SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive proxy statement
[ ] Definitive addition materials
[ ] Soliciting material under Rule 14a-12
WEBQUEST INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
WEBQUEST INTERNATIONAL, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies: __________________
(2) Aggregate number of securities to which transactions
applies: _________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined): _________________________
(4) Proposed maximum aggregate value of transaction: _____________
(5) Total fee paid: __________________
[ ] Fee paid previously with preliminary materials: ______________
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid: __________________
(2) Form, schedule or registration statement no.: ________________
(3) Filing party: __________________
(4) Date filed: __________________
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WEBQUEST INTERNATIONAL, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 16, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
WEBQUEST INTERNATIONAL, INC., a Nevada corporation, will be held on Friday, June
16, 2000 at 9:00 a.m., local time, at the company's principal executive offices
located at 2248 Meridian Boulevard, Suite A, Minden, Nevada 89423-8601, for the
following purposes:
1. To elect directors to serve for the ensuing year and until
their successors are elected.
2. To approve the adoption of the 2000 Stock Option Plan and the
reservation of 5,000,000 shares for issuance thereunder.
3. To ratify the appointment of Pritchett, Siler & Hardy, P.C. as
WebQuest's independent auditors for the fiscal year ending
September 30, 2000.
4. To transact such other business as may properly come before
the meeting or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 21, 2000
are entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
All stockholders are cordially invited to attend the Annual Meeting.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible. Any
stockholder attending the meeting may vote in person even if he or she returned
a proxy.
Very truly yours,
Kirk Johnson
Secretary
Minden, Nevada
May 12, 2000
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IMPORTANT
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. IF A QUORUM IS NOT REACHED, THE
COMPANY WILL HAVE THE ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF YOU
ATTEND THE MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON.
THANK YOU FOR ACTING PROMPTLY.
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<PAGE>
WEBQUEST INTERNATIONAL, INC.
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PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
WebQuest International, Inc. for use at the Annual Meeting of Stockholders to be
held Friday, June 16, 2000 at 9:00 a.m., local time, or at any postponement or
adjournment thereof (the "Annual Meeting"), for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Stockholders. The Annual
Meeting will be held at WebQuest's principal executive offices, located at 2248
Meridian Boulevard, Suite A, Minden, Nevada 89423-8601, where its telephone
number is (775) 782-0350.
These proxy solicitation materials and our Annual Report were mailed on
or about May 12, 2000 to all stockholders entitled to vote at the Annual
Meeting.
THE COMPANY SHALL PROVIDE WITHOUT CHARGE TO EACH STOCKHOLDER SOLICITED
BY THESE PROXY SOLICITATION MATERIALS A COPY OF THE ANNUAL REPORT ON FORM 10-KSB
TOGETHER WITH THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
REQUIRED TO BE FILED WITH THE ANNUAL REPORT UPON REQUEST OF THE STOCKHOLDER MADE
IN WRITING TO WEBQUEST INTERNATIONAL, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES,
ATTENTION: SCOTT BERRY, CHIEF FINANCIAL OFFICER.
Record Date
Stockholders of record of the WebQuest's common stock at the close of
business on April 21, 2000 are entitled to notice of, and to vote at, the Annual
Meeting. At the April 21, 2000 record date, 9,182,949 shares of common stock
were issued and outstanding.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it any time before its use by delivering to WebQuest (Attention:
Scott Berry, Inspector of Elections) a written notice of revocation or a duly
executed proxy bearing a later date or by attending the meeting and voting in
person.
Voting and Solicitation
Holders of shares of common stock are entitled to one vote per share on
all matters.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Inspector of Elections (the "Inspector") with the assistance of
WebQuest's transfer agent. The Inspector will also determine whether or not a
quorum is present. The affirmative vote of a majority of shares present in
person or represented by proxy at a duly held meeting at which a quorum is
present is required under
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Nevada law for approval of proposals presented to stockholders. In general,
Nevada law also provides that a quorum consists of a majority of the shares
entitled to vote and present in person or represented by proxy. The Inspector
will treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum and as negative votes for
purposes of determining the approval of any matter submitted to the stockholders
for a vote. Any proxy which is returned using the form of proxy enclosed and
which is not marked as to a particular item will be voted for the election of
directors, for ratification of the appointment of the designated independent
auditors and, as the proxy holders deem advisable, on other matters that may
come before the meeting, as the case may be with respect to the item not marked.
