SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS UNDER SECTION 12(b) OR 12(g) OF THE
SECURITIES ACT OF 1934
ASIA PACIFIC ENTERPRISES, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 51-0389325
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
8360 East Via de Ventura, Building L-200, Scottsdale, AZ 85258
(Address of Principal Executive Offices) (Zip Code)
480-905-5838
(Company's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name Of Each Exchange On Which
To Be So Registered Each Class Is To Be Registered
Securities to be registered pursuant to Section 12(g) of the Act:
Common stock, par value $0.0001 per share
(Title of Class)
<PAGE>
TABLE OF CONTENTS
PART I.......................................................................3
Item 1. Description of Business............................................3
Item 2 Management's Discussion and Analysis and Plan of Operation.........7
Item 3 Description of Property............................................9
Item 5 Directors, Executive Officers, Promoters and Control Persons......10
Item 6 Executive Compensation............................................12
Item 7 Certain Relationships and Related Transactions....................12
Item 8 Description of Securities.........................................12
PART II.....................................................................13
Item 1. Market Price of and Dividends on the Company's Common Equity
and Other Shareholder Matters.....................................13
Item 2 Legal Proceedings.................................................13
Item 3 Changes in and Disagreements with Accountants.....................14
Item 4 Recent Sales of Unregistered Securities...........................14
Item 5 Indemnification of Directors and Officers.........................15
PART F/S....................................................................16
Index to Financial Statements.............................................16
PART III....................................................................35
Index to Exhibits.........................................................35
SIGNATURES..................................................................36
<PAGE>
PART I
Item 1. Description of Business.
General Development of the Business
The Company was incorporated in Delaware on July 25, 1997 under the name Oro
Rico Mining Corporation. On August 25, 1997, ORM, Inc., an inactive company
incorporated in Colorado on July 25, 1997, was merged into the Company. The name
of the Company was changed to Asia Pacific Enterprises, Inc. on October 16,
1997.
Unless otherwise indicated, all references to the Company include the operations
of the Company and its wholly-owned subsidiary, eVideo U.S.A., Inc.
The planned business of the Company is to develop and operate an electronic
video delivery system in the United States. Digitally compressed video movies
and video games will be delivered on request to "set-top boxes" connected to the
televisions of individual cable or satellite subscribers. The set-top box will
permit the movie or game to be viewed or played, with full pause, rewind, fast
forward and playback controls, any number of times within a set period of time
(such as within 48 hours) after which it will be erased.
The Company's system will be designed to provide all of the advantages of video
movie and video game rentals, without requiring the customer to visit a store to
pick-up or return a video cassette. The customer will be able to order the video
in any one of three ways:
- by telephone,
- by the cable television network, using the set-top box and television, or
- from the Company's internet web-site.
The Company will then deliver the video electronically via high speed telephone
wires to the customer's cable or satellite television provider, along with the
address of the customer's set-top box and the address of all other customers'
set-top boxes who have ordered the same video. The cable or satellite television
provider then broadcasts the video and addresses. The set-top boxes whose
addresses match the broadcasted addresses will record the video and then alert
the customer that the video has been received.
The Company's system will compete directly with video rental outlets and with
Video-On-Demand services currently provided by satellite and cablevision
companies. The Company believes its system will be superior to video rental
outlets because its customers will not have to visit a video store or return
videos afterwards. The Company believes its system will be superior to current
Video-On-Demand services because its system will permit full VCR playback and
rewind controls, lets the viewer decide when to watch the video, and, because of
the system's fast delivery time of eight minutes for a two-hour movie, allows
cable and satellite providers to supply a greater variety of videos.
The Company's principal suppliers will be the owners of movie and video game
rights. Other significant suppliers will be providers of high-speed,
long-distance telephone communications and computer hardware and software
distributors.
Roy B. Bennett, the Company's President, developed the business plan for the
Company's video delivery system and transferred the world-wide rights in the
business plan to eVideo International, Inc., a company which he controlled.
On March 5, 1999 eVideo International, Inc. incorporated eVideo U.S.A., Inc.
in Nevada. eVideo International, Inc. then transferred the rights to use
the business plan in the United States to eVideo U.S.A., Inc.for $300,001. The
funds for the payment of the $300,001 were supplied by the Company to eVideo
U.S.A., Inc. prior to and at the closing of the acquisition of eVideo U.S.A.,
Inc. by the Company.
<PAGE>
On June 23, 1999, the Company acquired eVideo U.S.A., Inc. by issuing
6,623,016 of its common shares to eVideo International, Inc. and committing
to issue an additional 1.5 shares to eVideo International, Inc. for every
share the Company issues in raising up to $3,900,000 in additional capital.
One of eVideo U.S.A., Inc.'s primary assets at the time of the acquisition was
an option to acquire an exclusive license from Macrovision Corporation to use
certain technology which prevents a video from being copied onto a VCR tape or
other device. The rights to the technology are limited to the distribution of
videos in the United States by means of a compressed format.
To maintain the option the Company is required to pay Macrovision $15,000 on or
before November 30, 1999.
In order to exercise the option and obtain the rights to the Macrovision
technology the Company, prior to December 31, 1999, must pay Macrovision an
initial license fee of $400,000, issue Macrovision shares representing 3% of the
Company's common stock and receive an opinion from Macrovision's attorneys to
the effect that no other party has any rights to the technology.
If the option is exercised, the Company will be required to pay Macrovision an
annual royalty of the greater of $250,000 or 1% of the Company's gross revenues
derived from the distribution of videos using the Macrovision technology.
If the Macrovision license is obtained, the Company's exclusive rights to the
technology will become non-exclusive if the monthly royalties payable to
Macrovision do not exceed $1,000 within 18 months of the exercise of the option
or if the Company's revenues from the distribution of videos are less than
$250,000,000 during the twelve-month period beginning three years after the
exercise of the option. The license will expire five years from the date the
option is exercised, subject to the right of the Company to extend the option by
paying Macrovision $350,000 and agreeing to increase the monthly minimum
royalties to $350,000.
Macrovision, prior to granting the option to eVideo U.S.A., Inc., licensed the
technology to an unrelated third party which is presently in bankruptcy and
which has failed to comply with the terms of its license with Macrovision. It is
the Company's understanding that Macrovision has notified this third party that
its license to the technology has terminated.
Obtaining the license to the Macrovision technology is an important aspect of
the Company's business plan since, without the ability to protect the
unauthorized copying of videos, distributors of motion pictures, video games and
similar entertainment will not allow the Company to distribute newly released
product without the copy-protection features provided by the Macrovision
technology.
All of the shares issued and to be issued to eVideo International, Inc. for
the acquisition of eVideo U.S.A., Inc. are or will be held in escrow. These
shares will be released to eVideo International, Inc. on the basis of the
Company achieving certain milestones, according to the following schedule.
Portion released Conditions for release
25% when all of the following are achieved:
- the Company demonstrates an operational prototype
digital set-top box,
- the Company has entered into written agreements with
manufacturers to produce a total of 15,000 set-top boxes
per month,
- a formal license to use video copyright protection
technology has been entered into, and
- a distribution agreement has been entered into with a
motion picture studio in respect of a substantial portfolio
of video movies.
25% when all of the following are achieved:
- a recognized Chief Executive Officer has been
successfully recruited by the Company,
- a successful file server beta testing with video files has
been developed,
- a distribution agreement with a cable company has been
entered into, and
- a head-end communication test has been successfully
completed.
25% when the Company first generates gross annual revenues of
$5,000,000.
25% when the Company first generates gross annual revenues of
$500,000,000.
All shares the Company declares a dividend of at least $2.00 per common
remaining in share by June 23, 2001
escrow, if any
All shares the Company successfully completes a public offering that
remaining in raises more than $20,000,000 with less than 30% dilution to
escrow, if any the shareholders existing just before completing the offering.
All shares if a successful takeover for a majority of the issued and
remaining in outstanding common shares of the Company is completed.
escrow, if any
All shares if the Company's common shares have a publicly quoted market
remaining in price of over in $15.00 per share for more than 20 consecutive
escrow, if any trading days.
Any shares that have not been released from escrow by June 23, 2004 will be
cancelled.
At the present time, the Company is in the development stage, does not have any
customers, and has not earned any revenues from its proposed operations. The
Company currently has two full-time employees, its president and a project
manager. Both employees are based in Scottsdale, Arizona. The Company expects to
expand its workforce to 22 persons by the start of commercial operations in
January 2000 and increase its work force to 79 persons by December 2000 as
operations expand. Corporate record keeping and investor relations activities
are conducted through management companies in Vancouver, British Columbia.
Risk Factors
An investment in stock of the Company is highly speculative, involves a high
degree of risk, and should not be made by any person who cannot afford the loss
of the entire investment. The following factors should be considered carefully
in evaluating the Company and its business.
<PAGE>
Lack of Prior Operations and Experience
The Company is a development stage company, has no revenues from operations and,
except for the services of its officers and directors and the cash on hand, has
no other significant tangible assets. Accordingly, there can be no assurance
that the Company will operate at a profitable level. The Company's proposed
business involves the electronic delivery of videos on a faster than real-time
basis. Future development and operating results will depend on many factors,
including the initial completion of a developed product, the demand for the
Company's product, the level of product and price competition, the Company's
success in establishing and expanding distribution channels, and the Company's
ability to develop and market new products and control costs. In addition, the
Company's future prospects must be considered in light of the risks, expenses
and difficulties frequently encountered in establishing a new business in the
video distribution industry, which is characterized by intense competition,
rapid technological change, and significant regulation.
Acceptance of Company's Technology; Creation of New Market
There can be no assurance that the Company's proposed video delivery system will
be accepted. Although the Company believes that there will be a large market for
its proposed video delivery system, there can be no assurance that such a market
will develop, or how quickly such development may occur. The Company currently
is concentrating its efforts solely on the electronic distribution of videos and
will be dependent upon the successful development of this business to generate
revenues. Accordingly, for the foreseeable future, the Company's success will
depend upon the development and marketing of its electronic video distribution
system.
Additional Financing Required - Dilution to Present Shareholders
The funds available to the Company are not adequate for it to complete the
development of its business operating systems, reach full commercial
distribution of its products and be competitive in the industry. The Company's
capital requirements will depend on a variety of factors, including the progress
of systems development, the acquisition of rights to distribute videos,
negotiations with cable and satellite television providers to use their
distribution networks and market acceptance of and demand for its products. The
timing and amount of such capital requirements cannot be accurately predicted.
There is no assurance that additional funds will be available from any source
when needed by the Company. If additional funds are not available, the Company
may not be able to continue in business.
The Company's Articles of Incorporation, as amended, authorize the issuance of
30,000,000 shares of common stock and 5,000,000 shares of preferred stock. The
Company's Board of Directors has the power to issue, without shareholder
approval, any or all of such shares that are not yet issued. The Company's Board
of Directors may choose to issue some or all of such shares to acquire one or
more businesses or other types of property in the future. The issuance of any
such shares may result in a reduction of the net book value per share or market
price of the outstanding shares of the Company's common stock, and will reduce
proportionate ownership and voting power of all other shareholders. Further, any
such issuance may result in a change in control of the Company.
Stock Options
The Company plans to adopt a stock option plan. The issuance of options could
adversely affect the market price of the Company's common stock and could impair
the Company's ability to raise additional capital through the sale of its equity
securities or debt financing. Exercise of any such options will result in
dilution to the proportional interests of shareholders of the Company at the
time of exercise and, to the extent that the exercise price is less than the
book value of the common stock at that time, to the book value per share of the
common stock.
No Dividends
The Company never has paid and does not anticipate paying dividends on its
common stock in the foreseeable future. Retained earnings, if any, will be
utilized for the operation and expansion of the Company's business.
<PAGE>
Limited Public Market for Common Stock
The Company's common stock is traded in the over-the-counter market. An
investment in the Company's common stock should be considered highly illiquid,
and there can be no assurance that a market for the Company's common stock will
continue.
Penny Stock Regulation
The Securities and Exchange Commission (the "SEC") has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks." Penny stocks generally are equity securities with a price of less than
$5.00 per share (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ National Market System, provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document prepared by the
SEC that provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must provide the
customer with bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from such rules, the broker-dealer must
make a special written determination that a penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure requirements often have the effect of reducing the
level of trading activity in any secondary market for a stock that becomes
subject to the penny stock rules. The Company's common stock is subject to the
penny stock rules, and accordingly, owners of the Company's common stock may
find it difficult or impossible to sell their shares.
Need for Experienced Management and Key Employees
The Company is dependent upon the services of a few key management and technical
personnel. The loss of any one of their services, or an inability to recruit and
retain additional qualified personnel, could have a material adverse effect on
the Company.
Substantial Competition
The electronic video distribution industry is characterized by rapidly evolving
technology and intense competition. The Company will be at a disadvantage with
other companies having larger technical staffs, established market shares and
greater financial and operational resources than the Company. There can be no
assurance that the Company will be able to compete successfully. Most of the
Company's competitors have substantially greater capital resources, name
recognition and expertise in research, development, distribution and marketing.
There can be no assurance that the Company's competitors will not succeed in
developing products, or competing technologies that are more effective or more
effectively marketed than products marketed by the Company or that render the
Company's technology obsolete.
Dependence on Third Parties
The Company will rely on third parties for the supply of the video movies and
games that it proposes to distribute. In addition, the Company will rely upon
cable operators to distribute its videos to cable subscribers. There can be no
assurance that the Company will be able to acquire the rights required for the
distribution of these videos. The failure to obtain the rights to distribute
sufficient quantities and qualities of such videos will have a material adverse
effect on the Company's business, financial condition and results of operations.
<PAGE>
Item 2. Management's Discussion and Analysis and Plan of Operation.
The Company has not yet developed the systems required to operate the eVideo
business. The following are the major steps and estimated costs to develop the
Company's operating systems:
Estimated
Estimated Time Frame Cost
Capital Development Expenditures
- - Design, write and test video ordering June to November 1999 $315,000
system software
- - Set-Top Box engineering and design, July to October 1999 232,500
including embedded software programming,
gaming module design and operational testing
- - Purchase and install computer hardware
for movie file servers and peripherals November 1999 700,000
- - Purchase and install computer hardware
for web server November 1999 200,000
- - Purchase, install and configure operating
system and database management software December 1999 150,000
- - Purchase and configure software for embedding
in Set-Top boxes December 1999 140,000
----------
Total capital development expenditures 1,737,500
Development Stage Operating Expenses July to December 1999
- - Marketing 250,000
- - Personnel 556,250
- - Professional fees 600,000
- - Licensing fees 1,000,000(1)
- - Contract services 50,000
- - Travel expenses 250,000
- - Management services 120,000
- - Offices and facilities 226,500
----------
Total development stage operating expenses 3,052,750
----------
Total development stage cash requirements $4,790,250
==========
(1) Includes initial fee for Macrovision license, fees for distribution rights
to motion pictures, video games and other entertainment and related legal
and consulting services.
At June 30, 1999 the Company had cash on hand of approximately $760,000 but only
plans to spend $400,000 toward development costs until additional capital is
raised. The Company expects to have positive operating cash flows by January
2000.
The Company anticipates that it will need approximately $3,900,000 in additional
capital by September 30, 1999, and an additional $1,100,000 by December 1999 to
meet the development timetable set forth above. The Company's development
schedule will be delayed unless the capital required by the Company is available
when needed.
Another critical factor in the Company's ability to market its video movies and
games will be developing and funding the cost of producing a new digital set-top
box for cable and satellite TV subscribers. A digital set-top box capable of
receiving and storing the videos to be distributed by the Company is estimated
to cost $400. Each subscriber will require a digital set-top box in order to
receive the Company's videos.
A key feature of the eVideoTV set-top box will be a reader for a "smart-card"
issued by banks and other financial institutions. Key smart-card issuers are
Mondex (including City Bank and Wells Fargo), Visa, MasterCard and American
Express. Smart-cards are protected by a personal identification number, or PIN,
to prevent unauthorized use.
<PAGE>
A set-top box with a smart-card reader connected to a television and the
internet (through the cable television network) can act as a virtual automated
banking machine, providing easy access to a customer's banking, investing,
travel and shopping accounts. In addition to providing the common functions of a
credit card and a bank machine card, a smart-card can store information and
access up to 256 separate accounts or functions, such as brokerage accounts, air
mileage accounts, car rental and airline travel numbers and shopping
preferences. The smart-card can also function as an independent electronic cash
card since it can transfer funds from a customer's bank account to the
smart-card. Funds are deducted from the smart-card and added to a merchant's
account when purchases are made with the smart-card.
The smart-card's ability to store large amounts of information about its holder,
permits an advertiser to direct specific advertising to certain groups of people
based on the information stored on the smart-card. The advertising is displayed
on the television when the smart-card is inserted into the eVideoTV set-top box.
The Company anticipates that all of the cost of the eVideoTV set-top boxes will
financed by cable and satellite television providers, smart-card issuers and
advertisers.
<PAGE>
Item 3. Description of Property.
The Company does not currently own any material amount of property or equipment.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table shows the ownership of the Company's common stock by the
Company's officers and directors and by those persons known by the Company to be
the beneficial owner of more than 5% of the Company's common stock. Unless
otherwise indicated all shares are owned of record.
Percent of
Name and Address of Beneficial Owner Amount Owned Class
Roy B. Bennett, Director and President 6,623,016 (1) 42.5%
8266 East del Cadena Drive
Scottsdale, AZ 85258
Owen Granger, Director and Secretary/ 0 0.0%
Treasurer
1750 - 1177 W. Hastings St.
Vancouver, BC, Canada V6E 2K3
Adrian Rollke, Director 345,000 (2) 2.2%
1750 - 1177 W. Hastings St.
Vancouver, BC, Canada V6E 2K3
Peter Wilson, Director 0 0.0%
1750 - 1177 W. Hastings St.
Vancouver, BC, Canada V6E 2K3
Eileen A. Bennett, Director 0 0.0%
8266 East del Cadena Drive
Scottsdale, AZ 85258
Robert G. Dinning, Director 0 0.0%
3910 Indian River Road
North Vancouver, BC, Canada V7G 2G7
Directors and Executive Officers as a 6,968,016 44.7%
group (6 persons)
<PAGE>
(1)Shares are owned by eVideo International, Inc., a Bahamian company
controlled by Mr. Bennett. These shares are held in escrow and will be
released or cancelled in accordance with the schedule described under Item 1
of this Registration Statement.
(2)These shares are held in escrow and will be released to Mr. Rollke at the
rate of one share for each $11.30 in equity financing the Company raises by
September 30, 1999. Any shares remaining in escrow on October 1, 1999 will be
cancelled.
There are no arrangements known to the Company which may result in a change in
control of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Name and Age Position Business Experience for the Past Five Years
Roy B. Bennett, 52 President and President of Roy B. Bennett and Associates
Director since Ltd., a private venture capital and
June 23, 1999 management company specializing in new
technology start-ups, corporate structuring
and private funding since 1994.
Owen Granger, 42 Secretary/Treasurer Certified Management Accountant, employee
and Director since of CEBU Holdings Inc., a corporation
October 15, 1998 providing financial services to public
companies, since September 1998.Secretary/
Treasurer and Director of WestBond
Enterprises Corporation, a Vancouver
Stock Exchange listed paper converting
company, July 1988 to present. Secretary/
Treasurer of PetroReal Oil Corporation, a
Vancouver Stock Exchange listed oil
company, September 1998 to present.
Director of PetroReal Oil Corporation
since June 1999. Chief Financial Officer
and Director of Quest International
Resources Corporation (now named Standard
Mining Corporation), a NASDAQ and Toronto
Stock Exchange listed mineral exploration
company, December 1992 to August 1998.
Secretary/Treasurer and Director of Twin
Gold Corporation (formerly Atlanta Gold
Corporation), a Toronto Stock Exchange
listed mineral exploration company,
1989 to 1996.
Adrian Rollke, 30 Director since President of the Company; August 27, 1997
August 27, 1997 to June 23, 1999. Principal of Reinhart
Capital Corporation and officer of CEBU
Holdings Inc., companies providing
management services to public corporations,
1997 to present. Director of PetroReal
Oil Corporation, a Vancouver Stock Exchange
listed oil company, 1998 to present.
Secretary/Treasurer and Director of Twin
Gold Corporation a Toronto Stock
Exchange listed mineral exploration
company, 1996 to 1997. Controller of Twin
Gold Corporation and Quest International
Resources Corporation, a NASDAQ and
Toronto Stock Exchange listed mineral
exploration company, 1992 - 1996.
Peter Wilson, 31 Director since Businessman, principal of Sterling-Grant
June 23, 1999 Capital Inc., a private company specializing
in corporate development, structured
project financing and senior management
services to public corporations since 1997.
Director of Investor Relations, Samoth
Capital Corporation, a Toronto Stock
Exchange listed real estate investment
company, 1996 to 1999. Vice President
Samoth Equity Corporation, a subsidiary of
Samoth Capital Corporation from 1995 to
1997.
Eileen Bennett, 48 Director since Secretary and Chief Financial Officer of
June 23, 1999 Roy B. Bennett and Associates Ltd., a
private venture capital and management
company specializing in new technology
start-ups, corporate structuring and
private funding, since 1994.
Robert Dinning, 60 Director since Chartered Accountant; President of Bentley
June 23, 1999 Capital Ltd., a venture capital and
consulting company, since 1996. Chief
Financial Officer and Director of
Elgrande.com Inc., an internet based
retailer and Global Enviro Inc., since
1998. Director of eZuz.com Inc., an
internet based shopping service,since 1998.
Chief Financial Officer and Director of
First American Scientific Corp., from 1995
to 1998. Director of Visionary Solutions
Inc. from 1995 to 1997. Director of Reward
Enterprises Inc., 1998 to present.
Directors are elected at each annual general meeting and serve until their
successors have been elected. Officers are appointed by the board of directors
and serve at the pleasure of the board.
Roy and Eileen Bennett are married to each other. There are no other family
relationships among the Company's directors or executive officers.
During the past five years, none of the Company's directors, executive officers,
promoters or control persons:
(1) have been involved in any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that
time;
(2) have been convicted in a criminal proceeding or are subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) have been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting such person's involvement in any type of business, securities or
banking activities; or
(4) have been found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities law,
and the judgment has not been reversed, suspended, or vacated.
<PAGE>
Item 6. Executive Compensation.
The following table on discloses all compensation received by the Company's
President (the Chief Executive Officer) during the years ending December 31,
1997 and 1998. During 1997 and 1998 no executive officer received cash or other
compensation from the Company in excess of $100,000. During the six months
ending June 30, 1999 the Company paid $10,427 for the services of Adrian Rollke
to a company wholly owned by Adrian Rollke, the Company's President prior to
June 23, 1999.
Annual Compensation Long Term Compensation
Securi-
Other Restric- ties All
Annual ted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Awards SARs Payouts sation
Adrian Rollke, 1998 0 0 0 0 0 0 0
President from 1997 0 0 0 0 0 0 0
August. 27, 1997
to June 23, 1999
Effective June 21, 1999, the Company entered into a two-year non-cancellable
management agreement with Roy B. Bennett and Associates Ltd. ("RBA Ltd."), a
company wholly owned by Roy B. Bennett, the Company's president. Under the terms
of the management agreement RBA Ltd. is paid $144,000 per year for the services
of Roy B. Bennett and $36,000 per year for the services of a project manager
employed by RBA Ltd. A bonus of $25,000 will be paid to RBA Ltd. if the Company
successfully develops a set-top box by August 21, 1999. A bonus of $50,000 will
be paid to RBA Ltd. if the Company has gross revenues of at least $1,000,000 by
June 21, 2001.
