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As filed with the Securities and Exchange Commission on November 15, 1999
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
REGISTRATION STATEMENT FOR SMALL BUSINESS ISSUER UNDER
SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
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MERCANTILE FACTORING CREDIT ONLINE CORP.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 88-0335710
(STATE OR JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1250 BOUL. RENE-LEVESQUE OUEST
BUREAU 2925
MONTREAL, QUEBEC
H3B4W8, CANADA
(514)937-8118
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
AND PRINCIPAL PLACE OF BUSINESS)
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STANLEY MOSKOWITZ, ESQ
MOSKOWITZ ALTMAN & HUGHES LLP
11 EAST 44TH STREET, SUITE 504
NEW YORK, NEW YORK, 10017
(212) 953-1121
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
Copies to:
DOMINIQUE M. BELLEMARE
PRESIDENT
1495 RIDGEVIEW DRIVE. SUITE 220
RENO, NEVADA, 89509
(775) 827-6300
Securities to be registered under Section 12(g) of the Exchange Act:
Title of Each Class:
Common Stock, $0.001 par value
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TABLE OF CONTENTS
PART I
ITEM 6 DESCRIPTION OF BUSINESS
ITEM 7 DESCRIPTION OF PROPERTY
ITEM 8 DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
ITEM 9 REMUNERATION OF DIRECTORS AND OFFICERS
ITEM 10 SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN SECURITY HOLDERS
ITEM 11 INTEREST OF MANAGEMENT AND OTHERS IN
CERTAIN TRANSACTIONS
ITEM 12 DESCRIPTION OF SECURITIES
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
ITEM 2 LEGAL PROCEEDINGS
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
PART F/S
FINANCIAL STATEMENTS
PART III
ITEM 1 INDEX TO EXHIBITS
ITEM 2 DESCRIPTION OF EXHIBITS
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PART I
The Registrant has elected to report under Disclosure Alternative 2 of Form
10-SB.
ITEM 6 DESCRIPTION OF THE BUSINESS
Company Background
Mercantile Factoring Credit Online Corp. (the "Company"), a Nevada corporation,
has its principal offices at 1250 Boul. Rene-Levesque Ouest, Bureau 2925,
Montreal, Quebec, H3B4W8, Canada. The telephone number is (514) 937-8118.
Through October 15, 1999 the Company has generated no revenues from operations.
The Company was incorporated in March 1995 under the name of Truco, Inc. and was
to engage in the business of manufacturing, selling and marketing a product
described as the "Belt Wallet." However, soon thereafter the Company elected not
to proceed with its intended business objective of marketing and selling the
"Belt Wallet" but instead elected to change its focus to the area of developing
proprietary technology and services using smart and remote memory cards and
wireless and land-line networks in the fields of commerce, publishing, and
network-based systems. The Company entered into a licensing agreement for the
exclusive right to market and manufacture a technology known as the "ARCard,
ARCommerce Reader, ARCinternet Computer", and its application programming
bundled together as the "ARCommerce Kit" as a way of doing business over the
Internet's World-Wide Web (the "Web"). On March 22, 1996, the Company changed
its name to "Web Tech Incorporated".
Subsequently, on November 30, 1996, in an effort to diversify its product and
manufacturing base, the Company acquired all the issued and outstanding shares
of Geo-Ram, Inc., a Texas corporation, by issuing 6,000,000 shares of the
Company's common stock to the shareholders of Geo-Ram, Inc. Geo-Ram, Inc. was in
the business of manufacturing geophysical equipment which included a new drill
bit, the "Duckbill Bit", designed to implant explosive charges and geophones for
seismic surveys in harsh and environmentally fragile geographic areas known as
transition zones. On March 18, 1997 the Company changed its name to "Cynergy,
Inc.".
However, the Company was neither able to (i) successfully develop and market the
"ARCommerce Kit", or (ii) provide any further funding for the growth and
development of the geophysical equipment business. Consequently, the Company did
not continue its licensing of the "ARCommerce Kit" and further, on March 24,
1998, the Company entered into a Recission Agreement with the shareholders of
Geo-Ram, Inc. whereby the shareholders of Geo-Ram, Inc. returned the 6,000,000
shares that the Company issued in connection with the November 30, 1996
acquisition.
On September 22, 1999, the Company (i) entered into an Agreement and Plan of
Merger with Mercantile Factoring & Credit Corp., a Nevada corporation, (the
"Merger"), (ii) changed its name to " Mercantile Factoring Credit Online Corp.",
(iii) effected a reverse stock split of the Company's issued and outstanding
shares of common stock on a basis of one (1) new share for every 17.784 old
shares, and (iv) elected four (4) new directors to the Company's board of
directors (the "Board"). The Merger became effective upon the filing of the
Articles of Merger on September 29, 1999.
Strategy
Consumer credit has always represented a problem for a great many people having
no established credit rating or having ruined their credit rating though past
dealings. The Company believes that it has developed a collateral pledge system
that secures (i) repayment of capital to money lenders (the "Lender"), and (ii)
needed capital to money borrowers (the "Borrower"), as set forth below. The
pledging of accounts receivables, real estate, and other acceptable assets as
collateral will serve to secure the Lender full repayment of the loan and
provide the Borrower with capital to which it may not otherwise have access.
The Company, a development stage company, intends to offer a way for both
Borrowers and Lenders to take advantage of the global network that the Internet
offers. The Company's main objective is to provide an Internet web-site where
(i) Borrowers can post their offers to borrow money secured by pledged
collateral (primarily accounts receivable and real estate), and (ii) Lenders can
competitively bid to supply the money, with the competition being in the form of
the amount of money the Lender is willing to lend and the interest rate at which
the Lender is willing to supply the money. To accomplish this objective, the
Company is in the process of creating a multilingual online loan exchange which
will act as an Electronic Loan Center for individuals and small to medium size
businesses (the "Online Loan Exchange"). The Online Loan Exchange will allow
Borrowers to post their borrowing requirements online and to observe online the
amounts and interest rates that Lenders worldwide are willing to lend money to
them.
The Company believes that many potential Borrowers who have problems with their
credit ratings, or otherwise cannot access traditional lending institutions for
needed funds, have accounts receivables or other assets that can be used as
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collateral. The Company also believes that many potential Lenders would be
willing to supply funds to Borrowers, on a secured basis, but do not have access
to potential Borrowers.
The Company intends to launch its Online Loan Exchange when the final design of
the web-site is completed and tested. The Company believes that the web-site
will be ready for operation in approximately April of 2000. The Company will
administrate the Online Loan Exchange and will derive revenues from
administrative fees and from commissions charged to Lenders.
The Online Loan Exchange will initially be operative only in Europe and
available only to European based Borrowers and Lenders. North America will be
included when the Company has assessed and complied with North American
Regulating Authorities. The Company intends to apply for the licenses in the
Province of Quebec, Canada so as to be able to offer a wide scope of financing
and mortgage facilities to its local clients.
Also, the Company believes that the Online Loan Exchange will make the Secured
Loan industry, easily available and accessible to all Borrowers in an efficient
and competitive manner. The Company believes that the Secured Loan business is
growing at tremendous rates in Europe. However, the application procedures
remains cumbersome. It is the Company's belief that its online step-by-step
guide, along with listed possibilities and simple methods of execution, will
make it easy, quick, and efficient for both Borrowers and Lenders. For example,
the smallest manufacturer or professional, such as an architect or a doctor in
need of funds, who may consider himself too small or unable to afford the
interest rates demanded by lending institutions, could (i) freely consult our
listing of monies available for short or long term secured loans and (ii) place
a bid on the interest rates they are prepared to pay for accelerated payment
after delivery or completion of their services.
The web-site will be administered by Mercantile Clearing Center JMBH, a Swiss
Corporation located in Zug, Switzerland.
Products and Services
The Company will provide a multilingual loan exchange on the Web, which will
allow Lenders to bid on available offers from Borrowers to borrow money for
either a short term (one(1) year or less), or a long term, (one(1) year or
more).
The Company is in the process of creating a sophisticated and ergonomically
designed web-site for the above purposes. Internet will be the principal channel
used for conducting business. However, phone services and toll-free numbers will
also be made available from start-up.
Services for Borrowers
The Online Loan Exchange will be multilingual from inception (English, French,
German, Spanish, Italian, Portuguese, Dutch, Swedish, and Norwegian). The site's
basic content will be divided into categories of (i) Short Term Secured Loans
(loans that mature within one (1) year from the date of the loan) ("Short Term
Loans") and (ii) Long Term Secured Loans (loans that mature more than one (1)
year from the date of the loan) ("Long Term Loans"), each to be divided into
further sub-categories as needed.
o Procedure for obtaining a Short Term Secured Loan
The Borrower must submit to the Company a "Offer" for the amount of money the
Borrower wants to borrow with a description of the collateral and a limit on the
interest rate that the Borrower would accept. Offers to borrow money are
submitted on forms provided by the Company on the Web. All Offers must be
accompanied with a payment of fifty U.S. dollars ($50.00) which will be returned
to the Borrower in the event the Borrower's Offer is not accepted. However, in
the event the Borrower cancels an Offer after acceptance by a Lender, the fifty
U.S. dollars ($50.00) will be not be refunded. If the Borrower's loan is
processed, the fifty U.S. dollars ($50.00) may be applied as part of the costs
of processing the loan.
In the event the Offer is accepted by a Lender, the Borrower must secure the
loan by pledging collateral. Before any funds are delivered to the Borrower, the
Borrower must present evidence of ownership of the rights to the pledged
collateral. In the event the pledged collateral is in the form of an accounts
receivable, the Borrower must (i) verify that the delivery of goods or
performance of services was completed, (ii) enter into a Pledge Agreement
pledging to the Company the borrower's rights to the accounts receivable, (iii)
assign to the Company the borrower's rights to collect the accounts receivable,
(iv) execute a Right of Collection Agreement in favor of the Company, (v)
execute a Lockbox Agreement for deposit of the accounts receivable when paid,
and (vi) obtain an acknowledgment from the payor of the accounts receivable of
the assignment of the Borrower's rights to collect the account receivable. If
the collateral consists of some other tangible assets, then appropriate steps
will be taken to secure such collateral.
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o Procedure for obtaining a Long Term Secured Loan
In the case of Long Term Loans, the procedure is the same as with Short Term
Loans except that (i) the application fee shall be two hundred and fifty U.S.
dollars ($250.00), and (ii) all long term loans must be secured by either (a)
real estate, (either by first or second mortgages) which will depend on the
equity in the property, or (b) other collateral acceptable to the Company.
In the event the Offer is accepted by a Lender, the Borrower secures the loan by
pledging real property, and then, before any funds are delivered to the
Borrower, the Borrower must (i) advance to the Company, sufficient monies to pay
the Company's expenses in completing the funding process, (ii) present evidence
of ownership of the real property (either by certified copy or original, title
or deed to the property), and (iii) enter into a Mortgage Agreement with the
Lender. The Company will (a) require a property search, and (b) appoint a legal
representative in the Borrower's locality to prepare all the legal documents
and, if necessary, to record the mortgage with the appropriate governmental
division in the jurisdiction.
If the information on the Borrowers application form is found to be false or
does not correspond with the information listed in the land registry office of
the property's jurisdiction, the Borrower's Offer will be canceled and the two
hundred and fifty U.S. dollars ($250.00) will be used for costs and damages.
In the event an Offer for a Long Term Loan is accepted by a Lender, and the
Borrower secures the loan by collateral acceptable to the Company (other than
real estate), the Borrower must provide a complete description of the collateral
before the loan is fully processed. If the Borrower's bid has been accepted, the
Company will inform the Borrower where the pledged collateral will be held until
the loan has been paid.
Services for the Lender
The Company, through the Online Loan Exchange intends to provide Lenders (i) an
up-to-date database of potential Borrowers and their offerings, (ii)
administrative services to process and administrate the loan, (iii) a medium
(the Online Loan Exchange) to bid on making the loans, and (iv) the ability to
aggregate their funds with the funds of other Lenders willing to lend money on
identical terms.
o Procedure for Making a Secured Loan
The potential Lender will observe the "Offerings to Borrow" listed on the Online
Loan Exchange. If the Lender wishes to lend funds to a listed Borrower, the
Lender must submit a form to the Company which will indicate to the Company,
among other things, the Lender's ability and desire to provide funds to the
Borrower at a given interest rate. The Company would then request that the
Lender transmit to the Company, by wire transfer or other method, sufficient
funds to make the selected loan. If the funds were sufficient to make the entire
loan, then the Company would take the necessary action to secure the collateral
and thereafter advance the funds to the Borrower. The Company would then
administrate the loan on behalf of the Lender.
The Company believes that many non-traditional lenders will make use of the
Online Loan Exchange because of the expected higher interest rates (returns on
investment) that will be available as compared to savings accounts, certificates
of deposit, and other instruments issued by financial institutions or
governments. Further, the Company believes that its ability to aggregate a
number of Lenders that are willing to lend money upon identical terms to a
specific Borrower will provide Lenders with relatively small amounts of money to
lend, the ability to earn higher interest rates that are generally available
only to secured lenders who lend large amounts of money.
Once a loan is agreed to by the Borrower and Lender, and all documentation and
verification is complete, the Company will collect the funds from the Lender(s)
and advance the funds to the Borrower. Thereafter the Company will collect the
installment and final payment amounts from the Borrower and pay the Lender(s)
less any commissions earned by the Company. In the event of the default by the
Borrower, the Company will oversee collection activities and if necessary
foreclose on the collateral.
o Database of Potential Borrowers
The database of potential Borrowers who post their offers to borrow money on the
Company's web-site will be updated on a regular basis, and will be available to
Lenders 24-hours a day.
o Administrative Services Provided by the Company
The Company believes that it will assist Lenders by providing administrative
services to Lenders in administrating Loans for which services it will receive
processing fees as well as a commission for each transaction completed. The
Company intends to provide (i) a Technical Support Center to handle inquires
from both Lenders and Borrowers, (ii) an application form to be completed online
by all Borrowers which contains all the pertinent information required by the
Company, (iii)
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all agreements to properly secure Borrowers' collateral, and (iv) sub-contractor
services, for an additional fee, to verify the offered collateral.
o Potential Customers
The Company's target Borrowers will be individuals, proprietorships, new
businesses, and small and mid-size corporations. The Company believes that the
current weakness of the EURO, along with the growth potential of the secured
lending business and the relatively ease of entry into the business, make Europe
the Company's most desirable targeted region. For the purposes of this
paragraph, the "EURO" means the common currency adopted by members of the
European Union.
Competition
The market for the origination of secured loans is rapidly evolving, both online
and through traditional channels, and competition for borrowers is intense and
is expected to increase significantly in the future. The Company faces
competition from companies directly competing by offering secured loans or other
financing services over the Internet. Traditional lenders, including Banks and
Finance Companies, also provide access to their loan offerings and over the
Internet. Increased competition, particularly online competition, could result
in price reductions or reduced margins, either of which should adversely affect
the Company's business. Further, there can be no assurance that the Company's
competitors and potential competitors, will not develop services and products
that are equal or superior to those of the Company or that achieve greater
market acceptance than the Company's products and services.
The Company believes that the primary competitive factors in creating a
financial services resource on the Internet are functionality, brand
recognition, customer loyalty, ease-of-use, quality of service, reliability and
critical mass. Competition is likely to increase significantly as new companies
enter the market and current competitors expand their services. Many of these
potential competitors are likely to enjoy substantial competitive advantages
including longer operating histories, greater name recognition, larger
established customer bases, and substantially greater financial, marketing,
technical and other resources.
Source of Revenue
The Company's source of revenues will come from both Lenders and Borrowers. Its
revenues will be derived from (i) a commission of two (2%) percent of the total
interest earned by Lenders, (ii) application fees charged to the Borrower for
placing their offers on the Online Loan Exchange, and (iii) administrative fees
charged to Borrowers and Lenders. The Company's objective will be to try to
increase the lending capital.
Government Regulation
The financing industry is highly regulated in certain of the European countries
where the Company intends to offer its services. In those highly regulated
countries, the Company's business must comply with extensive and complex rules
and regulations of, and licensing and examination by, various government
authorities. These rules impose obligations and restrictions on the Company's
loan brokering activities. In particular, these rules may (i) limit the broker
fees, interest rates, finance charges and other fees the Company may assess,
(ii) require extensive disclosure to the Company's customers, and (iii) impose
multiple qualification and licensing obligations on the Company. Failure to
comply with these requirements may result, among other things, in the (i)
revocation of required licenses or registrations, (ii) loss of approved status,
(iii) voiding of the loan contracts or security interests, (iv) indemnification
liability or the rescission of secured loans, and (v) administrative enforcement
actions and civil and criminal liability. The Company intends to be in
substantial compliance with these rules and regulations when it commences its
lending service activities.
As a loan services company doing business exclusively through the Internet, the
Company faces an additional level of regulatory risk given the fact that the
statutes and regulations governing financing transactions have not been
substantially revised or updated to fully accommodate electronic commerce. Most
of the European Countries' laws, rules and regulations governing secured loans
contemplate or assume paper-based transactions and do not currently address the
delivery of required disclosures and other documents through electronic
communications. Until the applicable laws, rules and regulations are revised to
clarify their applicability to transactions through e-commerce, any company
offering secured loans through the Internet or other means of e-commerce will
face uncertainty as to compliance. In addition, there is no assurance that
revisions to the laws, rules and regulations will be adopted and, if adopted,
will be timely or adequate to eliminate this uncertainty. Nonetheless, the
Company intends to take prudent steps to mitigate these risks in offering its
loan services through the Web.
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When and if the Company decides to offer its services in the United States, the
Company will have to comply with all Federal and State licensing rules and
regulations and be subject to all Federal and State laws involving the extension
of credit. In addition, Lenders may also be subject to such rules and
regulations and may also be subject to individual licensing requirements.
Intellectual Property
Trademarks and other proprietary rights will be important to the Company's
competitive position. The Company does not currently have copyrights or patents
but intends to obtain a trademark for the logo "MFCO." There can be no assurance
that this trademark is available in the countries in which the Company will
operate or even if available, that the Company will have exclusive rights to
MFCO.
The Company intends to enter into confidentiality or license agreements with its
employees, consultants and corporate partners, and generally control access to
and distribution of its technologies, documentation and other proprietary
information. Despite its efforts to protect its proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
the Company's rights. The steps the Company intends to take may not prevent
misappropriation of its proprietary rights, particularly in countries where laws
or law enforcement practices may not protect the Company's proprietary rights as
fully as in the United States.
Advertising
The Company intends to advertise their unique financing services in leading
newspapers, financial magazines and journals, inviting interested parties to
visit our web-site and take advantage of our very unique service. The Company
intends to use four of the major media advertising agencies in covering Europe:
o Citigate Albert Frank Limited, London, UK
o Doremus Advertising Agency, London, UK
o Publicitas, Zurich, Switzerland
o Net Zed, Paris, France
They are Europe's premium communication companies with affiliates all over the
world's major financial centers. These agencies represent firms such as CIBC
World Markets, Schroders, Rothschild, Bank von Ernst, Halifax, Morgan Grenfell
Asset Management, Banker's Trust, Fidelity Investments, J P Morgan, Hill Samuel,
Bridgewater, Royal London Insurance, Credit Suisse, Hawk Point Partners, and
Bloomberg Personal Finance. They have Omnicom offices in 76 countries and
specialize in international and digital transmission of advertising.
Because of the particularities and attributes of the French language, a part of
the Company's marketing activities will be conducted in the French language. The
Company has identified a special agency, Net Zed of Paris, France, to prepare
the different advertisements.
Financial Information
On July 30, 1999, the Company had entered into a loan agreement with Worldnet
Connections, Inc.("Worldnet"), a Nevada corporation. The loan agreement provides
a credit facility to the Company for all the necessary start-up capital it
requires. The Company agreed to allow Worldnet the right of first refusal to
provide funds to the Company in multiples of $100,000 upon 15 day notice by the
Company. In the event Worldnet advances the funds, the Company will issue
unsecured convertible notes ("Unsecured Notes"), with a five (5) year term that
bears interest at eight (8%) percent per annum, each $100,000 Unsecured Note
will be convertible into 60,000, $.001 par value common shares of the Company
("Company Shares").
As of September 30, 1999, Worldnet had made advances to the Company totaling
$293,880.
