SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 31, 1999
AUTOEYE INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-26673 98-0207081
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
#6-2150 Bowen Road
Nanaimo, British Columbia
Canada V9F 1H7
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (250) 758-0665
Suite 1650
Waterfront Centre, 200 Burrard Street
Vancouver, British Columbia
Canada V6C 3L6
(Former name or former address if changed since last report.)
<PAGE>
Item 1. Changes in Control of Registrant
On January 31, 2000 the Company acquire all of the issued and outstanding
shares of Forest Industry Online, Inc. in exchange for 10,000,000 shares of the
Company's common stock.
Forest Industry was incorporated on January 9, 1997. Forest Industry's
principal business activities include designing web sites and operating and
maintaining a computer internet web site for companies associated with the
forest industry.
Forest Industry has a website at forestindustry.com, which is fully
operational.
As of January 25, 1999 Forest Industry employed thirteen people on a
full-time basis.
Following the acquisition of Forest Industry Andrew Hromyk resigned as the
Company's president. The Company's new officers and directors are:
Name Position
Joe Perraton President and a Director
Andrew Hromyk Secretary and a Director
Marc White Director
As a result of the acquisition of Forest Industry the following persons
are the principal shareholders of the Company's common stock.
Shares Percentage
Name Owned Ownership
Joe Perraton 2,400,000 17%
Lara Perraton 700,000 5%
Teaco Properties Ltd. 6,900,000 (1) 49%
Bona Vista West Ltd. 4,137,240 27%
(1) Mark White is a controlling person of Teaco Properties Ltd. and may be
considered the beneficial owner of these shares.
Item 2. Acquisition or Disposition of Assets
See Item 1.
<PAGE>
Item 5. Other Events
Concurrent with the acquisition of Forest Industry the Company sold 750
shares of its Series A Convertible Preferred stock at a price of $1,000 per
share to three investors. Each Series A Preferred Share is convertible into
shares of the Company's common stock on or after March 16, 2000. The number of
shares of the Company's common stock which will be issued upon the conversion of
each Series A Preferred share will be determined by dividing $1,000 by 75% of
the average closing bid of the Company's common stock for the ten trading days
prior to conversion. Notwithstanding the above, in no event will (i) less than
250 shares or (ii) more than 5,000 shares of common stock be issued upon the
conversion of each Series A Preferred share.
Item 7. Financial Statements, Pro Forma Financial Information
(a) Financial Statements of Business Acquired
(b) Pro Forma Financial Information
(c) Exhibits
2 Share Exchange Agreement
4 Certificate of Designation setting forth rights and preferences of
Series A Convertible Preferred Stock
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 15, 2000
AUTOEYE INC.
By: /s/ Andrew Hromyk
Andrew Hromyk, Secretary
<PAGE>
Forest Industry Online Inc.
Financial Statements
July 31, 1999 and 1998
(In U.S. $)
Page
o Auditors' Report 1
o Balance Sheet 2
o Statement of Operations and Deficit 3
o Statement of Cash Flows 4
o Statement of Stockholders' Deficit 5
o Notes to the Financial Statements 6-10
1999 1998
$ $
Revenues 300,362 128,685
Expenses 300,494 203,884
Net (Loss) (541) (65,667)
<PAGE>
Auditors' Report
To the Shareholders of:
FOREST INDUSTRY ONLINE INC.
We have audited the Balance Sheets of Forest Industry Online Inc. as at
July 31, 1999 and 1998 and the Statements of Operations and Deficit, Cash Flows
and Shareholders' Deficiency for the years then ended. 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. 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at July 31, 1999 and 1998 and
the results of its operations and the changes in its cash flows for the years
then ended in accordance with generally accepted accounting principles in
Canada, which except as disclosed in Note 16 to the financial statements, also
conform in all material respects with accounting principles generally accepted
in the United States.
Chartered Accountants
Vancouver, B.C., Canada
November 05, 1999
<PAGE>
FOREST INDUSTRY ONLINE INC.
Balance Sheet
AS AT JULY 31, 1999 AND 1998
- --------------------------------------------------------------------------
1999 1998
$ $
ASSETS
CURRENT
Cash 2,819 2,789
Accounts Receivable 64,657 23,498
Note Receivable - 14,406
Prepaid Expenses 1,795 414
Due from Affiliated Company (Note 3) 166 -
---------------------
69,437 41,107
Capital (Note 4) 31,031 11,785
---------------------
100,468 52,892
LIABILITIES
CURRENT
Operating Line of Credit (Note 5) 13,278 -
Accounts Payable and Accrued Liabilities 39,265 34,198
Unearned Revenues 52,281 23,162
Current Portion of Long Term Debt 22,465 -
------------------------
127,289 57,360
Due to Parent Company (Note 6) 50,341 123,055
Due to Shareholders (Note 7) 17,672 -
Long Term Debt (Note 8) 33,230 -
------------------------
228,532 180,415
SHAREHOLDERS' DEFICIENCY
Share Capital (Note 9) 1 1
Deficit (128,065) (127,524)
--------------------------
(128,064) (127,523)
--------------------------
100,468 52,892
========= =======
Approved on behalf of the Board of the Directors:
"Marc White", Director
"Joe Perraton", Director
<PAGE>
FOREST INDUSTRY ONLINE INC.
Statement of Operations and Deficit FOR THE YEARS ENDED JULY 31, 1999 AND
1998
- --------------------------------------------------------------------------
1999 1998
$ $
REVENUES 300,362 128,685
------- -------
EXPENSES
Advertising and Promotion 2,282 3,164
Amortization 7,763 3,036
Automobile 540 4,055
Bad Debts 7,782 3,155
Bank Charges and Interest 14,534 12,655
Consulting Fees 487 1,898
Insurance, Licenses and Dues 1,827 2,127
Internet and Connecting Fees 8,034 12,869
Office Supplies 11,403 10,200
Printing 11,167 -
Professional Fees 17,592 12,657
Rent, Property Taxes and Utilities 10,150 6,147
Repair and Maintenance 2,222 442
Salaries and Benefits 172,339 101,255
Telephone 13,664 15,610
Trade Shows 7,985 3,513
Travel and Lodging 10,723 11,101
------ ------
300,494 203,884
(Loss) Before Other Item (132) (75,199)
Foreign Exchange Gain (Loss) (409) 9,532
----- -----
NET (LOSS) FOR THE YEAR (541) (65,667)
Deficit, Beginning of the Year (127,524) (61,857)
DEFICIT, END OF THE YEAR (128,065) (127,524)
========= =========
<PAGE>
FOREST INDUSTRY ONLINE INC.
Statement of Cash Flows
FOR THE YEARS ENDED JULY 31, 1999 AND 1998
- --------------------------------------------------------------------------
1999 1998
$ $
CASH WAS PROVIDED FROM,
UTILIZED (FOR):
OPERATING ACTIVITIES:
Net (Loss) for the Year (541) (65,667)
Non-Cash Items:
Amortization 7,763 3,036
Change in Non-Cash Working Capital
Accounts (Note 13) 6,052 15,722
----- ------
13,274 (46,909)
FINANCING ACTIVITIES
Bank Loan (net of repayments) 55,695 -
Advances (to) Affiliated Company (166) -
Advances from (to) Parent Company (72,714) 47,406
Advances from (to) Shareholders 17,672 (1,759)
------ -------
487 45,647
INVESTING ACTIVITY
Acquisition of Capital Assets (27,009) (4,120)
-------- -------
DECREASE IN CASH (13,248) (5,382)
Cash, Beginning of the Year 2,789 8,171
---------- -----
CASH (BANK INDEBTEDNESS),
END OF THE YEAR (10,459) 2,789
======== =====
Cash (Bank Indebtedness) comprised of:
Cash 2,819 2,789
Operating Line of Credit (13,278) -
-------- ---------
(10,459) 2,789
======== =====
<PAGE>
FOREST INDUSTRY ONLINE INC.
Statement of Stockholders' Deficit
FROM JANUARY 09, 1997 (INCEPTION) TO JULY 31, 1999
- --------------------------------------------------------------------------------
Common Shares Deficit
Shares Amount Accumulated Total
# $ $ $
---------------------------------------
Issuance of Shares for Cash
in January 1997 100 1 - 1
Net (Loss) from Inception to
July 31, 1997 - - (61,857) (61,857)
- ------------------------------------------------------------------------------
Balance, July 31, 1997 100 1 (61,857) (61,856)
Net (Loss) for the Year Ended
July 31, 1998 - - (65,667) (65,667)
- ------------------------------------------------------------------------------
Balance, July 31, 1998 100 1 (127,524) (127,523)
Net (Loss) for the Year Ended
July 31, 1999 - - (541) (541)
- ------------------------------------------------------------------------------
Balance, July 31, 1999 100 1 (128,065) (128,064)
===============================================
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998
- --------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS
Forest Industry Online Inc. ("the Company") was incorporated on January
09, 1997 under the laws of the Province of British Columbia, Canada. The
Company's principal business activities include designing web sites and
operating and maintaining a computer internet web site for companies associated
with the forest industry.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a) Capital Assets and Amortization
Capital assets are recorded at cost. Amortization is provided for at the
following annual rates on the straightline basis:
Automotive Equipment - 20%
Computer Equipment - 20%
Furniture and Fixtures - 10%
Software - 100%
One half of the above rates are applied in the year of acquisition and no
amortization is taken in the year of disposal.
b) Revenue Recognition and Unearned Revenues
Revenues are recorded on the billed basis. Customers are billed on a
quarterly basis in advance for advertising fees and hosting revenue. Unearned
revenues relate to the period of the billing that has not yet transpired and
therefore not earned.
c) 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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998
- --------------------------------------------------------------------------
NOTE 3 - DUE FROM AFFILIATED COMPANY
Amounts due from an affiliated company are unsecured, are non-interest
bearing and have no formal terms of repayment.
1999 1998
$ $
Seaspray Log Scaling Ltd. 166 -
===================
NOTE 4 - CAPITAL ASSETS
Accumulated Net Book Value
Cost Amortization 1999 1998
$ $ $ $
Automotive Equipment 710 71 639 -
Computer Equipment 33,938 8,846 25,092 11,535
Furniture and Fixtures 3,013 175 2,838 100
Software 5,225 2,763 2,462 150
------------------------------------------------
42,886 11,855 31,031 11,785
=================================================
NOTE 5 - OPERATING LINE OF CREDIT
The Company has a $16,600 (CDN$25,000) revolving operating line of credit
with the Royal Bank of Canada. The line of credit is payable on demand, bears
interest at prime plus 1.75% per annum payable monthly, and is secured by a
general security agreement over all the assets of the Company, guarantees by the
corporate shareholder and personal guarantees of the principals of the Company.
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998
- --------------------------------------------------------------------------
NOTE 6 - DUE TO PARENT COMPANY
Amounts due to parent company, Teaco Properties Ltd. who owns 78% of the
Company, are unsecured and have no specific terms of repayment except for
$49,840 (1998 - $111,152) which bears interest at prime plus 5% per annum.
1999 1998
$ $
Teaco Properties Ltd. 50,341 123,055
====== =======
NOTE 7 - DUE TO SHAREHOLDERS
Amounts due to shareholders are non-interest bearing, unsecured, and have
no specific terms of repayment.
