SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
September 10, 2001
Date of Report
(Date of Earliest Event Reported)
North Pacific Capital Corp.
(Exact name of Registrant as Specified in its Charter)
#280-815 West Hastings Street, Vancouver, BC, V6C 1B4
(Address of Principal Executive Offices)
604-608-2540
(Registrant's Telephone Number)
Not Applicable
(Former name and former address)
Nevada 000-31909 88-0473897
------ --------- ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Share Purchase Agreement with SchoolWeb Systems Inc.
Pursuant to an Agreement (the "Share Exchange Agreement") dated as of July 2,
2001, as amended September 10, 2001 between SchoolWeb Holdings Inc. (formerly
SchoolWeb Systems Inc.), a Nevada corporation ("SchoolWeb"), and North Pacific
Capital Corp., a Nevada corporation ("North Pacific"), all of the 12,343,000
outstanding shares of common stock of SchoolWeb were exchanged for 12,343,000
shares of common stock of North Pacific, in a transaction in which North Pacific
was the surviving corporation. The 12,343,000 shares of common stock
represented approximately 86% of the issued and outstanding shares of common
stock as of September 30, 2001.
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The Share Exchange Agreement was adopted by the unanimous consent of the Board
of Directors of SchoolWeb on July 2, 2001 and approved by the unanimous consent
(evidenced by their signatures on the Share Exchange Agreement) of the
stockholders of SchoolWeb.
The Share Exchange Agreement was adopted by the unanimous consent of the Board
of Directors of North Pacific on July 2, 2001.
Under the terms of the Share Exchange Agreement, Advanced Interactive Inc., a
Nevada company, and its subsidiary, Advanced Interactive Canada Inc.
(collectively, "AII") which had licenced software to SchoolWeb under the terms
of a software license agreement (the "License Agreement") dated January 1, 2001
as amended June 29, 2001 and September 10, 2001, acquired 2,500,000 shares of
common stock upon closing of the Share Exchange Agreement and acquisition of
SchoolWeb. Under the terms of a settlement agreement dated September 10, 2001
(the "Settlement Agreement"), AII acquired an additional 500,000 shares of
common stock upon closing of the Share Exchange Agreement.
The closing of the Share Exchange Agreement occurred on September 10, 2001 with
the completion of stock issuances to Advanced Interactive Inc. under the terms
of the Settlement Agreement.
As a result of this closing, AII has a total of 3,000,000 (held 1,500,000 by
Advanced Interactive Inc. and 1,500,000 by Advanced Interactive Canada Inc.)
shares of common stock of North Pacific. This represents 21% of the issued and
outstanding shares of common stock.
As a result of this closing, Mr. Michael Dearden and Mr. Griffin Jones, who were
concurrently appointed as Directors, acquired 17.85% and 17.84% of the issued
and outstanding shares of common stock respectively.
A copy of the Share Exchange Agreement is filed as an exhibit to this Form 8-K
and is incorporated in its entirety herein. A copy of the License Agreement and
amendment dated June 29, 2001 and the Settlement Agreement dated September 10,
2001 are filed as exhibits to this Form 8-K and are incorporated in their
entirety herein. The foregoing description is modified by such references.
Upon closing of the Share Purchase Agreement, Michael Dearden, Greg Protti,
Patrick Fitzsimmons and Karim Lakhani were appointed to the board of directors
of North Pacific. Richard Silas resigned as director and officer of North
Pacific on that same date. See "Item 2. Acquisition or Disposition of Assets -
North Pacific's Directors, Executive Officers, Promoters and Control Persons and
Key Employees" below.
Control of North Pacific:
On September 30, 2001, North Pacific had 14,293,000 shares of common stock
issued and outstanding. The following table sets forth certain information
regarding the beneficial ownership of the common stock of North Pacific as of
September 30, 2001 of (1) each person who is known to North Pacific to own
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beneficially more than 5% of North Pacific's outstanding common stock, (2) each
of North Pacific's directors and officers, and (3) all directors and officers of
North Pacific as a group:
- --------------------------------------------------------------------------------
Name and Address Position Amount of Stock Percentage
Beneficially Owned of Class
- --------------------------------------------------------------------------------
Michael Dearden Director, President 2,551,000 17.85%
215 - 310 E 2nd St.
N. Vancouver, BC
- --------------------------------------------------------------------------------
Griffin Jones Director, Secretary, 2,550,000 17.84%
1243 W. 20th St. Treasurer
N. Vancouver, BC
V7P 2B8
- --------------------------------------------------------------------------------
Patrick Fitzsimmons Director, VP Sales 1,001,000 7.00%
1406-151 E. Keith Rd.
N. Vancouver, BC
V7L 4M3
- --------------------------------------------------------------------------------
Greg Protti Director, VP Business 501,000 3.51%
6405 Holly Park Dr. Development
Ladner, BC V4K 4W6
- --------------------------------------------------------------------------------
Karim Lakhani Director *1 0.00%
- --------------------------------------------------------------------------------
Advanced Interactive Inc. 1,500,000 10.49%
718 - 1350 East Flamingo Road
Las Vegas, NV
89119
Advanced Interactive Canada Inc. 1,500,000 10.49%
2101 - 1177 W. Hastings St.
Vancouver, BC
V6E 2K3
- --------------------------------------------------------------------------------
Directors, Officers and 9,603,000 67.19%
5% stockholders in
total (6 Persons)
- --------------------------------------------------------------------------------
1. Karim Lakhani does not personally own any common stock. However, as well
as being a director of North Pacific, he is a Director and President of
Advanced Interactive Inc. and is a director of its Canadian subsidiary,
Advanced Interactive Canada Inc. These two companies hold a total of 21%
of the issued and outstanding stock of the Company
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As used in this current report, the terms "we", "us", "our", "our company", "the
Company" and "the Registrant" mean North Pacific Capital Corp. and its wholly
owned subsidiary, SchoolWeb Systems Inc. ("SchoolWeb"), a Nevada corporation.
(a) Acquisition of SchoolWeb.
The consideration exchanged pursuant to the Share Exchange Agreement was
negotiated between the stockholders of SchoolWeb and the management of North
Pacific.
In evaluating SchoolWeb as a possible acquisition candidate, we used criteria
such as management's estimates of the value of the assets of SchoolWeb
(particularly the License Agreement), the anticipated future operations of
SchoolWeb, material contracts, quality of management and current operations.
The primary asset of SchoolWeb is the License Agreement between SchoolWeb,
Advanced Interactive Inc. and Advanced Interactive Canada Inc. dated January 1,
2001 as amended June 29, 2001 and September 10, 2001. Advanced Interactive Inc.
and its subsidiary, Advanced Interactive Canada Inc. had developed proprietary
hardware systems and software known as "SchoolWeb" and "OfficeServer" for
caching Internet and multimedia files on special servers at schools, homes,
businesses or other locations (the "Licensed Technology").
SchoolWeb, which at the time was named Alternet Systems Inc., wished to acquire
the rights to distribute, market, sell and license the Licensed Technology in
the United States and Canada.
The License Agreement grants SchoolWeb, for a term of five (5) years renewable
for an additional five (5) years, the exclusive right to distribute, market,
sell and sub-license the "SchoolWeb" portion of the Licensed Technology in the
US and Canada for educational related purposes and grants SchoolWeb, for a
period of five (5) years renewable for an additional five (5) years, the
non-exclusive worldwide right to distribute, market, sell and license the
"OfficeServer" portion of the Licensed Technology. Under the terms of the
License Agreement, SchoolWeb must pay to Advanced Interactive Inc. the sum of
$10,000 per month in year one, $20,000 per month in year two and increased
payments in subsequent years. Advanced Interactive Inc. also receives a royalty
of 40% on revenue realized from SchoolWeb's use of the Licensed Technology.
Advanced Interactive Inc. was issued a total of 3,000,000 shares of common stock
of North Pacific under the terms of the License Agreement, the Share Exchange
Agreement, the Settlement Agreement and their amendments.
(b) Corporate History of North Pacific and SchoolWeb:
North Pacific was incorporated in the State of Nevada on June 26, 2000, under
the name of "North Pacific Capital Corp.". North Pacific is seeking, at its
meeting of stockholders to be held on December 20, 2001, stockholder approval to
change its name to "SchoolWeb Systems Inc.".
SchoolWeb was incorporated in the State of Nevada on October 13, 2000 under the
name of Alternet Systems, Inc. On January 1, 2001 it entered into the License
Agreement with Advanced Interactive Inc. and its subsidiary, Advanced
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Interactive (Canada) Inc. (collectively, "AII") and subsequently changed its
name, on March 6, 2001, to "SchoolWeb Systems Inc.". On July 3, 2001
SchoolWeb's name was changed to "SchoolWeb Holdings Inc.", its present name.
The SchoolWeb hardware system and software were developed as a result of
Advanced Interactive Inc.'s subsidiary, Advanced Interactive Canada Inc., being
awarded a $650,000 contract in 1999 to provide a low cost, distance-learning
Internet access system for an initial pilot of 20 British Columbia, Canada
schools. The contract was awarded to Advanced Interactive Canada Inc. by the
Government of British Columbia.
(c) SchoolWeb's Products and Technology
SchoolWeb Systems Inc. ("SchoolWeb") is targeting the North American education
market with its proprietary SchoolWeb Internet access system.
Utilizing satellite broadcasting and caching server technology, SchoolWeb is the
first Internet access system developed specifically for schools. The SchoolWeb
system delivers up to ten times more user capacity than a telecom line system of
equivalent cost and provides students with e-mail and website hosting
capabilities.
Each basic SchoolWeb "system" or software / hardware package is comprised of the
SchoolWeb Librarian software, Linux Operating System, a network server,
redundant file system, software configuration, uninterruptible power supply,
satellite or cable port, SchoolWeb user license, 24 hour technical support
(provided by AII through the License Agreement), On-site installation and
training (provided by resellers and distributors), system maintenance and 5X9
on-site warranty.
How it works:
1 A student makes a request for an Internet website.
2 The SchoolWeb server at the school first searches its memory to determine
if the site was recently requested and cached (stored) in the computer
memory.
3 If the website is present in the computer memory, the information is
delivered at LAN speed (usually 100 megabits per second) to the student.
4 If the file is not available in the server cache, the SchoolWeb server
goes to the Internet (via the school's telecom link to the SchoolWeb
Network Center).
5 The SchoolWeb Network Center accesses the Internet and broadcasts the
website via satellite to the local SchoolWeb server.
6 All subsequent requests for this site are now available at high speed
(100Mb/sec) from the local SchoolWeb server.
Value added services offered by the SchoolWeb system include:
- - fast downloading of large Internet sites for each student
- - pre-programmed downloading of teacher-requested Internet sites
e-mail and web site hosting for each student
- - streaming audiovisual for 50+ computer stations
- - Internet computer games (recreational users do not affect Internet access
speed)
- - Content control and the ability to screen viewed sites
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The SchoolWeb system has more value added services than competitive systems and
is focussed on the education niche of the market for internet access services
(see "Competitive Factors in the Market on page 10). SchoolWeb provides more
benefits than any competitive alternative, features such as e-mail addresses and
websites for each student, and full-motion (streaming) audiovisual viewing. When
used as a distribution network to teachers, administrators and students,
SchoolWeb's broadcast caching method of distribution results in significant time
savings when compared to the current methods of information distribution over
the Internet.
Each school's SchoolWeb system includes a network server with large storage
capability, redundant file systems, uninterruptible power supply and a 36"
satellite dish. SchoolWeb utilizes a Linux operating system that includes
e-mail, streaming multimedia (video, audio, animation, text) and broadcast
caching, as well as many other features listed in the Server Comparative
Analysis chart (see appendix)
SchoolWeb can be managed and monitored by teachers at each school using
SchoolWeb Management Software. This client interface provides great flexibility
for teachers who, for teaching purposes, wish to pre-request websites the
previous day, or minutes before the class commences. The SchoolWeb network's
software and hardware performance is monitored remotely 24 hours/day by
SchoolWeb support personnel.
Although SchoolWeb was originally developed for rural schools that do not have
high speed Internet access, urban schools can also benefit from the SchoolWeb
system. These urban schools have the highest bandwidth telecom links available
in North America, but have saturated them with up to 600 online computers, all
accessing the Internet at the same time. SchoolWeb's efficiency provides an
additional 1000% user capacity increase for the same price as a telecom link
that would provide just a 100% increase in capacity.
The SchoolWeb system design is the type of infrastructure that is required to
solve the problem of congestion. SchoolWeb delivers the Internet to schools up
to ten times more efficiently than telecom lines, due to its caching server and
satellite downloading. Without it, most school administrators can't afford the
amount of Internet access they desire, due to the large monthly telephone bills
incurred. The paradox is, government directives have been funding more on-line
computers, but not the corresponding increase in monthly telecom expenses. This
can result in many computers trying to access an overcrowded telephone line, and
in effect, getting a busy signal.
SchoolWeb is presently installed in 23 schools in the United States (Hawaii,
Colorado, Washington) and Canada (British Columbia).
In British Columbia, where the first SchoolWeb systems were installed, 19
schools presently have the SchoolWeb system. The SchoolWeb systems were
installed on a 12 to 18 month test basis (the results of which have been
extremely positive according to the British Columbia Ministry of Education in
its September 2001 newsletter.
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Installation of 4 servers in Hawaii, Colorado and Washington is presently being
undertaken.
Because SchoolWeb is a new technology, acceptance of the SchoolWeb system (the
company believes) must be preceded by a test period of placing the SchoolWeb
server in the school for as long as a year to build comfort with the system and
generate (after the test period has been completed) orders and revenue.
As the test periods are only now being completed in British Columbia and have
only begun in the United States, it is anticipated that significant revenues
will not be realized from sales until the first quarter of 2002.
Employees
SchoolWeb currently has only two employees: Patrick Fitzsimmons, who performs
sales and marketing functions as VP Sales and Greg Protti, who performs various
business development functions as VP Business Development.
The directors of North Pacific, excluding Karim Lakhani, offer their services
full-time to North Pacific (although not remunerated as employees). Karim
Lakhani is only part-time.
SchoolWeb's business is not labour intensive. SchoolWeb's software development
and updating is provided by Advanced Interactive Inc. and Advanced Interactive
Canada Inc. under the terms of the License Agreement. The actual sales and
installations are performed by various resellers, primarily Microserve (a
division of IBM).
In addition, when needed, SchoolWeb employs independent consultants.
SchoolWeb anticipates hiring an additional four employees in the fiscal year
ending December 31, 2002 where revenues and funds permit (see "Future Plan of
Operations" on page 12).
Product Pricing
For elementary schools, the SchoolWeb system costs $525 per month for a period
of three years.
For secondary schools, the SchoolWeb system costs $695 per month for a period of
three years.