Projected Start-Up Costs and Capitalization
ESTIMATED START-UP COST Subtotals
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General and administrative
Legal and accounting U.S. $ 100,000
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Rental Deposits 25,000
Prepaid Insurance 20,000
Pre-opening salaries 25,000
Telephone 2,000
Total General and
Administrative Expenses: U.S. $ 172,000
Sales and marketing
Advertising 200,000
Promotion 50,000
Printing 10,000
Total Sales and Marketing
Expenses: U.S. $260,000
Computer and Software
Web-Site 50,000
Program 250,000
Total Computer and Software
Expenses: U.S. $300,000
Office Equipment
Furniture 45,000
Computer Hardware 100,000
Office Machines 30,000
Office Material 6,000
Total Office Equipment
Expenses: U.S. $181,000
Additional Working Capital* U.S. $1,587,000
Total Estimated Start- Up
Cost: U.S. $2,500,000
===============
*If necessary
Staffing Requirements
o SALES/SUPPORT STAFF
Currently, the Company does not have any full-time employees. Upon sufficient
funding and appropriate timing after the Company has completed the web-site
design and development, the Company intends to hire full-time employees.
Additionally, the Company intends to establish a Technical Support Center (the
"Center") using sub-contractors, which is intended to be operated 24-hours a
day/ 7 days a week. The purpose of the Center will be to (i) provide online
support
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to both Lenders and Borrowers, (ii) allow the Company to provide customer
service online, (iii) allow the Company to maintain independent Borrower and
Lender relationships, and (iv) provide a high level of customer satisfaction.
However, the Company will not hire any sales staff or establish a technical
support center unless the Company receives funding.
o KEY EMPLOYEES
Dominique M. Bellemare, Jean-Guy Hudon, Rita S. Dickson and Yvan Guillemin are
the officers and directors of the Company. None of them are currently being paid
a salary. Upon receiving funding, the Company intends to commence the payment of
salaries. The Company relies heavily on these officers to complete and
successfully market and implement the Online Loan Exchange and its other
services. Each officer either has or will sign a Confidentiality and
Non-Disclosure Agreement with the Company. The unavailability of any of Messrs.
Bellemare, Hudon, or Guillemin would set back the developmental time of the
Online Loan Exchange business and would have a materially adverse effect on the
Company's business, financial position and proposed operations.
o MANAGEMENT
The Company's management team is comprised of individuals who have many years of
experience in developing, managing, building and growing technology companies in
the competitive national and international environments. The Company intends to
use contract workers whenever possible. The Company currently maintains a staff
of three (3) officers (the "Officers") (See Item 8 below describing the
Officers), some of whom are presently serving on a part-time basis. Upon
additional funding, it is anticipated that the Company will hire additional
personnel within the upcoming year.
Year 2000 Compliance
There are issues associated with the programming code in existing computer
systems as the year 2000 approaches. The "year 2000 problem" ("Y2K") is complex
as virtually every computer operation will be affected in some way by the
rollover of the two-digit year value to 00. The issue is whether computer
systems will properly recognize date sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. After a complete assessment of
potential Y2K issues, the Company has made a determination that presently, and
in the near future, it will not be adversely affected by Y2K compliance issues.
The Company's Y2K assessment was based on the following: (i) as a development
stage company, the Company has no computer hardware or software systems to
update or replace; and (ii) the Company does not have any significant third
party relationships. As the Y2K problem is applied to the Company, the Y2K
problem does not present and will not present a material event or uncertainty
for the Company. Presently, the Company estimates that its web-site will be
ready in approximately April of 2000, and Y2K compliant. In addition, when the
purchase of computer systems and the making of third party relationships become
a necessity for the Company, the Company will take every measure to insure Y2K
compliancy by (i) purchasing computer systems from only known Y2K compliant
vendors, and (ii) sending questionnaires to, and obtaining written assurance of,
Y2K compliancy from potential third party vendors, suppliers, or subcontractors.
ITEM 7 DESCRIPTION OF PROPERTY
The Company maintains offices at:
1250 Boul. Rene-Levesque Ouest, Bureau 2925
Montreal, Quebec, H3B 4W8, Canada.
The Offices are subleased from Credit Mutuel De Montreal CCM Inc. ("Credit
Mutuel"), an affiliated party. The Company pays rent at the rate equal to twenty
(20%) percent of the total rent paid by Credit Mutuel which currently equals Cd.
(Canadian Dollars) $9,069.87 per month. The lease expires on January 31, 2003.
ITEM 8 DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets forth certain information with respect to the
directors and executive officers of the Company:
Name Age Position
---- --- --------
Dominique M. Bellemare 40 President/ Director
Jean-Guy Hudon 58 Vice President/ Director
Rita S. Dickson 49 Secretary/ Director
Yvan Guillemin 51 Director
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The Board will be the governing body of the Company and will set goals and
establish policies, will retain qualified executive leadership and will oversee
the performance of that leadership for the organization. The Board will be
active in that it will meet formally at least once annually. The full Board may
choose to delegate some authority to an executive committee that will meet more
frequently and will exercise interim policy making and oversight authority.
Each director will be elected to hold office until the next annual meeting of
shareholders and until his successor has been qualified and elected. The
following sets forth certain information as well as a brief account of business
experience during the past five years of each director and executive officer of
the Company.
Current Officers, Directors and Key Employees
o Dominique M. Bellemare
Dominique M. Bellemare has been serving as the Company's President and Director
since being elected to the Company's board of directors at a special meeting of
the Company's shareholders in September of 1999. Mr. Bellemare currently devotes
a percentage of his time to the business of the Company. Upon additional
funding, Mr. Bellemare will devote a greater percentage of his time to the
business of the Company. Mr. Bellemare is an attorney qualified to practice law
in the Province of Quebec. Since 1998, Mr. Bellemare has been serving as Senior
Vice-President and Senior Counsel for Credit Mutuel. Prior to that from the
period of 1991 through 1998, Mr. Bellemare was a partner at the Law Firm of
Bloomfield Bellemare.
o Jean-Guy Hudon
Jean- Guy Hudon has been serving as the Company's Vice President and Director
since being elected to the Company's board of directors at a special meeting of
the Company's shareholders in September of 1999. Mr. Hudon started his career as
an educator in Quebec. He later was elected to the Canadian Parliament where he
served for two terms. During his two terms, he was appointed by the Prime
Minister of Canada to the post of Parliamentary Secretary to the Right and
Honorable Joe Clark and minister of Foreign Affairs.
Mr. Hudon chaired various international committees and represented the Canadian
Government in different committees with international heads of state such as
Francois Mitterrand (the President of France), George Bush (former President of
U.S.), and his Holiness Pope Jean-Paul II. In 1993, Mr. Hudon retired from the
Parliament and in 1997 took an executive position with Credit Mutuel, a private
corporation.
o Rita S. Dickson
Rita S. Dickson has been serving as the Company's Secretary and Director since
being elected to the Company's board of directors at a special meeting of the
Company's shareholders in September of 1999. Ms. Dickson currently devotes a
percentage of her time to the business of the Company. Upon additional funding,
Ms. Dickson will devote a greater percentage of her time to the business of the
Company. Ms. Dickson is also currently serving as the Secretary and Treasurer of
Worldnet. Additionally, she has been employed for over 10 years as a Legal
Assistant to Michael J. Morrison, Esq. and currently remains employed by Mr.
Morrison.
o Yvan Guillemin
Yvan Guillemin has been serving as a Company Director since being elected to the
Company's board of directors at a special meeting of the Company's shareholders
in September of 1999. Mr. Guillemin graduated from the Paris School of Commerce
and directed a series of businesses in Paris, France. Mr. Guillemin is the
President of Polo Conseil, whose principal business is to organize equestrian
sporting events and the importation and distribution of polo sporting goods. He
has a personal stable of two hundred fully trained polo ponies which are rented
to various industrialists throughout Europe. Mr. Guillemin maintains a staff of
over ten people to deal with the business of organizing equestrian sporting
events and the distribution of polo sporting goods in Europe and Argentina. In
addition, Mr. Guillemin was also a pioneer in developing and manufacturing the
stretch material used in equestrian clothing which is used today in over 50% of
all riding clothes manufactured in Europe. Mr. Guillemin is the sole shareholder
of Worldnet which company has provided all of the financing of the Company and
which has the right of first refusal to provide additional funding. (See Item 6
"Financial Information" above)
ITEM 9 REMUNERATION OF DIRECTORS AND OFFICERS
To date, the Company has not paid any compensation to any of its officers or
directors. It is the Company's intention, upon acquiring additional funding in
the upcoming year, to compensate certain officers of the Company on a reasonable
basis in keeping with industry standards.
Directors of the Company who are not employees of the Company do not receive any
compensation for attending meetings
9
<PAGE>
of the Board. Directors are reimbursed for their expenses in attending such
meetings. The following table sets forth the compensation for the three (3)
officers of the Company.
Summary Compensation Table
Annual Expected
Name and Compensation Total Compensation
Principal Position Year Salary Compensation for 2000
------------------ ---- ------ ------------ --------
Dominique M. Bellemare 1999 $0 $0 To be determined
President
Jean-Guy Hudon 1999 $0 $0 To be determined
Vice-President
Rita S. Dickson 1999 $0 $0 To be determined
Secretary
ITEM 10 SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
As of September 30, 1999, the Company had 4,892,655 shares of common stock
issued and outstanding. The following table sets forth certain information with
respect to the beneficial ownership of the Company's common stock as of
September 30, 1999 by (i) each of the Company's directors, (ii) each of the
executive officers, (iii) each person or entity who is known to the Company to
beneficially own three (3%) percent or more of the outstanding common stock, and
(iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares Percentage of Class
Name and Address of Beneficial Owner(2) Beneficially Owned(1) Beneficially Owned
- --------------------------------------- --------------------- ------------------
<S> <C> <C>
Worldnet Connections, Inc. (3) ........... 176,328 3.5%
All Officers and Directors as a group .... See Note (3) See Note (3)
Mercantile Online Ltd
28 Pflug Strasse,
Vaduz, Liechtenstein ..................... 4,500,000 93%
Jean-Marc Jacobson ....................... See Note (4) See Note (4)
</TABLE>
- --------
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934, as amended. Generally, a person is
deemed to be the beneficial owner of a security if he has the right to
acquire voting or investment power within 60 days of the date of this
Registration Statement. Except as otherwise noted, each individual or
entity has sole voting and investment power over the securities listed.
(2) The address of the Officers and Directors is c/o Mercantile Factoring
Credit Online Corp., 1495 Ridgeview Drive, Suite 220, Reno, Nevada 89509.
(3) Yvan Guillemin, a director of the Company, owns all the issued and
outstanding shares of Worldnet's common stock. Worldnet owns Unsecured
Notes issued by the Company which are convertible into 176,328 Company
Shares. If the Unsecured Notes were to be converted, Worldnet would own a
total of 176,328 Company Shares representing approximately three and one
half (3.5 %) percent of the total outstanding Company Shares.
(4) Jean-Marc Jacobson owns all the issued and outstanding shares of
Mercantile Online Ltd's common stock.
Changes in Control
10
<PAGE>
The Company is not aware of any arrangements, including the pledge by any person
of securities of the Company, which may at a subsequent date result in a change
in control of the Company.
ITEM 11 INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Mr. Yvan Guillemin, a director of the Company, owns all of the issued and
outstanding shares of Worldnet's common stock. On July 30, 1999, the Company and
Worldnet had entered into a loan agreement allowing Worldnet the right of first
refusal to provide funds to the Company upon 15 day notice by the Company. In
the event Worldnet advances the funds, the Company will issue an Unsecured Note,
with a five (5) year term and bear interest at eight (8%) percent per annum,
which is convertible into 60,000 Company Shares for each $100,000 borrowed by
the Company. As of September 30, 1999, Worldnet has made advances to the Company
totaling $293,880.
Mr. Dominique M. Bellemare, the President and a director of the Company, is
currently serving as Senior Vice-President and Senior Counsel for Credit Mutuel,
the subleasor of the Company's offices located at 1250 Boul. Rene-Levesque
Ouest, Bureau 2925, Montreal, Quebec, H3B 4W8, Canada. Credit Mutuel is owned by
Caroline Investments, a private company owned by Jean-Marc Jacobson.
In addition to Caroline Investments, Mr. Jean-Marc Jacobson owns all the issued
and outstanding shares of Mercantile Online Ltd's common stock. Mercantile
Online Ltd., a Saint Vincent corporation, is the principal shareholder of
Company Shares (See Item 10 above).
Ms. Rita S. Dickson, the Secretary and a director of the Company, is also
currently serving as the Secretary and Treasurer of Worldnet.
No other member of the Board or officer of the Company, to the Company's
knowledge, has any material interest resulting from any relationship or business
affiliation with the Company.
ITEM 12 DESCRIPTION OF SECURITIES
Description of Securities
The Company, a Nevada corporation, had an initial authorization of 300,000,000
shares all of which will be common stock, $.001 par value. As of September 30,
1999, 4,892,655 Company Shares were issued and outstanding.
Common Stock
All shares are fully paid and non-assessable. All shares are equal to each other
with respect to voting, liquidation, and dividend rights. Special shareholder
meetings may be called by the officers or directors, or upon the request of
holders of at least one-tenth (1/10) of the outstanding shares. Holders of
shares are entitled to one vote at any shareholder's meeting for each share they
own as of the record date set by the Board. Holders of shares, are entitled to
receive dividends as may be declared by the Board, out of funds legally
available, and upon liquidation are entitled to participate in a distribution of
assets available for such a distribution to shareholders. There are no
conversion, preemptive or other subscription rights or privileges with respect
to any share. Reference is made to the Company's Articles of Incorporation and
its Bylaws as well as to the applicable Statutes of the State of Nevada for a
more complete description of the rights and liabilities of holders of shares. It
should be noted that the Bylaws may be amended by the Board without notice to
the shareholders. The Company Shares do not have cumulative voting rights, which
means that the holders of more than fifty percent (50%) of the shares voting for
election of directors may elect all the directors if they choose to do so. In
such event, the holders of the remaining shares aggregating less than fifty
percent (50%) will not be able to elect directors.
Dividend and Stock Buy Back Policy
The Company is a new business and no assurance can be given that it will
generate earnings from which cash dividends can be paid. However, if earnings
are generated, management may follow a policy of retaining all earnings for the
expansion of the capital base of its business. Such a policy could be maintained
as long as necessary to provide funds for the Company's expansion of capital
base. Any dividends that may be paid in the future will be
11
<PAGE>
dependent upon the earnings and financial requirements of the Company and all
other relevant factors. At such time as the Company has accumulated profits not
needed to sustain operations or planned for expansion, the Company may choose to
implement a share buy-back program, if such a program is deemed to be the most
cost efficient method of delivering a capital return to its shareholders. If
such a program is implemented, and if some shareholders choose to sell a portion
of their shares to the Company and others do not, the proportion of ownership of
the Company held by participating and nonparticipating shareholders will be
effected. The Company has not paid any dividends on its common stock to date.
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER STOCKHOLDER MATTERS
Market for Common Stock
Prior to this Registration, (i) no public trading market for the Company Shares
exist, and (ii) there can be no assurance that a public trading market will
develop at the conclusion of this Registration, or even if such a trading market
should develop, that the Company Shares may be resold at or near the original
purchase price. Any market for the Company Shares that may develop, in all
likelihood, will be a substantially limited one.
Dividend Policy
The Company does not have a policy of paying dividends, and it is currently
anticipated that no cash dividends will be paid. Any future decision to pay cash
dividends will be made on the basis of earnings, alternative needs for funds and
other conditions existing at the time.
ITEM 2 LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings or claims that it believes
will have, individually or in the aggregate, a material adverse effect on the
Company's business, financial condition or results of operations.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with its accountants since
the Company's incorporation.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
Within the last three (3) years, the Company has issued unregistered securities
to a limited number of persons. On August 15, 1998, the Company issued 1,500,000
unregistered pre-split Company shares for $15,000 cash.
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Limitation on Liability; Indemnification of Directors and Officers
The Company's Articles of Incorporation and Bylaws includes certain provisions
whereby officers and directors of the Company shall be indemnified against
certain liabilities to the Company or its stockholders.
The Articles of Incorporation limits a director's and /or an officer's liability
to the Company and its stockholders for damages resulting from the breach of
fiduciary duty of care as a director or officer involving any act or omission of
any such director or officer, except when such breach results from (i) acts or
omissions which involve intentional misconduct, fraud or knowing violation of
law, or (ii) the unlawful payments of dividends in violation of Section 78.300
of the Nevada Revised Statutes.
The Bylaws provides for the indemnification of all past and present directors
and officers of the Company for all expenses actually and necessarily incurred
by them in connection with the defense of any action, suit or proceeding in
12
<PAGE>
which they, or any of them, are made parties, or a party by reason of being or
having been a director or an officer of the Company, except in relation to
matters as to which any such director or officer shall be adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of a duty or duties.
The Company believes that these provisions will facilitate the Company's ability
to continue to attract and retain qualified individuals to serve as directors
and officers of the Company.
PART F/S FINANCIAL STATEMENT
<PAGE>
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
- INTERIM FINANCIAL STATEMENTS -
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
<PAGE>
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
SEPTEMBER 30, 1999
CONTENTS
PAGE
INTERIM FINANCIAL STATEMENTS
Balance Sheet I
Statement of Operations II
Statement of Stockholders' Equity (Deficit) III
Statement of Cash Flows IV
Notes to Financial Statements V-VIII
<PAGE>
PAGE I
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
INTERIM BALANCE SHEET
(U.S. Funds)
(Unaudited)
ASSETS
CURRENT
Cash $ 25,335
=========
LIABILITIES
CURRENT
Accounts payable $ 341,500
Loans payable (Note 6) 293,880
---------
635,380
---------
STOCKHOLDERS' EQUITY
AUTHORIZED
300,000,000 Common stock at $0.001 par value
ISSUED AND OUTSTANDING
4,892,655 Common shares 25,155
ADDITIONAL PAID-IN CAPITAL 13,345
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE (648,545)
---------
(610,045)
---------
$ 25,335
=========
See accompanying notes to financial statements.
<PAGE>
PAGE II
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
INTERIM STATEMENT OF OPERATIONS
(U.S. Funds)
(Unaudited)
For the From Inception
Nine Month on March 28,
Period Ended 1995 to Sep-
September 30 tember 30
1999 1999
----------- -----------
REVENUE $ -- $ --
EXPENSES 393,475 357,570
----------- -----------
NET LOSS FROM OPERATIONS $ (393,475) $ (357,570)
=========== ===========
Weighted average number of shares outstanding 4,501,438
===========
Basic loss per share $ (0.09)
===========
See accompanying notes to financial statements.
<PAGE>
PAGE III
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
INTERIM STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(U.S. Funds)
(Unaudited)
FOR THE PERIOD FROM THE DATE OF INCEPTION
MARCH 28, 1995 TO SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
# $ $ $
<S> <C> <C> <C> <C>
Inception on March 28, 1995 -- -- -- --
Common stock issued for offers
at $0.029 per share 370,108 -- -- --
Common stock issued for cash
at $0.167 per share 372,469 -- -- --
Net loss for the period ended December 31, 1995 -- -- -- --
--------- ------ ------ --------
Balance, December 31, 1995 742,577 -- -- --
Net loss for the year ended December 31, 1996 -- -- -- (1,500)
--------- ------ ------ --------
Balance, December 31, 1996 742,577 -- -- (1,500)
Net loss for the year ended December 31, 1997 -- -- -- (535)
--------- ------ ------ --------
Balance, December 31, 1997 742,577 -- -- (2,035)
Common stock issued for cash
at $0.178 per share (Note 4) 84,346 -- -- --
Net loss for the year ended December 31, 1998 -- -- -- (3,035)
--------- ------ ------ --------
Balance, December 31, 1998 826,923 -- -- (5,070)
Common stock cancelled (Note 4) (5,623) -- -- --
Common stock cancelled (Note 3) (506,923) -- -- (250,000)
Common stock cancelled (Note 4) (76,722) -- -- --
Common stock issued in exchange
for all issued and outstanding
common shares of MFCC (Note 3) 4,500,000 25,000 (2,000) --
Common stock issued for professional
fees at $0.10 per share (Note 4) 155,000 155 15,345 --
Net loss for the nine months ended
September 30, 1999 -- -- -- (393,475)
--------- ------ ------ --------
Balance, September 30, 1999 4,892,655 25,155 13,345 (648,545)
========= ====== ====== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PAGE IV
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
(A Development Stage Company)
INTERIM STATEMENT OF CASH FLOWS
(U.S. Funds)
(Unaudited)
<TABLE>
<CAPTION>
For the From Inception
Nine Month on March 28,
Period Ended 1995 to Sep-
September 30 tember 30
1999 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from operations $(393,475) $(398,545)
Increase in accounts payable 339,000 341,500
--------- ---------
(54,475) (57,045)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Amount paid for the acquisition of Cynergy shares (250,000) (250,000)
Accounts payable acquired on merger (2,000) (2,000)
--------- ---------
(252,000) (252,000)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 15,500 40,500
Loans payable 293,880 293,880
--------- ---------
309,380 334,380
--------- ---------
INCREASE (DECREASE) IN CASH 2,905 25,335
CASH, beginning of period 22,430 --
--------- ---------
CASH, end of period $ 25,335 $ 25,335
========= =========
SUPPLEMENTAL DISCLOSURES
Interest paid $ -- $ --
========= =========
Income taxes paid $ -- $ --
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PAGE V
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
NOTES TO INTERIM FINANCIAL STATEMENTS
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Mercantile Factoring Credit Online Corp. ("MFCOC" or the "Company")
(formerly Cynergy, Inc.) was incorporated under the laws of the state of
Nevada on March 28, 1995 under the name of Truco, Inc. The shareholders
approved a name change on March 22, 1996, March 18, 1997 and September 13,
1999 to Web Tech, Inc., Cynergy, Inc. and to its present name.
