct link to the Phoenix web site that identifies the site as an Affiliate participant. Phoenix may modify the text or graphic image from time to time. In addition the Affiliate may not in any manner misrepresent or embellish the relationship between Phoenix and the Affiliate or any other person or entity except as expressly permitted. 9. Limited License. Phoenix grants Affiliate a nonexclusive, revocable right (license) to use the Products, consisting of graphic image(s) and text supplied by Phoenix and other images and text for which Phoenix grants express permission, solely for the purpose of identifying a site as a Program Affiliate and to assist in generating sales. The Affiliate may not modify the graphic images and/or text, or any other of Phoenix's image, in any way. Phoenix reserves all of its rights in the graphic image and text, as well as any other images trade names and any and all associated intellectual property rights. Affiliate agrees to follow Phoenix patent, copyright and trademark guidelines, which may change from time to time. Phoenix may revoke Affiliate's license at any time by giving thirty (30) days written notice of intent to revoke. 10. Term of the Agreement. The term of this Agreement will begin upon the date of your acceptance of this Affiliate Agreement and will remain in full force and effect for a period of twelve (12) months. The Affiliate Agreement may be renewable on an annual basis thereafter, at the election of the parties. Either the Affiliate or Phoenix may terminate this Agreement at any time, after the initial agreement of twelve months, party written notice of termination. Upon the termination of this Agreement for any reason, the Affiliate will immediately cease use of graphic images supplied by Phoenix. In the case of linkage to Phoenix's web site, Phoenix will remove all links to the Phoenix site from the Affiliate's site. Affiliate will cease the use of all Phoenix trademarks, trade dress and logos and all other material provided by or on behalf of Phoenix to the Affiliate pursuant hereto or in connection with the Products and Services. Affiliate is eligible to earn commissions on Phoenix sales of Products and Services occurring during the term, and Commissions earned through the date of termination will remain payable only if the related orders are not canceled or returned. Phoenix may withhold the Affiliate's final payment for a reasonable time to ensure that the correct amount(s) are paid. 11. Use of Trademarks. As provided herein, Phoenix shall be allowed to publish and/or distribute, or permit the publication or distribution of, any material that makes reference to the Affiliate, or uses the Affiliate's names or logos (the Affiliate's respective "Trademarks"). The Affiliate grants Phoenix a non-exclusive, non-transferable, right to use the Trademarks for the sole purpose of serving and operating the Phoenix web site, as well as, advertising and publicizing the Affiliate's association and web site with Phoenix. The rights hereunder shall automatically terminate upon termination of the Affiliate Agreement, at which time both Phoenix and the Affiliate shall discontinue all use of the other's Trademarks, and shall destroy or, if requested, shall return to the other all materials bearing the Trademarks. Phoenix and Affiliate represent, warrant and agree that the context in which the Trademarks are used will not be derogatory or critical of the other party or related parties. 12. Modification. Due to the changing nature of the Internet environment Phoenix may be forced to modify language contained in this Agreement. Phoenix reserves the right to change the Agreement's language by posting an Agreement change notice or a new Agreement on our Web site. Modifications may include, for example, changes in the scope of available commissions, new product commission fee schedules, changes in payment procedure, etc. ALL EXISTING AFFILIATE AGREEMENTS WILL BE HONORED UNDER THE TERMS OF THE AGREEMENT GOVERNING THE RELATIONSHIP. ANY AFFILIATES SO DESIRING MAY ELECT TO MODIFY AN EXISTING AGREEMENT TO THE LATEST VERSION BY NOTIFYING PHOENIX MULTIMEDIA, INC., IN WRITING, OF THEIR DESIRE TO MODIFY. THE AFFILIATE'S CONTINUED PARTICIPATION IN THE PROGRAM FOLLOWING PHOENIX'S POSTING OF A CHANGE NOTICE OF MODIFICATION OR A NEW AGREEMENT ON THE PHOENIX WEB SITE WILL CONSTITUTE ACCEPTANCE OF THE TERMS AND CONDITIONS ORIGINALLY AGREED UPON. 13. Relationship of the Parties. The Affiliate is an independent contractor, and nothing in this Agreement will create any partnership, joint venture, agency, franchise, sales representatives or employment relationship between the parties. Affiliate has no authority to make or accept any offers of representations on Phoenix's behalf. Affiliate will not make any statement whether on the Affiliate site or otherwise that reasonably would contradict anything in this Section. 14. Limitation of Liability. In no event will Phoenix, its suppliers, licensees or affiliates be liable for any direct, or indirect, incidental, special exemplary or consequential damages that result or arise out of the Products or Services, the availability or use of the Products or Services, any information of Products derived through the use of the Products or Services, any other Products or Services used in conjunction with the Products and Services, or any transmission or use of Affiliates information. 15. Disclaimers. Phoenix makes no express or implied warranties or representations with respect the Affiliate program or any Products or Services sold through the Affiliate Program (including without limitation, warranties of fitness, merchantability, non-infringement, or any implied warranties arising out of a course of performance, dealing, or trade usage). In addition, Phoenix makes no representation that the operation of the Phoenix site will be uninterrupted or error-free, and Phoenix will not be liable for the consequences of any interruptions or errors. 16. Indemnification. Affiliate agrees to indemnify and hold Phoenix harmless from and against any and all damages, liabilities, costs and expenses (including reasonable attorney fees) incurred by Phoenix arising out of any use or misuse of the Products and Services (including any information or products obtained or derived through the use of the Products and Services) provided under this Agreement. Phoenix represents and warrants that it is the sole owner of the products and services and has the full right to enter into this Agreement. The content of Phoenix does not infringe any existing copyright, trade secret or other intellectual property right of any third party. Notwithstanding any limitation on liability contained elsewhere in this Agreement, Phoenix agrees to indemnify, defend and hold Affiliate harmless from and against any claims, actions or demands alleging that all or any part of the Phoenix content infringes any copyright, trade secret or other intellectual property right of any third party. 17. General. This Agreement constitutes the entire Agreement between Affiliate and Phoenix with respect to the Products and Services and supersedes all other Agreements, contemporaneous and prior, between the Affiliate and Phoenix with respect to the Products and Services. Phoenix's failure to enforce any provision of this Agreement will not be construed as a waiver of any provision or right. No amendment or modification will be valid or binding upon Phoenix unless assented to in writing (including electronic assent) by Phoenix. In the event that a portion of this Agreement is held unenforceable, the unenforceable portion will be construed in accordance with applicable law as nearly as possible to reflect the original intentions of the parties, and the remainder of the provisions will remain in full force and effect. Waiver by Phoenix of a breach of any provision of this Agreement or the failure by Phoenix to exercise any right hereunder shall not operate or be construed as a waiver of any subsequent breach of that right or as a waiver of any other right. Phoenix does not have any obligation to monitor use of the Products or Services, but Phoenix may do so and may also disclose information regarding the Affiliate's use of the Products and Services to satisfy laws, regulations or other government request. The laws of the State of Alabama (excluding its choice of law rules) will govern interpretation and enforcement of this Agreement. By using the Products and Services, Affiliate hereby consents to personal jurisdiction in the federal and state courts of Madison County, Alabama in any action arising out of or relating to the use of Products or Services. The terms of this section and sections 3, 14, 15, and 16 will survive any termination of this Agreement. Phoenix Multimedia, Inc. Global e Tutor, Inc. By: /s/ William Cole Smith By: /s/ Jerry Barton ----------------------- ------------------------ Title: President & C.E.O. Title: Pres. CEO ----------------------- ------------------------ Date: July 27, 2000 Date: 7-25-00 ----------------------- ------------------------ EX-2.3 4 0004.txt CONSENT ACTION OF THE BOARD OF DIRECTORS EXHIBIT 2.3 CONSENT ACTION OF THE BOARD OF DIRECTORS OF GLOBAL E TUTOR, INC., a Delaware corporation The undersigned, representing all the members of the Board of Directors of Global E Tutor, Inc., a Delaware corporation (the "Company") do hereby consent to and adopt the following resolutions, effective July 24, 2000. Appointment of the Chairman to the Executive Advisory Board ----------------------------------------------------------- WHEREAS, the Board of Directors of the Company has determined it to be in the best interest of the Company to create an Executive Advisory Board to advise the Company's Board of Directors and officers regarding certain strategic issues. WHEREAS, the Board of Directors of the Company has considered the experience, talents, commitment and suitability of Mr. Stephen Gross and decided that Mr. Gross is well qualified to serve as Chairman of the Company's Executive Advisory Board. NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of the Company hereby creates the Executive Advisory Board and appoints Stephen Gross to be Chairman of the Executive Advisory Board to serve until such time as he may resign, is removed or a replacement is appointed; RESOLVED FURTHER, that the initial members of the Executive Advisory Board will be Bob Cohn, Gary Hill, Karen Lennon, Ed Kramer, Stephen Martin, Milton Butler, Michael Vlass, Dr. Noel Brown, Anthony Daniels, Dr. Donald Ratajczak, and Stephen Gross to serve until such time as each may resign or is removed. Adoption of 2000 Stock Incentive Plan ------------------------------------- WHEREAS, the grants of stock options provided below in these resolutions will use all available shares under the Global E Tutor, Inc. Stock Option Plan, and the Board of Directors desires to create a new plan providing for the issuance of stock options and other incentives relating to the Company's common stock. NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby adopts the Global E Tutor, Inc. 2000 Stock Incentive Plan in substantially the form attached hereto and reserves 2,000,000 shares of common stock of the Company for issuance thereunder. RESOLVED FURTHER, that the 2000 Stock Incentive Plan will be submitted to shareholders within twelve months of the date of this meeting for their approval. Compensation of Mr. Barton -------------------------- WHEREAS, the Board of Directors of the Company has considered the experience, leadership and talents of Jerry Barton in the position of CEO and President and the contributions Mr. Barton will be able to make to the Company in those positions, and the Company's financial ability to pay compensation, and has determined that the following is an appropriate level of compensation for Mr. Barton in the positions of CEO and President: $50,000 Signing bonus $175,000 Annual salary NOW THEREFORE BE IT RESOLVED THAT Jerry Barton shall be compensated as stated until such time as he resigns or his replacement is appointed by the Board of Directors of the Company or another compensation level is set by the Board of Directors. Stock Option Grants ------------------- WHEREAS, the Board of Directors wishes to motivate and create incentives to employees, directors, and consultants to increase the value of the Company; and WHEREAS, the Board of Directors wishes to make certain grants to James W. Lewis and Jerry Barton in connection with their appointment as Directors. NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby approve the issuance of the Incentive Stock Options ("ISO's") and Non-Qualified Stock Options ("NQSO's") to the employees, directors, and consultants of the Corporation at an exercise price of $1.00 per share as indicated on Exhibit A --------- hereto. FURTHER RESOLVED, that any act taken or deed done by any director, officer or agent of the Company in accordance with any of the above resolutions or to facilitate the actions contemplated by the resolutions is hereby approved, ratified, confirmed and adopted; and that the directors, officers, and agents of the Company are authorized to take and do such further acts and deeds, and to execute and deliver, for and in the name of the Company, such other documents, papers, and instruments as they deem to be necessary, appropriate, advisable or required in order to effectuate the purpose and intent of the resolutions and to consummate the actions contemplated by the resolutions, and the taking of any such acts and deeds, and the execution and delivery of any such documents, papers and instruments are hereby approved, ratified, confirmed and adopted; Effective July 24, 2000. /s/ Jerry L. Barton ---------------------------- Jerry L. Barton /s/ James W. Lewis ---------------------------- James W. Lewis /s/ Thomas E. McMurrain ---------------------------- Thomas E. McMurrain /s/ Claes Noble ---------------------------- Claes Noble Exhibit A ---------