Where schools desire to pay "up front" the total costs of a SchoolWeb system,
prices vary according to the school's particular situation (eg. Urban or rural,
close to an established distributor / authorized dealer). Average cost per
secondary school is expected to be approximately $7,500 (Cdn $11,500 for
Canadian secondary schools) for "up front" payment.
Intellectual Property
SchoolWeb does not own the intellectual property rights to the SchoolWeb
hardware system and software. These rights are held by AII and licensed to
SchoolWeb under the terms of the License Agreement. Under the terms of the
License Agreement, SchoolWeb has the right to sub-license these rights.
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SchoolWeb has applied for trademark rights in the United States and Canada for
the tradename "SchoolWeb". The initial application was filed in Canada on March
30, 2001 and it is expected that a response should be received within 18 months.
The trademark is expected to be registered on the supplemental register in the
United States as the United States trademark was applied for based on the
Canadian trademark application. Once a company has used a supplemental
register mark in the United States for five years, the company's mark is placed
on the full register. In the meantime, its rights in the United States are
protected.
No application has been made for the trademark rights for "OfficeWeb" in any
jurisdiction. It appears that conflict with an existing mark in the United
States.
Research and Development
We do not anticipate incurring any significant expenditures on research and
development for the next 12 months. AII is responsible for the updating and
revision of the SchoolWeb software under the terms of the License Agreement.
Markets
The License Agreement limits SchoolWeb licensed rights to the SchoolWeb hardware
system and software to educational applications.
As a result, the market for SchoolWeb's system and software can best be
characterized as the market for "Internet access and e-learning in educational
organizations".
Estimating the size of this market is difficult.
The SchoolWeb system is suitable for colleges, universities and libraries.
Combined with approximately 96,000 K-12 schools (elementary and high schools)
and an additional 44,000 private schools, colleges, universities and other
educational institutions in North America, the total annual market targeted by
SchoolWeb is very large.
The market for Internet access and e-learning in educational organizations is
one of the fastest growing segments of the high-tech industry in North America.
Merrill Lynch estimates that the K-12 e-learning market is currently $1.3
billion and is likely to increase to $6.9 billion in 2003. In additionn, the US
Federal Communications Commission recently allocated $2.25 billion to fund
additional high-speed Internet access to US schools and libraries. In Canada,
similar funding initiatives are being implemented by Industry Canada, a federal
government agency, to facilitate Internet access for all Canadian K-12 students
(in fact, the first funding that SchoolWeb received came from Industry Canada).
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Marketing Strategy:
SchoolWeb's marketing strategy is characterized by the following:
- - Push sales strategy. The relative newness of the SchoolWeb hardware system
and software requires us to actively push it out into the field through direct
sales efforts (of distributors, authorized dealers and resellers) rather than
pull clients through print advertising campaigns.
- -Solution selling. The product is sold as a total solution complete with
implementation and on-going management services at the client site. This
differentiates us from "shrink-wrapped" software or communications suppliers
that offer no services or provide a limited set of services after installation
has occurred.
- -Strong branding within target segments. We intend to build the School Web
brand name within targetted markets. SchoolWeb hopes to accomplish this in part
through selective advertising in trade journals and attendance at relevant
trade shows if and when revenues permit such expenditures (it is unlikely that
there will be significant resources devoted to this in the year ending December
31, 2002).
- -Channel ready product. The SchoolWeb system is designed to be channel-ready
and easily installable by personnel working for our distributors and authorized
dealers. Installation of the SchoolWeb hardware system and software does not
require extensive training or experience.
- -Direct Distribution Channel (Direct Sales). Our direct sales channel will
consist of 4 regional sales managers for each geographic region, overseen by the
vice president of sales, Patrick Fitzsimmons. All corporate sales management
personnel will be involved in managing direct sales and in dealing with Federal,
State and Provincial Education Departments and school boards.
Although this direct distribution from SchoolWeb to schools is planned, it is
clear that SchoolWeb's marketing strategy relies to a great degree upon
SchoolWeb's ability to secure agreements with channel partners (authorized
dealers) and distributors (value added resellers). To this end SchoolWeb has
entered into agreements with Microserve Computer Solutions Inc. (with offices
in the United States and Canada) and only recently with K-Plus Group Inc. (with
offices in San Jose, California), Ceti Solutions (with offices in Los Angeles,
California) and with PY Investment Ltd. (with offices in Honolulu, Hawaii).
None of the distributorships have geographical or product exclusivity.
It is anticipated that future growth will be generated through existing and
additional distributorships in Canada and the United States. It is hoped that
some alliance or partnership can be formed with the larger server manufacturers
(such as IBM or Hewlett Packard) which would allow SchoolWeb access to their
established distribution channels in educational institutions.
To date, SchoolWeb's marketing efforts have been limited to California, Hawaii
and parts of Western Canada. SchoolWeb has servers installed in 23 schools in
Hawaii, Colorado, Washington and British Columbia, Canada (19 installed in
British Columbia and 4 installed or in the process of installation in the
remaining geographic areas).
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Competitors
SchoolWeb competes with the distribution branches of IBM, Compaq, Dell and
Hewlett Packard in that these companies market their servers directly to
educational institutions. It does not directly compete with them in the
provision of software and caching services and hopes to build strategic
alliances or partnerships with one or more of these companies (in exchange for
using their servers).
SchoolWeb's leading competitors in the area of caching server software are
Novell and Bascom.com (a company which produces caching server software directly
targetted at educational institutions). Novell does not specifically target
educational institutions and Bascom.com does not have the same number of value
added services that SchoolWeb's systems have.
The SchoolWeb system also arguably competes with providers of traditional cable
and telecomm means of accessing the internet. The competitive advantages that
SchoolWeb has over these providers is detailed in Competitive Factors below.
Competitive Factors in the Market:
The primary competitive factors in the market for internet access at educational
institutions are reliability, speed and efficiency.
The SchoolWeb system provides a dramatic increase in user speed and capacity
over telecommunication lines of similar cost. This increase in user speed and
capacity is due primarily to the SchoolWeb system's caching of internet files
and websites.
Although originally developed by AII as a software and hardware system geared
towards rural locations, the SchoolWeb system has been installed with success in
urban locations in British Columbia as well.
Although urban schools have better access to high-speed telecom lines, the
efficiency of the SchoolWeb system still allows up to ten times more users than
an equivalent costing telephone line.
In rural areas, which represent 23% of all schools in North America (22,000
schools), schools often have no access to high-speed telecom infrastructure.
These schools are restricted to access the Internet through slow-speed
(56K-128K) telecom lines, which are only suitable for a small number of users at
a time. For many rural schools, SchoolWeb is the only alternative for high-speed
Internet access.
A typical School Board will be utilizing a Private Line solution at 56k or 128k
for primary schools, and usually T-1 (DS-1), or Ethernet ports for their
secondary schools. Schools are usually connected to State or Provincial
communication systems by full or partial T-1 circuits to a central government
office, which provides services such as firewall filtering, virus protection,
curriculum and systems management. Because so many students and schools become
connected, not only are the typical school's overall telecom operating costs
are substantial, these circuits are usually near or at saturation most times,
due to increased demand from an ever increasing number of online computers. At a
conservative rating of 5 times more user capacity (based on the SchoolWeb
system's efficient use of bandwidth) than similar costing telecom lines, the
SchoolWeb system can provide cost savings of up to 80% over conventional
alternatives.
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ADSL and high speed Cable, although excellent for the residential/SOHO (small
office/home office) market, is not widely used by schools due to security issues
and limited performance for commercial applications. Cable is a shared network
with security and congestion problems, and ADSL bandwidth performance is greatly
affected by the distance from the telephone company Central Office (C.O.).
These internet access solutions are rarely used by educational institutions
(except in circumstances where a small or less developed school may only have
one or a few computers with internet access).
Because many school Internet requests are repetitive, the SchoolWeb system
caches and serves these requests at LAN speed of 100 megabits/second (Mb/S).
Based on SchoolWeb data in schools in British Columbia where the SchoolWeb
system has been installed, it has been shown that the repeat request ratio is
between 40% and 70%. Therefore, over half of the student requests are serviced
at 100 Mb/sec from the local SchoolWeb cache. This equates to a performance
increase of between 5 and 100 times when compared to operating without
SchoolWeb.
Risk Factors Associated with our Business:
The following risks should be considered carefully. Our business, financial
condition and results of operations could be materially and adversely affected
by any of the following risks:
- - We may be unable to protect our intellectual property rights or AII may be
unable to protect its intellectual property rights;
- - If we are unable to generate significant revenues, our License Agreement
with AII could be cancelled;
- - We may be unable to attract or retain customers;
- - We may be unable to anticipate changes in our target market or our
customers' needs;
- - Our infrastructure may fail (including our servers, hardware and software)
to efficiently handle the traffic it is required to handle;
- - We haven't paid dividends and don't know if or when we will be able to;
- - Changes in laws (especially laws relating to our trademarks or
intellectual property) could hurt our business;
- - We might not be able to handle a rapidly expanding operation and various
problems associated with this (such as installations, timing and amount of
capital expenditures and other problems);
- - We rely on AII for product development, product support and some
installation services under the terms of the License Agreement. If AII fails
to meet its obligations under the License Agreement, we may not be able to
continue to do business;
- - We will have to rely on future equity financing (which could dilute existing
shareholders) because we do not have sufficient revenue to fund ongoing
operations right now;
- - We may not be able to obtain future equity or debt financing, especially if
economic or securities market conditions deteriorate further;
- - We are very dependent on our key personnel and management;
- - General economic conditions may affect school funding for intellectual
property initiatives through federal, state and provincial budget cuts;
Page 12
(e) Our Operating History
Nine month period ending September 30, 2001
Our limited operating history makes the prediction of future results difficult
or impossible. Furthermore, our limited operating history leads us to believe
that period-to-period comparisons of our operating results may not be meaningful
and that the results for any particular period should not be relied upon as an
indication of future performance.
To date, SchoolWeb has essentially developed and tested its SchoolWeb system.
It is only now (in the first quarter of fiscal year 2002) anticipating that it
will begin to realize revenue from its products (although it has been installed
in some schools for as long as 12 months).
Development of the SchoolWeb system began when AII received approximately
$250,000 from Industry Canada (a branch of the Canadian federal government) and
the Ministry of Education for the Province of British Columbia to develop the
SchoolWeb system from 1998 to 2001.
From October 13, 2000 to the present, North Pacific and SchoolWeb have received
approximately $138,100 (see cumulative cash flow statement for cash flow
component of share capital) in subscription proceeds from investors. These
funds have been expended primarily for license fees under the License Agreement
($60,000), marketing ($14,376), expenses associated with developing distribution
capacity and office and general expenses of ($24,833).
Fiscal Year Ended December 31, 2000
This was the first year that North Pacific's subsidiary, SchoolWeb, commenced
operations.
As a result, there was little activity other than that relating to negotiating
the License Agreement, installing servers and the SchoolWeb system in the 19
schools in British Columbia where they are installed, working with AII to detect
any failings in the SchoolWeb software and monitoring the performance of the
SchoolWeb system in the schools in which it was installed.
(f) Future Plan of Operation
SchoolWeb has, as of the date of this report, for the most part completed its
testing of the SchoolWeb system in the 19 schools in British Columbia where it
is installed (some tests will continue until April of 2002). SchoolWeb has also
completed initial distributorship agreements or understandings with a number of
distributors.
As a result of the completion of this testing and the completion of these
initial distributorship agreements, SchoolWeb is now prepared to market and sell
its product.
SchoolWeb's plan of operation for the year ending December 31, 2002 anticipates
an increase in employees to 6 people, representing the hiring of 4 additional
persons, to focus on direct sales to schools. Existing employees will
(primarily Patrick Fitzsimmons and Greg Protti) continue to develop
distributorship relationships in the hopes of generating sales through these
channels.
Page 13
The Company expects that it will, at least to the year ending December 31, 2002,
maintain its present offices which have some additional office space for
expansion.
It is hoped that sales will commence in January of 2002 and will grow throughout
the year ending December 31, 2002. The magnitude and size of these sales
cannot, at this time (partly as a result of a lack of operating history on
SchoolWeb's part) be predicted.
Operating costs, particularly those costs associated with administrative
overhead, are expected to increase as a result of the planned hirings. To date,
salaries have been very limited (Patrick Fitzsimmons was the only paid employee
in this fiscal year to the date of this report at a salary of $40,000 per year).
(g) Forward Looking Statements
This report includes `Forward Looking Statements' within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act.
Any statements that express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions or future
events or performance (often, but not always, using words or phrases such as
"expects" or "does not expect", "is expected", "anticipates" or "does not
anticipate", "plans", "estimates" or "intends", or stating that certain actions,
events or results "may", "could", "would", "might" or "will" be taken, occur or
be achieved) are not statements of historical fact and may be "forward looking
statements". Such statements are included in many places in this Form 8K
including in "Future Plan of Operations" and in discussions of the market for
SchoolWeb's products and its size. Forward-Looking Statements are based on
expectations, estimates and projections at the time the statements are being
made that involve a number of risks and uncertainties which could cause actual
results or events to differ materially from those presently anticipated. See
"Risk Factors Associated with North Pacific and Its Business" herein. Although
we believe that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct.
(h) Description Of Property
North Pacific currently does not have any physical property other than its
office equipment and a number of computer servers.
(i) North Pacific's Directors, Executive Officers, Promoters and Control Persons
The following persons are the directors, executive officers, promoters and
control persons of North Pacific:
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- --------------------------------------------------------------------------------
Name Position Term of Office*1*2
- --------------------------------------------------------------------------------
Michael Dearden President and Director Expires December 19, 2001
- --------------------------------------------------------------------------------
Griffin Jones Secretary, Treasurer and Director Expires December 19, 2001
- --------------------------------------------------------------------------------
Patrick Fitzsimmons Director Expires December 19, 2001
- --------------------------------------------------------------------------------
Greg Protti Director Expires December 19, 2001
- --------------------------------------------------------------------------------
Karim Lakhani Director Expires December 19, 2001
- --------------------------------------------------------------------------------
Brandon Douglas Director Expires December 19, 2001
- --------------------------------------------------------------------------------
1. Directors, whether appointed at a meeting of stockholders or by the
remaining directors, are appointed until the next annual meeting of
stockholders. As North Pacific has its annual meeting of stockholders on
December 19, 2001, all of the directors terms expire on that date.
2. The President, Secretary and Treasurer do not have a set term of office.
They serve at the pleasure of the Directors and can be removed at any time
by the Directors.
