Document:

Unassociated Document

GURU
INTERNATIONAL, INC.

STOCK
OPTION AGREEMENT

THIS
STOCK OPTION AGREEMENT (the "Agreement") is made as of July 22, 1999 between
Guru International, Inc., a Delaware corporation (the "Company"), and Yossi
Vardi (the "Optionee").

1. Grant
of Option. The
Company hereby grants to the Optionee an option (the "Option") to purchase
1,270,650 shares ("Shares") of the Company's common stock ("Common Stock") at an
exercise price of $0.10 per Share (the "Exercise Price"). This Option is not
intended to be an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").

2. Vesting
Schedule. This
Option may be exercised, in whole or in part, at Optionee's election in
accordance with the terms of this Agreement.

3. Method
of Exercise. This
Option is exercisable by delivery of an exercise notice, in the form attached as
Exhibit A (the "Exercise Notice"), which shall state the election to exercise
the Option, the number of Shares in respect of which the Option is being
exercised (the "Exercised Shares"), and such other representations and
agreements as may be required by the Company. The Exercise Notice shall be
completed by the Optionee and shall be delivered to Secretary of the Company.
The Exercise Notice shall be accompanied by payment of the aggregate Exercise
Price as to all Exercised Shares. This Option shall be deemed to be exercised
upon receipt by the Company of such fully executed Exercise Notice accompanied
by such aggregate Exercise Price.

No Shares
shall be issued pursuant to the exercise of this Option unless such issuance and
exercise complies with applicable laws. Assuming such compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised
Shares.

4. Term
of Option. Subject
to earlier termination as specified herein, this Option may be exercised until
July 22, 2009, after which this Option shall terminate.

5.
 Optionee's
Representations. In the
event the Shares have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), at the time this Option is exercised, the
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his Investment
Representation Statement in the form attached hereto as Exhibit B.

6.
 Lock-Up
Period.
Optionee hereby agrees that, if so requested by the Company or any
representative of the underwriters (the "Managing Underwriter") in connection
with any registration of the offering of any securities of the Company under the
Securities Act, Optionee shall not sell or otherwise transfer any Shares or
other securities of the Company during the 180-day period (or such other period
as may be requested in writing by the Managing Underwriter and agreed to in
writing by the Company) (the "Market Standoff Period") following the effective
date of a registration statement of the Company filed under the Securities Act.
Such restriction shall apply only to the first registration statement of the
Company to become effective under the Securities Act that includes securities to
be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period.

 

7. Method
of Payment. Payment
of the aggregate Exercise Price shall be by any of the following, or a
combination thereof, at the election of the Optionee:

(a) cash;
or

(b) check;
or

               (c) surrender
of other shares of Common Stock of the Company which (i) in the case of Shares
acquired pursuant to the exercise of a Company option, have been owned by the
Optionee for more than six (6) months on the date of surrender, and (ii) have a
fair market value (as determined by the Board of Directors of the Company (the
"Board") in good faith) ("Fair Market Value") on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised;
or

                (d) to the
extent permitted by the Board, delivery of a properly executed exercise notice
together with such other documentation as the Board and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the Exercise
Price.

8. Non-Transferability
of Option. This
Option may not be transferred in any manner and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of this Agreement shall be
binding upon the executors, administrators, heirs, successors and assigns of the
Optionee.

9. Adjustments
Upon Changes in Capitalization or Dissolution.

(a) Changes
in Capitalization. Subject
to any required action by the stockholders of the Company, the number of shares
of Common Stock covered by this Option, as well as the price per share of Common
Stock covered by this Option, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to this
Option.

-2-

                               (b) Dissolution
or Liquidation. In the
event of the proposed dissolution or liquidation of the Company, to the extent
that this Option has not been previously exercised, it will terminate
immediately prior to the consummation of such proposed action. The Board may, in
the exercise of its sole discretion in such instances, declare that this Option
shall terminate as of a date fixed by the Board and give the Optionee the right
to exercise his or her Option as to any unexercised, vested part of the Optioned
Stock.

 

10. Tax
Consequences. Some of
the federal tax consequences relating to the exercise and disposition of this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE,
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.

 

(a) Exercising
the Option. The
Optionee may incur regular federal income tax liability upon exercise of the
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an employee or a former employee,
the Company will be required to withhold from his compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash equal to
a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts
are not delivered at the time of exercise.