Type Number ---- ------ Name Position of of Vesting* Plan** - ---- -------- -- -- ------- ---- Option Shares ------ ------ Jerry Barton Employee ISO 300,000 33-1/3% SOP NQSO 200,000 33-1/3% SOP Holly Employee ISO 50,000 33-1/3% SOP Cartmill Scott Fellows Employee ISO 100,000 33-1/3% SOP Marcus Employee ISO 100,000 33-1/3% SOP Nobel Deborah Employee ISO 50,000 33-1/3% SOP Ward Jerry Barton Director NQSO 250,000 50% SOP James W. Director NQSO 250,000 50% SOP Lewis Dr. Noel Advisor NQSO 100,000 33-1/3% SOP Brown Milton Butler Advisor NQSO 100,000 33-1/3% SOP Anthony Advisor NQSO 50,000 33-1/3% SOP Daniels Stephen Advisor NQSO 250,000 50% SOP Gross Ed Kramer Advisor NQSO 50,000 33-1/3% SOP Dr. Donald Advisor NQSO 100,000 33-1/3% SIP Ratajczak Michael Advisor NQSO 100,000 33-1/3% SIP Vlass
Habif, Consultant NQSO 252,990 33-1/3% *** Arogeti, and Wynne Mary Consultant NQSO 100,000 33-1/3% SIP Catherine Wolff * Vesting is the designated percentage per year of uninterrupted service for the Company measured from the date of grant. ** "SOP" means the Global E Tutor, Inc. Stock Option Plan. SIP means the Global E Tutor, Inc. 2000 Stock Incentive Plan. *** An option to purchase [35,826] shares is granted under the SOP. The balance is granted under the SIP. EX-2.4 5 0005.txt 2000 STOCK INCENTIVE PLAN EXHIBIT 2.4 GLOBAL E TUTOR, INC. 2000 STOCK INCENTIVE PLAN GLOBAL E TUTOR, INC. 2000 STOCK INCENTIVE PLAN TABLE OF CONTENTS
Page ---- SECTION I. DEFINITIONS...........................................................................................1 1.1 Definitions..............................................................................................1 ----------- SECTION 2 THE STOCK INCENTIVE PLAN...............................................................................5 2.1 Purpose of the Plan......................................................................................5 ------------------- 2.2 Stock Subject to the Plan................................................................................5 ------------------------- 2.3 Administration of the Plan...............................................................................5 -------------------------- 2.4 Eligibility and Limits...................................................................................5 ---------------------- SECTION 3 TERMS OF STOCK INCENTIVES..............................................................................6 3.1 Terms and Conditions of All Stock Incentives.............................................................6 -------------------------------------------- 3.2 Terms and Conditions of Options..........................................................................7 ------------------------------- (a) Option Price....................................................................................7 ------------ (b) Option Term.....................................................................................7 ----------- (c) Payment.........................................................................................7 ------- (d) Conditions to the Exercise of an Option.........................................................8 --------------------------------------- (e) Termination of Incentive Stock Option...........................................................8 ------------------------------------- (f) Special Provisions for Certain Substitute Options...............................................9 ------------------------------------------------- 3.3 Terms and Conditions of Stock Appreciation Rights........................................................9 ------------------------------------------------- (a) Settlement......................................................................................9 ---------- (b) Conditions to Exercise..........................................................................9 ---------------------- 3.4 Terms and Conditions of Stock Awards.....................................................................9 ------------------------------------ 3.5 Terms and Conditions of Dividend Equivalent Rights......................................................10 -------------------------------------------------- (a) Payment........................................................................................10 ------- (b) Conditions to Payment..........................................................................10 --------------------- 3.6 Terms and Conditions of Performance Unit Awards.........................................................10 ----------------------------------------------- (a) Payment........................................................................................10 ------- (b) Conditions to Payment..........................................................................10 --------------------- 3.7 Terms and Conditions of Phantom Shares..................................................................10 -------------------------------------- (a) Payment........................................................................................11 ------- (b) Conditions to Payment..........................................................................11 --------------------- 3.8 Treatment of Awards Upon Termination of Employment......................................................11 -------------------------------------------------- SECTION 4 RESTRICTIONS ON STOCK.................................................................................11 4.1 Escrow of Shares........................................................................................11 ---------------- 4.2 Restrictions on Transfer................................................................................12 ------------------------ SECTION 5 GENERAL PROVISIONS....................................................................................12 5.1 Withholding.............................................................................................12 ----------- 5.2 Changes in Capitalization; Merger; Liquidation..........................................................12 ---------------------------------------------- 5.3 Cash Awards.............................................................................................13 ----------- 5.4 Compliance with Code....................................................................................13 -------------------- 5.5 Right to Terminate Employment...........................................................................14 ----------------------------- 5.6 Non-Alienation of Benefits..............................................................................14 -------------------------- 5.7 Restrictions on Delivery and Sale of Shares; Legends....................................................14 ---------------------------------------------------- 5.8 Listing and Legal Compliance............................................................................14 ---------------------------- 5.9 Termination and Amendment of the Plan...................................................................14 ------------------------------------- 5.10 Stockholder Approval....................................................................................14 -------------------- 5.11 Choice of Law...........................................................................................15 ------------- 5.12 Effective Date of Plan..................................................................................15 ----------------------
i GLOBAL E TUTOR, INC. 2000 STOCK INCENTIVE PLAN SECTION I. DEFINITIONS 1.1 Definitions. Whenever used herein, the masculine pronoun will be ----------- deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used herein with the meaning thereafter ascribed: (a) "Affiliate" means: --------- (1) Any Subsidiary or Parent, (2) An entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with the Company, as determined by the Company, or (3) Any entity in which the Company has such a significant interest that the Company determines it should be deemed an "Affiliate", as determined in the sole discretion of the Company. (b) "Board of Directors" means the board of directors of the Company. ------------------ (c) "Code" means the Internal Revenue Code of 1986, as amended. ---- (d) "Committee" means the committee appointed by the Board of --------- Directors to administer the Plan. The Board of Directors shall consider the advisability of whether the members of the Committee shall consist solely of at least two members of the Board of Directors who are both "outside directors" as defined in Treas. Reg. ss. 1.162-27(e) as promulgated by the Internal Revenue Service and "non-employee directors" as defined in Rule 16b-3(b)(3) as promulgated under the Exchange Act. If the Committee has not been appointed, the Board of Directors in their entirety shall constitute the Committee. (e) "Company" means Global E Tutor, Inc., a Delaware corporation. ------- (f) "Disability" has the same meaning as provided in the long-term ---------- disability plan or policy maintained or, if applicable, most recently maintained, by the Company or, if applicable, any Affiliate of the Company for the Participant. If no long-term disability plan or policy was ever maintained on behalf of the Participant or, if the determination of Disability relates to an Incentive Stock Option, Disability means that condition described in Code Section 22(e)(3), as amended from time to time. In the event of a dispute, the determination of Disability will be made by the Committee and will be supported by advice of a physician competent in the area to which such Disability relates. (g) "Dividend Equivalent Rights" means certain rights to receive cash -------------------------- payments as described in Section 3.5. (h) "Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended from time to time. (i) "Fair Market Value" with regard to a date means: ----------------- (1) the price at which Stock shall have been sold on that date or the last trading date prior to that date as reported by the national securities exchange selected by the Committee on which the shares of Stock are then actively traded or, if applicable, as reported by the NASDAQ Stock Market. (2) if such market information is not published on a regular basis, the price of Stock in the over-the-counter market on that date or the last business day prior to that date as reported by the NASDAQ Stock Market or, if not so reported, by a generally accepted reporting service. (3) if Stock is not publicly traded, as determined in good faith by the Committee with due consideration being given to (i) the most recent independent appraisal of the Company, if such appraisal is not more than twelve months old and (ii) the valuation methodology used in any such appraisal. For purposes of Paragraphs (1), (2), or (3) above, the Committee may use the closing price as of the applicable date, the average of the high and low prices as of the applicable date or for a period certain ending on such date, the price determined at the time the transaction is processed, the tender offer price for shares of Stock, or any other method which the Committee determines is reasonably indicative of the fair market value. (j) "Incentive Stock Option" means an incentive stock option within ---------------------- the meaning of Section 422 of the Internal Revenue Code. (k) "Option" means a Non-Qualified Stock Option or an Incentive Stock ------ Option. (l) "Over 10% Owner" means an individual who at the time an Incentive -------------- Stock Option is granted owns Stock possessing more than 10% of the total combined voting power of the Company or one of its Subsidiaries, determined by applying the attribution rules of Code Section 424(d). (m) "Non-Qualified Stock Option" means a stock option that is not an -------------------------- Incentive Stock Option. (n) "Parent" means any corporation (other than the Company) in an ------ unbroken chain of corporations ending with the Company if, with respect to Incentive Stock Options, at the time of the granting of the Option, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A Parent shall include any entity other than a corporation to the extent permissible under Section 424(f) or regulations and rulings thereunder. (o) "Participant" means an individual who receives a Stock Incentive ----------- hereunder. (p) "Performance Goals" means the measurable performance objectives, ----------------- if any, established by the Committee for a Performance Period that are to be achieved with respect to a Stock Incentive granted to a Participant under the Plan. Performance Goals may be described in terms of Company-wide objectives or in terms of objectives that are related to performance of the division, Affiliate, department or function within the Company or an Affiliate in which the Participant receiving the Stock Incentive is employed or on which the Participant's efforts have the most influence. The achievement of the Performance Goals established by the Committee for any Performance Period will be determined without regard to the effect on such Performance Goals of any acquisition or disposition by the Company of a trade or business, or of substantially all of the assets of a trade or business, during the Performance Period and without regard to any change in accounting standards by the Financial Accounting Standards Board or any successor entity. The Performance Goals established by the Committee for any Performance Period under the Plan will consist of