Michael Dearden, President and Director
Michael Dearden, age 47. Mr. Dearden has over 25 years experience in sales and
marketing, and for the past 15 years has focused specifically on corporate
marketing and venture capital financing. Mr. Dearden was formerly a director of
Americ Resources Corp., where he helped to facilitate the merger of Rolland
Virtual Business Systems Limited and Americ Resources Corp. and helped to
facilitate a concurrent financing of $1,800,000. Rolland Virtual Business
Systems Limited is a Montreal, Canada, based E-commerce software developer with
35 employees.
Griffin Jones, Secretary, Treasurer and Director
Griffin Jones, age 46. Mr. Jones has served as an Officer and Director with
both private and public trading companies. Over the past 7 years he has assisted
in securing financing of over $5,000,000 in industries such as high technology,
industrial products and mining. Mr. Jones has worked in marketing management,
finance and corporate relations.
Patrick Fitzsimmons, Director
Pat Fitzsimmons, age 48. Mr. Fitzsimmons has extensive sales and management
experience, gained from a 22-year career in the high-technology marketplace. Mr.
Fitzsimmons has represented firms such as NCR, Timeplex, Rogers Cable, and
Newbridge Networks, offering a wide range of technology solutions. His most
recent position was Manager, Major Accounts, AT&T Canada, Vancouver B.C.,
Canada.
Greg Protti, Director
Greg Protti, age 44. Mr. Protti has over 17 years experience in the high
technology sector. He has held sales and management positions in all segments of
the high tech sector from SHL Systemhouse consultants to Regional Sales Manager
for Merisel Canada, where he was responsible for running a $200 million in sales
revenue territory in Western Canada. Mr. Protti was previously Regional Manager
for Digidyne, Inc., in the VAR community, where he was responsible for hardware
sales as well as managing a staff of contract personnel.
Page 15
Karim Lakhani, Director
Karim Lakhani, age 42. Mr. Lakhani is a co-founder of AII Multimedia Corp. He
holds a Bachelor of Applied Science in Electrical Engineering from The
University of British Columbia. From 1993 to 1996, Mr. Lakhani was Vice
President of Electronic Cottage International Inc. During this period he
developed a News Archival and Retrieval system as well as the Internet-based
U.S. Senate Proceedings Multimedia Archiving and Retrieval system. As President
of Orion Technologies Inc. he directed the development of a secure network for
electronic commerce and banking for 79 banks in 33 countries in Asia Pacific. In
addition, Mr. Lakhani has marketed technologies to giants such as McDonnel
Douglas, Groupe Videotron, Raytheon, and Samsung. Recognized within the
industry as one of the foremost minds in the fields of interactivity and
multimedia, Mr. Lakhani provides ingenuity and innovation in creating new Aii
technologies.
Each officer and director generally serves until the next annual meeting of
stockholders or until such time as he or she resigns.
(j) Executive Compensation
Summary Compensation Table
- ----------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
----------------------------------------
Awards Payouts
-----------------------------------------------------------------------------------------
Other Securities All
Annual Restricted Under Other
Compen- Stock Options/ LTIP Compen-
Name and Salary Bonus sation Award(s) SARs Payouts sation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ----------------------------------------------------------------------------------------------------------------------------
Michael 2000 - - - - - - -
Dearden, 2001 - - - - - - -
President &
Director
- ----------------------------------------------------------------------------------------------------------------------------
Griffin 2000 - - - - - - -
Jones, 2001 - - - - - - -
Secretary,
Treasurer &
Director
- ----------------------------------------------------------------------------------------------------------------------------
Patrick
Fitzsimmons 2000 - - - - - - -
Director 2001 $40,000 - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------
Greg
Protti 2000 - - - - - - -
Director 2001 - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------
Karim
Lakhani 2000 - - - - - - -
Director 2001 - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------
Page 16
North Pacific is proposing, at its annual meeting of stockholders to be held on
December 20, 2001, to adopt a Stock Option Plan. If this Stock Option Plan is
adopted, some or all of the persons named above may be granted options.
Other than as stated below, there is no known relationship between any of the
Directors and Control persons with major clients or providers of essential
products and technology, nor are there any known related transactions.
Karim Lakhani is Director and President of Advanced Interactive Inc. and
Director of Advanced Interactive Canada Inc., corporations which own a total of
3,000,000 shares of common stock (approximately 21% of the issued and
outstanding shares of common stock) of North Pacific. These corporations are
also party to the License Agreement.
(k) Description Of Securities.
North Pacific is authorized to issue 100,000,000 shares of the common stock of
which 14,293,000 shares of common stock were issued and outstanding as of
September 30, 2001. Each outstanding share of the common stock entitles the
holder to one vote, either in person or by proxy, on all matters that may be
voted upon by the owners thereof at meetings of the stockholders.
The holders of the common stock (i) have equal rights to dividends from funds
legally available therefore, when, and if, declared by our the Board of
Directors; (ii) are entitled to share ratably in all of our assets available for
distribution to the holders of the common stock upon liquidation, dissolution or
winding up of our affairs; (iii) do not have preemptive, subscription or
conversion rights; and (iv) are entitled to one non-cumulative vote per share on
all matters on which stockholders may vote at all meetings of stockholders.
The holders of the common stock do not have cumulative voting rights, which
means that the holders of more than 50% of such outstanding shares of common
stock, voting for the election of directors, can elect all directors of North
Pacific if they so choose and, in such event, the holders of the remaining
shares of common stock will not be able to elect any of the directors.
(l) Litigation
North Pacific is not party to any litigation and has no knowledge of any
threatened or pending litigation against North Pacific.
(m) Market For North Pacific's Securities
Currently North Pacific's common stock does not trade on any exchange or
quotation system including the NASD's OTCBB.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
Page 17
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Successor Issuer Election
Upon closing of the Share Purchase Agreement on September 10, 2001, pursuant to
Rule 12g-3(a) of the General Rules and Regulations of the Securities and
Exchange Commission, North Pacific elects, should that election be necessary, to
remain an issuer for reporting purposes under the Securities Exchange Act of
1934 (the "Exchange Act") and will continue to report under the Exchange Act.
ITEM 6. RESIGNATION OF DIRECTORS AND EXECUTIVE OFFICERS
In contemplation of the acquisition of SchoolWeb, Richard Silas resigned as a
director of North Pacific on September 10, 2001. Upon closing of the
acquisition of SchoolWeb, Griffin Jones, Michael Dearden, Karim Lakhani and
Patrick Fitzsimmons were appointed as directors of North Pacific.
ITEM 7. FINANCIAL STATEMENTS
Unaudited Pro-Forma Consolidated Financial Statements:
Introduction
Pro-Forma Consolidated Statement of Stockholders' Equity as at June 30, 2001
Notes to Pro-Forma Consolidated Statement of Stockholders' Equity as at June
30, 2001
Audited Consolidated Financial Statements:
Report of Independent Auditor dated July 17, 2001 (except as to Note 7 which is
dated September 10, 2001)
Consolidated Balance Sheet as at June 30, 2001
Consolidated Statement of Operations for the period of October 13, 2000 to
June 30, 2001
Consolidated Statement of Changes in Stockholders' Equity as at June 30, 2001
Consolidated Statement of Cash Flows for the period of October 13, 2000 to
June 30, 2001
Notes to Consolidated Financial Statements as at June 30, 2001 (except as to
Note 7 which is dated September 10, 2001
NORTH PACIFIC CAPITAL CORP.
(a development stage company)
PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
JUNE 30, 2001
(Unaudited)
INTRODUCTION
PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NOTES TO PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NORTH PACIFIC CAPITAL CORP.
(a development stage company)
PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
JUNE 30, 2001
================================================================================
(Unaudited)
INTRODUCTION
By agreement dated July 2, 2001, North Pacific Capital Corp. ("North
Pacific" or "the Company"), a Nevada corporation issued 12,343,000 shares of
restricted common stock to the shareholders of SchoolWeb Systems Inc. (a
development stage company) ("SchoolWeb"), a Nevada corporation, in exchange for
all of the issued and outstanding shares of SchoolWeb. In connection with this
transaction, SchoolWeb changed its name effective July 3, 2001 to SchoolWeb
Holdings Inc.
This transaction will be accounted for as a recapitalization using accounting
principles applicable to reverse acquisitions whereby the financial statements
subsequent to the date of the transaction will be presented as a continuation of
SchoolWeb. Under reverse acquisition accounting, the value assigned to the
common stock of consolidated North Pacific on acquisition of SchoolWeb will be
equal to the book value of the common stock of SchoolWeb plus the book value of
the net assets of North Pacific as at the date of the transaction.
The pro-forma consolidated statement of stockholders' equity has been prepared
to reflect the statement of stockholders' equity of North Pacific as at June 30,
2001 assuming the acquisition of SchoolWeb had occurred effective June 30, 2001.
As the results of operations of consolidated North Pacific are considered to be
a continuation of the results of SchoolWeb. As the audited financial statements
of SchoolWeb as at June 30, 2001 have been included in the Company's filing on
Form 8-K/A, no pro-forma statements of operations have been presented.
The pro-forma consolidated statement of stockholders' equity is based on the
following audited financial statements:
- North Pacific - as at December 31, 2000.
- SchoolWeb - as at June 30, 2001.
The financial statements of North Pacific have been adjusted to reflect certain
stockholders' equity transactions of North Pacific for the period from January
1, 2001 to June 30, 2001 and as a result, the pro-forma consolidated statement
of stockholders' equity has been prepared as at June 30, 2001.
This pro-forma consolidated statement of stockholders' equity should be read in
conjunction with North Pacific's December 31, 2000 audited financial statements
as filed on Form 10-KSB.
NORTH PACIFIC CAPITAL CORP.
(a development stage company)
PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
JUNE 30, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
(unaudited) (expressed in United States dollars)
Pro-Forma
North Pacific SchoolWeb Pro-Forma Adjustments Consolidated
North Pacific
31-Dec-00 30-Jun-01 (a) (b) (c) (d) 30-Jun-01
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL STOCK $ 20 $ 12,343 $ (6) $ (14) $ (4,605) $ (7,601) $ 137
ADDITIONAL PAID-IN CAPITAL - 140,760 19 (19) - 7,601 148,361
ACCUMULATED DEFICIT (4,280) (106,370) (358) 4,638 - - (106,370)
- -----------------------------------------------------------------------------------------------------------------------------------
$ (4,260) $ 46,733 $ 42,128
===================================================================================================================================
The accompanying notes are an integral part of this pro-forma consolidated
statement of stockholders' equity
NORTH PACIFIC CAPITAL CORP.
(a development stage company)
NOTES TO PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
JUNE 30, 2001
================================================================================
(Unaudited)
NOTE 1 - ACQUISITION
- --------------------------------------------------------------------------------
By agreement dated July 2, 2001, North Pacific acquired 100 % of the issued and
outstanding shares of SchoolWeb in exchange for 12,343,000 shares of restricted
common stock of North Pacific. As a result of this transaction, the former
shareholders of SchoolWeb own 90.1% of North Pacific representing 12,343,000 of
the 13,693,000 total issued and outstanding shares.
For purposes of this pro-forma consolidated statement of stockholders' equity,
this acquisition has been accounted as a recapitalization using accounting
principles applicable to reverse acquisitions whereby the value assigned to the
common stock of consolidated North Pacific on acquisition of SchoolWeb will be
equal to the book value of the common stock of SchoolWeb plus the book value of
the net assets of North Pacific as at the date of the transaction.
The book value of North Pacific' capital stock as at December 31, 2000 is
calculated as follows:
SchoolWeb capital stock $ 153,103
North Pacific net assets (liabilities) (4,605)
-----------
North Pacific pro-forma capital stock $ 148,498
===========
North Pacific pro-forma capital stock is made up as follows:
Capital stock $ 137
Additional paid-in capital 148,361
-----------
$ 148,498
===========
NOTE 2 - PRO-FORMA ADJUSTMENTS
- --------------------------------------------------------------------------------
(a) Amendment to accounting period
The financial statements of North Pacific have been adjusted as follows to
reflect the reorganization of North Pacific's capital stock and to reflect
the change in accumulated deficit of North Pacific for the period from
January 1, 2001 to June 30, 2001 so that the financial information of both
North Pacific and SchoolWeb is as at June 30, 2001.
Additional Deficit Accumulated
Common Paid in During
Stock Capital Development Stage Total
---------------------------------------------------------------
Balance, December 31, 2000 $ 20 $ - $ (4,280) $ (4,260)
Common stock reorganization (19) 19 - -
Common stock issuances,
January 1, 2001 to June 30, 2001 13 - - 13
Net loss, January 1, 2001 to June 30, 2001 - - (358) (358)
---------------------------------------------------------------
Balance, June 30, 2001 (unaudited) $ 14 $ 19 $ (4,638) $ (4,605)
===============================================================
NORTH PACIFIC CAPITAL CORP.
(a development stage company)
NOTES TO PRO-FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
JUNE 30, 2001
================================================================================
(Unaudited)
NOTE 2 - PRO-FORMA ADJUSTMENTS (cont'd)
- --------------------------------------------------------------------------------
(b) Elimination of North Pacific' stockholder's equity
In accordance with reverse acquisition accounting, the financial
statements subsequent to the date of the transaction will be presented as
a continuation of SchoolWeb and as a result the stockholders' equity of
North Pacific has been eliminated as follows:
Total
Elimination
-----------
North Pacific share capital $ 14
North Pacific additional paid in capital 19
North Pacific accumulated deficit (4,638)
-----------
Book value of North Pacific net assets (liabilities) $ (4,605)
===========
(c) Record value assigned to North Pacific under reverse merger accounting
As at the date of the transaction, North Pacific does not have any
significant operations or assets and as a result the transaction will be
accounted for as a recapitalization using accounting principles applicable
to reverse acquisitions and accordingly, no goodwill is recorded and the
value assigned to North Pacific is equal to the book value of the net
assets (liabilities) of North Pacific as at the date of the transaction.
As at July 2, 2001, the net book value of the net assets (liabilities) of
North Pacific is $(4,605).
(d) Restatement of share capital under reverse merger accounting
In accounting for this reverse merger, the legal share capital is that of
North Pacific (the legal parent) and the value of share capital is
calculated as described in Note 1. Upon completion of this transaction,
North Pacific has 13,693,000 of its $US 0.00001 par value common shares
issued and outstanding which requires the following pro-forma adjustments.