If a broker indicates on the enclosed proxy or its substitute that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present with respect to that
matter. WebQuest believes that the tabulation procedures to be followed by the
Inspector are consistent with the general statutory requirements in Nevada
concerning voting of shares and determination of a quorum.
The cost of soliciting proxies will be borne by WebQuest. In addition,
we may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of our directors,
officers and regular employees, without additional compensation, personally or
by telephone or telegram.
Form 10-KSB
We will provide to each stockholder without charge a copy of our annual
report on Form 10-KSB together with the financial statements and financial
statement schedules required to be filed with the annual report upon request of
the stockholder made in writing to the attention of Investor Relations at 2248
Meridian Blvd., Suite A, Minden, NV 89423-8601.
Deadline for Receipt of Stockholder Proposals for 2001 Annual Meeting
Stockholders are entitled to present proposals for action at a
forthcoming meeting if they comply with the requirements of the proxy rules
established by the Securities and Exchange Commission. Proposals of stockholders
of WebQuest that are intended to be presented by such stockholders at our 2001
Annual Meeting of Stockholders must be received by us no later than January 15,
2001 in order that they may be considered for inclusion in the proxy statement
and form of proxy relating to that meeting.
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PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Nominees
A board of four directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for Management's four nominees named below, all of whom are currently directors
of WebQuest.
In the event that any nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner as will assure the election of as many of the nominees listed below as
possible and, in such event, the specific nominees to be voted for will be
determined by the proxy holders. It is expected that all nominees will be able
and willing to serve as directors. The term of office of each person elected as
a director will continue until the next Annual Meeting of Stockholders or until
such director's successor has been elected and qualified.
The names of the nominees, and certain information about them as of May
1, 2000, are set forth below:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Kirk Johnson .......................... 43 Chief Executive Officer, Secretary/Treasurer and
Chairman of the Board
Frank Howard .......................... 51 President, Chief Operating Officer and Director
Bradley N. Rotter ..................... 44 Director
Nolan Bushnell ........................ 57 Director
</TABLE>
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Kirk Johnson has served as our Chief Executive Officer, President,
Secretary and Treasurer since January 1999, has served as our Chairman of the
Board since January 2000, served as our President from January 1999 until
January 2000, served as our Vice President from October 1997 to December 1998,
and has been a Director since October 1997. Mr. Johnson has been involved in all
phases of management of our Company. Mr. Johnson brings 17 years of investment
and corporate management experience as owner and operator of Nevada-Johnson,
Inc., a real estate development and construction firm, and has knowledge and
experience in the capitalization of, and development of start-up companies.
Frank Howard has served as our President and Chief Operating Officer
since January 2000, served as our Chairman of the Board from January 1999 until
January 2000 and has been a Director since December 1997. Prior to joining us as
a full-time officer in January 2000, Mr. Howard founded Sales Technology, Inc.
("STI") in March 1989, a manufacturer and manufacturer's representative of
industrial electronic products. Mr. Howard served as President and CEO of STI
from March 1989 to January 2000.
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From 1976 to 1989 Mr. Howard worked for Bentley Nevada Corporation, an
international supplier of high-speed electronic monitoring devices, where his
last position was acting Vice President of Sales.
Bradley N. Rotter has served as a Director since April 2000. Since
1992, Mr. Rotter has served as Chairman of the Board of Point West Capital
Corporation ("Point West"), a specialty financial services company. Mr. Rotter
is also the managing member of The Echelon Group of Companies, LLC, which
provides investment and financial services. He was the principal shareholder of
The Echelon Group Inc., a financial services company that was merged into Point
West in 1995, and served as Chairman of the Board of that company from 1988
until the merger with Point West.
Nolan Bushnell has served as a Director since January 2000. Mr.