1999 1998
$ $
17,672 -
====== ==========
NOTE 8 - LONG TERM DEBT
1999 1998
$ $
Demand Bank Loan, Royal Bank 55,695 -
The demand loan is repayable in monthly
instalments of $1,992 including interest at
prime plus 2% per annum and is secured by a
general security agreement over all the
assets of the Company, guarantees by the
corporate shareholder and personal guarantees
of the principals of the Company.
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998
- --------------------------------------------------------------------------
55,695 -
Less: Current Portion (22,465) -
-------- ---------
33,230 -
========== ===========
The estimated principal repayments over the next three years are as
follows:
Year $
2000 22,465
2001 23,185
2002 10,045
------
55,695
NOTE 9 - SHARE CAPITAL
Authorized:
10,000 Class "A" voting common shares with no par value
Issued: 1999 1998
$ $
100 Class "A" voting common shares 1 1
===== =====
The shares were issued on January 09, 1997 for cash proceeds of $0.01
per share.
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998
- --------------------------------------------------------------------------
NOTE 10 - INCOME TAXES
The Company has non-capital losses available for carry-forward totalling
$129,921. These losses may be carried forward to be applied against future
income for Canadian tax purposes. The losses expire as follows:
Year $
2004 56,828
2005 72,031
2006 1,062
---------
129,921
No future benefit for these losses has been recognized in these financial
statements.
NOTE 11 - COMMITMENTS
A) The Company has entered into an agreement to lease office premise to
March 31, 2000. The monthly lease payment, excluding operating costs, is
$1,007.
B) The Company has entered into an agreement to lease a vehicle to November
30, 1999. The monthly lease payment is $213 with an option to purchase
the vehicle at the end of the lease for $11,950. The Company does not
plan to exercise the option to purchase the vehicle when the lease
expires.
C) The Company has entered into an agreement to lease an internet
telecommunication line to December 31, 2002. The monthly lease payment
is $863.
NOTE 12 - RELATED PARTY TRANSACTIONS
In addition to those transactions disclosed elsewhere in these financial
statements, the Company had the following transactions with related parties:
1999 1998
$ $
Salaries paid to shareholders of the Company for
Management administration, sales, supervision,
and product development services 49,410 25,325
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998
- --------------------------------------------------------------------------
1999 1998
$ $
Interest paid to the parent company for funds
advanced to the Company. 9,905 11,031
Professional fees paid to the parent company
for accounting services provided. 12,220 8,275
NOTE 13 - CHANGE IN NON-CASH WORKING CAPITAL ACCOUNTS
1999 1998
$ $
Accounts Receivable (41,159) (12,870)
Note Receivable 14,406 (14,406)
Prepaid Expenses (1,381) (414)
Accounts Payable and Accrued Liabilities 5,067 20,250
Unearned Revenues 29,119 23,162
6,052 15,722
NOTE 14 - FINANCIAL INSTRUMENTS
Financial instruments include cash, accounts receivable, due from
affiliated company, operating line of credit, accounts payable and accrued
liabilities, long term debt, amounts due to parent company and shareholders. The
estimated fair value of such financial instruments approximates their carrying
value.
NOTE 15 - UNCERTAINTY DUE TO YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on,or after
January 01, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
<PAGE>
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other parties, will be fully resolved.
The Company's software programs are Year 2000 compliant. In addition, as a
safety measure, the Company backs up all its computer data on a daily basis.
NOTE 16 - UNITED STATES ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada. They do not differ
materially from accounting principles generally accepted in the United States.
<PAGE>
FOREST INDUSTRY ONLINE INC.
INTERIM FINANCIAL STATEMENTS
PREPARED BY MANAGEMENT (unaudited)
FOR THE THREE MONTHS ENDED OCTOBER 31, 1999
- Balance Sheet
- Statement of Operations and Deficit
- Statement of Cash Flows
- Notes to the Financial Statements
<PAGE>
FOREST INDUSTRY ONLINE INC.
INTERIM BALANCE SHEET (unaudited)
AS AT OCTOBER 31, 1999
- ------------------------------------------------------------------------------
Oct-31 Oct-31
1999 1998
($ U.S.) ($ U.S.)
ASSETS
CURRENT
Cash $ -- $ 2,762
Accounts Receivable 64,956 28,065
Prepaid Expenses 239 232
Due from Shareholders (Note 3) -- 20,027
Due from Affiliated Companies (Note 4) 531 --
-------------------
65,726 51,086
Capital Assets (Note 5) 38,021 16,544
-------------------------
$ 103,747 $ 67,630
=========================
LIABILITIES
CURRENT
Operating Line of Credit (Note 6) $ 11,915 $ --
Accounts Payable and Accrued Liabilities 40,625 42,584
Due to Shareholders (Note 3) 17,878 --
Unearned Revenue 59,166 27,349
Current portion of bank loan 23,327 --
--------------------------
152,911 69,933
Due to Parent Company (Note 7) 58,607 120,730
Long Term Debt (Note 8) 29,058 --
--------------------------
240,576 190,663
SHAREHOLDERS' EQUITY
Share Capital (Note 9) 1 1
Deficit (136,830) (123,034)
---------------------------
(136,829) (123,033)
$ 103,747 $ 67,630
=======================
<PAGE>
FOREST INDUSTRY ONLINE INC.
INTERIM STATEMENT OF INCOME AND DEFICIT (unaudited)
FOR THE THREE MONTHS ENDED OCTOBER 31, 1999
- ------------------------------------------------------------------------------
Three Three
Months Months
Ended Ended
Oct-31 Oct-31
1999 1998
($ U.S.) ($ U.S.)
REVENUE $ 86,363 $ 59,519
--------------------
EXPENSES
Advertising and promotion 857 1,361
Amortization 2,726 1,084
Automobile 327 (484)
Bad Debts 2,033 247
Bank Charges and Interest 3,439 3,916
Consulting Fees 203 98
Insurance, Licenses and Dues 960 1,352
Internet and Connecting Fees 2,874 3,222
Office Supplies 3,239 2,446
Printing 1,454 --
Professional Fees 6,570 3,063
Rent, Property Taxes and Utilities 3,877 1,472
Repairs and maintenance 217 919
Salaries and benefits 50,440 29,205
Telephone 4,388 3,406
Trade Shows 3,286 2,750
Travel and lodging 4,316 860
--------------------
91,206 54,917
NET INCOME (LOSS) BEFORE OTHER ITEMS (4,843) 4,602
Foreign Exchange Gain (Loss) (3,922) (112)
NET INCOME (LOSS) FOR THE PERIOD (8,765) 4,490
Deficit, beginning of period (128,065) (127,524)
----------------------
DEFICIT, END OF PERIOD $ (136,830) $ (123,034)
=======================
<PAGE>
FOREST INDUSTRY ONLINE INC.
INTERIM STATEMENT OF CASH FLOW (unaudited)
FOR THE THREE MONTHS ENDED OCTOBER 31, 1999
- ------------------------------------------------------------------------------
Three Months Three Months
Ended Ended
Oct-31, 1999 Oct-31, 1998
($ U.S. ($ U.S.)
CASH WAS PROVIDED FROM, UTILIZED (FOR):
OPERATING ACTIVITIES:
Net Income (Loss) for the Period $ (8,765) $ 4,490
Non-Cash Item:
Amortization 2,726 1,084
Change in Non-Cash Working Capital
Accounts (Note 13) 9,502 8,188
-------------------------
3,463 13,762
FINANCING ACTIVITIES
Bank Loan (net of repayments) (3,310) --
Note Receivable (net of repayments) -- (5,621)
Advances from (to) Affiliated Company (365) --
Advances from (to) Parent Company 8,266 (2,325)
Advances from (to) Shareholders 206 --
-----------------------
4,797 (7,946)
INVESTING ACTIVITY
Acquisition of Capital Assets (9,716) (5,843)
--------------------------
DECREASE IN CASH (1,456) (27)
Cash (Bank Indebtedness), Beginning of
the Period (10,459) 2,789
--------------------------
CASH (BANK INDEBTEDNESS),
END OF THE PERIOD (11,915) 2,762
------------------------
Cash (Bank Indebtedness) comprised of:
Cash -- 2,762
Operating Line of Credit (11,915) --
-------------------------
$ (11,915) $ 2,762
=========================
<PAGE>
FOREST INDUSTRY ONLINE INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
AS AT OCTOBER 31, 1999
- -----------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS
Foresty Industry Online Inc. ("the company") was incorporated on January 9, 1997
under the laws of the Province of British Columbia. The Company's principal
business activities include designing web sites and operating and maintaining a
computer internet web site for companies associated with the forest industry.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a) Capital Assets and Amortization
Capital assets are recorded at cost. Amortization is provided for at the
following annual rates on the straight line basis:
Automotive Equipment - 20%
Computer Equipment - 20%
Furniture and Fixtures - 10%
Software - 100%
One half of the above rates are applied in the year of acquisition and no
amortization is taken in the year of disposal.
b) Revenue Recognition and Unearned Revenues
Revenues are recorded on a billed basis. Customers are billed on a quarterly
basis in advance for advertising fees and hosting revenue. Unearned revenues
relate to the period of the billing that as not yet transpired and therefore not
earned.
c) 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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE 3 - DUE FROM (TO) SHAREHOLDERS
Amounts due from (to) shareholders are unsecured, are non-interest bearing and
have no formal terms of repayment.
<PAGE>
FOREST INDUSTRY ONLINE INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
AS AT OCTOBER 31, 1999
- -----------------------------------------------------------------------------
NOTE 4 - DUE FROM AFFILIATED COMPANY
Amounts due from an affiliated company are unsecured, are non-interest bearing
and have no formal terms of repayment.
October 31 October 31
1999 1998
Seaspray Log Scaling Ltd. $ 531 $ ----
=======================
NOTE 5 - CAPITAL ASSETS
Net Book Value
Accumulated October 31 October 31
Cost Amortization 1999 1998
Automotive Equipment $ 732 $ 257 $ 475 $ --
Computer Equipment 43,401 10,926 32,475 14,863
Furniture and Fixtures 3,471 263 3,208 395
Software 5,382 3,519 1,863 1,286
-----------------------------------------------
52,986 14,965 38,021 $ 16,544
===============================================
NOTE 6 - OPERATING LINE OF CREDIT
The company has a $ 16,560 ($25,000 CDN) revolving operating line of credit with
the Royal Bank of Canada. The line of credit is payable on demand, bears
interest at prime plus 1.75% per annum payable monthly, and is secured by a
general security agreement over all assets of the Company, guarantees by the
corporate shareholder and personal guarantees of the principals of the Company.
<PAGE>
NOTE 7 - DUE TO PARENT COMPANY
Amounts due to parent company, Teaco Properties Ltd. owns 78% of the Company,
are unsecured and have no specific terms of repayment except $ 52,850 (October
31, 1998 - $114,973) which bears interest at prime plus 5% per annum.