one or more of the following: (i) earnings per share and/or growth in earnings per share in relation to target objectives, excluding the effect of extraordinary or nonrecurring items; (ii) operating cash flow and/or growth in operating cash flow in relation to target objectives; (iii) cash available in relation to target objectives; (iv) net income and/or growth in net income in relation to target objectives, excluding the effect of extraordinary or nonrecurring items; (v) revenue and/or growth in revenue in relation to target objectives; (vi) total shareholder return (measured as the total of the appreciation of and dividends declared on the Common Stock) in relation to target objectives; (vii) return on invested capital in relation to target objectives; (viii) return on shareholder equity in relation to target objectives; (ix) return on assets in relation to target objectives; and (x) return on common book equity in relation to target objectives If the Committee determines that, as a result of a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which the Company conducts its business, or any other events or circumstances, the Performance Goals are no longer suitable, the Committee may in its discretion modify such Performance Goals or the related minimum acceptable level of achievement, in whole or in part, with respect to a period as the Committee deems appropriate and equitable, except where such action would result in the loss of the otherwise available exemption of the Stock Incentive under Section 162(m) of the Code. In such case, the Committee will not make any modification of the Performance Goals or minimum acceptable level of achievement. (q) "Performance Period" means, with respect to a Stock Incentive, a ------------------ period of time within which the Performance Goals relating to such Stock Incentive are to be measured. The Performance Period will be established by the Committee at the time the Stock Incentive is granted. (r) "Performance Unit Award" refers to a performance unit award as ---------------------- described in Section 3.6. (s) "Phantom Shares" refers to the rights described in Section 3.7. -------------- (t) "Plan" means the Global E Tutor, Inc. 2000 Stock Incentive Plan. ---- (u) "Stock" means Company's common stock. ----- (v) "Stock Appreciation Right" means a stock appreciation right ------------------------ described in Section 3.3. (w) "Stock Award" means a stock award described in Section 3.4. ----------- (x) "Stock Incentive Agreement" means an agreement between the ------------------------- Company and a Participant or other documentation evidencing an award of a Stock Incentive. (y) "Stock Incentive Program" means a written program established by ----------------------- the Committee, pursuant to which Stock Incentives are awarded under the Plan under uniform terms, conditions and restrictions set forth in such written program. (z) "Stock Incentives" means, collectively, Dividend Equivalent ---------------- Rights, Incentive Stock Options, Non-Qualified Stock Options, Phantom Shares, Stock Appreciation Rights and Stock Awards and Performance Unit Awards. (aa) "Subsidiary" means any corporation (other than the Company) in an ---------- unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. A "Subsidiary" shall include any entity other than a corporation to the extent permissible under Section 424(f) or regulations or rulings thereunder. (bb) "Termination of Employment" means the termination of the ------------------------- employee-employer relationship between a Participant and the Company and its Affiliates, regardless of whether severance or similar payments are made to the Participant for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement. The Committee will, in its absolute discretion, determine the effect of all matters and questions relating to a Termination of Employment, including, but not by way of limitation, the question of whether a leave of absence constitutes a Termination of Employment. SECTION 2 THE STOCK INCENTIVE PLAN 2.1 Purpose of the Plan. The Plan is intended to (a) provide incentive ------------------- to officers, employees, directors and consultants of the Company and its Affiliates to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encourage stock ownership by officers, key employees, directors and consultants by providing them with a means to acquire a proprietary interest in the Company, acquire shares of Stock, or to receive compensation which is based upon appreciation in the value of Stock; and (c) provide a means of obtaining, rewarding and retaining officers, key personnel, directors, and consultants. 2.2 Stock Subject to the Plan. Subject to adjustment in accordance with ------------------------- Section 5.2, two million (2,000,000) shares of Stock (the "Maximum Plan Shares") are hereby reserved exclusively for issuance upon exercise or payment pursuant to Stock Incentives. The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Stock Incentive that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full will again be available for purposes of the Plan. 2.3 Administration of the Plan. The Plan is administered by the -------------------------- Committee. The Committee has full authority in its discretion to determine the officers, key employees, directors and consultants of the Company or its Affiliates to whom Stock Incentives will be granted and the terms and provisions of Stock Incentives, subject to the Plan. Subject to the provisions of the Plan, the Committee has full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Stock Incentive Agreements and to make all other determinations necessary or advisable for the proper administration of the Plan. The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated). The Committee's decisions are final and binding on all Participants. 2.4 Eligibility and Limits. Stock Incentives may be granted only to ---------------------- officers, employees, directors, and consultants of the Company, or any Affiliate of the Company; provided, however, that an Incentive Stock Option may only be granted to an employee of the Company or any Subsidiary. In the case of Incentive Stock Options, the aggregate Fair Market Value (determined as at the date an Incentive Stock Option is granted) of stock with respect to which stock options intended to meet the requirements of Code Section 422 become exercisable for the first time by an individual during any calendar year under all plans of the Company and its Subsidiaries may not exceed $100,000; provided further, that if the limitation is exceeded, the Incentive Stock Option(s) which cause the limitation to be exceeded will be treated as Non-Qualified Stock Option(s). SECTION 3 TERMS OF STOCK INCENTIVES 3.1 Terms and Conditions of All Stock Incentives. -------------------------------------------- (a) The number of shares of Stock as to which a Stock Incentive may be granted will be determined by the Committee in its sole discretion, subject to the provisions of Section 2.2 as to the total number of shares available for grants under the Plan and subject to the limits on Options and Stock Appreciation Rights in the following sentence. On such date as required by Section 162(m) of the Code and the regulations thereunder for compensation to be treated as qualified performance based compensation, the maximum number of shares of Stock with respect to which Options or Stock Appreciation Rights may be granted during any one year period to any employee may not exceed 1,000,000. If, after grant, an Option is cancelled, the cancelled Option shall continue to be counted against the maximum number of shares for which options may be granted to an employee as described in this Section 3.1. If, after grant, the exercise price of an Option is reduced or the base amount on which a Stock Appreciation Right is calculated is reduced, the transaction shall be treated as the cancellation of the Option or the Stock Appreciation Right, as applicable, and the grant of a new Option or Stock Appreciation Right, as applicable. If an Option or Stock Appreciation Right is deemed to be cancelled as described in the preceding sentence, the Option or Stock Appreciation Right that is deemed to be canceled and the Option or Stock Appreciation Right that is deemed to be granted shall both be counted against the maximum number of shares for which Options or Stock Appreciation Rights may be granted to an employee as described in this Section 3.1. (b) Each Stock Incentive will either be evidenced by a Stock Incentive Agreement in such form and containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, Performance Goals that must be achieved as a condition to vesting or payment of the Stock Incentive, or be made subject to the terms of a Stock Incentive Program, containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, Performance Goals that must be achieved as a condition to vesting or payment of the Stock Incentive. Each Stock Incentive Agreement or Stock Incentive Program is subject to the terms of the Plan and any provisions contained in the Stock Incentive Agreement or Stock Incentive Program that are inconsistent with the Plan are null and void. (c) The date a Stock Incentive is granted will be the date on which the Committee has approved the terms and conditions of the Stock Incentive and has determined the recipient of the Stock Incentive and the number of shares covered by the Stock Incentive, and has taken all such other actions necessary to complete the grant of the Stock Incentive. (d) Any Stock Incentive may be granted in connection with all or any portion of a previously or contemporaneously granted Stock Incentive. Exercise or vesting of a Stock Incentive granted in connection with another Stock Incentive may result in a pro rata surrender or cancellation of any related Stock Incentive, as specified in the applicable Stock Incentive Agreement or Stock Incentive Program. (e) Stock Incentives are not transferable or assignable except by will or by the laws of descent and distribution and are exercisable, during the Participant's lifetime, only by the Participant; or in the event of the Disability of the Participant, by the legal representative of the Participant; or in the event of death of the Participant, by the legal representative of the Participant's estate or if no legal representative has been appointed, by the successor in interest determined under the Participant's will; provided, however, that the Committee may waive any of the provisions of this Section or provide otherwise as to any Stock Incentives other than Incentive Stock Options. 3.2 Terms and Conditions of Options. Each Option granted under the Plan ------------------------------- must be evidenced by a Stock Incentive Agreement. At the time any Option is granted, the Committee will determine whether the Option is to be an Incentive Stock Option described in Code Section 422 or a Non-Qualified Stock Option, and the Option must be clearly identified as to its status as an Incentive Stock Option or a Non-Qualified Stock Option. Incentive Stock Options may only be granted to employees of the Company or any Subsidiary. At the time any Incentive Stock Option granted under the Plan is exercised, the Company will be entitled to legend the certificates representing the shares of Stock purchased pursuant to the Option to clearly identify them as representing the shares purchased upon the exercise of an Incentive Stock Option. An Incentive Stock Option may only be granted within ten (10) years from the earlier of the date the Plan is adopted or approved by the Company's stockholders. (a) Option Price. Subject to adjustment in accordance with Section ------------ 5.2 and the other provisions of this Section 3.2, the exercise price (the "Exercise Price") per share of Stock purchasable under any Option must be as set forth in the applicable Stock Incentive Agreement, but in no event may it be less than the Fair Market Value on the date the Option is granted with respect to an Incentive Stock Option. With respect to each grant of an Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise Price may not be less than 110% of the Fair Market Value on the date the Option is granted. (b) Option Term. Any Incentive Stock Option granted to a Participant ----------- who is not an Over 10% Owner is not exercisable after the expiration of ten (10) years after the date the Option is granted. Any Incentive Stock Option granted to an Over 10% Owner is not exercisable after the expiration of five (5) years after the date the Option is granted. The term of any Non- Qualified Stock Option must be as specified in the applicable Stock Incentive Agreement. (c) Payment. Payment for all shares of Stock purchased pursuant to ------- exercise of an Option will be made in any form or manner authorized by the Committee in the Stock Incentive Agreement or by amendment thereto, including, but not limited to, cash or, if the Stock Incentive Agreement provides: (i) by delivery to the Company of a number of shares of Stock which have been owned by the holder for at least six (6) months prior to the date of exercise having an aggregate Fair Market Value of not less than the product of the Exercise Price multiplied by the number of shares the Participant intends to purchase upon exercise of the Option on the date of delivery; (ii) in a cashless exercise through a broker; or (iii) by having a number of shares of Stock withheld, the Fair Market Value of which as of the date of exercise is sufficient to satisfy the Exercise Price. In its discretion, the Committee also may authorize (at the time an Option is granted or thereafter) Company financing to assist the Participant as to payment of the Exercise Price on such terms