Additional Total Share
Capital Stock Paid in Capital Capital
------------------------------------------------
North Pacific as at December 31, 2000 $ 20 $ - $ 20
SchoolWeb as at June 30, 2001 12,343 140,760 153,103
Pro-forma adjustment # 1 (6) 19 13
Pro-forma adjustment # 2 (14) (19) (33)
Pro-forma adjustment # 3 (4,605) - (4,605)
Pro-forma adjustment # 4, to reconcile (7,601) 7,601 -
------------------------------------------------
Pro-forma balance, June 30, 2001 (unaudited) $ 137 $ 148,361 $ 148,498
================================================
SCHOOLWEB SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
CONSOLIDATED BALANCE SHEET
CONSOLIDATED STATEMENT OF OPERATIONS
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LABONTE & CO. 1205 - 1095 West Pender Street
----------------------------------------
C H A R T E R E D A C C O U N T A N T S Vancouver, BC Canada
----------------------------------------
V6E 2M6
Telephone (604) 682-2778
Facsimile (604) 689-2778
Email rjl@labonteco.com
AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of SchoolWeb Systems Inc.
We have audited the consolidated balance sheet of SchoolWeb Systems Inc. (A
Development Stage Company) as at June 30, 2001 and the consolidated statements
of operations, stockholders' equity and cash flows for the period from October
13, 2000 (inception) to June 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian and United States generally
accepted auditing standards. Those standards require that we plan and perform
an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at June 30, 2001 and
the results of its operations and its cash flows and the changes in
stockholders' equity for the period from October 13, 2000 (inception) to June
30, 2001 in accordance with generally accepted accounting principles in the
United States.
/s/ LaBonte & Co.
CHARTERED ACCOUNTANTS
July 17, 2001 (except as to Note 7 which is dated September 10, 2001)
Vancouver, B.C.
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES REPORTING
- --------------------------------------------------------------------------------
DIFFERENCES
- -----------
In the United States, reporting standards for auditors would require the
addition of an explanatory paragraph following the opinion paragraph when the
financial statements are affected by conditions and events that cast substantial
doubt on the Company's ability to continue as a going concern, such as those
described in Note 1. Our report to Board of Directors and Stockholders dated
July 17, 2001 (except as to Note 7 which is dated September 10, 2001) is
expressed in accordance with Canadian reporting standards which do not permit a
reference to such conditions and events in the auditors' report when these are
adequately disclosed in the financial statements.
/s/ LaBonte & Co.
CHARTERED ACCOUNTANTS
July 17, 2001 (except as to Note 7 which is dated September 10, 2001)
Vancouver, B.C.
SCHOOLWEB SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
June 30, 2001
================================================================================
ASSETS
CURRENT ASSETS
Cash $ 53,113
LICENSE RIGHTS, net of amortization of $3,000 (Note 4) 27,000
CAPITAL ASSETS 4,000
- --------------------------------------------------------------------------------
$ 84,113
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 14,395
License agreement payable (Note 4) 5,000
Due to related parties (Note 3) 20,985
- --------------------------------------------------------------------------------
40,380
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 4)
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Capital stock
Common stock, $0.001 par value, 100,000,000 shares authorized
12,343,000 shares issued and outstanding 12,343
Additional paid-in capital 140,760
Deficit accumulated during development stage (109,370)
- --------------------------------------------------------------------------------
43,733
- --------------------------------------------------------------------------------
$ 84,113
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements
SCHOOLWEB SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
October 13, 2000
(inception) to
June 30, 2001
================================================================================
GENERAL AND ADMINISTRATIVE EXPENSES
Amortization of license rights $ 3,000
License fees 60,000
Marketing 14,376
Office and general 24,833
Professional fees 7,161
- --------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $ (109,370)
================================================================================
BASIC NET LOSS PER SHARE $ (0.09)
================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,219,553
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements
SCHOOLWEB SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 13, 2000 (INCEPTION) TO JUNE 30, 2001
Deficit
Accumulated
Additional During
Number of paid in Development
shares Amount capital Stage Total
===========================================================================================================================
Issuance of common stock for cash at $.001
per share - October 16, 2000 3,000 $ 3 $ - $ - $ 3
Issuance of common stock for cash at $.007
per share - May 24, 2001 5,500,000 5,500 33,000 - 38,500
Issuance of common stock for cash at $.01
per share - June 4, 2001 4,010,000 4,010 36,090 - 40,100
Issuance of common stock for cash at $.15
per share - June 8, 2001 330,000 330 49,170 - 49,500
Issuance of common stock for license
agreement at $.01 per share - June 29,
2001 (Note 4) 2,500,000 2,500 22,500 - 25,000
Net loss for the period October 13, 2000
(inception) to June 30, 2001 - - - (109,370) (106,370)
- ---------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2001 12,343,000 $ 12,343 $ 140,760 $ (109,370) $ 46,733
===========================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements
SCHOOLWEB SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
October 13, 2000
(inception) to
June 30, 2001
================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (109,370)
Adjusted for item not involving cash:
Amorization of license rights 3,000
Changes in accounts payable 14,395
- --------------------------------------------------------------------------------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (91,975)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of capital assets (4,000)
- --------------------------------------------------------------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (4,000)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from directors 20,985
Proceeds on sale of common stock 128,103
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 149,088
- --------------------------------------------------------------------------------
INCREASE IN CASH 53,113
CASH, BEGINNING OF PERIOD -
- --------------------------------------------------------------------------------
CASH, END OF PERIOD $ 53,113
================================================================================
OTHER NON-CASH TRANSACTION:
During the period the Company issued 2,500,000 common shares for a license
agreement at $.01 per share.
The accompanying notes are an integral part of these consolidated financial
statements
SCHOOLWEB SYSTEMS INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
================================================================================
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
The Company was incorporated on October 13, 2000 in the State of Nevada as
Alternet Systems Inc., changed its name to SchoolWeb Systems Inc. on March 6,
2001 and ultimately to SchoolWeb Holdings Inc. on July 3, 2001. To date the
Company has had no significant business operations and is considered to be in
the development stage. The Company, through a License Agreement dated January
1, 2001, will distribute, market, sell and license in the United States and
Canada, certain proprietary software and hardware systems technology known as
"SchoolWeb" used for caching Internet and multimedia files on special servers
(refer to Note 4). The Company has incurred losses since inception totalling
$109,370 and its ability to continue as a going concern is dependent on raising
capital to fund future operations and ultimately to attain profitable
operations. Accordingly, these factors raise substantial doubt as to the
Company's ability to continue as a going concern
By agreement dated July 2, 2001 and completed September 10, 2001, North Pacific
Capital Corp. ("North Pacific") acquired 100% of the issued and outstanding
shares of the Company from the Company's shareholders in exchange for 12,343,000
shares of North Pacific. Refer to Note 7.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, SchoolWeb Systems (Canada) Ltd. incorporated April
17, 2001 in British Columbia, Canada. All significant intercompany transactions
and account balances have been eliminated.
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all liquid investments, with an original maturity of three
months or less when purchased, to be cash equivalents.
License Rights
The Company amortizes the cost of acquiring license rights on a straight line
basis over the term of the license.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation", foreign denominated monetary assets and liabilities are translated
to their United States dollar equivalents using foreign exchange rates which
prevailed at the balance sheet date. Revenue and expenses are translated at
average rates of exchange during the year. Related translation adjustments are
reported as a separate component of stockholders' equity, whereas gains or
losses resulting from foreign currency transactions are included in results of
operations.
Fair Value of Financial Instruments
In accordance with the requirements of SFAS No. 107, the Company has determined
the estimated fair value of financial instruments using available market
information and appropriate valuation methodologies. The fair value of
financial instruments classified as current assets or liabilities approximate
carrying value due to the short-term maturity of the instruments.
SCHOOLWEB SYSTEMS INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
================================================================================
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
- --------------------------------------------------------------------------------
Net Loss per Common Share
Basic earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Dilutive earnings per share reflects the potential
dilution of securities that could share in the earnings of the Company. Because
the Company does not have any potentially dilutive securities, the accompanying
presentation is only of basic loss per share.
Stock-Based Compensation
The Company accounts for stock-based compensation in respect to stock options
granted to employees and officers using the intrinsic value based method in
accordance with APB 25. Stock options granted to non-employees are accounted for
using the fair value method in accordance with SFAS No. 123. In addition, with
respect to stock options granted to employees, the Company provides pro-forma
information as required by SFAS No. 123 showing the results of applying the fair
value method using the Black-Scholes option pricing model.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
Income taxes
The Company follows the liability method of accounting for income taxes. Under
this method, future tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
balances. Future tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on future tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment. As at June 30, 2001 the Company had net operating loss
carryforwards; however, due to the uncertainty of realization the Company has
provided a full valuation allowance for the deferred tax assets resulting from
these loss carryforwards.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), which requires that
goodwill not be amortized. SFAS requires that the Company review goodwill at
least annually to determine if an impairment has occurred and if so that
goodwill should be reduced accordingly. The Company has determined that the
implementation of this standard will not have any impact on its financial
statements.
On March 31, 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No.44, Accounting for Certain Transactions Involving Stock
Compensation - An Interpretation of APB Opinion No. 25 ("FIN 44"), which
provides guidance as to certain applications of APB 25. FIN 44 is generally
effective July 1, 2000 with the exception of certain events occurring after
December 15, 1998. The Company has determined that the implementation of this
standard does not have a material impact on its financial statements.
NOTE 3 - RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
Certain directors have provided cash loans totalling $20,085 at June 30, 2001.
Amounts due from related parties are non-interest bearing and have no specific
terms of repayment.
SCHOOLWEB SYSTEMS INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
================================================================================
NOTE 4 - LICENSE RIGHTS
- --------------------------------------------------------------------------------
By agreement dated January 1, 2001 between the Company, Advanced Interactive
Inc. ("AII") and Advanced Interactive (Canada) Inc. ("AIC"), the Company
acquired from AII and AIC exclusive and non-exclusive rights and licenses to
commercialise, distribute and market SchoolWeb related licensed technology,
products and services in the United States and Canada for a period of five
years. Commencing January 15, 2001, under the terms of the agreement, the
Company must pay a monthly fee of $10,000 per month in the first year, $20,000
per month in year two and increasing by $8,000 per month in each of the
subsequent years to a maximum of $84,000 less royalty amounts otherwise payable
equal to 40% of net revenue received (minimum $1,000 per month). In addition
the Company agreed to issue 2,000,000 shares (amended to 2,500,000 shares
effective June 29, 2001) valued at $.01 per share or $25,000 (issued on June 29,
2001) and must pay 40% of net revenue received in connection with this agreement
(minimum $1,000 per month).
Refer to Note 7.
NOTE 5 - CAPITAL STOCK
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The Company's capitalization is 100,000,000 common shares with a par value of
$0.001 per share.
To June 30, 2001, the Company has not granted any stock options and has not
recorded any stock-based compensation.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
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Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107 Disclosures about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. The fair value of financial instruments classified as
current assets or liabilities including cash and cash equivalents and notes and
accounts payable approximate carrying value due to the short-term maturity of
the instruments.
Concentration of Credit Risk
The Company invests its cash and certificates of deposit primarily in deposits
with major banks. Certain deposits, at times, are in excess of federally
insured limits. The Company has not incurred losses related to its cash.
NOTE 7 - SUBSEQUENT EVENTS
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By agreement dated July 2, 2001 and completed September 10, 2001, North Pacific
Capital Corp. ("North Pacific"), a Nevada corporation, acquired 100% of the
issued and outstanding shares of the Company from the Company's shareholders in
exchange for 12,343,000 shares of North Pacific such that the previous
shareholders of the Company own 90.1% of the shares of North Pacific. As a
result of the reverse acquisition, there was no effect on the control of the
Company.
By directors' resolution dated July 3, 2001, the Company changed its name to
SchoolWeb Holdings Inc.
Effective September 10, 2001 the Company, AII and AIC amended the original
license agreement such that AI and AIC would receive an additional 500,000
shares valued at $5,000 which has been recorded as an additional License
Agreement Payable as at June 30, 2001.
Also effective September 10, 2001, North Pacific issued 250,000 of its
restricted common shares to each of AII and AIC in settlement of the $5,000
License Agreement Payable on behalf of the Company.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
EXHIBITS
2.1 Share Purchase Agreement between the stockholders of SchoolWeb Systems,
Inc. and North Pacific Capital Corp. dated as of July 2, 2001 as amended
September 10, 2001.
2.2 License Agreement between SchoolWeb and Advanced Interactive Inc. dated as
of January 1, 2001 as amended June 29, 2001 and September 10, 2001.
2.3 Settlement Agreement between North Pacific Capital Corp. and Advanced
Interactive Inc. et al dated as of September 10, 2001.
3.1 Certificate of Incorporation (incorporated by reference to Exhibit 1 of
the Registration Statement on Form 10-SB filed on November 6, 2000)
3.2 Articles of Incorporation of North Pacific Capital Corp. (incorporated
by reference to Exhibit 3 of the Form 10-SB filed on November 6, 2000)
3.3 Certificate of Amendment of Articles of Incorporation (incorporated by
reference to Exhibit 2 of the Registration Statement on Form 10-SB filed
on November 6, 2000)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
North Pacific Capital Corp.
By: /s/ Griffin Jones
-------------------------------
Griffin Jones, Director
Dated: December 17, 2001
SCHOOLWEB SYSTEMS INC.
711 S. Carson, Suite 4
Carson City, Nevada 89701
Tel: (604) 608-2540
Fax: (604) 608-8775
July 2, 2001
North Pacific Capital Corp.
#280-815 West Hastings Street
Vancouver, BC V6C 1B4
Attention: Mr. Richard Silas
Dear Mr. Silas:
Re: Sale of all issued and outstanding shares of SchoolWeb Systems Inc.,
formerly Alternet Systems Inc. ("SchoolWeb") to North Pacific Capital
Corp. ("North Pacific")
This agreement (the "Agreement") sets forth the terms and conditions of our
agreement whereby North Pacific Capital Corp. ("North Pacific") will purchase a
100% beneficial right, title and interest in and to all of the issued and
outstanding shares (the "Shares") of SchoolWeb Systems Inc. ("SchoolWeb") from
the shareholders of SchoolWeb (the "Shareholders").
In consideration of the sum of $10.00 paid to each of the Shareholders and to
SchoolWeb, by North Pacific, the receipt and sufficiency of which is hereby
acknowledged, and for other good and valuable consideration, the parties hereto
agree as follows:
1. REPRESENTATIONS AND WARRANTIES
1.1 North Pacific represents and warrants to the Shareholders and to
SchoolWeb that:
(a) North Pacific is a valid and subsisting corporation duly
incorporated and in good standing under the laws of the State of
Nevada;
(b) entering into this Agreement does not and will not conflict with,
and does not and will not result in a breach of, any of the terms of
its incorporating documents or any agreement or instrument to which
North Pacific is a party;
(c) this Agreement has been or will be authorized by all necessary
corporate action on the part of North Pacific; and
(d) North Pacific is in good standing with the Securities and Exchange
Commission, the Nevada Secretary of State and all other regulatory
and statutory bodies having jurisdiction over its business affairs.