October 31 October 31
1999 1998
Teaco Properties Ltd. $ 58,607 $ 120,730
========================
FOREST INDUSTRY ONLINE INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
AS AT OCTOBER 31, 1999
- ---------------------------------------------------------------------------
NOTE 8 - LONG TERM DEBT
October 31 October 31
1999 1998
Demand Bank Loan, Royal Bank
The demand loan is repayable in monthly
instalments of $ 2,051 including interest
at prime plus 2% per annum and is secured
by a general security agreement over all the
assets of the Company, guarantees by the
corporate shareholder and personal guarantees
of the principals of the Company. $ 52,385 $ -----
Less: Current Portion 23,327 -----
-----------------------
29,058 $ -----
=======================
The estimated principal repayments over the next three years are as follows:
Year
----
2000 $ 23,327
2001 24,075
2002 4,983
<PAGE>
NOTE 9 - SHARE CAPITAL
Authorized:
10,000 Class "A" voting common shares with no par value
Issued:
October 31 October 31
1999 1998
100 Class "A" voting common shares $ 1 $ 1
NOTE 10 - INCOME TAXES
The company has non-capital losses available for carry-forward totalling
$112,196. These losses may be carried forward to be applied against future
income for tax purposes. The losses expire as follows:
Year
2004 $ 40,231
2005 71,965
<PAGE>
FOREST INDUSTRY ONLINE INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
AS AT OCTOBER 31, 1999
- ------------------------------------------------------------------------------
NOTE 11 - COMMITMENTS AND CONTINGENCIES
A) The Company has entered into an agreement to lease office premises to
March 31, 2000. The monthly lease payment excluding operating costs is
$1,521 ($2,517 CDN).
B) The Company has entered into an agreement to lease a vehicle to November
30, 2000. The monthly lease payment is $220 ($321CDN) with an option to
purchase the vehicle at the end of the lease for $12,312 ($18,000 CDN).
The Company does not plan to exercise the option to purchase the vehicle
when the lease expires.
C) The Company has entered into an agreement to lease an internet
telecommunication line to December 31, 2002. The monthly lease payment is
$ 889 ($1,300 CDN).
NOTE 12 - RELATED PARTY TRANSACTIONS
In addition to those transactions disclosed elsewhere in these financial
statements, the Company had the following transactions with related parties:
October 31 October 31
1999 1998
Salaries paid to a shareholder of the Company for $ 7,827 $ 5,026
management administration, sales, supervision, and
product development services.
Interest paid to the parent company for funds
advanced to the Company 1,430 3,646
Professional fees paid to the parent company for 6,570 3,063 accounting services
provided.
NOTE 13 - CHANGE IN NON-CASH WORKING CAPITAL ACCOUNTS
October 31 October 31
1999 1998
Accounts Receivable $ ( 299) $ ( 4,567)
Prepaid Expenses 1,556 182
Accounts Payable and Accrued Liabilities 1,360 8,386
Unearned Revenues 6,885 4,187
-----------------------
9,502 8,188
<PAGE>
FOREST INDUSTRY ONLINE INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
AS AT OCTOBER 31, 1999
- -------------------------------------------------------------------------------
NOTE 14 - FINANCIAL INSTRUMENTS
Financial instruments include cash, accounts receivable, due from affiliated
company, operating line of credit, accounts payable and accrued liabilities,
long term debt, amounts due to parent company and shareholders. The estimated
fair value of such financial instruments approximates their carrying value.
NOTE 15 - UNCERTAINTY DUE TO YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digit
rather than four to identify a year. Date sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other parties, will be fully resolved.
The Company's software programs are Year 2000 compliant. In addition, as a
safety measure, the Company backs up all its computer data on a daily basis.
NOTE 16 - UNITED STATES ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada. They do not differ materially from
accounting principles generally accepted in the United States.
<PAGE>
Autoeye Inc.
Pro Forma Consolidated Financial Statements
Pro Forma Consolidated Financial Statements
October 31, 1999 and July 31, 1999
(In U.S. $)
Pro Forma Consolidated Balance Sheets
Pro Forma Consolidated Statements of Operations
Pro Forma Consolidated Statements of Stockholders' Equity
Pro Forma Consolidated Statements of Cash Flows
Notes to the Pro Forma Consolidated Financial Statements
<PAGE>
AUTOEYE INC.
Pro Forma Consolidated Balance Sheets
As at October 31 and July 31, 1999 (In U.S. $)
- --------------------------------------------------------------------
October 31, 1999 July 31, 1999
$ $
ASSETS
CURRE NT
Cash 750,833 753,567
Accounts Receivable 64,956 64,657
Prepaid Expenses 239 1,795
Due from Affiliated Company 531 166
--------- ----------
816,559 820,185
Property and Equipment 38,021 31,031
--------- ---------
854,580 851,216
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT
Operating Line of Credit 11,915 13,278
Accounts Payable and Accrued Liabilities 75,048 69,839
Unearned Revenues 59,166 52,281
Current Portion of Long Term Debt 23,327 22,465
-------- ------
169,456 157,863
Due to Related Company 58,607 50,341
Due to Shareholders 17,878 17,672
Long Term Debt 29,058 33,230
-------- --------
274,999 259,106
STOCKHOLDERS' EQUITY
Share Capital
Common stock, $0.0001 par value
30,000,000 authorized; 14,964,540
issued and outstanding 1,497 1,497
Preferred stock, $0.0001 par value
5,000,000 authorized; 750 issued and
outstanding 1 1
Additional paid in capital 718,677 718,677
Deficit (140,594) (128,065)
579,581 592,110
854,580 851,216
Unaudited - "See accompanying notes to the pro forma consolidated financial
statements"
<PAGE>
<PAGE>
AUTOEYE INC.
Pro Forma Consolidated Statements of Operations
For the Periods Ended October 31 and July 31, 1999 (In U.S. $)
- ------------------------------------------------------------------------------
Three Months Year
Ended Ended
October 3, 1999 July 31, 1999
$ $
REVENUES 86,363 300,362
--------------------------
EXPENSES
Advertising and Promotion 857 2,282
Amortization 2,726 7,763
Automobile 327 540
Bad Debts 2,033 7,782
Bank Charges and Interest 3,480 14,534
Consulting Fees 203 487
Foreign Exchange Loss 3,922 409
Insurance, Licenses and Dues 960 1,827
Internet and Connecting Fees 2,874 8,034
Office Supplies 5,277 11,403
Printing 1,454 11,167
Professional Fees 8,255 17,592
Rent, Property Taxes and Utilities 3,877 10,150
Repair and Maintenance 217 2,222
Salaries and Benefits 50,440 172,339
Telephone 4,388 13,664
Trade Shows 3,286 7,985
Travel and Lodging 4,316 10,723
--------------------------
98,892 300,903
--------------------------
NET LOSS FOR THE PERIOD (12,529) (541)
--------------------------
Weighted Average Number of Shares Outstanding, 14,964,540 10,000,000
Basic and Diluted
Loss per Common Share, Basic and Diluted (0.001) (0.001)
--------------------------
Unaudited - "See accompanying notes to the pro forma consolidated financial
statements"
<PAGE>
AUTOEYE INC.
Pro Forma Consolidated Statements of Stockholders' Equity For the Periods
from August 1, 1998 to October 31, 1999 (In U.S. $)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock Preferred Stock Additional Deficit Total
Number of Number of Paid in
Shares Amount Shares Amount Capital
Balance, August 1, 1998 4,927,040 493 - - (492) (127,524) (127,523)
Adjustment to comply with
recapitalization accounting (note 2):
Common stocks issued to purchase all
issued and outstanding shares of The
Forest Industry Online Inc.,July 31,
1999; net of transaction costs of
of $15,863 (note 2) 10,000,000 1,000 - - (31,689) - (30,689)
Common stocks issued for service, July
31, 1999, valued at approximately
$0.023 per share (note 2) 37,500 4 - - 859 - 863
750 Series `A' convertible preferred
shares issued for cash, July 31, 1999
at $1,000 per share (note 2) - - 750 1 749,999 - 750,000
Net Loss for the Period - - - - - (541) (541)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 1999 14,964,540 1,497 750 1 718,677 (128,065) 592,110
Net Loss for the Period - - - - - (12,529) (12,529)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1999 14,964,540 1,497 750 1 718,677 (140,594) 579,581
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Unaudited - "See accompanying notes to the pro forma consolidated financial
statements"
<PAGE>
AUTOEYE INC.
Pro Forma Consolidated Statements of Cash Flows
For the Periods Ended October 31 and July 31, 1999 (In U.S. $)
- ----------------------------------------------------------------------------
Three Months Year
Ended Ended
October 31, July 31,
1999 1999
$ $
CASH WAS PROVIDED FROM, UTILIZED (FOR):
OPERATING ACTIVITIES:
Net Loss for the Period (12,529) (541)
Non-Cash Items:
Amortization 2,726 7,763
Change in Non-Cash Working Capital Accounts
Accounts Receivable (299) (41,159)
Note Receivable - 14,406
Prepaid Expenses 1,556 (1,381)
Accounts Payable and Accrued Liabilities 5,209 5,067
Unearned Revenues 6,885 29,119
--------------------------
Net Cash Provided by Operating Activities 3,548 13,274
--------------------------
FINANCING ACTIVITIES
Long Term Debt and Operating Line of Credit (4,673) 68,973
Advances (Repayments)
Advances (to) Affiliated Company (365) (166)
Advances from (to) Related Company 8,266 (72,714)
Advances from (to) Shareholders 206 17,672
Cash Acquired in Acquisition - 750,748
--------------------------
Net Cash Provided by Financing Activities 3,434 764,513
--------------------------
INVESTING ACTIVITY
Acquisition of Capital Assets (9,716) (27,009)
--------------------------
INCREASE (DECREASE) IN CASH (2,734) 750,778
Cash, Beginning of the Period 753,567 2,789
--------------------------
CASH, END OF THE PERIOD 750,833 753,567
--------------------------
Unaudited - "See accompanying notes to the pro forma consolidated financial
statements"
<PAGE>
AUTOEYE INC.
Notes to the Pro Forma Consolidated Financial Statements
For the Periods Ended October 31 and July 31, 1999
- -------------------------------------------------------------------------------
Note 1 - General
The unaudited pro forma consolidated balance sheets and pro forma consolidated
statements of operations, stockholders' equity and cash flows of Autoeye Inc.
(Autoeye) have been compiled from and include:
(a) the audited balance sheets of Autoeye Inc. as at May 31, 1999 and the
audited statements of operations, stockholders' equity and cash flows for
the year then ended;
(b) the audited balance sheets of The Forest Industry Online Inc. (Forest
Industry) as at July 31, 1999 and the audited statements of operations,
stockholders' deficit and cash flows for the year then ended;
(c) the unaudited balance sheets of Autoeye as at October 31and July 31, 1999
and the unaudited statements of operations and cash flows for the periods
then ended; and
(d) the unaudited balance sheets of Forest Industry as at October 31, 1999 and
the unaudited statements of operations and cash flows for the period then
ended.
For more detailed information, readers should refer to the financial statements
of Autoeye and Forest Industry included elsewhere in this Registration
Statement.
The unaudited pro forma consolidated balance sheets, statements of operations,
stockholders' equity and cash flows give effect to the proposed transactions, as
detailed in the Share Exchange Agreement between Autoeye and Forest Industry,
described in note 2 below. The pro forma consolidated financial statements have
been presented as though the transactions occurred on July 31, 1999.
The pro forma consolidated financial statements may not necessarily be
indicative of the results and financial position which would have resulted had
the transactions been effected on the date indicated above. Further, the pro
forma financial information is not necessarily indicative of the financial
position that may be attained in the future.