as may be offered by the Committee in its discretion. Payment must be made at the time that the Option or any part thereof is exercised, and no shares may be issued or delivered upon exercise of an option until full payment has been made by the Participant. The holder of an Option, as such, has none of the rights of a stockholder. (d) Conditions to the Exercise of an Option. Each Option granted --------------------------------------- under the Plan is exercisable by the Participant or any other designated person, at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the Stock Incentive Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may accelerate the time or times at which such Option may be exercised in whole or in part, including, without limitation, upon a Change in Control as defined in the Stock Incentive Agreement and may permit the Participant or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term, notwithstanding any provision of the Stock Incentive Agreement to the contrary. (e) Termination of Incentive Stock Option. With respect to an ------------------------------------- Incentive Stock Option, in the event of Termination of Employment of a Participant, the Option or portion thereof held by the Participant which is unexercised will expire, terminate, and become unexercisable no later than the expiration of three (3) months after the date of Termination of Employment; provided, however, that in the case of a holder whose Termination of Employment is due to death or Disability, one (1) year will be substituted for such three (3) month period; provided, further that such time limits may be exceeded by the Committee under the terms of the grant, in which case, the Incentive Stock Option will be a Non-Qualified Option if it is exercised after the time limits that would otherwise apply. For purposes of this Subsection (e), Termination of Employment of the Participant will not be deemed to have occurred if the Participant is employed by another corporation (or a parent or subsidiary corporation of such other corporation) which has assumed the 8 Incentive Stock Option of the Participant in a transaction to which Code Section 424(a) is applicable. (f) Special Provisions for Certain Substitute Options. ------------------------------------------------- Notwithstanding anything to the contrary in this Section 3.2, any Option issued in substitution for an option previously issued by another entity, which substitution occurs in connection with a transaction to which Code Section 424(a) is applicable, may provide for an exercise price computed in accordance with such Code Section and the regulations thereunder and may contain such other terms and conditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same terms and conditions (including the applicable vesting and termination provisions) as those contained in the previously issued option being replaced thereby. 3.3 Terms and Conditions of Stock Appreciation Rights. Each Stock ------------------------------------------------- Appreciation Right granted under the Plan must be evidenced by a Stock Incentive Agreement. A Stock Appreciation Right entitles the Participant to receive the excess of (1) the Fair Market Value of a specified or determinable number of shares of the Stock at the time of payment or exercise over (2) a specified or determinable price which, in the case of a Stock Appreciation Right granted in connection with an Option, may not be less than the Exercise Price for that number of shares subject to that Option. A Stock Appreciation Right granted in connection with a Stock Incentive may only be exercised to the extent that the related Stock Incentive has not been exercised, paid or otherwise settled. (a) Settlement. Upon settlement of a Stock Appreciation Right, ---------- the Company must pay to the Participant the appreciation in cash or shares of Stock (valued at the aggregate Fair Market Value on the date of payment or exercise) as provided in the Stock Incentive Agreement or, in the absence of such provision, as the Committee may determine. (b) Conditions to Exercise. Each Stock Appreciation Right ---------------------- granted under the Plan is exercisable or payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the Stock Incentive Agreement; provided, however, that subsequent to the grant of a Stock Appreciation Right, the Committee, at any time before complete termination of such Stock Appreciation Right, may accelerate the time or times at which such Stock Appreciation Right may be exercised or paid in whole or in part. 3.4 Terms and Conditions of Stock Awards. The number of shares of ------------------------------------ Stock subject to a Stock Award and restrictions or conditions on such shares, if any, will be as the Committee determines, and the certificate for such shares will bear evidence of any restrictions or conditions. Subsequent to the date of the grant of the Stock Award, the Committee has the power to permit, in its discretion, an acceleration of the expiration of an applicable restriction period with respect to any part or all of the shares awarded to a Participant. The Committee may require a cash payment from the Participant in an amount no greater than the aggregate Fair Market Value of the shares of Stock awarded determined at the date of grant in exchange for the grant of a Stock Award or may grant a Stock Award without the requirement of a cash payment. 9 3.5 Terms and Conditions of Dividend Equivalent Rights. A Dividend -------------------------------------------------- Equivalent Right entitles the Participant to receive payments from the Company in an amount determined by reference to any cash dividends paid on a specified number of shares of Stock to Company stockholders of record during the period such rights are effective. The Committee may impose such restrictions and conditions on any Dividend Equivalent Right as the Committee in its discretion shall determine, including the date any such right shall terminate and may reserve the right to terminate, amend or suspend any such right at any time. (a) Payment. Payment in respect of a Dividend Equivalent Right ------- may be made by the Company in cash or shares of Stock (valued at Fair Market Value as of the date payment is owed) as provided in the Stock Incentive Agreement or Stock Incentive Program, or, in the absence of such provision, as the Committee may determine. (b) Conditions to Payment. Each Dividend Equivalent Right --------------------- granted under the Plan is payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the applicable Stock Incentive Agreement or Stock Incentive Program; provided, however, that subsequent to the grant of a Dividend Equivalent Right, the Committee, at any time before complete termination of such Dividend Equivalent Right, may accelerate the time or times at which such Dividend Equivalent Right may be paid in whole or in part. 3.6 Terms and Conditions of Performance Unit Awards. A Performance ----------------------------------------------- Unit Award shall entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of the value of a specified or determinable number of units (stated in terms of a designated or determinable dollar amount per unit) granted by the Committee. At the time of the grant, the Committee must determine the base value of each unit, the number of units subject to a Performance Unit Award, and the Performance Goals applicable to the determination of the ultimate payment value of the Performance Unit Award. The Committee may provide for an alternate base value for each unit under certain specified conditions. (a) Payment. Payment in respect of Performance Unit Awards may ------- be made by the Company in cash or shares of Stock (valued at Fair Market Value as of the date payment is owed) as provided in the applicable Stock Incentive Agreement or Stock Incentive Program or, in the absence of such provision, as the Committee may determine. (b) Conditions to Payment. Each Performance Unit Award granted --------------------- under the Plan shall be payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee shall specify in the applicable Stock Incentive Agreement or Stock Incentive Program; provided, however, that subsequent to the grant of a Performance Unit Award, the Committee, at any time before complete termination of such Performance Unit Award, may accelerate the time or times at which such Performance Unit Award may be paid in whole or in part. 3.7 Terms and Conditions of Phantom Shares. Phantom Shares shall -------------------------------------- entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of 10 the Fair Market Value of a specified number of shares of Stock at the end of a specified period. At the time of the grant, the Committee will determine the factors which will govern the portion of the phantom shares so payable, including, at the discretion of the Committee, any performance criteria that must be satisfied as a condition to payment. Phantom Share awards containing performance criteria may be designated as performance share awards. (a) Payment. Payment in respect of Phantom Shares may be made ------- by the Company in cash or shares of Stock (valued at Fair Market Value as of the date payment is owed) as provided in the applicable Stock Incentive Agreement or Stock Incentive Program, or, in the absence of such provision, as the Committee may determine. (b) Conditions to Payment. Each Phantom Share granted under the --------------------- Plan is payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specify in the applicable Stock Incentive Agreement or Stock Incentive Program; provided, however, that subsequent to the grant of a Phantom Share, the Committee, at any time before complete termination of such Phantom Share, may accelerate the time or times at which such Phantom Share may be paid in whole or in part. 3.8 Treatment of Awards Upon Termination of Employment. Except as -------------------------------------------------- otherwise provided by Plan Section 3.2(e), any award under this Plan to a Participant who has experienced a Termination of Employment may be cancelled, accelerated, paid or continued, as provided in the applicable Stock Incentive Agreement or Stock Incentive Program, or, in the absence of such provision, as the Committee may determine. The portion of any award exercisable in the event of continuation or the amount of any payment due under a continued award may be adjusted by the Committee to reflect the Participant's period of service from the date of grant through the date of the Participant's Termination of Employment or such other factors as the Committee determines are relevant to its decision to continue the award. SECTION 4 RESTRICTIONS ON STOCK 4.1 Escrow of Shares. Any certificates representing the shares of ---------------- Stock issued under the Plan will be issued in the Participant's name, but, if the applicable Stock Incentive Agreement or Stock Incentive Program so provides, the shares of Stock will be held by a custodian designated by the Committee (the "Custodian"). Each applicable Stock Incentive Agreement or Stock Incentive Program providing for transfer of shares of Stock to the Custodian must appoint the Custodian as the attorney-in-fact for the Participant for the term specified in the applicable Stock Incentive Agreement or Stock Incentive Program, with full power and authority in the Participant's name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the shares under the terms of the applicable Stock Incentive Agreement or Stock Incentive Program. During the period that the Custodian holds the shares subject to this Section, the Participant is entitled to all rights, except as provided in the applicable Stock Incentive Agreement or Stock Incentive Program, applicable to shares of Stock not so held. Any dividends declared on shares of Stock held by the Custodian must provide in the applicable Stock Incentive Agreement or Stock 11 Incentive Program, to be paid directly to the Participant or, in the alternative, be retained by the Custodian or by the Company until the expiration of the term specified in the applicable Stock Incentive Agreement or Stock Incentive Program and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable. 4.2 Restrictions on Transfer. The Participant does not have the right ------------------------ to make or permit to exist any disposition of the shares of Stock issued pursuant to the Plan except as provided in the Plan or the applicable Stock Incentive Agreement or Stock Incentive Program. Any disposition of the shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the applicable Stock Incentive Agreement or Stock Incentive Program will be void. The Company will not recognize, or have the duty to recognize, any disposition not made in accordance with the Plan and the applicable Stock Incentive Agreement or Stock Incentive Program, and the shares so transferred will continue to be bound by the Plan and the applicable Stock Incentive Agreement or Stock Incentive Program. SECTION 5 GENERAL PROVISIONS 5.1 Withholding. The Company must deduct from all cash distributions ----------- under the Plan any taxes required to be withheld by federal, state or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan or upon the vesting of any Stock Award, the Company has the right to require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local tax withholding requirements prior to the delivery of any certificate or certificates for such shares or the vesting of such Stock Award. A Participant may pay the withholding obligation in cash, or, if the applicable Stock Incentive Agreement or Stock Incentive Program provides, a Participant may elect to have the number of shares of Stock he is to receive reduced by, or with respect to a Stock Award, tender back to the Company, the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the shares of Stock determined as of the Tax Date (defined below), is sufficient to satisfy federal, state and local, if any, withholding obligation arising from exercise or payment of a Stock Incentive (a "Withholding Election"). A Participant may make a Withholding Election only if both of the following conditions are met: (a) The Withholding Election must be made on or prior to the date on which the amount of tax required to be withheld is determined (the "Tax Date") by executing and delivering to the Company a properly completed notice of Withholding Election as prescribed by the Committee; and (b) Any Withholding Election made will be irrevocable except on six months advance written notice delivered to the Company; however, the Committee may in its sole discretion disapprove and give no effect to the Withholding Election. 