Item 7. Certain Relationships and Related Transactions.
Since February 1999 CEBU Holdings Inc. ("CEBU") has provided office space,
furniture, equipment and management services to the Company. CEBU is
wholly-owned by Karl Rollke, the father of Adrian Rollke, a director and former
officer of the Company. Adrian Rollke is also an officer of CEBU. Owen Granger,
a director and the Secretary/Treasurer of the Company, is an employee of CEBU.
This arrangement is expected to continue.
CEBU did not charge the Company for any costs or expenses during 1997 or 1998.
During the six months ended June 30, 1999, the Company paid $31,504 to CEBU for
rent, office supplies and services and management fees.
The Company received loans of $16,000 from CEBU during 1997 and 1998. These
loans were repaid after December 31, 1998.
See Part I, Item 1 of this Registration Statement for information concerning the
acquisition of eVideo USA, Inc. from Roy Bennett, an officer and director of the
Company.
See Part II, Item 4 of this Registration Statement for information concerning
shares of the Company's common stock acquired by Adrian Rollke, the Company's
former President.
<PAGE>
Item 8. Description of Securities.
Common Stock
The Company is authorized to issue 30,000,000 shares of common stock with a par
value of $0.0001 per share, (the "Common Stock"). Holders of Common Stock are
entitled to cast one vote for each share held of record on all matters presented
to shareholders. Cumulative voting is not allowed, which allows the holders of a
majority of the outstanding Common Stock to elect all directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available for the
payment of dividends and, in the event of liquidation, to share pro rata in any
distribution of the Company's assets after payment of liabilities. The board is
not obligated to declare a dividend. It is not anticipated that dividends will
be paid in the foreseeable future.
Holders of Common Stock do not have preemptive rights to subscribe to additional
shares issued by the Company. All of the outstanding shares of Common Stock are
fully paid and non-assessable.
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of preferred stock
with a par value of $0.0001 per share, (the "Preferred Stock"). The Company's
Articles of Incorporation provide that the Board of Directors has the authority
to issue the Preferred Stock from time to time, with such designations,
preferences, conversion rights, cumulative, relative, participating, optional or
other rights, qualifications, limitations, or restrictions thereof as they
determine, within the limitations provided by Delaware statute.
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and
Other Shareholder Matters.
The Company's common stock has been quoted on the National Association of
Securities Dealers' Over-the-Counter market since May 11, 1999. There is no
other public trading market for the Company's equity securities.
The following table summarizes trading in the Company's common stock, as
provided by quotations published on the OTC Bulletin Board for the period
indicated. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
Quarter ended Volume High Bid Low Bid
June 30, 1999 1,303,300 $4-3/16 $1-5/8
The Company has issued warrants that entitle the holder to purchase up to
307,693 shares of common stock at $3.25 per share until May 25, 2000.
As of July 26, 1999, there were approximately 310 holders of record of the
Company's common stock.
The Company has not paid, and, in the foreseeable future, the Company does not
intend to pay, any dividends.
<PAGE>
Item 2. Legal Proceedings.
The Company is not party to any pending legal proceeding nor is any of its
property the subject of any pending legal proceeding. The Company is not aware
of any proceeding that a governmental authority is contemplating.
Item 3. Changes in and Disagreements with Accountants.
Grant Thornton, Chartered Accountants, Vancouver, Canada, were appointed as the
auditors of the Company on May 14, 1999. They replaced Spicer, Jeffries & Co.,
Certified Public Accountants, Denver, Colorado, who resigned at the request of
the Company on May 13, 1999.
The report of Spicer Jeffries & Co. on the Company's financial statements for
the period ending August 26, 1997 did not contain any adverse opinion or
disclaimer of opinion, nor was it modified as to uncertainty, audit scope, or
accounting principles.
This change in auditors was recommended and approved by the board of directors
of the Company. The Company does not have an audit committee.
There were no disagreements with Spicer, Jeffries & Co. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to the satisfaction of Spicer,
Jeffries & Co., would have caused them to make reference to the subject matter
of the disagreement in connection with their report.
<PAGE>
Item 4. Recent Sales of Unregistered Securities.
The following information sets forth all securities of the Company which have
been sold and which were not registered under the Securities Act of 1933.
In July 1997 the Company sold 7,200,000 shares of its common stock to Bona Vista
Ltd. for $5,000 in cash. On August 27, 1997 Bona Vista West Ltd. sold these
shares to Trifina Finanz. On the same date that Trifina Finanz acquired these
shares, it transferred the 7,200,000 shares to twenty persons, including Adrian
Rollke, an officer and director of the Company, who received 345,000 shares. Mr.
Rollke paid Trifina Finanz $2,875 for these shares.
In August 1997 the Company issued 175,456 shares of its common stock in exchange
for all of the Series C shares of Century International Ventures Ltd.
("Century") in a share-for-share exchange with the holders of such Series C
stock.
In March 1999 the Company sold 1,200,000 shares of its common stock to three
persons for $120,000.
All of the foregoing sales of the Company's common stock were exempt from
registration pursuant to Rule 504 of the Securities and Exchange Commission. No
underwriters were used and the Company did not pay any commissions in connection
with the sale of these securities.
In May 1999 the Company sold 374,534 shares of its common stock, plus warrants
for the purchase of 307,693 shares of common stock, to 2 persons for $1,066,843.
The sale of the Company's common stock and warrants in May 1999 was exempt from
registration pursuant to Regulation S of the Securities and Exchange Commission.
The shares of the common stock and warrants were acquired for investment
purposes only and without a view to distribution. The purchasers of the
Company's common stock acquired the securities for their own accounts. All of
the common stocks and warrants are "restricted" securities as defined in Rule
144 of the Rules and Regulations of the Securities and Exchange Commission.
Although no underwriter was used in connection with the sale of these
securities, the Company issued 15,384 shares of common stock to one person for
his assistance in selling these securities.
In June 1999 the Company issued 6,623,016 shares of its common stock to eVideo
International, Inc. in exchange for all of the issued and outstanding shares of
eVideo USA, Inc.
The issuance of the shares in June 1999 was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933. All of these shares were acquired
for investment purposes only and without a view to distribution. The corporation
which received these shares was fully informed about matters concerning the
Company, including its business, financial affairs and other matters and
acquired the securities for its own accounts. The 6,623,016 shares are
"restricted" securities as defined in Rule 144 of the Rules and Regulations of
the Securities and Exchange Commission. No underwriters were used and no
commissions were paid in connection with the issuance of these shares.
Item 5. Indemnification of Directors and Officers.
The Delaware Business Corporation Act and the Company's Bylaws provide that the
Company may indemnify any and all of its officers, directors, employees or
agents or former officers, directors, employees or agents, against expenses
actually and necessarily incurred by them, in connection with the defense of any
legal proceeding or threatened legal proceeding, except as to matters in which
such persons shall be determined not to have acted in good faith and in the best
interest of the Company. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
<PAGE>
PART F/S
Index to Financial Statements
Page #
FINANCIAL STATEMENTS OF THE REGISTRANT
Report of the Independent Auditors 17
Consolidated Balance Sheet as at June 30, 1999 18
Consolidated Statement of Operations for the period from inception,
March 5, 1999 to June 30, 1999 19
Consolidated Statement of Cash Flows for the period from inception,
March 5, 1999 to June 30, 1999 20
Consolidated Statement of Shareholders' Equity from inception,
March 5, 1999, to June 30, 1999 21
Notes to the Consolidated Financial Statements 22
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of the Independent Auditors 26
Balance Sheets as at June 22, 1999, December 31, 1998 and
December 31, 1997 27
Statements of Operations for the cumulative period from ]
inception, July 24, 1997, to June 22, 1999, for the period
from January 1, 1999 to June 22, 1999, for the year ended December
31, 1998 and for the period from inception, July 25, 1997, to
December 31, 1997 28
Statements of Cash Flows for the cumulative period from
inception, July 24, 1997, to June 22, 1999, for the period
from January 1, 1999 to June 22, 1999, for the year ended
December 31, 1998 and for the period from inception, July 25,
1997, to December 31, 1997 29
Statement of Shareholders' Equity from Inception, July 25, 1997 to
June 22, 1999 30
Notes to the Financial Statements 31
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
Notice to Reader 33
Pro-forma Consolidated Statement of Operations for the Six Months
ended June 30, 1999 34
<PAGE>
INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS
We have audited the consolidated balance sheet of Asia Pacific Enterprises, Inc.
as at June 30, 1999 and the consolidated statements of operations, cash flows
and shareholders' equity for the period from inception, March 5, 1999, to June
30, 1999. These consolidated financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada, which are in substantial agreement with those in the United States of
America. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Asia Pacific Enterprises, Inc. as
at June 30, 1999 and the results of its operations and its cash flows for the
period from inception, March 5, 1999, to June 30, 1999 in accordance with
generally accepted accounting principles in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
the company will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, the company has no established source of
revenue and is dependent on its ability to raise substantial amounts of equity
funds. This raises substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Grant Thornton
Vancouver, Canada
July 21, 1999 Chartered Accountants
<PAGE>
Consolidated Balance Sheet
June 30, 1999
U.S. Dollars
ASSETS $
Current Assets
Cash 759,744
Prepaid expenses 14,289
Total Current Assets 774,033
Technology Acquisition Costs (note 4) 315,001
Deposit on Computer Software Development 33,933
Total Assets 1,122,967
LIABILITIES
Current Liabilities
Accounts payable 39,207
SHAREHOLDERS' EQUITY
Share Capital (notes 3 and 5)
Authorized
- - 30,000,000 shares of common stock, $0.0001 par value
- - 5,000,000 shares of preferred stock, $0.0001 par valu
Issued and outstanding
- - 15,588,359 common shares 1,559
Additional paid in capital 1,095,297
Total Share Capital 1,096,856
Deficit Accumulated during the Development Stage (13,096)
Net Shareholders' Equity 1,083,760
Total Liabilities and Shareholders' Equity 1,122,967
Continuance of Operations (note 1)
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Consolidated Statement of Operations
Inception, March 5, 1999, to June 30, 1999
U.S. Dollars
$
General and Administrative Expenses
Corporate promotion 1,045
General corporate expenses 1,299
Management and consulting fees 7,473
Professional fees 1,700
Rent 834
Travel 1,433
--------
Total General and Administrative Expenses 13,784
Interest Income 688
Net Loss for the Period 13,096
Weighted Average Number of Shares Outstanding (note 5) 515,747
Net Loss Per Share 0.03
<PAGE>
Consolidated Statement of Cash Flows
Inception, March 5, 1999, to June 30, 1999
U.S. Dollars
$
Operating Activities
Net loss for the period (13,096)
Adjustments to reconcile net loss to net cash
used in operating activities:
- - accounts receivable 2,262
- - prepaid expenses (3,947)
- - accounts payable 6,977
----------
Net Cash Used in Operating Activities (7,804)
----------
Financing Activities
Proceeds from sale of common shares 1
Loans from parent company prior to acquisition 115,000
Cash acquired on acquisition of parent company 1,001,481
Re-payment of note payable (200,000)
----------
Total Cash Flow from Financing Activities 916,482
----------
Investing Activities
Technology rights (115,001)
Deposit on computer software development (33,933)
Total Cash Used in Investing Activities (148,934)
----------
Increase in Cash During the Period and Cash
at the End of the Period 759,744
Non-Cash Activities Not Included in Cash Flows
Acquisition of technology rights through
note payable 200,000
Cancellation of loans from parent company on
acquisition 115,000
<PAGE>
Consolidated Statement of Shareholders' Equity
Inception, March 5, 1999, to June 30, 1999
U.S. Dollars
Additional Total
Number Par Paid in Shareholders'
of Shares value Capital Deficit Equity
$ $ $ $
Issuance of shares for cash on
incorporation 1 1 - - 1
Adjustment for change in share
tructure resulting from acquisition
of eVideo U.S.A., Inc. 6,623,015 661 (661) - -
Shares outstanding at date of
acquisition of eVideo U.S.A.,
Inc., previously issued for
cash, net of issue costs (note 3) 8,965,343 897 1,095,958 - 1,096,855
Net loss, inception to June
30, 1999 - - - (13,096) (13,096)
- ------- -------------------------------------------------
Balance, June 30, 1999 15,588,359 1,559 1,095,297 (13,096) 1,083,760
========== ======= ========= ======= =========
<PAGE>
Notes to the Consolidated Financial Statements
June 30, 1999
U.S. Dollars
1. Basis of Presentation
The Company is developing an electronic video distribution system and has not
commenced commercial operations.
The ability of the Company to continue as a going concern is dependent upon
its ability to raise substantial amounts of equity for use in developing its
intended business and its administrative activities. While management
believes that the Company will be able to raise sufficient funds through the
sale of equity or debt securities, there is no assurance that sufficient
funds will be raised.
2. Significant Accounting Policies
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. The principal area requiring the use of
management estimates is the determination of the appropriate carrying values
for the Company's investments in technology and software.
Actual results could differ from those estimates.
Translation of Foreign Currencies - Monetary assets and liabilities are
translated at the exchange rate in effect at the balance sheet date and
non-monetary assets and liabilities at the exchange rates in effect at the
time of acquisition or issue. Revenues and expenses are translated at the
rates in effect at the time of the transaction. Exchange gains or losses
arising on translation are included in net income or loss for the period.
Financial Instruments - The company has various financial instruments,
including cash and payables. The carrying values of these financial
instruments approximate their fair values.
Deposit on Computer Software Development - The Company has capitalized a
deposit made in consideration of computer software development. Once the
software has been fully developed and implemented, its cost will be amortized
over its estimated economic life.
Technology Acquisition Costs - The costs incurred to acquire the Company's
technology have been capitalized and will be amortized over its estimated
economic life upon commencement of commercial operations.
<PAGE>
Notes to the Consolidated Financial Statements
June 30, 1999
U.S. Dollars
3. Business Combination
On June 23, 1999, the Company acquired all of the outstanding shares of
eVideo U.S.A., Inc. in exchange for the issuance of 6,623,016 shares of
common stock and a commitment to issue an additional one and one-half shares
of common stock for every share the Company issues in raising $3,900,000
after June 23, 1999. This business combination has been accounted for as an
acquisition of the Company by eVideo U.S.A., Inc. Accordingly, these
consolidated financial statements combine the operations of eVideo U.S.A.,
Inc. since its incorporation on March 5, 1999 and the operations of Asia
Pacific Enterprises, Inc. since the date of acquisition, June 23, 1999. All
intercompany transactions and balances have been eliminated.
At the date of acquisition, the net tangible assets of Asia Pacific
Enterprises Inc. acquired were:
Cash $1,001,481
Other current assets 12,604
Advances to eVideo U.S.A., Inc. 115,000
Current liabilities (32,230)
--------
Value assigned to 8,965,343 shares
outstanding at date of acquisition $ 1,096,855
4. Technology Acquisition Costs
The costs include $300,001 that the company paid to a company controlled by
the president of the Company for the right to distribute video movies and
games electronically in the United States of America in accordance with a
business plan developed by the Company's president. The purchase price for
this technology was negotiated at arm's length with the Company prior to the
acquisition of eVideo U.S.A., Inc.
<PAGE>
Notes to the Consolidated Financial Statements
June 30, 1999
U.S. Dollars
5. Share Capital
Warrants are outstanding that entitle their holder to purchase up to 307,693
shares of common stock at $3.25 per share until May 25, 2000.
All of the shares issued and to be issued for the acquisition of eVideo
U.S.A., Inc. are or will be held in escrow. These shares will be released to
on the basis of the company achieving certain milestones according to the
following schedule:
Portion released Conditions for release
25% when all of the following are achieved:
- the Company demonstrates an operational prototype
digital set-top box,
- the Company has entered into written agreements with
manufacturers to produce a total of 15,000 set-top
boxes per month,
- a formal license to use video copyright protection
technology has been entered into, and
- a distribution agreement has been entered into with a
motion picture studio in respect of a substantial
portfolio of video movies.
25% when all of the following are achieved:
- a recognized Chief Executive Officer has been
successfully recruited by the Company,
- a successful file server beta testing with video
files has been developed,
- a distribution agreement with a cable company has
been entered into, and
- a head-end communication test has been successfully
completed.
25% when the Company first generates gross annual revenues
of $5,000,000.
25% when the Company first generates gross annual revenues
of $500,000,000.
All shares remaining if the Company declares a dividend of at least $2.00
in escrow, if any per common share in escrow, by June 23, 2001.
All shares remaining if the Company successfully completes a public offering
in escrow, if any that raises more than $20,000,000 with less than 30%
dilution to the shareholders existing just before
completing the offering.
All shares remaining if a successful takeover for a majority of the issued
in escrow, if any and outstanding common shares of the Company is completed.
All shares remaining if the Company's common shares have a publicly quoted
in escrow, if any market price of over $15.00 per share for more than 20
consecutive trading days.
Any shares that have not been released from escrow by June 23, 2004 will be
cancelled.
An additional 345,000 shares of common stock are held in escrow and will be
released at the rate of 1 share for each $11.30 in equity financing that the
Company raises by September 30, 1999. Any shares remaining in escrow on
October 1, 1999 will be cancelled.
All shares held in escrow have been excluded from the calculation of the
weighted average number of shares outstanding.
<PAGE>
Notes to the Consolidated Financial Statements
June 30, 1999
U.S. Dollars
6. Related Party Transactions
Pursuant to a management agreement effective for two years commencing June
21, 1999, the Company has committed to pay $15,000 per month to a company
controlled by the president of the Company for the services of the president
and a project manager. $5,000 was paid for the period from inception to June
30, 1999.
Consulting fees of $2,473 and rent of $834 have been paid to other companies
that employ other directors and officers of the Company.
<PAGE>
INDEPENDENT AUDITORS' REPORT
We have audited the balance sheets of Asia Pacific Enterprises, Inc. as at June
22, 1999, December 31, 1998 and December 31, 1997 and the statements of
operations, cash flows and shareholders' equity for the cumulative period from
inception, July 25, 1997, to June 22, 1999, the period from January 1, 1999 to
June 22, 1999, the year ended December 31, 1998 and the period from inception,
July 25, 1997, to December 31, 1997. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada, which are in substantial agreement with those in the United States of
America. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Asia Pacific Enterprises, Inc. as at June
22, 1999, December 31, 1998 and December 31, 1997 and the results of its
operations and cash flows for the cumulative period from inception, July 25,
1997, to June 22, 1999, the period from January 1, 1999 to June 22, 1999, the
year ended December 31, 1998 and the period from inception, July 25, 1997, to
December 31, 1997 in accordance with generally accepted accounting principles in
the United States of America.
The accompanying financial statements have been prepared assuming the company
will continue as a going concern. As discussed in note 1 to the financial
statements, the company has no established source of revenue and is dependent on
its ability to raise substantial amounts of equity funds. This raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Grant Thornton
Vancouver, Canada
July 21, 1999 Chartered Accountants
<PAGE>
Asia Pacific Enterprises, Inc.
(formerly Oro Rico Mining Corporation)
A Development Stage Company
Notes to the Financial Statements
December 31, 1998
<PAGE>
Balance Sheets
U.S. Dollars
June 22, December 31,
1999 1998 1997
ASSETS
Current Assets
Cash 1,001,481 229 -
Accounts receivable 2,262 - -
Prepaid expenses 10,342 - 2,500
--------- ---------- --------
Total Current Assets 1,014,085 229 2,500
Advances to eVideo U.S.A., Inc. 115,000 - -
--------- ---------- --------
Total Assets 1,129,085 229 -2,500
========= ========== ========
LIABILITIES
Current Liabilities
Accounts payable 32,230 3,366 6,454
Advances from related party (note 3) - 16,000 5,300
--------- ---------- -------
Total Liabilities 32,230 19,366 11,754
--------- ---------- -------
SHAREHOLDERS' EQUITY
Share Capital (notes 4 and 6)
Authorized
- - 30,000,000 shares of common stock, $0.0001
par value
- - 5,000,000 shares of preferred stock,
$0.0001 par value
Issued and outstanding - 8,965,343 common
shares (1998 and 1997 - 7,375,425 897 738 738
Additional paid in capital 1,191,121 4,437 4,437
--------- ---------- -------
Total Share Capital 1,192,018 5,175 5,175
Deficit Accumulated during the Development
Stage (95,163) (24,312) (14,429)
Total Shareholders' Equity (Deficiency) 1,096,855 (19,137) (9,254)
Total Liabilities and Shareholders' Equity 1,129,085 229 2,500
========= ========== =======
Continuance of Operations (note 1)
<PAGE>
Statements of Operations
U.S. Dollars
Cumulative, January 1 Inception,
Inception to to Year ended July 25 to
June 22, June 22, December 31, December 31,
1999 1999 1998 1997
General and Administrative Expenses
Professional fees 17,780 12,005 3,002 2,773
Management and consulting fees 38,979 38,979 - -
Rent 9,217 9,217 - -
Office supplies and services 1,457 1,457 - -
General corporate expenses 20,977 2,398 6,923 11,656
Corporate promotion 3,252 3,252 - -
Travel 7,057 7,057 - -
----- ----- --------- ----------
Total General and Administrative
Expenses 98,719 74,365 9,925 14,429
Interest Income (3,556) (3,514) (42) -
------ ------ ----- -----
Net Loss for the Period 95,163 70,851 9,883 14,429
====== ====== ====== ======
Weighted Average Number of Shares
Outstanding 8,087,110 7,375,425 7,295,340
Net Loss per Share 0.01 0.00 0.00
==========================================
<PAGE>
Statements of Cash Flows
U.S. Dollars
Cumulative, January 1 Inception,
Inception to to Year ended July 25 to
June 22, June 22, December 31, December 31,
1999 1999 1998 1997
General and Administrative Expenses
Operating Activities
Net loss for the period (95,163) (70,851) (9,883) (14,429)
Adjustments to reconcile net loss to
net cash used in operating activities
- - investment written off 175 - - 175
- - accounts receivable (2,262) (2,262) - -
- - prepaid expenses (10,342) (10,342) 2,500 (2,500)
- - accounts payable 32,230 28,864 (3,088) 6,454
-------- ---------- --------- ----------
Net Cash Used in Operating
Activities (75,362) (54,591) (10,471) (10,300)
--------- -------- --------- ---------
Financing Activities
Proceeds from sale of common
stock 1,191,843 1,186,843 - 5,000
Loans from related party - (16,000) 10,700 5,300
-------- ---------- --------- ----------
Total Cash From Financing
Activities 1,191,843 1,170,843 10,700 10,300
----------- ----------- --------- -------
Investing Activities
Advances to eVideo U.S.A., Inc. (115,000) (115,000) - -
-------- ---------- --------- ----------
Increase in Cash During
the Period 1,001,481 1,001,252 229 -
Cash at the Beginning of
the Period - 229 - -
--- ----- --- ---
Cash at the End of the Period 1,001,481 1,001,481 229 -
========= ========== ========= ==========
Non-Cash Investing and
Financing Activities Not
Included in Cash Flows
Acquisition of investment
for shares 175 - - 175
===== === === ===
<PAGE>
Statement of Shareholders' Equity
Inception, July 25, 1997, to June 22, 1999
U.S. Dollars
Additional Total
Number of Par Paid in Shareholders'
Shares Value Capital Deficit Equity
Issuance of shares on Jul
25, 1997 7,200,000 720 4,280 - 5,000
Issuance of shares
on August 25, 1997 on
acquisition of Century
International Venture
Inc. series C common shares 175,425 18 157 - 175
Net loss, inception, July 25,
1997, to December 31, 1997 - - - (14,429) (14,429)
-------------------------------------------------
Balance, December 31, 1997 7,375,425 738 4,437 (14,429) (9,254)
Net loss, year ended
December 31, 1998 - - - (9,883) (9,883)
-------- ----- ------- -------- -------
Balance, December 31, 1998 7,375,425 738 4,437 (24,312) (19,137)
Issuance of shares on
March 17, 1999 800,000 80 19,920 - 20,000
Issuance of shares on
March 31, 1999 400,000 40 99,960 - 100,000
Issuance of shares on
May 4, 1999 66,841 7 66,834 - 66,841
Issuance of shares on
May 25, 1999 323,077 32 999,970 - 1,000,002
Net loss, January 1, 1999
to June 22, 1999 - - - (70,851) (70,851)
-------- ------ --------- -------- -------
Balance, June 22, 1999 8,965,343 897 1,191,121 (95,163) 1,096,855
========= ===== ======== ======= =========
<PAGE>
Notes to the Financial Statements
June 22, 1999
U.S. Dollars
1. Basis of Presentation and Nature of Operations
The Company was incorporated in the State of Delaware on July 25, 1997. On
August 25, 1997, ORM, Inc., a company incorporated in the State of Colorado
on July 25,1997, was merged into the Company. This business combination is
accounted for on the pooling of interests basis, as if the two companies had
always been combined. The name of the Company was changed from Oro Rico
Mining Corporation to Asia Pacific Enterprises, Inc.
on October 16, 1997.