               
(b)  Disposition
of Shares. If the
Optionee holds Shares acquired upon exercise of the Option for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

11.
 Entire
Agreement; Governing Law. This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes in its entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified except by means of a writing signed by the
Company and Optionee. This agreement is governed by the internal substantive
laws, but not the choice of law rules, of California.

-3-

 

By your
signature and the signature of the Company's representative below, you and the
Company agree that this Option is granted under and governed by the terms and
conditions of this Agreement. Optionee has reviewed this Agreement in its
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions of this Agreement.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.

	OPTIONEE 	 	 	GURU INTERNATIONAL, INC. 
	 	 	 	 
	/s/ Joseph
      Vardi                               
       	 	 	/s/
      Robert S.
      Rosenschein                        
       
	Signature 	 	 	By:
	 	 	 	 
	Joseph
      Vardi                                     
       	 	 	Chairman &
      President                                
       
	Print Name 	 	 	Title: 
	 	 	 	 
	12 Shamir St Tel-Aviv 69693
      Israel 	 	 	 
	Residence Address 	 	 	 
	 	 	 	 

      

-4-

 

EXHIBIT
A

GURU
INTERNATIONAL, INC.

EXERCISE
NOTICE

Guru
International, Inc. 

P.O. Box
48253, Building 1 

Jerusalem
Technology Park 

Jerusalem
91481, Israel

Attention:
Stock Option Administrator

1. Exercise
of Option.
Effective as of today, August 25, 1999 the undersigned ("Optionee") hereby
elects to exercise Optionee's option (the "Option") to purchase 500,000 shares
(the "Shares") of the common stock ("Common Stock") of Guru International, Inc.
(the "Company") under and pursuant to the Stock Option Agreement dated July 22,
1999 (the "Agreement").

2. Representations
of Optionee.
Optionee acknowledges that Optionee has received, read and understood the
Agreement and agrees to abide by and be bound by its terms and
conditions.

3. Rights
as Stockholder. Until
the stock certificate evidencing such Shares is issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), no right to vote or receive dividends or any other rights
as a stockholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Agreement.

Optionee
shall enjoy rights as a stockholder until such time as Optionee disposes of the
Shares or the Company and/or its assignee(s) exercises the Right of First
Refusal hereunder. Upon such exercise, Optionee shall have no further rights as
a holder of the Shares so purchased except the right to receive payment for the
Shares so purchased in accordance with the provisions of this Exercise Notice,
and Optionee shall forthwith cause the certificate(s) evidencing the Shares so
purchased to be surrendered to the Company for transfer or
cancellation.

4. Company's
Right of First Refusal. Before
any Shares held by Optionee or any transferee (either being sometimes referred
to herein as the "Holder") may be sold or otherwise transferred (including
transfer by gift or operation of law), the Company or its assignee(s) shall have
a right of first refusal to purchase the Shares on the terms and conditions set
forth in this Section (the "Right of First Refusal").

A-1

 

(a) Notice
of Proposed Transfer. The
Holder of the Shares shall deliver to the Company a written notice (the
"Notice") stating: (i) the Holder's bona fide intention to sell or otherwise
transfer such Shares; (ii) the name of each proposed purchaser or other
transferee ("Proposed Transferee"); (iii) the number of Shares to be transferred
to each Proposed Transferee; and (iv) the bona fide cash price or other
consideration for which the Holder proposes to transfer the Shares (the "Offered
Price"), and the Holder shall offer the Shares at the Offered Price to the
Company or its assignee(s):

(b) Exercise
of Right of First Refusal. At any
time within thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in accordance
with subsection (c) below.

(c) Purchase
Price. The
purchase price ("Purchase Price") for the Shares purchased by the Company or its
assignee(s) under this Section shall be the Offered Price. If the Offered Price
includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company (the "Board") in good faith.

(d) Payment. Payment
of the Purchase Price shall be made, at the option of the Company or its
assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of
repurchase by an assignee, to the assignee), or by any combination thereof
within 30 days after receipt of the Notice or in the manner and at the times set
forth in the Notice.