Note 2 - Basis of Presentation
Autoeye and the shareholders of Forest Industry have entered into a share
exchange agreement dated January 20, 2000. Under the terms of the agreement:
Autoeye issued 10,000,000 common shares for all of the issued and outstanding
shares of Forest Industry, 100 common shares. As at July 31, 1999, there were
4,927,040 common shares of Autoeye (after reflecting a 21:1 stock consolidation
which occurred on August 20, 1999 and a subsequent stock split of 1:40 which
occurred on August 21, 1999). The acquisition was accounted for as a
recapitalization of Forest Industry. The transaction has been accounted for as a
capital transaction effectively representing an issue of shares by Forest
Industry for the net assets of Autoeye. The transaction was completed on January
31, 2000 and at that date the net assets of Autoeye consisted of:
Cash and cash equivalent $ 750,748
Accounts Payable (15,574)
------------
$ 735,174
------------
Unaudited - See "Independent Accountants' Compilation Report"
<PAGE>
AUTOEYE INC.
Notes to the Pro Forma Consolidated Financial Statements
For the Periods Ended October 31 and July 31, 1999
- -------------------------------------------------------------------------------
Note 2 - Basis of Presentation (Continued)
Total costs related to this recapitalization transaction were estimated at
$15,863. They include cash expense in the estimated amount of $15,000 and
non-cash expense in the amount of $863. The non-cash expense relates to the
issuance of 37,500 shares of common stock of Autoeye. The fair value of these
services was estimated based upon the estimated fair value of the shares at
$0.023 per share. Total transaction costs have been recorded as a charge to the
stockholders' equity of Autoeye.
Cash and cash equivalents held by Autoeye in the amount of $750,000 were
obtained through subscriptions for a private placement of 750 Series "A"
Convertible Preferred Stock at a price of $1,000 per share. The closing of this
private placement and the release of funds held in escrow were contingent on
this acquisition being completed. The Series "A" preferred stocks are
convertible at the option of the holder, and at any time after forty-five days
from the day the subscription funds are received, into common stocks at 75% of
the last ten day average closing bid price of Autoeye subject to a maximum
conversion rate of 5,000 common stocks for one preferred stock and a minimum
conversion rate of 250 common stocks for one preferred stock. In addition,
provided a securities registration is in effect qualifying the resale of the
common stocks, all Series "A" preferred stocks will be deemed to convert into
common stocks on or before January 31, 2001, the first anniversary date.
The pro forma financial statements give effect to the recapitalization
transaction and completion of the private placement as at July 31, 1999. These
historical financial statements reflect the financial position, results of
operations and cash flows of Forest Industry consolidated with those of Autoeye
from August 1, 1999. The number of common stocks outstanding reflects those of
Autoeye.
Unaudited - See "Independent Accountants' Compilation Report"
SHARE EXCHANGE AGREEMENT
THIS AGREEMENT is made as of the 20th day of January, 2000.
AMONG:
AUTOEYE INC., a body corporate formed pursuant to the laws of the
State of Delaware and having an office for business located at Suite
1650, 200 Burrard Street, Vancouver, British Columbia, V6C 3L6
(the "Purchaser")
AND:
TEACO PROPERTIES LTD., a body corporate formed pursuant to the laws
of the Province of British Columbia and having an office for
business located at 649 Belle View Place, Nanaimo, British
Columbia, V9V 1B5
("Teaco")
AND:
JOE PERRATON, Businessman, of 7491 Elizabeth Way, Lantzville,
British Columbia, V0R 2H0
AND:
LARA PERRATON, Businesswoman, of 485 Howard Avenue, Nanaimo,
British Columbia, V9R 3S2
(Teaco, Joe Perraton, and Lara Perraton being hereinafter
collectively referred to as the "Vendors")
WHEREAS:
A. The Forest Industry Online Inc. (the "Company") is a body corporate
formed pursuant to the laws of the Province of British Columbia and
engaged in the business of providing direct customer service and
support to businesses, individuals and organizations within the
worldwide forest and wood product industries;
B. The Vendors own all of the issued and outstanding common shares in
the capital stock of the Company (the "Company Common Shares"); and
C. The Vendors have agreed to sell and the Purchaser has agreed to
purchase the Company Common Shares, subject to the terms and
conditions of this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and the mutual covenants, agreements, representations and warranties contained
herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Definitions
1.1 In this Agreement the following terms will have the following meanings:
(a) "Acquisition Shares" means the 10,000,000 Purchaser Common Shares to
be issued in the names of the Vendors at Closing;
(b) "Agreement" means this agreement among the Purchaser and the Vendors;
(c) "Audited Company Financial Statements" means the audited financial
statements of the Company for the fiscal years ended July 31, 1998
and 1999, prepared in accordance with United States' generally
accepted accounting principles, together with the unqualified
auditors' report thereon attached hereto as Schedule "A";
(d) "Business" means all aspects of the business conducted by the
Company, including, without limitation, the services and support
provided to the forest and wood product industries;
(e) "Closing" means the completion, on the Closing Date, of the
transactions contemplated hereby in accordance with Article 10
hereof;
(f) "Closing Date" means the day on which all conditions precedent to
the completion of the transaction as contemplated hereby have been
satisfied or waived; provided that in no event shall the Closing
Date be later than January 31, 2000;
(g) "Company" means The Forest Industry Online Inc.;
(h) "Company Accounts Payable and Liabilities" means all accounts
payable and liabilities of the Company due and owing as of December
31, 1999 as set forth in Schedule "E" hereto;
(i) "Company Accounts Receivable" means all accounts receivable and
other debts owing to the Company as of December 31, 1999 as set
forth in Schedule "D" hereto;
(j) "Company Assets" means the undertaking and all the property and
assets of the Business of every kind and description wheresoever
situated including, without limitation, the Company Equipment, the
Company Inventory, the Company Material Contracts, the Company
Accounts Receivable, the Company Cash, the Company Intangible Assets
and the Company Goodwill, and all credit cards, charge cards and
banking cards issued to the Company;
(k) "Company Cash" means all cash on hand or on deposit to the credit of
the Company on the Closing Date;
(l) "Company Common Shares" means Common Shares without par value in the
capital stock of the Company;
<PAGE>
(m) "Company Equipment" means all machinery, equipment, furniture, and
furnishings used in the Business, including, without limitation, the
items more particularly described in Schedule "B" hereto;
(n) "Company Financial Statements" means, collectively, the Audited
Company Financial Statements and the Quarterly Company Financial
Statements, true copies of which are attached as Schedule "A"
hereto;
(o) "Company Goodwill" means the goodwill of the Business together with the
exclusive right of the Purchaser to represent itself as carrying on the
Business in succession of the Company subject to the terms hereof, the
right to all corporate, operating and trade names associated with the
Business, or any variations of such names as part of or in connection with
the Business, all telephone listings and telephone advertising contracts,
all lists of customers, books and records and other information relating to
the Business, all necessary licenses and authorizations and any other
rights used in connection with the Business;
(p) "Company Insurance Policies" means the public liability insurance
and insurance against loss or damage to the Company Assets and the
Business as described in Schedule "G" hereto;
(q) "Company Intangible Assets" means all of the intangible assets of
the Company, including, without limitation, the Company Goodwill,
all trademarks, logos, copyrights, designs, and other intellectual
and industrial property including, without limiting the generality
of the foregoing, the domain names "www.forestindustry.com",
www.forestindustry.net, and "www.forestind.com" and all other domain
names registered by or in the name of the Company or the Vendors and
related to the Business;
(r) "Company Inventory" means all inventory and supplies of the Business
existing on the Closing Date;
(s) "Company Material Contracts" means the burden and benefit of and the right,
title and interest of the Company in, to and under all trade and non-trade
contracts, engagements or commitments, whether written or oral, to which
the Company is entitled in connection with the Business whereunder the
Company is obligated to pay or entitled to receive the sum of $10,000 or
more including, without limitation, any pension plans, profit sharing
plans, bonus plans, loan agreements, security agreements, indemnities and
guarantees, any agreements with employees, lessees, licensees, managers,
accountants, suppliers, agents, distributors, officers, directors,
attorneys or others which cannot be terminated without liability on not
more than one month's notice, and those contracts listed in Schedule "C"
hereto;
(t) "Employment Agreement" means the employment agreement among the
Company and Joe Perraton to be entered into pursuant to Article 7
hereof substantially in the form attached hereto as Schedule "K";
(u) "Place of Closing" means the offices of Century Capital Management
Ltd. or such other place as the Purchaser and the Vendors may
mutually agree upon;
(v) "Private Placement" means the private sale by the Purchaser of not
less than 750 Purchaser Preferred Shares at a price of $1,000.00 per
Purchaser Preferred Share;
<PAGE>
(w) "Purchaser" means Autoeye Inc.;
(x) "Purchaser Accounts Payable and Liabilities" means all accounts
payable and liabilities of the Purchaser due and owing as of
December 31, 1999 as set forth is Schedule "I" hereto;
(y) "Purchaser Common Shares" means the shares of common stock in the
capital of the Purchaser;
(z) "Purchaser Financial Statements" means the audited financial
statements of the Purchaser for the periods ended May 31, 1998 and
1999 and the management prepared financial statements of the
Purchaser for the six month period ended November 30, 1998 and 1999,
true copies of which are attached as Schedule "H" hereto;
(aa) "Purchaser Preferred Shares" means the 750 shares of the Purchaser's
Series A Convertible Preferred Stock to be issued in the Private
Placement pursuant to the terms of the Subscription;
(bb) "Quarterly Company Financial Statements" means the management
prepared financial statements of the Company for the three month
period ended October 31, 1998 and 1999, prepared in accordance with
United States' generally accepted accounting principles, attached
hereto as Schedule "A";
(cc) "Subscription" means the subscription for Purchaser Preferred Shares
to be entered into at or prior to closing pursuant to the Private
Placement, substantially in the form attached hereto as Schedule
"J"; and
(dd) "Teaco" means Teaco Properties Ltd.
Any other terms defined within the text of this Agreement will have the meanings
so ascribed to them.
Captions and Section Numbers
1.2 The headings and section references in this Agreement are for convenience
of reference only and do not form a part of this Agreement and are not
intended to interpret, define or limit the scope, extent or intent of this
Agreement or any provision thereof.
Section References and Schedules
1.3 Any reference to a particular "Article", "section", "paragraph", "clause" or
other subdivision is to the particular Article, section, clause or other
subdivision of this Agreement and any reference to a Schedule by letter will
mean the appropriate Schedule attached to this Agreement and by such reference
the appropriate Schedule is incorporated into and made part of this Agreement.
The Schedules to this Agreement are as follows:
Information concerning the Company
Schedule "A" Company Financial Statements
Schedule "B" Company Equipment
Schedule "C" Company Material Contracts
Schedule "D" Company Accounts Receivable
Schedule "E" Company Accounts Payable and Liabilities
Schedule "F" Debts to Related Parties
Schedule "G" Company Insurance Policies
<PAGE>
Information concerning the Purchaser
Schedule "H" Purchaser Financial Statements
Schedule "I" Purchaser Accounts Payable and Liabilities
Schedule "J" Subscription
Schedule "K" Employment Agreement
Severability of Clauses
1.4 If any part of this Agreement is declared or held to be invalid for any
reason, such invalidity will not affect the validity of the remainder which will
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion, and it is hereby declared the intention of
the parties that this Agreement would have been executed without reference to
any portion which may, for any reason, be hereafter declared or held to be
invalid.
Currency
1.5 Unless otherwise specified, all sums referred to herein and all payments to
be made hereunder will be in lawful money of the United States of America.