Prior to the Merger (Note 3), the Company's activities had been in the
development of proprietary technology and services using smart and remote
memory cards and wireless and landline networks in the fields of commerce,
publishing and network based systems.
The Company, a development stage company, intends to offer a way for both
money borrowers ("Borrowers") and money lenders ("Lenders") to take
advantage of the global network that the Internet offers. The Company's
main objective is to provide an Internet web-site where Borrowers can post
their offers to borrow money, secured by pledged collateral, primarily
accounts receivable and real estate, and where Lenders can competitively
bid to supply the money, the competition being in the form of the amount
of money the Lender is willing to lend and the interest rate at which the
Lender is willing to supply the money. To accomplish their objective, the
Company is in the process of creating a multilingual online loan exchange
which will act as an Electronic Loan Center for individuals and small to
medium size businesses (the "Online Loan Exchange"). The Online Loan
Exchange will initially be operative only in Europe with North America to
be included when the Company has assessed and complied with North American
Regulating Authorities. The Online Loan Exchange will allow Borrowers to
post their borrowing requirements online and to observe online the amounts
and interest rates that lenders worldwide are willing to lend money to
them.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
(b) Income Taxes
No provision for income taxes has been made due to the inactive
status of the Company. The Company has net operating loss
carry-forwards of approximately $449,000, including Cynergy's net
operating loss carry-forward of $92,000 at the time of merger, which
expire up to 2014. The potential tax benefit of the loss
carry-forwards has been offset in full by a valuation allowance.
<PAGE>
PAGE VI
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
NOTES TO INTERIM FINANCIAL STATEMENTS
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of
revenues and expenses during the reported period. These estimates
are reviewed periodically, and, as adjustments become necessary,
they are reported in earnings in the period in which they become
known.
(d) Basic Loss per Common Share
Basic loss per common share has been calculated based on the
weighted average number of shares of common stock outstanding during
the period.
(e) Unaudited Financial Statements
The accompanying financial statements for the nine month period
ended September 30, 1999 were unaudited and include all of the
adjustments which, in the opinion of management, are necessary for a
fair presentation. Such adjustments are of a normal recurring
nature.
3. BUSINESS COMBINATION
On September 29, 1999, Cynergy and Mercantile Factoring & Credit Corp.
("MFCC") completed their agreement to merge upon the filing of the
Articles of Merger with the Secretary of State of the State of Nevada (the
"Merger").
Pursuant to a separate transaction (prior to the Merger), MFCC bought
506,923 shares of the Company (61.3%) from the shareholders for cash of
$250,000, and immediately upon the closing of the Merger, contributed
those shares to the Company for cancellation.
In accordance with the merger agreement, the Company issued 4,500,000 post
merger shares to the former owner of MFCC in consideration for all of the
issued and outstanding common shares of MFCC. As the former shareholder of
MFCC obtained control (91.97%) of the Company through the share exchange,
this transaction has been accounted for in these financial statements as a
reverse takeover and the purchase method of accounting has been applied.
Under reverse takeover accounting, MFCC is considered to have acquired
Cynergy with the results of Cynergy's operations included in these
financial statements from the date of acquisition. Cynergy is considered
the continuing entity and consequently, the comparative figures are those
of MFCC. MFCC was then merged into Cynergy.
<PAGE>
PAGE VII
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
NOTES TO INTERIM FINANCIAL STATEMENTS
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
4. STOCK TRANSACTIONS
In March 1995, the Company issued 370,108 shares of common stock to
individuals at $0.029 per share for cash.
At the end of 1995, the Company completed a public offering. A total of
372,469 shares of common stock were issued at $0.167 per share. The stock
offering costs were offset against the proceeds of the common stock. On
January 10, 1996, the Company effected a 10 for 1 reverse stock split. On
March 28, 1996, the Company effected a 6 for 1 forward stock split and
changed its par value from $0.01 per share to $0.001 per share.
The authorized shares were 300,000,000 after these amendments. The
financial statements reflect the stock splits on a retroactive basis.
On March 24, 1998, the Company entered into a Rescission Agreement with
the shareholders of Geo Ram, Inc. whereby the shareholders of Geo Ram,
Inc. returned the 6,000,000 shares issued in connection with the Share
Exchange Agreement dated November 30, 1996. The rescission has been
reflected on a retroactive basis.
Per a letter of understanding, dated May 25, 1998, the Company acquired
the rights to purchase a 100% working interest, subject to a 21% royalty
(79% net revenue interest), in oil and gas leases consisting of 960 acres
for a total of $240,000. The leases were located in the San Joaquin
Valley, Kern County, California.
The Company decided not to proceed with the option. No further payments
were made and the option expired. The initial payment of $15,000 was paid
by shareholders who were issued 84,346 shares of common stock at $0.178
per share.
On September 3, 1999, the Company cancelled 5,623 common stock and
credited the paid-in capital for the original par value.
On September 13, 1999, the Company effected a 17.784 for 1 reverse stock
split. The financial statements reflect the stock splits on a retroactive
basis.
On September 22, and 23, 1999, the Company cancelled 506,923, and 76,722,
common stock, respectively, and credited the paid-in capital for the
original par value.
In accordance with the merger agreement (Note 3), the Company issued
4,500,000 common shares at $0.001 per share to the former owner of MFCC in
exchange for all issued and outstanding shares of MFCC.
The Company issued 80,000 and 75,000 common shares at $0.10 per share in
September 1999 as finders' and legal fees, respectively, in connection
with the Merger.
<PAGE>
PAGE VIII
MERCANTILE FACTORING CREDIT ONLINE CORP.
(Formerly Cynergy, Inc.)
NOTES TO INTERIM FINANCIAL STATEMENTS
(U.S. Funds)
(Unaudited)
SEPTEMBER 30, 1999
5. GOING CONCERN
The Company financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. The Company has not established revenues sufficient to cover
its operating costs and allow it to continue as a going concern. The
Company is seeking a merger with an existing, operating company. In the
interim, management is committed to covering all operating and other costs
until a merger is completed.
6. COMMITMENTS
Financing Agreement
On July 30, 1999, the Company entered into an agreement with Worldnet
Connections Corp. ("Worldnet"), a company incorporated under the laws of
the state of Nevada, United States of America. Worldnet agreed to provide
funds up to US$2,500,000, to be issued in multiples of $100,000, upon a 15
day notice by the Company. These funds will be considered as unsecured
loans and will be provided to the Company on an as needed basis. Worldnet
will have the option to immediately transform these loans into
convertible, unsecured, 6% debentures. The holders of the debentures will
have the option at any time after August 31, 1999 to convert such
debentures into common stock of the Company at the rate of 20% of the
Company's issued and outstanding shares after the merger.
These debentures are redeemable at any prior to their maturity dates at a
redemption price equivalent to the principal amount plus accrued and
unpaid interest up to the redemption date.
Subsequently, certain terms of the agreement were amended as follows:
(a) Worldnet removed the limit of funds to be loaned by the Company,
which was $2,500,000;
(b) The Company agreed to allow Worldnet the right of first refusal to
provide funds in multiples of $100,000;
(c) In the event that Worldnet advances the funds, the Company will issue
a 5 year, 8%, unsecured convertible note which is convertible into 60,000
common shares for each $100,000 tranche.
As of September 30, 1999, Worldnet had made advances to the Company
totalling $293,880.
Lease
The Company entered into a sublease agreement with an affiliated company
for the use of its office space. The amount of rent payable is equal to
20% of the total rent paid by that affiliated company (approximately US
$6,200 per month). The lease expires on January 31, 2003.
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year Date-sensitive systems may
recognize the year 2000 as 1900 or some other date resulting in errors
when information using year dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved
<PAGE>
ADVANCED MEDICAL TECHNOLOGIES
RESEARCH CORP.
(A Development Stage Company)
FINANCIAL STATEMENTS
(U.S. Funds)
DECEMBER 31, 1998 and 1997
<PAGE>
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
DECEMBER 31, 1998 and 1997
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT I
FINANCIAL STATEMENTS
Balance Sheets II
Statements of Operations III
Statements of Stockholder's Equity IV
Statements of Cash Flows V
Notes to Financial Statements VI-VII
<PAGE>
PAGE I
JULITO F. LONGKINES
Certified Public Accountant
3160 Steeles Avenue East, Suite 300
Markham, Ontario L3R 3Y2
Telephone - 905-475-2222
Member, American Institute of
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
To the Sole Shareholder of
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
I have audited the balance sheets of ADVANCED MEDICAL TECHNOLOGIES RESEARCH
CORP. (A DEVELOPMENT STAGE COMPANY) as at December 31, 1998 and 1997 and the
statements of operations, stockholder's equity and cash flows for the years then
ended and for the period from inception, July 26, 1996 to December 31, 1998.
These financial statements are the responsibility of the company's management.
My responsibility is to express an opinion on these financial statements based
on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the 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. I believe that my
audits provide a reasonable basis for my opinion.
In my opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1998 and 1997
and the results of its operations and its cash flows for the years then ended
and for the period from inception, July 26, 1996 to December 31, 1998 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the company is a development stage company with no significant
operating revenues to date. Because the company has no significant sources of
revenue, there is substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ JULITO F. LONGKINES
JULITO F. LONGKINES
Certified Public Accountant
Markham, Ontario
September 7, 1999
<PAGE>
PAGE II
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
BALANCE SHEET
(U.S. Funds)
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
-------- --------
CURRENT
Cash $ 22,430 $ 22,965
======== ========
LIABILITIES
CURRENT
Accounts payable $ 2,500 $ --
-------- --------
STOCKHOLDER'S EQUITY
AUTHORIZED
25,000,000 Common stock at $0.001 par value
ISSUED AND OUTSTANDING
25,000,000 Common shares 25,000 25,000
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (5,070) (2,035)
-------- --------
19,930 22,965
-------- --------
$ 22,430 $ 22,965
======== ========
See accompanying notes to financial statements.
<PAGE>
PAGE III
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(U.S. Funds)
<TABLE>
<CAPTION>
From Inception on
For the Years Ended July 31, 1996 to
December 31 December 31
1998 1997 1998
---- ---- ----
<S> <C> <C> <C>
REVENUE $ -- $ -- $ --
EXPENSES 3,035 535 5,070
------- ------- -------
NET LOSS FROM OPERATIONS $(3,035) $ (535) $(5,070)
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PAGE IV
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
(U.S. Funds)
FOR THE PERIOD FROM THE DATE OF INCEPTION
JULY 26, 1996 TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
# $ $ $
<S> <C> <C> <C> <C>
Inception on July 26, 1996 -- -- -- --
Common stock issued for cash 25,000,000 25,000 -- --
Net loss for the period ended December 31, 1996 -- -- -- (1,500)
---------- ------ ---- ------
Balance, December 31, 1996 25,000,000 25,000 -- (1,500)
Net loss for the year ended December 31, 1997 -- -- -- (535)
---------- ------ ---- ------
Balance, December 31, 1997 25,000,000 25,000 -- (2,035)
Net loss for the year ended December 31, 1998 -- -- -- (3,035)
---------- ------ ---- ------
Balance, December 31, 1998 25,000,000 25,000 -- (5,070)
========== ====== ==== ======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PAGE V
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(U.S. Funds)
<TABLE>
<CAPTION>
From Inception on
For the Years Ended July 31, 1996 to
December 31 December 31
1998 1997 1998
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from operations $ (3,035) $ (535) $ (5,070)
Increase in accounts payable 2,500 -- 2,500
-------- -------- --------
Net cash used by operating activities (535) (535) (2,570)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITY
Issuance of common stock for cash -- -- 25,000
-------- -------- --------
INCREASE (DECREASE) IN CASH (535) (535) 22,430
CASH, beginning of year 22,965 23,500 --
-------- -------- --------
CASH, end of year $ 22,430 $ 22,965 $ 22,430
======== ======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid $ -- $ -- $ --
Income taxes paid -- -- --
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PAGE VI
ADVANCED MEDICAL TECHNOLOGIES RESEARCH CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(U.S. Funds)
DECEMBER 31, 1998 and 1997
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
On July 26, 1996, Advanced Medical Technologies Research Corp. ("company")
was incorporated under the laws of the state of Nevada, U.S.A. On the date
of incorporation, 25,000,000 shares of $0.001 par value common stock were
authorized. The company has been inactive since incorporation and is
presently creating an online loan exchange allowing the use of
collectibles as collateral and will act as a combination of an electronic
financial loan centre for individual and factoring purposes, as well as
that of an original pawning and auction centre.
Subsequent to the year-end, the company changed its name to Mercantile
Factoring & Credit Corp.
The company has elected a calendar year-end.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Accounting Method
The company's financial statements are prepared using the accrual
method of accounting.
(b) Income Taxes
No provision for income taxes has been made due to the inactive
status of the company. The company has net operating loss
carry-forwards of approximately $5,000 which expire up to 2013. The
potential tax benefit of the loss carry-forwards has been offset in
full by a valuation allowance.
(c) Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of
revenues and expenses during the reported period. These estimates
are reviewed periodically, and, as adjustments become necessary,
they are reported in earnings in the period in which they become
known.
3. GOING CONCERN
The company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. The company has not established revenues sufficient to cover
its operating costs and allow it to continue as a going concern.
<PAGE>
PAGE VII
4. SUBSEQUENT EVENTS
(a) On July 30, 1999, the company entered into an agreement with
Worldnet Connections Corp. ("Worldnet"), a company incorporated
under the laws of the state of Nevada, United States of America.
Worldnet agreed to provide funds up to US$2,500,000, to be issued in
multiples of $100,000, upon a 15 day notice by the company. These
funds will be considered as unsecured loans and will be provided to
the company on an as needed basis. Worldnet will have the option to
immediately transform these loans into convertible, unsecured, 6%
debentures. The holders of the debentures will have the option at
any time after August 31, 1999 to convert such debentures into
common stock of the company at the rate of 20% of the company's
issued and outstanding shares after the merger (Note 4(b)).
These debentures are redeemable at any time prior to their maturity
dates at a redemption price equivalent to the principal amount plus
accrued and unpaid interest up to the redemption date.
(b) Plan of Merger
The company is presently negotiating a merger with Cynergy, Inc., a
Nevada corporation. Under the proposed merger, Cynergy, Inc. will be
the surviving corporation ("Cynergy"). All outstanding common stock
of the company will be converted into 4,500,000 new Cynergy shares
and the current stockholders of Cynergy will receive 320,000 new
Cynergy shares. This plan of merger is subject to approval of
various parties.
(c) Cancellation and Issuance of Shares
On July 31, 1999, the company cancelled the stock certificate
covering all of the issued and outstanding 25,000,000 shares of
common stock with a par value of $0.001 and returned the amount of
$25,000 to the shareholder. Thereafter, 25,000,000 shares of common
stock with a par value of $0.001 per share were issued for
proprietary software valued at $800,000.
Subsequently, this transaction was rescinded.
PART III
ITEM 1 INDEX TO EXHIBITS
Exhibit No. Exhibit Name
----------- ------------
2.1 Articles of Incorporation of Registrant
2.2 By-laws of Registrant
3.1 Form of Unsecured Convertible Note
6.1 Loan Agreement
6.1a The Merger Agreement
6.2.4 Office Space Lease for principal office: 1250
Boul. Rene-Levesque Ouest, Bureau 2925, Montreal,
Quebec H3B 4W8, Canada.
12 Articles of Merger
ITEM 2 DESCRIPTION OF EXHIBITS
See Item 1 above
13
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MERCANTILE FACTORING CREDIT ONLINE CORP.
Date: November 12, 1999 By: \s\ Dominique M. Bellemare
----------------- ------------------------------
Dominique M. Bellemare
President
14
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that the persons whose signatures
appear below each severally constitutes and appoints Dominique M. Bellemare as
true and lawful attorney-in-fact and agent, with full powers of substitution and
resubstitution, for them in their name, place and stead, in any and all
capacities, to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement, any registration
statement relating to the same offering as this Registration Statement that is
to be effective upon filing pursuant to Section 12 under the Securities Exchange
Act of 1934, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all which said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do,
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
\s\ Dominique M. Bellemare
- -------------------------------
Dominique M. Bellemare
President and Director Date: November 12, 1999
-----------------------
\s\ Jean-Guy Hudon
- -------------------------------
Jean-Guy Hudon
Vice-President and Director Date: November 12, 1999
-----------------------
\s\ Rita S. Dickson
- -------------------------------
Rita S. Dickson
Secretary and Director Date: November 12, 1999
-----------------------
\s\ Yvan Guillemin
- -------------------------------
Yvan Guillemin
Director Date: November 12, 1999
-----------------------
15
<PAGE>
EXHIBIT 2.1
Articles of Incorporation of Mercantile Factoring Credit Online Corp.
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAR 28 1995
5208-95
DEAN HELLER, SECRETARY OF STATE
/s/ Dean Heller
No. ______________
ARTICLES OF INCORPORATION
OF
TRUCO, INC.
FIRST. The name of the corporation is:
TRUCO, INC.
SECOND. Its registered office in the State of Nevada is located at
2533 North Carson Street, Carson City, Nevada 89706 that this corporation may
maintain an office, or offices, in such other place within or without the State
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-laws of said Corporation, and that this Corporation may conduct all
Corporation business of every kind and nature, including the holding of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada.
THIRD. The objects for which this Corporation is formed are: To
engage in any lawful activity, including, but not limited to the following:
(A) Shall have such rights, privileges and powers as may be conferred upon
corporations by any existing law.
(B) May at any time exercise such rights, privileges and powers, when not
inconsistent with the purposes and objects for which this corporation is
organized.
12377
1
<PAGE>
(C) Shall have power to have succession by its corporate name for the
period limited in its certificate or articles of incorporation, and when no
period is limited, perpetually, or until dissolved and its affairs wound up
according to law.
(D) Shall have power to sue and be sued in any court of law or equity.
(E) Shall have power to make contracts.
(F) Shall have power to hold, purchase and convey real and personal estate
and to mortgage or lease any such real and personal estate with its franchises.
The power to hold real and personal estate shall include the power to take the
same by devise or bequest in the State of Nevada, or in any other state,
territory or country.
(G) Shall have power to appoint such officers and agents as the affairs of
the corporation shall require, and to allow them reasonable compensation.
(H) Shall have the power to make By-Laws not inconsistent with the
constitution or laws of the United States, or of the State of Nevada, for the
management, regulation and government of its affairs and property, the transfer
of its stock, the transaction of its business, and the calling and holding of
meetings of its stockholders.
(I) Shall have the power to wind up and dissolve itself, or be wound up
and dissolved.
(J) Shall have the power to adopt and use a common seal or stamp, and
alter the same at pleasure. The use of a seal or stamp by the corporation on any
corporate documents is not necessary. The corporation may use a seal or stamp,
if it desires, but such use or nonuse shall not in any way affect the legality
of the document.
(K) Shall have the power to borrow money and contract debts, when
necessary for the transaction of its business, or for the exercise of its
corporate rights, privileges or franchises
2
<PAGE>
or for any other lawful purpose of its incorporation; to issue bonds, promissory
notes, bills of exchange, debentures, and other obligations and evidences of
indebtedness, payable at a specified time or times, or payable upon the
happening of a specified event or events, whether secured by mortgage, pledge or
otherwise, or unsecured, for money borrowed, or in payment for property
purchased, or acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of the shares of the capital stock of, or
any bonds, securities or evidences of the indebtedness created by, any other
corporation or corporations of the State of Nevada, or any other state or
government, and, while owners of such stock, bonds, securities or evidences of
indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer shares of its
own capital stock, and use therefor its capital, capital surplus, surplus, or
other property or fund.