5.2 Changes in Capitalization; Merger; Liquidation. ---------------------------------------------- (a) The number of shares of Stock reserved for the grant of Options, Dividend Equivalent Rights, Performance Unit Awards, Phantom Shares, Stock Appreciation 12 Rights and Stock Awards; the number of shares of Stock reserved for issuance upon the exercise or payment, as applicable, of each outstanding Option, Dividend Equivalent Right, Phantom Share and Stock Appreciation Right and upon vesting or grant, as applicable, of each Stock Award; the Exercise Price of each outstanding Option and the specified number of shares of Stock to which each outstanding Dividend Equivalent Right, Phantom Share and Stock Appreciation Right pertains must be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or combination of shares or the payment of a stock dividend in shares of Stock to holders of outstanding shares of Stock or any other increase or decrease in the number of shares of Stock outstanding effected without receipt of consideration by the Company. (b) In the event of a merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company's assets, other change in capital structure of the Company, tender offer for shares of Stock, or a change in control of the Company (as defined by the Committee in the applicable Stock Incentive Agreement) the Committee may make such adjustments with respect to awards and take such other action as it deems necessary or appropriate to reflect such merger, consolidation, reorganization or tender offer, including, without limitation, the substitution of new awards, or the adjustment of outstanding awards, the acceleration of awards, the removal of restrictions on outstanding awards, or the termination of outstanding awards in exchange for the cash value determined in good faith by the Committee of the vested and/or unvested portion of the award. Any adjustment pursuant to this Section 5.2 may provide, in the Committee's discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Stock Incentive, but except as set forth in this Section may not otherwise diminish the then value of the Stock Incentive. (c) The existence of the Plan and the Stock Incentives granted pursuant to the Plan must not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding. 5.3 Cash Awards. The Committee may, at any time and in its ----------- discretion, grant to any holder of a Stock Incentive the right to receive, at such times and in such amounts as determined by the Committee in its discretion, a cash amount which is intended to reimburse such person for all or a portion of the federal, state and local income taxes imposed upon such person as a consequence of the receipt of the Stock Incentive or the exercise of rights thereunder. 5.4 Compliance with Code. All Incentive Stock Options to be granted -------------------- hereunder are intended to comply with Code Section 422, and all provisions of the Plan and all Incentive Stock Options granted hereunder must be construed in such manner as to effectuate that intent. 13 5.5 Right to Terminate Employment. Nothing in the Plan or in any ----------------------------- Stock Incentive confers upon any Participant the right to continue as an employee or officer of the Company or any of its Affiliates or affect the right of the Company or any of its Affiliates to terminate the Participant's employment or services at any time. 5.6 Non-Alienation of Benefits. Other than as provided herein, no -------------------------- benefit under the Plan may be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so shall be void. No such benefit may, prior to receipt by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant. 5.7 Restrictions on Delivery and Sale of Shares; Legends. Each Stock ---------------------------------------------------- Incentive is subject to the condition that if at any time the Committee, in its discretion, shall determine that the listing, registration or qualification of the shares covered by such Stock Incentive upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the granting of such Stock Incentive or the purchase or delivery of shares thereunder, the delivery of any or all shares pursuant to such Stock Incentive may be withheld unless and until such listing, registration or qualification shall have been effected. If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Stock Incentives then outstanding, the Committee may require, as a condition of exercise of any Option or as a condition to any other delivery of Stock pursuant to a Stock Incentive, that the Participant or other recipient of a Stock Incentive represent, in writing, that the shares received pursuant to the Stock Incentive are being acquired for investment and not with a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities laws. The Company may include on certificates representing shares delivered pursuant to a Stock Incentive such legends referring to the foregoing representations or restrictions or any other applicable restrictions on resale as the Company, in its discretion, shall deem appropriate. 5.8 Listing and Legal Compliance. The Committee may suspend the ---------------------------- exercise or payment of any Stock Incentive so long as it determines that securities exchange listing or registration or qualification under any securities laws is required in connection therewith and has not been completed on terms acceptable to the Committee. 5.9 Termination and Amendment of the Plan. The Board of Directors at ------------------------------------- any time may amend or terminate the Plan without stockholder approval; provided, however, that the Board of Directors may condition any amendment on the approval of stockholders of the Company if such approval is necessary or advisable with respect to tax, securities or other applicable laws. No such termination or amendment without the consent of the holder of a Stock Incentive may adversely affect the rights of the Participant under such Stock Incentive. 5.10 Stockholder Approval. The Plan must be submitted to the -------------------- stockholders of the Company for their approval within twelve (12) months before or after the adoption of the Plan by 14 the Board of Directors of the Company. If such approval is not obtained, any Incentive Stock Option granted hereunder will be a Non-Qualified Stock Option, but will not otherwise affect any Stock Incentive granted hereunder. 5.11 Choice of Law. The laws of the State of Delaware shall govern the ------------- Plan, to the extent not preempted by federal law, without reference to the principles of conflict of laws. 5.12 Effective Date of Plan. This Plan was approved by the Board of ---------------------- Directors as of July 1, 2000. GLOBAL E TUTOR, INC. By: /s/ Jerry L. Barton ------------------- Title: President and Chief Executive Officer ------------------------------------- 15 EX-2.5 6 0006.txt FORM OF NONQUALIFIED STOCK OPTION AWARD Exhibit 2.5 FORM OF NONQUALIFIED STOCK OPTION AWARD PURSUANT TO THE GLOBAL E TUTOR, INC. 2000 STOCK INCENTIVE PLAN THIS AWARD is made as of the Grant Date, by Global E Tutor, Inc. (the "Company") to _____________________ (the "Optionee"). Upon and subject to the Terms and Conditions attached hereto and incorporated herein by reference, the Company hereby awards as of the Grant Date to Optionee a Nonqualified Stock Option (the "Option"), as described below, to purchase the Option Shares. A. Grant Date: _________________, ________. B. Type of Option: Nonqualified Stock Option. C. Plan (under which Option is granted): Global E Tutor, Inc. 2000 Stock Incentive Plan. D. Option Shares: All or any part of __________ shares of the Company's Stock (the "Stock"), subject to adjustment as provided in the attached Terms and Conditions. E. Exercise Price: $______ per share, subject to adjustment as provided in the attached Terms and Conditions. F. Option Period: The Option may be exercised only during the Option Period which commences on the Grant Date and ends, generally, on the earliest of: (i) the tenth (10/th/) anniversary of the Grant Date; (ii) three (3) months following the date the Optionee ceases to perform services as an employee, director, or consultant of the Company or an Affiliate (as defined in the Plan) for any reason other than death, Disability (defined in the Plan) or termination by the Company with Cause; (iii) twelve (12) months following the date the Optionee ceases to perform services as either an employee or consultant of the Company or an Affiliate due to death or Disability; (iv) the date the Optionee ceases to perform services as either an employee, director, or consultant of the Company or an Affiliate due to termination by the Company or an Affiliate with Cause; (v) the date the Optionee violates any nonsolicitation or non-compete agreement with the Company or an Affiliate; or (vi) the date the Optionee engages in Competition with the Company. The Option may only be exercised as to the vested Option Shares determined pursuant to the Vesting Schedule. Note that other restrictions to exercising the Option, as described in the attached Terms and Conditions, may apply. G. Vesting Schedule: The Option shall become vested in accordance with the vesting schedule attached hereto as Exhibit 3. Any portion of the Option which is not vested at the Optionee's termination of employment with or services to the Company shall be forfeited to the Company. IN WITNESS WHEREOF, the Company and Optionee have executed and sealed this Award as of the Grant Date set forth above. Global E Tutor, Inc. ____________________________________ By:________________________________ Optionee Title:_____________________________ EX-2.6 7 0007.txt FORM OF TERMS AND CONDITION OF THE INCENTIVE STK PLAN Exhibit 2.6 FORM OF TERMS AND CONDITIONS TO THE INCENTIVE STOCK OPTION AWARD PURSUANT TO THE GLOBAL E TUTOR, INC. 2000 STOCK INCENTIVE PLAN 1. Exercise of Option. Subject to the provisions provided herein or in ------------------ the Award made pursuant to the Global E Tutor, Inc. 2000 Stock Incentive Plan; (a) the Option may be exercised with respect to all or any portion of the vested Option Shares at any time during the Option Period by the delivery to the Company, at its principal place of business, of (i) a written notice of exercise in substantially the form attached hereto as Exhibit 1, which shall be actually delivered to the Company at least ten (10) days prior to the date upon which Optionee desires to exercise all or any portion of the Option (unless such prior notice is waived by the Company) and (ii) payment to the Company of the Exercise Price multiplied ---------- by the number of shares being purchased (the "Purchase Price") in the -- manner provided in Subsection (b). Upon acceptance of such notice and receipt of payment in full of the Purchase Price and any tax withholding liability, to the extent applicable, Company shall cause to be issued a certificate representing the Option Shares purchased. (b) The Purchase Price shall be paid in full upon the exercise of an Option and no Option Shares shall be issued or delivered until full payment therefor has been made. Payment of the Purchase Price for all Option Shares purchased pursuant to the exercise of an Option shall be made in cash, certified check, or, alternatively, as follows: (i) by delivery to the Company of a number of shares of Stock which have been owned by the Optionee for at least six (6) months prior to the date of the Option's exercise, having an aggregate Fair Market Value, as determined under the Plan, on the date of exercise either equal to the Purchase Price or in combination with cash equal to the Purchase Price; or (ii) by receipt of the Purchase Price in cash from a broker, dealer or other "creditor" as defined by Regulation T issued by the Board of Governors of the Federal Reserve System following delivery by the Optionee to the Committee (defined in the Plan) of instructions in a form acceptable to the Committee regarding delivery to such broker, dealer or other creditor of that number of Option Shares with respect to which the Option is exercised. 