The ability of the Company to continue as a going concern is dependent upon
its ability to raise substantial amounts of equity funds for use in
administrative and investment activities. There is no assurance that the
Company's investments will generate future cash flow for the Company.
2. Significant Accounting Policies
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Translation of Foreign Currencies - Monetary assets and liabilities are
translated at the exchange rate in effect at the balance sheet date and
non-monetary assets and liabilities at the exchange rates in effect at the
time of acquisition or issue. Revenues and expenses are translated at the
rates in effect at the time of the transaction. Exchange gains or losses
arising on translation are included in net income or loss for the period.
Financial Instruments - The company has various financial instruments,
including cash, receivables and payables. The carrying values of these
financial instruments approximate their fair values.
3. Advances from Related Party
The loans from a related party are from a management company that employs the
Company's executive officers and are without interest and specific repayment
terms.
4. Share Capital
There are warrants outstanding that entitle the holder to purchase 307,693
shares of common stock at $3.25 per share until May 25, 2000.
<PAGE>
5. Related Party Transactions
The Company paid the following expenses during the period from January 1,
1999 to June 22, 1999 to companies that employ executive officers of the
Company. No expenses were paid to related parties during 1998 and 1997.
Management and consulting fees $ 38,979
Rent 9,217
Office supplies and services 1,308
6. Subsequent Event
On June 23, 1999 the Company issued 6,623,016 shares of common stock to
acquire all of the issued and outstanding shares of eVideo U.S.A., Inc. This
acquisition is considered a purchase of the Company by eVideo U.S.A., Inc.
and will be accounted for as a reverse acquisition by the purchase method.
<PAGE>
Asia Pacific Enterprises, Inc.
(formerly Oro Rico Mining Corporation)
A Development Stage Company
Notes to the Financial Statements
December 31, 1998
<PAGE>
NOTICE TO READER
We have reviewed, as to the compilation only, the accompanying unaudited
pro-forma consolidated statement of operations of Asia Pacific Enterprises, Inc.
for the six month period ended June 30, 1999. In our opinion, the unaudited
pro-forma consolidated statement of operations has been properly compiled to
give effect to the acquisition of Asia Pacific Enterprises, Inc. by eVideo
U.S.A., Inc. as if it had occurred on January 1, 1999.
/s/ Grant Thornton
Vancouver, Canada
July 21, 1999 Chartered Accountants
<PAGE>
Pro-forma Consolidated Statement of Operations
Six months ended June 30, 1999
U.S. Dollars
Unaudited - see Notice to Reader
This pro-forma consolidated statement of operations has been prepared to
demonstrate the results of operations of the Company as if the acquisition of
eVideo U.S.A., Inc. had occurred on January 1, 1999. A pro-forma statement of
operations for the year ended December 31, 1998 has not been presented as eVideo
U.S.A., Inc. did not exist in 1998. The pro-forma results of operations are not
necessarily indicative of future financial results.
Asia Pacific eVideo
Enterprises, U.S.A. Proforma
Inc. Inc. Consolidated
$ $ $
General and Administrative Expenses
Professional fees 12,005 1,700 13,705
Management and consulting fees 41,452 5,000 46,452
Rent 10,051 - 10,051
Office supplies and services 1,457 568 2,025
General corporate expenses 3,129 - 3,129
Corporate promotion 4,297 - 4,297
Travel 7,057 1,433 8,490
----- ----- -----
Total General and
Administrative Expenses 79,448 8,701 88,149
Interest Income (4,202) - (4,202)
------ --------------------------------
Net Loss for the Period 75,246 8,701 83,947
=======================================
Weighted Average Number
of Shares Outstanding 8,620,343
---------
Net Loss per Share 0.01
====
<PAGE>
PART III
Index to Exhibits
Page
Exhibit 2 Articles of Incorporation, as amended, and Bylaws
Exhibit 3 Instruments Defining the Rights of Security Holders
Exhibit 3.1 Warrant Agreement
Exhibit 4 Subscription Agreement None
Exhibit 5 Voting Trust Agreement None
Exhibit 6 Material Contracts
Exhibit 6.1 Agreement dated June 8, 1999 between the Registrant,
eVideo U.S.A., Inc., eVideo International, Inc.,
Roy B. Bennett & Associates Ltd. and Roy B. Bennett
with respect to the acquisition of eVideo U.S.A.,
Inc. by the Registrant
Exhibit 6.2 Management agreement effective June 21, 1999 between
eVideo U.S.A., Inc. Roy B. Bennett & Associates Ltd.
pursuant to which Roy B. Bennett and Associates Ltd.
agrees to provide the services of Roy Bennett and a
project manager
Exhibit 6.3 Letter Agreement between Roy B. Bennett and
Associates and Macrovision Corporation dated September
14, 1998 pursuant to which eVideo U.S.A., Inc., as the
company designated by Roy B. Bennett and Associates
and accepted by Macrovision Corporation as the
corporation to acquire a license, is granted a conditional
option to acquire a license to use Macrovision's
analog copy protection technology in the US for eVideoTV's
less than real time programming service
Exhibit 7 Material Foreign Patents None
Exhibit 8 Plan of Acquisition, Reorganization, Arrangement,
Liquidation, etc. None
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASIA PACIFIC ENTERPRISES, INC.
Date: August 10, 1999 By: /s/ Owen Granger
---------------------------- ------------------
Owen Granger
Secretary/Treasurer and Director
By: /s/ Adrian Rollke
Adrian Rollke
Director
Index to Exhibits Page
Exhibit 3.1 Articles of Incorporation, as amended
Exhibit 3.2 Bylaws
Exhibit 4 Instruments Defining the Rights of Security Holders - Warrant
Exhibit 5 Subscription Agreement None
Exhibit 6 Voting Trust Agreement None
Exhibit 10.1 Agreement Relating to Acquisition of eVideo USA, Inc.
Exhibit 10.2 Management Agreement with Roy B. Bennett & Associates Ltd.
Exhibit 10.3 Macrovision Corporation Option and License Agreement
Exhibit 7 Material Foreign Patents None
Exhibit 8 Plan of Acquisition, Reorganization, Arrangement,
Liquidation, etc. None
CERTIFICATE OF INCORPORATION
OF
ORO RICO MINING CORPORATION
The undersigned natural, adult person, acting as incorporator of a
corporation (hereinafter usually referred to as the "Corporation") pursuant to
the provisions of the Delaware Corporation Law, hereby adopts the following
Certificate of Incorporation for said Corporation:
ARTICLE I
Name
The name of the Corporation shall be Oro RicoMining Corporation.
ARTICLE II
Duration
The period of duration of the Corporation shall be perpetual.
ARTICLE III
Purpose
The purpose for which the Corporation is organized is to transact any or
all lawful business for which corporations may be incorporated pursuant to the
Delaware Corporation Law.
ARTICLE IV
Capital Stock
The authorized capital stock of the Corporation shall consist of
30,000,000 shares of common stock, $0.0001 par value, and 5,000,000 shares of
preferred stock, $0.0001 par value.
ARTICLE V
Preferences, Limitations,
and Relative Rights of
Capital Stock
No share of the common stock shall have any preference over or limitation
in respect to any other share of such common stock. All shares of common stock
shall have equal rights and privileges, including the following:
1. All shares of common stock shall share equally in dividends. Subject to
the applicable provisions of the laws of this State, the Board of Directors of
the Corporation may, from time to time, declare and the Corporation may pay
dividends in cash, property, or its own shares, except when the Corporation is
insolvent or when the payment thereof would render the Corporation insolvent or
when the declaration or payment thereof would be contrary to any restrictions
contained in this Certificate of Incorporation. When any dividend is paid or any
other distribution is made, in whole or in part, from sources other than
unreserved and unrestricted earned surplus, such dividend or distribution shall
be identified as such, and the source and amount per share paid from each source
shall be disclosed to the stockholder receiving the same concurrently with the
distribution thereof and to all other stockholders not later than six months
after the end of the Corporation's fiscal year during which such distribution
was made.
2. All shares of common stock shall share equally in distributions in
partial liquidation. Subject to the applicable provisions of the laws of this
State, the Board of Directors of the Corporation may distribute, from time to
time, to its stockholders in partial liquidation, out of stated capital or
capital surplus of the Corporation, a portion of its assets in cash or property,
except when the Corporation is insolvent or when such distribution would render
the Corporation insolvent. Each such distribution, when made, shall be
identified as a distribution in partial liquidation, out of stated capital or
capital surplus, and the source and amount per share paid from each source shall
be disclosed to all stockholders of the Corporation concurrently with the
distribution thereof. Any such distribution may be made by the Board of
Directors from stated capital without the affirmative vote of any stockholders
of the Corporation.
3. Each outstanding share of common stock shall be entitled to one vote at
stockholders' meetings, either in person or by proxy.
(b) The designations, powers, rights, preferences, qualifications,
restrictions and limitations of the preferred stock shall be established from
time to time by the Corporation's Board of Directors, in accordance with the
Delaware Corporation Law.
(c) 1. Cumulative voting shall not be allowed in elections of
directors or for any purpose.
2. No holders of shares of capital stock of the Corporation
shall be entitled, as such, to any preemptive or preferential right to subscribe
to any unissued stock or any other securities which the Corporation may now or
hereafter be authorized to issue. The Board of Directors of the Corporation,
however, in its discretion by resolution, may determine that any unissued
securities of the Corporation shall be offered for subscription solely to the
holders of common stock of the Corporation, or solely to the holders of any
class or classes of such stock, which the Corporation may now or hereafter be
authorized to issue, in such proportions based on stock ownership as said board
in its discretion may determine.
3. The Board of Directors may restrict the transfer of any of
the Corporation's stock issued by giving the Corporation or any stockholder
"first right of refusal to purchase" the stock, by making the stock redeemable,
or by restricting the transfer of the stock under such terms and in such manner
as the directors may deem necessary and as are not inconsistent with the laws of
this State. Any stock so restricted must carry a conspicuous legend noting the
restriction and the place where such restriction may be found in the records of
the Corporation.
<PAGE>
4. The judgment of the Board of Directors as to the adequacy
of any consideration received or to be received for any shares, options, or any
other securities which the Corporation at any time may be authorized to issue or
sell or otherwise dispose of shall be conclusive in the absence of fraud,
subject to the provisions of these Articles of Incorporation and any applicable
law.
ARTICLE VI
Registered Agent
The name and address of the Corporation's initial registered agent shall
be:
The Company Corporation
1313 North Market Street
New Castle County
Wilmington, Delaware 19801-1151
The Board of Directors, however, from time to time may establish such
other offices, branches, subsidiaries, or divisions which it may consider to be
advisable.
ARTICLE VII
Directors
The affairs of the Corporation shall be governed by a board of not less
than one (1) director, who shall be elected in accordance with the Bylaws of the
Corporation. Subject to such limitation, the number of directors shall be fixed
by or in the manner provided in the Bylaws of the Corporation, as may be amended
from time to time. The organization and conduct of the board shall be in
accordance with the following:
l. The name and address of the initial Director, who shall hold office
until the first annual meeting of the stockholders of the Corporation or until
his successor shall have been elected and qualified, is:
Name Address
Adrian Rollke 1177 West Hastings St., Suite 1818
Vancouver, British Columbia, Canada V6E-2K3
2. The directors of the Corporation need not be residents of Delaware and
shall not be required to hold shares of the Corporation's capital stock.
3. Meetings of the Board of Directors, regular or special, may
be held within or without Delaware upon such notice as may be prescribed by the
Bylaws of the Corporation. Attendance of a director at a meeting shall
constitute a waiver by him of notice of such meeting unless he attends only for
the express purpose of objecting to the transaction of any business thereat on
the ground that the meeting is not lawfully called or convened.
4. A majority of the number of directors at any time constituting the
Board of Directors shall constitute a quorum for the transaction of business.
5. By resolution adopted by a majority of the Directors at any time
constituting the Board of Directors, the Board of Directors may designate two or
more directors to constitute an Executive Committee or one or more other
committees each of which shall have and may exercise, to the extent permitted by
law or in such resolution, all the authority of the Board of Directors in the
management of the Corporation; but the designation of any such committee and the
delegation of authority thereto shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed on it or him by
law.
6. Any vacancy in the Board of Directors, however caused or created, may
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office
and until his successor is duly elected and qualified.
ARTICLE VIII
Officers
The officers of the Corporation shall be prescribed by the Bylaws of this
Corporation.
ARTICLE IX
Meetings of Stockholders
Meetings of the stockholders of the Corporation shall be held at such
place within or without Delaware and at such times as may be prescribed in the
Bylaws of the Corporation. Special meetings of the stockholders of the
Corporation may be called by the President of the Corporation, the Board of
Directors, or by the record holder or holders of at least ten percent (l0%) of
all shares entitled to vote at the meeting. At any meeting of the stockholders,
except to the extent otherwise provided by law, a quorum shall consist of a
majority of the shares entitled to vote at the meeting; and, if a quorum is
present, the affirmative vote of the majority of shares represented at the
meeting and entitled to vote thereat shall be the act of the stockholders unless
the vote of a greater number is required by law.
ARTICLE X
Voting
When, with respect to any action to be taken by stockholders of this
Corporation, the laws of Delaware requires the affirmative vote of the holders
of more than a majority of the outstanding shares entitled to vote thereon, or
of any class or series, such action may be taken by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote on such action.
<PAGE>
ARTICLE XI
Bylaws
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. Subject to repeal or change by action of the stockholders, the power
to alter, amend, or repeal the Bylaws or to adopt new Bylaws shall be vested in
the Board of Directors.
ARTICLE XII
Transactions with Directors and
Other Interested Parties
No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are pecuniarily or otherwise interested in, or
are directors or officers of, such other corporation. Any director of the
corporation, individually, or any firm with which such director is affiliated
may be a party to or may be pecuniarily or otherwise interested in any contract
or transaction of the Corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of the Corporation, or a majority thereof, at or before the
entering into such contract or transaction; and any director of the Corporation
who is also a director or officer of such other corporation, or who is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested.
ARTICLE XIII
Limitation of Director Liability
and Indemnification
No director of the Corporation shall have liability to the Corporation or
to its stockholders or to other security holders for monetary damages for breach
of fiduciary duty as a director; provided, however, that such provisions shall
not eliminate or limit the liability of a director to the Corporation or to its
shareholders or other security holders for monetary damages for: (i) any breach
of the director's duty of loyalty to the Corporation or to its shareholders or
other security holders; (ii) acts or omissions of the director not in good faith
or which involve intentional misconduct or a knowing violation of the law by
such director; (iii) acts by such director as specified by the Delaware
Corporation Law; or (iv) any transaction from which such director derived an
improper personal benefit.
No officer or director shall be personally liable for any injury to person
or property arising out of a tort committed by an employee of the Corporation
unless such officer or director was personally involved in the situation giving
rise to the injury or unless such officer or director committed a criminal
offense. The protection afforded in the preceding sentence shall not restrict
other common law protections and rights that an officer or director may have.
<PAGE>
The word "director" shall include at least the following, unless limited
by Delaware law: an individual who is or was a director of the Corporation and
an individual who, while a director of a Corporation is or was serving at the
Corporation's request as a director, officer, partner, trustee, employee or
agent of any other foreign or domestic corporation or of any partnership, joint
venture, trust, other enterprise or employee benefit plan. A director shall be
considered to be serving an employee benefit plan at the Corporation's request
if his duties to the Corporation also impose duties on or otherwise involve
services by him to the plan or to participants in or beneficiaries of the plan.
To the extent allowed by Delaware law, the word "director" shall also include
the heirs and personal representatives of all directors.
This Corporation shall be empowered to indemnify its officers and
directors to the fullest extent provided by law, including but not limited to
the provisions set forth in the Delaware Corporation Law, or any successor
provision.
ARTICLE XIII
Incorporator
The name and address of the incorporator of the Corporation is as
follows:
Name Address
William T. Hart 1624 Washington Street
Denver, CO 80203
IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed his
signature on the 24th day of July, 1997.
/s/ William T. Hart
William T. Hart
<PAGE>
ORO RICO MINING CORPORATION
AMENDMENT
to the
CERTIFICATE OF INCORPORATION
Pursuant to the provisions of the Delaware Corporation Law, Oro Rico
Mining Corporation adopts the following Amendment to its Certificate of
Incorporation.
The following amendment was adopted on October 8, l997, pursuant to
Section 242 of the Delaware Corporation Law. Such amendment was adopted by the
consent of shareholders owning a majority of the Corporation's issued and
outstanding shares of common stock. Notice of this amendment has been sent to
all shareholders of record pursuant to Section 228 of the Delaware Corporation
Law.
Amendment
ARTICLE ONE OF THE CERTIFICATE OF INCORPORATION WAS AMENDED TO READ AS
FOLLOWS:
The name of this Corporation shall be Asia Pacific Enterprises, Inc.
ORO RICO MINING CORPORATION
By /s/ Adrian Rollke
Adrian Rollke, President
BYLAWS
OF
ORO RICO MINING CORPORATION
ARTICLE I
OFFICES
Section l. Offices:
The principal office of the Corporation shall be determined by the
Board of Directors, and the Corporation shall have other offices at such places
as the Board of Directors may from time to time determine.
ARTICLE II
STOCKHOLDER'S MEETINGS
Section l. Place:
The place of stockholders' meetings shall be the principal office of the
Corporation unless some other place shall be determined and designated from time
to time by the Board of Directors.
Section 2. Annual Meeting:
The annual meeting of the stockholders of the Corporation for the election
of directors to succeed those whose terms expire, and for the transaction of
such other business as may properly come before the meeting, shall be held each
year on a date to be determined by the Board of Directors.
Section 3. Special Meetings:
Special meetings of the stockholders for any purpose or purposes may be
called by the President, the Board of Directors, or the holders of ten percent
(l0%) or more of all the shares entitled to vote at such meeting, by the giving
of notice in writing as hereinafter described.
Section 4. Voting:
At all meetings of stockholders, voting may be viva voce; but any
qualified voter may demand a stock vote, whereupon such vote shall be taken by
ballot and the Secretary shall record the name of the stockholder voting, the
number of shares voted, and, if such vote shall be by proxy, the name of the
proxy holder. Voting may be in person or by proxy appointed in writing, manually
signed by the stockholder or his duly authorized attorney-in-fact. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided therein.
Each stockholder shall have such rights to vote as the Articles of
Incorporation provide for each share of stock registered in his name on the
books of the Corporation, except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date, not to
exceed, in any case, fifty (50) days preceding the meeting, for the
determination of stockholders entitled to vote. The Secretary of the Corporation
shall make, at least ten (l0) days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of ten (l0) days prior
to such meeting, shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting.
Section 5. Order of Business:
The order of business at any meeting of stockholders shall be as follows:
l. Calling the meeting to order.
2. Calling of roll.
3. Proof of notice of meeting.
4. Report of the Secretary of the stock represented at the meeting and
the existence or lack of a quorum.
5. Reading of minutes of last previous meeting and disposal of any
unapproved minutes.
6. Reports of officers.
7. Reports of committees.
8. Election of directors, if appropriate.
9. Unfinished business.
10. New business.
11. Adjournment.
12. To the extent that these Bylaws do not apply, Roberts' Rules of Order
shall prevail.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section l. Organization and Powers: The Board of Directors shall constitute the
policy-making or legislative authority of the Corporation. Management of the
affairs, property, and business of the Corporation shall be vested in the Board
of Directors, which shall consist of not less than one nor more than ten
members, who shall be elected at the annual meeting of stockholders by a
plurality vote for a term of one (l) year, and shall hold office until their
successors are elected and qualify. Directors need not be stockholders.
Directors shall have all powers with respect to the management, control, and
determination of policies of the Corporation that are not limited by these
Bylaws, the Articles of Incorporation, or by statute, and the enumeration of any
power shall not be considered a limitation thereof.
Section 2. Vacancies:
Any vacancy in the Board of Directors, however caused or created, shall be
filled by the affirmative vote of a majority of the remaining directors, though
less than a quorum of the Board, or at a special meeting of the stockholders
called for that purpose. The directors elected to fill vacancies shall hold
office for the unexpired term and until their successors are elected and
qualify.
Section 3. Regular Meetings:
A regular meeting of the Board of Directors shall be held, without other
notice than this Bylaw, immediately after and at the same place as the annual
meeting of stockholders or any special meeting of stockholders at which a
director or directors shall have been elected. The Board of Directors may
provide by resolution the time and place, either within or without the State of
Delaware, for the holding of additional regular meetings without other notice
than such resolution.
Section 4. Special Meetings:
Special meetings of the Board of Directors may be held at the principal
office of the Corporation, or such other place as may be fixed by resolution of
the Board of Directors for such purpose, at any time on call of the President or
of any member of the Board, or may be held at any time and place without notice,
by unanimous written consent of all the members, or with the presence and
participation of all members at such meeting. A resolution in writing signed by
all the directors shall be as valid and effectual as if it had been passed at a
meeting of the directors duly called, constituted, and held.
<PAGE>
Section 5. Notices:
Notices of both regular and special meetings, save when held by unanimous
consent or participation, shall be mailed by the Secretary to each member of the
Board not less than three days before any such meeting and notices of special
meetings may state the purposes thereof. No failure or irregularity of notice of
any regular meeting shall invalidate such meeting or any proceeding thereat.