(N) Shall have power to conduct business, have one or more offices, and
hold, purchase, mortgage and convey real and personal property in the State of
Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia, and any foreign
countries.
(O) Shall have the power to do all and everything necessary and proper for
the accomplishment of the objects enumerated in its certificate or articles of
incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the
3
<PAGE>
objects of the corporation, whether or not such business is similar in nature to
the objects set forth in the certificate or articles of incorporation of the
corporation, or any amendment thereof.
(P) Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or limited, or
joint ventures, in connection with any lawful activities, as may be allowed by
law.
FOURTH. The aggregate number of shares the corporation shall have
authority to issue shall be FIVE MILLION (5,000,000) shares of common stock, par
value one cent ($.01) per share, each share of common stock having equal rights
and preferences.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the By-Laws of this
Corporation, providing that the number of directors shall not be reduced to
fewer than one (1).
The name and post office address of the first Board of Directors shall be
one (1) in number and listed as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Cheryl Mall 2533 N. Carson Street
Carson City, Nevada 89706
SIXTH. The capital stock, after the amount of the subscription
price, or par value, has been paid in, shall not be subject to assessment to pay
the debts of the corporation.
4
<PAGE>
SEVENTH. The name and post office address of the Incorporator
signing the Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Cheryl Mall 2533 N. Carson Street
Carson City, Nevada 89706
EIGHTH. The resident agent for this corporation shall be:
LAUGHLIN ASSOCIATES, INC.
The address of said agent, and, the registered or statutory address of
this corporation in the State of Nevada, shall be:
2533 North Carson Street
Carson City, Nevada 89706
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized:
Subject to the By-Laws, if any, adopted by the Stockholders, to
make, alter or amend the By-Laws of the Corporation.
To fix the amount to be reserved as working capital over and above
its capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole Board, to designate one
(1) or more committees, each committee to consist of one or more of the
Directors of the Corporation, which, to the extent provided by the resolution,
or in the By-Laws of the Corporation, shall have and may exercise the powers of
the Board of Directors in the management of the business and
5
<PAGE>
affairs of the Corporation. Such committee, or committees, shall have such name,
or names, as may be stated in the By-Laws of the Corporation, or as may be
determined from time to time by resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the Stockholders
holding stock entitling them to exercise at least a majority of the voting power
given at a Stockholders meeting called for that purpose, or when authorized by
the written consent of the holders of at least a majority of the voting stock
issued and outstanding, the Board of Directors shall have power and authority at
any meeting to sell, lease or exchange all of the property and assets of the
Corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of Directors deems expedient and for the best
interests of the Corporation.
ELEVENTH. No shareholder shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or other
securities convertible into stock may be issued or disposed of by the Board of
Directors to such persons and on such terms as in its discretion it shall deem
advisable.
TWELFTH. No director or officer of the Corporation shall be
personally liable to the Corporation or any of its stockholders for damages for
breach of fiduciary duty as director or officer involving any act or omission of
any such director or officer; provided, however, that the foregoing provision
shall not eliminate or limit the liability of a director or officer for (i) acts
or omissions which involve intentional misconduct, fraud or a knowing violation
of law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada
6
<PAGE>
Revised Statutes. Any repeal or modification of this Article by the stockholders
of the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director or officer of the Corporation
for acts or omissions prior to such repeal or modification.
THIRTEENTH. This Corporation reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation, in
the manner now or hereafter prescribed by statute, or by the Articles of
Incorporation, and all rights conferred upon Stockholders herein are granted
subject to this reservation.
7
<PAGE>
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 28th day of March, 1995.
/s/ Cheryl Mall
---------------
Cheryl Mall
STATE OF NEVADA )
) SS:
CARSON CITY )
On this 28th day of March, 1995, in Carson City, Nevada, before me, the
undersigned, a Notary Public in and for Carson City, State of Nevada, personally
appeared
Cheryl Mall
Known to me to be the person whose name is subscribed to the foregoing document
and acknowledged to me that she executed the same.
[SEAL] MARK SHATAS /s/ Mark Shatas
---------------
Notary Public
I, Laughlin Associates, hereby accept as Resident Agent for the previously named
Corporation.
3/28/95 /s/ Cheryl Mall
- -------------------------------
Date Service Coordinator
RECEIVED
MAR 28 1995
8
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JAN 10 1996
No. 5208-95
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
TRUCO, INC.
THE UNDERSIGNED President and Secretary of TRUCO, INC., a Nevada
Corporation, pursuant to the provisions of Sections 78.385 and 78.390 of the
Nevada Revised Statutes, for the purpose of amending the Articles of
Incorporation of said Corporation, do hereby certify as follows:
That the Board of Directors of said Corporation at a meeting duly convened
and held on the 4TH day of January, 1996, adopted a resolution to amend the
Articles of Incorporation as follows:
FIRST: Article FOURTH shall be amended to read as follows:
"ARTICLE FOURTH
The aggregate number of shares the Corporation shall have authority
to issue shall be FIFTY MILLION (50,000,000) shares of common stock,
par value one cent ($.01) per share, each share of common stock
having equal rights and preferences."
The foregoing amendments to the Articles of Incorporation were duly
adopted by written consent of the shareholders of the Corporation pursuant to
Section 78.320 of the Nevada Revised Statutes on the 4TH day of January, 1996.
The number of shares of the corporation outstanding and entitled to vote
on the foregoing amendment to the Articles of Incorporation is 220,100; and that
said amendment was approved and consented to by 119,700 shares which represents
more than a 50% majority of
<PAGE>
the issued and outstanding shares of the Corporations common stock.
DATED this 9 day of January, 1996.
The undersigned President and Secretary of the Corporation hereby declare
that the foregoing Certificate of Amendment To The Articles Of Incorporation are
true and correct to the best of their knowledge and belief.
/s/ Jackie Sheahan
---------------------------------
JACKIE SHEAHAN, PRESIDENT
/s/ Benjamin Sheahan
---------------------------------
BENJAMIN SHEAHAN, SECRETARY
STATE OF NEVADA )
) SS:
COUNTY OF CLARK )
On this 9th day of JAN, 1996, before me, the undersigned, a Notary Public,
in and for said State, personally appeared JACKIE SHEAHAN and BENJAMIN SHEAHAN,
who first being duly sworn, did each hereby affirm that they are the President
and Secretary, respectively, of TRUCO, INC., a Nevada Corporation, and that they
did execute the foregoing Amendment to the Articles of Incorporation on behalf
of said Corporation and that such instrument was executed pursuant to a
resolution of the Board of Directors and ratified by more than a 50% majority of
the issued and outstanding shares of the Corporation common stock.
/s/ Nakachi M. Clark
---------------------------------
NOTARY PUBLIC
Residing at Henderson, NV
My commission Expires:
12/14/98
- ----------------------
[SEAL] NAKACHI M. CLARK
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAR 28 1996
DEAN HELLER, SECRETARY OF STATE
/s/ Dean Heller
No. 5208-95
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
TRUCO, INC.
THE UNDERSIGNED President and Secretary of TRUCO, INC., a Nevada
Corporation, pursuant to the provisions of Sections 78.385 and 78.390 of the
Nevada Revised Statutes, for the purpose of amending the Articles of
Incorporation of said Corporation, do hereby certify as follows:
That the Board of Directors of said Corporation at a meeting duly convened
and held on the 22ND day of March, 1996, adopted a resolution to amend the
Articles of Incorporation as follows:
FIRST: Article FIRST shall be amended to read as follows:
"ARTICLE FIRST
The name of the corporation is:
WEB TECH, INCORPORATED"
SECOND: Article Fourth shall be amended to read as follows:
"ARTICLE FOURTH
The aggregate number of shares the Corporation shall have authority
to issue shall be THREE HUNDRED MILLION (300,000,000) shares of
common stock, par value one mil ($.001) per share, each share of
common stock having equal rights and preferences."
There are presently TWO MILLION TWO HUNDRED AND ONE THOUSAND
(2,201,000) one cent ($.01) par value common shares of the
corporation outstanding. Each of the said outstanding shares shall
be and is hereby forward split six (6) shares of the one mil ($.001)
par value common stock for one (1) share of the one cent ($.01) par
value common stock. The Transfer Agent of the corporation shall
cause this forward split of the outstanding shares of the
corporation to be effective as to all transfers of common shares of
the corporation which shall occur after April 1ST, 1996, by issuing
certificates representing six times the number of outstanding shares
tendered for transfer. All new issuances of shares after
<PAGE>
April 1ST, 1996 shall be deemed to give effect to this forward split
of shares."
The foregoing amendments to the Articles of Incorporation were duly
adopted by written consent of the shareholders of the Corporation pursuant to
Section 78.320 of the Nevada Revised Statutes on the 22ND day of March, 1996.
The number of shares of the corporation outstanding and entitled to vote
on the foregoing amendment to the Articles of Incorporation is 2,201,000; and
that said amendment was approved and consented to by 1,197,000 shares which
represents more than a 50% majority of the issued and outstanding shares of the
Corporations common stock.
DATED this 22 day of March, 1996.
The undersigned President and Secretary of the Corporation hereby declare
that the foregoing Certificate of Amendment To The Articles Of Incorporation are
true and correct to the best of their knowledge and belief.
/s/ Jackie Sheahan
---------------------------------
JACKIE SHEAHAN, PRESIDENT
/s/ Bonnie Williams
---------------------------------
BONNIE WILLIAMS,
SECRETARY BY APPOINTMENT
<PAGE>
STATE OF NEVADA )
) SS:
COUNTY OF )
On this 27 day of March, 1996, before me, the undersigned, a Notary
Public, in and for said State, personally appeared JACKIE SHEAHAN and BONNIE
WILLIAMS, who first being duly sworn, did each hereby affirm that they are the
President and Secretary by appointment, respectively of TRUCO, INC., a Nevada
Corporation, and that they did execute the foregoing Amendments to the Articles
of Incorporation on behalf of said Corporation and that such instrument was
executed pursuant to a resolution of the Board of Directors and ratified by more
than a 50% majority of the issued and outstanding shares of the Corporation
common stock.
/s/ Tammy Sedman
---------------------------------
NOTARY PUBLIC
Residing at 10-C Water St.
My commission Expires:
June 5, 1999
- ----------------------
[SEAL] NOTARY PUBLIC
STATE OF NEVADA
County of Clark
TAMMY SEDMAN
My Appointment Expires June 5, 1999
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
APR 16 1997
No. C5208-95
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
WEB TECH, INC.
THE UNDERSIGNED President and Secretary of Web Tech, Incorporated, a
Nevada Corporation, pursuant to the provisions of Sections 78.385 and 78.390 of
the Nevada Revised Statutes, for the purpose of amending the Articles of
Incorporation of said Corporation, do hereby certify as follows:
That the Board of Directors of said Corporation at a meeting duly convened
and held on the 18th day of March, 1997, adopted a resolution to amend the
Articles of Incorporation as follows:
FIRST: Article FIRST shall be amended to read as follows:
"ARTICLE FIRST
The name of the corporation is:
CYNERGY, INC."
The foregoing amendments to the Articles of Incorporation were duly
adopted by written consent of the shareholders of the Corporation pursuant to
Section 78.320 of the Nevada Revised Statutes on the 18th day of March, 1997.
The number of shares of the corporation outstanding and entitled to vote
on the foregoing amendment to the Articles of Incorporation is 19,206,000; and
that said amendment was approved and consented to by 10,782,000 shares which
represents more than a 50% majority of the issued and outstanding shares of the
Corporations common stock.
<PAGE>
DATED this 18th day of March, 1997.
The undersigned President and Secretary of the Corporation hereby declare
that the foregoing Certificate of Amendment To The Articles Of Incorporation are
true and correct to the best of their knowledge and belief.
/s/ Rod Kelley
---------------------------------
PRESIDENT
/s/ Sean Kelley
---------------------------------
SECRETARY BY APPOINTMENT
<PAGE>
________________________)
) SS:
________________________)
On this 18th day of March, 1997, before me, the undersigned, a Notary
Public, in and for said State, personally appeared [ILLEGIBLE] and [ILLEGIBLE],
who first being duly sworn, did each hereby affirm that they are the President
and Secretary by appointment, respectively of Web.Tech, Incorporated, a Nevada
corporation, and that they did execute the foregoing Amendments to the Articles
of Incorporation on behalf of said Corporation and that such instrument was
executed pursuant to a resolution of the Board of Directors and ratified by more
than a 50% majority of the issued and outstanding shares of the Corporation
common stock.
/s/ Donna Wiles
----------------------
NOTARY PUBLIC
Residing at Houston, Texas
--------------
My commission Expires:
November 3, 1997
- ----------------------
[SEAL] DONNA WILES
Notary Public, State of Texas
My Appointment Expires
NOVEMBER 3, 1997
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
SEP 29 1999
No. C5208-95
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
AMENDMENT TO ARTICLES OF INCORPORATION
OF
CYNERGY, INC.
Pursuant to Section 78.320 of the Nevada Revised Statutes, the undersigned
hereby certifies that pursuant to action taken at a duly constituted Special
Meeting of Shareholders of CYNERGY, INC. (the "Corporation") held on the 13th
day of September 1999, the Articles of Incorporation are amended as set forth
hereinafter:
1. Article First of the Articles of Incorporation is hereby amended to
read as follows:
"ARTICLE FIRST
The name of the Corporation is Mercantile Factoring Online Credit
Corp.
2. At the date of the shareholders' meeting, the Corporation had a total
of 14,706,000 shares of common stock issued and outstanding and entitled to
vote. A total of 8,637,000 voted FOR the amendment, -0- shares against the
amendment, and -0- shares abstained.
IN WITNESS WHEREOF, these Articles of Amendment are hereby executed this
22nd day of September 1999.
/s/ George I. Norman III
-------------------------------------
George I. Norman III, President
and Assistant Secretary
<PAGE>
EXHIBIT 2.2
By-laws of Mercantile Factoring Credit Online Corp.
<PAGE>
TRUCO. INC.
BY-LAWS
ARTICLE I MEETINGS OF STOCKHOLDERS
1. Stockholders' Meetings shall be held in the office of the corporation,
at Carson City, NV, or at such other place or places as the Directors shall from
time to time determine.
2. The annual meeting of the stockholders of this corporation shall be
held at 11:00 a.m., on the 28th day of March of each year beginning in 1996, at
which time there shall be elected by the stockholders of the corporation a Board
of Directors for the ensuing year, and the stockholders shall transact such
other business as shall properly come before them.
3. A notice signed by any officer of the corporation or by any person
designated by the Board of Directors, which sets forth the place of the annual
meeting, shall be personally delivered to each of the stockholders of record, or
mailed postage prepaid, at the address as appears on the stock book of the
company, or if no such address appears in the stock book of the company, to his
last known address, at least ten (10) days prior to the annual meeting.
Whenever any notice whatever is required to be given under any article of
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time of the meeting of the
stockholders, shall be deemed equivalent to proper notice.
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4. If a quorum is not present at the annual meeting, the stockholders
present, in person or by proxy, may adjourn to such future time as shall be
agreed upon by them, and notice of such adjournment shall be mailed, postage
prepaid, to each stockholder of record at least ten (10) days before such date
to which the meeting was adjourned; but if a quorum is present, they may adjourn
from day to day as they see fit, and no notice of such adjournment need be
given.
5. Special meetings of the stockholders may be called at anytime by the
President; by all of the directors provided there are no more than three, or if
more than three, by any three Directors; or by the holder of a majority share of
the capital stock of the corporation. The Secretary shall send a notice of such
called meeting to each stockholder of record at least ten (10) days before such
meeting, and such notice shall state the time and place of the meeting, and the
object thereof. No business shall be transacted at a special meeting except as
stated in the notice to the stockholders, unless by unanimous consent of all
stockholders present, either in person or by proxy, all such stock being
represented at the meeting.
6. A majority of the stock issued and outstanding, either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of the stockholders.
7. Each stockholder shall be entitled to one vote for each share of stock
in his own name on the books of the company, whether represented in person or by
proxy.
8. All proxies shall be in writing and signed.
9. The following order of business shall be observed at all meetings of
the stockholders so far as is practicable:
a. Call the roll;
b. Reading, correcting, and approving of the minutes
of the previous meeting;
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c. Reports of officers;
d. Reports of Committees;
e. Election of Directors;
f. Unfinished business; and
g. New business.
ARTICLE II STOCK
1. Certificates of stock shall be in a form adopted by the Board of
Directors and shall be signed by the President and Secretary of the Corporation.
2. All certificates shall be consecutively numbered; the name of the
person owning the shares represented thereby, with the number of such shares and
the date of issue shall be entered on the company's books.
3. All certificates of stock transferred by endorsement thereon shall be
surrendered by cancellation and new certificates issued to the purchaser or
assignee.
ARTICLE III DIRECTORS
1. A Board of Directors, consisting of at least one (1) person shall be
chosen annually by the stockholders at their meeting to manage the affairs of
the company. The Directors' term of office shall be one (1) year, and Directors
may be re-elected for successive annual terms.
2. Vacancies on the board of Directors by reason of death, resignation or
other causes shall be filled by the remaining Director or Directors choosing a
Director or Directors to fill the unexpired term.
3. Regular meetings of the Board of Directors shall be held at 1:00 p.m.,
on the 28th day of March of each year beginning in 1996 at the office of the
company at Carson City, NV, or at such other time or place as the Board of
Directors shall by resolution appoint; special
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<PAGE>
meetings may be called by the President or any Director giving ten (10) days
notice to each Director. Special meetings may also be called by execution of the
appropriate waiver of notice and call when executed by a majority of the
Directors of the company. A majority of the Directors shall constitute a quorum.
4. The Directors shall have the general management and control of the
business and affairs of the company and shall exercise all the powers that may
be exercised or performed by the corporation, under the statutes, the
certificates of incorporation, and the By-Laws. Such management will be by equal
vote of each member of the Board of Directors with each Board member having an
equal vote.
5. A resolution, in writing, signed by all or a majority of the members of
the Board of Directors, shall constitute action by the Board of Directors to
effect therein expressed, with the same force and effect as though such
resolution had been passed at a duly convened meeting; and it shall be the duty
of the Secretary to record every such resolution in the Minute Book of the
corporation under its proper date.
ARTICLE IV OFFICERS
1. The officers of this company shall consist of: a President, one or more
Vice Presidents, Secretary, Treasurer, and such other officers as shall, from
time to time, be elected or appointed by the Board of Directors.
2. The PRESIDENT shall preside at meetings of the Directors and the
Stockholders and shall have general charge and control over the affairs of the
corporation subject to the Board of Directors. He shall sign or countersign all
certificates, contracts and other instruments of the corporation as authorized
by the Board of Directors and shall perform all such other duties as are
incident to his office or are ordered by him by the Board of Directors.
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<PAGE>
3. The VICE PRESIDENT shall exercise the functions of the President during
the absence or disability of the President and shall have such powers and such
duties as may be assigned to him from time to time by the Board of Directors.
4. The SECRETARY shall issue notices for all meetings as required by the
By-Laws, shall keep a record of the minutes of the proceedings of the meetings
of the Stockholders and Directors, shall have charge of the corporate books, and
shall make such reports and perform such other duties as are incident to his
office, or properly required of him by the Board of Directors. He shall be
responsible that the corporation complies with Section 78.105 of the Nevada
Corporation Laws and supplies to the Nevada Resident Agent or Registered Office
in Nevada, any and all amendments to the Corporation's Articles of Incorporation
and any and all amendments or changes to the By-Laws of the Corporation. In
compliance with Section 78.105, he will also supply to the Nevada Resident Agent
or Registered Office in Nevada, and maintain, a current statement setting out
the name of the custodian of the stock ledger or duplicate stock ledger, and the
present and complete Post Office address, including street and number, if any,
where such stock ledger or duplicate stock ledger specified in the section is
kept.
5. The TREASURER shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He shall disburse the
funds of the corporation in payment of the just demands against the corporation.
or as may be ordered by the Board of Directors, making proper vouchers for such
disbursement and shall render to the Board of Directors, from time to time, as
may be required of him, on account of all his transactions as Treasurer and of
the financial condition of the corporation, he shall perform all duties incident
to his office or which are properly required of him by the Board of Directors.
5
<PAGE>
6. The RESIDENT AGENT shall be in charge of the corporation's registered
office in the State of Nevada, upon whom process against the corporation may be
served and shall perform all duties required of him by statute.
7. The salaries of all officers shall be fixed by the Board of Directors
and may be changed from time to time by a majority vote of the Board.