(e) Holder's
Right to Transfer. If all
of the Shares proposed in the Notice to be transferred to a given Proposed
Transferee are not purchased by the Company and/or its assignee(s) as provided
in this Section, then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided
that such sale or other transfer is consummated within 120 days after the date
of the Notice and provided further that any such sale or other transfer is
effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of this Section shall continue
to apply to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to the Company, and the Company and/or
its assignees shall again be offered the Right of First Refusal before any
Shares held by the Holder may be sold or otherwise transferred.

(f) Exception
for Certain Family Transfers.
Anything to the contrary contained 4 n this Section notwithstanding, the
transfer of any or all of the Shares during the Optionee's lifetime or on the
Optionee's death by will or intestacy to the Optionee's immediate family or a
trust for the benefit of the Optionee's immediate family shall be exempt from
the provisions of this Section. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold
the

A-2

 

Shares so
transferred subject to the provisions of this Section, and there shall be no
further transfer of such Shares except in accordance with the terms of this
Section.

(g) Termination
of Right of First Refusal. The
Right of First Refusal shall terminate as to any Shares 90 days after the first
sale of Common Stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission under the Securities Act of 1933, as amended.

5. Tax
Consultation.
Optionee understands that Optionee may suffer adverse tax consequences as a
result of Optionee's purchase or disposition of the Shares. Optionee represents
that Optionee has consulted with any tax consultants Optionee deems advisable in
connection with the purchase or disposition of the Shares and that Optionee is
not relying on the Company for any tax advice.

6. Restrictive
Legends and Stop-Transfer Orders.

(a) Legends.
Optionee understands and agrees that the Company shall cause the legends set
forth below or legends substantially equivalent thereto, to be placed upon any
certificate(s) evidencing ownership of the Shares together with any other
legends that may be required by state or federal securities laws:

 

	 	
      THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
      OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
      UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
      SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
      TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
      THEREWITH. 

	 	 
	 	THE SHARES REPRESENTED BY THIS CERTIFICATE
      ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL
      OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE
      NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY
      OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
      TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON
      TRANSFEREES OF THESE SHARES. 

 

            
(b) Stop-Transfer
Notices.
Optionee agrees that, in order to ensure compliance with the restrictions
referred to herein, the Company may issue appropriate "stop transfer"
instructions to its transfer agent, if any, and that, if the Company transfers
its own securities, it may make appropriate notations to the same effect in its
own records.

A-3

 

(c) Refusal
to Transfer. The
Company shall not be required (i) to transfer on its books any Shares that have
been sold or otherwise transferred in violation of any of the provisions of this
Exercise Notice or (ii) to treat as owner of such Shares or to accord the right
to vote or pay dividends to any purchaser or other transferee to whom such
Shares shall have been so transferred.

7. Successors
and Assigns. The
Company may assign any of its rights under this Exercise Notice to single or
multiple assignees, and this Exercise Notice shall inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on transfer
herein set forth, this Exercise Notice shall be binding upon Optionee and his
heirs, executors, administrators, successors and assigns.

8. Interpretation. Any
dispute regarding the interpretation of this Exercise Notice shall be submitted
by Optionee or by the Company forthwith to the Board or the committee thereof
that administers the Agreement and/or Exercise Notice, which shall review such
dispute at its next regular meeting. The resolution of such a dispute by the
Board or committee shall be final and binding on the Company and on
Optionee.

9. Governing
Law: Severability. This
Exercise Notice shall be governed by and construed in accordance with the laws
of the State of California excluding that body of law pertaining to conflicts of
law. Should any provision of this Exercise Notice be determined by a court of
law to be illegal or unenforceable, the other provisions shall nevertheless
remain effective and shall remain enforceable.

10. Notices. Any
notice required or permitted hereunder shall be given in writing and shall be
deemed effectively given upon personal delivery or upon deposit in the United
States mail by certified mail, with postage and fees prepaid, addressed to the
other party at its address as shown below beneath its signature, or to such
other address as such party may designate in writing from time to time to the
other party.

11. Further
Instruments. The
parties agree to execute such further instruments and to take such further
action as may be reasonably necessary to carry out the purposes and intent of
this Exercise Notice.

12. Delivery
of Payment.
Optionee herewith delivers to the Company the full Exercise Price for the
Shares.

REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

A-4

13. Entire
Agreement. The
Agreement is incorporated herein by reference. The Agreement, this Exercise
Notice and the Investment Representation Statement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof.