Section 6. Quorum and Manner of Acting:
A quorum for any meeting of the Board of Directors shall be a majority of
the Board of Directors as then constituted. Any act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Any action of such majority, although not at a regularly
called meeting, and the record thereof, if assented to in writing by all of the
other members of the Board, shall always be as valid and effective in all
respects as if otherwise duly taken by the Board of Directors.
Section 7. Executive Committee:
The Board of Directors may by resolution of a majority of the Board
designate two (2) or more directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
Corporation; but the designation of such committee and the delegation of
authority thereto shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed on it or him by law.
Section 8. Order of Business:
The order of business at any regular or special meeting of the Board of
Directors, unless otherwise prescribed for any meeting by the Board, shall be as
follows:
l. Reading and disposal of any unapproved minutes.
2. Reports of officers and committees.
3. Unfinished business.
4. New business.
5. Adjournment.
6. To the extent that these Bylaws do not apply, Roberts' Rules of
Order shall prevail.
<PAGE>
Section 9. Remuneration:
No stated salary shall be paid to directors for their
services as such, but, by resolution of the Board of Directors, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board. Members of special or standing committees may be
allowed like compensation for attending meetings. Nothing herein contained shall
be construed to preclude any director from receiving compensation for serving
the Corporation in any other capacity, subject to such resolutions of the Board
of Directors as may then govern receipt of such compensation.
ARTICLE IV
OFFICERS
Section l. Titles:
The officers of the Corporation shall consist of a President, one or more
Vice Presidents, a Secretary, and a Treasurer, who shall be elected by the
directors at their first meeting following the annual meeting of stockholders.
Such officers shall hold office until removed by the Board of Directors or until
their successors are elected and qualify. The Board of Directors may appoint
from time to time such other officers as it deems desirable who shall serve
during such terms as may be fixed by the Board at a duly held meeting. The
Board, by resolution, shall specify the titles, duties and responsibilities of
such officers.
Section 2. President:
The President shall preside at all meetings of stockholders and, in the
absence of a, or the, Chairman of the Board of Directors, at all meetings of the
directors. He shall be generally vested with the power of the chief executive
officer of the Corporation and shall countersign all certificates, contracts,
and other instruments of the Corporation as authorized by the Board of Directors
or required by law. He shall make reports to the Board of Directors and
stockholders and shall perform such other duties and services as may be required
of him from time to time by the Board of Directors.
Section 3. Vice President:
The Vice President shall perform all the duties of the President if the
President is absent or for any other reason is unable to perform his duties and
shall have such other duties as the Board of Directors shall authorize or
direct.
Section 4. Secretary:
The Secretary shall issue notices of all meetings of stockholders and
directors, shall keep minutes of all such meetings, and shall record all
proceedings. He shall have custody and control of the corporate records and
books, excluding the books of account, together with the corporate seal. He
shall make such reports and perform such other duties as may be consistent with
his office or as may be required of him from time to time by the Board of
Directors.
Section 5. Treasurer:
The Treasurer shall have custody of all moneys and securities of the
Corporation and shall have supervision over the regular books of account. He
shall deposit all moneys, securities, and other valuable effects of the
Corporation in such banks and depositories as the Board of Directors may
designate and shall disburse the funds of the Corporation in payment of just
debts and demands against the Corporation, or as they may be ordered by the
Board of Directors, shall render such account of his transactions as may be
required of him by the President or the Board of Directors from time to time and
shall otherwise perform such duties as may be required of him by the Board of
Directors.
The Board of Directors may require the Treasurer to give a bond
indemnifying the Corporation against larceny, theft, embezzlement, forgery,
misappropriation, or any other act of fraud or dishonesty resulting from his
duties as Treasurer of the Corporation, which bond shall be in such amount as
appropriate resolution or resolutions of the Board of Directors may require.
Section 6. Vacancies or Absences:
If a vacancy in any office arises in any manner, the directors then in
office may choose, by a majority vote, a successor to hold office for the
unexpired term of the officer. If any officer shall be absent or unable for any
reason to perform his duties, the Board of Directors, to the extent not
otherwise inconsistent with these Bylaws, may direct that the duties of such
officer during such absence or inability shall be performed by such other
officer or subordinate officer as seems advisable to the Board.
Section 7. Compensation:
No officer shall receive any salary or compensation for his services
unless and until the Board of Directors authorizes and fixes the amount and
terms of such salary or compensation.
<PAGE>
ARTICLE V
STOCK
Section 1. Regulations:
The Board of Directors shall have power and authority to take all such
rules and regulations as they deem expedient concerning the issue, transfer, and
registration of certificates for shares of the capital stock of the Corporation.
The Board of Directors may appoint a Transfer Agent and/or a Registrar and may
require all stock certificates to bear the signature of such Transfer Agent
and/or Registrar.
Section 2. Restrictions on Stock:
The Board of Directors may restrict any stock issued by giving the
Corporation or any stockholder "first right of refusal to purchase" the stock,
by making the stock redeemable or by restricting the transfer of the stock,
under such terms and in such manner as the directors may deem necessary and as
are not inconsistent with the Articles of Incorporation or by statute. Any stock
so restricted must carry a stamped legend setting out the restriction or
conspicuously noting the restriction and stating where it may be found in the
records of the Corporation.
ARTICLE VI
DIVIDENDS AND FINANCES
Section l. Dividends:
Dividends may be declared by the directors and paid out of any funds
legally available therefor under the laws of Delaware, as may be deemed
advisable from time to time by the Board of Directors of the Corporation. Before
declaring any dividends, the Board of Directors may set aside out of net profits
or earned or other surplus such sums as the Board may think proper as a reserve
fund to meet contingencies or for other purposes deemed proper and to the best
interests of the Corporation.
Section 2. Monies:
The monies, securities, and other valuable effects of the Corporation
shall be deposited in the name of the Corporation in such banks or trust
companies as the Board of Directors shall designate and shall be drawn out or
removed only as may be authorized by the Board of Directors from time to time.
Section 3. Fiscal Year:
Unless and until the Board of Directors by resolution shall determine the
fiscal year of the Corporation.
<PAGE>
ARTICLE VII
AMENDMENTS
These Bylaws may be altered, amended, or repealed by the Board of
Directors by resolution of a majority of the Board.
<PAGE>
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify any and all of its directors or officers,
or former directors or officers, or any person who may have served at its
request as a director or officer of another corporation in which this
Corporation owns shares of capital stock or of which it is a creditor and the
personal representatives of all such persons, against expenses actually and
necessarily incurred in connection with the defense of any action, suit, or
proceeding in which they, or any of them, were made parties, or a party, by
reason of being or having been directors or officers or a director or officer of
the Corporation, or of such other corporation, except in relation to matters as
to which any such director or officer or person shall have been adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of any duty owed to the Corporation. Such indemnification shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled, independently of this Article, by law, under any Bylaw agreement, vote
of stockholders, or otherwise.
ARTICLE IX
CONFLICTS OF INTEREST
No contract or other transaction of the Corporation with any other
persons, firms or corporations, or in which the Corporation is interested, shall
be affected or invalidated by the fact that any one or more of the directors or
officers of the Corporation is interested in or is a director or officer of such
other firm or corporation; or by the fact that any director or officer of the
Corporation, individually or jointly with others, may be a party to or may be
interested in any such contract or transaction.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF
AVAILABLE, OR (D) IN COMPLIANCE WITH CERTAIN OTHER PROCEDURES SATISFACTORY TO
THE CORPORATION.
THIS WARRANT WILL BE VOID AND OF NO VALUE UNLESS EXERCISED WITHIN THE LIMITS
HEREIN PROVIDED.
THIS WARRANT IS NON-TRANSFERABLE
ASIA PACIFIC ENTERPRISES, INC.
(Incorporated under the laws of the State of Delaware)
Right to Purchase
307,693 Common shares
par value $0.0001 per share
WARRANT FOR THE PURCHASE OF COMMON SHARES
THIS IS TO CERTIFY THAT, for value received, Rahn and Bodmer Bank,
(hereinafter called the "holder"), is entitled to subscribe for and purchase
307,693 fully paid and non-assessable common shares, par value $0.0001 per
share, in the capital stock of Asia Pacific Enterprises, Inc. (hereinafter
called the "Corporation") at any time prior to 4:30 p.m. (Pacific time) on May
25, 2000, at an exercise price of $3.25 per share, subject, however, to the
provisions and upon the terms and conditions hereinafter set forth.
The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part (but not as to a fractional share), by completing
the subscription form attached hereto as Schedule "A" and surrendering this
Warrant at the office of the Corporation, 1750 - 1177 West Hastings Street,
Vancouver, British Columbia, Canada V6E 2K3, together with a certified check
payable to or to the order of the Corporation in payment of the purchase price
for the number of shares subscribed for.
In the event of any exercise of the rights represented by this Warrant,
certificates for the shares so purchased shall be delivered to the holder hereof
within a reasonable time, not exceeding ten (10) days after the rights
represented by this Warrant shall have been so exercised, and, unless this
Warrant has expired, a new Warrant representing the number of shares, if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the holder hereof within such time.
The Corporation covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be fully paid and non-assessable and free of all liens, charges and
encumbrances. The Corporation further covenants and agrees that, during the
period within which the rights represented by this Warrant may be exercised, the
Corporation will at all times have authorized and reserved a sufficient number
of Common shares to provide for the exercise of the rights represented by this
Warrant.
THE FOLLOWING ARE THE TERMS AND CONDITIONS REFERRED TO IN THIS WARRANT:
The rights evidenced by this Warrant are to purchase shares in the capital
stock of the Corporation as they were constituted on May 25, 1999. If there
shall, prior to the exercise of any of these rights evidenced hereby, be any
reorganization of the authorized capital of the Corporation by way of
consolidation, merger, sub-division, amalgamation or otherwise, or the payment
of any stock dividends, then there shall automatically be an adjustment in
either or both the number of shares of the Corporation which may be purchased
pursuant hereto or the price at which such shares may be purchased, by
corresponding amounts, so that the rights evidenced hereby shall thereafter be
as reasonably as possible equivalent to those originally granted hereby. The
Corporation shall have the sole and exclusive power to make adjustments as it
considers necessary and desirable.
This Warrant shall not entitle the holder hereof to any rights as a
shareholder of the Corporation, including, without limitation, voting rights.
Neither this Warrant nor the rights represented hereby are transferable in
whole or in part. The holder acknowledges that any shares or other securities
issued upon the exercise from time to time of the rights hereunder will be
subject to restrictions on disposition, and may not be transferred, except
pursuant to a statutory exemption and that a legend to that effect will be
endorsed on any certificates representing securities issued hereunder.
None of this Warrant, the rights represented hereby or any of the
securities issuable on the exercise hereof (collectively the "Securities") have
been registered under the United States Securities Act of 1993, as amended (the
"U.S. ACT") or any applicable securities laws of any state. Accordingly, this
Warrant does not constitute an offer to any person within the United States or
to any U.S. person (within the meaning of Regulation S under the U.S. Act) and
may not be exercised within the United States or by or on behalf of any U.S.
person (within the meaning of Regulation S under U.S. Act). The holder, by
acquiring this Warrant and the rights represented hereby or any Securities,
agrees with and for the benefit of the Corporation that it will not offer,
distribute, sell, pledge or otherwise transfer or dispose of the Securities
except to (i) the Corporation; (ii) a person who, in the opinion of counsel
satisfactory to the Corporation and its counsel, is a person to whom such
Securities may be legally transferred without registration and without the
delivery of a current prospectus under the U.S. Act with respect thereto; (iii)
in reliance upon Rule 904 of Regulation S under the U.S. Act and in compliance
with local laws and regulations, and then only upon execution and delivery of a
certificate in the form attached hereto as Annex A to the Corporation; (iv)
pursuant to an effective registration statement under the U.S. Act; (v) pursuant
to an exemption from registration under the U.S. Act provided by Rule 144
thereunder, if available; (vi) in a transaction that does not require
registration under the U.S. Act or any applicable United States state laws and
regulations governing the offer and sale of securities, and it has therefor
furnished to the Corporation an opinion of counsel of recognized standing
reasonably satisfactory to the Corporation. Each certificate representing the
Securities or any other securities issued in respect of the Securities upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall be stamped or otherwise imprinted with a legend substantially in
the following form (in addition to any legend required under applicable state
securities laws):
<PAGE>
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1993, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION
THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE CORPORATION (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF
AVAILABLE, OR (D) IN COMPLIANCE WITH CERTAIN OTHER PROCEDURES SATISFACTORY TO
THE CORPORATION."
IN WITNESS WHEREOF Asia Pacific Enterprises, Inc. has caused this Warrant
to be signed by its duly authorized officers and this warrant to be dated May
25, 1999.
ASIA PACIFIC ENTERPRISES INC.
Per: /s/ Adrian Rollke
Director
<PAGE>
SCHEDULE "A"
SUBSCRIPTION FORM
TO: ASIA PACIFIC ENTERPRISES, INC. (the "Corporation")
Dear Sirs:
The undersigned hereby exercises the right to purchase and hereby subscribes for
__________________ Common shares in the capital stock of the Corporation
referred to in the attached Warrant according to the conditions thereof and
herewith makes payment by certified cheque of the subscription price in full for
the said shares.
The undersigned HEREBY CERTIFIES, with the intent that the Corporation rely on
such certification in issuing Common shares pursuant to the exercise of the
attached Warrant, that all of the representations and warranties and all of the
acknowledgements contained in the Subscription Agreement dated May 21, 1999
between the Corporation and Rahn and Bodmer Bank and the letter from Rahn and
Bodmer Bank to the Corporation dated May 28, 1999.
The undersigned HEREBY CERTIFIES that it is not a "U.S. Person", within the
meaning of Regulation S made under the U.S. Securities Act of 1993, as amended
(the "Securities Act") and is not exercising this Warrant on behalf of any U.S.
Person..
The undersigned represents that it has had access to such current public
information concerning the Corporation as it considers necessary in connection
with its investment decision and understands that the Common Shares have not
been and will not be registered under the Securities Act and agrees that it will
only resell the Common Shares issuable upon exercise hereof to the Corporation,
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, pursuant to the exemption from registration under the Securities
Act provided by Rule 144 under the Securities Act, if available, or in
compliance with certain other procedures satisfactory to the Corporation. The
Common Shares issuable upon exercise hereof will bear a legend to the foregoing
effect.
Please issue a certificate in the name of the undersigned for the shares being
purchased, as follows:
NAME:_________________________________________________________________________
ADDRESS: _____________________________________________________________________
If applicable, please deliver to ________________________ a Warrant certificate
in respect of the balance of the Common shares referred to in the attached
Warrant but not presently subscribed for.
DATED this ________ day of _________, ________.
_______________________________
(signature)
Warrants may not be exercised within the United States or by or on behalf of any
"U.S. person", within the meaning of Regulation S under the Securities Act and
no Common Shares will be issued to any person who has set out an address in the
United Shares nor shall any certificates representing Common Shares be delivered
to any U.S. address.
THIS AGREEMENT made and dated for reference the 8th day of June, 1999.
AMONG:
ASIA PACIFIC ENTERPRISES, INC., a body corporate, incorporated
under the laws of the State of Delaware, having its registered
office at 1313 North Market Street, New Castle County,
Wilmington, Delaware 19801-1151
(hereinafter called "Asia Pacific")
OF THE FIRST PART
AND:
EVIDEO USA, INC., a body corporate, incorporated under the
laws of Nevada, having its registered office at 502 East John
Street, Carson City, Nevada 89706
(hereinafter called "USA")
OF THE SECOND PART
AND:
EVIDEO INTERNATIONAL, INC., a body corporate, incorporated
under the laws of The Commonwealth of the Bahamas, having its
registered office at ABL Building, Bank Lane, Nassau, Bahamas
(hereinafter called "International")
OF THE THIRD PART
AND:
ROY B. BENNETT & ASSOCIATES LTD., a body corporate,
incorporated under the laws of the Province of British
Columbia, having its head office at 2757 Chelsea Court, West
Vancouver, British Columbia V7S 3E9
(hereinafter called "Bennett")
OF THE FOURTH PART
AND:
ROY B. BENNETT, an individual, of 2757 Chelsea
Court, West Vancouver, British Columbia V7S 3E9
(hereinafter called "Roy Bennett")
OF THE FIFTH PART
<PAGE>
WHEREAS:
A. Pursuant to a letter agreement between Bennett and Macrovision Corporation
(hereinafter called "Macrovision") dated September 14, 1998 (hereinafter called
the "Macrovision Agreement"), a copy of which has been delivered to each of the
parties hereto, Bennett was granted an option entitling it to procure an
exclusive, non-transferable license (hereinafter called the "License"), without
the right to sub-license, to apply Macrovision's analog copy protection
technology (hereinafter called the "Technology") in the United States of
America, as well as a right of first refusal to extend the territory of the
License to other countries, subject to the terms and conditions contained in the
Macrovision Agreement (which right of first refusal Bennett has agreed to waive
in favour of CEBU Holdings Inc. with respect to Germany and China, and in favour
of International with respect to all other countries);
B. Bennett has agreed to designate USA under the Macrovision Agreement as
the corporation to be entitled to procure the License;
C. Bennett has agreed to transfer all of its rights in and to the business and
technology described in the document prepared by Bennett entitled "eVideo
Business Plan - May 1999 - Confidential" (hereinafter called the "Business
Plan"), a copy of which has been delivered to each of the parties hereto;
D. International owns all of the issued and outstanding shares of USA;
E. Asia Pacific wishes to acquire all of the issued and outstanding shares
of USA from International on the terms and conditions hereinafter set forth;
F. Roy Bennett owns all of the issued and outstanding shares of Bennett;
G. Asia Pacific has agreed to acquire all of the issued and outstanding shares
of Bennett from Roy Bennett in the event Macrovision has not accepted the
designation of USA under the Macrovision Agreement as the corporation to be
entitled to procure the License within 60 days of the closing provided for
hereunder (hereinafter called the "Closing") on the terms and conditions
hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of these
presents and the sum of Ten Dollars ($10.00) now paid by each of the parties to
each of the other parties hereto, the receipt and sufficiency of which is hereby
acknowledged by each of the parties, and for other good and valuable
consideration, the receipt and sufficiency of which is also hereby acknowledged
by each of the parties, the parties hereby agree as follows:
PURCHASE AND SALE OF SHARES OF USA AND, POTENTIALLY, OF BENNETT
1.01 Subject to the terms and conditions hereof, International hereby agrees to
sell to Asia Pacific, and Asia Pacific hereby agrees to purchase from
International, one common share in the capital stock of USA, representing all of
the issued and outstanding shares of USA, with the consideration, in addition to
the consideration provided for in paragraph 1.02 hereof, to consist of the
issuance of 6,623,016 common shares in the capital stock of Asia Pacific, with
all of these shares to be held in escrow by an independent escrow agent, with
these shares of Asia Pacific to be dealt with on the following basis:
(a) 25% of these shares will be released to International from escrow
when all of the following business milestones have been met:
(i) the demonstration of an operational prototype digital set
top box (hereinafter called a "STB") for the Technology;
(ii) USA has entered into with written agreements with
manufacturers to produce a total of 15,000 STB's per month;
(iii) the formal Long Form Agreement contemplated in paragraph 16 of
the Macrovision Agreement has been entered into; and
(iv) an initial distribution agreement with a motion picture studio
in respect of a substantial portfolio of video movies has been
entered into;
(b) an additional 25% of these shares will be released to International
from escrow when each of the following conditions have been met:
(i) Asia Pacific has successfully recruited a recognized Chief
Executive Officer and such recruitment has been approved by
Asia Pacific's board of directors;
(ii) a successful file server beta testing with video files has
been developed;
(iii) the first cable company distribution letter of agreement has
been entered into and a head end communication test has been
successfully completed;
(c) an additional 25% of these shares will be released to International
from escrow when Asia Pacific first generates gross annual revenues
of Five Million Dollars ($5,000,000) on a consolidated basis;
(d) the remaining 25% of these shares will be released to International
from escrow when Asia Pacific first generates gross annual revenues
of Five Hundred Million Dollars ($500,000,000) on a consolidated
basis; and
(e) any shares not released to International from escrow at the
expiration of 5 years from the Closing will be surrendered to Asia
Pacific for cancellation;
PROVIDED THAT, notwithstanding any of the provisions of this paragraph 1.01, all
shares not yet released to International from escrow pursuant to the provisions
of sub-paragraphs (a), (b), (c) or (d) or not cancelled pursuant to the
provision of sub-paragraph (e) hereof shall be released from escrow upon the
occurrence of any of the following events:
(f) in the event of the declaration by Asia Pacific of a dividend within
24 months of the Closing Date equivalent to at least Two Dollars
($2.00) per common share; or
(g) the completion of a successful secondary public offering raising in
excess of Twenty Million Dollars ($20,000,000) with less than a
thirty percent (30%) dilution factor to its existing shareholders at
the time of the completion of such secondary offering; or
<PAGE>
(h) the completion of a successful takeover for a majority of the issued
and outstanding common shares of Asia Pacific; or
(i) Asia Pacific having a publicly quoted market price in excess of
Fifteen Dollars ($15.00) per common share for a period in excess of
twenty consecutive trading days.
1.02 It is Asia Pacific's intention to raise an additional Three Million
Nine Hundred Thousand Dollars ($3,900,000) by the sale of equity
capital subsequent to the date of this Agreement as follows:
(a) Two Million Four Hundred Thousand Dollars ($2,400,000) by July 31,
1999; and
(b) an additional One Million Five Hundred Thousand Dollars ($1,500,000) by
September 30, 1999.
For every common share of Asia Pacific issued to raise the funds
provided for in sub-paragraphs (a) and (b) of this paragraph 1.02, Asia Pacific
agrees to issue one and one-half (1 1/2) common shares in its capital stock to
International, which shares are to be issued on September 30, 1999 or, to the
extent that the funds are raised subsequent to September 30, 1999, such later
date(s) as International may agree to, with all of these shares to be held in
escrow by an independent escrow agent and released to International from escrow
on the same basis as the 6,623,016 common shares to be held in escrow pursuant
to paragraph 1.01 hereof.
1.03 In order to secure Asia Pacific's performance in the raising of the
additional equity capital provided for in paragraph 1.02 hereof, Adrian Rollke,
a director and the President of Asia Pacific, has agreed to lodge 345,000 common
shares of Asia Pacific currently owned by him with an independent escrow agent,
which shares will be released to Mr. Rollke from escrow on a pro rata basis to
the amount of additional equity capital raised by Asia Pacific pursuant to
paragraph 1.02 hereof, with any shares not entitled to be released from escrow
as provided for herein by September 30, 1999 to be surrendered to Asia Pacific
for cancellation.
1.04 Subject to the terms and conditions hereof, in the event Macrovision has
not accepted the designation of USA under the Macrovision Agreement as the
corporation to be entitled to procure the License within 60 days of the Closing
provided for hereunder, Roy Bennett hereby agrees to sell to Asia Pacific, and
Asia Pacific hereby agrees to purchase from Roy Bennett, 10 common shares in the
capital stock of Bennett, representing all of the issued and outstanding shares
of Bennett, with the consideration to consist of the payment by Asia Pacific to
Roy Bennett of One Dollar ($1).