8. Each of such officers shall serve for a term of one (1) year or until
their successors are chosen and qualified. Officers may be re-elected or
appointed for successive annual terms.
9. The Board of Directors may appoint such other officers and agents, as
it shall deem necessary or expedient, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
ARTICLE V INDEMNIFICATION OF OFFICERS AND DIRECTORS
1. The corporation shall indemnify any and all of its Directors and
Officers, and its former Directors and Officers, or any person who may have
served at the Corporations request as a Director or Officer of another
corporation in which it owns shares of capital stock or of which it is a
creditor, against expenses actually and necessarily incurred by them in
connection with the defense of any action, suit or proceeding in which they, or
any of them, are made parties, or a party, by reason of being or having been
Director(s) or Officer(s) of the corporation, or of such other corporation,
except, in relation to matters as to which any such Director or Officer or
former Director or Officer or person shall be adjudged in such action, suit
or proceeding to be liable for negligence or misconduct in the performance of
duty. Such
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<PAGE>
indemnification shall not be deemed exclusive of any other rights to which those
indemnified may be entitled, under By-Law, agreement, vote of stockholders or
otherwise.
ARTICLE VI AMENDMENTS
1. Any of these By-Laws may be amended by a majority vote of the
stockholders at any annual meeting or at any special meeting called for that
purpose.
2. The Board of Directors may amend the By-Laws or adopt additional
By-Laws, but shall not alter or repeal any By-Laws adopted by the stockholders
of the company.
********************************************************************************
CERTIFIED TO BE THE BY-LAWS OF:
TRUCO. INC.
BY: /s/ Benjamin Sheahan
-----------------------------
Secretary
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<PAGE>
EXHIBIT 3.1
Form of Unsecured Convertible Note
<PAGE>
UNSECURED CONVERTIBLE NOTE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO THE
UNSECURED CONVERTIBLE NOTES (THE "NOTES") LOAN AGREEMENT BETWEEN MERCANTILE
FACTORING & CREDIT CORP. AND WORLDNET CONNECTIONS, INC, DATED JULY 30, 1999, AND
MAY BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF ONLY IN ACCORDANCE WITH THE
TERMS THEREOF.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") , OR ANY STATE SECURITIES
LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR (2) THE ISSUER RECEIVES AN OPINION OF COUNSEL TO THE HOLDER
OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
ISSUER, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
Issue Date:________________________, 1999 (the "Issue Date")
Principal Amount: U.S.$________________________________(the "Principal Amount")
FOR VALUE RECEIVED, MERCANTILE FACTORING & CREDIT CORP., a Nevada
corporation (the "Company"), promises to pay to WORLDNET CONNECTION, INC. or its
assigns (the "Holder"), the Principal Amount in lawful money of the United
States of America together with interest in the amounts and at the times set out
below:
(i) on the first (1st) business day following the fifth
anniversary of the Issue Date ("Anniversary Date") or on such
earlier date as the Principal Amount hereof may become due in
accordance with the provisions and subject to the conditions
contained herein; and
(ii) to pay interest on the Principal Amount hereof at rate of
eight percent (8%) per annum ("Interest Rate"), compounded
annually, from the Issue Date up to the first (1st) business
day following the Anniversary Date or on such earlier date as
the Principal Amount hereof may become due in accordance with
the provisions and subject to the conditions contained herein.
The Company will pay or cause to be paid to the Holder all sums becoming
due as principal of and premium, if any, and interest (including interest on
amounts in default) on this
<PAGE>
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Note, at the address set forth on the books of the Company (or at such other
place as the Holder may designate for such purpose from time to time by written
notice to the Company), without presentation of this Note or making any notation
thereon. Such payments shall be made either by cheque or bank draft or other
means acceptable to Holder payable at par in Nevada, at the office of the
Holder, located at 1495 Ridgeview Drive, Suite 220, Reno, Nevada 89509, or at
such other place as shall be designated in writing for such purpose.
At any time after the date hereof, the Company shall have the right, at
its entire discretion, to redeem all or any of the Note prior the Anniversary
Date at a redemption price equivalent to the Principal Amount plus accrued and
unpaid interest to the date specified for redemption.
At any time after the close of business on the last business day of August
1999 (the "Conversion Date"), the principal amount of this Note is convertible,
in whole, into fully paid and non-assessable common shares of the Company's
$.001 par value common stock (the "Company Shares"), at a conversion rate of
sixty (60) Company Shares for each one hundred dollars ($100.00) in principal,
in the manner specified herein and subject to adjustment as set forth below.
Should this Note be converted as provided for herein, no interest shall accrue
or be payable in respect of the Principal Amount of this Note. Conversion of
this Note shall be determined as follows:
(i) divide the Principal Amount by one hundred (100) and then,
(ii) multiply the quotient by sixty (60), the product of which is the
amount of Company Shares to be issued to the Holder.
In the event that this Note is converted as specified herein, the Holder
shall surrender this Note to the Company at its principal office, or its
registered office, together with the conversion form attached hereto, duly
executed by the Holder in form and executed in a manner satisfactory to the
Company. Thereupon the Holder shall be entitled to be entered into the books of
the Company, on the Conversion Date, as the holder of the number of Company
Shares into which the Principal Amount of this Note is converted into in
accordance with the provisions hereof and, as soon as practicable thereafter,
the Company shall deliver to the Holder the certificates for such Company
Shares. The Company Shares received by the Holder as a result of the conversion
of this Note shall qualify to receive dividends declared in favour of
shareholders of record on and after the Conversion Date and from such date such
Company Shares will for all purposes be and be deemed to be issued and
outstanding as fully paid and non-assessable Company Shares. The Company shall
not be required to issue fractional Company Shares upon the conversion of this
Note pursuant hereto. The Company covenants with the Holder that it will at all
times reserve and keep available out of its authorized Company Shares, solely
for the purpose of issue upon conversion of this Note as provided herein. The
Company covenants with the Holder that all Company Shares which shall be so
issuable shall be duly and validly issued as fully paid and non-assessable.
The price at which this Note is convertible and the number of Company
Shares
<PAGE>
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deliverable upon the conversion of the Note will be subject to adjustment in the
events and in the manner following:
(1) If and whenever at any time prior to the Conversion Date, the Company:
(i) subdivides or redivides the outstanding Company Shares into a
greater number of Company Shares;
(ii) reduces, combines or consolidates the outstanding Company Shares
into a smaller number of Company Shares; or
(iii) issues Company Shares or securities exchangeable for or convertible
into Company Shares to the holders of all or substantially all of
the outstanding Company Shares by way of a stock dividend (other
than the issue of Company Shares to holders of Company Shares
pursuant to their exercise of options or other entitlement to
receive dividends in the form of Company Shares in lieu of dividends
paid in the ordinary course on the Company Shares),
(any of such events being called a "Share Reorganization") the number of
Company Shares to be issued will be adjusted by multiplying such number by
a fraction, the denominator of which is the number of Company Shares
outstanding on such date before giving effect to such Share Reorganization
and the numerator of which is the total number of Company Shares
outstanding immediately after the effective date, in the case of
subsections (i) and (ii) above and the record date in the case of
subsection (iii), including in the case where securities exchangeable for
or convertible into Company Shares are distributed, the number of Company
Shares that would have been outstanding had such securities been exchanged
for or converted into Company Shares on such record or effective date.
Such adjustment will be made successively whenever any event referred to
in this subsection (1) occurs.
(2) If and whenever at any time prior to the Conversion Date there is a
reclassification or change of outstanding Company Shares, other than a
subdivision or consolidation described above, or a consolidation, merger,
reorganization or amalgamation of the Company with or into another body
corporate, or a sale of all or substantially all of the assets of the
Company followed immediately by a liquidation or winding-up of the Company
and distribution of its assets to its shareholders, the Holder will be
entitled to receive and will accept, upon any conversion hereunder at any
time after the effective date thereof, in lieu of the number of Company
Shares to which it was theretofore entitled on conversion, the kind and
number of Company Shares or other securities or money or other property
that such Holder would have been entitled to receive as a result of such
reclassification, change, consolidation, merger, reorganization,
amalgamation or winding-up, if, on the effective date thereof it had been
the registered holder of the number of Company Shares to which it was
theretofore entitled upon conversion, subject to adjustment thereafter in
accordance with provisions which are the same, as nearly as possible, to
those contained above.
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(3) In any case in which these provisions require an adjustment which shall
become effective immediately after a record date for an event referred to
herein, the Company may defer, until the occurrence of such event, issuing
to the Holder converting after such record date and before the occurrence
of such event, the additional Company Shares issuable upon such conversion
by reason of the adjustment required by such event before giving effect to
such adjustment; provided, however, that the Company will deliver to the
Holder an appropriate instrument evidencing the Holder's right to receive
such additional Company Shares upon the occurrence of the event requiring
such adjustment and the right to receive any distributions made on such
additional Company Shares declared in favour of holders of record of
Company Shares on and after the Conversion Date or such later date as the
Holder would, but for the provisions of this subsection (3) have become
the holder of record of such additional Company Shares hereunder.
(4) The adjustments provided for herein are cumulative and will apply to
successive subdivisions, redivisions, reductions, combinations,
consolidations, distributions, issues or other events resulting in any
adjustment under the provisions hereof.
(5) In the event of any question arising with respect to the adjustments
provided herein, such question will be conclusively determined by an
accounting firm appointed by the Company and acceptable to the Holder, and
the accountants from such firm will have access to all necessary records
of the Company and such determination will be binding upon the Company and
the Holder.
(6) At any time prior to the Conversion Date, the Company will give at least
fourteen (14) days' prior written notice of any subdivision, redivision,
reduction, combination, consolidation, distribution, issue or other events
resulting in any adjustment under the provisions hereof and will not
during the period of such notice close the transfer books for its Company
Shares so as to prevent the Company Shares resulting from the conversion
of this Note to be voted.
(7) If any of the events referred to in subsections (1) or (2) hereof occurs,
the Company will promptly file with the Holder a certificate of the
Company, setting forth a brief statement of the facts and the consequent
adjustment required to be made by the provisions of this Note with respect
to conversion of this Note.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company, duly endorsed
or accompanied by a written instrument of transfer duly executed by the Holder
of this Note. Payment of or on account of principal and interest on this Note
shall be made only to or upon the order in writing of the Holder.
Upon reasonable request by the Holder and without expense to the Holder,
the Company will exchange the Note held by the Holder for other Notes of
different denominations.
If this Note is placed in the hands of an attorney for collection, or is
collected through
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court proceedings, or through other legal proceedings, the Company promises to
pay an additional reasonable amount as attorneys' fees.
The Company hereby waives presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note.
No delay or failure on the part of the Holder hereof to exercise any power
or right shall operate as a waiver hereof, and such rights and powers shall be
deemed continuous, nor shall a partial exercise preclude full exercise thereof;
and no right or remedy of the Holder hereof shall be deemed abridged or modified
by any source of conduct, and no waiver thereof shall be predicated thereon, nor
shall failure to exercise any such power or right subject the Holder hereof to
any liability.
Any one or more of the following shall constitute an "Event of Default" as
the term is used herein:
(a) default occurring in the payment of interest on this Note when the
same shall become due and such default continues for more than
fifteen (15) days; or
(b) default occurring in any payment of principal of this Note at the
expressed or any accelerated maturity date or at any date fixed for
prepayment and such default continues for more than fifteen (15)
days; or
(c) default is made in the payment of the principal of or interest on
any indebtedness of the Company for borrowed money as and when the
same shall become due and payable by the lapse of time, by
declaration, by call for redemption or otherwise, and such default
continues beyond the period of grace, if any, allowed with respect
thereto; or
(d) default or the happening of any event occurring under any indenture,
agreement or other instrument under which the Company has borrowed
money and such default or event continues for a period of time
sufficient to permit the acceleration of the maturity of any
indebtedness of the Company outstanding thereunder; or
(e) if any representation or warranty made by the Company in any
statement or certificate furnished by the Company to the Holder at
the time of the making of this Note or at any time in respect of
this Note is untrue or misleading in any material respect as of the
date of the issuance or making thereof; or
(f) default is made in the performance of any of other covenant,
agreement or condition herein contained or in any other agreement to
which the Holder and the Company are a party and such default shall
continue for fifteen (15) days after written notice thereof to the
Company by the Holder; or
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(g) the Company ceases or threatens to cease to carry on the business
currently being carried on by it or a substantial portion thereof or
makes or agrees to make an assignment, disposition or conveyance,
whether by way of sale or otherwise, of its assets in bulk or an
order is made for the winding-up of the Company; or
(h) the Company becomes insolvent or admits in writing its inability to
pay its debts as they mature or makes an assignment for the benefit
of creditors, or the Company applies for or consents to the
appointment of a trustee or receiver for the Company or for any part
of its property or a proposal is made by the Company or a petition
is filed by or against the Company or an authorized assignment is
made by the Company or an application is made under the Companies'
Creditors Arrangement Act or any successor or similar legislation;
or
(i) any one or more of a trustee, receiver and manager, custodian,
liquidator or other person with similar powers is appointed for the
Company or for any material part of its property and is not
discharged within thirty (30) days after such appointment; or
(j) final judgment or judgments for the payment of money aggregating in
excess of Ten Thousand Dollars ($10,000) is or are outstanding
against the Company or against any property or assets of the Company
and any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of thirty
(30) days from the date of its entry; or
(k) any material part of the property of the Company is seized or
otherwise attached by anyone pursuant to any legal process or other
means, including distress, execution or any other step or proceeding
with similar effect, and the same is not released, bonded,
satisfied, discharged or vacated within the period of ten (10) days
less than such period as would permit such property or any part
thereof to be sold pursuant thereto; or
(l) bankruptcy, reorganization, arrangement or insolvency proceedings,
or other proceedings for relief of debtors are instituted by or
against the Company and, if instituted against the Company, are
consented to or are not dismissed or stayed pending the resolution
of the matters in dispute within sixty (60) days after such
institution; or
(m) the Company takes any corporate proceedings for its dissolution or
liquidation or amalgamation with another company or if the corporate
existence of the Company shall be terminated by expiration,
forfeiture or otherwise.
When any Event of Default has occurred, or if the holder of any note or of
any other evidence of indebtedness of the Company gives any notice or takes any
other action with respect to a claimed default, the Company shall give written
notice within five (5) business days of such event to the Holder.
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When any Event of Default described in subsections (a) through (j)
inclusive has happened and is continuing, the Holder may, by notice in writing
sent by registered or certified mail to the Company, declare the entire
principal and all interest accrued on this Note to be and this Note shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived.
When any Event of Default described in subsection (k) has occurred, then this
Note shall immediately become due and payable without presentment, demand or
notice of any kind.
All notices, requests, consents and other communications hereunder shall
be in writing and shall be delivered by hand, by facsimile, by overnight mail or
mailed by first class certified or registered mail, return receipt requested,
posted prepaid, as follows:
Company: Mercantile Factoring & Credit Corp..
1250 Boul. Rene-Levesque Ouest,
Bureau 2925
Montreal, Quebec H3B 4W8
Attention: Mr. Dominique M. Bellemare, President
Facsimile No.: (514) 937-1994
Holder: Worldnet Connections, Inc.
1495 Ridgeview Drive, Suite 220
Reno, Nevada 89509
Attention: Rita S. Dickson, Secretary and Treasurer
Facsimile No.: (775) 827-6311
(or at such other address as may have been furnished in writing by either party
to the other), and such notices, requests, consents or other communications
shall be deemed to have been received when delivered, on the business day after
the date of the facsimile (with receipt confirmed), on the fifth day after being
mailed by overnight mail or on the third day after being mailed by first class
certified or registered mail, as the case may be.
For all purposes, "Holder" shall include the Holder's successors, assigns
or other nominees or attorneys duly appointed by instrument in writing.
<PAGE>
- 8 -
IN WITNESS WHEREOF the Company has executed and delivered this Note
on the date first set out above.
MERCANTILE FACTORING & CREDIT CORP.
by: _________________________________
Name
Title
by: _________________________________
Name
Title
<PAGE>
CONVERSION FORM
TO:
The undersigned registered holder of the Note to which this Conversion
Form is attached hereby irrevocably elects to convert such Note into $.001 par
value common stock of Mercantile Factoring & Credit Corp. (the "Company Shares")
in accordance with the terms of such Note and directs that the Company Shares
issuable and deliverable upon the conversion be issued and delivered to the
person indicated below. (If Company Shares are to be issued in the name of a
person other than the Holder, all requisite transfer taxes must be tendered by
the undersigned.)
Dated:
(Signature of Registered Holder)
(Print name in which Company Shares issued on conversion are to be issued,
delivered and registered)
Name
(Address) (City, Province, and Postal Code)
Name of guarantor:
Authorized signature:
<PAGE>
EXHIBIT 6.1
Loan Agreement
<PAGE>
Loan Agreement
This Loan Agreement (the "Agreement") is made and entered into on July 30,
1999, by and between Mercantile Factoring & Credit Corp., a Nevada corporation,
having its principal place of business at 1250 Boul. Rene Levesque Ouest, Bureau
#2925, Montreal, Quebec H3B 4W8, Canada (the "Borrower" or "MFC"), and Worldnet
Connections Inc., a Nevada corporation, having its registered office at 1495
Ridgeview Drive, Suite 220, Reno, Nevada 89509 (the "Creditor" or "Worldnet").
The Borrower and Creditor are referred to collectively as the "Parties".
Recitals
WHEREAS, Borrower has requested that the Creditor make loans and/or
otherwise extend credit to or on behalf of Borrower to finance Borrower's
business;
WHEREAS, Creditor is willing to make such loans and/ or extensions of
credit to Borrower upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual promises herein contained,
and each intending to be legally bound thereby, the Parties hereto agree as
follows:
1 Definitions.
1.1 "Borrower" has the meaning set forth in the preface above.
1.2 "Creditor" has the meaning set forth in the preface above.
1.3 "Funds" means the capital needed by MFC to finance MFC's business in
multiples of one hundred thousand ($100,000) dollars.
1.4 "MFC" has the meaning set forth in the preface above.
1.5 "Worldnet" has the meaning set forth in the preface above.
2 Basic Transaction.
2.1 Borrowing and Lending Funds. On and subject to the terms and
conditions of this Agreement, the Borrower agrees to borrow from the Creditor,
and the Creditor agrees to lend to the Borrower (in multiples of one hundred
thousand ($100,000) dollars) the Funds on an as-needed basis.
3 Representations and Warranties of the Borrower.
3.1 Principal Place of Business. The principal place of business of the
Borrower is 1250 Boul. Rene Levesque Ouest, Bureau #2925, Montreal, Quebec H3B
4W8, Canada.
3.2 Use of Proceeds. The borrowed Funds contemplated hereunder shall be
used for legal and proper corporate purposes.
3.3 Organization of the Borrower. The Borrower is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
3.4 Authorization of Transaction. The Borrower has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of the Borrower have duly
authorized the execution, delivery, and performance of this
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Agreement by the Borrower. This Agreement constitutes the valid and legally
binding obligation of the Borrower, enforceable in accordance with its terms and
conditions.
3.5 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Borrower is subject or any provision
of the charter or bylaws of the Borrower or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Borrower is a party or by which it is bound. The
Borrower does not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement.
4 Representations and Warranties of the Creditor.
4.1 Principal Place of Business. The principal place of business of the
Creditor is 1495 Ridgeview Drive, Suite 220, Reno, Nevada 89509.
4.2 Organization of the Creditor. The Creditor is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.3 Authorization of Transaction. The Creditor has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of the Creditor have duly
authorized the execution, delivery, and performance of this Agreement by the
Creditor. This Agreement constitutes the valid and legally binding obligation of
the Creditor, enforceable in accordance with its terms and conditions.
4.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Creditor is subject or any provision
of the charter or bylaws of the Creditor or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Creditor is a party or by which it is bound. The
Creditor does not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement.
5 Covenants. The Parties agrees as follows:
5.1 General. Each of the Parties will use its reasonable best efforts to
take all action and do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement.
5.2 Notices. The Creditor agrees to provide Funds to the Borrower upon
being notified by the Borrower fifteen (15) days in advance and in accordance to
Section 6.8 herein.
5.3 Availibility of Funds. Subject to Section 5.6, the Creditor agrees to
provide Funds to the Borrower upon Borrower's request.
5.4 Request for Funds. The Borrower agrees that all request for Funds
shall be in
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<PAGE>
multiples of one hundred thousand ($100,000) dollars.
5.5 Unsecured Convertible Note. The Borrower shall execute an Unsecured
Convertible Note ("Unsecured Note"), the form of which is annexed hereto as
Exhibit A, with a five (5) year term that bears interest at eight (8%) percent
per annum. Each $100,000 Unsecured Note will be convertible at the discretion of
the Creditor into 60,000, $.001 par value common shares of the Borrower.