2. Withholding. To the extent the Option is deemed to be a Non-Qualified ----------- Stock Option in accordance with Section 17, the Optionee must satisfy his federal, state, and local, if any, withholding obligations imposed by reason of the exercise of the Option either by paying to the Company the full amount of the withholding obligation (i) in cash; (ii) by tendering shares of Stock which have been owned by the Optionee for at least six (6) months prior to the date of exercise having an aggregate Fair Market Value equal to the withholding obligation; (iii) by electing, irrevocably and in writing (the "Withholding Election"), to have the smallest number of whole shares of Stock withheld by the Company which, when multiplied by the Fair Market Value of the Stock as of the date the Option is exercised, is sufficient to satisfy the amount of withholding obligations; or (iv) by any combination of the above. Optionee may make a Withholding Election only if the following conditions are met: (a) the Withholding Election is made on or prior to the date on which the amount of tax required to be withheld is determined (the "Tax Date") by executing and delivering to the Company a properly completed Notice of Withholding Election in substantially the form attached hereto as Exhibit 2; and (b) any Withholding Election will be irrevocable except; however, the Committee (as defined in the Plan) may, in its sole discretion, disapprove and give no effect to the Withholding Election. 3. Rights as Shareholder. Until the stock certificates reflecting the --------------------- Option Shares accruing to the Optionee upon exercise of the Option are issued to the Optionee, the Optionee shall have no rights as a shareholder with respect to such Option Shares. The Company shall make no adjustment for any dividends or distributions or other rights on or with respect to Option Shares for which the record date is prior to the issuance of that stock certificate, except as the Plan or this Award otherwise provides. 4. Restriction on Transfer of Option and Option Shares. The Option --------------------------------------------------- evidenced hereby is nontransferable other than by will or the laws of descent and distribution, and, shall be exercisable during the lifetime of the Optionee only by the Optionee (or in the event of his disability, by his legal representative) and after his death, only by legal representative of the Optionee's estate. 5. Changes in Capitalization. ------------------------- (a) The number of Option Shares and the Exercise Price shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or combination of shares or the payment of a stock dividend in shares of Stock to holders of outstanding shares of Stock or any other increase or decrease in the number of shares of Stock outstanding effected without receipt of consideration by the Company. (b) In the event of a merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company's assets, other change in capital structure of the Company, or a tender offer for shares of Stock, the Committee may, in its sole discretion, adjust the number and class of securities subject to the Option, with a corresponding adjustment made in the Exercise Price; substitute a new option to replace the Option; or accelerate the termination of the Option Period; or, terminate the Option in consideration of payment to Optionee of the excess of the then Fair Market Value (as defined in the Plan) of the vested Option Shares over the aggregate Exercise Price of the vested Option Shares. (c) The existence of the Plan and this Award shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding. 6. Special Limitations on Exercise. Any exercise of the Option is subject ------------------------------- to the condition that if at any time the Committee, in its sole discretion, shall determine that the listing, registration or qualification of the shares covered by the Option upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the delivery of shares thereunder, the delivery of any or all shares pursuant to the Option may be withheld unless and until such listing, registration or qualification shall have been effected. The Optionee shall deliver to the Company, prior to the exercise of the Option, such information, representations and warranties as the Company may reasonably request in order for the Company to be able to satisfy itself that the Option Shares are being acquired in accordance with the terms of an applicable exemption from the securities registration requirements of applicable federal and state securities laws. 7. Legend on Stock Certificates. Certificates evidencing the Option ---------------------------- Shares, to the extent appropriate at the time, shall have noted conspicuously on the certificates a legend intended to give all persons full notice of the existence of the conditions, restrictions, rights and obligations set forth in this Award and in the Plan. 8. Governing Laws. This Award shall be construed, administered and -------------- enforced according to the laws of the State of Delaware; provided, however, no option may be exercised except, in the reasonable judgment of the Board of Directors, in compliance with exemptions under applicable state securities laws of the state in which the Optionee resides, and/or any other applicable securities laws. 9. Successors. This Award shall be binding upon and inure to the benefit ---------- of the heirs, legal representatives, successors and permitted assigns of the parties. 10. Notice. Except as otherwise specified herein, all notices and other ------ communications under this Award shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein. 11. Severability. In the event that any one or more of the provisions or ------------ portion thereof contained in this Award shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Award, and this Award shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein. 12. Entire Agreement. Subject to the terms and conditions of the Plan, ---------------- this Award expresses the entire understanding and agreement of the parties. This Award may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. 13. Violation. Except as provided in Section 4, any transfer, pledge, --------- sale, assignment, or hypothecation of the Option or any portion thereof shall be a violation of the terms of this Award and shall be void and without effect. 14. Headings. Paragraph headings used herein are for convenience of -------- reference only and shall not be considered in construing this Award. 15. Specific Performance. In the event of any actual or threatened -------------------- default in, or breach of, any of the terms, conditions and provisions of this Award, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. 16. No Right to Continued Employment. Neither the establishment of the -------------------------------- Plan nor the award of Option Shares hereunder shall be construed as giving the Optionee the right to continued employment. 17. Qualified Status of Option. The aggregate fair market value -------------------------- (determined as of the date an Incentive Stock Option is granted) of the shares of Stock with respect to which an Incentive Stock Option first becomes exercisable for the first time by an individual during any calendar year shall not exceed $100,000 (determined as of the date of grant). The Exercise Price per share multiplied by the total number of Option Shares represents the aggregate fair market value of the Option Shares. To the extent the foregoing limitation is exceeded with respect to any portion of the Option Shares, such portion of the Option shall be deemed a Non-Qualified Stock Option. 18. Definitions. As used in these Terms and conditions and this Award, ----------- (a) "Cause" means "Cause" as defined in any Employment Agreement ----- between the Optionee and the Company or an Affiliate, or if none, (i) willful and continued failure (other than such failure resulting from his incapacity during physical or mental illness) by the Optionee to substantially perform his duties with the Company or an Affiliate; (ii) willful misconduct by the Optionee; (iii) gross negligence by the Optionee causing material harm to the Company or an Affiliate; (iv) any act by the Optionee of fraud, misappropriation, dishonesty or embezzlement; (v) commission by the Optionee of a felony or any other crime involving moral turpitude or dishonesty; or (vi) illegal drug use. (b) "Competition with the Company" means to own an interest in, ---------------------------- operate, join, control, or participate as a partner, director, principal, officer, or agent of, enter into the employment of, or act as a consultant to, any entity, other than the Company, whose principal business is the provision of internet based interactive video-on-demand tutoring services. Notwithstanding anything herein to the contrary, the foregoing provisions of this Section 18(b) shall not prevent the Employee from acquiring securities representing not more than five percent (5%) of the value or voting power of the outstanding voting securities of any publicly held corporation. EXHIBIT 1 --------- NOTICE OF EXERCISE OF STOCK OPTION TO PURCHASE STOCK OF GLOBAL E TUTOR, INC. Name:______________________________ Address:___________________________ ___________________________________ Date:______________________________ Global E Tutor, Inc. 3340 Peachtree Road, Suite 1800 Atlanta, GA 30326 Attn: Corporate Secretary Re: Exercise of Incentive Stock Option Dear Sir: Subject to acceptance hereof in writing by Global E Tutor, Inc. (the "Company") pursuant to the provisions of the Global E Tutor, Inc. 2000 Stock Incentive Plan, I hereby give at least ten days but not more than thirty days prior notice of my election to exercise options granted to me to purchase ______________ shares of Stock of the Company under the Incentive Stock Option Award (the "Award") pursuant to the Global E Tutor, Inc. 2000 Stock Incentive Plan dated as of ____________, ______. The purchase shall take place as of ____________, _____ (the "Exercise Date"). On or before the Exercise Date, I will pay the applicable purchase price as follows: [_] by delivery of cash or a certified check for $___________ for the full purchase price payable to the order of the Company. [_] by delivery of a certified check for $___________ representing a portion of the purchase price with the balance to consist of shares of Stock that I have owned for at least six months and that are represented by a stock certificate I will surrender to the Company with my endorsement. If the number of shares of Stock represented by such stock certificate exceed the number to be applied against the purchase price, I understand that a new stock certificate will be issued to me reflecting the excess number of shares. [_] by delivery of a stock certificate representing shares of Stock that I have owned for at least six months which I will surrender to the Company with my endorsement as payment of the purchase price. If the number of shares of Stock represented by such certificate exceed the number to be applied against the purchase price, I understand that a new certificate will be issued to me reflecting the excess number of shares. Exhibit 1 - Page 1 [_] by delivery of the purchase price by ________________, a broker, dealer or other "creditor" as defined by Regulation T issued by the Board of Governors of the Federal Reserve System. I hereby authorize the Company to issue a stock certificate in the number of shares indicated above in the name of said broker, dealer or other creditor or its nominee pursuant to instructions received by the Company and to deliver said stock certificate directly to that broker, dealer or other creditor (or to such other party specified in the instructions received by the Company from the broker, dealer or other creditor) upon receipt of the purchase price. As soon as the stock certificate is registered in my name, please deliver it to me at the above address. If the Stock being acquired is not registered for issuance to and resale by the Optionee pursuant to an effective registration statement on Form S-8 (or successor form) filed under the Securities Act of 1933, as amended (the "1933 Act"), I hereby represent, warrant, covenant, and agree with the Company as follows: The shares of the Stock being acquired by me will be acquired for my own account without the participation of any other person, with the intent of holding the Stock for investment and without the intent of participating, directly or indirectly, in a distribution of the Stock and not with a view to, or for resale in connection with any distribution of the Stock, nor am I aware of the existence of any distribution of the Stock; I am not acquiring the Stock based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Stock but rather upon an independent examination and judgment as to the prospects of the Company; The Stock was not offered to me by means of any publicly disseminated advertisements or sales literature, nor am I aware of any offers made to other persons by such means; I am able to bear the economic risks of the investment in the Stock, including the risk of a complete loss of my investment therein; I understand and agree that the Stock will be issued and sold to me without registration under any state law relating to the registration of securities for sale, and will be issued and sold in reliance on the exemptions from registration under the 1933 Act, provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder; The Stock cannot be offered for sale, sold or transferred by me other than pursuant to: (A) an effective registration under the 1933 Act or in a transaction otherwise in compliance with the 1933 Act; and (B) evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws; The Company will be under no obligation to register the Stock or to comply with any exemption available for sale of the Stock without registration or filing, and the information or conditions necessary to permit routine sales of securities of the Company under Rule 144 under the 1933 Act may not now be available and no assurance has been given that it or they will become Exhibit 1 - Page 2 available. The Company is under no obligation to act in any manner so as to make Rule 144 available with respect to the Stock; I have and have had complete access to and the opportunity