COVENANTS, REPRESENTATIONS AND WARRANTIES OF ASIA PACIFIC
2.01 Asia Pacific covenants, represents and warrants to each of USA and
International that:
<PAGE>
(a) it is a company validly subsisting under the laws of the State of
Delaware and has all necessary corporate power and authority to
execute and deliver this Agreement to purchase all of the issued and
outstanding shares of USA from International, to issue shares in its
capital stock to International as provided for herein and to perform
its obligations hereunder;
(b) all necessary corporate action of the directors and members of
Asia Pacific to authorize the issuance of shares of Asia Pacific
hereunder and the execution, delivery and performance of this
Agreement has been taken, the shares of Asia Pacific to be issued
hereunder have been duly and validly created and this Agreement
has been duly executed and delivered on behalf of Asia Pacific
and constitutes a legal, valid and binding obligation of Asia
Pacific enforceable by USA and International in accordance with
its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency or other laws of general application
affecting the enforcement of creditors' rights and subject to the
qualification that specific performance and injunction, being
equitable remedies, may only be granted in the discretion of a
court of competent jurisdiction;
(c) the authorized and issued share capital of Asia Pacific,
including convertible securities, warrants and options or other
rights to acquire shares of Asia Pacific, consists of 30,000,000
common shares having a par value of US$0.0001 each and 5,000,000
preferred shares having a par value of $0.0001 each, of which
8,965,343 common shares are issued and outstanding as fully paid
and non-assessable, no issued and outstanding preferred shares,
307,693 issued and outstanding common share purchase warrants
exercisable at a price of $3.25 per share until May 25, 2000, no
issued and outstanding common share purchase options, no issued
and outstanding preferred share purchase warrants, and no issued
and outstanding preferred share purchase options;
(d) none of the authorization, execution, delivery or performance by
Asia Pacific of this Agreement, including, without limitation,
the issuance of the shares of Asia Pacific as provided hereunder,
requires any approval or consent of any governmental or
regulatory authority or agency having jurisdiction (except as has
already been, or at or prior to the Closing will be, obtained)
nor is in conflict with or in contravention of Asia Pacific's
constating documents (including the provisions attaching to its
common shares), resolutions of the directors or members of Asia
Pacific or the provisions of any written instrument or agreement
to which Asia Pacific is a party or by which Asia Pacific or its
properties or assets are bound or constitutes a default
thereunder;
(e) to the best of Asia Pacific's knowledge, there is not now pending or
threatened against Asia Pacific or any of its subsidiaries, nor has
Asia Pacific received notice in respect of any claim which could
lead to any litigation, action, suit or other proceeding by or
before any court, tribunal or other competent governmental agency or
authority or regulatory body that is material to the business or
affairs of Asia Pacific;
<PAGE>
(f) neither Asia Pacific nor any affiliate or associate thereof is a
party to, or is aware of, any agreement, commitment or understanding
between or among the shareholders of Asia Pacific with respect to
the exercise of any voting rights attaching to any securities of
Asia Pacific beneficially owned by such shareholders or any voting
trust agreement or other shareholders' agreement relating to
securities of Asia Pacific;
(g) it will use its best efforts to satisfy and fulfill all requirements
and conditions contained in this Agreement required to be satisfied
or fulfilled by it in order to complete the transactions
contemplated hereby and to comply with, satisfy and fulfill promptly
all legal and regulatory requirements applicable to Asia Pacific
with respect to the consummation of the transactions contemplated
hereby;
(h) it is in good standing with the National Association of Securities
Dealers in the United States of America and that its common shares
are quoted for trading on the National Association of Securities
Dealers Automatic Quotation Over-the-Counter Bulletin Board System
under the trading symbol "APEP";
(i) its financial statements prepared as at March 31, 1999
(hereinafter called the "Asia Pacific Financial Statements"), a
copy of which are attached as Schedule "A", are true and correct
in every material respect and present fairly the financial
position of Asia Pacific as at the date of the Asia Pacific
Financial Statements and the results of its operations for the
period then ended in accordance with generally accepted
accounting principles on a basis consistently applied;
(j) since the date of the Asia Pacific Financial Statements:
(i) there has not been any material adverse change in the
financial position or condition of Asia Pacific or any damage,
loss or other change in circumstances materially affecting the
business or property of Asia Pacific or its right or capacity
to carry on business;
(ii) Asia Pacific has not waived or surrendered any right of
material value;
(iii) Asia Pacific has not discharged or satisfied or paid any lien
or encumbrance or obligation or liability other than current
liabilities in the ordinary course of business;
(iv) the business of Asia Pacific has been carried on in the
ordinary course; and
(v) the constating documents of Asia Pacific have not been
amended;
(k) there are no liabilities, contingent or otherwise, commitments or
material contracts of Asia Pacific not disclosed or reflected in the
Asia Pacific Financial Statements except those incurred in the
ordinary course of Asia Pacific's business since the date of the
Asia Pacific Financial Statements, and Asia Pacific has not
guaranteed or agreed to guarantee any debt, liability or other
obligation of any person, firm or corporation;
(l) it will raise the funds provided for in paragraph 1.02 hereof on the
timetable provided for therein by the sale of equity capital.
2.02 Asia Pacific acknowledges that the covenants, representations and
warranties set forth in paragraph 2.01 hereof form a part of this Agreement and
are conditions upon which each of USA and International has relied in entering
into this Agreement, and that these covenants, representations and warranties
shall survive the acquisition of any interest in the issued and outstanding
shares of USA by Asia Pacific hereunder.
<PAGE>
2.03 The parties also acknowledge and agree that the covenants, representations
and warranties set forth in paragraph 2.01 hereof are provided for the exclusive
benefit of USA and International, and a breach of any one or more thereof may be
waived by USA or International in whole or in part at any time without prejudice
to either of their rights in respect of any other breach of the same or any
other covenant, representation or warranty.
COVENANTS, REPRESENTATIONS AND WARRANTIES OF USA
3.01 USA covenants, represents and warrants to each of Asia Pacific and
International that:
(a) it is a company validly subsisting under the laws of Nevada and has
all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder;
(b) all necessary corporate action of the directors and members of
USA to authorize the sale of shares of USA hereunder and the
execution, delivery and performance of this Agreement has been
taken, the shares of USA to be sold hereunder have been duly and
validly created and this Agreement has been duly executed and
delivered on behalf of USA and constitutes a legal, valid and
binding obligation of USA enforceable by Asia Pacific and
International in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency or
other laws of general application affecting the enforcement of
creditors' rights and subject to the qualification that specific
performance and injunction, being equitable remedies, may only be
granted in the discretion of a court of competent jurisdiction;
(c) the authorized and issued share capital of USA, including
convertible securities, warrants and options or other rights to
acquire shares of USA, consists of 100,000,000 common shares without
par value, of which one (1) common share is issued and outstanding
as fully paid and non-assessable, and no issued and outstanding
common share purchase options and no issued and outstanding common
share purchase warrants;
(d) none of the authorization, execution, delivery or performance by
USA of this Agreement, including, without limitation, the sale of
the shares of USA as provided hereunder, requires any approval or
consent of any governmental or regulatory authority or agency
having jurisdiction (except as has already been, or at or prior
to the Closing will be, obtained) nor is in conflict with or in
contravention of USA's constating documents (including the
provisions attaching to its common shares), resolutions of the
directors or members of USA or the provisions of any written
instrument or agreement to which USA is a party or by which USA
or its properties or assets are bound or constitutes a default
thereunder;
<PAGE>
(e) to the best of USA's knowledge, there is not now pending or
threatened against USA or any of its subsidiaries, nor has USA
received notice in respect of any claim which could lead to any
litigation, action, suit or other proceeding by or before any court,
tribunal or other competent governmental agency or authority or
regulatory body that is material to the business or affairs of USA;
(f) neither USA nor any affiliate or associate thereof is a party to, or
is aware of, any agreement, commitment or understanding between or
among the shareholders of USA with respect to the exercise of any
voting rights attaching to any securities of USA beneficially owned
by such shareholders or any voting trust agreement or other
shareholders' agreement relating to securities of USA;
(g) it will use its best efforts to satisfy and fulfill all requirements
and conditions contained in this Agreement required to be satisfied
or fulfilled by it in order to complete the transactions
contemplated hereby and to comply with, satisfy and fulfill promptly
all legal and regulatory requirements applicable to USA with respect
to the consummation of the transactions contemplated hereby;
(h) it has the appropriate authority to procure the License and that it
will not sell, transfer, dispose of or encumber in any way its right
to procure the License or in respect of the Technology after having
been designated by Bennett under the Macrovision Agreement as the
corporation to be entitled to procure the License;
(i) its only assets, liabilities, commitments and material contracts are
disclosed on the attached Schedule "B".
3.02 USA acknowledges that the covenants, representations and warranties set
forth in paragraph 3.01 hereof form a part of this Agreement and are conditions
upon which each of Asia Pacific and International has relied in entering into
this Agreement, and that these covenants, representations and warranties shall
survive the acquisition of any interest in the issued and outstanding shares of
USA by Asia Pacific hereunder.
3.03 The parties also acknowledge and agree that the covenants, representations
and warranties set forth in paragraph 3.01 hereof are provided for the exclusive
benefit of Asia Pacific and International, and a breach of any one or more
thereof may be waived by Asia Pacific or International in whole or in part at
any time without prejudice to any of their rights in respect of any other breach
of the same or any other covenant, representation or warranty.
COVENANTS, REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL
4.01 International covenants, represents and warrants to each of Asia Pacific
and USA that:
(a) it is a company validly subsisting under the laws of The
Commonwealth of the Bahamas and has all necessary corporate power
and authority to execute and deliver this Agreement and to sell all
of the issued and outstanding shares of USA to Asia Pacific as
provided to herein and to perform its obligations hereunder;
<PAGE>
(b) all necessary corporate action of the directors and members of
International to authorize the sale of shares of USA hereunder
and the execution, delivery and performance of this Agreement has
been taken, the shares of USA to be sold to Asia Pacific
hereunder have been duly and validly created and this Agreement
has been duly executed and delivered on behalf of International
and constitutes a legal, valid and binding obligation of
International enforceable by USA and Asia Pacific in accordance
with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency or other laws of general application
affecting the enforcement of creditors' rights and subject to the
qualification that specific performance and injunction, being
equitable remedies, may only be granted in the discretion of a
court of competent jurisdiction;
(c) none of the authorization, execution, delivery or performance by
International of this Agreement, including, without limitation,
the sale of shares of USA as provided hereunder, requires any
approval or consent of any governmental or regulatory authority
or agency having jurisdiction (except as has already been, or at
or prior to the Closing will be, obtained) nor is it in conflict
with or in contravention of International's constating documents
(including the provisions attaching to its common shares),
resolutions of the directors or members of International or the
provisions of any written instrument or agreement to which
International is a party or by which International or its
properties or assets are bound or constitutes a default
thereunder;
(d) to the best of International's knowledge, there is not now pending
or threatened against International or any of its subsidiaries, nor
has International received notice in respect of any claim which
could lead to any litigation, action, suit or other proceeding by or
before any court, tribunal or other competent governmental agency or
authority or regulatory body that is material to the business or
affairs of International;
(e) neither International nor any affiliate or associate thereof is a
party to, or is aware of, any agreement, commitment or understanding
between or among the shareholders of International with respect to
the exercise of any voting rights attaching to any securities of
International beneficially owned by such shareholders or any voting
trust agreement or other shareholders' agreement relating to
securities of International;
(f) it will use its best efforts to satisfy and fulfill all requirements
and conditions contained in this Agreement required to be satisfied
or fulfilled by it in order to complete the transactions
contemplated hereby and to comply with, satisfy and fulfill promptly
all legal and regulatory requirements applicable to International
with respect to the consummation of the transactions contemplated
hereby;
(g) the assets, liabilities, commitments and material contracts of USA
as reflected on the list attached hereto as Schedule "B" are true
and correct in every material respect and present fairly the
financial position of USA as of the date of this Agreement;
<PAGE>
(h) it will acquire from Bennett all of the rights in and to the
business and technology described in the Business Plan and transfer
the rights for the operation of that business and the use of that
technology in the United States of America to USA for the sole
consideration of a note payable to International in the amount of
$200,000, without interest, payable in conjunction with the Closing.
4.02 International acknowledges that the covenants, representations and
warranties set forth in paragraph 4.01 hereof form a part of this Agreement and
are conditions upon which each of Asia Pacific and USA has relied in entering
into this Agreement, and that these covenants, representations and warranties
shall survive the acquisition of any interest in the issued and outstanding
shares of USA by Asia Pacific hereunder.
4.03 The parties also acknowledge and agree that the covenants, representations
and warranties set forth in paragraph 4.01 hereof are provided for the exclusive
benefit of Asia Pacific and USA, and a breach of any one or more thereof may be
waived by Asia Pacific or USA in whole or in part at any time without prejudice
to any of their rights in respect of any other breach of the same or any other
covenant, representation or warranty.
COVENANTS, REPRESENTATIONS AND WARRANTIES OF BENNETT
5.01 Bennett covenants, represents and warrants to each of the parties hereto
that:
(a) it is a company validly subsisting under the laws of the Province of
British Columbia and has all necessary corporate power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder;
(b) all necessary corporate action of the directors and members of
Bennett to authorize the sale of shares of Bennett hereunder and
the execution, delivery and performance of this Agreement has
been taken, the shares of Bennett to be sold hereunder have been
duly and validly created and this Agreement has been duly
executed and delivered on behalf of Bennett and constitutes a
legal, valid and binding obligation of Bennett enforceable by
Asia Pacific in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency or
other laws of general application affecting the enforcement of
creditors' rights and subject to the qualification that specific
performance and injunction, being equitable remedies, may only be
granted in the discretion of a court of competent jurisdiction;
(c) the authorized and issued share capital of Bennett, including
convertible securities, warrants and options or other rights to
acquire shares of Bennett, consists of 10,000 common shares without
par value, of which ten (10) common shares are issued and
outstanding as fully paid and non-assessable, and no issued and
outstanding common share purchase options and no issued and
outstanding common share purchase warrants;
(d) none of the authorization, execution, delivery or performance by
Bennett of this Agreement, including, without limitation, the
sale of the shares of Bennett as provided hereunder, requires any
approval or consent of any governmental or regulatory authority
or agency having jurisdiction (except as has already been, or at
or prior to the Closing will be, obtained) nor is in conflict
with or in contravention of Bennett's constating documents
(including the provisions attaching to its common shares),
resolutions of the directors or members of Bennett or the
provisions of any written instrument or agreement to which
Bennett is a party or by which Bennett or its properties or
assets are bound or constitutes a default thereunder;
<PAGE>
(e) to the best of Bennett's knowledge, there is not now pending or
threatened against Bennett or any of its subsidiaries, nor has
Bennett received notice in respect of any claim which could lead to
any litigation, action, suit or other proceeding by or before any
court, tribunal or other competent governmental agency or authority
or regulatory body that is material to the business or affairs of
Bennett;
(f) neither Bennett nor any affiliate or associate thereof is a party
to, or is aware of, any agreement, commitment or understanding
between or among the shareholders of Bennett with respect to the
exercise of any voting rights attaching to any securities of Bennett
beneficially owned by such shareholders or any voting trust
agreement or other shareholders' agreement relating to securities of
Bennett;
(g) it will use its best efforts to satisfy and fulfill all requirements
and conditions contained in this Agreement required to be satisfied
or fulfilled by it in order to complete the transactions
contemplated hereby and to comply with, satisfy and fulfill promptly
all legal and regulatory requirements applicable to Bennett with
respect to the consummation of the transactions contemplated hereby;
(h) its only commitments and material contracts are disclosed on the
attached Schedule "C";
(i) its financial statements prepared as at January 31, 1999
(hereinafter called the "Bennett Financial Statements"), a copy
of which are attached as Schedule "D", are true and correct in
every material respect and present fairly the financial position
of Bennett as at the date of the Bennett Financial Statements and
the results of its operations for the period then ended in
accordance with generally accepted accounting principles on a
basis consistently applied;
(j) other than as provided for in sub-paragraphs 5.01(l) through (n)
herein, inclusive, since the date of the Bennett Financial
Statements:
(i) there has not been any material adverse change in the
financial position or condition of Bennett or any damage, loss
or other change in circumstances materially affecting the
business or property of Bennett or its right or capacity to
carry on business;
(ii) Bennett has not waived or surrendered any right of material
value;
(iii) Bennett has not discharged or satisfied or paid any lien or
encumbrance or obligation or liability other than current
liabilities in the ordinary course of business;
(iv) the business of Bennett has been carried on in the ordinary
course; and
<PAGE>
(v) the constating documents of Bennett have not been amended;
(k) there are no liabilities, contingent or otherwise, commitments or
material contracts of Bennett not disclosed in the Bennett Financial
Statements except those incurred in the ordinary course of Bennett's
business since the date of the Bennett Financial Statements, and
Bennett has not guaranteed or agreed to guarantee any debt,
liability or other obligation of any person, firm or corporation;
(l) it has agreed to transfer all of its rights and interests in and to
the business and technology described in the Business Plan to
International in consideration for preference shares of
International (the "Preference Shares");
(m) the creditors and debt-holders of Bennett have agreed to accept the
Preference Shares in full satisfaction of all of the liabilities and
debts of Bennett; and
(n) it has agreed to designate USA under the Macrovision Agreement as
the corporation to be entitled to procure the License in
consideration of One Dollar ($1).
5.02 Bennett acknowledges that the covenants, representations and warranties set
forth in paragraph 5.01 hereof form a part of this Agreement and are conditions
upon which Asia Pacific has relied in entering into this Agreement, and that
these covenants, representations and warranties shall survive the acquisition of
any interest in the issued and outstanding shares of Bennett by Asia Pacific
hereunder.
5.03 The parties also acknowledge and agree that the covenants, representations
and warranties set forth in paragraph 5.01 hereof are provided for the exclusive
benefit of Asia Pacific, and a breach of any one or more thereof may be waived
by Asia Pacific in whole or in part at any time without prejudice to its rights
in respect of any other breach of the same or any other covenant, representation
or warranty.
COVENANTS, REPRESENTATIONS AND WARRANTIES OF ROY BENNETT
6.01 Roy Bennett covenants, represents and warrants to Asia Pacific that:
(a) the shares of Bennett which may be sold to Asia Pacific here under have
been duly and validly created and this Agreement has been duly
executed and delivered by Roy Bennett and constitutes a legal,
valid and binding obligation of Roy Bennett enforceable by
Bennett and Asia Pacific in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency
or other laws of general application affecting the enforcement of
creditors' rights and subject to the qualification that specific
performance and injunction, being equitable remedies, may only be
granted in the discretion of a court of competent jurisdiction;
(b none of the authorization, execution, delivery or performance by Roy Bennett
of this Agreement, including, without limitation, the sale of shares of Bennett
as provided hereunder, requires any approval or consent of any governmental or
regulatory authority or agency having jurisdiction (except as has already been,
or at or prior to the Closing will be, obtained) nor is in conflict with or in
contravention of the provisions of any written instrument or agreement to which
Roy Bennett is a party or by which Roy Bennett or his properties or assets are
bound or constitutes a default thereunder;
<PAGE>
(c) to the best of his knowledge,
there is not now pending or threatened against him, nor has he received notice
in respect of any claim which could lead to any litigation, action, suit or
other proceeding by or before any court, tribunal or other competent
governmental agency or authority or regulatory body that is material to his
business or affairs;
(d) he will use his best efforts to satisfy and fulfill all
requirements and conditions contained in this Agreement required to be satisfied
or fulfilled by him in order to complete the transactions contemplated hereby
and to comply with, satisfy and fulfill promptly all legal and regulatory
requirements applicable to him with respect to the consummation of the
transactions contemplated hereby;
(e) the commitments and material contracts of
Bennett as reflected on the list attached hereto as Schedule "C" are true and
correct in every material respect and present fairly the financial position of
Bennett as of the date of this Agreement;
(f) the Bennett Financial Statements are true and correct in every material
respect and present fairly the financial position of Bennett as at
the date of the Bennett Financial Statements and the results of its
operations for the period then ended in accordance with generally
accepted accounting principles on a basis consistently applied;
6.02 Roy Bennett acknowledges that the covenants, representations and warranties
set forth in paragraph 6.01 hereof form a part of this Agreement and are
conditions upon which Asia Pacific has relied in entering into this Agreement,
and that these covenants, representations and warranties shall survive the
acquisition of any interest in the issued and outstanding shares of Bennett by
Asia Pacific hereunder.
6.03 The parties also acknowledge and agree that the covenants, representations
and warranties set forth in paragraph 6.01 hereof are provided for the exclusive
benefit of Asia Pacific, and a breach of any one or more thereof may be waived
by Asia Pacific in whole or in part at any time without prejudice to its rights
in respect of any other breach of the same or any other covenant, representation
or warranty.
ADDITIONAL COVENANTS
7.01 In conjunction with the Closing on the Closing Date, the following will
become or remain the directors and officers of each of Asia Pacific and USA:
(a) Roy Bennett will become or remain a director, the President and the
Chief Executive Officer until a new Chief Executive Officer is
appointed under subsection 1.01(b)(i) herein, at which time Roy
Bennett will remain a director;
<PAGE>
(b) Adrian Rollke will have the right to nominate three directors, who,
if not already directors of Asia Pacific, will be appointed
directors forthwith upon being nominated by Adrian Rollke;
(c) Roy Bennett will have the right to nominate two additional
directors, who shall be appointed directors forthwith upon being
nominated by Roy Bennett; and
(d) Owen Granger will become or remain the Secretary/Treasurer.
7.02 Asia Pacific covenants and agrees to nominate annually for election as
directors for a period of 2 years from the date of this Agreement a slate of 6
directors, to consist of the 6 individuals referred to or contemplated in
paragraph 7.01 hereof, provided that, in the event the Chief Executive Officer
contemplated in sub-paragraph 1.01 (b)(i) herein is also appointed a director of
Asia Pacific, the slate will consist of 7 directors, with the additional member
of the slate to be said Chief Executive Officer.
7.03 International covenants and agrees to vote all of its shares of Asia
Pacific at general meetings of members of Asia Pacific for the election of the
persons referred to or contemplated in paragraph 7.01 hereof to the Board of
Directors of Asia Pacific from the date of this Agreement for a period ending on
the first to occur of 2 years from the date of this Agreement and the completion
of a successful takeover for a majority of the issued and outstanding common
shares of Asia Pacific, as contemplated in sub-paragraph 1.01(h) hereof.
7.04 International acknowledges that all common shares of Asia Pacific to be
issued to International hereunder will be restricted securities as that term is
defined in Rule 144 of the Securities and Exchange Commission of the United
States of America. International also acknowledges that all such shares must be
held for at least one year before any of such shares can be sold in the public
market and that any sale of such shares must be in accordance with said Rule
144.
7.05 Asia Pacific and USA acknowledge and agree that, in conjunction with the
Closing, they will change their bank signing officers such that 2 signatures are
required on all cheques to be issued by them, with one authorized signatory to
be either Roy Bennett or one of the directors nominated by Roy Bennett and the
other to be either Adrian Rollke or one of the directors nominated by Adrian
Rollke.