5.6 Right of First Refusal. The Borrower agrees that Creditor shall have a
right of first refusal on all of Borrower's request for Funding.
6 Miscellaneous.
6.1 Waiver. Failure to insist upon strict compliance with any term or
condition of this Agreement shall not be deemed a waiver of such term or
condition, nor shall any waiver or relinquishment of any right or power at any
one or more times be deemed a waiver or relinquishment of such right or power at
any other time.
6.2 Severability. If any clause or provision of this Agreement shall be
held to be unenforceable by any court, the remaining clauses and provisions
shall be unaffected and shall continue in full force and effect. It is the
desire and intent of the parties to this Agreement that the provisions of this
Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
6.3 Agreement Binding on Successors. This Agreement shall be binding upon
the parties, their legal representatives, heirs, successors and assigns.
6.4 Entire Agreement; Modification. This Agreement contains the entire
understanding between the Parties as to the their obligations, and all prior
oral discussions, compensation understandings, negotiations and writings
notwithstanding, this Agreement constitutes the Parties' sole source of rights
and duties with respect to their obligations. This Agreement may not be changed
orally, but only by agreement in writing expressly identifying itself as an
amendment to this Agreement and signed by the Parties.
6.5 Governing Law. This Agreement shall be governed, construed and
enforced in accordance with the domestic laws of the State of Nevada without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Nevada or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Nevada.
6.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but which together shall constitute one and
same instrument.
6.7 Construction. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Debtor and the Creditor and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Neither the drafting history nor the negotiating
history of this Agreement shall be used or referred to in connection with the
construction or interpretation of this Agreement. Any reference to any federal,
state, local, provincial or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation.
6.8 Notices. All notices, requests, demands, and other communications to
be given pursuant to the terms of this Agreement shall be in writing and shall
be deemed to have been duly given if delivered, mailed by certified or
registered mail (postage prepaid), shipped and
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<PAGE>
receipted by express courier service (charges prepaid), or mailed first class
(postage prepaid):
If to the Debtor: Copy to:
Dominique M. Bellemare, President
Mercantile Factoring & Credit Corporation, "NONE"
1250 Boul. Rene Levesque Ouest, Suite #2925,
Montreal, Quebec H3B 4W8, Canada
If to the Creditor: Copy to:
Rita S. Dickson, President,
Worldnet Connections, Inc. "NONE"
1495 Ridgeview Drive, Suite 220
Reno, Nevada 89509 .
Any party may change its address by prior written notice to the other
parties.
6.9 Third Party Beneficiaries. There are no third party beneficiaries of
this Agreement.
6.10 Headings. The headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be part of this Agreement
and shall not be referred to in connection with the construction or
interpretation of this Agreement.
6.11 Further Actions. Each party hereto shall execute and/or cause to be
delivered to the other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request to
effectuate the intent and purposes of this Agreement.
6.12 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this Agreement
is brought against either party to this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).
6.13 Unsecured Loan. The Parties agree that the Funds will be unsecured
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Mercantile Factoring & Credit Corp. Worldnet Connections Inc.
by: /s/ Dominique M. Bellemare by: /s/ Rita S. Dickson
---------------------------- ------------------------------
Dominique M. Bellemare Rita S. Dickson
President Secretary
4
<PAGE>
EXHIBIT 6.1a
The Merger Agreement
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of September 22, 1999 by and among
Mercantile Factoring & Credit Corp., a Nevada corporation with its principal
offices located at 1025 Ridgeview Drive, suite #400, Reno, Nevada 89509,
("MFC"), Cynergy, Inc., a Nevada corporation with its principal offices located
at 149 East 900 South, Salt Lake City, Utah 84111, (the "Surviving Corporation"
or "CYNG" ) (MFC and CYNG are collectively referred to herein as the "Parties").
WHEREAS, the respective Boards of Directors of CYNG and MFC deem it
advisable to merge MFC into CYNG ( the "Merger") pursuant to this Agreement and
Articles of Merger to be executed by each Company ("Articles of Merger"),
whereby the holders of shares of common stock of each Company outstanding at the
Effective Date (as hereinafter defined below) of the Merger will have the right
to receive shares of CYNG common stock, $.001 par value, post-split, ("New CYNG
Shares") in the manner and in such amount as is set forth in Section 1 hereof
and upon the terms and conditions otherwise set forth in this Agreement; and
WHEREAS, to effectuate the foregoing, the Parties desire to adopt a plan
of reorganization in accordance with the provisions of Section 368 (a)(1)(B) of
the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and for the purpose of stating the terms and
conditions of the Merger, the mode of carrying the same into effect, the manner
of converting the shares of each Company issued and outstanding immediately
prior to the Effective Date into New CYNG Shares (as herein defined below), and
such other details and provisions as are deemed desirable, the Parties hereto,
severally and jointly, have agreed, and do hereby agree, subject to the terms
and conditions hereinafter set forth as follows:
1 Merger.
1.1 Execution of Articles of Merger. Subject to the provisions of this
Agreement, the Articles of Merger with respect to the Merger shall be executed
and acknowledged by CYNG and MFC and thereafter delivered to the Secretary of
State of the State of Nevada for filing, as provided by the Nevada Revised
Statute, as soon as practicable on or after the Closing Date (as defined in
Section 8 herein) of such Merger. The Merger shall become effective upon the
completion of the filing of the Articles of Merger with the Secretary of State
of the State of Nevada ( the "Effective Date"). At the Effective Date, the
separate existence of MFC shall cease and MFC shall be merged with and into CYNG
and CYNG shall be the Surviving Corporation upon the consummation of the Merger.
1.2 Consummation of the Merger. As soon as practicable after the approval
of the Merger by the Parties' shareholders, CYNG and MFC will cause such Merger
to be consummated in accordance with applicable law, subject to the conditions
hereinafter set forth.
1.3 Conversion of Shares of MFC/CYNG. At the Effective Date, each issued
and outstanding share of MFC common stock with $.001 par value ("MFC
Shares")(currently 25,000,000 MFC Shares are issued and outstanding) shall be
converted into New CYNG Shares, at the ratio of 0.18 New CYNG Shares to one (1)
MFC Share. By virtue of such Merger and without any action on the part of the
holder thereof, prior shareholders of MFC Shares will hold 4,500,000 New CYNG
Shares and current CYNG shareholders will hold 314,377 New CYNG Shares in
accordance with Section 2.1.3 (ii), herein. The 4,500,000 New CYNG Shares to be
issued in the transaction to MFC shareholders shall be "restricted securities"
(as defined by Rule 144 of the Securities Act of 1933, as amended("'33 Act")).
1
<PAGE>
1.4 Exchange of Certificates. After the Effective Date, each holder of a
certificate evidencing outstanding MFC Shares, upon surrender of the same to
Pacific Stock Transfer Company located at 5844 South Pecos Road, Suite D, Las
Vegas, Nevada 89193, (the "Transfer Agent") or such other agent or agents as
shall be appointed by CYNG, shall be entitled to receive in exchange therefor a
certificate or certificates evidencing the number of full New CYNG Shares for
which the MFC Shares represented by the certificate or certificates so
surrendered shall have been exchanged as provided in this Section 1.4. As soon
as practicable after the Effective Date, the Transfer Agent will send a notice
and transmittal form to each holder of an outstanding certificate evidencing MFC
Shares immediately prior to the Effective Date which is to be exchanged for New
CYNG Shares as provided in Section 1.3 herein, advising such shareholder of the
terms of the exchange effected by such Merger and the procedure for surrendering
to the Transfer Agent (which may appoint forwarding agents) such certificate for
exchange into one or more certificates of New CYNG Shares. Until so surrendered,
each outstanding certificate which, prior to the Effective Date, represented MFC
Shares (other than shares previously held by dissenting shareholders) will be
deemed for all corporate purposes of CYNG to evidence ownership of the number of
full New CYNG Shares for which the MFC Shares represented thereby were
exchanged; provided, however, that until such outstanding certificates formerly
evidencing MFC Shares are so surrendered, no dividend payable to holders of
record of New CYNG Shares as of any date subsequent to the Effective Date or any
cash in lieu of any fraction of New CYNG Shares payable pursuant to Section 1.5
herein shall be paid to the holder of such outstanding certificates in respect
thereof. After the Effective Date there shall be no further registry of
transfers on the records of MFC of MFC Shares and if a certificate evidencing
such shares is presented to CYNG, it shall be canceled and exchanged for a
certificate evidencing New CYNG Shares as provided in Section 1 herein.
1.5 No Fractional Shares. Neither certificates nor scrip for fractional
New CYNG Shares will be issued, rather each fractional share resulting from
converting the MFC Shares to New CYNG Shares pursuant to Section 1.3 herein,
shall be rounded up to a full New CYNG Share.
1.6 Certificate of Incorporation and By-laws. The Certificate of
Incorporation and ByLaws of CYNG, as amended, as in effect immediately prior to
the Effective Date of the Merger, shall continue to be the Certificate of
Incorporation and By-laws of CYNG, until they shall thereafter be duly altered,
amended or repealed.
2 Representations and Warranties.
2.1 Representations and Warranties of CYNG. CYNG represents and warrants
to MFC that the statements contained in this Section 2.1 are correct and
complete as of the date of this Agreement and will be correct and complete in
all material respects as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 2.1), except as set forth in the disclosure schedule accompanying this
Agreement and initiated by the Parties (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged in sections corresponding to the lettered
and numbered sections contained in this Section 2.1.
2.1.1 Organization, Qualification, and Corporate Power.
(i) CYNG is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Nevada and has the corporate
power to own its property and to carry on its business as now conducted. The
nature of the business now conducted by
2
<PAGE>
CYNG, the character of the property owned by it, or any other state of facts
does not require CYNG to be qualified to do business as a foreign corporation in
any jurisdiction.
(ii) CYNG has no subsidiaries or affiliates (as that term is
used in the regulations promulgated under the Securities Act of 1933, as amended
(the " '33 Act") ).
2.1.2 Authorization of Transaction. CYNG has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of CYNG, and, except for the approval of CYNG's shareholders, no other
corporate proceedings on the part of CYNG are necessary to authorize this
Agreement and the transactions contemplated hereby.
2.1.3 Capitalization.
(i) The total authorized capital stock of CYNG consists of
300,000,000 shares of common stock with $.001 par value ("CYNG Shares"). As of
the date hereof, 14,606,000 CYNG Shares are issued and outstanding. All of said
common stock have been duly and validly issued and are fully paid and
non-assessable.
(ii) On or before the Closing Date, CYNG shall effect a
reverse stock split, of all CYNG Shares that are issued and outstanding, at a
ratio of 17.784 issued and outstanding CYNG Shares for each one (1) New CYNG
Share. Subsequently, prior CYNG shareholders will hold 821,300 shares of New
CYNG Shares.
(iii) There are, and on the Closing Date there will be, no
outstanding subscriptions, options, warrants, contracts, calls, puts,
agreements, demands or other commitments or rights of any type to purchase or
acquire any securities of CYNG, nor are there outstanding securities of CYNG
which are convertible into or exchangeable for any CYNG Shares or New CYNG
Shares, and CYNG has no obligation of any kind to issue any additional
securities.
2.1.4 Noncontravention. To the knowledge of any director or officer
of CYNG, neither the execution and delivery of this Agreement, nor compliance
with the terms and provisions hereof, including without limitation the
consummation of the transactions contemplated hereby, will violate any statute,
regulation or ordinance of any governmental authority, or conflict with or
result in the breach of any term condition or provisions of the Articles of
Incorporation or Bylaws of CYNG, or of any agreement, deed, contract, mortgage,
indenture, writ, order decree, legal obligation or instrument to which CYNG is a
party or by which it or any of its respective assets or properties are or may be
bound, or constitute a default (or an event which, with the lapse of time or the
giving of notice, or both, would constitute a default) thereunder, or result in
the creation or imposition or any lien, charge or encumbrance, or restriction of
any nature whatsoever with respect to any properties or assets of CYNG, or give
to others any interest or rights, including rights of termination, acceleration
or cancellation in or with respect to any of the properties, assets, contracts
or business of CYNG.
2.1.5 Governmental Approval. CYNG has all permits, licenses, orders
and approvals of all federal, state, local or foreign governmental or regulatory
bodies required for CYNG to conduct its business as presently conducted. All
such permits, licenses, orders and approvals are in full force and effect and no
suspension or cancellation of any of them is threatened, and none of such
permits, licenses, orders or approvals will be affected by the consummation of
the transactions contemplated by this Agreement and all such permits, licenses,
order or approvals to
3
<PAGE>
the extent transferable, are transferable to the Surviving Corporation. No
approval or authorization of or filing with any governmental authority on the
part of CYNG is required as a condition to the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
2.1.6 Litigation. There are no actions, suits, investigations, or
proceedings pending, or, to the knowledge of CYNG, threatened against or
affecting or which may affect CYNG, the performance of the terms and conditions
hereof, or the consummation of the transactions contemplated hereby, in any
court or by or before any governmental body or agency, including without
limitation any claim, proceeding or litigation for the purpose of challenging,
enjoining or preventing the execution, delivery or consummation of this
Agreement, and CYNG does not know of any facts which would give rise to any such
action, suit, investigation or proceeding. CYNG is not subject to any order,
judgment, decree, stipulation or consent or any agreement with any governmental
body or agency which affects its business or operation.
2.1.7 Financial Information.
(i) CYNG has heretofore delivered to MFC its audited financial
statements for the fiscal years ended December 31, 1997, December 31, 1998 and
period ended April 30, 1999, and the unaudited financial statements for the
interim period commencing May 1, 1999 through June 30, 1999 (the "Financials")
which have been prepared by an independent Certified Public Accountant
("Accountant") certified by the Security Exchange Commission and accompanied by
an audit report of such Accountant containing the opinion of such Accountant
regarding the preparation of the Financials. As of the respective dates, such
documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(ii) since December 31, 1998, there has been no material
adverse change in the business or financial condition or the operations of CYNG
or any occurrence, circumstance, or combination thereof which reasonably could
be expected to result in such a material adverse change in the future;
(iii) at December 31, 1998, there were no liabilities,
absolute or contingent of CYNG that were not shown or reserved against on the
balance sheets included in the Financials;
(iv) since December 31, 1998, CYNG has not sold or otherwise
disposed of or encumbered any of the properties or assets reflected on the
Financials, or otherwise owned or leased by it, except in the ordinary course of
business; and
(v) since December 31, 1998, CYNG has good and marketable
title to all assets and properties set forth in its Financials and that any and
all liens, mortgages or other encumbrances against said assets and properties
are duly and completely set forth in the Financials.
2.1.8 Undisclosed Liabilities. CYNG does not have any liability
whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued, whether liquidated or unliquidated, and whether due
or to become due, including any liability for taxes, except for liabilities
which have arisen in the ordinary course of business none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law.
4
<PAGE>
2.1.9 Tax Matters.
(i) CYNG has filed or caused to be filed with the appropriate
federal, state, county, local and foreign governmental agencies or
instrumentalities all tax returns and tax reports required to be filed, and all
taxes, assessments, fees and other governmental charges have been fully paid
when due. Section 2.1.9 of the Disclosure Schedule lists all federal, state,
local, and foreign income tax returns filed with respect to CYNG for taxable
periods ended on or after December 31, 1993, indicates those tax returns that
have been audited, and indicates those tax returns that currently are the
subject of audit. CYNG has delivered to MFC correct and complete copies of all
federal, state and local income tax returns, examination reports, and statements
of deficiencies assessed against or agreed to by CYNG since December 31, 1993;
(ii) there is no pending or, to the best knowledge of CYNG,
any threatened federal, state or local tax audit of CYNG, there is no agreement
with any federal, state or local taxing authority by CYNG that may affect the
subsequent tax liabilities of the Surviving Corporation; and
(iii) without limiting the foregoing: (a) the Financials
include adequate provisions for all taxes, assessments, fees, penalties and
governmental charges which have been or in the future may be assessed against
CYNG with respect to the period then ended and all periods prior, thereto; and
(b) CYNG is not, on the date hereof, liable for taxes, assessments, fees or
governmental charges.
2.1.10 Salaries. Exhibit A annexed hereto and made a part hereof is
a true and complete list, as of the date of this Agreement, of all of the
persons who are employed by CYNG, together with their compensation (including
bonuses) for the period ended July 31,1999, and the rate of compensation
(including bonus arrangements) currently being paid to each such employee.
2.1.11 Accrued Compensation. CYNG does not have outstanding
liability for payment of wages, vacation pay (whether accrued or otherwise),
salaries, bonuses, pensions or contributions under any labor or employment
contract, whether oral or written, or by reason of any past practices with
respect to such employees based upon or accruing with respect to services of
present or former employees of CYNG.
2.1.12 Employee Benefit Plans. CYNG does not have any pension plan,
profit-sharing plan or employees' savings plan, and CYNG is not otherwise
subject to any applicable provisions of the Employee Retirement Income Security
Act of 1974 (ERISA).
2.1.13 Party to Agreements. CYNG is not a party to any contract or
other arrangement except those made in the ordinary course of business or which
are terminable on the giving of sixty (60) days (or less) notice of CYNG's
intent to terminate such contract. CYNG is not in default in any material
respect under any contract or agreement to which it is a party or by which it or
any of its assets is or may be bound.
2.1.14 Securities Filings. Prior to closing CYNG shall not: (i)
undertake to file reports under the Securities Exchange Act of 1934, as amended
("'34 Act"); or (ii) take any action or omit to take any action which would
result in CYNG qualifying as an "Investment Company" as defined in Section
3(a)(1) of the Investment Company Act of 1940.
2.1.15 Except as previously disclosed to MFC in writing or in the
reports delivered pursuant to the Proxy Statement with respect to the Merger,
since December 31, 1998 there has
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not been any material adverse change in the business, operations, properties,
assets, conditions, financials or otherwise, or prospects of CYNG.
2.1.16 Assets and Liabilities. As of the date hereof, CYNG has no
assets and or material liabilities.
2.1.17 Environmental Concerns. CYNG has not engaged in any
operations which have resulted or will result in any chemicals, hazardous,
noxious or toxic wastes being deposited, spilled, leaked, disposed of, dumped or
buried at any facility, contiguous property, or any other real property, which
have, will, or may result in property damages, personal injury or clean-up
costs.
2.2 Representations and Warranties of MFC. MFC represents and warrants to
CYNG that the statements contained in this Section 2.2 are correct and complete
as of the date of this Agreement and will be correct and complete in all
material respects as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 2.2), except as set forth in the Disclosure Schedule accompanying this
Agreement and initiated by the Parties. The Disclosure Schedule will be arranged
in sections corresponding to the lettered and numbered sections contained in
this Section 2.2.
2.2.1 Organization, Qualification, and Corporate Power.
(i) MFC is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada and has the corporate
power to own its property and to carry on its business as now conducted. The
nature of the business now conducted by MFC, the character of the property owned
by it, or any other state of facts does not require MFC to be qualified to do
business as a foreign corporation in any jurisdiction; and
(ii) MFC has no subsidiaries or affiliates (as that term is
used in the regulations promulgated under the '33 Act).
2.2.2 Authorization of Transaction. MFC has the corporate power and
authority to enter into this Agreement and to carry out its obligation
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by its Board of
Directors and, except for the approval of its shareholders, no other corporate
proceedings on the part of MFC are necessary to authorize this Agreement and the
transactions contemplated hereby.
2.2.3 Capitalization.
(i) The authorized capital stock of MFC consists of 25,000,000
MFC Shares, all of which are issued and outstanding as of the date hereof. All
the issued and outstanding MFC Shares have been duly authorized, and are validly
issued, fully paid and nonassessable; and
(ii) there are, and on the Closing Date there will be, no
outstanding subscriptions, options, warrants, contracts, calls, puts,
agreements, demands or other commitments or rights of any type to purchase or
acquire any securities of MFC, nor are there outstanding securities of MFC which
are convertible into or exchangeable for any MFC Shares and MFC has no
obligation of any kind to issue additional securities.
2.2.4 Noncontravention. Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof, including
without limitation the consummation of the transactions contemplated hereby,
will violate any statute, regulation or ordinance of any
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governmental authority, or conflict with or result in the breach of any term,
condition or provisions of the Articles of Incorporation or Bylaws of MFC, or of
any agreement, deed, contract, mortgage, indenture, writ, order decree, legal
obligation or instrument to which MFC is a party or by which it or any of its
respective assets or properties are or may be bound, or constitute a default (or
an event which, with the lapse of time or the giving of notice, or both, would
constitute a default) thereunder, or result in the creation or imposition of any
lien, charge or encumbrance, or restriction of any nature whatsoever with
respect to any properties or assets of MFC, or give to others any interest or
rights, including rights of termination, acceleration or cancellation in or with
respect to any of the properties, assets, contracts or business of MFC.