	Submitted by: 	 	Accepted by: 
	 	 	 
	OPTIONEE 	 	GURU INTERNATIONAL, INC. 
	 	 	 
	                                                     
       	 	By:                                                         
	 	 	Its:                                                         
	Address: 	 	 
	 	 	 
	                                                        	 	 
	                                                        	 	 

       

A-5

EXHIBIT
B

INVESTMENT
REPRESENTATION STATEMENT

	OPTIONEE: 	 	 	 
	 	 	 	 
	COMPANY:  	GURU INTERNATIONAL,
INC.  	 	 
	 	 	 	 
	AMOUNT: 	SECURITY: COMMON STOCK 	 	 
	 	 	 	 
	DATE: 	 	 	 

 

In
connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

1. Optionee
is aware of the Company's business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. Optionee is acquiring these
Securities for investment for Optionee's own account only and not with a view
to, or for resale in connection with, any "distribution" thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities
Act").

2. Optionee
acknowledges and understands that the Securities constitute "restricted
securities" under the Securities Act and have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Optionee's investment
intent as expressed herein. In this connection, Optionee understands that, in
the view of the Securities and Exchange Commission, the statutory basis for such
exemption may be unavailable if Optionee's representation was predicated solely
upon a present intention to hold these Securities for the minimum capital gains
period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future. Optionee further understands
that the Securities must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Optionee further acknowledges and understands that the Company is
under no obligation to register the Securities. Optionee understands that the
certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company and any other legend required under applicable state securities
laws.

3. Optionee
is familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of the grant of the option to the Optionee, the exercise will be exempt
from registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 as amended (the "Exchange Act"), ninety (90) days
thereafter (or such longer period as any market stand-off agreement may require)
the Securities exempt under Rule 701 may be resold, subject to the satisfaction
of certain of the conditions specified by Rule 144, including: (1) the resale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Exchange Act); and, in the case of an affiliate, (2) the availability of certain
public information about the Company, (3) the amount of Securities being sold
during any three month period not exceeding the limitations specified in Rule
144(e), and (4) the timely filing of a Form 144, if applicable.

B-1

 

In the
event that the Company does not qualify under Rule 701 at the time of grant of
the option, then the Securities may be resold in certain limited circumstances
subject to the provisions of Rule 144, which requires the resale to occur not
less than one year after the later of the date the Securities were sold by the
Company or the date the Securities were sold by an affiliate of the Company,
within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.

4. Optionee
further understands that in the event all of the applicable requirements of Rule
701 or 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the
Staff of the Securities and Exchange Commission has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rules 144 or 701 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.

	 	 	Signature of Optionee: 	 
	 	 	_________________________ 	 
	 	 	Date:
      _________, 19__ 	 

 

 

 

 

 

B-2ROYCE BIOMEDICAL INC.
                           433 Town Center, Suite 316
                             Corte Madera, CA 94925
                      Tel (415) 738.8887 Fax (309) 404.4687

MARCH 8, 2005

SMART-TEK COMMUNICATIONS INC.
#10 - 11720 VOYAGEUR WAY
RICHMOND, BC
V6X 3G9

ATTENTION:  MR. PERRY LAW, PRESIDENT

Dear Sir,

RE:   OFFER TO ACQUIRE ALL OF THE ISSUED AND OUTSTANDING SHARES OF SMART-TEK
      COMMUNICATIONS INC. BY ROYCE BIOMEDICAL INC.

This letter  shall  serve to confirm  the  intention  of Royce  Biomedical  Inc.
("ROYCE ") to acquire from the sole shareholder of Smart-Tek Communications Inc.
("Perry   Law")  all  of  the  issued  and   outstanding   shares  of  Smart-Tek
Communications Inc. ("SCI").

This offer is open for  acceptance  until 5:00 P.M. PST on March 14, 2005.  Upon
acceptance  of the  offer,  this  letter  will  constitute  a binding  agreement
enforceable  on its terms  subject  to due  diligence  and the  negotiation  and
execution of a formal share exchange agreement (the "Agreement").

The terms and conditions of the proposed acquisition will be as follows:

1.       TIMING

(a)      It is intended that the closing will take place within 45 days from the
         date hereof (the "Closing").