7.06 Asia Pacific also acknowledges and agrees that, subsequent to the Closing,
it will cause USA, to the extent that is practicable, to implement the matters
contained in the Business Plan.
CONDITIONS OF CLOSING
8.01 Asia Pacific's obligation to carry out the terms of this Agreement and to
purchase all of the issued and outstanding shares of USA from International
hereunder will be subject to the following conditions for the exclusive benefit
of Asia Pacific, to be fulfilled or satisfied at or prior to the Closing on the
Closing Date:
(a) Bennett shall have completed the designation of USA under the
Macrovision Agreement as the corporation to be entitled to procure
the License and the transfer of all of its rights in and to the
technology described in the Business Plan;
<PAGE>
(b) the covenants, representations and warranties of each of USA,
International, Bennett and Roy Bennett contained in this Agreement
or in any certificate or other document delivered pursuant hereto
shall be true and correct on and as of the date of this Agreement
and the Closing Date, as the case may be, with the same force and
effect as though made on and as of such date or dates;
(c) each of USA, International, Bennett and Roy Bennett shall have
complied with all covenants and agreements herein agreed to be
performed or caused to be performed by it;
(d) no action or proceeding, at law or in equity, shall be pending or
threatened by any person, company, firm, domestic or foreign
court, governmental authority, securities commissions or other
regulatory body or agency, and no order, decision or ruling shall
have been made by any such court, governmental authority,
securities commission or other regulatory authority, and no law
or regulation shall have been passed which, in any of the
foregoing cases, would have the effect of:
(i) enjoining or prohibiting Asia Pacific's purchase of all of the
issued and outstanding shares of USA from International
hereunder; or
(ii) imposing on Asia Pacific material burdensome obligations,
restrictions, limitations or conditions on its ownership of or
exercise of rights of ownership of the shares of USA to be
purchased hereunder which would have a materially adverse
effect on the value of such shares;
(iii) enjoining or prohibiting Asia Pacific's purchase of all of the
issued and outstanding shares of Bennett from Roy Bennett
hereunder; or
(iv) imposing on Asia Pacific material burdensome obligations,
restrictions, limitations or conditions on its ownership of or
exercise of rights of ownership of the shares of Bennett to be
purchased hereunder which would have a materially adverse
effect on the value of such shares;
(e) each of USA, International, Bennett and Roy Bennett shall have
delivered at the Closing a certificate dated the Closing Date in
form and substance satisfactory to Asia Pacific, executed by USA,
International, Bennett or Roy Bennett as the case may be,
certifying that the covenants, representations and warranties of
USA, International, Bennett or Roy Bennett contained in this
Agreement, as the case may be, are true and correct on and as of
the Closing Date with the same force and effect as though made on
and as of such date, and certifying as to the fulfilment or
satisfaction of the conditions contained in sub-paragraphs
8.01(a) through (d) and as to such other matters as Asia Pacific
may require, acting reasonably;
(f) Asia Pacific shall be satisfied, acting reasonably, that it is or
will be in compliance with all applicable legal and regulatory
requirements relating to it with respect to its
(i) purchase of all of the issued and outstanding shares of USA
from International hereunder and shall have received, in its
discretion, all necessary or appropriate orders, rulings and
consents from all regulatory bodies, securities commissions,
governmental authorities and others with respect thereto; and
<PAGE>
(ii) potential purchase of all of the issued and outstanding shares
of Bennett from Roy Bennett hereunder and shall have received,
in its discretion, all necessary or appropriate orders,
rulings and consents from all regulatory bodies, securities
commissions, governmental authorities and others with respect
thereto;
(g) Asia Pacific shall have received a favourable written opinion from
each of USA's, International's and Bennett's counsel dated the
Closing Date satisfactory in scope and substance to Asia Pacific and
its counsel, acting reasonably, with respect to the following
matters:
(i) each of USA, International and Bennett is a company validly
subsisting under the laws of its jurisdiction of incorporation
and has all necessary corporate power and authority to execute
and deliver this Agreement and to perform its obligations
hereunder;
(ii) all necessary corporate action has been taken by each of
USA, International and Bennett to authorize the execution,
delivery and performance of this Agreement and this
Agreement has been duly executed and delivered by each of
USA, International and Bennett and constitutes a legal,
valid and binding obligation of each of USA, International
and Bennett enforceable against each of USA, International
and Bennett in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy,
insolvency laws or other laws of general application
affecting enforcement of creditors' rights and subject to
the qualification that specific performance and injunction,
being equitable remedies, may only be granted in the
discretion of a court of competent jurisdiction;
(iii) the USA shares to be acquired by Asia Pacific hereunder have
been duly and validly created and issued and are outstanding
as fully paid and non-assessable shares in the capital stock
of USA;
(iv) the Bennett shares that may be acquired by Asia Pacific
hereunder have been duly and validly created and issued and
are outstanding as fully paid and non-assessable shares in the
capital stock of Bennett;
(v) none of the authorization, execution, delivery or
performance by either USA, International or Bennett of this
Agreement requires any approval or consent of any
governmental or regulatory authority or agency having
jurisdiction (except as such has already been obtained) or
breaches any of the terms and conditions of either of
USA's, International's or Bennett's constating documents or
constitutes a default thereunder;
<PAGE>
(h) Macrovision has accepted the designation by Bennett of USA under
the Macrovision Agreement as the corporation to be entitled to
procure the License, PROVIDED THAT in the event such designation
has not been accepted by Macrovision prior to the Closing or
within a period of 60 days subsequent to the Closing Date, Roy
Bennett will sell to Asia Pacific 10 common shares in the capital
of Bennett, representing all of the issued and outstanding shares
of Bennett, for consideration of One Dollar ($1), with the
closing in respect of the sale of these shares of Bennett from
Roy Bennett to Asia Pacific to occur on the 61st day subsequent
to the Closing Date;
(i) an employment or management contract between USA and Bennett with
respect to the services of Roy Bennett acceptable to Asia Pacific
has been entered into.
If any of the foregoing conditions have not been fulfilled or
satisfied to the satisfaction of Asia Pacific at or before the Closing on the
Closing Date, Asia Pacific may rescind this Agreement by notice to each of USA,
International, Bennett and Roy Bennett and in such event Asia Pacific will be
released from all obligations hereunder, provided that any of such conditions
may be waived in whole or in part by Asia Pacific without prejudice to its
rights of rescission in the event of the non-fulfilment of any other condition
or conditions.
8.02 USA's obligation to carry out the terms of this Agreement will be subject
to the following conditions for the exclusive benefit of USA, to be fulfilled or
satisfied at or prior to the Closing on the Closing Date:
(a) the covenants, representations and warranties of each of Asia
Pacific and International contained in this Agreement or in any
certificate or other document delivered pursuant hereto shall be
true and correct on and as of the date of this Agreement and the
Closing Date, as the case may be, with the same force and effect as
though made on and as of such date or dates;
(b) each of Asia Pacific and International shall have complied with all
covenants and agreements herein agreed to be performed or caused to
be performed by it;
(c) no action or proceeding, at law or in equity, shall be pending or
threatened by any person, company, firm, domestic or foreign
court, governmental authority, securities commissions or other
regulatory body or agency, and no order, decision or ruling shall
have been made by any such court, governmental authority,
securities commission or other regulatory authority, and no law
or regulation shall have been passed which, in any of the
foregoing cases, would have the effect of enjoining or
prohibiting Asia Pacific's purchase of all of the issued and
outstanding shares of USA from International hereunder;
(d) each of Asia Pacific and International shall have delivered at
the Closing a certificate dated the Closing Date in form and
substance satisfactory to USA, executed by Asia Pacific or
International, as the case may be, certifying that the covenants,
representations and warranties of Asia Pacific or International
contained in this Agreement, as the case may be, are true and
correct on and as of the Closing Date with the same force and
effect as though made on and as of such date, and certifying as
to the fulfilment or satisfaction of the conditions contained in
sub-paragraphs 8.02(a) through (c) and as to such other matters
as USA may require, acting reasonably;
<PAGE>
(e) USA shall be satisfied, acting reasonably, that it is or will be
in compliance with all applicable legal and regulatory
requirements relating to it with respect to the purchase by Asia
Pacific of all of the issued and outstanding shares of USA from
International hereunder and shall have received, in its
discretion, all necessary or appropriate orders, rulings and
consents from all regulatory bodies, securities commissions,
governmental authorities and others with respect thereto;
(f) USA shall have received a favourable written opinion from each of
Asia Pacific's and International's counsel dated the Closing Date
satisfactory in scope and substance to USA and its counsel, acting
reasonably, with respect to the following matters:
(i) each of Asia Pacific and International is a company validly
subsisting under the laws of its jurisdiction of incorporation
and has all necessary corporate power and authority to execute
and deliver this Agreement and to perform its obligations
hereunder;
(ii) all necessary corporate action has been taken by each of
Asia Pacific and International to authorize the execution,
delivery and performance of this Agreement and this
Agreement has been duly executed and delivered by each of
Asia Pacific and International and constitutes a legal,
valid and binding obligation of each of Asia Pacific and
International enforceable against each of Asia Pacific and
International in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy,
insolvency laws or other laws of general application
affecting enforcement of creditors' rights and subject to
the qualification that specific performance and injunction,
being equitable remedies, may only be granted in the
discretion of a court of competent jurisdiction;
(iii) none of the authorization, execution, delivery or performance
by either Asia Pacific or International of this Agreement
requires any approval or consent of any governmental or
regulatory authority or agency having jurisdiction (except as
such has already been obtained) or breaches any of the terms
and conditions of either of Asia Pacific's or International's
constating documents or constitutes a default thereunder;
(g) an employment or management contract between USA and Bennett with
respect to the services of Roy B. Bennett has been entered into.
If any of the foregoing conditions have not been fulfilled or
satisfied to the satisfaction of USA at or before the Closing on the Closing
Date, USA may rescind this Agreement by notice to each of Asia Pacific and
International and in such event USA will be released from all obligations
hereunder, provided that any of such conditions may be waived in whole or in
part by USA without prejudice to its rights of rescission in the event of the
non-fulfilment of any other condition or conditions.
8.03 International's obligation to carry out the terms of this Agreement and to
sell all of the issued and outstanding shares of USA to Asia Pacific hereunder
will be subject to the following conditions for the exclusive benefit of
International, to be fulfilled or satisfied at or prior to the Closing on the
Closing Date:
<PAGE>
(a) Asia Pacific has at least Nine Hundred Thousand Dollars ($900,000)
on hand at Closing;
(b) the covenants, representations and warranties of each of Asia
Pacific and USA contained in this Agreement or in any certificate or
other document delivered pursuant hereto shall be true and correct
on and as of the date of this Agreement and the Closing Date, as the
case may be, with the same force and effect as though made on and as
of such date or dates;
(c) each of Asia Pacific and USA shall have complied with all covenants
and agreements herein agreed to be performed or caused to be
performed by it;
(d) no action or proceeding, at law or in equity, shall be pending or
threatened by any person, company, firm, domestic or foreign
court, governmental authority, securities commissions or other
regulatory body or agency, and no order, decision or ruling shall
have been made by any such court, governmental authority,
securities commission or other regulatory authority, and no law
or regulation shall have been passed which, in any of the
foregoing cases, would have the effect of:
(i) enjoining or prohibiting Asia Pacific's purchase of all of the
issued and outstanding shares of USA from International
hereunder; or
(ii) imposing on International material burdensome obligations,
restrictions, limitations or conditions on its ownership of or
exercise of rights of ownership of the shares of Asia Pacific
to be purchased hereunder which would have a materially
adverse effect on the value of such shares, save as
specifically provided for herein;
(e) each of Asia Pacific and USA shall have delivered at the Closing
a certificate dated the Closing Date in form and substance
satisfactory to International, executed by Asia Pacific or USA,
as the case may be, certifying that the covenants,
representations and warranties of Asia Pacific or USA contained
in this Agreement, as the case may be, are true and correct on
and as of the Closing Date with the same force and effect as
though made on and as of such date, and certifying as to the
fulfilment or satisfaction of the conditions contained in
sub-paragraphs 8.03(a) through (d) and as to such other matters
as International may require, acting reasonably;
(f) International shall be satisfied, acting reasonably, that it is
or will be in compliance with all applicable legal and regulatory
requirements relating to it with respect to its sale of all of
the issued and outstanding shares of USA to Asia Pacific
hereunder and shall have received, in its discretion, all
necessary or appropriate orders, rulings and consents from all
regulatory bodies, securities commissions, governmental
authorities and others with respect thereto;
(g) International shall have received a favourable written opinion from
each of Asia Pacific's and USA's counsel dated the Closing Date
satisfactory in scope and substance to International and its
counsel, acting reasonably, with respect to the following matters:
<PAGE>
(i) each of Asia Pacific and USA is a company validly subsisting
under the laws of its jurisdiction of incorporation and has
all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations
hereunder;
(ii) all necessary corporate action has been taken by each of
Asia Pacific and USA to authorize the execution, delivery
and performance of this Agreement and this Agreement has
been duly executed and delivered by each of Asia Pacific
and USA and constitutes a legal, valid and binding
obligation of each of Asia Pacific and USA enforceable
against each of Asia Pacific and USA in accordance with its
terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency laws or other laws of general
application affecting enforcement of creditors' rights and
subject to the qualification that specific performance and
injunction, being equitable remedies, may only be granted
in the discretion of a court of competent jurisdiction;
(iii) none of the authorization, execution, delivery or performance
by either Asia Pacific or USA of this Agreement requires any
approval or consent of any governmental or regulatory
authority or agency having jurisdiction (except as such has
already been obtained) or breaches any of the terms and
conditions of either of Asia Pacific's or USA's constating
documents or constitutes a default thereunder;
(h) a nominee or nominees of International have entered into agreements
acceptable to them for the purchase of at least 2,730,000 currently
issued and outstanding common shares of Asia Pacific from the
holders of these shares;
(i) an employment or management contract between USA and Bennett with
respect to the services of Roy Bennett acceptable to International
has been entered into;
(j) there shall have been delivered to Asia Pacific's transfer agent
certificates representing the 2,730,000 common shares in its capital
stock provided for in sub-paragraph 8.03(h) hereof, duly endorsed in
blank for transfer to a nominee or nominees of International.
If any of the foregoing conditions have not been fulfilled or
satisfied to the satisfaction of International at or before the Closing on the
Closing Date, International may rescind this Agreement by notice to each of Asia
Pacific and USA and in such event International will be released from all
obligations hereunder, provided that any of such conditions may be waived in
whole or in part by International without prejudice to its rights of rescission
in the event of the non-fulfilment of any other condition or conditions.
8.04 Bennett's obligation to carry out the terms of this Agreement will be
subject to the following conditions for the exclusive benefit of Bennett, to be
fulfilled or satisfied at or prior to the Closing on the Closing Date:
(a) the covenants, representations and warranties of Asia Pacific
contained in this Agreement or in any certificate or other document
delivered pursuant hereto shall be true and correct on and as of the
date of this Agreement and the Closing Date, as the case may be,
with the same force and effect as though made on and as of such date
or dates;
<PAGE>
(b) Asia Pacific shall have complied with all covenants and agreements herein
agreed to be performed or caused to be performed by it;
(c) no action or proceeding, at law or in equity, shall be pending or
threatened by any person, company, firm, domestic or foreign
court, governmental authority, securities commissions or other
regulatory body or agency, and no order, decision or ruling shall
have been made by any such court, governmental authority,
securities commission or other regulatory authority, and no law
or regulation shall have been passed which, in any of the
foregoing cases, would have the effect of enjoining or
prohibiting Asia Pacific's purchase of all of the issued and
outstanding shares of Bennett from Roy Bennett hereunder;
(d) Asia Pacific shall have delivered at the Closing a certificate
dated the Closing Date in form and substance satisfactory to
Bennett, executed by Asia Paific, certifying that the covenants,
representations and warranties of Asia Pacific contained in this
Agreement are true and correct on and as of the Closing Date with
the same force and effect as though made on and as of such date,
and certifying as to the fulfilment or satisfaction of the
conditions contained in sub-paragraphs 8.04(a) through (c) and as
to such other matters as Bennett may require, acting reasonably;
(e) Bennett shall be satisfied, acting reasonably, that it is or will
be in compliance with all applicable legal and regulatory
requirements relating to it with respect to the purchase by Asia
Pacific of all of the issued and outstanding shares of Bennett
from Roy Bennett hereunder and shall have received, in its
discretion, all necessary or appropriate orders, rulings and
consents from all regulatory bodies, securities commissions,
governmental authorities and others with respect thereto;
(f) Bennett shall have received a favourable written opinion from Asia
Pacific's counsel dated the Closing Date satisfactory in scope and
substance to Bennett and its counsel, acting reasonably, with
respect to the following matters:
(i) Asia Pacific is a company validly subsisting under the laws of
its jurisdiction of incorporation and has all necessary
corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
(ii) all necessary corporate action has been taken by Asia
Pacific to authorize the execution, delivery and
performance of this Agreement and this Agreement has been
duly executed and delivered by Asia Pacific and constitutes
a legal, valid and binding obligation of Asia Pacific
enforceable against Asia Pacific in accordance with its
terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency laws or other laws of general
application affecting enforcement of creditors' rights and
subject to the qualification that specific performance and
injunction, being equitable remedies, may only be granted
in the discretion of a court of competent jurisdiction;
<PAGE>
(iii) none of the authorization, execution, delivery or performance
by Asia Pacific of this Agreement requires any approval or
consent of any governmental or regulatory authority or agency
having jurisdiction (except as such has already been obtained)
or breaches any of the terms and conditions of Asia Pacific's
constating documents or constitutes a default thereunder.
If any of the foregoing conditions have not been fulfilled or
satisfied to the satisfaction of Bennett at or before the Closing on the Closing
Date, Bennett may rescind this Agreement by notice to Asia Pacific and in such
event Bennett will be released from all obligations hereunder, provided that any
of such conditions may be waived in whole or in part by Bennett without
prejudice to its rights of rescission in the event of the non-fulfilment of any
other condition or conditions.
8.05 Roy Bennett's obligation to carry out the terms of this Agreement and to
sell all of the issued and outstanding shares of Bennett to Asia Pacific
hereunder will be subject to the following conditions for the exclusive benefit
of Roy Bennett, to be fulfilled or satisfied at or prior to the Closing on the
Closing Date:
(a) Asia Pacific has at least Nine Hundred Thousand Dollars ($900,000)
on hand at Closing;
(b) the covenants, representations and warranties of Asia Pacific
contained in this Agreement or in any certificate or other document
delivered pursuant hereto shall be true and correct on and as of the
date of this Agreement and the Closing Date, as the case may be,
with the same force and effect as though made on and as of such date
or dates;
(c) Asia Pacific shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by it;
(d) no action or proceeding, at law or in equity, shall be pending or
threatened by any person, company, firm, domestic or foreign
court, governmental authority, securities commissions or other
regulatory body or agency, and no order, decision or ruling shall
have been made by any such court, governmental authority,
securities commission or other regulatory authority, and no law
or regulation shall have been passed which, in any of the
foregoing cases, would have the effect of enjoining or
prohibiting Asia Pacific's purchase of all of the issued and
outstanding shares of Bennett from Roy Bennett hereunder;
(e) Asia Pacific shall have delivered at the Closing a certificate
dated the Closing Date in form and substance satisfactory to Roy
Bennett, executed by Asia Pacific, certifying that the covenants,
representations and warranties of Asia Pacific contained in this
Agreement are true and correct on and as of the Closing Date with
the same force and effect as though made on and as of such date,
and certifying as to the fulfilment or satisfaction of the
conditions contained in sub-paragraphs 8.05(a) through (d) and as
to such other matters as Roy Bennett may require, acting
reasonably;
<PAGE>
(f) Roy Bennett shall be satisfied, acting reasonably, that he is or
will be in compliance with all applicable legal and regulatory
requirements relating to him with respect to his sale of all of
the issued and outstanding shares of Bennett to Asia Pacific
hereunder and shall have received, in his discretion, all
necessary or appropriate orders, rulings and consents from all
regulatory bodies, securities commissions, governmental
authorities and others with respect thereto;
(g) Roy Bennett shall have received a favourable written opinion from
Asia Pacific's counsel dated the Closing Date satisfactory in scope
and substance to Roy Bennett and his counsel, acting reasonably,
with respect to the following matters:
(i) Asia Pacific is a company validly subsisting under the laws of
its jurisdiction of incorporation and has all necessary
corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
(ii) all necessary corporate action has been taken by Asia
Pacific to authorize the execution, delivery and
performance of this Agreement and this Agreement has been
duly executed and delivered by Asia Pacific and constitutes
a legal, valid and binding obligation of Asia Pacific
enforceable against Asia Pacific in accordance with its
terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency laws or other laws of general
application affecting enforcement of creditors' rights and
subject to the qualification that specific performance and
injunction, being equitable remedies, may only be granted
in the discretion of a court of competent jurisdiction;
(iii) none of the authorization, execution, delivery or performance
by Asia Pacific of this Agreement requires any approval or
consent of any governmental or regulatory authority or agency
having jurisdiction (except as such has already been obtained)
or breaches any of the terms and conditions of Asia Pacific's
constating documents or constitutes a default thereunder;
(h) an employment or management contract between USA and Roy Bennett has
been entered into.
If any of the foregoing conditions have not been fulfilled or
satisfied to the satisfaction of Roy Bennett at or before the Closing on the
Closing Date, Roy Bennett may rescind this Agreement by notice to Asia Pacific
and in such event Roy Bennett will be released from all obligations hereunder,
provided that any of such conditions may be waived in whole or in part by Roy
Bennett without prejudice to his rights of rescission in the event of the
non-fulfilment of any other condition or conditions.
<PAGE>
CLOSING
9.01 The closing date for the transactions provided for in this Agreement will
occur on June 21, 1999 or on such other date as the parties unanimously agree to
in writing (hereinafter called the "Closing Date").
9.02 The Closing will be at 2:00 p.m. on the Closing Date at Suite 1750 - 1177
West Hastings Street, Vancouver, British Columbia, Canada, or at such other
time, date or place as the parties may agree to.
9.03 In conjunction with the Closing, Asia Pacific shall deliver the following
at the Closing:
(a) a certified copy of a Resolution of the Directors of Asia Pacific,
approving this Agreement, or any amendments hereto;
(b) the certificates provided for in sub-paragraphs 8.02(d), 8.03(e) and
8.05(e) hereof;
(c) the legal opinions provided for in sub-paragraphs 8.02(f), 8.03(g)
and 8.05(g) hereof;
(d) Asia Pacific share certificates representing 6,623,016 common shares
in its capital stock, registered in the name of International, which
are to be held by an independent escrow agent in escrow pursuant to
the provisions of paragraph 1.01 hereof;
(e) Asia Pacific share certificates representing 345,000 common shares
owned by Adrian Rollke, which are to be held by an independent
escrow agent in escrow pursuant to the provisions of paragraph 1.03
hereof;
(f) confirmation from its transfer agent that said transfer agent is in
a position to complete the transfer to the nominee or nominees of
International of the 2,730,000 common shares of Asia Pacific
provided for in sub-paragraph 8.03(h) hereof;
(g) irrevocable instructions to its bankers to wire transfer $200,000 to
International's bank account, in satisfaction of USA's liability to
International disclosed in Schedule "B" hereto;
(h) such other documents as may be required to give effect to this
Agreement.