2.2.5 Governmental Approval. MFC has all permits, licenses, orders
and approvals of all federal, state, local or foreign governmental or regulatory
bodies required for MFC to conduct its business as presently conducted. All such
permits, licenses, orders and approvals are in full force and effect and no
suspension or cancellation of any of them is threatened, and none of such
permits, licenses, orders of approvals will be affected by the consummation of
the transactions contemplated by this Agreement and all such permits, licenses,
order or approvals, to the extent transferable, are transferable to CYNG. No
approval or authorization of or filing with any governmental authority on the
part of MFC is required as a condition to the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
2.2.6 Litigation. There are no actions, suits, investigations, or
proceedings pending, or, to the knowledge of MFC, threatened, against or
affecting or which may affect MFC, the performance of the terms and conditions
hereof, or the consummation of the transactions contemplated hereby, in any
court or by or before any governmental body or agency, including without
limitation any claim, proceeding or litigation for the purpose of challenging,
enjoining or preventing the execution, delivery or consummation of this
Agreement; and except as otherwise disclosed herein does not know of any state
of facts which would give rise to any such action, suit investigation or
proceeding. MFC is not subject to any order, judgment, decree, stipulation or
consent or any agreement with any governmental body or agency which affects its
business or operation.
2.2.7 Financial Information.
(i) MFC has heretofore delivered to CYNG its audited financial
statements ("MFC Financials") for the most recent fiscal year ended December 31,
1998 ("Most Recent Fiscal Year End") and the unaudited interim period between
the Most Recent Fiscal Year End and August 31, 1999 prepared by an Accountant
certified by the Securities Exchange Commission and accompanied by an audit
report of such Accountant containing the opinion of such Accountant regarding
the preparation of the MFC Financials;
(ii) at December 31, 1998, there were no liabilities, absolute
or contingent of MFC that were not shown or reserved against on the balance
sheets included in the MFC Financials;
(iii) since December 31, 1998, MFC has not sold or otherwise
disposed of or encumbered any of the properties or assets reflected on the MFC
Financials, or otherwise owned or leased by it, except in the ordinary course of
business;
(iv) since December 31, 1998, there has been no material
adverse change in the business or financial condition or operations of MFC or
any occurrence, circumstance, or
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combination thereof which reasonably could be expected to result in such a
material adverse change in the future; and
(v) since December 31, 1998, MFC has good and marketable title
to all assets and properties set forth in MFC Financials and that any and all
liens mortgages or other encumbrances against said assets and properties are
duly and completely set forth in the MFC Financials.
2.2.8 Tax Matters.
(i) MFC has filed or caused to be filed with the appropriate
federal, state, county, local and foreign governmental agencies or
instrumentalities all tax returns and tax reports required to be filed, and all
taxes, assessments, fees and other governmental charges have been fully paid
when due;
(ii) there is no pending or, to the best knowledge of MFC,
threatened federal, state or local tax audit of MFC; there is no agreement with
any federal, state or local taxing authority that may affect the subsequent tax
liabilities of MFC; and
(iii) without limiting the foregoing: (a) the MFC Financials
include adequate provisions for all taxes, assessments, fees, penalties and
governmental charges which have been or in the future may be assessed against
MFC with respect to the period then ended and all periods prior thereto; and (b)
MFC is not, on the date hereof, liable for taxes, assessments, fees or
governmental charges.
2.2.9 Title and Authority. To the best of the knowledge of MFC, the
shareholders of record and sole beneficial owners of all of the issued and
outstanding MFC Shares and now have, at closing will have, and at all times
prior to the closing will have:
(i) full legal title to all of such shares free and clear of
any liens, security interests, encumbrances, pledges, charges, claims, voting
trusts, restrictions on transfer, and of any rights or interest therein, direct
or contingent, in favor of any other parties; and
(ii) full and unrestricted right, power and authority to sell,
assign, transfer and deliver the same or to cause the same to be transferred to
CYNG in accordance with this Agreement.
2.2.10 Salaries. Exhibit B annexed hereto and made a part hereof is
a true and complete list, as of the date of this Agreement, of all of the
persons who are employed by MFC, together with their compensation (including
bonuses) for the period ended August 31, 1999 and the rate of compensation
(including bonus arrangements) currently being paid to each such employee.
2.2.11 Accrued Compensation. MFC does not have any outstanding
liability for payment of wages, vacation pay (whether accrued or otherwise),
salaries, bonuses, pensions or contributions under any labor or employment
contract, whether oral or written or by reason of any past practices with
respect to such employees based upon or accruing with respect to services or
present or former employees of MFC, except for such amounts as are disclosed in
Exhibit B and except for any payment or contribution period.
2.2.12 Employee Benefit Plans. MFC does not have any pension plan,
profit-sharing plan or employees' savings plan, and MFC is not otherwise subject
to any applicable
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provision of the Employee Retirement Income Security Act of 1974 ("ERISA").
2.2.13 Party to Agreements. MFC is not a party to any contract or
other arrangement except those made in the ordinary course of business or which
are terminable on the giving of sixty (60) days (or less) notice of MFC's intent
to terminate such contract. MFC is not in default in any material respect under
any contract or agreement to which it is a party or by which it or any of its
assets is or may be bound.
2.2.14 Environmental Concerns. MFC has not engaged in any operations
which have resulted or will result in any chemicals, hazardous, noxious or toxic
wastes being deposited, spilled, leaked, disposed of, dumped or buried at any
facility, contiguous property, or any other real property, which have, will, or
may result in property damages, personal injury or clean-up costs.
3 Covenants.
3.1 Covenants of MFC. MFC agrees that prior to the Closing Date:
3.1.1 No dividend shall be declared or paid by other distribution
(whether in cash, stock, property or any combination thereof) or payment
declared or made in respect to MFC Shares, nor shall MFC purchase, acquire or
redeem or split, combine or reclassify any shares of its capital stock.
3.1.2 No change shall be made in the number of shares of authorized
or issued MFC Shares; nor shall any option, warrant, call, right, commitment or
agreement of any character be granted or made by MFC relating to its authorized
or issued MFC Shares; nor shall MFC issue, grant or sell any securities or
obligations convertible into or exchangeable for MFC Shares.
3.1.3 MFC shall not take, agree to take or knowingly permit to be
taken any action or do or knowingly permit to be done anything, in the conduct
of the business of MFC or otherwise, which would be contrary to or in breach of
any of the terms or provisions of this Agreement, or which would cause any of
MFC's representations contained herein to be or become untrue in any material
respect at the Closing Date.
3.1.4 MFC shall not (i) incur any indebtedness for borrowed money;
(ii) assume, guarantee, endorse, or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
individual, firm or corporation; or (iii) make any loans, advances or capital
contributions to or investments in, any other individual, firm or corporation.
3.1.5 MFC shall not alter or change any employment or other contract
with any of its management personnel or make, adapt, alter, revise, or amend any
pension, bonus, profit-sharing or other employee benefit plan, or grant any
salary increase or bonus to any person without the prior written consent of
CYNG, except for normal year end or anniversary salary adjustments for
employees, excluding officers
3.1.6 MFC shall deliver to CYNG the MFC Business Plan.
3.2 Covenants of CYNG. CYNG agrees that prior to the Closing Date:
3.2.1 No dividend shall be declared or paid or other distribution
(whether in cash, stock, property or any combination thereof) or payment
declared or made in respect of CYNG Shares, nor shall CYNG purchase, acquire or
redeem or split, combine or reclassify any shares of CYNG Shares except as
provided in this Agreement.
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3.2.2 Except as set forth in Section 2.1.3, above, no change shall
be made in the number of shares of authorized or issued CYNG Shares; nor shall
any option, warrant, call, right, commitment or agreement (other than this
Agreement) of any character be granted or made by CYNG relating to its
authorized or issued CYNG Shares; nor shall CYNG issue, grant or sell any
securities or obligations convertible into or exchangeable for shares of common
stock.
3.2.3 CYNG shall not (i) incur any indebtedness for borrowed money;
(ii) assume, guarantee, endorse, or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
individual, firm or corporation; or (iii) make any loans, advances or capital
contributions to or investments in, any other individual, firm or corporation.
3.2.4 CYNG shall not make any employment or other contract with any
of its management personnel or make, adopt, alter, revise, or amend any pension,
bonus, profit-sharing or other employee benefit plan, or grant any salary
increase or bonus to any person or owe any accrued salary or other compensation
under any agreement or plan (except as disclosed on Exhibit A) without the prior
written consent of MFC.
3.2.5 CYNG shall not take, agree to take, or knowingly permit to be
taken any action, or do, or knowingly permit to be done anything in the conduct
of the business of CYNG, or otherwise, which would be contrary to or in breach
of any of the terms or provisions of this Agreement, or which would cause any of
the representations of CYNG contained herein to be or become untrue in any
material respect at the Closing Date.
3.2.6 No Solicitation. Officers, directors and shareholders holding
ten (10%) percent or more shares of CYNG common stock will not (nor will it
permit any agent or affiliate to) solicit, initiate or encourage any Acquisition
Proposal or furnish any information to, or cooperate with, any person,
corporation, firm or other entity with respect to an Acquisition Proposal. As
used herein "Acquisition Proposal" means a proposal for a Merger or other
business combination involving either of their respective Parties or for the
acquisition of a substantial equity interest in, or a substantial portion of the
assets of MFC other than the Merger.
4 Certain Covenants
4.1 Shareholders' Meeting. Each of MFC and CYNG will take all actions
necessary in accordance with applicable law and its Articles of Incorporation
and By-laws (i) to convene a meeting of its shareholders as promptly as
practicable to consider and vote upon the approval of the Merger or (ii) by
obtaining written consent from a majority of the voting shareholders.
4.2 Change of Corporate Name. CYNG shall, as of the Closing Date, change
its corporate name from Cynergy, Inc., to Mercantile Factoring Credit Online
Corp. or such other name as may be acceptable to MFC.
4.3 Conduct of Business by MFC Pending the Merger. Prior to the Effective
Date, unless CYNG and MFC shall otherwise agree in writing prior to the date
hereof, MFC shall not (i) operate its business otherwise than in the ordinary
course, (ii) grant any compensation increase to any director, officer or
employee, (iii) issue, authorize or propose the issuance of additional shares of
capital stock of any class or securities convertible into any such shares or
rights, warrants or options to acquire any such shares or convertible securities
(iv) amend its Articles of Incorporation or By-laws, (v) split, combine or
reclassify its outstanding shares of common stock, or (vi) authorize, recommend
or propose any merger, consolidation, acquisition of assets, disposition of
assets, material change in its capitalization or any comparable event, not in
the
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ordinary course of business (other than the transactions contemplated hereby and
transactions as to which written notice has been given to CYNG prior to the date
hereof).
4.4 Takeover Proposals. Each of MFC and CYNG will not authorize or permit
any of its officers, directors, employees, investment bankers, attorneys,
accountants or other representatives, or agents, to directly or indirectly
solicit or encourage any proposal for a merger or other business combination
involving its Company or for the acquisition of a substantial equity interest in
its Company or a substantial portion of its Company's assets, other than as
contemplated by this Agreement. Each of MFC and CYNG will promptly advise the
other of the terms of any such proposal that it may receive.
4.5 Conduct of Business by CYNG Pending the Merger. Prior to the Effective
Date, unless CYNG and MFC shall otherwise agree in writing prior to the date
hereof, CYNG shall not (i) operate its business otherwise than in the ordinary
course, (ii) grant any compensation increase to any director, officer or
employee, (iii) issue, authorize or propose the issuance of additional shares of
capital stock of any class or securities convertible into any such shares or
rights, warrants or options to acquire any such shares or convertible securities
(iv) amend its Articles of Incorporation or By-laws, (v) split, combine or
reclassify its outstanding shares of common stock, except as provided in Section
2.1.3(ii) above, or (vi) authorize, recommend or propose any merger,
consolidation, acquisition of assets, disposition of assets, material change in
its capitalization or any comparable event, not in the ordinary course of
business (other than the transactions contemplated hereby and transactions as to
which written notice has been given to MFC prior to the date hereof).
4.6 Information Provided by CYNG. The information to be provided by CYNG
for use in CYNG's Proxy Statement to be used in connection with the Merger,
shall, at the respective time the Proxy Statement is mailed, and at the time of
the shareholders' meeting of MFC and at the Effective Date, be true and correct
in all material respects and shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein to
make the statements made, in the light of the circumstances, under which they
were made, not misleading.
4.7 Information Provided by MFC. The information to be provided by MFC for
use in the Proxy Statement to be used in connection with the merger to which MFC
is a party shall, at the times Proxy Statement is mailed, and at the time of the
shareholders' meetings of CYNG and at the Effective Date, be true and correct in
all material respects and shall not contain any untrue statement of a material
fact, or omit to state a material fact required to be stated therein to make the
statements made, in the light of the circumstances under which they were made,
not misleading.
4.8 Proxy Statement. In the event the Parties are unable to obtain
approval of the Merger by written consent of a majority of voting shareholders
and the Parties elect to prepare Proxy Statements then in connection with such
preparation of the Proxy Statement for the Parties, and/or any other filings,
MFC and CYNG will cooperate with each other and will furnish the information
relating to MFC and CYNG, as the case may be, required by the Nevada Revised
Statute.
4.9 Press Releases. MFC and CYNG agree to cooperate with each other in
releasing information concerning this Agreement and the transactions
contemplated herein. Where possible, each of the Parties shall furnish to the
other drafts of all releases prior to publication. Nothing
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contained herein shall prevent either party at any time from furnishing any
information to any governmental agency.
4.10 Recommendation of Approval. The Board of Directors of CYNG and MFC
shall continue to recommend to their respective shareholders approval of this
Agreement and the Merger to which such Company is a party, except as the
fiduciary obligations of each such Board of Directors may otherwise require.
4.11 Full Access. Prior to the closing, the Parties shall afford to the
officers, directors, controlling shareholders, attorneys, accountants, and other
authorized representatives ("Agents") of the other, free and full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the other Company, to all premises, properties,
personnel, books, records (including tax records), contracts, and documents of
or pertaining to each Company ("Confidential Information"), in order to make
such investigation as it may desire of the affairs of each other. The Parties
and its Agents (i) shall treat and hold as such any Confidential Information it
receives in the course of the reviews contemplated by this Section 4.11; (ii)
shall not use any of the Confidential Information except in connection with this
Agreement; and (iii) if this Agreement is terminated for any reason whatsoever,
shall, respectively, retain no copies and return all Confidential Information in
its possession.
4.12 Fair Value. From the Effective Date and for a period of six (6)
months following the Surviving Corporation's listing on the National Association
of Securities Dealers, Inc. ("NASD") Automated Quotation System, the Surviving
Corporation of this Merger shall not issue, sell, transfer, any securities or
rights, warrants or instruments or make any agreements or arrangements related
to any securities of the Surviving Corporation (as determined on the Effective
Date) without payment of fair value for such securities. It is the intent of the
Parties hereto not to eliminate or diminish the benefits (of any kind) intended
to be afforded to the pre-Merger shareholders of CYNG.
5 Conditions Precedent
5.1 Conditions to the Obligations of CYNG to Close. The obligations of
CYNG to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
5.1.1 the shareholders of MFC shall have duly approved such Merger
in accordance with applicable law;
5.1.2 no action shall have been taken, and no statute, rule,
regulation or order shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Merger by any federal, state or foreign government or
governmental authority or by any court, domestic or foreign, including the entry
of a preliminary of permanent injunction, which would (i) make the Merger
illegal, (ii) require the divestiture by MFC or any other subsidiary of MFC of
MFC Shares or of a material portion of the business of MFC and its subsidiaries
taken as a whole, (iii) impose material limits on the ability of MFC to
effectively control the business of MFC and its subsidiaries, (iv) otherwise
materially adversely affect MFC and its subsidiaries taken as a whole or (v) if
the Merger is consummated, subject any officer, director, or employee of MFC to
criminal penalties or to civil liabilities not adequately covered by insurance
or enforceable indemnification maintained by MFC;
5.1.3 no action or proceeding before any court of governmental
authority, domestic or foreign, by any government or governmental authority or
by any other person, domestic or
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foreign, shall be threatened, instituted or pending which would reasonably be
expected to result in any of the consequences referred to in clauses (i) through
(v) of Section 5.1.2 above;
5.1.4 MFC shall have complied in all material respects with its
agreements and covenants as set forth in Section 3.1 and Section 4, above, and
all representations and warranties of MFC as set forth in Section 2.2 above and
shall be true and correct in all material respects at the time of consummation
of the Merger as if made at that time, except to the extent they expressly
relate to an earlier date;
5.1.5 MFC shall have delivered to CYNG a certificate to the effect
that to the best of the knowledge of MFC, each of the conditions specified above
in Sections 5.1.1 - 5.1.4 are satisfied in all respects;
5.1.6 CYNG shall have received from Moskowitz Altman & Hughes LLP,
counsel for MFC, an opinion (Exhibit C), in form and substance satisfactory to
CYNG, dated the Effective Date to which MFC is a party, to the effect that:
(i) MFC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada;
(ii) all the outstanding shares of common stock of MFC have
been duly authorized, and are validly issued, fully paid and nonassessable;
(iii) MFC has taken all requisite corporate actions to approve
this Agreement and the transactions contemplated hereby, and this Agreement has
been duly authorized, executed and delivered by MFC and constitutes a valid and
binding a agreement of MFC enforceable in accordance with its terms; and
(iv) shareholders of MFC have taken all requisite corporate
action to approve this Agreement and the transactions contemplated hereby;
5.1.9 The holders of no more than ten (10%) percent of the MFC
Shares with respect to which such Merger is proposed shall have exercised their
right to dissent as dissenting shareholders;
5.1.10 MFC shall have delivered or caused to be delivered to CYNG,
share certificates representing all of the MFC Shares, endorsed in blank or
accompanied by duly executed assignment documents;
5.1.11 MFC shall have entered into a separate agreement attached
hereto as Exhibit D, with certain third party finders, facilitators and
consultants participating in the transactions contemplated by this Agreement;
and
5.1.12 all actions to be taken by MFC in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
CYNG.
CYNG may waive any condition specified in this Section 5.1 if it executes
a writing so stating at or prior to the Closing.