to review and make copies of all material documents related to the business of the Company, including, but not limited to, contracts, financial statements, tax returns, leases, deeds and other books and records. I have examined such of these documents as I wished and am familiar with the business and affairs of the Company. I realize that the purchase of the Stock is a speculative investment and that any possible profit therefrom is uncertain; I have had the opportunity to ask questions of and receive answers from the Company and any person acting on its behalf and to obtain all material information reasonably available with respect to the Company and its affairs. I have received all information and data with respect to the Company which I have requested and which I have deemed relevant in connection with the evaluation of the merits and risks of my investment in the Company; I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of the purchase of the Stock hereunder and I am able to bear the economic risk of such purchase; and The agreements, representations, warranties and covenants made by me herein extend to and apply to all of the Stock of the Company issued to me pursuant to this Award. Acceptance by me of the certificate representing such Stock shall constitute a confirmation by me that all such agreements, representations, warranties and covenants made herein shall be true and correct at that time. I understand that the certificates representing the shares being purchased by me in accordance with this notice shall bear a legend referring to the foregoing covenants, representations and warranties and restrictions on transfer, and I agree that a legend to that effect may be placed on any certificate which may be issued to me as a substitute for the certificates being acquired by me in accordance with this notice. Very truly yours, ________________________________________ AGREED TO AND ACCEPTED: _________________________ By:____________________________ Title:_________________________ Number of Shares Exercised:____________________ Number of Shares Remaining:____________________ Date:_____________ Exhibit 1 - Page 3 EXHIBIT 2 --------- NOTICE OF WITHHOLDING ELECTION GLOBAL E TUTOR, INC. TO: Global E Tutor, Inc. FROM: ____________________________ RE: Withholding Election This election relates to the Option identified in Paragraph 3 below. I hereby certify that: (1) My correct name and social security number and my current address are set forth at the end of this document. (2) I am (check one, whichever is applicable). [_] the original recipient of the Option. [_] the legal representative of the estate of the original recipient of the Option. [_] the legal guardian of the original recipient of the Option. (3) The Option to which this election relates was issued under the Global E Tutor, Inc. 2000 Stock Incentive Plan (the "Plan") in the name of _________________________ for the purchase of a total of _________ shares of Stock of the Company. This election relates to _______________ shares of Stock issuable upon exercise of the Option, provided that the numbers set forth above shall be deemed changed as appropriate to reflect the applicable Plan provisions. (4) In connection with any exercise of the Option with respect to the Stock, I hereby elect: [_] to have certain of the shares issuable pursuant to the exercise withheld by the Company for the purpose of having the value of the shares applied to pay federal, state, and local, if any, taxes arising from the exercise. [_] to tender shares held by me for a period of at least six (6) months prior to the exercise of the Option for the purpose of having the value of the shares applied to pay such taxes. The shares to be withheld or tendered, as applicable, shall have, as of the Tax Date applicable to the exercise, an aggregate Fair Market Value equal to the minimum statutory tax withholding requirement under federal, state, and local law in connection with the exercise. (5) This Withholding Election is made no later than the Tax Date and is otherwise timely made pursuant to the Plan. Exhibit 2 - Page 1 (6) I understand that this Withholding Election may not be revised, amended or revoked by me. (7) I further understand that the Company shall withhold from the shares a whole number of shares having the value specified in Paragraph 4 above, as applicable. (8) The Plan has been made available to me by the Company. I have read and understand the Plan and I have no reason to believe that any of the conditions to the making of this Withholding Election have not been met. (9) Capitalized terms used in this Notice of Withholding Election without definition shall have the meanings given to them in the Plan. Dated:____________________ ____________________________________ Signature __________________________ ____________________________________ Social Security Number Name (Printed) ____________________________________ Street Address ____________________________________ City, State, Zip Code Exhibit 2 - Page 2 EXHIBIT 3 VESTING SCHEDULE GLOBAL E TUTOR, INC. Vesting Schedule - ---------------- The Option shall become vested as to one third of the Option Shares following completion by the Optionee of each year of service following the Grant Date. For purposes of this Exhibit 3, the Optionee shall receive credit for service for each year during which the Optionee continuously remains employed with or provides services to the Company or an Affiliate following the Grant Date. Exhibit 3 - Page 1 of 1 EX-2.7 8 0008.txt FORM OF TERMS AND CONDITIONS OF NONQUALIFIED STK PLAN Exhibit 2.7 FORM OF TERMS AND CONDITIONS TO THE NONQUALIFIED STOCK OPTION AWARD PURSUANT TO THE GLOBAL E TUTOR, INC. 2000 STOCK INCENTIVE PLAN 1. Exercise of Option. Subject to the provisions provided herein or in ------------------ the Award made pursuant to the Global E Tutor, Inc. 2000 Stock Incentive Plan; (a) the Option may be exercised with respect to all or any portion of the vested Option Shares at any time during the Option Period by the delivery to the Company, at its principal place of business, of (i) a written notice of exercise in substantially the form attached hereto as Exhibit 1, which shall be actually delivered to the Company at least ten (10) days prior to the date upon which Optionee desires to exercise all or any portion of the Option (unless such prior notice is waived by the Company) and (ii) payment to the Company of the Exercise Price multiplied ---------- by the number of shares being purchased (the "Purchase Price") in the -- manner provided in Subsection (b). Upon acceptance of such notice and receipt of payment in full of the Purchase Price and any tax withholding liability, to the extent applicable, Company shall cause to be issued a certificate representing the Option Shares purchased. (b) The Purchase Price shall be paid in full upon the exercise of an Option and no Option Shares shall be issued or delivered until full payment therefor has been made. Payment of the Purchase Price for all Option Shares purchased pursuant to the exercise of an Option shall be made in cash, certified check, or, alternatively, as follows: (i) by delivery to the Company of a number of shares of Stock which have been owned by the Optionee for at least six (6) months prior to the date of the Option's exercise, having an aggregate Fair Market Value, as determined under the Plan, on the date of exercise either equal to the Purchase Price or in combination with cash equal to the Purchase Price; or (ii) by receipt of the Purchase Price in cash from a broker, dealer or other "creditor" as defined by Regulation T issued by the Board of Governors of the Federal Reserve System following delivery by the Optionee to the Committee (defined in the Plan) of instructions in a form acceptable to the Committee regarding delivery to such broker, dealer or other creditor of that number of Option Shares with respect to which the Option is exercised. 2. Withholding. The Optionee must satisfy his federal, state, and local, ----------- if any, withholding obligations imposed by reason of the exercise of the Option either by paying to the Company the full amount of the withholding obligation (i) in cash; (ii) by tendering shares of Stock which have been owned by the Optionee for at least six (6) months prior to the date of exercise having an aggregate Fair Market Value equal to the withholding obligation; (iii) by electing, irrevocably and in writing (the "Withholding Election"), to have the smallest number of whole shares of Stock withheld by the Company which, when multiplied by the Fair Market Value of the Stock as of the date the Option is exercised, is sufficient to satisfy the amount of withholding obligations; or (iv) by any combination of the above. Optionee may make a Withholding Election only if the following conditions are met: (a) the Withholding Election is made on or prior to the date on which the amount of tax required to be withheld is determined (the "Tax Date") by executing and delivering to the Company a properly completed Notice of Withholding Election in substantially the form attached hereto as Exhibit 2; and (b) any Withholding Election will be irrevocable except; however, the Committee (as defined in the Plan) may, in its sole discretion, disapprove and give no effect to the Withholding Election. 3. Rights as Shareholder. Until the stock certificates reflecting the --------------------- Option Shares accruing to the Optionee upon exercise of the Option are issued to the Optionee, the Optionee shall have no rights as a shareholder with respect to such Option Shares. The Company shall make no adjustment for any dividends or distributions or other rights on or with respect to Option Shares for which the record date is prior to the issuance of that stock certificate, except as the Plan or this Award otherwise provides. 4. Restriction on Transfer of Option and Option Shares. The Option --------------------------------------------------- evidenced hereby is nontransferable other than by will or the laws of descent and distribution, and, shall be exercisable during the lifetime of the Optionee only by the Optionee (or in the event of his disability, by his legal representative) and after his death, only by legal representative of the Optionee's estate. 5. Changes in Capitalization. ------------------------- (a) The number of Option Shares and the Exercise Price shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or combination of shares or the payment of a stock dividend in shares of Stock to holders of outstanding shares of Stock or any other increase or decrease in the number of shares of Stock outstanding effected without receipt of consideration by the Company. (b) In the event of a merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company's assets, other change in capital structure of the Company, or a tender offer for shares of Stock, the Committee may, in its sole discretion, adjust the number and class of securities subject to the Option, with a corresponding adjustment made in the Exercise Price; substitute a new option to replace the Option; or accelerate the termination of the Option Period; or, terminate the Option in consideration of payment to Optionee of the excess of the then Fair Market Value (as defined in the Plan) of the vested Option Shares over the aggregate Exercise Price of the vested Option Shares. (c) The existence of the Plan and this Award shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding. 6. Special Limitations on Exercise. Any exercise of the Option is subject ------------------------------- to the condition that if at any time the Committee, in its sole discretion, shall determine that the listing, registration or qualification of the shares covered by the Option upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the delivery of shares thereunder, the delivery of any or all shares pursuant to the Option may be withheld unless and until such listing, registration or qualification shall have been effected. The Optionee shall deliver to the Company, prior to the exercise of the Option, such information, representations and warranties as the Company may reasonably request in order for the Company to be able to satisfy itself that the Option Shares are being acquired in accordance with the terms of an applicable exemption from the securities registration requirements of applicable federal and state securities laws. 7. Legend on Stock Certificates. Certificates evidencing the Option ---------------------------- Shares, to the extent appropriate at the time, shall have noted conspicuously on the certificates a legend intended to give all persons full notice of the existence of the conditions, restrictions, rights and obligations set forth in this Award and in the Plan. 8. Governing Laws. This Award shall be construed, administered and -------------- enforced according to the laws of the State of Delaware; provided, however, no option may be exercised except, in the reasonable judgment of the Board of Directors, in compliance with exemptions under applicable state securities laws of the state in which the Optionee resides, and/or any other applicable securities laws. 9. Successors. This Award shall be binding upon and inure to the benefit ---------- of the heirs, legal representatives, successors and permitted assigns of the parties. 10. Notice. Except as otherwise specified herein, all notices and other ------ communications under this Award shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein. 11. Severability. In the event that any one or more of the provisions or ------------ portion thereof contained in this Award shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Award, and this Award shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein. 12. Entire Agreement. Subject to the terms and conditions of the Plan, ---------------- this Award expresses the entire understanding and agreement of the parties. This Award may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. 