ARTICLE 2
PURCHASE AND SALE OF COMPANY COMMON SHARES
Sale of Company Common Shares
2.1 The Vendors agree to sell to the Purchaser, and the Purchaser agrees to
purchase from the Vendors, all the Company Common Shares at Closing subject to
the terms and conditions of this Agreement.
Consideration
2.2 In consideration of the sale of the Company Common Shares by the Vendors to
the Purchaser, the Purchaser agrees to issue the Acquisition Shares to the
Vendors at Closing.
Adherence with Applicable Securities Laws
2.3 The Vendors agree that they are acquiring the Acquisition Shares for
investment purposes and will not offer, sell or otherwise transfer, pledge or
hypothecate any of the Acquisition Shares (other than pursuant to an effective
Registration Statement under the Securities Act of 1933 (United States), as
amended) directly or indirectly unless:
(a) the sale is to the Purchaser;
(b) the sale is made pursuant to the exemption from registration under
the Securities Act of 1933 (United States) provided by Rule 144
thereunder; or
(c) the Acquisition Shares are sold in a transaction that does not
require registration under the Securities Act of 1933 (United
States) or any applicable United States state laws and regulations
governing the offer and sale of securities, and the Vendor selling
same has furnished to the Purchaser an opinion of counsel to that
effect or such other written opinion as may be reasonably required
by the Purchaser.
<PAGE>
The Vendors acknowledge that the certificates representing the Acquisition
Shares shall bear the following legend:
NO SALE, OFFER TO SELL, OR TRANSFER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE SHALL BE MADE UNLESS A REGISTRATION STATEMENT UNDER
THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, IN RESPECT OF SUCH
SHARES IS THEN IN EFFECT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT IS THEN IN FACT APPLICABLE TO SAID SHARES.
The Vendors further acknowledge that trades of Acquisition Shares within
British Columbia will be subject to restrictions imposed by the Securities Act
(British Columbia) and that the Acquisition Shares may not be traded within
British Columbia unless the trade is made solely through a registered dealer and
a prospectus is filed with the British Columbia Securities Commission in respect
of the Acquisition Shares (and a final receipt obtained for such prospectus) or
an exemption from the registration and prospectus requirements may be relied
upon.
Allocation
2.4 The Acquisition Shares shall be allocated and issued to the Vendors on the
following basis:
(a) 6,900,000 Acquisition Shares to Teaco;
(b) 2,400,000 Acquisition Shares to Joe Perraton; and
(c) 700,000 Acquisition Shares to Lara Perraton.
ARTICLE 3
REGISTRATION RIGHTS
3.1 As soon as practicable after the Closing the Purchaser shall file a
registration statement on Form SB-2 (or similar form) under the Securities Act
of 1933 (United States) covering not more than 200,000 of the Acquisition Shares
and will use its best efforts to cause such registration statement to be
declared effective by the Securities and Exchange Commission at the earliest
practicable date, all at the Purchaser's sole cost and expense. Such best
efforts shall include responding to all comments received by the staff of the
Securities and Exchange Commission and promptly preparing and filing amendments
to such registration statement which are responsive to the comments received
from the staff of the Securities and Exchange Commission. Such registration
statement shall name the Vendors as selling shareholders and shall provide for
the sale by the Vendors of the Acquisition Shares being registered from time to
time directly to purchasers or in the over-the-counter market or through or to
securities brokers or dealers that may receive compensation in the form of
discounts, concessions, or commissions. None of the foregoing shall in any way
limit the Vendors' rights to sell any Acquisition Shares held by them in
reliance on an exemption from the registration requirements under the Securities
Act of 1933 (United States) in connection with a particular transaction.
<PAGE>
3.2 The Purchaser shall use its best efforts to maintain the currency of the
registration statement filed with the Securities and Exchange Commission in
respect of the Acquisition Shares being registered for a period of twelve months
following the effective date thereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE VENDORS
Representations and Warranties
4.1 Each of the Vendors jointly and severally represent and warrant in all
material respects to the Purchaser, with the intent that the Purchaser will rely
thereon in entering into this Agreement and in completing the transactions
contemplated hereby, that:
The Company - Corporate Status and Capacity
(a) Incorporation. The Company is a corporation duly incorporated and
validly subsisting under the laws of the Province of British
Columbia, and is in good standing with the office of the Registrar
of Companies;
(b) Carrying on Business. The Company carries on business in the
Province of British Columbia. The Company has an office in Nanaimo,
British Columbia and in no other locations. The nature of the
Business does not require the Company to register or otherwise be
qualified to carry on business in any other jurisdiction;
(c) Corporate Capacity. The Company has the corporate power, capacity and
authority to own the Company Assets and to carry on the Business;
The Vendors - Capacity and Tax Matters
(d) Capacity. Each of the Vendors, as to their portion of the Company
Common Shares, has the full right, power and authority to enter into
and complete this Agreement on the terms and conditions contained
herein and to transfer and cause the transfer of full legal,
registered and beneficial title and ownership of their portion of
the Company Common Shares to the Purchaser;
(e) Resident in Canada. Each of the Vendors is a resident of Canada
within the meaning of the Income Tax Act (Canada).
The Company - Capitalization
(f) Authorized Capital. The authorized capital of the Company consists
of 10,000 Common Shares without par value (being the Company Common
Shares);
(g) Ownership of Company Common Shares. The issued and outstanding share
capital of the Company will on to Closing consist of 100 Common
Shares without par value(being the Company Common Shares), which
shares on Closing shall be validly issued and outstanding as fully
paid and non-assessable shares. Each of the Vendors will be
immediately prior to Closing the registered and beneficial owner of
the number of the Company Common Shares set forth opposite their
name as follows:
<PAGE>
Teaco - 69 Company Common Shares
Joe Perraton - 24 Company Common Shares
Lara Perraton - 7 Company Common Shares
Each of the Vendors owns or will immediately prior to Closing own his portion of
the Company Common Shares free and clear of any and all liens, charges, pledges,
encumbrances, restrictions on transfer and adverse claims whatsoever;
(h) No Option. No person, firm or corporation has any agreement or
option or any right capable of becoming an agreement or option for
the acquisition of the Company Common Shares or for the purchase,
subscription or issuance of any of the unissued shares in the
capital of the Company;
(i) No Restrictions. The transfer of the Company Common Shares to the
Purchaser will not be restricted under the charter documents of the
Company or under any agreement, and will be permitted under all
applicable laws and regulations;
The Company - Records and Company Financial Statements
(j) Charter Documents. The charter documents of the Company have not been
altered since the incorporation of the Company, except as filed in the
record book of the Company;
(k) Books and Records. The books and records of the Company fairly and
correctly set out and disclose in all material respects the
financial position of the Company, and all material financial and
other transactions of the Company relating to the Business,
including any and all Company Material Contracts and any amendments
thereto, have been accurately recorded or filed in such books and
records;
(l) Company Financial Statements. The Company Financial Statements are
true and correct and present fairly and correctly the assets and
liabilities (whether accrued, absolute, contingent or otherwise) of
the Company as of the respective dates thereof, and the sales and
earnings of the Business during the periods covered thereby, in all
material respects, and have been prepared in substantial accordance
with United States' generally accepted accounting principles
consistently applied;
(m) Company Accounts Receivable. All Company Accounts Receivable are
bona fide and are good and collectible without, to the knowledge and
belief of the Vendors, set-off or counterclaim;
(n) Company Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of the Company which are not
disclosed in Schedules "E" or "F" hereto or reflected in the Company
Financial Statements except those incurred in the ordinary course of
business since the date of the said financial statements, and the Company
has not guaranteed or agreed to guarantee any debt, liability or other
obligation of any person, firm or corporation. Without limiting the
generality of the foregoing, all accounts payable and liabilities of the
Company are described in Schedules "E" or "F" hereto;
<PAGE>
(o) No Debt to Related Parties. The Company is not, and on Closing will
not be, materially indebted to any of the Vendors nor to any family
member of any of the Vendors, nor to any affiliate, director or
officer of the Company or the Vendors except as set forth in
Schedule "F" hereto;
(p) No Related Party Debt to the Company. None of the Vendors is now
indebted to or under any financial obligation to the Company on any
account whatsoever, except for advances on account of travel and
other expenses not exceeding $5,000 in total;
(q) No Dividends. No dividends or other distributions on any shares in the
capital of the Company have been made, declared or authorized since the
date of the Company Financial Statements;
(r) No Payments. No payments of any kind have been made or authorized
since the date of the Company Financial Statements to or on behalf
of the Vendors or to or on behalf of officers, directors,
shareholders or employees of the Company or under any management
agreements with the Company, except payments made in the ordinary
course of business and at the regular rates of salary or other
remuneration payable to them;
(s) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation plans
affecting the Company;
(t) No Adverse Events. Since the date of the Company Financial Statements
(i) there has not been any material adverse change in the
financial position or condition of the Company, its
liabilities or the Company Assets or any damage, loss or other
change in circumstances materially affecting the Company, the
Business or the Company Assets or the Company's right to carry
on the Business, other than changes in the ordinary course of
business,
(ii) there has not been any damage, destruction, loss or other
event (whether or not covered by insurance) materially and
adversely affecting the Company, the Business or the Company
Assets,
(iii) there has not been any material increase in the compensation
payable or to become payable by the Company to the Vendors or
to any of the Company's officers, employees or agents or any
bonus, payment or arrangement made to or with any of them,
(iv) the Business has been and continues to be carried on in the
ordinary course,
(v) the Company has not waived or surrendered any right of
material value,
(vi) the Company 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, and
(vii) no capital expenditures in excess of $10,000 individually or
$30,000 in total have been authorized or made;
<PAGE>
The Company - Income Tax Matters
(u) Tax Returns. All tax returns and reports of the Company required by
law to be filed have been filed and are true, complete and correct,
and any taxes payable in accordance with any return filed by the
Company or in accordance with any notice of assessment or
reassessment issued by any taxing authority have been so paid;
(v) Current Taxes. Adequate provisions have been made for taxes payable for the
current period for which tax returns are not yet required to be filed and
there are no agreements, waivers, or other arrangements providing for an
extension of time with respect to the filing of any tax return by, or
payment of, any tax, governmental charge or deficiency by the Company. The
Vendors are not aware of any contingent tax liabilities or any grounds
which would prompt a reassessment including aggressive treatment of income
and expenses in filing earlier tax returns;
The Company- Applicable Laws and Legal Matters
(w) Licences. The Company holds all licences and permits as may be
requisite for carrying on the Business in the manner in which it has
heretofore been carried on, which licences and permits have been
maintained and continue to be in good standing;
(x) Applicable Laws. The Company has not been charged with or received
notice of breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which apply to
it the violation of which would have a material adverse effect on
the Company, and the Company is not in breach of any laws,
ordinances, statutes, regulations, by-laws, orders or decrees the
contravention of which would result in a material adverse impact on
the Business;
(y) Pending or Threatened Litigation. There is no material litigation or
administrative or governmental proceeding or enquiry pending or
threatened against or relating to the Company, the Business, or any
of the Company Assets, nor does the Company have any knowledge of
any deliberate act or omission of the Company that would form any
material basis for any such action, proceeding or enquiry;
(z) No Bankruptcy. The Company has not made any voluntary assignment or
proposal under applicable laws relating to insolvency and bankruptcy
and no bankruptcy petition has been filed or presented against the
Company and no order has been made or a resolution passed for the
winding-up, dissolution or liquidation of the Company;
(aa) Labour Matters. The Company is not party to any collective agreement
relating to the Business with any labour union or other association
of employees and no part of the Business has been certified as a
unit appropriate for collective bargaining or, to the knowledge of
the Vendors, has made any attempt in that regard;
(bb) Finder's Fees. The Company is not party to any agreement which
provides for the payment of finder's fees, brokerage fees,
commissions or other fees or amounts which are or may become payable
to any third party in connection with the execution and delivery of
this Agreement and the transactions contemplated herein except as
due to Century Capital Management Ltd.;
<PAGE>
Execution and Performance of Agreement
(cc) Authorization and Enforceability. The execution and delivery of this
Agreement, and the completion of the transactions contemplated
hereby, have been duly and validly authorized by all necessary
corporate action on the part of Teaco and this Agreement constitutes
a legal, valid and binding obligation of the Vendors and is
enforceable against each of them in accordance with its terms;
(dd) No Violation or Breach. The performance of this Agreement will not
(i) violate the charter documents of the Company or result in any
breach of, or default under, any loan agreement, mortgage,
deed of trust, or any other agreement to which the Vendors or
the Company, or any of them, is a party,
(ii) give any person any right to terminate or cancel any agreement
including, without limitation, the Company Material Contracts,
or any right or rights enjoyed by the Company,
(iii) result in any alteration of the Company's obligations under
any agreement to which the Company is party including, without
limitation, the Company Material Contracts,
(iv) result in the creation or imposition of any lien, encumbrance
or restriction of any nature whatsoever in favour of a third
party upon or against the Company Assets,
(v) result in the imposition of any tax liability to the Company
relating to the Company Assets or the Company Common Shares,
or
(vi) violate any court order or decree to which the Company and the
Vendors or any of them are subject.