(b)      Upon execution of this binding letter of intent (the  "Letter"),  it is
         anticipated  that the parties  will  proceed to prepare  the  Agreement
         containing  the  terms  prescribed  in  this  Letter  as  well  as  any
         agreements and instruments usual to such a transaction.

2.       TERMS AND CONDITIONS

(a)      ROYCE will  acquire  from  Perry Law all of the issued and  outstanding
         shares of SCI in exchange for issuing  common  shares of ROYCE to Perry
         Law the sole shareholder of SCI (the "ROYCE Shares").  The exact amount
         of the ROYCE Shares will be negotiated  upon the receipt of the audited
         financial  statements  described  in  section  5(e)  below,   provided,
         however,  Perry Law agrees and acknowledges  that the ROYCE Shares will
         not exceed 40% of the then outstanding capital stock of ROYCE

<PAGE>

                                                                          Page 2

(b)      After the Closing,  the board of directors of ROYCE will consist of six
         (6)  members,  of whom  five  (5)  will  be  nominated  by the  current
         directors, and one (1) will be a nominee of SCI.

(c)      On  Closing,  Perry Law and  Stephen  Platt will enter into  employment
         agreements with SCI on mutually satisfactory terms to be negotiated.

(d)      Prior to  execution  of this  agreement,  ROYCE  shall  have  reached a
         settlement with the holder of a certain Promissory Note as disclosed in
         ROYCE's 8-K filing of March 3, 2005,  thereby avoiding the inclusion of
         SCI in any potential  legal action  arising from the  expiration of the
         forbearance agreement disclosed in same 8-K filing.

(e)      All costs  incurred by the parties in connection  with the  transaction
         contemplated  in this  Letter,  whether  incurred  before,  on or after
         Closing, will be paid by the party incurring such cost.

3.       REPRESENTATIONS AND WARRANTIES

3.1 ROYCE  hereby  represents  and  warrants to Perry Law and SCI as follows and
Perry Law and SCI  acknowledges  that they are relying on these  representations
and  warranties in accepting the offer made in this Letter,  and ROYCE agrees to
provide the following representations and warranties to Perry Law and SCI in the
Agreement in addition to the representations  and warranties  typically included
in a share exchange agreement.

(a)      ROYCE is a corporation duly incorporated,  validly existing and in good
         standing under the laws of the State of Nevada.

(b)      ROYCE has full power, right and authority to enter into this Letter and
         to perform its obligations under it.

(c)      The execution and delivery of this Letter and the  consummation  of the
         transactions  contemplated  under it have been duly  authorized  by all
         necessary corporate action on the part of ROYCE.

(d)      This  Letter  has  been  duly  executed  and  delivered  by  ROYCE  and
         constitutes a valid and binding obligation of ROYCE.

(e)      ROYCE  is not a party  to,  bound  or  affected  by or  subject  to any
         agreement which would be violated,  breached or terminated by, or which
         would  result in the creation or  imposition  of any  encumbrance  upon
         ROYCE or any of its assets or the ROYCE Shares as a consequence of, the
         execution  and  delivery  of this  Letter  or the  consummation  of the
         transactions contemplated in this Letter.

(f)      The ROYCE Shares will be validly  issued to Perry Law as fully paid and
         non-assessable shares of ROYCE.

<PAGE>

                                                                          Page 3

(g)      ROYCE is a reporting company under the U.S.  Securities Exchange Act of
         1934 and is not in  default  under  the  provisions  of said Act or the
         regulations, rules or policies promulgated thereunder.

(h)      The common  shares of ROYCE are quoted for trading on the OTC  Bulletin
         Board, such trading has not been suspended or halted,  and ROYCE is not
         in  default  under  the  regulations,  rules  and  policies  of the OTC
         Bulletin Board.

(i)      ROYCE is not now and at the date of the Closing  will not be in arrears
         or in default in respect of the filing of any required federal,  state,
         county or municipal  tax or other  return,  and to the best of ROYCE 's
         knowledge,  no such return contains any  mis-statement  or conceals any
         statement  that should have been included  therein.  ROYCE has paid and
         will pay all taxes,  filing fees and other  assessments due and payable
         or collectable as they became or become due.