Bushnell is the Founder and currently the CEO of uWink.com, Inc., a provider of
Internet-networked games, digital jukeboxes and e-commerce terminals to retail
establishments such as airports, coffee houses, bars and restaurants. Mr.
Bushnell, considered the "Father of the Video Game Industry", is best known as
the founder of Atari Corporation and Chuck E. Cheese's Pizza Time Theater. He
has founded and successfully operated more than 20 companies over the last 25
years. He sits on the Boards of Directors of several leading companies,
including Wave Systems, Inc. and Tradius, Inc. He is a regular content
contributor to the "Webbie" nominated Metamarkets.com online "Think Tank"
website. Over the years Mr. Bushnell has received numerous awards of
distinction, including induction into the "Video Game Hall of Fame" and the
Consumer Electronics Association Hall of Fame. He is the creator and holder of
several patents in various industries. Mr. Bushnell received his B. S. in
Electrical Engineering in 1968 from the University of Utah, where he is a
"Distinguished Fellow", and also attended Stanford University Graduate School.
He frequently lectures at major universities and corporations throughout the
United States, inspiring others with his views on entrepreneurship and
innovation.
Board Meetings and Committees
Our Board of Directors held a total of seven meetings during fiscal
1999, including meetings held by conference telephone call but excluding actions
taken by unanimous written consent. Our Board of Directors currently has an
Audit Committee. This committee was established on April 13, 2000. The Audit
Committee consists of Mr. Bushnell and Mr. Rotter. The functions of the Audit
Committee are to recommend annually to the Company's Board of Directors the
appointment of the independent public auditors of the Company, discuss and
review the scope and the fees of the prospective annual audit, review the
results thereof with the Company's independent public auditors, review
compliance with existing major accounting and financial policies of the Company,
review the adequacy of the financial organization of the Company, review
management's procedures and policies relative to the adequacy of the Company's
internal accounting controls and compliance with federal and state laws relating
to accounting practices, and review and approve (with the concurrence of a
majority of the independent directors of the Company) transactions, if any, with
affiliated parties. The Audit Committee did not exist during fiscal 1999.
During fiscal 1999, each of our directors attended at least 75% of the
meetings of the Board during the year or portion thereof that such director was
a member of our Board.
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Director Compensation
Our non-employee directors are paid $500.00 for each meeting they
attend. When they join the Board of Directors, each non-employee director
receives a fully vested warrant to purchase 100,000 shares of WebQuest Common
Stock at the then-current market price. Such warrant has a term of three years.
At the end of each full year of service as a director, directors receive a
comparable warrant.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES LISTED
ABOVE.
PROPOSAL NO. 2:
ADOPTION OF THE 2000 STOCK OPTION PLAN
At the Annual Meeting, WebQuest's stockholders are being asked to
approve the adoption of the WebQuest International, Inc. 2000 Stock Option Plan
(the "2000 Option Plan") and the reservation of 5,000,000 shares of Common Stock
for issuance thereunder.
General
The 2000 Option Plan was adopted by the Board of Directors on January
19, 2000. The Board of Directors has initially reserved 5,000,000 shares of
Common Stock for issuance under the 2000 Option Plan.
The Board of Directors believes that, in order to attract qualified
employees to the Company and to provide incentive to its current employees, it
is necessary to grant options or rights to purchase Common Stock to such
employees pursuant to the 2000 Option Plan. Accordingly, stockholders are being
asked to approve the 2000 Option Plan at the Annual Meeting.
Options granted under the 2000 Option Plan may be either "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonstatutory stock options at the discretion
of the Board of Directors and as reflected in the terms of the written option
agreement.