The Company Assets - Ownership and Condition
(ee) Business Assets. The Company Assets comprise all of the property and
assets of the Business, and none of the Vendors nor any other
person, firm or corporation owns any assets used by the Company in
operating the Business, whether under a lease, rental agreement or
other arrangement;
(ff) Title. The Company is the legal and beneficial owner of the Company Assets,
free and clear of all mortgages, liens, charges, pledges, security
interests, encumbrances or other claims whatsoever;
(gg) No Option. No person, firm or corporation has any agreement or option or a
right capable of becoming an agreement for the purchase of any of the
Company Assets;
(hh) Company Insurance Policies. The Company maintains the public liability
insurance and insurance against loss or damage to the Company Assets and
the Business as described in Schedule "G" hereto;
(ii) Company Material Contracts. The Company Material Contracts listed in
Schedule "C" constitute all of the material contracts of the Company;
<PAGE>
(jj) No Default. There has not been any default in any material
obligation of either of the Company, the Vendors or any other party
to be performed under any of the Company Material Contracts, each of
which is in good standing and in full force and effect and
unamended, and the Vendors are not aware of any default in the
obligations of any other party to any of the Company Material
Contracts;
(kk) No Compensation on Termination. There are no agreements, commitments or
understandings relating to severance pay or separation allowances on
termination of employment of any employee of the Company. The Company is
not obliged to pay benefits or share profits with any employee after
termination of employment except as required by law;
The Company Assets - Company Equipment
(ll) Company Equipment. The Company Equipment has been maintained in a manner
consistent with that of a reasonably prudent owner;
The Company Assets - Company Goodwill and Other Assets
(mm) Company Goodwill. The Company carries on the Business only under the names
"The Forest Industry Online Inc.", "The Forest Industry Network", "The
FIN", "forestindustry.com", "forestindustry.net", and "forestind.com" and
under no other business or trade names. The Company has the legal right to
use its corporate name in the Province of British Columbia and neither the
Company nor any of the Vendors are aware of any names similar to The Forest
Industry Online in use in any areas where the Business is conducted. None
of the Vendors has any knowledge of any infringement by the Company of any
patent, trademark, copyright or trade secret;
The Business
(nn) Maintenance of Business. Since the date of the Company Financial
Statements, the Business has been carried on in the ordinary course
and the Company has not entered into any material agreement or
commitment except in the ordinary course; and
(oo) No Ownership of Company. The Company does not own any subsidiary and does
not otherwise own, directly or indirectly, any shares or interest in any
other corporation, partnership, joint venture or firm.
Non-Merger and Survival
4.2 The representations and warranties of the Vendors contained herein will be
true at and as of Closing in all material respects as though such
representations and warranties were made as of such time. Notwithstanding the
completion of the transactions contemplated hereby, the waiver of any condition
contained herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by the Purchaser, the
representations and warranties of the Vendors shall survive the Closing.
Indemnity
4.3 The Vendors jointly and severally agree to indemnify and save harmless the
Purchaser from and against any and all claims, demands, actions, suits,
proceedings, assessments, judgments, damages, costs, losses and expenses,
including any payment made in good faith in settlement of any claim (subject to
the right of the Vendors to defend any such claim), resulting from the breach by
any of them of any representation or warranty of such party under this Agreement
or from any misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished by the Vendors to the Purchaser
hereunder.
<PAGE>
ARTICLE 5
COVENANTS OF THE VENDORS
Covenants
5.1 The Vendors jointly and severally covenant and agree with the Purchaser that
they will:
(a) Conduct of Business. Until the Closing, conduct the Business
diligently and in the ordinary course consistent with the manner in
which the Business generally has been operated up to the date of
execution of this Agreement;
(b) Preservation of Business. Until the Closing, use their best efforts
to preserve the Business and the Company Assets and, without
limitation, preserve for the Purchaser the Company's relationships
with their suppliers, customers and others having business relations
with them;
(c) Insurance. Until the Closing, maintain in full force and effect the
Company Insurance Policies;
(d) Access. Until the Closing, give the Purchaser and its
representatives full access to all of the properties, books,
contracts, commitments and records of the Company relating to the
Company, the Business and the Company Assets, and furnish to the
Purchaser and its representatives all such information as they may
reasonably request; and
(e) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party
consents required to permit the transfer of the Company Common
Shares to the Purchaser and to preserve and maintain the Company
Assets, including the Company Material Contracts, notwithstanding
the change in control of the Company arising from the purchase of
the Company Common Shares by the Purchaser.
Authorization
5.2 The Vendors hereby agree to promptly cause the Company, upon the request of
the Purchaser, to authorize and direct any and all federal, provincial,
municipal, foreign and international governments and regulatory authorities
having jurisdiction respecting the Company to release any and all information in
their possession respecting the Company to the Purchaser. The Vendors shall
promptly cause the Company to execute and deliver to the Purchaser any and all
consents to the release of information and specific authorizations which the
Purchaser reasonably requires to gain access to any and all such information.
Survival
5.3 The covenants set forth in this Article shall survive until the Closing for
the benefit of the Purchaser.
<PAGE>
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Representations and Warranties
6.1 The Purchaser represents and warrants in all material respects to the
Vendors, with the intent that the Vendors will rely thereon in entering into
this Agreement and in completing the transactions contemplated hereby, that:
The Purchaser - Corporate Status and Capacity
(a) Incorporation. The Purchaser is a corporation duly incorporated and
validly subsisting under the laws of the State of Delaware, and is
in good standing with the office of the Secretary of State for the
State of Delaware;
(b) Carrying on Business. The Purchaser has not carried on and does not
now carry on any material business activity. The Purchaser has an
office in Vancouver, British Columbia and in no other locations;
(c) Corporate Capacity. The Purchaser has the corporate power, capacity
and authority to enter into and complete this Agreement;
(d) Reporting Status. The Purchaser Common Shares have been registered
pursuant to s. 12(g) of the Securities and Exchange Act of 1934
(United States);
The Purchaser - Capitalization
(e) Authorized Capital. The authorized capital of the Purchaser consists
of 30,000,000 Purchaser Common Shares, $0.0001 par value and
5,000,000 shares of preferred stock. $0.0001 par value, of which
4,927,040 Purchaser Common Shares and no shares of preferred stock
are presently issued and outstanding;
(f) No Option. No person, firm or corporation has any agreement or
option or any right capable of becoming an agreement or option for
the acquisition of Purchaser Common Shares or for the purchase,
subscription or issuance of any of the unissued shares in the
capital of the Purchaser;
(g) Capacity. The Purchaser has the full right, power and authority to
enter into and complete this Agreement on the terms and conditions
contained herein;
(h) No Restrictions. There are no restrictions on the transfer, sale or
other disposition of the Acquisition Shares contained in the charter
documents of the Purchaser or under any agreement to which the
Purchaser is a Party;
The Purchaser - Records and Financial Statements
(i) Charter Documents. The charter documents of the Purchaser have not
been altered since the incorporation of the Purchaser, except as
filed in the record books of the Purchaser;
(j) Books and Records. The books and records of the Purchaser fairly and
correctly set out and disclose in all material respects the
financial position of the Purchaser, and all material financial and
other transactions of the Purchaser, including any and all contracts
and any amendments thereto, have been accurately recorded or filed
in such books and records;
<PAGE>
(k) Purchaser Financial Statements. As at the date of this Agreement,
the Purchaser Financial Statements are true and correct and present
fairly and correctly the assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Purchaser as of the
respective dates thereof and have been prepared in substantial
accordance with United States' generally accepted accounting
principles consistently applied;
(l) Purchaser Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of the Purchaser which are not
disclosed in Schedule "I" hereto or reflected in the Purchaser Financial
Statements except those incurred in the ordinary course of business since
the date of the said financial statements, and the Purchaser has not
guaranteed or agreed to guarantee any debt, liability or other obligation
of any person, firm or corporation. Without limiting the generality of the
foregoing, all accounts payable and liabilities of the Purchaser are
described in Schedule "I" hereto;
(m) No Dividends. No dividends or other distributions on any shares in the
capital of the Purchaser have been made, declared or authorized since the
date of the Purchaser Financial Statements;
(n) No Payments. No payments of any kind have been made or authorized
since the date of the Purchaser Financial Statements to or on behalf
of officers, directors, shareholders or employees of the Purchaser
or under any management agreements with the Purchaser;
(o) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation plans
affecting the Purchaser;
(p) No Adverse Events. Since the date of the Purchaser Financial
Statements there has not been any material adverse change in the
financial position or condition of the Purchaser or its liabilities
or any damage, loss or other change in circumstances materially
affecting the Purchaser;
(q) Applicable Laws. The Purchaser has not been charged with or received
notice of breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which apply to
it the violation of which would have a material adverse effect on
the Purchaser;
(r) Pending or Threatened Litigation. There is no material litigation or
administrative or governmental proceeding or enquiry pending or
threatened against or relating to the Purchaser nor does the
Purchaser have any knowledge of any deliberate act or omission of
the Purchaser that would form any material basis for any such
action, proceeding or enquiry;
(s) No Bankruptcy. The Purchaser has not made any voluntary assignment
or proposal under applicable laws relating to insolvency and
bankruptcy and no bankruptcy petition has been filed or presented
against the Purchaser and no order has been made or a resolution
passed for the winding-up, dissolution or liquidation of the
Purchaser;
<PAGE>
(t) Finder's Fees. The Purchaser is not party to any agreement which
provide for the payment of finder's fees, brokerage fees,
commissions or other fees or amounts which are or may become payable
to any third party in connection with the execution and delivery of
this Agreement and the transactions contemplated herein except as
due to Century Capital Management Ltd.;
Execution and Performance of Agreement
(u) Authorization and Enforceability. The execution and delivery of this
Agreement, and the completion of the transactions contemplated
hereby, have been duly and validly authorized by all necessary
corporate action on the part of the Purchaser and this Agreement
constitutes a legal, valid and binding obligation of the Purchaser
and is enforceable against it in accordance with its terms;
(v) No Violation or Breach. The performance of this Agreement will not
violate the charter documents of the Purchaser or result in any
breach of, or default under, any agreement to which the Purchaser is
a party; and
The Purchaser - Acquisition Shares
(w) Acquisition Shares. The Acquisition Shares when delivered to the Vendors
shall be validly issued and outstanding as fully paid and non-assessable
shares, subject to the provisions of this Agreement, and the Acquisition
Shares shall be transferable upon the books of the Purchaser, in all cases
subject to the provisions and restrictions of all applicable securities
laws.