<PAGE>
9.04 In conjunction with the Closing, USA shall deliver the following at the
Closing:
(a) a certified copy of a Resolution of the Directors of USA, approving
this Agreement, or any amendments hereto;
(b) the certificates provided for in sub-paragraphs 8.01(e) and 8.03(e)
hereof;
(c) the legal opinions provided for in sub-paragraphs 8.01(g) and 8.03
(g) hereof;
(d) such other documents as may be required to give effect to this
Agreement.
<PAGE>
9.05 In conjunction with the Closing, International shall deliver the following
at the Closing:
(a) a certified copy of a Resolution of the Directors of International,
approving this Agreement, or any amendments hereto;
(b) the certificates provided for in sub-paragraphs 8.01(e) and 8.02(d)
hereof;
(c) the legal opinions provided for in sub-paragraphs 8.01(g) and
8.02(f) hereof;
(d) a USA share certificate representing one (1) common share in its
capital stock, duly endorsed for transfer to Asia Pacific;
(e) such other documents as may be required to give effect to this
Agreement.
9.06 In conjunction with the Closing, Bennett shall deliver the following at the
Closing:
(a) a certified copy of a Resolution of the Directors of Bennett,
approving this Agreement, or any amendments hereto;
(b) the certificate provided for in sub-paragraph 8.01(e) hereof;
(c) the legal opinion provided for in sub-paragraph 8.01(g) hereof;
(d) financial statements prepared as at April 30, 1999 and the review
engagement report of its certified general accountants thereon;
(e) a certificate dated the Closing Date in form and substance satisfactory to
Asia Pacific, executed by Bennett, certifying that Bennett has no
unsatisfied liabilities as of the Closing Date;
(f) such otherdocuments as may be required to give effect to this Agreement.
9.07 In conjunction with the Closing, Roy Bennett shall deliver the following
at the Closing:
(a) the certificate provided for in sub-paragraph 8.01(e) hereof;
(b) a Bennett share certificate representing 10 common shares in its capital
stock, duly endorsed for transfer to Asia Pacific, PROVIDED THAT Asia Pacific
agrees to return this share certificate to Roy Bennett and to release Roy
Bennett of his obligations under this Agreement in the event that Macrovision
consents within 60 days of the Closing to the designation of USA under the
Macrovision Agreement as the corporation to be entitled to procure the License;
(c) a certificate dated the Closing Date in form and substance satisfactory to
Asia Pacific, executed by Roy Bennett, certifying that Bennett has no
unsatisfied liabilities as of the Closing Date;
(d) such other documents as may be required to give effect to this Agreement.
<PAGE>
NOTICES AND PAYMENT
10.01 Any notice, demand, payment or other communication under this Agreement
will be given in writing and must be delivered or sent by telecopier and
addressed to the party to which it is being given at the following addresses:
Asia Pacific Enterprises, Inc. with a copy to: Adrian Rollke
1313 North Market Street Facsimile No. (604) 683-2286
New Castle County
Wilmington, Delaware 19801-1151
Attention: Adrian Rollke
Facsimile No. (604) 683-2286
eVideo USA, Inc. with a copy to: Roy B. Bennett
502 East John Street Facsimile No. (604) 925-9367
Carson City, Nevada 89706
and with a copy to: Adrian Rollke
Attention: Roy B. Bennett Facsimile No. (604) 683-2286
Facsimile No. (604) 925-9367
eVideo International, Inc.
ABL Building
Bank Lane
Nassau, Bahamas
Attention: Roy B. Bennett
Facsimile No. (604) 925-9367
Roy B. Bennett & Associates Ltd.
2757 Chelsea Court
West Vancouver, British Columbia
V7S 3E9
Attention: Roy B. Bennett
Facsimile No. (604) 925-9367
Roy B. Bennett
2757 Chelsea Court
West Vancouver, British Columbia
V7S 3E9
Facsimile No. (604) 925-9367
<PAGE>
10.02 If notice, demand, payment or other communication is sent by telecopier or
is delivered, it will be deemed to have been received on the next business day
following the day of transmission or delivery.
10.03 Any party may at any time give to the others notice in writing of any
change of address of the party giving such notice and from and after the giving
of such notice the address or addresses therein specified will be deemed the
address of such party for the purposes of giving notice hereunder.
CURRENCY
11.01 All references to monies hereunder will be in lawful currency of the
United States of America.
ARBITRATION
12.01 The parties agree that all questions or matters in dispute with respect to
the matters provided for herein shall be submitted to arbitration pursuant to
the terms hereof.
12.02 It shall be a condition precedent to the right of any party to submit any
matter to arbitration pursuant to the provisions hereof that any party intending
to refer any matter to arbitration shall have given not less than thirty (30)
days' prior written notice of its intention so to do to the other party together
with particulars of the matter in dispute. On the expiration of such thirty (30)
days, the party who gave such notice may proceed to refer the dispute to
arbitration as provided for in paragraph 12.03 hereof.
12.03 The party desiring arbitration shall appoint one arbitrator, and shall
notify the other party of such appointment, and the other party shall, within
fifteen (15) days after receiving such notice, appoint an arbitrator, and the
two arbitrators so named, before proceeding to act, shall, within fifteen (15)
days of the appointment of the last appointed arbitrator, unanimously agree on
the appointment of a third arbitrator to act with them and be chairman of the
arbitration herein provided for. If the other party shall fail to appoint an
arbitrator within fifteen (15) days after receiving notice of the appointment of
the first arbitrator, and if the two arbitrators appointed by the parties shall
be unable to agree on the appointment of the chairman, the chairman shall be
appointed under the provision of the Commercial Arbitration Act (British
Columbia). Except as specifically otherwise provided in this paragraph, the
arbitration herein provided for shall be conducted in accordance with such Act.
The chairman, or in the case where only one arbitrator is appointed, the single
arbitrator, shall fix a time and place in Vancouver, British Columbia, for the
purpose of hearing the evidence and representations of the parties, and he shall
preside over the arbitration and determine all questions of procedure not
provided for under such Act or this paragraph. After hearing any evidence and
representations that the parties may submit, the single arbitrator, or the
arbitrators, as the case may be, shall make an award and reduce the same to
writing, and deliver one copy thereof to each of the parties. The expense of the
arbitration shall be paid as specified in the award.
12.04 The parties may agree that the award of a majority of the arbitrators, or
in the case of a single arbitrator, of such arbitrator, shall be final and
binding upon each of them.
<PAGE>
FURTHER ASSURANCES
13.01 Each of the parties hereto agrees to do and/or execute all such further
and other acts, deeds, things, devices, documents and assurances as may be
required in order to carry out the true intent and meaning of this Agreement.
TIME OF THE ESSENCE
14.01 Time shall be of the essence of this Agreement.
COSTS
15.01 Each of the parties hereto will be responsible for paying its own costs
relating to the preparation and execution of this Agreement.
SEVERABILITY
16.01 In the event that any provision of this Agreement is determined to be void
or unenforceable in whole or in part it shall be deemed to be severed from this
Agreement and shall not affect or impair the validity or enforceability of any
other provision of this Agreement.
ENTIRE AGREEMENT
17.01 The parties hereto agree that the terms and conditions of this Agreement
shall supersede and replace any other agreements or arrangements, whether oral
or written, heretofore existing among the parties in respect of the subject
matter of this Agreement.
COUNTERPARTS
18.01 This Agreement and any certificate or other writing delivered in
connection herewith may be executed in any number of counterparts and any party
hereto may execute any counterpart, each of which when executed and delivered
will be deemed to be an original and all of which counterparts of this Agreement
or such other writing, as the case may be, taken together, will be deemed to be
one and the same instrument. The execution of this Agreement or any other
writing by any party hereto will not become effective until all counterparts
hereof have been executed by all the parties hereto.
EXECUTION BY FACSIMILE
19.01 Each of the parties hereto will be entitled to rely upon delivery by
facsimile of executed copies of this Agreement and any certificates or other
writings delivered in connection herewith, and such facsimile copies will be
legally effective to create a valid and binding agreement among the parties in
accordance with the terms and conditions of this Agreement.
TITLES
20.01 The titles to the respective paragraphs hereof shall not be deemed as part
of this Agreement but shall be regarded as having been used for convenience
only.
GOVERNING LAW
21.01 This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the federal laws of Canada
applicable therein.
<PAGE>
ENUREMENT
22.01 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and each of their successors and permitted assigns, as the case
may be.
IN WITNESS WHEREOF this Agreement has been executed as of the day and year first
above written.
SIGNED and DELIVERED by
ASIA PACIFIC ENTERPRISES, INC.
in the presence of:
/s/ Adrian Rollke
Authorized Signatory
SIGNED and DELIVERED by
EVIDEO USA, INC.
in the presence of:
/s/ R. Bennett
Authorized Signatory
SIGNED and DELIVERED by
EVIDEO INTERNATIONAL, INC.
in the presence of:
/s/ R. Bennett
Authorized Signatory
SIGNED and DELIVERED by
ROY B. BENNETT & ASSOCIATES LTD.
in the presence of:
/s/ R. Bennett
Authorized Signatory
<PAGE>
SIGNED and DELIVERED by )
ROY B. BENNETT )
in the presence of: )
)
)
/s/ Gary R. Smith ) /s/ R. Bennett
- ------------------------------------------ --------------
Signature of Witness ) ROY B. BENNETT
)
Gary R. Smith )
- ------------------------------------------------
Name of Witness - please type or print )
)
505-2370 W 2nd Ave )
Address of Witness - please type or print )
)
Vancouver, B.C. Canada )
)
Barrister & Solicitor )
Occupation of Witness - please type or print )
<PAGE>
SCHEDULE "A"
FINANCIAL STATEMENTS OF ASIA PACIFIC ENTERPRISES, INC.
PREPARED AS AT MARCH 31, 1999
<PAGE>
Balance Sheets
(Unaudited)
March 31, December 31,
1999 1998
US$ US$
A S S E T S
Current Assets
Cash 546 229
Long-Term Investments (note 0) 100,175 175
Organization Costs 3,250 3,500
---------------------
Total Assets 103,971 3,904
===================
L I A B I L I T I E S
Current Liabilities
Accounts payable 3,802 3,366
Loans from related party (note 3) 4,386 16,000
-----------------
Total Liabilities 8,188 19,366
-----------------
S H A R E H O L D E R S ' E Q U I T Y
Share Capital (notes 0 and 4)
Authorized
- - 30,000,000 shares of common stock, $0.0001 par value
- - 5,000,000 shares of preferred stock, $0.0001 par value
Issued and outstanding
- - 8,575,425 common shares (1998 - 7,375,425) 858 738
Contributed surplus 124,317 4,437
-------------------
Total Share Capital 125,175 5,175
Deficit Accumulated during the Development Stage (29,392) (20,637)
---------------------
Total Shareholders' Equity 95,783 (15,462)
---------------------
Total Liabilities and Shareholders' Equity 103,971 3,904
===================
Continuance of Operations (note 1)
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statements of Operations
(Unaudited)
Cumulative,
inception to Three months ended
March 31, March 31,
1999 1999 1998
US$ US$ US$
General and Administrative Expenses
Professional fees 5,775 - 2,500
Transfer agent fees 9,282 - 1,685
Management and consulting fees 6,293 6,293 -
Rent 2,117 2,117 -
Amortization of incorporation costs 1,750 250 250
General corporate expenses 4,239 117 166
---------------------------------------
Total General and Administrative
Expenses 29,456 8,777 4,601
Interest Income 64 22 -
-----------------------------------------
Net Loss for the Period 29,392 8,755 4,601
=======================================
Weighted average number of shares
outstanding 7,393,667 7,499,900 7,375,456
-------------------------------------
Net Loss Per Share - - -
============================================
<PAGE>
Statements of Cash Flows
(Unaudited) Cumulative,
inception to Three months ended
March 31, March 31,
1999 1999 1998
US$ US$ US$
Operating Activities
Net loss for the period (29,392) (8,755) (4,601)
Adjustments to reconcile net loss
to net cash used in operating activities:
- - amortization 1,750 250 250
- - decrease in prepaid expenses - - 2,500
- - increase in accounts payable 3,802 436 1,851
----------------------------------
Net Cash Used in Operating Activities
Investing Activities (23,840) (8,069) -
--------------------------------
Incorporation costs (5,000) - -
Acquisition of long-term investments (100,000) (100,000) -
---------------------------------
Total Cash Flow from Investing Activities (105,000) (100,000) -
---------------------------------
Financing Activities
Proceeds from sale of common shares 125,000 120,000 -
Loans from related party 4,386 (11,614) -
----------------------------------
Total Cash Flow from Financing Activities 129,386 108,386 -
--------------------------------
Increase in Cash During the Period 546 317 -
Cash at the Beginning of the Period - 229 -
-------------------------------
Cash at the End of the Period 546 546 -
============================
Non-Cash Activity not included in
Cash Flows Acquisition of long-term
investment for common shares 175 - -
============================
- -
<PAGE>
Statement of Shareholders' Equity
Incorporation, July 25, 1997, to March 31, 1999
(Unaudited)
Total
Number of Par Contributed Shareholders'
Shares value Surplus Deficit Equity
US$ US$ US$ US$
Issuance of shares on
July 25, 1997 7,200,000 720 4,280 - 5,000
Issuance of shares on
August 25, 1997 on
acquisition of Century
International Ventures
Inc. Series C common
shares 175,425 18 157 - 175
Net loss, incorporation,
July 27, 1997, to
December 31, 1997 - - - (9,754) (9,754)
--------------------------------------------------
Balance, December 31,
1997 7,375,425 738 4,437 (9,754) (4,579)
Net loss, year ended
December 31, 1998 - - - (10,883) (10,883)
----------------------------------------------------
Balance, December 31,
1998 7,375,425 738 4,437 (20,637) (15,462)
Issuance of shares
on March 17, 1999 800,000 80 19,920 - 20,000
Issuance of shares
on March 31, 1999 400,000 40 99,960 - 100,000
Net loss, three months ended
March 31, 1999 (8,755) (8,755)
---------------------------------------------------
Balance, March 31, 1999 8,575,425 858 124,317 (29,392) 95,783
==================================================
<PAGE>
Notes to the Financial Statements
March 31, 1999
(Unaudited)
1. Basis of Presentation and Nature of Operations
The ability of the Company to continue as a going concern is dependent upon
its ability to raise substantial amounts of equity funds for use in
administrative and investment activities. There is no assurance that the
Company's investments will generate future cash flow for the Company.
The Company is developing an electronic video distribution system.
2. Significant Accounting Policies
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. The principal area requiring the use of
management estimates is the determination of the appropriate carrying values
for the Company's investments. Actual results could differ from those
estimates.
Investments - Investments in which the Company has significant influence,
generally the ability to appoint more than 20% of the board of directors, are
accounted for under the equity method, whereby the value of the investment is
adjusted for the Company's share of income or loss realized by the investee.
Investments in which the Company does not have significant influence are
recorded at the lower of cost and estimated market value. If the Company has
the ability to appoint a majority of the directors to the board of an
investee, that investee's financial statements will be consolidated into
those of the Company.
Translation of Foreign Currencies - Monetary assets and liabilities are
translated at the exchange rate in effect at the balance sheet date and
non-monetary assets and liabilities at the exchange rates in effect at the
time of acquisition or issue. Revenues and expenses are translated at the
rates in effect at the time of the transaction. Exchange gains or losses
arising on translation are included in net income or loss for the period.
Financial Instruments - The company has various financial instruments,
including cash, receivables and payables. The carrying values of these
financial instruments approximate their fair values.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
3. Long Term Investments
During the year ended December 31, 1997, the Company acquired all of the
series C common shares of Century International Ventures Inc. in exchange for
175,456 common shares of the Company valued at $175.
Subsequent to March 31, 1999, the Company agreed to acquire all of the
outstanding shares of eVideo U.S.A. Inc. in exchange for the issuance of
6,623,016 common shares of the Company. As additional consideration, the
Company must issue one and one-half shares to the vendor of eVideo U.S.A.
Inc. for each share issued, subsequent to the issuance of the shares
described in note 5, to raise additional equity capital of $3,900,000.
At March 31, 1999, the Company had loaned $100,000 to eVideo U.S.A. Inc.
4. Loans from Related Party
The loans from a related party are from a management company that employs the
Company's executive officers and are without interest and specific repayment
terms.
5. Share Capital
Subsequent to March 31, 1999, the Company issued the following shares for
cash, net of issue costs:
Number Price Contributed
of shares per share Par value surplus Total
US$ US$ US$ US$ US$
66,841 1.00 7 66,834 66,841
323,078 3.25 32 999,970 1,000,002
The Company also issued warrants that entitle the holder to purchase 307,693
common shares at $3.25 per share until May 25, 2000.
<PAGE>
SCHEDULE "B"
LIST OF ASSETS AND LIABILITIES OF EVIDEO USA, INC.
Assets
Rights under a Professional Services Agreement dated May 13, 1999 with Burnt
Sand Solutions Inc.
Liabilities
$100,000 owed to Asia Pacific Enterprises, Inc.
Commitments
Material Contracts
Agreement with Bennett and International under which Bennett has agreed to
designate USA under the Macrovision Agreement as the corporation to be entitled
to procure the License and to transfer all of its rights in and to the business
and technology described in the Business Plan to International and under which
International has agreed to transfer the rights in and to the business and
technology described in the Business Plan for the operation of that business and
the use of that technology in the United States of America to USA for the sole
consideration of a note payable to International in the amount of $200,000,
without interest, payable in conjunction with the Closing provided for in this
Agreement.
Professional Services Agreement dated May 13, 1999 with Burnt Sand Solutions
Inc.
<PAGE>
SCHEDULE "C"
LIST OF COMMITMENTS AND MATERIAL CONTRACTS
OF ROY B. BENNETT & ASSOCIATES LTD.
Commitments
Material Contracts
Agreement with USA under which it has agreed to designate USA under the
Macrovision Agreement as the corporation to be entitled to procure the License.
Agreement with International under which it has agreed to transfer all of its
rights in and to the business and technology described in the Business Plan to
International in exchange for the Preference Shares.
Agreements with all of its creditors and debt-holders to accept the Preference
Shares in full satisfaction of all of Bennett's liabilities.
MANAGEMENT AGREEMENT
THIS AGREEMENT effective as of the 21st day of June, 1999.
BETWEEN:
EVIDEO U.S.A. INC.
(hereinafter referred to as the "Company")
OF THE FIRST PART
AND:
ROY B. BENNETT & ASSOCIATES LTD.
(hereinafter referred to as the "Manager")
OF THE SECOND PART
RECITALS
WHEREAS the Company has requested the assistance of the Manager in providing
certain management services, as hereinafter described;
WHEREAS the Manager has agreed to provide such assistance and services to the
Company in accordance with the terms and conditions herein set forth;
NOW THEREFORE, in consideration of the foregoing recitals and the mutual
covenants set forth below, the parties hereto agree as follows:
1. DUTIES AND PERSONNEL
1.1 Duties. During the terms of this Agreement the Manager shall be responsible
for the duties contained in Schedule "A" attached hereto and incorporated herein
by this reference (the "Duties").
1.2 Personnel. During the currency of this Agreement, the Manager shall provide
the services of a President in the person of Roy B. Bennett, and a Project
Manager to be employed by the Manager.
1.3 Location of Company Headquarters. The parties hereto acknowledge that the
effective strategic direction of the Company and its subsidiaries requires that
the headquarters of the Company be in the City of Phoenix/Scottsdale, Arizona,
U.S.A.
<PAGE>
1.4 Implementing the Business Plan of the Company. The mandate of the Manager is
to build out the Business Plan of the Company, as described in a certain
document entitled "eVideo Business Plan - May 1999 - Confidential" (hereinafter
called the "Business Plan"), a copy of which has been delivered to each of the
parties hereto.
1.5 U.S.A. Residency. It is a fundamental condition of this Agreement, that the
key personnel of the Manager obtain USA residency, and the Manager undertakes to
obtain any necessary working visas as may be reasonably required in the
circumstances.
2. MANAGEMENT FEES, AND OTHER MATTERS
2.1 Management Fees. In consideration of the Manager providing the services
referred to herein, the Company agrees to pay the Manager an annual base
management fee of $144,000.00 U.S. dollars per annum for the services provided
by Roy B. Bennett and $36,000.00 U.S. dollars per annum for the services
provided by the Project Manager, payable in 12 equal monthly instalments on the
last day of each month, plus the incentive fees as set out below, subject to
increase from time to time as approved by the Board of Directors of the Company,
having regard to the market rates of management fee remuneration paid in the
U.S.A. for similar duties and responsibilities in the same and allied business
sectors.
2.2 Benefits. The Company shall provide, maintain and pay for:
(a) medical insurance for the key personnel of the Manager and their
immediate families in the form of a Company Medical Services Plan;
(b) such extended health and other benefits for the key personnel of the
Manager and their immediate families as are provided to senior
management employees of the Company, subject to the eligibility of
the such key personnel;
(c) a leased van, immediately, for the President's use, and 1 leased
compact car (both with purchase rights) for the Project Manager's
use when the parent corporation of the Company has secured
additional financing in the amount of $3,900,000 U.S. dollars;
(d) a health club membership; and
(e) reasonable moving and relocation expenses for the key personnel of the
Manager from Vancouver, B.C., to Scottsdale, Arizona.
<PAGE>
2.3 Incentive Fees. The Company may pay incentive fees (the "Incentive Fees" to
the Manager at any time, and from time to time, and for the realisation of any
of the Performance Objectives, as initially defined in Schedule "B" attached
hereto and incorporated hereinafter by this reference, and as amended from time
to time in writing by both parties. The amount of the Incentive Fees shall be
determined by the Board of Directors of the Company and shall be based on the
nature of the Performance Objectives and other significant corporate objectives
attained by the Manager.
2.4 Payment in Cash. All payments payable by the Company to the Manager,
including the salary, Incentive Fees, and reimbursement of expenses under
Section 4, hereof, shall be payable in cash.
3. VACATION
3.1 Entitlement to Vacation. The Company acknowledges that the Manager's key
personnel shall be entitled to annual vacation of three (3) weeks. The Manager
shall use its best efforts to ensure that such vacation is arranged with the
Company in advance such that it does not unduly affect the operations of the
Company.
3.2 Increase in Vacation. The period set out in Section 3.1 above may be
increased from time to time as mutually agreed to by the Manager and the Board
of Directors of the Company.
4. REIMBURSEMENT OF EXPENSES
4.1 Reimbursement of Expenses. The Manager shall be reimbursed for all
reasonable expenses incurred by the Manager in or about the execution of the
Duties contained herein, including, without limitation to the generality of the
foregoing, all reasonable travel and promotional expenses payable or incurred by
the Manager in connection with the Duties under this Agreement. All payments and
reimbursements shall be made within five (5) days of submission by the Manager
of vouchers, bills or receipts for such expenses.
5. CONFIDENTIAL INFORMATION
5.1 Confidential Information. The Manager shall not, either during the term of
this Agreement or at any time thereafter, without specific consent in writing,
disclose or reveal in any manner whatsoever to any other person, firm or
corporation, nor will it use, directly or indirectly, for any purpose other than
the purposes of the Company, the private affairs of the Company or any
confidential information which it may acquire during the term of this Agreement
with relation to the business and affairs of the directors and shareholders of
the Company, unless the Manager is ordered to do so by a court of competent
jurisdiction or unless required by any statutory authority.