5.2 Conditions to the Obligations of MFC to Close. The obligations of MFC
to consummate the transactions to be performed by it in connection with the
Closing is subject to
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satisfaction of the following conditions:
5.2.1 The shareholders of CYNG shall have duly approved the Merger
in accordance with applicable law, and each MFC Share (currently 25,000,000)
shall be canceled and shall be converted into New CYNG Shares (at the ratio of
0.18 New CYNG Shares to one MFC Share). By virtue of such Merger and without any
action on the part of the holder thereof, such that prior shareholders of MFC
Shares will hold 4,500,000 New CYNG Shares and current shareholders of CYNG will
hold 314,377 New CYNG Shares;
5.2.2 The Board of Directors and shareholders of CYNG shall have
approved a reverse stock split of all the CYNG Shares on a ratio of 17.784 CYNG
Shares for each 1 New CYNG Share;
5.2.3 no action shall have been taken, and no statute, rule,
regulation or order shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Merger by any federal, state or foreign government or
governmental authority or by any court, domestic or foreign, including the
Merger of a preliminary or permanent injunction, which would (i) make the Merger
illegal, (ii) require the divestiture by CYNG or any other subsidiary of CYNG of
CYNG Shares or of a material portion of the business of CYNG and its
subsidiaries taken as a whole, (iii) impose material limits on the ability of
CYNG to effectively control the business of CYNG and its subsidiaries, (iv)
otherwise materially adversely affect CYNG and its subsidiaries taken as a whole
or (v) if the Merger is consummated, subject any officer, director, or employee
of CYNG to criminal penalties or to civil liabilities;
5.2.4 no action or proceeding before any court or governmental
authority, domestic or foreign, by any government or governmental authority or
by any other person, domestic or foreign, shall be threatened, instituted or
pending which would reasonably be expected to result in any of the consequences
referred to in clauses (i) through (v) of Section 5.2.2 above;
5.2.5 CYNG shall have complied in all material respects with its
agreements and covenants as set forth in Section 3.2 and Section 4, above, and
all representations and warranties of CYNG as set forth in Section 2.1 above and
shall be true and correct in all material respects at the time of consummation
of the Merger as if made at that time, except to the extent they expressly
relate to an earlier date;
5.2.6 CYNG shall have delivered to MFC a certificate to the effect
that to the best of the knowledge of CYNG, each of the conditions specified
above in Sections 5.2.1 - 5.2.4 are satisfied in all respects;
5.2.7 MFC shall have received from counsel for CYNG, an opinion
(Exhibit E), in form and substance satisfactory to MFC, dated the Effective
Date, to which CYNG is a party to the effect that:
(i) CYNG is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada;
(ii) all the outstanding shares of common stock of CYNG have
been duly authorized, and are validly issued, fully paid and nonassessable;
(iii) CYNG has taken all requisite corporate action to approve
this Agreement and the transactions contemplated hereby, and this Agreement has
been duly authorized, executed and delivered by CYNG and constitutes a valid and
binding agreement of
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CYNG enforceable in accordance with its terms;
(iv) shareholders of CYNG have taken all requisite corporate
action to approve this Agreement and the transactions contemplated hereby;
(v) to such counsel's knowledge, the execution delivery and
performance of this Agreement by CYNG and the consummation of the transactions
contemplated hereby will not conflict with or result in the breach of any of the
terms, conditions or provisions of any agreement, contract or commitment to
which CYNG is not also a party which is material to the business or properties
of CYNG as a whole or constitute a material default thereunder or give the
others any material right of termination, cancellation or acceleration
thereunder, or otherwise require any approval which has not been obtained;
5.2.8 the holders of no more than ten (10%) percent of New CYNG
Shares with respect to which such Merger is proposed shall have exercised their
right to dissent as dissenting shareholders;
5.2.9 MFC shall have received the resignations, effective as of the
Closing, of each director and officer of CYNG other than those whom MFC have
specified in writing prior to the Closing;
5.2.10 MFC shall have received from CYNG: (i) certified CYNG minutes
containing shareholders resolutions consenting to the transactions contemplated
by this Agreement; (ii) a list of the shareholders of CYNG certified by the
Transfer Agent of CYNG and dated of a date not more than forty-eight (48) hours
prior to closing; (iii) a certificate of good standing issued by the appropriate
government agency certifying that CYNG is in good standing in its state of
incorporation; (iv) all original corporate records and minute books of CYNG,
including the articles of incorporation, by-laws, proceedings of corporate
meetings of shareholders and directors from inception to Closing, tax returns,
annual registration filings and franchise tax returns; and (v) a complete copy
of the Form 211 filed with the NASD under Rule 15c2-11 respecting CYNG with a
copy of the clearance letter received from the NASD and confirmation of listing
in a recognized investor manual (Moody's or Standard & Poors) for Blue Sky
purposes; and
5.2.11 all actions to be taken by CYNG in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
MFC.
MFC may waive any condition specified in this Section 5.2 if it executes
a writing so stating at or prior to the closing.
6 Indemnification and Waiver of Claims - CYNG. CYNG, hereby agrees to indemnify
and hold MFC, its officers, directors, employees and agents harmless from and
against the following:
6.1 any and all liabilities, losses, damages, claims, costs and expenses
of CYNG of any nature, whether absolute, contingent or otherwise, which are not
expressly assumed by MFC as herein provided, including but not limited to any
and all claims or rights to dissent from the shareholders of CYNG, claims of
CYNG creditors, federal and state or local taxing authorities, and other
claimants of CYNG;
6.2 any and all actions, suits, proceedings, demands, assessments or
judgments, costs and expenses (including reasonable attorneys' fees) incident of
any of the foregoing;
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6.3 any and all damages or deficiencies resulting from any
misrepresentation, breach of any warranty, or non-fulfillment of any covenant or
agreement on the part of CYNG contained in Sections 2.1, 3.2 and 4 herein or in
any statement or certificate furnished or to be furnished to MFC pursuant hereto
or in connection with the transactions contemplated hereby; and
6.4 CYNG, as of the date immediately preceding this Agreement, will
indemnify and hold harmless MFC, from and against any and all losses, claims,
damages, expenses or liabilities, joint or several, to which it may become
subject within the meaning of the 34' Act and the 33' Act (collectively the
"Acts") or under any other statutes or at common law or otherwise, and will
reimburse and indemnify MFC and its officers and directors for any legal or
other expenses (including the cost of any investigation and preparation)
reasonably incurred by them or any of them in connection with investigating or
defending any litigation or claim, whether or not resulting in any liability
insofar as such losses, claims, damages, expenses, liabilities or actions
arising out of, or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus, Private Placement
Memorandums, Offering Circulars, Proxy Statements, and Verbal, Written and other
representations in connection with or related to Limited Partnership Offerings,
Joint Ventures, any stock or bond offering, stock conversion rights granted,
investment contracts, or other security as that terms is defined under the Acts
or any State Security Act (as amended or as supplemented thereof) or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; or any negligent misrepresentations of any
officer, director, agent, or employee of CYNG; or any failure to perform any of
the terms or conditions of this Agreement MFC agrees upon its receipt of written
notice of the commencement of any action against them as aforesaid, in respect
of which indemnity may be sought from CYNG, on account of the indemnity
agreement contained in this subsection, to notify CYNG promptly in writing of
the commencement thereof. MFC agrees to notify CYNG promptly of the commencement
of any litigation or proceeding against it or against any of the officers or
directors of MFC of which it may be advised, in connection with the issue and
sale of any of its securities.
7 Indemnification and Waiver of Claims - MFC. MFC, hereby agrees to indemnify
and hold CYNG, its officers, directors, employees and agents harmless from and
against the following:
7.1 any and all liabilities, losses, damages, claims, costs and expenses
of MFC of any nature, whether absolute, contingent or otherwise, which are not
expressly assumed by CYNG as herein provided, including but not limited to any
and all claims or rights to dissent from the shareholders of MFC, purported
shareholders of MFC, claims of MFC creditors, federal or state or local taxing
authorities, other claimants of MFC, claims arising out of and/or connected to
the cancellation, redemption, retirement of MFC Shares;
7.2 any and all damages or deficiencies resulting from any
misrepresentation, breach of any warranty, or non-fulfillment of any covenant or
agreement on the part of MFC contained in Sections 2.2, 3.1 and 4 herein or in
any statement or certificate furnished or to be furnished to MFC pursuant hereto
or in connection with the transactions contemplated hereby; and
7.3 any and all actions, suits, proceedings, demands, assessments or
judgments, costs and expenses (including reasonable attorneys' fees) incident of
any of the foregoing.
7.4 MFC, as of the date immediately preceding this Agreement, will
indemnify and hold harmless CYNG, from and against any and all losses, claims,
damages, expenses or liabilities, joint or several, to which they or any of them
may become subject within the meaning of the Acts or under any other statutes or
at common law or otherwise, and will reimburse and indemnify CYNG and its
officers and directors for any legal or other expenses (including the cost of
any investigation
16
<PAGE>
and preparation) reasonably incurred by them or any of them in connection with
investigating or defending any litigation or claim, whether or not resulting in
any liability insofar as such losses, claims damages expenses, liabilities or
actions arise out of are based upon any untrue statement of a material fact
contained in any Prospectus, Private Placement Memorandums, Offering Circulars,
Proxy Statements, and Verbal, Written and other representations in connection
with or related to Limited Partnership Offerings, Joint Ventures, any stock or
bond offering, stock conversion rights granted, investment contracts, or other
security as that term is defined under the Acts or any State Security Act (as
amended or as supplemented thereof) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; or any negligent misrepresentation of any officer, director, agent,
or employee of MFC; or any failure to perform any of the terms or conditions of
this Agreement. CYNG agrees upon its receipt of written notice of the
commencement of any action against them as aforesaid, in respect of which
indemnity may be sought from MFC, its directors and officers on account of the
indemnity agreement contained in this subsection, to notify MFC promptly in
writing of the commencement thereof. CYNG agrees to notify MFC promptly of the
commencement of any litigation or proceeding against it or against any of the
officers or directors of MFC of which it may be advised, in connection with the
issue and sale of any of its securities.
8 Closing Date
The closing for the consummation of the Merger contemplated by this
Agreement shall unless another date or place is agreed to in writing by the
Parties hereto, take place at the offices of Moskowitz Altman & Hughes LLP, on
the date which is no later than five (5) business days after the last to occur
of the following dates( the "Closing Date"):
8.1 Five (5) days after the date the shareholders of CYNG and MFC with
respect to which such Merger is proposed shall have given the approval referred
to in Section 4.1, hereof; or
8.2 The date on which all the conditions set forth in Section 5 hereof
shall have been satisfied, except to the extent any such conditions shall have
been waived by the respective Parties; or
8.3 September 30, 1999
9 Resignation and Election
At the closing, CYNG will cause all of its officers and directors to
resign from office and to cause to be elected to the Board of Directors of CYNG
those persons designated by MFC to wit:
Dominique M. Bellemare President/Director
Jean-Guy Hudon Vice President/ Director
Rita S. Dickson Secretary/Director
Yvan Guillemin Director
10 Miscellaneous
10.1 Termination. With respect to each of MFC and CYNG, this Agreement may
be terminated and the Merger to which each such Company is proposed to be a
party as contemplated herein may be abandoned (i) by the mutual consent of CYNG
and MFC at any time; (ii) by either
17
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MFC or CYNG if the Merger has not been consummated on or prior to September 30,
1999; (iii) in the event of any material adverse change in the business,
property, or financial condition of CYNG or MFC; (iv) in the event of any
action, suit, or proceeding at law or equity against either MFC or CYNG or by
any federal, state, local government agency or commission, board or agency,
where any unfavorable decision would materially adversely affect the business,
property or financial condition or income of MFC and CYNG; or (v) in the event
the Merger violates any federal or state statute, rule or regulation. In the
event of such termination and abandonment, neither CYNG nor MFC (or any of its
directors or officers) shall have any liability or further obligation to any
other party to this Agreement, except that nothing herein will relieve any party
from liability for any willful breach of this Agreement.
10.2 Expenses. Whether or not a Merger is consummated, all out-of-pocket
costs and expenses incurred in connection with the Merger and this Agreement
will be paid by the Parties hereto, respectively, and their officers, directors,
and shareholders shall pay their own expenses and costs associated with this
transaction, including, without limitation, attorneys' fees, accounting fees,
transfer taxes and fees and other incidental expenses.
10.3 Third Party Finders, Facilitators and Consultants. No broker or
finder is entitled to any brokerage or finder's fee or other commission or fee
from either MFC or CYNG or based upon arrangements made by or on behalf of
either MFC or CYNG with respect to the transactions contemplated by this
Agreement, except as disclosed on the Agreement attached hereto as Exhibit D.
10.4 Alternate Dispute Resolution
10.4.1 The Parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by negotiations
among each Company's representatives. Any Company may give the other Company
written notice of any dispute not resolved in the normal course of business.
Within fifteen (15) days after giving notice, the receiving Company shall submit
to the other a written response. The notice and the response shall include: (i)
a statement of each Company's position and a summary of arguments supporting
that position; and (ii) the name and title of the representative of that Company
and of any other person who will accompany the representative. Within thirty
(30) days after delivery of the disputing Company's notice, the representatives
of both Parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to attempt to resolve the
dispute. All reasonable requests for information made by one Company to the
other Company will be honored. All negotiations pursuant to this clause are
confidential and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of evidence.
10.4.2 If the dispute has not been resolved within ninety (90) days
of the disputing Company's notice or if the Parties fail to meet within thirty
(30) days, then either Company may immediately initiate arbitration of the
controversy or claim as provided in Section 10.4.3.
10.4.3 Arbitration, if initiated, shall be in accordance with the
then current Rules of the American Arbitration Association by three (3)
independent and impartial arbitrators, of whom each Company shall appoint one.
The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
Section 1-16 and, if binding, judgment upon the award rendered by the
arbitrator(s) may be entered by any court having jurisdiction thereof. The place
of arbitration shall be Nevada. The arbitrators are not empowered to award
damages in excess of compensatory damages and each Company hereby irrevocably
waives any right to recover such noncompensatory damages with respect to any
dispute resolved by arbitration.
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10.4.4 In the event of binding arbitration, any claim by either
Company shall be time-barred unless the asserting Company commences an
arbitration proceeding with respect to such claim within one (1) year after the
basis for such claim became known to the asserting Company.
10.4.5 In the event of binding arbitration, the procedures specified
in this Section 10.4.1 shall be the sole and exclusive procedures for the
resolution of disputes between the Parties arising out of or relating to this
Agreement; provided, however, that a Company, without prejudice to the above
procedures, may file a complaint to seek a preliminary injunction or other
provisional judicial relief, if in its sole judgment reasonably exercised such
action is necessary to avoid irreparable damage or to preserve the status quo.
Despite action pursuant to this section 10.4, the Parties will continue to
participate in good faith in the procedures specified in this Section 10.4.1.
10.4.6 All applicable statutes of limitation and defenses based upon
the passage of time shall be tolled while the procedures specified in this
Section 10.4.1 are pending. The Parties will take such action, if any, required
to effectuate such tolling.
10.4.7 Each Company is required to continue to perform its
obligations under this Agreement pending final resolution of any dispute arising
out of or relating to this Agreement.
10.5 Other Actions. Each of the Parties hereto agrees to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
10.6 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by both
Parties. No waiver by either Company of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10.7 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
10.8 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada.
10.9 Descriptive Headings. The descriptive headings are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.10 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two (2)
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to CYNG: Copy to:
George I. Norman III, President Timothy N. Vujnich, Esq.
Cynergy Inc. 734 West Port Plaza, Suite 273
c/o Alewine LLC St. Louis Missouri 63146
149 East 900 South
Salt Lake City, Utah 84111 and
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Leonard E. Neilson, Esq.
1121 East 3900 South, Suite 200
Building C
Salt Lake City, Utah 84124
If to MFC: Copy to:
Dominique M. Bellemare, President Stanley M. Moskowitz, Esq.
Mercantile Factoring & Credit Corp. Moskowitz Altman & Hughes LLP
1025 Ridgeview Drive, #400 11 East 44th Street, Suite 504
Reno, Nevada 89509 New York, NY 10017
Any Company may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Company may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Company notice in the manner herein set forth.
10.11 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person or entity other than the Parties and their
respective successors and permitted assigns.
10.12 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his,
hers or its rights, interests, or obligations hereunder without the prior
written approval of the Parties.
10.13 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Company by virtue of the authorship of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance.
10.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
10.15 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.16 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one agreement.
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10.17 Signatures. Each of the undersigned, being all the directors in
office of CYNG and MFC hereby agree to vote all shares held of record by him/her
and to recommend to the shareholders a vote in favor of the transactions
contemplated by the within Agreement at the meeting of shareholders of said
corporation contemplated by this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the Parties hereto as of the date first herein
above written.
Mercantile Factoring & Credit Corp. Cynergy, Inc.
by: /s/ Dominique M. Bellemare by: /s/ George I. Norman III
------------------------------ ------------------------------
Dominique M. Bellemare George I. Norman III
President and Secretary President
Cynergy, Inc.
by: /s/ George A.J. Monteith
------------------------------
George A.J. Monteith
Secretary
21
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EXHIBIT 6.2.4
Office Space Lease for Principal Office
<PAGE>
LEASE AGREEMENT
BETWEEN:
CREDIT MUTUEL DE MONTREAL CMM INC., a company duly incorporated under the laws
of Canada, having its head office at 1250 Rene-Levesque West, suite 2925,
Montreal, Province of Quebec, Canada, H3B 4W8, herein represented by Dominique
M. Bellemare, its vice-president and secretary, (hereinafter called "CMM");
AND
MERCANTILE FACTORING CREDIT ONLINE CORP., a company duly incorporated under the
laws of the State of Nevada, U.S.A., having its head office at 1495 Ridgeview
Drive, suite 220, Reno, State of Nevada, U.S.A., 89509, and having a place of
business at 1250 Rene-Levesque West, suite 2925, Montreal, Province of Quebec,
Canada, H3B 4W8, herein represented by Dominique M. Bellemare, its president,
(hereinafter called "MFCO");
CONSIDERING THAT MFCO intends to occupy part of CMM's office space which is
situated at 1250 Rene-Levesque West, suite 2925, Montreal, Province of Quebec,
Canada, H3B 4W8 (hereinafter called the "Premises"), the parties have entered
into the present lease agreement:
TERM OF THE LEASE
This lease shall commence on the first (1st) day of October, 1999 and shall
expire on the thirty-first (31st) day of January, 2003.
RENT
As rent for the Premises, MFCO covenants and agrees to pay to CMM twenty percent
(20%) of CMM's rent, payable in consecutive monthly installments, in advance on
the first day of each calendar month. On October 1st, 1999, the rent payable of
CMM is 9,069.87 CAD, including taxes. Any increase or escalation of CMM's rent
shall increase MFCO's rent accordingly.
HEAD LEASE
It is understood between both parties that the present agreement is subject to
the terms of a lease between CMM and TWELVE-FIFTY, COMPANY LIMITED executed on
the third (3rd) day of April, 1998.
AND THE PARTIES HAVE SIGNED ON THIS FIRST (1ST) DAY OF OCTOBER, 1999 IN
MONTREAL, PROVINCE OF QUEBEC, CANADA.
/s/ Dominique M. Bellemare /s/ Dominique M. Bellemare
- ----------------------------------- ----------------------------------------
Credit Mutuel de Montreal CMM Inc. Mercantile Factoring Credit Online Corp.
<PAGE>
EXHIBIT 12
Articles of Merger
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
SEP 29 1999
No. C5208-95
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
ARTICLES OF MERGER
OF
MERCANTILE FACTORING AND CREDIT CORP.
WITH AND INTO
CYNERGY, INC.
To: The Secretary of State of the State of Nevada
The undersigned domestic corporations, pursuant to the Nevada Revised Code
("NRS") Section 92A.100, Section 92A.120 and Section 92A.200, hereby executes
the following Articles of Merger for the purpose of merging Mercantile Factoring
& Credit Corp., a Nevada Corporation ("MFC"), with and into Cynergy, Inc., a
Nevada Corporation (the "CYNG").
CYNG hereby certifies that:
1 The name and jurisdiction of each of the constituent corporations are:
1.1 Mercantile Factoring & Credit Corp, incorporated in the state of
Nevada; and
1.2 Cynergy, Inc., incorporated in the state of Nevada.
2 A Plan of Merger has been adopted by each of the constituent corporations.
3 Pursuant to the Nevada Revised Statute Section 92A.120, the Plan of Merger
was duly adopted and approved by the unanimous consent of the Board of Directors
and shareholders of each of MFC and CYNG, respectively.
4 The unamended articles of incorporation of CYNG will be the articles of
incorporation of the surviving corporation.
5 The Plan of Merger is on file at 1495 Ridgeview Drive, Suite 220, Reno,
Nevada 89509.
6 A copy of the Plan of Merger will be furnished by CYNG, on request and
without cost, to any stockholder of MFC or CYNG.
In witness whereof, the undersigned have caused this certificate to be
signed and attested to, on the 22nd day of September, 1999.
Cynergy, Inc. Mercantile Factoring & Credit Corp.
By: /s/ George I. Norman III By: /s/ Dominique M. Bellemare
---------------------------- --------------------------------
George I. Norman III Dominique M. Bellemare
President President
Attest: Attest:
/s/ George A.J. Montieth /s/ Rita S. Dickson
- ---------------------------- ------------------------------
George A.J. Montieth
Secretary Secretary
<PAGE>
State of
County of
On this 21 day of September, 1999, before me, the undersigned, a Notary
Public in and for the State of Utah, personally appeared George I. Norman III,
known to me to be the President of Cynergy, Inc., who executed the within and
foregoing instrument and acknowledged the said instrument to be the free and
voluntary act and deed for the uses and purposes therein mentioned, and on oath
stated that he was authorized to execute said instrument.
[SEAL] NOTARY PUBLIC /s/ Derek S. Miller
STATE OF UTAH -------------------------------------
My Commission Expires Notary Public
October 4, 1999
Derek S. Miller
710 S. 200 W.
Salt Lake City, Utah 84101
State of
County of
On this 20 day of September, 1999, before me, the undersigned, a Notary
Public in and for the Province of Quebec, Canada, personally appeared Dominique
M. Bellemare, to me known to be the President of Mercantile Factoring & Credit
Corp., who executed the within and foregoing instrument and acknowledged the
said instrument to be the free and voluntary act and deed for the uses and
purposes therein mentioned, and on oath stated that he was authorized to execute
said instrument.
/s/ (a signature appears here on the
original; it is not legible; and is
not accompanied by a seal.)
-----------------------------------------
Notary Public