Non-Merger and Survival
6.2 The representations and warranties of the Purchaser contained herein will be
true at and as of Closing in all material respects as though such
representations and warranties were made as of such time. Notwithstanding the
completion of the transactions contemplated hereby, the waiver of any condition
contained herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by the Vendors, the
representations and warranties of the Purchaser shall survive the Closing.
Indemnity
6.3 The Purchaser agrees to indemnify and save harmless the Vendors from and
against any and all claims, demands, actions, suits, proceedings, assessments,
judgments, damages, costs, losses and expenses, including any payment made in
good faith in settlement of any claim (subject to the right of the Purchaser to
defend any such claim), resulting from the breach by it of any representation or
warranty of such party under this Agreement or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
by the Purchaser to the Vendors hereunder.
<PAGE>
ARTICLE 7
EMPLOYMENT AGREEMENTS
At the Closing, the Company shall enter into the Employment Agreement with
Joe Perraton pursuant to which each of them will provide services to the
Company.
ARTICLE 8
CONDITIONS PRECEDENT
Conditions Precedent in favour of the Purchaser
8.1 The Purchaser's obligations to carry out the transactions contemplated
hereby is subject to the fulfillment of each of the following conditions
precedent on or before the Closing:
(a) all documents or copies of documents required to be executed and
delivered to the Purchaser hereunder will have been so executed and
delivered;
(b) pro forma financial statements showing the combined assets,
liabilities, stockholders' equity and results of operations of the
Purchaser and the Company, prepared in prepared in accordance with
United States' generally accepted accounting principles and the
requirements of the Securities and Exchange Commission will have
been delivered to the Purchaser;
(c) the Purchaser shall have completed its due diligence review of the
affairs of the Company, and shall be satisfied with same in all
material respects;
(d) all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Vendors at or prior to the Closing
will have been complied with or performed;
(e) title to the Company Common Shares and Company Assets will be free
and clear of all mortgages, liens, charges, pledges, security
interests, encumbrances or other claims whatsoever;
(f) the Vendors will have transferred the Company Common Shares to the
Purchaser and the Company Common Shares will be issued to the
Purchaser and registered on the books of the Company in the name of
the Purchaser at Closing;
(g) subject to Article 9 hereof, there will not have occurred
(i) any material adverse change in the financial position or
condition of the Company, its liabilities or the Company
Assets or any damage, loss or other change in circumstances
materially and adversely affecting the Vendors, the Business
or the Company Assets or the Company's right to carry on the
Business, other than changes in the ordinary course of
business, none of which has been materially adverse, or
(ii) any damage, destruction, loss or other event, including
changes to any laws or statutes applicable to the Company or
the Business (whether or not covered by insurance) materially
and adversely affecting the Company, the Business or the
Company Assets; and
(h) the transactions contemplated hereby shall have been approved by all
other regulatory authorities having jurisdiction over the subject
matter hereof, if any.
<PAGE>
Waiver by the Purchaser
8.2 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of the Purchaser and any such condition may be waived in
whole or in part by the Purchaser at or prior to Closing by delivering to the
Vendors a written waiver to that effect signed by the Purchaser. In the event
that the conditions precedent set out in the preceding section are not satisfied
on or before the Closing the Purchaser shall be released from all obligations
under this Agreement.
Conditions Precedent in Favour of Vendors
8.3 The obligation of the Vendors to carry out the transactions contemplated
hereby is subject to the fulfillment of each of the following conditions
precedent on or before the Closing:
(a) all documents or copies of documents required to be executed and
delivered to the Vendors hereunder will have been so executed and
delivered;
(b) all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Purchaser at or prior to the
Closing will have been complied with or performed;
(c) the Purchaser will have delivered the Acquisition Shares to the
Vendors and the Acquisition Shares will be registered on the books
of the Purchaser in the name of the Vendors at Closing;
(d) title to the Acquisition Shares will be free and clear of all
mortgages, liens, charges, pledges, security interests, encumbrances
or other claims whatsoever;
(e) the board of directors of the Purchaser shall have appointed Marc
White and Joe Perraton as directors of the Purchaser; and
(f) the Purchaser shall have received duly executed Subscriptions for
not less that 750 Purchaser Preferred Shares pursuant to the Private
Placement and shall have received in full the subscription funds
therefore, such funds being held in escrow pending Closing.
Waiver by Vendors
8.4 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of the Vendors and any such condition may be waived in
whole or in part by the Vendors at or prior to the Closing by delivering to the
Purchaser a written waiver to that effect signed by the Vendors. In the event
that the conditions precedent set out in the preceding section are not satisfied
on or before the Closing the Vendors shall be released from all obligations
under this Agreement.
Nature of Conditions Precedent
8.5 The conditions precedent set forth in this Article are conditions of
completion of the transactions contemplated by this Agreement and are not
conditions precedent to the existence of a binding agreement. Each party
acknowledges receipt of the sum of $1.00 and other good and valuable
consideration as separate and distinct consideration for agreeing to the
conditions of precedent in favour of the other party or parties set forth in
this Article.
Termination
8.6 Notwithstanding any provision herein to the contrary, if Closing does not
occur on or before January 31, 2000 this Agreement will be at an end and will
have no further force or effect, unless otherwise agreed upon by the parties in
writing.
<PAGE>
Confidentiality
8.7 Notwithstanding any provision herein to the contrary, the parties hereto
agree that the existence and terms of this Agreement are confidential and that
if this Agreement is terminated pursuant to the preceding section the parties
agree to return to one another any and all financial, technical and business
documents delivered to the other party or parties in connection with the
negotiation and execution of this Agreement and shall keep the terms of this
Agreement and all information and documents received from the Company and the
contents thereof confidential and not utilize nor reveal or release same,
provided, however, that the Purchaser will be required to issue one or more news
releases and file a Current Report on Form 8-K with the Securities and Exchange
Commission respecting the proposed share purchase contemplated hereby.
ARTICLE 9
RISK
If any material loss or damage to the Business occurs prior to Closing and
such loss or damage, in the Purchaser's reasonable opinion, cannot be
substantially repaired or replaced within sixty (60) days, the Purchaser shall,
within seven (7) days following any such loss or damage, by notice in writing to
the Vendors, at its option, either:
(a) terminate this Agreement, in which case no party will be under any
further obligation to any other party; or
(b) elect to complete the purchase of the Company Common Shares and the
other transactions contemplated hereby, in which case the proceeds
and the rights to receive the proceeds of all insurance covering
such loss or damage will, as a condition precedent to the
Purchaser's obligations to carry out the transactions contemplated
hereby, be vested in the Company or otherwise adequately secured to
the satisfaction of the Purchaser on or before the Closing Date.
ARTICLE 10
CLOSING
Closing
10.1 The purchase and sale of the Company Common Shares and the other
transactions contemplated by this Agreement will be closed at the Place of
Closing in accordance with the closing procedure set out in this Article.
Documents to be Delivered by Vendors
10.2 On or before the Closing, the Vendors will deliver or cause to be delivered
to the Purchaser:
(a) a certificate of status in respect of the Company and Teaco and a
certificate of incumbency in respect of the authorized signatories
of Teaco;
(b) certified copies of such resolutions of the directors of Teaco as
are required to be passed to authorize the execution, delivery and
implementation of this Agreement;
<PAGE>
(c) the original or certified copies of the charter documents of the
Company and all corporate records documents and instruments of the
Company, the corporate seals of the Company and all books and
accounts of the Company;
(d) certificates representing the Company Common Shares, duly endorsed
for transfer to the Purchaser, together with a duly executed share
certificate respecting the Company Common Shares issued to the
Purchaser and recorded in the share register of the Company;
(e) all reasonable consents or approvals required to be obtained by the
Vendors and the Company for the purposes of validly transferring the
Company Common Shares to the Purchaser and preserving and
maintaining the interests of the Company under any and all Company
Material Contracts and in relation to the Company Assets;
(f) certified copies of such resolutions of the shareholders and
directors of the Company as are required to be passed to authorize
the execution, delivery and implementation of this Agreement;
(g) an acknowledgement from each of the Vendors of the satisfaction of
the conditions precedent set forth in section 8.3 hereof;
(h) the Employment Agreement, duly executed by the Company and Joe
Perraton; and
(i) such other documents as the Purchaser may reasonably require to give
effect to the terms and intention of this Agreement.
Documents to be Delivered by the Purchaser
10.3 On or before the Closing, the Purchaser shall deliver or cause to be
delivered to the Vendors:
(a) a certificate of status in respect of the Purchaser and a
certificate of incumbency in respect of the authorized signatories
of the Purchaser;
(b) share certificates representing the Acquisition Shares duly
registered in the names of the Vendors;
(c) certified copies of such resolutions of the directors of the Purchaser as
are required to be passed to authorize the execution, delivery and
implementation of this Agreement, the execution and delivery of the
Subscriptions and the closing of the Private Placement, the appointment of
the Significant Shareholders to the board of directors of the Purchaser,
the change of the authorized signatories on the Purchaser's bank accounts,
and such other resolutions as are reasonably required by the Vendors to
complete this Agreement and the transactions contemplated hereby;
(d) an acknowledgement from the Purchaser of the satisfaction of the
conditions precedent set forth in section 8.1 hereof;
(e) a certificate signed by an officer of the Purchaser confirming the
accuracy, at and as of the Closing Date, of the representations and
warranties of the Purchaser contained in Article 6 hereof;
<PAGE>
(f) an opinion from counsel for the Purchaser confirming the accuracy,
at and as of the Closing Date, of paragraphs 6.1(a), (c), (d), (h),
(u), (w) of the Share Exchange Agreement, that the Acquisition
Shares have been validly issued to the Vendors in compliance with
all applicable United States' laws and regulations and that the form
of Acquisition Share certificate have been duly authorized, executed
and delivered by the Purchaser, are in compliance with the laws of
Delaware, and do not conflict with articles of the Purchaser;
(g) such other documents as the Vendors may reasonably require to give
effect to the terms and intention of this Agreement.