(j)      No governmental or regulatory  authorization,  approval, order, consent
         or filing,  with the  exception of the 8-K filing on  completion of the
         share  exchange,  is required on the part of ROYCE,  in connection with
         the  execution,  delivery  and  performance  of  this  Letter  and  the
         performance of ROYCE 's obligations under this Letter.

(k)      No proceedings  have been taken,  are pending or authorized by ROYCE or
         by  any  other  person  in  respect  to  the  bankruptcy,   insolvency,
         liquidation, dissolution or winding up of ROYCE.

(l)      There are no judgements,  decrees, injunctions, ruling or orders of any
         court,  governmental authority or arbitration,  or any actions,  suits,
         grievances or  proceedings  (whether or not on behalf of ROYCE) pending
         or threatened which may materially adversely affect ROYCE 's assets.

3.2      REPRESENTATIONS AND WARRANTIES OF SCI AND PERRY LAW

          SCI and Perry Law hereby  jointly and severally  represent and warrant
to  ROYCE  as  follows  and   acknowledges   that  ROYCE  is  relying  on  these
representations and warranties in making the offer contained in this Letter, and
SCI and Perry Law agree to provide the following  representations and warranties
to ROYCE in the  Agreement  in addition to the  representations  and  warranties
typically included in a share exchange agreement.

(a)      SCI is a corporation  duly  incorporated and validly existing under the
         laws of the province of British Columbia.

(b)      SCI and Perry Law have full power,  right and  authority  to enter into
         this Letter and to perform the obligations under it.

(c)      The execution and delivery of this Letter and the  consummation  of the
         transactions  contemplated  under it have been duly  authorized  by all
         necessary corporate action on the part of SCI.

<PAGE>

                                                                          Page 4

(d)      This letter has been duly  executed  and  delivered  by each of SCI and
         Perry Law and  constitutes  a valid and binding  obligation  of SCI and
         Perry Law.

(e)      Neither  SCI nor Perry Law is not a party to,  bound or  affected by or
         subject  to  any  agreement  which  would  be  violated,   breached  or
         terminated  by, or which would result in the creation or  imposition of
         any  encumbrance  upon any of its  assets  or their  shares in SCI as a
         consequence  of,  the  execution  and  delivery  of this  Letter or the
         consummation of the transactions contemplated in this Letter.

(f)      SCI is the legal owner of and has good and  marketable  title to all of
         its assets.  Perry Law is the legal and beneficial  owner of the shares
         which it is  transferring  to ROYCE and such shares  represent  all the
         outstanding shares of SCI.

(g)      No governmental or regulatory  authorization,  approval, order, consent
         or filing is required  on the part of SCI or Perry Law,  in  connection
         with the  execution,  delivery and  performance  of this Letter and the
         performance of their respective obligations under this Letter.

(h)      No  proceedings  have been taken,  are pending or  authorized by SCI or
         Perry  Law  or by any  other  person  in  respect  to  the  bankruptcy,
         insolvency, liquidation, dissolution or winding up of SCI or Perry Law.

(i)      There are no judgements,  decrees, injunctions, ruling or orders of any
         court,  Governmental authority or arbitration,  or any actions,  suits,
         grievances  or  proceedings  (whether  or not on behalf of SCI or Perry
         Law) pending or threatened which may materially adversely affect any of
         their respective assets.

4.       DUE DILIGENCE

Each party shall have until April 15, 2005, to complete its due diligence review
of the other parties.  For this purpose,  each party agrees to give to the other
parties and their authorized  representatives  reasonable access to all relevant
information in its possession including minute books, records, and all technical
and legal data, as well as access to its facilities and properties (if any).

Each  party  agrees  to treat as  confidential  all  information  that the other
parties or their  representatives  advisors disclose to it and will not disclose
any such  information  to persons  other than its advisors and its employees who
are directly  involved in the  transactions  contemplated  in this  letter.  The
foregoing  restriction  does not apply to any  information  which is or  becomes
generally available to the public (other than by the receiving party's breach of
its obligation of  confidentiality),  or which was known to the receiving  party
prior to receiving it from the other party,  or which was obtained  from a third
party that was not subject to an obligation of confidentiality.