The 2000 Option Plan is not a qualified deferred compensation plan
under Section 401(a) of the Code, and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
As of April 30, 2000 options for 3,009,000 shares were outstanding
under the 2000 Option Plan, no shares had been issued pursuant to the exercise
of options granted under such plan and 1,991,000 shares remained available for
future grants. No stock purchase rights have been granted under the 2000 Option
Plan. Shares not purchased under an option prior to its expiration will be
available for future option grants under the 2000 Option Plan. As of April 30,
2000, the aggregate fair market value of shares subject to outstanding options
under the 2000 Option Plan was $5,641,875, based on the $1.875 closing price of
the Common Stock as reported on the National Association of Security Dealer's
Over the Counter Bulletin Board Market on such date. The actual benefits, if
any, to the holders of stock options
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issued under the 2000 Option Plan are not determinable prior to exercise as the
value, if any, of such stock options to their holders is represented by the
difference between the market price of a share of the Company's Common Stock on
the date of exercise and the exercise price of a holder's stock option, as set
forth below.
Purpose
The purposes of the 2000 Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees and directors of the Company and to promote
the success of the Company's business.
Administration
The 2000 Option Plan may be administered by the Board of Directors or
by a committee of the Board of Directors. The 2000 Option Plan is currently
being administered by the Board of Directors. In the event that the Board of
Directors determines that it is in the best interests of WebQuest to grant
performance-based compensation to employees, the Board of Directors will appoint
a committee pursuant to Code Section 162(m) and any such grants will be subject
to any restrictions necessary to comply with Rule 16b-3 promulgated pursuant to
the Securities Exchange Act of 1934, as amended. Members of the Board of
Directors receive no additional compensation for their services in connection
with the administration of the 2000 Option Plan. All questions of interpretation
of the 2000 Option Plan are determined by the Board of Directors or its
committee and its decisions are final and binding upon all participants.
Eligibility
The 2000 Option Plan provides that either incentive stock options or
nonstatutory stock options may be granted to employees (including officers and
directors who are also employees) of the Company or any of its parents or
subsidiaries. The Board of Directors or its committee selects the optionees and
determines the number of shares to be subject to each option. In making such
determination, certain factors are taken into account, including the duties and
responsibilities of the optionee, the value of the optionee's services, the
optionee's present and potential contribution to the success of the Company, and
other relevant factors. At the present time, approximately twenty (20)
individuals are eligible to participate in the 2000 Option Plan.
The 2000 Option Plan provides that the aggregate fair market value of
shares with respect to which an incentive stock option is first exercisable by
an eligible person during any calendar year shall not exceed $100,000.00.
Terms of Options
Each option is evidenced by a written document between the Company and
the optionee. Each option is subject to the following additional terms and
conditions:
(a) Exercise of the Option. The Board of Directors or its
committee determines when options may be exercised. An option is exercised by
giving written notice of exercise to the Company specifying the number of full
shares of Common Stock to be purchased and by tendering payment of the full
purchase price. The purchase price of the shares purchased upon exercise of an
option shall be payable in cash or by check, or the Company's stock, if so
permitted by the Board of
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Directors in its discretion, having a value equal to such purchase price. Each
optionee refers to his or her writing from the Company for specific information
as to the exercisability and form of consideration applicable to his or her
option.
(b) Exercise Price. The exercise price under the 2000 Option
Plan is determined by the Board of Directors or its committee and shall not be
less than (i) in the case of an incentive stock option, the fair market value on
the date of the grant, (ii) in the case of an incentive stock option granted to
a ten percent or greater stockholder, 110% of the fair market value on the date
of the grant, or (iii) in the case of a nonstatutory stock option, not less than
75% of the fair market value (but in no event less than the par value) of one
share of stock on the date the option is granted, as determined by the Board of
Directors or its committee. In the case of a nonstatutory stock option intended
to qualify as performance-based compensation within the meaning of Section
162(m) of the Code, the option price per share shall not be less than 100% of
the fair market value on the date of the grant.
(c) Termination of Employment. If the optionee's employment
relationship terminates for any reason other than disability or death, options
under the 2000 Option Plan may be exercised for up to three months following
such termination, or on or before the expiration date of the options, whichever
occurs first, and may be exercised only to the extent the option was exercisable
on the date of termination. In no event can an option be exercised by anyone
after the expiration of its term.
(d) Disability. If an optionee is unable to continue his or
her employment relationship with the Company as a result of his or her
disability, options may be exercised within twelve months of termination and may
be exercised only to the extent the option was exercisable on the date of such
disability, but in no event may the option be exercised after the expiration of
its term.