5.2 Provisions Survive Termination. The provisions of this section shall
survive the termination of this Agreement.
6. TERM
6.1 Term. Subject to the termination provisions contained hereunder, this
Agreement shall remain in effect for a period of two (2) years from June 21,
1999.
<PAGE>
7. TERMINATION
7.1 Termination by Company. The Company may terminate this agreement at any time
for just cause.
7.2 Death. In the event of the death of the key employee of the Manager, Roy B.
Bennett, during the term of this Agreement, this Agreement shall be terminated
as of the date of such death.
7.3 Disability. In the event that the key employee of the Manager, Roy B.
Bennett, will during the term of this Agreement by reason of illness or mental
or physical disability or incapacity be prevented from or incapable of
performing the Duties hereunder, then the Manager shall be entitled to receive
the remuneration provided for herein at the rate specified hereinbefore for the
period during which such illness, disability or incapacity will continue, but
not exceeding three (3) successive months. If such illness, disability or
incapacity continues or will continue for a period longer than three (3) but
less than six (6) successive months, the Manager will not be entitled to receive
the remuneration provided for herein during such period. If such illness,
disability or incapacity continues or will continue for a period longer than six
(6) successive months, then this Agreement may, at the option of the Company,
forthwith be terminated.
8. RIGHTS AND OBLIGATIONS UPON TERMINATION
8.1 Rights and Obligations. Upon termination of this Agreement, the Manager
shall deliver up to the Company all documents, papers, plans, materials and
other property of or relating to the affairs of the Company.
9. NOTICES AND REQUESTS
9.1 Notices and Requests. All notices and requests in connection with this
Agreement shall be deemed given as of the day they are received either by
messenger, delivery service, or mailed by registered or certified mail with
postage prepaid and return receipt requested and addressed as follows:
(a) if to the Company:
502 East John Street,
Carson City, Nevada, 89706
U.S.A. Attention Adrian Rollke
(b) If to the Manager:
2757 Chelsea Court,
West Vancouver, British Columbia,
Canada, V7S 3E9 Attention Roy B. Bennett
or to such other address as the party to receive notice or request so designates
by written notice to the other.
<PAGE>
10. INDEPENDENT PARTIES
10.1 Independent Parties. This Agreement is intended solely as a management
services agreement and no partnership, agency, joint venture, distributorship or
other form of agreement is intended.
11. AGREEMENT VOLUNTARY AND EQUITABLE
11.1 Agreement Voluntary. The parties acknowledge and declare that in executing
this Agreement they are each relying wholly on their own judgement and knowledge
and have not been influenced to any extent whatsoever by any representations or
statements made by or on behalf of the other party regarding any matters dealt
with herein or incidental thereto.
11.2 Agreement Equitable. The parties further acknowledge and declare that they
each have carefully considered and understand the provisions contained herein,
including, but without limiting the generality of the foregoing, the Manager's
rights upon termination and the restrictions on the Manager after termination
and agree that the said provisions are mutually fair and equitable, and that
they executed this Agreement voluntarily and of their own free will.
12. CONTRACT NON-ASSIGNABLE; INUREMENT
12.1 Contract Non-Assignable. This Agreement and all other rights, benefits and
privileges contained herein may not be assigned by the Manager other than to a
wholly-owned subsidiary of the Manager.
12.2 Inurement. The rights, benefits and privileges contained herein shall inure
to the benefit of and be binding upon the respective parties hereto, their
heirs, executors, administrators and successors.
13. ARBITRATION: In the event of any dispute between the parties in respect of
the interpretation of this Agreement, or any matter to be agreed on, such
dispute shall be determined by a single arbitrator appointed and acting pursuant
to the Commercial Arbitration Act (British Columbia) and the decision of the
arbitrator shall be final and binding on the parties.
14. ENTIRE AGREEMENT
14.1 Entire Agreement. This Agreement represents the entire Agreement between
the parties and supersedes any and all prior agreements and understandings,
whether written or oral, between the parties. The Manager acknowledges that it
was not induced to enter into this Agreement by any representation, warranty,
promise or other statement, except as contained herein.
14.2 Previous Agreements Cancelled. Save and except for the express provisions
of this Agreement, any and all previous agreements, written or oral, between the
parties hereto or on their behalf relating to the services of the Manager for
the Company are hereby terminated and cancelled and each of the parties hereby
releases and further discharges the other of and from all manner of actions,
causes of action, claims and demands whatsoever under or in respect of any such
Agreement.
<PAGE>
15. WAIVER
15.1 Waiver. No consent or waiver, express or implied, by either party to or of
any breach or default by the other party in the performance by the other of its
obligations herein shall be deemed or construed to be a consent or waiver to or
of any breach or default of the same or any other obligation of such party.
Failure on the part of any party to complain of any act or failure to act, or to
declare either party in default irrespective of how long such failure continues,
shall not constitute a waiver by such party of its rights herein or of the right
to then or subsequently declare a default.
16. SEVERABILITY
16.1 Severability. If any provision contained herein is determined to be void or
unenforceable in whole or in part, it is to that extent deemed omitted. The
remaining provisions shall not be affected in any way.
17. AMENDMENT
17.1 Amendment. This Agreement shall not be amended or otherwise modified except
by a written notice of even date herewith or subsequent hereto signed by both
parties.
18. HEADINGS
18.1 Headings. The headings of the sections and subsections herein are for
convenience only and shall not control or affect the meaning or construction of
any provisions of this Agreement.
19. GOVERNING LAW
19.1 Governing Law. This Agreement shall be construed under and governed by the
laws of the Province of British Columbia and the laws of Canada applicable
therein.
20. EXECUTION
21.1 Execution in Several Counterparts. This Agreement may be executed by
facsimile and in several counterparts, each of which shall be deemed to be an
original and all of which shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
21st day of June, 1999.
EVIDEO U.S.A. INC. ROY B. BENNETT & ASSOCIATES LTD.
Per: /s/ R. Bennett Per: /s/ R. Bennett
Authorized Signatory Authorized Signatory
<PAGE>
SCHEDULE "A"
MANAGER'S DUTIES
1. To create value for the Company's shareholders by establishing the business
for the Company pursuant to the Business Plan.
2. Roy B. Bennett, a key employee of the Manager shall be appointed by the
Company as the full time president, a director on the Board of Directors of the
Company and each of the Company's subsidiaries, and the Manager shall
faithfully, honestly and diligently serve the Company and each of the Company's
subsidiaries in these capacities.
3. Reporting by the Manager: The Manager will provide to the Directors of the
Company such information concerning the Company's business and activities as the
Directors may reasonably require.
4. Subject to direction by the Board of Directors of the Company the Manager
shall be responsible for leading in the strategic management and direction of
the Company and each of the Company's subsidiaries and for the supervision and
delegation of such duties and responsibilities as the Company deems appropriate
to other officers and the employees of the Company and its subsidiaries, and for
the implementation of the Business Plan; including
(a) establish, set-up, manage and operate the Company's offices in Arizona;
(b) build out the Company's business as described in the Business Plan;
(c) maintain key communications with Asia Pacific Enterprises Inc. to manage the
public markets and the marketing of the WEB site;
(d) hire and manage the personnel of the Company;
(e) design, negotiate, purchase and set up and operate the File Server;
(f) establish a MPEGII mastering facility as required;
(g) organize all the communications systems including inter-office, T1-T3 lines
to distributors, Web server, on-line communications;
(h) establish and manage programming systems to support the EVIDEO data base;
(I) develop and manage the Web based ordering system and internet service
provider;
(j) develop and manage video movie and game sources for distribution;
(k) establish and maintain accounting and control systems;
(l) establish, complete and maintain all licensing requirements;
(m) develop and manage joint ventures and strategic alliances;
(n) provide timely news release information for marketing;
(o) engage and manage public relations consultants;
(p) establish a legal department and Washington liaison;
(q) maintain a marketing presence using media and trade shows;
(r) provide other management services as required to make EVIDEO
commercially successful;
(s) assist in the search for a new Chief Executive Officer.
<PAGE>
SCHEDULE "B"
PERFORMANCE OBJECTIVES
(1) The Manager shall be entitled to receive an Incentive Fee of US$25,000.00 on
the successful demonstration of a working set top box by August 21, 1999;
(2) The Manager shall be entitled to receive a further Incentive Fee of an
additional US$50,000.00 on the Company achieving gross revenues of at least
US$1,000,000.00.
Macrovision Corporation
1341 Orleans Drive
Sunnyvale, CA 94089
(408) 743-8600
Fax: (408) 743-8610
www.macrovision.com
Confidential to Roy B. Bennett & Associates and Macrovision Corporation
September 14, 1998 via Federal Express
Copy to FAX to 604 925 9367 (7 pages)
Tel: 604 922 9367
Mr. Roy B. Bennett
Roy B. Bennett & Associates
2757 Chelsea Court
W. Vancouver, British Columbia
CANADA V7S 3E9
Dear Roy:
Following up on our discussion earlier today, I am pleased to present to you
this updated letter agreement. This letter supersedes my earlier letter to you
dated September 13, 1998.
We present below the key business terms related to the grant by Macrovision of
an option to Roy B. Bennett & Associates (or a corporation designated by Roy B.
Bennett and Associates which is acceptable to Macrovision as a corporation duly
organized and in good standing and which has the appropriate corporate authority
to receive such a license - referred to hereinafter as "RBBA") to procure an
exclusive license to use Macrovision's analog copy protection technology in the
US for RBBA's E-video less than real time programming service.
1. Option Grant
Macrovision hereby grants to RBBA the exclusive option (the "Option") for the
fifteen month period beginning October 1, 1998 and ending December 31, 1999 (the
"Option Period"), and subject to the occurrence of one or more events described
in paragraph 3 below (the "Trigger Events"), to procure an exclusive,
non-transferable license, without the right to sub-license (the "License"), to
apply Macrovision's analog copy protection technology (the "Technology") in the
US (the "Territory") to RBBA's E-Video transmissions in the "less than real
time" domain (the "Field of Use"). In this context, "less than real time" means
any application in which video programs are transmitted to an end user in
significantly less time than the program's normal running time, and such
programs are recorded as received on a suitable medium, for later viewing by the
end user.
<PAGE>
The Option shall not be exercisable unless one or more of the Trigger Events has
first occurred during the Option Period. RBBA acknowledges that there is no
assurance that one or more Trigger Events will occur during the Option Period.
The Option shall expire if it has not been exercised by notice to Macrovision in
writing during the Option Period.
2. Option Fee
RBBA will pay to Macrovision, upon the execution of this Letter Agreement by
Macrovision and RBBA, the initial sum of US $25,000 and shall pay an additional
sum of $15,000 on or before each of the following dates (individually, an
"Option Fee"; collectively the "Option Fees"):
1. November 30, 1998
2. February 28, 1999
3. May 31, 1999
4. August 31, 1999
5. November 30, 1999
Each Option Fee shall be nonrefundable when paid. This letter agreement shall
terminate immediately and automatically if any Option Fee is not paid within 5
business days of the due date listed above. All Option Fees which are due
subsequent to the payment of the Initial License Fee (as described below) shall
be waived.
3. Trigger Events
Each of the following events qualifies as a "Trigger Event" if, in Macrovision's
sole discretion, any of them are deemed to have occurred and if Macrovision's
legal counsel is able to issue a legal opinion which states that the Technology
is unencumbered and available to be licensed to RBBA as contemplated herein:
All of the EMC3 corporate entities (including but not limited to EMC2
International Holding N.V., EMC3 International Holding B.V., Entertainment Made
Convenient (Emc3) U.S.A. Inc., and Entertainment Made Convenient (Emc3)) with
potential claims upon Macrovision for use of Macrovision's analog copy
protection technology in the Field of Use in the US are:
i. declared bankrupt,
ii. make a formal assignment for the benefit of creditors,
iii. formally go into liquidation,
iv. are wound up, or
v. have receivers or trustees appointed to oversee all their
assets, and such petition, assignment or appointment is not
dismissed or discharged within 60 days of such event.
RBBA acknowledges that Macrovision will not take any action against or in
respect of any of the aforementioned corporate entities for the purpose of
bringing about such financial status.
<PAGE>
4. Initial License Fee
Upon RBBA's exercise of the Option, RBBA will pay to Macrovision an initial
license fee of US$400,000.
5. Usage Royalties
RBBA will pay to Macrovision usage royalties for the application of the
Technology to E-video programming at the rate of 1% of the gross subscription
fees received from E-video customers; i.e., 1% of the gross revenues generated
by the E-video services. Royalties shall be payable in U.S. dollars monthly and
shall be accompanied by reports reasonably satisfactory to Macrovision which
support the calculation of the royalty payment.
6. Minimum Royalties
Beginning on the first anniversary of the exercise of the Option, and at each of
the next three anniversaries thereafter, RBBA shall pay to Macrovision a minimum
annual usage fee of US$250,000 as an advance against that year's 1% royalties on
total revenues from the E-video service. Each such US$250,000 minimum annual fee
shall be applicable to usage royalties incurred during the 12 months following
each payment; there shall be no carryover from one year to the next.
7. Minimum Gross Revenues
RBBA's exclusive rights under the license contemplated hereunder shall become
non-exclusive if a commercial launch of the E-video service has not occurred
within 18 months of RBBA's exercise of the Option or if the E-video service does
not generate in excess of US$250,000,000 in gross revenues from the US in the
fourth full year of operation following RBBA's exercise of the Option. For the
purposes of this Letter Agreement, "commercial launch" means the first month in
which usage royalties payable to Macrovision exceed US$1,000.00.
8. Ownership Interest in RBBA
For valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by RBBA, RBBA shall, within thirty days following RBBA's exercise
of the Option, grant Macrovision a 3% equity interest in its common stock.
9. Specification of Copy Protection Technology in Receiver/Decoders
RBBA agrees to specify that all E-video authorized receiver/recorders
incorporate the Technology, and to apply the Technology to all E-video program
transmissions. Each RBBA- authorized receiver/recorder manufacturer shall be
required to enter into a separate license agreement with Macrovision for the
E-video copy protection application. Such application based license will be
under terms and conditions specified by Macrovision, which currently include an
initial license fee of US$75,000, and royalty of US$1.00 per receiver/recorder
produced.
<PAGE>
10. Copy Protection Management Strategy
RBBA will design and implement a Copy Protection Management Strategy (CPMS) in
the E-video transaction processing, conditional access, and billing systems. A
customized version of the CPMS software architecture will be created by E-video
and Macrovision technical personnel for this purpose.
11. Term
The initial term of the License shall be five years from the date of exercise of
the Option. So long as RBBA has materially complied with all of the terms and
conditions of this Letter Agreement and any succeeding long form agreement, RBBA
shall have the additional option, by providing Macrovision with written notice
on or before the fifty-fourth month of this Letter Agreement (4.5 years) to
renew the License for an additional five year term (the "Renewal Term") on the
same terms and conditions as described above, for an additional US$350,000
license fee paid to Macrovision prior to the expiration of the initial License.
Such renewed License shall include all of the terms of the initial License,
except that the requirement for the payment of minimum annual usage royalties
shall increase to the sum of US$350,000 per year beginning on the first
anniversary of the Renewal Term and on each anniversary thereafter.
12. Additional Countries; Right of First Refusal
So long as RBBA has materially complied with all of the terms and conditions of
this Letter Agreement and any succeeding long form agreement, and subject to the
restrictions set out below, RBBA shall have the additional option to extend the
territory of the License (the "Expanded Territory License") to countries outside
the Territory by payment to Macrovision of an initial license fee for each such
country of US$1,000 per 1,000,000 population in each such country and the
execution of an Expanded Territory License applicable to such countries. Such
Expanded Territory License shall also include all of the terms of this Letter
Agreement (and any succeeding long form agreement), including but not limited to
the payment of minimum annual usage royalties of US$1,000 per 1,000,000
population per year beginning on the first anniversary of the term of each such
Expanded Territory License.
Notwithstanding the above, such Expanded Territory Licenses shall not be
applicable to Canada nor to any country in which Macrovision has, previous to
RBBA's exercise of such option, granted exclusive or nonexclusive rights to the
Technology to a third party; provided that if Macrovision receives a request
from a third party to procure the rights described herein in any country other
than the US, then Macrovision shall offer such License to RBBA on similar terms
and conditions to those which Macrovision is prepared to enter into with such
third party, and shall be free to enter into such license with such third party
if RBBA does not execute an Expanded Territory License addendum to this Letter
Agreement within thirty days of Macrovision's written notice to RBBA. In such
cases, the option terms described above in this Section 12 shall not be
applicable and RBBA shall either accept or decline such terms within sixty days
of receiving notice from Macrovision. Failure of RBBA to sign such an Expanded
Territory License within the said sixty days for such additional country or
countries shall be deemed to be a decision on part of RBBA to decline such
Expanded Territory License. RBBA and Macrovision agree to maintain an ongoing
dialogue related to an Expanded Territory License for Canada and upon
Macrovision's determination (such determination to be made in Macrovision's sole
discretion) that there are no third party claims with respect to the Technology
in Canada for the Field of Use, Macrovision shall make such a license available
to RBBA under the terms specified in this Letter Agreement in return for a one
time fee of $29,000 plus Usage Royalties as described in Paragraph 5 hereof.
<PAGE>
13. Improvements
Macrovision agrees to make available to RBBA during the term of this Letter
Agreement and any succeeding long form agreement, without charge, any
improvements to Macrovision's analog copy protection technology ("Improvements")
which relate to degrading VHS videocassette copies made from an analog video
signal to which such technology has been applied.
Other technologies developed by Macrovision prior to or during the term of this
Letter Agreement or any succeeding long form agreement, including but not
limited to digital watermarking, play control, disc authentication, and
digital-to-digital copy protection solutions ("New Technologies"), shall not be
considered Technology or Improvements hereunder. New Technologies may be made
available to RBBA under a separate agreement with terms and conditions to be
negotiated by the parties. RBBA acknowledges that Macrovision shall not be under
any obligation to license RBBA one or more New Technologies unless the parties
mutually agree upon fees, terms and conditions execute a separate agreement for
such purpose.
14. Confidentiality
Any and all information of a confidential and/or proprietary nature of either
party ("Confidential Information") as may be disclosed and exchanged between the
parties during the term of this Letter Agreement (and marked so as to indicate
its confidentiality) shall be kept strictly confidential by each of the parties.
Neither party shall disclose any Confidential Information of the other party to
any third party (except for its accounting and legal advisors) without the prior
written consent of the party disclosing such Confidential Information (the
"Disclosing Party").
The foregoing shall not apply to information disclosed by a Disclosing Party
which:
a) is now publicly available, or becomes publicly available, through no
fault of the other party;
b) can be shown by written evidence to have been in the possession of the
other party prior to the time of disclosure by the Disclosing Party;
c) becomes available to the other party, other than by breach of
confidentiality owed to the Disclosing Party;
d) is required by law or ordered by competent government or court.
<PAGE>
15. Progress Reports
Subsequent to RBBA's exercise of the Option, RBBA shall provide to Macrovision
monthly status reports related to the design, development, and deployment of the
E-video service.
16. Long Form Agreement
Upon execution of this Letter Agreement by both parties, Macrovision and RBBA
shall use their respective reasonable efforts to prepare and execute, on or
before October 31, 1998, a long-form agreement and related documentation which
incorporates the terms herein and incorporates such other terms and conditions
as RBBA and Macrovision may deem reasonable or necessary to accomplish the
agreement set forth herein. Notwithstanding the foregoing, this Letter Agreement
when executed by Macrovision and RBBA shall represent a binding agreement
between the parties which reflects the entire agreement as to the subject matter
hereof and the essential terms related to the license described herein, until
such time as a long form agreement which supercedes this Letter Agreement has
been executed by the parties hereto.
17. Attorney's Fees
In any dispute, litigation, or arbitration between the parties arising out of or
related to this Letter Agreement, the prevailing party therein shall be entitled
to have its attorneys' fees, reasonable expenses, related litigation cost and
costs of suit (if any) paid by the non-prevailing party.
18. Inspection of Records
Macrovision will have the right during the term of this Agreement and for one
(1) year thereafter to have an independent certified public accounting firm
review or audit RBBA's records for the purpose of certifying compliance with
this Letter Agreement or any succeeding long form agreement. All audits will be
at Macrovision's expense and conducted during regular business hours, and begun
upon at least one (1) week's prior notice. If the audit reveals that any
payments due to Macrovision have been understated by more than five percent
(5%), then RBBA will reimburse Macrovision for the cot of the audit. Any
discrepancy in the amounts paid will be corrected within ten (10) days of the
written notice of the official results of the audit being delivered by the
auditor.
<PAGE>
19. Termination for Breach
In the event of a material breach by either party in the performance of its
duties, obligations or undertakings under this Letter Agreement, the other party
will have the right to give written notice to the breaching party advising such
party of the specific breach involved. If the breaching party will not have
remedied such breach within thirty (30) days after such notice, the other party
will have the right, in addition to any other rights and remedies it may have,
to terminate this Letter Agreement immediately upon written notice to the
defaulting party.
20. Governing Law
This Agreement will be governed by and interpreted in accordance with the laws
of the State of California, as such laws are applied to agreements between
California residents entered into and to be wholly performed within California.
21. Acceptance
The offer represented herein shall remain effective through September 30, 1998.
It shall expire if a copy of this Letter Agreement signed on behalf of RBBA and
payment of the Option Fee is not received by Macrovision on or before September
30, 1998.
Roy, if the above terms are acceptable to RBBA, please confirm this by having
the appropriate RBBA official sign in the space provided below and return this
Letter Agreement to me via FAX. We can then task our respective legal
representatives with drafting the long form agreement as described above. Don't
hesitate to call me if you would like to discuss any aspect of this letter
Agreement in more detail before proceeding.
Best regards,
/s/ Mark S. Belkinsky
Mark S. Belinsky
Senior Vice President
cc: John Ryan, Bill Krepick
Vic Viegas, Chris Wilcox,
Gerry Brill
Accepted and Agreed by RBBA
/s/ R. Bennett 16 SEPT. 1998
- ------------------------ ----------------
By (Signature) Date
R. BENNETT PRESIDENT
Printed Name Title
<PAGE>
Macrovision Corporation
1341 Orleans Drive
Sunnyvale, CA 94089
(408) 743-8600
Fax: (408) 743-8610
www.macrovision.com
BY FAX - 604-925-9367 - 1 PAGE
June 9, 1999
Mr. Roy B. Bennett
Roy B. Bennett & Associates, Ltd.
2757 Chelsea Court
West Vancouver, BC V7S 3E9
CANADA
Dear Roy:
Re: Less-Than-Real-Time Option Agreement
Thank you for your fax to Bill Krepick dated June 4, 1999. Based on your
representations and the materials you included with that fax, we are happy to
agree to the Nevada company that you have recently incorporated, E-VIDEO U.S.A.,
INC., being the designated option holder in accordance with the terms of our
letter agreement.
Best regards,
/s/ Christopher Wilcox
Christopher J. Wilcox,
Director, Contracts & Licensing
[email protected]
cc: W. Krepick
J. Ryan
V. Viegas
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