<PAGE>

                                                                          Page 5

5.       CLOSING CONDITIONS

Each party's obligation to complete the transactions contemplated in this Letter
will be  conditional  on the fulfilment or  satisfaction  of various  additional
matters usual in formal share exchange agreements,  including but not limited to
the following:

(a)      satisfactory completion of each party's due diligence review;

(b)      receipt of all necessary consents and approvals;

(c)      possession by SCI of good and valid title to its assets;

(d)      the  reorganization  of the board of  directors  of ROYCE as set out in
         section 2(b) above;

(e)      receipt by ROYCE of audited financial statements for SCI for its 2 most
         recent fiscal years showing a minimum gross revenue of CDN$1,750,000.00
         for its most recent fiscal year;

(f)      the execution of an employment agreements between Perry Law and Stephen
         Platt and SCI as set out in section 2(c) above;

(g)      ROYCE has  completed its  recapitalization  to have  sufficient  shares
         authorized to execute the proposed acquisition of SCI.

(h)      the settlement and retirement of the Promissory  Note default  pursuant
         to ROYCE's 8-K filing on March 3, 2005.

6.       INDEMNITY

Each party hereby  covenants  and agrees with the other parties to indemnify and
save harmless the other parties, effective as and from the date of acceptance of
this letter by the  Companies,  from and against any claims which may be made or
brought  against the other parties  and/or which the other parties may suffer or
incur as a result of, or arising out of any  non-fulfilment  of any  covenant or
agreement on the part of the party under this letter or any  incorrectness in or
breach of any  representation  or  warranty  of the  parties  contained  in this
letter.

7.       BUSINESS IN THE ORDINARY COURSE

From the date of this letter  until the earlier of the Closing or the  execution
of the Agreement,  each party will carry on its business in the ordinary  course
and will maintain itself,  its assets and any rights that it may have (including
but not limited to the listing of its shares on any stock exchange or securities
market) in good standing.

8.       PUBLICITY

The parties hereto agree to keep  confidential  discussions  with respect to the
transactions  contemplated  between the parties herein, save and accept for such
disclosure  as may be  required  by all  applicable  securities  legislation  or
regulatory authorities. For greater certainty, it is anticipated that ROYCE will
issue a press release to announce the execution of this Letter.

<PAGE>

                                                                          Page 6

9.       STANDSTILL

SCI and Perry Law shall not  directly or  indirectly  during the period from the
date hereof until the earlier of the execution of the  Agreement,  or until 5:01
P.M. on March 14, 2005, engage in any discussions or negotiations, or enter into
any  agreement,  commitment  or  understanding,  or otherwise  act jointly or in
concert  with any other  person or  entity,  in order to  encourage,  propose or
effect a reverse take-over,  merger or similar transaction between SCI and Perry
Law and any person or entity other than ROYCE.

10.      FURTHER ASSURANCES

The parties  hereby agree to execute and deliver all such further  documents and
instruments  and do all acts and things as may  reasonably  be required to carry
out the intent of this Letter.

11.      INDEPENDENT LEGAL ADVICE

The parties  acknowledge that this provision shall serve as notice to each party
of being  advised to arrange for such  independent  legal advice with respect to
this Letter,  each of the matters herein and the implications  thereof,  as each
party may independently deem necessary,  and that each party has either obtained
such  independent  legal  advice or waives the right  thereto  by  signing  this
Letter.

12.       GOVERNING LAW

This letter and any subsequent  agreements  shall be governed by and interpreted
in  accordance  with the laws of the State of  Nevada  and the  federal  laws of
United States of America applicable therein.

If the foregoing is acceptable to you, would you kindly indicate your acceptance
hereof by executing and returning a copy of this letter.

Yours very truly,
ROYCE BIOMEDICAL INC.

Per: /s/ Donald Gee
     ------------------------------------
       Donald Gee
       Authorized Signing Officer
I have authority to bind the corporation.

<PAGE>

                                                                          Page 7

If you are  satisfied  with the above,  please so  acknowledge  by  signing  and
returning  the  enclosed   copy  of  this  letter,   by  mail  or  by  facsimile
transmission, no later than 5:00 P.M. PST on March 14, 2005.

SMART-TEK COMMUNICATIONS INC.

Per: /s/ Perry Law
     ------------------------------------
       Perry Law
       Authorized Signing Officer
I have authority to bind the corporation.

Per:   /s/ PERRY LAW
      --------------------
       PERRY LAW

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