(e) Death. Under the 2000 Option Plan, if an optionee should
die while employed or retained by the Company or during the ninety-day period
following termination of the optionee's employment relationship, options may be
exercised within twelve months after the date of death to the extent the options
would have been exercisable (i) on the date of death, in the case of an optionee
who dies while employed or retained by the Company, or (ii) on the date of
termination of the employment relationship, in the case of an optionee who dies
within ninety days after termination of the employment relationship.
(f) Termination of Options. The 2000 Option Plan provides that
options granted under the 2000 Option Plan have the term provided in the writing
between the Company and the optionee. No option may be exercised by anyone after
its expiration.
(g) Option Not Transferable. An option is nontransferable by
the optionee other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during his or her lifetime or, in the event of
the optionee's death, by a person who acquires the right to exercise the option
by bequest or inheritance or by reason of the death.
(h) Acceleration of Options. In the event of the proposed
dissolution or liquidation of the Company, a proposed sale of all or
substantially all of the assets of the Company or a merger or tender for the
Company's shares of stock, the Board of Directors shall give not less than
thirty days' notice of the acceleration of the optionee's right to exercise his
or her outstanding options as to some or all of the optioned stock at any time
during the period which is thirty days preceding the termination of the 2000
Option Plan as a result of one of the events described above.
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(i) Other Provisions. The options granted to optionees may
contain such other terms, provisions and conditions not inconsistent with the
2000 Option Plan as may be determined by the Board of Directors or its
committee.
Adjustments Upon Changes in Capitalization
If there is any change in the number of shares of stock of the Company
on account of the declaration of stock dividends, recapitalization resulting in
stock split-ups, or combinations or exchanges of shares of stock, or otherwise,
the number of shares of stock (as well as the price per share) available for
purchase upon the exercise of options, the shares of stock subject to any option
and the exercise price of any outstanding option shall be appropriately adjusted
by the Board of Directors or its committee, subject to any required action by
the Company's stockholders.
Amendment and Discontinuance of Plan
The Company's Board of Directors may amend, suspend or discontinue the
2000 Option Plan at any time. However, no such action may prejudice the rights
of any participant who has been granted options. Further, no amendment to the
2000 Option Plan which has the effect of (a) increasing the aggregate number of
shares of stock subject to the plan, or (b) changing the definition of who may
participate under the plan, may be effective unless and until approval of the
stockholders of the Company is obtained in the same manner as approval of the
2000 Option Plan is required. The Company's Board of Directors is authorized to
seek the approval of the Company's stockholders for any other changes it
proposes to make to the 2000 Option Plan which require such approval, however,
the Board of Directors may modify the 2000 Option Plan, as necessary, to
effectuate the intent of the plan as a result of any changes in the tax,
accounting or securities laws treatment of participants and the plan.
Federal Income Tax Aspects of the 2000 Option Plan
The following is a brief summary of the United States federal income
tax consequences of transactions under the 2000 Option Plan based on federal
securities and income tax laws in effect as of the date of this Prospectus
(which laws could change at any time hereafter).
This summary is not intended to be exhaustive and does not discuss the
tax consequences of a participant's death or provisions of the income tax laws
of any municipality, state or other country in which an optionee may reside.
This summary does not purport to be complete. The Company advises all optionees
to consult their own tax advisors concerning tax implications of option grants
and exercises, and the disposition of shares acquired upon such exercise, under
the 2000 Option Plan.
Options granted under the 2000 Option Plan may be either "incentive
stock options," as defined in Section 422 of the Code, or nonstatutory options.