Page 2
1.2 SchoolWeb and the Shareholders represent and warrant to North Pacific
that:
(a) SchoolWeb beneficially owns any and all rights to the business of
SchoolWeb (the "Business and Intellectual Property") including the
software license agreement (the "License Agreement") dated January
1, 2001 between SchoolWeb and Advanced Interactive Inc.;
(b) there are no outstanding agreements or options to acquire or
purchase any interest in any of the Business and Intellectual
Property, and no person has any royalty or other interest whatsoever
in the Business and Intellectual Property except as disclosed in the
License Agreement;
(c) entering into this Agreement does not and will not conflict with,
and does not and will not result in a breach of, any agreement or
instrument to which SchoolWeb and/or the Shareholders are party;
(d) SchoolWeb and the Shareholders have due and sufficient right and
authority to enter into this Agreement in accordance with this
Agreement, and this Agreement has been or will be authorized by all
necessary action on the part of SchoolWeb;
(e) the Shareholders beneficially own, free and clear of all liens and
encumbrances of any kind, all of the Shares and the Shares represent
all of the issued and outstanding shares, of all types or classes,
of SchoolWeb; and
(f) SchoolWeb will manage the business of the Business and Intellectual
Property in a reasonable and responsible manner until Closing.
1.3 The Shareholders represent and warrant to North Pacific that:
(a) they beneficially own, free and clear of all liens and encumbrances
of any kind, all of the Shares and the Shares represent all of the
issued and outstanding shares, of all types or classes, of
SchoolWeb;
(b) there are no outstanding agreements or options to acquire or
purchase any interest in any of the Shares, and no person has any
royalty or other interest whatsoever in the Shares (save and except
that which is created in this Agreement and that which vests in the
Shareholders themselves);
(c) entering into this Agreement does not and will not conflict with,
and does not and will not result in a breach of, any agreement or
instrument to which the Shareholders are party; and
(d) the Shareholders have due and sufficient right and authority to
enter into this Agreement in accordance with the terms and
conditions of this Agreement.
Page 3
2. PURCHASE AND SALE
2.1 The Shareholders hereby agree to sell to North Pacific, and North Pacific
hereby agrees to purchase from the Shareholder, an undivided 100%
beneficial right, title and interest in and to the Shares in consideration
of the issuance to the Shareholders of 12,343,000 common shares of North
Pacific (the "North Pacific Shares") being an exchange of shares on a one-
for-one basis.
2.2 The North Pacific Shares shall be, when issued, fully paid and non-
assessable common shares in the capital of North Pacific and will be free
and clear of all liens, charges and encumbrances save and except for hold
periods or resale restrictions imposed by applicable securities laws,
regulations and statutes in the United States and in the jurisdiction of
residence of individual shareholders.
3. RIGHTS AND OBLIGATIONS OF THE PARTIES
3.1 From and after the date of this Agreement and until Closing, unless this
Agreement is otherwise terminated, SchoolWeb will be entitled to undertake
all business concerning the Business and Intellectual Property and its
development and shall have the sole and exclusive right to:
(a) enter into agreements concerning the Business and Intellectual
Property and its development as a business provided that none of
those agreements in any way encumbers its right, title and interest
in and to the Business and Intellectual Property; and
(b) do such research and development as it may deem, in its sole and
absolute discretion, to be of benefit to the furtherment and
development of the business of the Business and Intellectual
Property.
3.2 Upon execution of this Agreement, North Pacific shall take all
reasonable steps to:
(a) gain, prior to Closing, such approvals to this Agreement as may be
required from its shareholders and from regulatory and statutory
authorities having jurisdiction;
(b) at any time prior to Closing, not do or permit to be done any act or
thing which would or might in any way adversely affect the rights of
SchoolWeb and the Shareholders hereunder; and
(c) provide to the Shareholders and their designated representatives
(including legal counsel) any and all reasonably requested
agreements, documents, records, data and files (in written or
electronic form) relating to North Pacific which are in the care,
control and possession of North Pacific.
3.3 Upon execution of this Agreement, the Shareholders and SchoolWeb shall
take all reasonable steps to:
Page 4
(a) gain, prior to Closing, such approvals to the purchase and sale of
the Shares as may be required from SchoolWeb and from regulatory and
statutory authorities having jurisdiction including, without
limiting the generality of the foregoing, the written consent of the
directors and officers of SchoolWeb to the terms of this Agreement
(in a form required by the corporate counsel of North Pacific);
(b) at any time prior to Closing, not do or permit to be done any act
or thing which would or might in any way adversely affect the rights
of North Pacific hereunder; and
(c) ensure that SchoolWeb and North Pacific (through its ownership of
the Shares) will have, upon Closing, exclusive and quiet possession
of the Business and Intellectual Property, without the occupation of
the same or any part thereof by any other person.
4. FORMAL AGREEMENT
4.1 The parties agree that this Agreement incorporates all of the essential
terms of their agreement and that it shall be binding upon them. However,
the parties may negotiate, on or before Closing, a formal agreement, or
agreements, (the "Formal Agreement") which may incorporate such further
terms and conditions as are reasonably necessary to carry out, and give
effect to, the general terms and conditions of this Agreement if they so
choose.
4.2 If the parties choose to negotiate the Formal Agreement, they hereby
agree that upon execution of the Formal Agreement all prior understandings
and agreements, whether verbal or written, shall be superseded by the
terms of the Formal Agreement and that such prior understandings and
agreements, including this Agreement, shall be superseded and terminated
by the terms of the Formal Agreement.
5. CLOSING
5.1 The closing of the purchase of the Shares (the "Closing") shall occur no
later than 10 business days following the execution of this Agreement
unless otherwise agreed by North Pacific, the Shareholders, and SchoolWeb.
5.2 Upon Closing, the Directors of North Pacific shall appoint to the Board of
Directors of North Pacific Michael Dearden, Pat Fitzsimmons Griffin Jones
and Karim Lakhani should he/they consent to so act.
5.3 Upon Closing, the sole shareholder of SchoolWeb (which shall then be North
Pacific) shall hold a shareholders' meeting for SchoolWeb and shall
confirm the appointment of the present President and Directors of
SchoolWeb until such time as the next annual meeting of shareholders is
convened.
5.4 Upon Closing, Michael Dearden, Pat Fitzsimmons and Griffin Jones will
agree to execute a management contract with SchoolWeb or North Pacific
whereby they shall devote a minimum of 35 hours per week to the business
of SchoolWeb and North Pacific for a two year period following Closing.
The management contract shall contain reasonable terms standard in the
industry in which SchoolWeb does business.
Page 5
6. MISCELLANEOUS
6.1 Any notice to be required or permitted hereunder will be in writing and
sent by delivery, facsimile transmission, or prepaid registered mail
addressed to the party entitled to receive the same, or delivered to such
party at the address specified above, or to such other address as either
party may give to the other for that purpose. The date of receipt of any
notice, demand or other communication hereunder will be the date of
delivery if delivered, the date of transmission if sent by facsimile, or,
if given by registered mail as aforesaid, will be the date on which the
notice, demand or other communication is actually received by the
addressee.
6.2 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, successors and
permitted assigns.
6.3 Each of the parties hereto agrees that it shall be responsible for its
own legal expenses and disbursements relating to this Agreement and the
negotiation and preparation of any further agreements.
6.4 This Agreement and the Final Agreement shall be interpreted and construed
in accordance with the laws of British Columbia and the parties agree to
attorn to the courts thereof.
6.5 All dollar figures in this Agreement are given in valid currency of
Canada.
6.6 This Agreement may be executed by facsimile and in counterpart.
6.7 All amendments to this Agreement must be in writing and signed by all of
the parties hereto.
6.8 The interests, rights and obligations of the parties herein may not be
assigned, sold, transferred or otherwise conveyed without the express
written consent of the parties hereto.
6.9 The performance of the covenants and obligations of North Pacific herein
are hereby made expressly subject to the completion of due diligence
investigations of SchoolWeb and the Shareholders by North Pacific on or
before July 10, 2001 and are further subject to the receipt of any
required regulatory approvals by North Pacific or shareholder approvals
required by North Pacific.
6.10 The parties hereto acknowledge that Heenan Blaikie has acted for SchoolWeb
in the preparation and negotiation of this Agreement. The parties hereto
further acknowledge that Christopher D. Farber is the beneficial holder of
approximately 115,000 common shares of North Pacific. All parties other
than SchoolWeb have been advised to seek independent legal advice with
respect to applicable securities laws and with respect to their review of
this Agreement.
Page 6
If the above terms and conditions accurately record your understanding of our
agreement, please so acknowledge by signing a copy of this Agreement in the
space provided below turning the same to us at your earliest convenience. Upon
your execution thereof, this Agreement will constitute a legal and binding
agreement subject to its terms.
Yours truly,
SCHOOLWEB SYSTEMS INC.
/s/ signature
________________________
The terms of the Agreement above are hereby read, understood, acknowledged,
accepted and consented to (should such consent by required) by the undersigned
effective the 2nd day of July, 2001.
NORTH PACIFIC CAPITAL CORP.
/s/ signature
____________________________
Authorized Signatory
ALL OF THE SHAREHOLDERS OF SCHOOLWEB SYSTEMS INC.
/s/ Michael Dearden /s/ Pat Fitzsimmons
___________________________________ ___________________________________
MICHAEL DEARDEN PAT FITZSIMMONS
/s/ Greg Protti /s/ Griffin Jones
___________________________________ ___________________________________
GREG PROTTI GRIFFIN JONES
/s/ Grant Farkes /s/ Deborah Stockwell
___________________________________ ___________________________________
GRANT FARKES DEBORAH STOCKWELL
Page 7
/s/ Sheila Adams /s/ Pamela Briskar
___________________________________ ___________________________________
SHEILA ADAMS PAMELA BRISKAR
/s/ Tom Acheson /s/ Karen Acheson
___________________________________ ___________________________________
TOM ACHESON KAREN ACHESON
/s/ David Forsythe /s/ Cynthia Eden
___________________________________ ___________________________________
DAVID FORSYTHE CYNTHIA M. EDEN
UNITED EQUITIES MANAGEMENT CORP. ADVANCED INTERACTIVE INC.
By Its Authorized Signatory By Its Authorized Signatory
/s/ signature /s/ signature
___________________________________ ___________________________________
/s/ Brandon Douglas
__________________________________
BRANDON DOUGLAS
Exhibit 2.2
AII - Alternet Page 1 of 22
License Agreement
LICENSE AGREEMENT
THIS LICENSE AGREEMENT made effective this 1st day of January, 2001
BETWEEN:
ADVANCED INTERACTIVE INC., a corporation, incorporated on
September 1, 1998 established under the laws of the State
of Nevada, USA, and having its head offices located at
Suite 718 - 1350 East Flamingo Road, Las Vegas, NV 89119
(hereinafter called "AII Nevada")
AND:
ADVANCED INTERACTIVE CANADA INC., a corporation established
under the laws of the Province of British Columbia which is
a wholly owned subsidiary of AII Nevada with offices at Suite
2101 - 1177 West Hastings Street, Vancouver, BC V6E 2K3
(hereinafter called "AII Canada")
AND:
ALTERNET SYSTEMS INC., a corporation established under the
laws of the State of Nevada, USA, having offices at Suite
280 - 815 West Hastings Street, Vancouver, BC, Canada V6C 1B4
(hereinafter called "Alternet")
singularly referred to as "party", and together referred to as "the Parties"
WITNESSETH THAT:
A. WHEREAS AII Nevada and AII Canada have developed proprietary software and
hardware systems technology known as "SchoolWeb" and "OfficeServer" for
caching Internet and multimedia files on special servers at schools, homes,
businesses or other locations, and wish to license certain rights to the
SchoolWeb and OfficeServer software and hardware systems technology (the
"Licensed Technology") to Alternet;
B. WHEREAS AII Nevada or AII Canada wishes to provide Products and Services to
customers using the Licensed Technology including after installation
support and services to customers which use the Licensed Technology; and
C. WHEREAS Alternet is a start-up company with a skilled sales force,
operating in North America, and wishes to enter into this License Agreement
to obtain rights to distribute, market, sell and license the Licensed
Technology, to provide the Licensed Technology, Products and Services in a
prescribed Field of Use, in a prescribed Territory, under the terms and
conditions of this Agreement, and
AII - Alternet Page 2 of 22
License Agreement
D. WHEREAS Alternet represents that it is experienced in, and wishes to put
its full energy towards, the enhancement and commercial development of a
business which would use the Licensed Technology including devoting funds,
staff, business expertise and business and marketing planning to further
the commercial success of the Licensed Technology.
NOW THEREFORE in consideration of the mutual promises and covenants hereinafter
contained, AII Nevada, AII Canada, and Alternet, the Parties to this Agreement,
agree as follows:
1.0 INTERPRETATION
1.1 As used in this Agreement, the following terms shall have the definitions
respectively assigned to them hereunder unless the subject matter or
context otherwise requires:
(a) "Agreement" means this document comprising Sections 1 to 22 inclusive
together with Schedules 1.0 and 2.0 attached hereto, which shall be
read with and form a part of this Agreement;
(b) "SchoolWeb" and "OfficeServer" mean the trademarked names of the
Licensed Technology produced by employing the Licensed Technology and
shall be read to include any future names trademarked by AII Nevada
or AII Canada or Alternet which relate to the Licensed Technology;
(c) "Follow-on Invention" means an invention made by, owned by or
licensed to AII Nevada or AII Canada that falls within the scope of
the claims of the intellectual property ("IP") rights forming the
Licensed Technology, or an invention that utilizes the IP or one that
constitutes an Improvement to the IP;
(d) "Field of Use" has the meaning set out in Schedule 1.0, part V;
(e) "herein", "hereby", "hereof", "hereunder", and similar expressions,
when used in any Section, shall be understood to relate to this
Agreement as a whole and not merely to the Section in which they
appear;
(f) "Improvement" means any change to or development of the Licensed
Technology made by, owned by, or licensed to, AII Nevada or AII
Canada, including a Follow-on Invention, that may improve the
Licensed Technology or the Services or both. Improvement includes for
copyrightable or copyrighted material, any translation, abridgement,
revision or other form in which an existing work may be recast,
transformed or adapted; for patentable or patented material, any
improvement thereon; and for material which is protected by trade
secret, any new material derived from such existing trade secret
material, including new material which may be protected or
protectable by copyright, patent and/or trade secret;
(g) "Licensed Technology" means the proprietary software and hardware
systems technology currently known as "SchoolWeb" and "OfficeServer"
for caching and indexing Internet and multimedia files on special
servers at schools, homes and businesses as described in Schedule
1.0, Part I.