13. Violation. Except as provided in Section 4, any transfer, pledge, --------- sale, assignment, or hypothecation of the Option or any portion thereof shall be a violation of the terms of this Award and shall be void and without effect. 14. Headings. Paragraph headings used herein are for convenience of -------- reference only and shall not be considered in construing this Award. 15. Specific Performance. In the event of any actual or threatened -------------------- default in, or breach of, any of the terms, conditions and provisions of this Award, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. 16. No Right to Continued Employment. Neither the establishment of the -------------------------------- Plan nor the award of Option Shares hereunder shall be construed as giving the Optionee the right to continued employment or engagement. 17. Definitions. As used in these Terms and conditions and this Award, ----------- (a) "Cause" means "Cause" as defined in any Employment Agreement ----- between the Optionee and the Company or an Affiliate, or if none, (i) willful and continued failure (other than such failure resulting from his incapacity during physical or mental illness) by the Optionee to substantially perform his duties with the Company or an Affiliate; (ii) willful misconduct by the Optionee; (iii) gross negligence by the Optionee causing material harm to the Company or an Affiliate; (iv) any act by the Optionee of fraud, misappropriation, dishonesty or embezzlement; (v) commission by the Optionee of a felony or any other crime involving moral turpitude or dishonesty; or (vi) illegal drug use. (b) "Competition with the Company" means to own an interest in, ---------------------------- operate, join, control, or participate as a partner, director, principal, officer, or agent of, enter into the employment of, or act as a consultant to, any entity, other than the Company, whose principal business is the provision of internet based interactive video-on-demand tutoring services. Notwithstanding anything herein to the contrary, the foregoing provisions of this Section 18(b) shall not prevent the Employee from acquiring securities representing not more than five percent (5%) of the value or voting power of the outstanding voting securities of any publicly held corporation. EXHIBIT 1 --------- NOTICE OF EXERCISE OF STOCK OPTION TO PURCHASE STOCK OF GLOBAL E TUTOR, INC. Name: ________________________ Address:______________________ ______________________________ Date: ________________________ Global E Tutor, Inc. 3340 Peachtree Road, Suite 1800 Atlanta, Georgia 30326 Attn: Corporate Secretary Re: Exercise of Incentive Stock Option Dear Sir: Subject to acceptance hereof in writing by Global E Tutor, Inc. (the "Company") pursuant to the provisions of the Global E Tutor, Inc. 2000 Stock Incentive Plan, I hereby give at least ten days but not more than thirty days prior notice of my election to exercise options granted to me to purchase ______________ shares of Stock of the Company under the Nonqualified Stock Option Award (the "Award") pursuant to the Global E Tutor, Inc. 2000 Stock Incentive Plan dated as of ____________, ______. The purchase shall take place as of ____________, _____ (the "Exercise Date"). On or before the Exercise Date, I will pay the applicable purchase price as follows: [ ] by delivery of cash or a certified check for $___________ for the full purchase price payable to the order of the Company. [ ] by delivery of a certified check for $___________ representing a portion of the purchase price with the balance to consist of shares of Stock that I have owned for at least six months and that are represented by a stock certificate I will surrender to the Company with my endorsement. If the number of shares of Stock represented by such stock certificate exceed the number to be applied against the purchase price, I understand that a new stock certificate will be issued to me reflecting the excess number of shares. [ ] by delivery of a stock certificate representing shares of Stock that I have owned for at least six months which I will surrender to the Company with my endorsement as payment of the purchase price. If the number of shares of Stock represented by such certificate exceed the number to be applied against the purchase price, I understand that a new certificate will be issued to me reflecting the excess number of shares. Exhibit 1 - Page 1 [ ] by delivery of the purchase price by ________________, a broker, dealer or other "creditor" as defined by Regulation T issued by the Board of Governors of the Federal Reserve System. I hereby authorize the Company to issue a stock certificate in the number of shares indicated above in the name of said broker, dealer or other creditor or its nominee pursuant to instructions received by the Company and to deliver said stock certificate directly to that broker, dealer or other creditor (or to such other party specified in the instructions received by the Company from the broker, dealer or other creditor) upon receipt of the purchase price. As soon as the stock certificate is registered in my name, please deliver it to me at the above address. If the Stock being acquired is not registered for issuance to and resale by the Optionee pursuant to an effective registration statement on Form S-8 (or successor form) filed under the Securities Act of 1933, as amended (the "1933 Act"), I hereby represent, warrant, covenant, and agree with the Company as follows: The shares of the Stock being acquired by me will be acquired for my own account without the participation of any other person, with the intent of holding the Stock for investment and without the intent of participating, directly or indirectly, in a distribution of the Stock and not with a view to, or for resale in connection with any distribution of the Stock, nor am I aware of the existence of any distribution of the Stock; I am not acquiring the Stock based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Stock but rather upon an independent examination and judgment as to the prospects of the Company; The Stock was not offered to me by means of any publicly disseminated advertisements or sales literature, nor am I aware of any offers made to other persons by such means; I am able to bear the economic risks of the investment in the Stock, including the risk of a complete loss of my investment therein; I understand and agree that the Stock will be issued and sold to me without registration under any state law relating to the registration of securities for sale, and will be issued and sold in reliance on the exemptions from registration under the 1933 Act, provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder; The Stock cannot be offered for sale, sold or transferred by me other than pursuant to: (A) an effective registration under the 1933 Act or in a transaction otherwise in compliance with the 1933 Act; and (B) evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws; The Company will be under no obligation to register the Stock or to comply with any exemption available for sale of the Stock without registration or filing, and the information or conditions necessary to permit routine sales of securities of the Company under Rule 144 under the 1933 Act may not now be available and no assurance has been given that it or they will become Exhibit 1 - Page 2 available. The Company is under no obligation to act in any manner so as to make Rule 144 available with respect to the Stock; I have and have had complete access to and the opportunity to review and make copies of all material documents related to the business of the Company, including, but not limited to, contracts, financial statements, tax returns, leases, deeds and other books and records. I have examined such of these documents as I wished and am familiar with the business and affairs of the Company. I realize that the purchase of the Stock is a speculative investment and that any possible profit therefrom is uncertain; I have had the opportunity to ask questions of and receive answers from the Company and any person acting on its behalf and to obtain all material information reasonably available with respect to the Company and its affairs. I have received all information and data with respect to the Company which I have requested and which I have deemed relevant in connection with the evaluation of the merits and risks of my investment in the Company; I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of the purchase of the Stock hereunder and I am able to bear the economic risk of such purchase; and The agreements, representations, warranties and covenants made by me herein extend to and apply to all of the Stock of the Company issued to me pursuant to this Award. Acceptance by me of the certificate representing such Stock shall constitute a confirmation by me that all such agreements, representations, warranties and covenants made herein shall be true and correct at that time. I understand that the certificates representing the shares being purchased by me in accordance with this notice shall bear a legend referring to the foregoing covenants, representations and warranties and restrictions on transfer, and I agree that a legend to that effect may be placed on any certificate which may be issued to me as a substitute for the certificates being acquired by me in accordance with this notice. Very truly yours, ____________________________ AGREED TO AND ACCEPTED: _________________________ By: _________________________ Title: ______________________ Number of Shares Exercised: ________________ Number of Shares Remaining: ________________ Date:_____________ Exhibit 1 - Page 3 EXHIBIT 2 --------- NOTICE OF WITHHOLDING ELECTION GLOBAL E TUTOR, INC. TO: Global E Tutor, Inc. FROM: _____________________________ RE: Withholding Election This election relates to the Option identified in Paragraph 3 below. I hereby certify that: (1) My correct name and social security number and my current address are set forth at the end of this document. (2) I am (check one, whichever is applicable). [ ] the original recipient of the Option. [ ] the legal representative of the estate of the original recipient of the Option. [ ] the legal guardian of the original recipient of the Option. (3) The Option to which this election relates was issued under the Global E Tutor, Inc. 2000 Stock Incentive Plan (the "Plan") in the name of _________________________ for the purchase of a total of _________ shares of Stock of the Company. This election relates to _______________ shares of Stock issuable upon exercise of the Option, provided that the numbers set forth above shall be deemed changed as appropriate to reflect the applicable Plan provisions. (4) In connection with any exercise of the Option with respect to the Stock, I hereby elect: [ ] to have certain of the shares issuable pursuant to the exercise withheld by the Company for the purpose of having the value of the shares applied to pay federal, state, and local, if any, taxes arising from the exercise. [ ] to tender shares held by me for a period of at least six (6) months prior to the exercise of the Option for the purpose of having the value of the shares applied to pay such taxes. The shares to be withheld or tendered, as applicable, shall have, as of the Tax Date applicable to the exercise, an aggregate Fair Market Value equal to the minimum statutory tax withholding requirement under federal, state, and local law in connection with the exercise. (5) This Withholding Election is made no later than the Tax Date and is otherwise timely made pursuant to the Plan. Exhibit 2 - Page 1 (6) I understand that this Withholding Election may not be revised, amended or revoked by me. (7) I further understand that the Company shall withhold from the shares a whole number of shares having the value specified in Paragraph 4 above, as applicable. (8) The Plan has been made available to me by the Company. I have read and understand the Plan and I have no reason to believe that any of the conditions to the making of this Withholding Election have not been met. (9) Capitalized terms used in this Notice of Withholding Election without definition shall have the meanings given to them in the Plan. Dated: ___________________ ______________________________ Signature __________________________ ______________________________ Social Security Number Name (Printed) ______________________________ Street Address ______________________________ City, State, Zip Code Exhibit 2 - Page 2 EXHIBIT 3 VESTING SCHEDULE GLOBAL E TUTOR, INC. Vesting Schedule - ---------------- The Option shall become vested as to one third of the Option Shares following completion by the Optionee of each year of service following the Grant Date. For purposes of this Exhibit 3, the Optionee shall receive credit for service for each year during which the Optionee continuously remains employed with or provides services to the Company or an Affiliate following the Grant Date. Exhibit 3 - Page 1 of 1 EX-27 9 0009.txt FDS
5 6-MOS YEAR DEC-31-2000 DEC-31-1999 JAN-01-2000 JAN-01-1999 JUN-30-2000 DEC-31-1999 74,240 774,911 0 0 0 0 0 0 0 0 80,266 794,911 454,768 5,369 (30,271) (79) 795,186 875,333 629,961 1,033,996 0 0 0 0 0 0 27,568 9,640 137,657 (168,303) 795,186 875,333 0 0 0 0 0 0 0 0 1,699,926 945,086 0 0 7,122 5,149 (1,688,243) (939,097) (1,688,243) (939,097) 0 0 0 0 0 0 0 0 (1,688,243) (939,097) (0.060) (0.030) (0.060) (0.030)
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