If an option granted under the 2000 Option Plan is an incentive stock
option, the optionee will recognize no income upon grant of the incentive stock
option and incur no regular tax liability upon its exercise of an incentive
stock option may give rise to alternative minimum tax (see below). The Company
will not be allowed a deduction for federal income tax purposes as result of the
exercise of an incentive stock option regardless of the applicability of the
alternative minimum tax. Upon the sale or exchange of the shares more than two
years after grant of the option and more than one year after receipt of the
shares by the optionee, any gain will be treated as long-term capital gain. If
both of these holding
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periods are not satisfied (a "disqualifying disposition"), the optionee will
recognize ordinary income equal to the difference between the exercise price and
the lower of the fair market value of the stock at the date of the option
exercise or the sale price of the stock. A different rule for measuring ordinary
income upon such a disqualifying disposition may apply if the optionee is also
an officer, director, or 10% stockholder of the Company. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain recognized on such a disqualifying disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term capital gain if the sale occurs more than one year after exercise
of the option or as short-term capital gain if the sale is made earlier. The tax
rate on long-term capital gains under current federal income tax laws is
generally subject to a maximum rate of 20%, whereas other income is taxable at
federal rates of up to 39.6% (although proposals are currently under
consideration that could change these rates). Capital losses are allowed in full
against capital gains plus $3,000 of other income.
All other options that do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income under U.S. tax laws at the time he or she is granted a nonstatutory
option. However, upon its exercise, under .S. tax laws the optionee will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares over the exercise price. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired or where the optionee is an officer, director or 10% stockholder
of the Company, the date of taxation may be deferred unless the optionee files
an election with the Internal Revenue Service under Section 83(b) of the Code.
The income recognized by an optionee who is also an employee of the Company will
be subject to income and employment tax withholding by the Company by payment in
cash or out of the current earnings paid to the optionee. Upon sale of such
shares by the optionee, any difference between the sales price and the exercise
price, to the extent not recognized as ordinary income as provided above, will
be treated as capital gain or loss, and will qualify for long-term capital gain
or loss treatment if the shares have been held for more than one year.
Alternative Minimum Tax
As noted above, the exercise of an incentive stock option may subject
the optionee to the alternative minimum tax ("AMT") under Section 55 of the
Code. The AMT is calculated for federal tax purposes by applying a tax rate of
26% to alternative minimum taxable income up to $175,000 ($87,500 for married
taxpayers filing separately) and 28% to alternative minimum income above
$175,000. Alternative minimum taxable income for federal tax purposes is equal
to (i) taxable income adjusted for certain items, plus (ii) items of tax
preference less an exclusion of $45,000 for joint returns and $33,750 for
individual returns (with the exclusion amount phased out for upper-income
taxpayers).
In computing alternative minimum taxable income, shares purchased upon
exercise of an incentive stock option are treated as if they had been acquired
by the optionee pursuant to a nonstatutory option, as described above. Because
the AMT rules are complex and their effects depend upon the personal
circumstances of each taxpayer, an optionee should consult his or her own tax
advisor prior to exercising an incentive stock option.
If an optionee pays AMT, the amount of such AMT may be carried forward
as a credit against any subsequent year's regular tax in excess of the AMT.
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Required Vote
The approval of the adoption of the 2000 Option Plan and the
reservation of 5,000,000 shares for issuance thereunder requires the affirmative
vote of the holders of a majority of the shares of our Common Stock present at
the Annual Meeting in person or by proxy and entitled to vote.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
ADOPTION OF THE 2000 OPTION PLAN AND THE RESERVATION OF 5,000,000 SHARES FOR
ISSUANCE THEREUNDER. THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE
AGAINST THE APPROVAL OF THE ADOPTION OF THE 2000 OPTION PLAN.
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Pritchett, Siler & Hardy, P.C.,
independent auditors, to audit our consolidated financial statements for the
fiscal year ending September 30, 2000, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Pritchett, Siler & Hardy, P.C. has been engaged since November 5, 1996
and has audited our financial statements for fiscal years 1997 through 1999.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF Pritchett, Siler & Hardy, P.C. AS INDEPENDENT AUDITORS FOR THE
COMPANY. THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE
PROPOSAL.
10
<PAGE>
OTHER INFORMATION
COMMON STOCK Ownership
of CERTAIN BENEFICIAL OWNERS and Management
The following table sets forth the beneficial ownership of WebQuest's
common stock as of March 31, 2000 as to (i) each person who is known by us to
beneficially own more than five percent of the Company's common stock, (ii) each
of our directors, (iii) each of the executive officers named in the Summary
Compensation Table beginning on page 13, and (iv) all directors and executive
officers as a group.