AII - Alternet Page 3 of 22
License Agreement
The term Licensed Technology also includes:
(i) the head-end hardware and software system necessary to transmit
data via various broadcasting systems, and the receiving and
decoding hardware and software at the receiving location, as
described in Part III of Schedule 1.0,
(ii) all claims specific to the transmission encoding process
contained in IP described in Part II of Schedule 1.0, as may be
amended from time to time, including any continuation,
divisional, or continuation-in-part application entitled to
priority based on the IP, as described in Schedule 1.0, as well
as any Improvements,
(iii) any Licensed Technology provided by way of technical assistance
as more particularly set out in Section 4.0 hereof of this
Agreement; and
(iv) Product as defined below.
(h) "Maintenance" means provision of Hardware Maintenance, and Software
Maintenance which is required to ensure Licensed Technology
customers' ability to utilize the Licensed Technology.
"Hardware Maintenance" means the provision of hardware service calls
and repair and/or replacement of hardware components of SchoolWeb
and OfficeServer systems.
"Software Maintenance" means provision of a service to repair any
software problems, as well as provide upgrades to the software, on a
periodic basis;
(i) "Net Revenue" means the total revenue from the distribution,
marketing, sub-license or sale of the Licensed Technology, less the
cost of installation, Maintenance, hardware costs, hardware leasing
costs, taxes, costs incurred by third parties (parties other than
the Parties) but charged against the Net Revenue, discounts and
rebates Alternet receives from its rights to the Licensed
Technology, and specifically excludes revenues of AII Nevada or AII
Canada which are realized from providing Product Software, Software
Maintenance and Software License to Alternet's customers;
(j) "Party" means Alternet, AII Nevada and/or AII Canada as the context
requires, and "Parties" means all of Alternet, AII Nevada or AII
Canada;
(k) "Product" means any Product Hardware and Product Software which are
made in whole or in part by utilizing the Licensed Technology, or
any application or hardware of the IP which falls within the
definition of Licensed Technology, or which are produced according
to a process which, in whole or in part, is subject to IP which
falls within the definition of Licensed Technology, or any IP
application therefor.
"Product Hardware" means any physical hardware that resides in the
server box, along with any other peripheral units required to make
up the SchoolWeb and OfficeServer systems. Product hardware may also
include installation and commissioning at the customer's premises.
"Product Software" means any software operating systems and software
applications that are part of , and allow the SchoolWeb and
OfficeServer to operate, including software programs that may reside
on computer clients that use the SchoolWeb and OfficeServer systems.
Product Software may also include installation and configuration of
software on server hard drives;
AII - Alternet Page 4 of 22
License Agreement
(l) "Restricted Information" means information of a confidential or
proprietary nature disclosed by one party to another. Restricted
Information does not include:
(i) information which is lawfully in the public domain at the time
of one Party's receipt or acquisition thereof from the other
Party, or which becomes a part of the public domain through no
breach, by the receiving Party, of any obligation of
confidentiality with respect to such information; and
(ii) information which, subsequent to one Party's receipt or
acquisition thereof from the other Party, is lawfully obtained
by the receiving Party from another source without restriction
on further disclosure and without breach by any person of any
obligation of confidentiality (contained herein or otherwise
existing) with respect to such information.
(m) "Services" means any Support Services or Consulting Services related
to the Licensed Technology which are required to ensure Licensed
Technology customers' ability to utilize the Licensed Technology.
"Support Services" means the provision of help desk and technical
support for purchasers of SchoolWeb and OfficeServer systems, for
'x' hours per day, 'y' hours per week.
"Consulting Services" means the provision of consulting work
regarding variations of hardware and software of SchoolWeb and
OfficeServer systems to suit new client applications;
(n) "Software License" means the license attached to each SchoolWeb and
OfficeServer system sold or leased to every client;
(o) "Territory" means the geographical area, in which Alternet has been
given the licensed rights to the Licensed Technology. The Territory
is described in Schedule 1, Part IV.
1.2 For the purposes of this Agreement, any reference to the "sale" of
Licensed Technology or Services shall be interpreted to include the
"lease", "license" or "sub-license" of Licensed Technology or Service, or
both.
2.0 GRANT OF LICENSE
2.1 Subject to the terms of this Agreement AII Canada and AII Nevada hereby
grant to Alternet an exclusive right and license to commercialize,
distribute, sell, sub-license and market SchoolWeb related Licensed
Technology, Products and Services in the prescribed Fields of Use, and in
prescribed Territories, as set out in Schedule 1.0 hereto; and a non-
exclusive license to commercialize, distribute, sell, sub-license and
market OfficeServer related Licensed Technology, Products and Services, in
the prescribed Fields of Use, and in prescribed Territories, as set out in
Schedule 1 hereto.
2.2 AII Canada and AII Nevada shall be the sole and exclusive provider of the
Software License for SchoolWeb and OfficeServer systems. AII Canada and
AII Nevada shall also have the right of first refusal to be the provider
to Alternet (at commercially reasonable and competitive rates) of Product
AII - Alternet Page 5 of 22
License Agreement
Software and Software Maintenance. AII Nevada shall have the right to
approve any alternate supplier of these services (such approval not to be
unreasonably withheld). The Parties shall agree annually on suitable
levels of service and cost of both Product Software (including
installation and configuration on a hard drive) and Software Maintenance.
2.3 Alternet agrees that this Agreement does not grant Alternet any rights
to or interest in such Licensed Technology except the right to use such
Licensed Technology in accordance with the terms of this Agreement. In
short, Alternet will not acquire existing IP rights from AII Nevada or AII
Canada as a result of engaging in the transactions in this License
Agreement.
2.4 Alternet agrees that during the term of this Agreement and thereafter it
will not dispute or contest, directly or indirectly, the validity of AII
Nevada's or AII Canada's IP rights to the Licensed Technology, nor counsel
or assist any other party to do the same, unless compelled to do so by due
process of law.
2.5 Except as concerns GNU licenses and other software vendors licenses
provided to Alternet by AII Nevada or AII Canada, neither AII Nevada nor
AII Canada are aware of any way in which the Licensed Technology or
Services infringe upon any third parties' copyright, patent, industrial
design, registration or trademark rights. Nothing in this Agreement shall
be construed as a representation, warranty or covenant by or on behalf of
AII Nevada or AII Canada,
(a) that any Licensed Technology which is manufactured, used, or sold, or
any Service which is provided pursuant to the license granted under
this Agreement, is, or will be, free from infringement of any
copyright, patent, industrial design registration, or trademark, or
is not, or will not be, in breach of a trade secret,
(b) that it will bring or prosecute any action or suit of any nature
against any third party with respect to such third party's
infringement or alleged infringement of the Licensed Technology, or
(c) that it will defend any action or suit of any nature brought by any
third party in which it is alleged that use of the Licensed
Technology has infringed, or will infringe, such third party's
rights,
(d) if there are any software license fees to be paid to third parties
then Alternet will pay those fees and the fees will be considered as
part of the cost of the server.
2.6 Alternet agrees that it will not institute any action or suit of any
nature against AII Nevada or AII Canada, by way of indemnification or
otherwise, in respect of any of the matters set out in Section 2.4.
2.7 In the event of an alleged infringement of the Licensed Technology or
any right with respect to the Licensed Technology, Alternet shall have the
right to prosecute litigation designed to enjoin infringers of the
Licensed Technology. AII Nevada and AII Canada agree to co-operate to the
extent of executing all necessary documents and to vest in Alternet the
right to institute any such suits, so long as all the direct costs and
expenses of bringing and conducting any such litigation or settlement
shall be borne by Alternet and in such event all recoveries in excess of
all costs relating to the litigation shall enure to Alternet.
AII - Alternet Page 6 of 22
License Agreement
2.8 Subject to the prior written consent (said consent not to be unreasonably
withheld) of AII Nevada or AII Canada, Alternet may grant sublicenses to
third parties on terms and conditions substantially in accordance with the
terms and conditions contained herein. AII Canada's or AII Nevada's
entitlement to payments derived from such sublicensing arrangements shall
be agreed upon by the Parties prior to AII Nevada or AII Canada providing
its written consent.
2.9 In the event that any complaint is made against Alternet with respect to
its marketing, use or sale of the Licensed Technology or Services, the
following procedure shall be adopted:
(a) Alternet shall promptly notify AII Nevada or AII Canada upon receipt
of any such complaint and shall keep AII Nevada or AII Canada fully
informed of the actions and positions taken by the complainant and
taken or proposed to be taken by Alternet on behalf of itself or a
sublicensee,
(b) all costs and expenses incurred by Alternet or any sublicensee of
Alternet in investigating, resisting, litigating and settling such a
complaint, including the payment of any award of damages and/or costs
to any third party, shall be paid by Alternet or any sublicensee of
Alternet, as the case may be save and except in the case of
negligence or fault in the provision of Services by AII Canada or AII
Nevada (in which case the costs and expenses shall be paid by AII
Canada or AII Nevada);
(c) no decision or action concerning or governing any final disposition
of the complaint shall be taken without fully informing AII Nevada or
AII Canada;
(d) AII Nevada or AII Canada may elect to participate formally in any
litigation involving the complaint to the extent that the court may
permit, but any additional expenses generated by such formal
participation shall be paid by AII Nevada or AII Canada (subject to
the possibility of recovery of some or all of such additional
expenses from the complainant); and
(e) if the complainant is willing to make or accept an offer of
settlement and Alternet is willing to make or accept such offer and
AII Nevada or AII Canada is not, then AII Nevada or AII Canada shall
conduct all further proceedings at its own expense, and shall be
responsible for the full amount of any damages, costs, accounting of
profits and settlement costs in excess of those provided in such
offer, but shall be entitled to retain unto itself the benefit of any
litigated or settled result entailing a lower payment of costs,
damages, accounting of profits and settlement costs than that
provided in such offer.
2.10 In the event that any complaint is made against AII Nevada or AII
Canada with respect to the use of the Licensed Technology by Alternet or
the marketing, use or sale of the Licensed Technology by Alternet for
which AII Nevada or AII Canada is relying upon the indemnification of
Alternet pursuant to Section 14 herein, then the following procedure shall
be adopted:
(a) AII Nevada or AII Canada shall promptly notify Alternet upon receipt
of any such complaint and shall keep Alternet fully informed of the
actions and positions taken by the complainant and taken or proposed
to be taken by AII Nevada or AII Canada,
AII - Alternet Page 7 of 22
License Agreement
(b) pursuant to the indemnification contained in Section 14, all
reasonable costs and expenses incurred by AII Nevada or AII Canada in
investigating, resisting, litigating and settling such a complaint,
including the payment of any award of damages and/or costs to any
third party, shall be paid by Alternet,
(c) no decision or action concerning or governing any final disposition
of the complaint shall be taken without full consultation with and
approval by Alternet in writing, such approval not to be unreasonably
withheld,
(d) Alternet may elect to participate formally in any litigation
involving the complaint to the extent that the Court may permit, with
the consent of AII Nevada or AII Canada, such consent not to be
unreasonably withheld, but any additional expenses generated by such
formal participation shall be paid by Alternet (subject to the
possibility of recovery of some or all of such additional expenses
from the complainant), and
(e) if the complainant is willing to accept an offer of settlement and
AII Nevada or AII Canada is willing to approve the acceptance of such
an offer and Alternet is not, then Alternet shall conduct all further
proceedings at its own expense and shall be responsible for the full
amount of damages, costs, accounting of profits and settlement costs
in excess of those provided in such offer, but shall be entitled to
retain unto itself the benefit of any litigated or settled result
entailing a lower payment of costs, damages, accounting of profits
and settlement costs than that provided in such offer.
2.11 Upon request by AII Nevada or AII Canada (both acting reasonably and
without undue interference in the business of Alternet):
(a) Alternet shall provide AII Nevada or AII Canada with copies of all
reports, minutes, notes, and other documents containing information
which Alternet generates in relation to the use of the Licensed
Technology (provided no law, statute or regulation bars such
provision); and
(b) Alternet shall grant to AII Nevada or AII Canada an exclusive,
irrevocable right and license to use such information together with
the right to grant other sublicensees the right to use such
information at no cost to AII Nevada or AII Canada.
3.0 TRANSFER OF LICENSED TECHNOLOGY
3.1 To the extent required for marketing, use and sales, and subject to the
terms and conditions contained in this Agreement, and upon execution of
the Agreement, AII Nevada or AII Canada shall provide to Alternet, at AII
Nevada's or AII Canada's expense:
(a) an IP disclosure statement prepared by AII Nevada or AII Canada
relating to the IP referred to in Schedule 1.0, Part I;
(b) all of the available technical information described in Schedule 1.0,
Parts I and III which deal with the knowledge of the Licensed
Technology, within one hundred fifty (150) days after the effective
date of this Agreement, and
(c) technical assistance in accordance with Article 4.0.
AII - Alternet Page 8 of 22
License Agreement
3.2 During the term of this Agreement AII Nevada or AII Canada shall provide
to Alternet any Improvement to the Licensed Technology, in which case the
provisions of Article 7 hereof shall apply to said Improvement.
3.3 To maintain quality control during the term of this Agreement, Alternet
agrees to purchase materials and software provided by AII Nevada or AII
Canada provided that these are available at commercially reasonable and
competitively advantageous rates. AII Nevada's or AII Canada's proprietary
software shall be kept by Alternet as highly Restricted Information as
outlined in Section 8.0.
3.4 Alternet further agrees to make all reasonably necessary efforts to affix
or print the SchoolWeb or OfficeServer trademark on software or hardware
components comprising the Licensed Technology marketed under this
Agreement to its customers, such that a trade mark is clearly visible to
its customers.
4.0 TECHNICAL ASSISTANCE
4.1 Upon the written request of Alternet, AII Nevada or AII Canada will make
available, for a time period and at a commercially reasonable and
competitive price to be determined at the time of the request, and at a
level to be determined by AII Nevada or AII Canada, the services of a
minimum of two (2) full time suitable, competent personnel to assist
Alternet in exploiting the Licensed Technology for the purposes specified
in Section 2.1 to provide Products and Services to customers.
4.2 Upon the written request of Alternet, AII Nevada or AII Canada may permit
Alternet to attach a reasonable number of two (2) or more of its personnel
to AII Nevada's or AII Canada's facilities, in accordance with terms and
conditions reasonably specified by AII Nevada or AII Canada, in order to
assist Alternet in exploiting the Licensed Technology.
4.3 Upon the written request of AII Nevada or AII Canada, Alternet may, at
Alternet's discretion, permit AII Nevada or AII Canada to attach a limited
number of its personnel to any facility where the Licensed Technology is
being exploited by Alternet for the purposes specified in Section 2.1,
under terms and conditions specified by Alternet, to enable AII Nevada or
AII Canada to observe such exploitation of the Licensed Technology.