ARTICLE 11
GENERAL PROVISIONS
Arbitration
11.1 The parties hereto shall attempt to resolve any dispute, controversy,
difference or claim arising out of or relating to this Agreement by negotiation
in good faith. If such good negotiation fails to resolve such dispute,
controversy, difference or claim within fifteen (15) days after any party
delivers to any other party a notice of its intent to submit such matter to
arbitration, then any party to such dispute, controversy, difference or claim
may submit such matter to arbitration in the City of Vancouver, British
Columbia. The arbitration panel shall consist of a single arbitrator selected by
the joint agreement of the parties to the dispute; provided that if the parties
cannot agree upon the identity of a single arbitrator within fifteen (15) days,
then the arbitration panel shall consist of three (3) arbitrators, one (1) of
whom shall be appointed by each party within ten (10) days and the third duly
appointed by mutual agreement of the two (2) arbitrators so appointed by the
parties; provided further that if the two arbitrators cannot select the third
arbitrator within ten (10) days after their appointment, the selection of the
third arbitrator shall be made in accordance with the general rules of
arbitration in relation to arbitrations in the Province of British Columbia (the
"Rules"). If no such arbitrator is appointed within ten (10) days of such
request, either party may apply to a court having jurisdiction to make such
appointment. Once the arbitration panel has been selected, the arbitration of
the dispute shall be conducted in English in accordance with the Rules in the
City of Vancouver, British Columbia, unless otherwise provided or limited by the
Rules. The arbitrator(s) shall give each of the parties a fair opportunity to
prepare, including pre-arbitration hearing discoveries, and present its position
with respect to the dispute, and each party shall be entitled to call witnesses
to testify, examine and cross-examine witnesses that the other party calls to
testify, introduce documents and other materials and submit written statements
of position and arguments. The arbitration panel shall make a final
determination, to be provided in writing to each party, that resolves the
dispute and includes an allocation of the aggregate fees, costs and expenses of
the arbitration between the parties to the dispute, such allocation to be made
in the sole discretion of the arbitration panel after giving due consideration
to the relative merits of the parties positions in the dispute. All results of
the arbitration proceedings shall be final, conclusive and binding on all
parties to this Agreement, and shall not be subject to judicial review. Judgment
upon the award rendered by the arbitrator may be entered in the Province of
British Columbia or any other court having competent jurisdiction. For the
purposes of this section, the Vendors shall collectively be deemed to be one
party, and their selection of an arbitrator or concurrence therein shall be made
by notice in writing duly executed by a simple majority of the Vendors.
<PAGE>
Notice
11.2 Any notice required or permitted to be given by any party will be deemed to
be given when in writing and delivered to the address for notice of the intended
recipient by personal delivery, prepaid single certified or registered mail, or
telecopier. Any notice delivered by mail shall be deemed to have been received
on the fourth business day after and excluding the date of mailing, except in
the event of a disruption in regular postal service in which event such notice
shall be deemed to be delivered on the actual date of receipt. Any notice
delivered personally or by telecopier shall be deemed to have been received on
the actual date of delivery.
Addresses for Service
11.3 The address for service of notice of each of the parties hereto is as
follows:
(a) the Vendors:
Teaco Properties Ltd.
649 Belle View Place
Nanaimo, British Columbia
V9V 1B5
Telecopier: (250) 751-7966
Joe Perraton
7491 Elizabeth Way
Lantzville, British Columbia
V0R 2H0
Lara Perraton
485 Howard Avenue
Nanaimo, British Columbia
V9R 3S2
Lang Michener Lawrence & Shaw
Attention: Leo Raffin and Susan Goscoe
500 Royal Centre
1055 West Georgia Street
Vancouver, British Columbia
V6E 4N7
Telecopier: (604) 685-7084
(b) the Purchaser:
1650, 200 Burrard Street
Vancouver, British Columbia
V6C 3L6
Telecopier: (604) 689-5320
<PAGE>
Change of Address
11.4 Any party may, by notice to the other parties change its address for notice
to some other address in North America and will so change its address for notice
whenever the existing address or notice ceases to be adequate for delivery by
hand. A post office box may not be used as an address for service.
Further Assurances
11.5 Each of the parties will execute and deliver such further and other
documents and do and perform such further and other acts as any other party may
reasonably require to carry out and give effect to the terms and intention of
this Agreement.
Time of the Essence
11.6 Time is expressly declared to be the essence of this Agreement.
Entire Agreement
11.7 The provisions contained herein constitute the entire agreement among the
Vendors and the Purchaser respecting the subject matter hereof and supersede all
previous communications, representations and agreements, whether verbal or
written, among the Vendors and the Purchaser with respect to the subject matter
hereof.
Enurement
11.8 This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
Assignment
11.9 This Agreement is not assignable without the prior written consent of the
parties hereto.
Counterparts
11.10 This Agreement may be executed in counterparts, each of which when
executed by any party will be deemed to be an original and all of which
counterparts will together constitute one and the same Agreement. Delivery of
executed copies of this Agreement by telecopier will constitute proper delivery,
provided that originally executed counterparts are delivered to the parties
within a reasonable time thereafter.
Applicable Law
11.11 This Agreement is subject to the laws of the Province of British Columbia
and the laws of Canada applicable therein and, subject to section 11.1 hereof,
the parties hereto to attorn to the exclusive jurisdiction of the Courts of the
Province of British Columbia.
Independent Legal Advice
11.12 The parties hereto acknowledge that they have each received independent
legal advice with respect to the terms of this Agreement and the transactions
contemplated herein or have knowingly and willingly elected not to do so. The
parties hereto further acknowledge that this Agreement has been prepared by
Century Capital Management Ltd. as a convenience to the parties only, and that
Century Capital Management Ltd. has not provided any of the parties hereto with
any professional advice with respect to this Agreement.
<PAGE>
Novation
11.13 This Agreement supercedes and novates the Share Exchange Agreement made as
of the 24th day of December, 1999 between the parties hereto, which agreement is
hereby agreed by the parties hereto to be cancelled and of no further force or
effect.
IN WITNESS WHEREOF the parties have executed this Agreement effective as of the
day and year first above written.
AUTOEYE INC.
____________________ By: ___________________________
Witness Authorized Signatory
____________________
Name
____________________
Address
TEACO PROPERTIES LTD.
By: ___________________________
____________________ Authorized Signatory
Witness
____________________
Name
____________________
Address
___________________________________
___________________ JOE PERRATON
Witness
____________________
Name
____________________
Address
___________________________________
LARA PERRATON
______________________
Witness
______________________
Name
______________________
Address
This is Page 24 to the Share Exchange Agreement dated January 20, 2000 among
Autoeye Inc., Teaco Properties Ltd., Joe Perraton and Lara Perraton.
CERTIFICATE OF DESIGNATION
Andrew Hromyk certifies that he is the President and Secretary of Autoeye Inc.,
a Delaware corporation (hereinafter referred to as the "Company") and that,
pursuant to the Company's Certificate of Incorporation, as amended, and Section
151 of the General Business Corporation Law, the Board of Directors of the
Company adopted the following resolutions on , ; and that none of the shares of
Non-Transferable Series A Special Voting Preferred Stock referred to in this
Certificate of Designation have been issued.
Creation of Non-Transferable Series A Special Voting Preferred Stock
1. There is hereby created a series of preferred stock consisting of 5,000,000
shares and designated as the Non-Transferable Series A Special Voting Preferred
Stock (the "Preferred Stock"), having the voting powers, preferences,
limitations, qualifications, relative, participating, optional and other special
rights and the qualifications, limitations and restrictions thereof that are set
forth below.
Preferences, Limitations and Relative Rights
2. No share of Preferred Stock shall have any preference over or limitation in
respect to any other share of such Preferred Stock. All shares of Preferred
Stock shall have equal rights and privileges.
Voting Rights
3. Each outstanding share of Preferred Stock shall be entitled to two votes at
meetings of holders of the Company's Common Stock, either in person or by proxy,
and each holder of shares of Preferred Stock on the record date for such meeting
shall be entitled to notification of such meeting as if such holder were a
holder of shares of the Company's Common Stock on the record date for such
meeting.
Dividends
4. The holders of shares of Preferred Stock shall not be entitled to receive any
dividends.
Liquidation Provisions
5. In the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, holders of Preferred Stock shall not be
entitled to receive any payment whatsoever and the shares of Preferred Stock
then outstanding will be deemed to be cancelled. A reorganization or any other
consolidation or merger of the Company with or into any other corporation, or
any other sale of all or substantially all of the assets of the Company, shall
not be deemed to be a liquidation, dissolution or winding up of the Company
within the meaning of this Section 5, and the Preferred Stock shall be entitled
only to: (i) the rights provided in any agreement or plan governing the
reorganization or other consolidation, merger or sale of assets transaction;
(ii) the rights contained in the Delaware General Business Corporation Law; and
(iii) the rights contained in other Sections hereof.
<PAGE>
Cancellation Provisions
6. Each one share of Preferred Stock held by a particular stockholder shall be
cancelable by the Company without payment of further consideration by the
Company to the holder thereof upon the issuance of each two shares of the
Company's Common Stock to that particular stockholder pursuant to the Put Right
or the Call Right as defined in the Preferred Share Exchange Agreement dated ,
between the
Company and the holders of the shares of Preferred Stock.
No Fractional Shares
7. In the event that an uneven number of shares of the Company's Common Stock
are issued to a particular stockholder at a particular time pursuant to the Put
Right or the Call Right, the number of shares of Preferred Stock to be cancelled
pursuant to Section 6 hereof shall be that number as would be cancelled if one
additional share of the Company's Common Stock were issued to that particular
stockholder at that particular time.
Reclassification, Exchange and Substitution
8. If the Common Stock, the issuance of which causes the cancellation of the
Preferred Stock pursuant to Section 6 hereof, is changed into the same or a
different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification, reverse stock split or forward stock
split, stock dividend or otherwise, the number of shares of Preferred Stock to
be cancelled pursuant to the Put Right or the Call Right pursuant to Section 6
hereof shall be adjusted by multiplying by two the ratio the numerator of which
is the number of shares of the Company's Common Stock outstanding immediately
prior to the said capital reorganization, reclassification, reverse stock split
or forward stock split or stock dividend and the denominator of which is the
number of shares of the Company's Common Stock outstanding immediately following
the said capital reorganization, reclassification, reverse stock split or
forward stock split or stock dividend.
Reorganizations, Mergers, Consolidations or Sale of Assets
9. If at any time there shall be a capital reorganization of the Company's
common stock (other than a subdivision, combination, reclassification or
exchange of shares provided for in Section 8 hereof) or merger of the Company
into another corporation, or the sale of the Company's properties and assets as,
or substantially as, an entirety to any other person, then, as a part of such
reorganization, merger or sale, lawful provision shall be made so that the
holders of the Preferred Stock receive shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
merger, as are required to ensure that the holders of the Preferred Stock
continue to enjoy and be subject to the preferences, limitations and relative
rights granted hereunder in respect of the Preferred Stock then held by such
stockholders, subject at all times to the Put Right and the Call Right.
No Impairment
10. The Company will not, by amendment of its Articles of Incorporation or
through any reorganization, recapitalization, transfer of assets, merger,
dissolution, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions hereof and in the taking of all such action
as may be necessary or appropriate in order to protect the rights of the holders
of the Preferred Stock against impairment.
Non-Transferable
11. The shares of Preferred Stock shall not be transferable except with the
consent of the board of directors of the Company.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation of
Non-Transferable Series A Special Voting Preferred Stock to be duly executed by
its President and attested to by its Secretary this day of , who, by signing
their names hereto, acknowledge that this Certificate of Designation is the act
of the Company and state to the best of their knowledge, information and belief,
under the penalties of perjury, that the above matters and facts are true in all
material respects.
AUTOEYE INC.
___________________________
Andrew Hromyk, President
___________________________
Andrew Hromyk, Secretary