Except as otherwise noted, the address of each person listed in the
table below is c/o WebQuest International, Inc., 2248 Meridian Boulevard, Suite
A, Minden, Nevada 89423-8601. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the percentage of ownership
of that person, shares of common stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of March 31, 2000
are deemed outstanding. Such shares, however, are not deemed outstanding for the
purposes of computing the percentage of ownership of any other person. To our
knowledge, except as otherwise noted, the persons named in the table have sole
voting and investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable.
The percent of beneficial ownership for each stockholder is based on
8,832,140 shares of common stock outstanding as of March 31, 2000. An "*"
indicates ownership of less than 1%.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percentage
Name and Address of Beneficial Owner (1) Ownership (2) of Class
- ----------------------------------------- ------------- --------
<S> <C> <C>
Scott Berry (3) ............................................................... 58,088 *
Nolan Bushnell (4) ............................................................ 100,000 1.1%
David Gallagher (5) ........................................................... 42,000 *
Robert Horn (6)................................................................ 13,000 *
Frank Howard (7) .............................................................. 172,500 1.9%
Kirk Johnson (8) .............................................................. 725,221 7.7%
Tony Marzullo (9) ............................................................. 10,000 *
Brad Rotter (10)............................................................... 100,000 1.1%
All officers & directors as a group (8 people)................................. 1,220,809 12.4%
HomeSeekers.com, Inc. (11)..................................................... 800,000 9.1%
William Tomerlin (12).......................................................... 512,200 5.8%
Greg & Jeannie Johnson (13).................................................... 469,050 5.1%
Ruth Kelly (14)................................................................ 800,138 9.1%
Darin Murphy (15).............................................................. 676,493 7.7%
Douglas Swanson (16) .......................................................... 601,000 6.4%
</TABLE>
- --------------
11
<PAGE>
(1) Unless otherwise indicated, the address of each of the listed
beneficial owners identified is 2248 Meridian Boulevard, Suite A, Minden,
Nevada 89423-8601. Unless otherwise noted, we believe that all persons
named in the table have sole voting and investment power with respect to
all the shares beneficially owned by them.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of warrants or
options or the conversion of convertible securities. Each beneficial
owner's percentage ownership is determined by assuming that warrants,
options or convertible securities that are held by such person (not those
held by any other person) and that are exercisable within 60 days have been
exercised or converted.
(3) Mr. Berry is our Chief Financial Officer. Includes options to purchase
50,000 shares.
(4) Mr. Bushnell is a Director. Represents warrants to purchase 100,000 shares.
(5) Mr. Gallagher is our Vice President of Marketing and Sales. Includes
options to purchase 40,000 shares.
(6) Mr. Horn was our Chairman, CEO and President until January 1999. His
address is 2355 San Elijo Ave., Cardiff, CA 92007.
(7) Mr. Howard is President and Chief Operating Officer. Includes options to
purchase 160,000 shares and warrants to purchase 2,500 shares.
(8) Mr. Johnson is Chief Executive Officer, Secretary/Treasurer and Chairman of
the Board of Directors of our Company. Includes options to purchase 530,000
shares.
(9) Mr. Marzullo is our Vice President of Development. Includes options to
purchase 10,000 shares.
(10) Mr. Rotter is a Director. Includes a warrant to purchase 100,000 shares.
(11) We purchased our iPong technology from HomeSeekers and continue to purchase
programming services from HomeSeekers. HomeSeekers' address is 6490 South
McCarran Blvd., Suite D-28, Reno, Nevada 89509.
(12) Includes warrants to purchase 5,000 shares.
(13) Includes warrants to purchase 451,250 Shares. Mr. Greg Johnson and Mrs.
Jeannie Johnson are the brother, and sister-in-law, respectively, of Mr.