4.4 AII Nevada or AII Canada may also provide to Alternet other forms of
technical assistance, including making its facilities available in
connection with a demonstration of the Licensed Technology. Such technical
assistance will be provided upon payment therefor by Alternet, on the
basis of AII Nevada's or AII Canada's standard commercial rates (which
shall be commercially reasonable) plus travelling and living expenses at
AII Nevada's or AII Canada's standard rates (provided these rates are
commercially reasonable).
5.0 PAYMENTS
5.1 In consideration of the grant of license under this Agreement Alternet
shall pay to AII Nevada or AII Canada during the term of this Agreement,
the following payments (the "Payments"):
AII - Alternet Page 9 of 22
License Agreement
(a) Payments from its revenue from the sale, lease or sub-license of
Licensed Technology, Products and Services equal to forty (40) % of
the Net Revenue received for such revenue, except that payment under
Net Revenue shall not be less than US$1000 per server per annum; and
(b) Payments, if applicable, for Product Software and Software
Maintenance provided by AII Nevada or AII Canada (if these fees are
first received by Alternet from its clients to whom the services were
rendered), as agreed annually by the Parties as described in Article
2.2 for both the SchoolWeb and OfficeServer portions of the Licensed
Technology;
(c) Also, in consideration of the license granted, and on execution of
this Agreement, Alternet will issue to AII Nevada the greater of
2,000,000 of its common shares, or an amount equal to 25% of
Alternet's totally issued and outstanding common shares at the date
of execution of this Agreement. Furthermore, Alternet will give AII
Nevada the right to appoint Karim Lakhani (or such other person as
may be agreed by AII Nevada and Alternet) to its Board of Directors;
(d) For the term of this Agreement and commencing on January 15, 2001
Alternet will make payments to AII Nevada or AII Canada of US$10,000
per month in year one (1), US$20,000 per month in year two (2), and
increasing in US$8,000 per month in each of the subsequent years of
the Agreement to maximum monthly payments of US$84,000 in year ten
(10), said payments to be reduced in any given month by the amount
received in the previous month by AII Nevada or AII Canada from
payments in 5.1(a) hereof after the first three years of this
agreement, except that the total payment under 5.1(a) and 5.1(d)
shall not be less than the regular monthly fee in 5.1(d).
5.2 The Parties agree that a payment in respect of Licensed Technology or
Service shall be made even if such Licensed Technology or Service is not
covered by a claim of a proprietary right set forth in Schedule 1.0, Part
II.
5.3 Alternet shall provide financial accounting statements to AII Nevada or
AII Canada within thirty (30) days after each quarterly period during the
term of this Agreement. All such statements shall include a calculation of
the amount due to AII Nevada or AII Canada for payments under Section 5.1,
be certified as correct by the Treasurer or other responsible financial
officer of Alternet, and be accompanied by a remittance to AII Nevada or
AII Canada of the amount shown to be payable.
5.4 All payments and statements to be submitted by Alternet to AII Nevada or
AII Canada shall be sent as directed by AII Nevada or AII Canada. All
amounts payable to AII Nevada or AII Canada shall be calculated and paid
in US dollars (using prevailing currency exchange rates where Alternet has
received revenues in Canadian dollars).
5.5 All overdue accounts shall bear interest at a rate equal to the Royal Bank
of Canada's bank prime commercial lending rate in effect on the date the
payment becomes overdue, plus 2%.
5.6 Alternet agrees that it will not sell or sub-license the Office Server
portion of the Licensed Technology for a price less than US$2,500 per
server per year unless otherwise agreed with AII Nevada.
AII - Alternet Page 10 of 22
License Agreement
5.7 AII Nevada and AII Canada agree that they will direct Alternet as to
which one of them any individual Payment should be made. AII Canada and
AII Nevada are both included as parties to this Agreement because:
(a) this permits them to direct income in accordance with the applicable
laws governing income distribution between a US parent and a Canadian
subsidiary;
(b) it is unclear to Alternet which has Proprietary IP rights to all or
part of the Licensed Technology so it is necessary for Alternet to
contract with both to protect its rights under this Agreement.
6.0 AUDIT AND INSPECTION OF RECORDS
6.1 Alternet shall keep proper and detailed records and accounts including
invoices, receipts, and vouchers showing all information necessary for the
accurate determination of the Payments.
6.2 During reasonable business hours, Alternet shall make available such
accounts and records and permit AII Nevada or AII Canada or its authorized
representatives to audit and inspect such records, to take extracts
therefrom and make copies thereof. Furthermore Alternet shall afford
reasonable facilities for such audits and inspections and furnish AII
Nevada or AII Canada or its authorized representatives with all
information requisite to the understanding of the records.
6.3 All costs incurred in conducting an audit or inspection referred to in
Section 6.2 shall be borne by Alternet if the amount found to be due to
AII Canada or AII Nevada exceeds by five (5%) percent or more the amount
which Alternet previously reported as due to AII Canada or AII Nevada.
6.4 Alternet shall keep and preserve the accounts and records referred to in
Section 6.1, relative to each year of the term of this Agreement, for a
period of five years thereafter.
7.0 IMPROVEMENTS
7.1 If AII Nevada or AII Canada develops or acquires an Improvement to the
Licensed Technology and has the right to license or transfer such
Improvement to others, AII Nevada or AII Canada shall, by written notice,
inform Alternet of the Improvement within ninety (90) days of its
development or acquisition. Any such Improvement shall, upon the request
of Alternet become part of the Licensed Technology and all further use,
licensing or transfer of the Improvement by Alternet (including any
revenues it realizes) shall be subject to the term of this Agreement.
7.2 If Alternet develops or acquires an Improvement to the Licensed Technology
and has the right to license or transfer such Improvement to others,
Alternet shall, by written notice, inform AII Nevada or AII Canada of the
Improvement within ninety (90) days of its development or acquisition.
Upon request by AII Nevada or AII Canada, Alternet shall transfer such
Improvement to AII Nevada or AII Canada and grant to AII Nevada or AII
Canada an exclusive, irrevocable right and license to use such Improvement
together with the right to grant to others sublicenses to use such
Improvement at no cost to AII Nevada or AII Canada.
7.3 Should AII Nevada or AII Canada or Alternet, as the case may be, decide
not to seek or maintain IP protection on any Improvement or Follow-on
Invention more than six (6) months after its discovery, the other Parties
shall be entitled to apply for, obtain or maintain, as the case may be,
such IP Rights protection, in their own names and at their own expense,
AII - Alternet Page 11 of 22
License Agreement
and AII Nevada or AII Canada or Alternet, as the case may be, shall do all
such things as are requisite for implementing the foregoing including
assigning their ownership rights to the Improvement or Follow-on Invention
to the Party seeking IP protection.
7.4 Subject to Section 9.2, no fee shall be charged by any Party to another
Party for the costs of creating an Improvement or Follow-on Invention
under Sections 7.1 or 7.2.
8.0 PROTECTION OF RESTRICTED INFORMATION
8.1 A Party receiving Restricted Information pursuant to this Agreement
(hereinafter referred to as the "Receiving Party") shall respect the
confidential nature thereof. A Receiving Party shall, in addition to
complying with the provisions of Sections 8.2 and 8.3, use the same
precautions to protect Restricted Information which it uses to protect its
own proprietary or confidential information.
8.2 A Receiving Party shall not, without the prior written consent of the
other Party, disclose or permit disclosure of such Restricted Information
to any person, firm, corporation or other entity, other than to employees,
agents or contractors of the Receiving Party who require such Restricted
Information in order to carry out the purposes of this Agreement and who
receive such Restricted Information under an obligation of confidence no
less onerous than that set out in this Agreement for the benefit of AII
Nevada or AII Canada and Alternet. Where Restricted Information is
disclosed to such employees, agents or contractors, the Receiving Party
shall ensure that such employees, agents or contractors do not further
disclose such Restricted Information in violation of this Section 8.0.
8.3 A Receiving Party shall not use or permit use of such Restricted
Information in any manner not permitted under the terms of this Agreement.
8.4 Any copy or other reproduction of Restricted Information shall be
identified as confidential and shall be subject to the same restrictions
as to disclosure and use as apply to the original thereof.
8.5 Notwithstanding Section 21.0 of this Agreement, the provisions of this
Section 8.0 shall survive the expiration or early termination of this
Agreement for a period of ten (10) years from the date of expiration
referred to in Section 11.0.
9.0 AII NEVADA OR AII CANADA PARTICIPATION IN PRODUCT SOFTWARE, SOFTWARE
MAINTENANCE AND R&D WORK
9.1 Alternet agrees that AII Nevada or AII Canada shall have the right and the
obligation to provide all SchoolWeb and OfficeServer Product Software and
Software Maintenance work at commercially reasonable and competitive
rates. In the event that AII Nevada or AII Canada is unable to provide the
required services at commercially reasonable and competitive rates ,
Alternet may use the services of another Product Software and Software
Maintenance company, upon written approval from AII Nevada or AII Canada,
which approval shall not be unreasonably withheld.
9.2 In the event that Alternet wishes to contract to have any research or
development work with a third party (the "Contractor") to have any
services carried out in relation to the Licensed Technology, AII Nevada or
AII Canada shall have the right of first refusal to carry out such work at
AII - Alternet Page 12 of 22
License Agreement
commercially reasonable and competitive rates. Concurrently with entering
into such an Agreement, the Contractor must agree to enter into a non-
disclosure and non-competition agreement with Alternet, AII Nevada and AII
Canada, satisfactory to AII Nevada and AII Canada.
9.3 Alternet agrees that in the promotion of Licensed Technology or Service by
Alternet, where reasonable to do so, the words, "developed, produced, or
supplied under license from Advanced Interactive Inc.", shall be used.
10.0 DUE DILIGENCE
10.1 Alternet shall use its best efforts and exercise due diligence in
commercially exploiting the Licensed Technology as provided for herein.
Alternet shall, within 90 days of the effective date of this Agreement,
produce a Business Plan, to be attached to this Agreement as Schedule 2.
The Business Plan shall be prepared in consultation and collaboration with
AII Nevada or AII Canada and shall outline the entire business strategy
for exploitation of the Licensed Technology, forecasts of sales of
Licensed Technology and Services for current and future years, and
forecasts of minimum targets of performance.
11.0 TERM
11.1 This Agreement shall be effective as of the date first set out herein.
Unless otherwise terminated pursuant to the provisions hereof, this
Agreement shall continue in force for a period of five (5) years following
the effective date and may automatically be renewed (at Alternet's sole
and absolute discretion) for a further 5 year term.
11.2 Alternet agrees that, in the event that Alternet wishes to terminate this
Agreement pursuant to Section 11.1, it shall give AII Nevada and AII
Canada written notice of its intention a minimum of six (6) months prior
to such termination.
12.0 TERMINATION AND EXPIRATION
12.1 The Parties shall be entitled to terminate this Agreement and/or to revoke
the grant of license under this Agreement if the other Party becomes
insolvent or makes an assignment for the benefit of creditors or passes a
resolution for winding up or takes the benefit of any statute relating to
bankruptcy or insolvency or the orderly payment of debts, or a receiver is
appointed, provided however that no termination of this Agreement shall
take effect if a trustee or other representative of the Insolvent Party is
willing and able to complete that Party's obligations under this
Agreement. The Insolvent Party is required to notify the other Parties 30
days prior to filing a petition for bankruptcy.
12.2 Alternet shall be entitled to terminate this Agreement upon the occurrence
of any of the following events:
(a) failure by AII Nevada or AII Canada to take corrective actions
sufficient to ensure Alternet's customers' ability to use Licensed
Technology, Products and Services, within 90 days after being advised
by Alternet in writing of the failure of the Licensed Technology,
Products and Services.
AII - Alternet Page 13 of 22
License Agreement
12.3 AII Nevada and AII Canada shall be entitled to terminate this Agreement
and/or revoke the grant of license hereunder upon any of the following
events:
(a) the failure by Alternet to make timely payments to AII Nevada or AII
Canada when due; or
(b) the failure by Alternet to comply with Section 14.3.
12.4 Any termination shall be effected by a notice which shall, as of the date
stated therein, terminate the license granted hereunder, together with all
rights of Alternet under this Agreement, without prejudice to the right of
AII Nevada or AII Canada to sue for and recover any benefits due to AII
Nevada or AII Canada, and without prejudice to the remedy of either Party
in respect of any previous breach of this Agreement. A failure by AII
Nevada or AII Canada in 12.2 above may be waived by Alternet to prevent
termination of this Agreement and a failure by Alternet in 12.3 above may
be waived by AII Nevada or AII Canada to prevent termination of this
Agreement.
12.5 Upon expiration of the term of this Agreement, or upon early termination
of this Agreement:
(a) all rights to the Licensed Technology shall revert to AII Nevada or
AII Canada, and Alternet thereafter shall not utilize the Licensed
Technology and Services, IP and IP applications which form a part of
the Licensed Technology in any manner or for any purpose whatsoever,
(b) Alternet shall return to AII Nevada or AII Canada and AII Nevada or
AII Canada shall have the right to take possession of all technical
information furnished by AII Nevada or AII Canada to Alternet under
this Agreement,
(c) Alternet may sell all stocks of Licensed Technology which remain
unsold, and shall complete all Services which are in the course of
being provided by it or are contracted for at the date of expiration
or earlier termination provided that within thirty (30) days after
the date of such sale of Licensed Technology or the completion of
such Services, Alternet submits Payments to AII Nevada or AII Canada
with respect thereto, computed in accordance with Article 5 hereof.
(d) (i) AII Nevada's or AII Canada's rights to use any information
licensed to it under Section 2.10(b) shall remain in full
force; and
(ii) AII Nevada's or AII Canada's rights to use any Improvement
licensed to it under Section 7.2 shall remain in full force.
(e) Upon termination of this Agreement, Alternet agrees not to
manufacture, supply, market, or sell any other system similar to the
Licensed Technology for a period of five (5) years.
13.0 ASSIGNMENT/CHANGE OF OWNERSHIP
13.1 This Agreement shall be binding upon and enure to the benefit of the
Parties hereto and their respective successors and permitted assigns. No
Party shall assign this Agreement or any rights hereunder, whether by
operation of law or otherwise, without first obtaining the written consent
of the other Parties and any assignment or attempted assignment made
without such consent is void.
AII - Alternet Page 14 of 22
License Agreement
14.0 LIABILITY/INDEMNIFICATION
14.1
(a) In no event shall AII Nevada or AII Canada be liable to Alternet for
any injury to or death of persons or for damage to, or loss of
property, or for any other loss, cost, expense or damage of any kind
whatsoever (hereinafter collectively referred to as "damages")
arising out of or in any way resulting from this Agreement, whether
based on contract, tort including negligence, strict liability or
otherwise, unless such damages result from the negligence of AII
Nevada or AII Canada.
(b) Notwithstanding Section 14.1(a), in no event shall AII Nevada or AII
Canada be liable to Alternet for any indirect, consequential,
special, incidental or contingent damages of any nature whatsoever,
including but not limited to loss of revenue or profit, or loss of
use of either, or costs of capital.
(c) Notwithstanding Section 14.1(a), in no event shall AII Nevada or AII
Canada be liable to Alternet for an amount in excess of the total
consideration received by AII Nevada of AII Canada hereunder as at
the date of claim, or an aggregate amount of $50,000 over the entire
term of the Agreement, whichever is the lesser.
14.2 Alternet shall indemnify and hold harmless AII Nevada or AII Canada from
and against any and all claims, demands, actions, suits or proceedings of
whatever nature including all costs and expenses incurred in connection
therewith, brought or instituted by a third party, and based on or arising
out of Alternet's unauthorized disclosure of any Restricted Information of
AII Nevada or AII Canada; the supply, use or sale of a Product, or the
provision of a Service or both by Alternet; or the use by any customer of
Alternet of any Product or Service.
14.3 Prior to the receipt of revenue from its use of Licensed Technology,
Alternet shall obtain and maintain insurance coverage with respect to
public liability, product liability, and errors and omissions with respect
to Alternet's use of the Licensed Technology. Alternet shall provide AII
Nevada or AII Canada with a certified copy of such a policy of insurance
prior to any utilization of the Licensed Technology, and such policy of
insurance shall:
(i) name AII Nevada or AII Canada as co-insured;
(ii) contain an appropriate and commercially standard cross-
liability clause;
(iii) be a minimum face amount of US$2,000,000; and
(iv) require the insurer to provide AII Nevada or AII Canada with a
minimum of sixty (60) days notice prior to cancellation or
expiry.
In the event that Alternet fails to pay the premiums as they fall due, AII
Nevada or AII Canada may, at its option, renew such policy or
alternatively purchase a new policy of insurance in accordance with the
terms and conditions above described and Alternet shall reimburse AII
Nevada or AII Canada forthwith upon demand any premiums, sums, or other
costs so incurred by AII Nevada or AII Canada in renewing or purchasing
such a policy of insurance. Failure to reimburse AII Nevada or AII Canada
within six months may be cause for termination of this agreement.
AII - Alternet Page 15 of 22
License Agreement
15.0 FORCE MAJEURE
15.1 No Party shall be in breach of this Agreement where its failure to perform
or its delay in performing any obligation is due wholly or in part to a
cause beyond its reasonable control including but not limited to an act of
God, an act of any national, civil or military authority, civil commotion,
war, strikes, lockouts and other labour disputes, fires, floods, sabotage,
earthquake, storm, or epidemic.
15.2 Each Party shall notify the other promptly of any failure to perform or
delay in performing due to a cause set out in Section 15.1, and shall
provide an estimate, as soon as practicable, of the date when the
obligation will be performed.
15.3 When the performance of an obligation is delayed by at least six months
due to a force majeure event and the Parties have not agreed upon a
revised basis for performing the obligation, either Party may, upon thirty
(30) days prior written notice, terminate this Agreement.
16.0 NOTICES
16.1 Any notice, request, demand, consent or other communication provided or
permitted under this Agreement shall be in writing unless otherwise
specified, and shall be transmitted by personal delivery, telex,
telecopier, or by registered mail addressed to the recipient at its
address as follows:
AII Nevada: Advance Interactive Inc.
718-1350 East Flamingo Rd
Las Vegas Nevada 89119
USA
Attention: Karim Lakhani, President and CEO
AII Canada: Advanced Interactive Canada Inc.
2010 - 1177 West Hastings Street
Vancouver, B.C. V6E 2K3
Canada
Attention: Harry K. Davis, CEO
Alternet: Alternet Systems Inc.
280 - 815 West Hastings street
Vancouver, BC V6C 1B4
Canada
Attention: Michael Dearden, President
16.2 Any communication so transmitted shall be deemed to have been received on
the date on which it was personally delivered, or sent by telex or
telecopier, or if mailed, on the 10th day next following the mailing
thereof.
AII - Alternet Page 16 of 22
License Agreement
16.3 Any Party may change its address for purposes of receipt of communication
by giving at least fifteen (15) days prior written notice of such change
to the other Parties, in the manner prescribed above.
17.0 ARBITRATION
17.1 All Parties shall act in good faith and utilize their best efforts to
resolve any dispute arising in connection with this Agreement. All
disputes which are not so resolved shall be finally settled under and in
accordance with the current Arbitration Act in effect in British Columbia,
Canada.
17.2 The Arbitration Panel shall consist of three arbitrators and any award
made by the arbitrators shall be decided by majority vote and shall state
the reasons for their decision. The arbitrators shall also decide and fix
in their award the extent to which each of the Parties shall bear the
arbitration costs. Any such arbitration shall be held at Vancouver, B.C.,
Canada and shall be conducted in the English language. Judgement upon any
award may be entered in any court having jurisdiction. Alternatively, an
application may be made to such court for a judicial acceptance of the
award and an order of enforcement.
17.3 The performance of obligations under the terms of this Agreement shall
continue during any arbitration proceedings and payments due to AII Nevada
or AII Canada shall not be withheld on account of any such proceeding.
18.0 WAIVER
18.1 The failure of a Party to enforce, at any time, any of the provisions of
this Agreement or any of its rights hereunder, or to insist upon strict
adherence to any condition of this Agreement shall not be considered to be
a waiver of such provision or right or condition, nor shall it deprive
that Party of the right thereafter to enforce any such provision or right
or to insist upon such strict adherence.
18.2 The exercise by a Party of any of its rights under this Agreement will not
prejudice that Party from exercising any other rights it may have under
this Agreement, irrespective of any previous action or proceeding taken by
such Party.
18.3 Where a Party waives any of its rights under this Agreement, such waiver
will be valid only where it is expressed in writing and only where it is
signed by the Party for whose benefit such right was granted.
19.0 GOVERNING LAW
19.1 This Agreement shall be governed by, subject to and interpreted in
accordance with the laws of the Province of British Columbia and the
federal laws of Canada applicable therein. The Parties hereto agree that
the Courts of the Province of British Columbia shall have jurisdiction to
entertain any action or other legal proceeding based on any provisions of
this Agreement. Each Party hereby agrees to the jurisdiction of such
Courts.
AII - Alternet Page 17 of 22
License Agreement
20.0 SEVERABILITY
20.1 In the event that any provision contained in this Agreement shall be
declared invalid, illegal or unenforceable by a court or other lawful
authority of competent jurisdiction, this Agreement shall continue in
force with respect to the enforceable provisions and all rights and
remedies accrued under the enforceable provisions shall survive any such
declaration.
21.0 SURVIVAL
21.1 In addition to the provisions of Section 6.4 and 8.5 hereof, Sections 2.4,
2.5, 2.6, 7.3, 14.1, 14.2 and this Section 21.0 shall survive the early
termination or expiration of this Agreement.
22.0 ENTIRE AGREEMENT
22.1 This Agreement constitutes the entire agreement between the Parties
relating to the subject matter herein and supersedes any and all prior
agreements, negotiations, representations and understandings whether
written or oral between the Parties. This Agreement may not be released,
supplemented, or modified in any manner except by further written
agreement signed by a duly authorized officer or representative of each of
the Parties.
23.0 OUTSTANDING LIABILITIES
23.1 The Parties hereto agree and confirm that Alternet, AII Nevada and AII
Canada are current (and not in arrears) on any and all payments
outstanding as of the date of execution of this Agreement and that there
are no presently outstanding payments as of the date of execution hereof.
24.0 INDEPENDENT LEGAL ADVICE
24.1 The Parties hereby confirm that Heenan Blaikie has represented only
Alternet in the preparation and negotiation of this Agreement and that AII
Canada and AII Nevada have hereby been advised to seek independent legal
advice in general and in particular with respect to any tax consequences
arising out of the transactions (including Payment transactions)
contemplated in this Agreement.
25.0 CURRENCY
25.1 All dollar figures in this Agreement are given in the valid currency of
the United States.
AII - Alternet Page 18 of 22
License Agreement
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of by their duly authorized signing officers.
ADVANCED INTERACTIVE INC. ALTERNET SYSTEMS INC.
by its authorized signatory: by its authorized signatory:
Per /s/ Karim Lakhani Per /s/ Michael Dearden
------------------------------------ ------------------------------------
Name Mr. Karim Lakhani Name Mr. Michael Dearden
Title President and CEO Title President
ADVANCED INTERACTIVE CANADA INC.
by its authorized signatory:
Per /s/ Harry Davis
------------------------------------
Name Mr. Harry Davis
Title CEO
AII - Alternet Page 19 of 22
License Agreement
SCHEDULE 1.0
PART I Licensed Technology
1. SchoolWeb software and ancillary systems as described in the
product description attached hereto.
2. OfficeServer software, and ancillary systems as described in the
product description attached hereto.
PART II Territory
The Territory for the SchoolWeb portion of the Licensed Technology is
exclusive for USA and Canada.
The Territory for the OfficeServer portion of the Licensed Technology
is non-exclusive, worldwide.
PART III The Field of Use
The Field of Use for the SchoolWeb portion of the Licensed Technology
is for educational purposes.
The Field of Use for the OfficeServer portion of the Licensed
Technology is unlimited.
AII - Alternet Page 20 of 22
License Agreement
SCHEDULE 2.0 BUSINESS PLAN
To be developed by Alternet in co-operation with AII Nevada or AII Canada
AII - Alternet Page 21 of 22
License Agreement
SCHOOLWEB PRODUCT DESCRIPTION
SchoolWeb is a server with a Linux operating system that has the ability to act
as a Windows NT file server equivalent. SchoolWeb provides local network
services and access to the Internet. SchoolWeb caches previously visited
Internet sites and demanded sites transferred by the broadcast/cable/satellite
network. Both 'Policy-based' (scheduled) and 'Dynamic' (demand-based) caching
is used to provide a large cache of educational material at the school location
for immediate access by students and teachers. Access requests are serviced by
SchoolWeb Librarian and an automatic indexing and retrieval system.
SCHOOLWEB SYSTEM SOFTWARE AND HARDWARE
Linux Operating System
Virtual Private Network and Firewall
Roaming E-mail server
High-speed local HTTP (Web) server
Proxy/cache/DNS server
Automatic on-line backup
Redundant on-line system
FTP server
NFS server
Print Server
Broadcast caching software
Head-end broadcast equipment
AII - Alternet Page 22 of 22
License Agreement
OFFICESERVER PRODUCT DESCRIPTION
OfficerServer is a server with a Linux operating system that has the ability to
act as a Windows NT file server equivalent. OfficeServer provides local network
services and access to the Internet. OfficeServer caches previously visited
Internet sites and demanded sites transferred by the broadcast/cable/satellite
network. Both 'Policy-based' (scheduled) and 'Dynamic' (demand-based) caching
is used to provide a large cache of business material at the office location for
immediate access by employees and others.
OFFICESERVER SYSTEM SOFTWARE AND HARDWARE
Linux Operating System
Virtual Private Network and Firewall
Roaming E-mail server
High-speed local HTTP (Web) server
Proxy/cache/DNS server
Automatic on-line backup
Redundant on-line system
FTP server
NFS server
Print Server
Broadcast caching software
Head-end broadcast equipment
Exhibit 2.3
NORTH PACIFIC CAPITAL CORP.
#280-815 West Hastings Street
Vancouver, BC V6C 1B4
Phone: (604) 608-2700
Fax: (604) 608-8775
September 10, 2001
Advanced Interactive Inc.
718-1350 East Flamingo Road
Las Vegas, Nevada 89119
Attention: Karim Lakhani
- -and-
Advanced Interactive Canada Inc.
2101-1177 West Hastings Street
Vancouver, BC V6E 2K3
Attention: Harry K. Davis
Dear Sirs:
Re: License Agreement dated January 1, 2001 (the "License Agreement")
This Settlement Agreement is written to confirm our agreement as follows:
1. The parties hereto agree that the license agreement dated January 1, 2001
(the "License Agreement") between Advanced Interactive Inc. ("AII Nevada"),
Advanced Interactive Canada Inc. ("AII Canada") and SchoolWeb Systems Inc.
(formerly Alternet Systems Inc.) ("SchoolWeb") states, in Section 5.1(c), that
SchoolWeb shall issue shares to AII Nevada for the license as follows:
"Also, in consideration of the license granted, and on execution of this
Agreement, Alternet will issue to AII Nevada the greater of 2,000,000 of
its common shares, or an amount equal to 25% of Alternet's totally issued
and outstanding common shares at the date of execution of this Agreement "
2. The parties hereto agree that the Agreement should have stated that the
number of shares to be granted was:
"Also, in consideration of the license granted, and on execution of this
Agreement, Alternet will issue to AII Nevada 3,000,000 of its common
shares "
Page 2
3. The parties hereto agree that under the share purchase agreement (the
"Share Purchase Agreement") between North Pacific Capital Corp. ("North
Pacific") and various parties dated July 2, 2001 which called for the issuance
of common shares of North Pacific on a one-for-one basis to shareholders of
SchoolWeb to purchase all of the issued and outstanding shares of SchoolWeb,
should have (as a result of the correction to the License Agreement described in
2 above) called for the issuance to AII Nevada and AII Canada, collectively,
3,000,000 common shares of North Pacific and not the 2,500,000 which have been
issued.
4. The parties hereto agree, upon issuance of an additional 500,000 common
shares to AII Nevada and/or AII Canada (the 500,000 common shares of North
Pacific to be registered as AII Canada and AII Nevada agree), North Pacific has
satisfied any and all obligations to issue common shares to AII Nevada or AII
Canada under the Share Purchase Agreement and its subsidiary, SchoolWeb Holdings
Inc. (formerly, SchoolWeb Systems Inc.), has satisfied all obligation to issue
common shares to AII Nevada or AII Canada under the terms of the License
Agreement.
If this accurately describes your understanding of our agreement, please so
indicate by signing below and returning a copy of this letter to our offices at
(604) 608-8775.
Upon execution hereof, this letter becomes a Settlement Agreement binding upon
its terms.
Yours truly,
NORTH PACIFIC CAPITAL CORP.
/s/ Griffin Jones
Griffin Jones, Director
The terms of the Settlement Agreement above are hereby read, understood,
acknowledged and accepted by the undersigned effective the 10th day of
September, 2001.
ADVANCED INTERACTIVE INC.
By Its Authorized Signatory
/s/ signature
_______________________________
Page 3
ADVANCED INTERACTIVE CANADA INC.
By Its Authorized Signatory
/s/ signature
_______________________________
SCHOOLWEB HOLDINGS INC.
(formerly SchoolWeb Systems Inc.)
By Its Authorized Signatory
/s/ signature
_______________________________