Kirk Johnson. Mr. Greg Johnson is the Chief Technology Officer and a
Director of HomeSeekers.com, Inc. ("HomeSeekers"), and is a principal
shareholder of HomeSeekers. HomeSeekers is also a principal shareholder of
our Company. The Johnson's address is c/o HomeSeekers.com, Inc., 2241 Park
Place, Suite E, Minden, Nevada 89423-8601.
(14) Mrs. Kelly's address is 7230 Sierra Vista Way, Reno, Nevada 89511.
(15) Includes warrants to purchase 1,250 Shares. Mr. Murphy's address is 4465
Juniper Trail, Reno, Nevada 89509.
(16) Mr. Swanson is Vice Chairman of the Board of Directors and Executive Vice
President of HomeSeekers and is a principal shareholder of HomeSeekers.
HomeSeekers is also a principal shareholder of our Company. Consists of
options to purchase 450,000 Shares. Does not include 676,493 shares
beneficially owned by Darin Murphy, the son-in-law of Mr. Swanson, as to
which shares Mr. Swanson disclaims beneficial ownership. Mr. Swanson's
address is c/o HomeSeekers.com, Inc., 6490 South McCarran Blvd., Suite
D-28, Reno, Nevada 89509.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation received by (i) our Chief
Executive Officer, and (ii) the other most highly compensated executive officers
serving at the end of the fiscal year ended September 30, 1999 who received
combined salary and bonus in excess of $100,000 during fiscal 1999, and the
compensation received by each such individual for WebQuest's prior fiscal year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------------- ---------------
Other
Annual Securities All Other
Fiscal Salary Bonus Compensation Underlying Compensation
Name and Principal Position Year ($) ($) ($)(1) Options(#) ($)(2)
- --------------------------- ------ ------ ----- ------------ --------------- ------------
<S> <C> <C> <C>
Robert Horn (1) 1999 $45,000 -- -- -- --
CEO, Chairman and President 1998 120,000 -- -- -- --
1997 -- -- -- 100,000 --
Kirk Johnson (2) 1999 $136,917 -- -- 200,000 --
Vice President, Secretary/Treasurer, 1998 104,000 -- -- -- --
CEO, President and Director 1997 -- -- -- 180,000 --
</TABLE>
- ----------------
(1) Mr. Horn was Chairman of the Board, Chief Executive Officer and President
from September 1997 until January 1999, when he resigned.
(2) Mr. Johnson was Vice President, Secretary/Treasurer and Director from
October 1997 until Mr. Horns' resignation in January 1999, when he accepted
the additional responsibilities of President and CEO.
The following table sets forth information for the named executive
officers with respect to grants of options to purchase WebQuest common stock
made during the fiscal year ended September 30, 1999.
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN FISCAL 1999
Individual Grants (1)
--------------------------------------------------------------------
Number of % of Total
Securities Options Granted
Underlying to Employees in Exercise
Options Fiscal Price Expiration
Grantee Name Granted (#) Year (2) $/Sh. Date
- ----------------------------- ------------- --------------- -------- ----------
<S> <C> <C> <C> <C>
Kirk Johnson 200,000 92% $1.00 Dec. 2001
</TABLE>
- --------------
13
<PAGE>
The following table sets forth information for the named executive
officer with respect to exercise of options to purchase WebQuest common stock
during the fiscal year ended September 30, 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares at Fiscal Year-end at Fiscal Year-end ($)(1)
Acquired on Value (#)(Exercisable/ (Exercisable/
Name Exercise (#) Realized ($) Unexercisable) Unexercisable)
- --------------- ------------ ------------ -------------------- ---------------------
<S> <C> <C> <C> <C>
Kirk Johnson 0 $0 380,000/0 (1) $159,120 / $0
</TABLE>
- --------------
(1) Does not include a stock option to purchase 300,000 Shares at $1.00 per
Share granted to Mr. Johnson on October 1, 1999. This option vests
100,000 Shares on October 1, 1999, 100,000 shares on October 1, 2000 and
100,000 shares on October 1, 2001.
EMPLOYMENT AGREEMENTS
Subsequent to Year-End
Kirk Johnson, CEO, Secretary/Treasurer and Director -- On October 1,
1999 we entered into a five-year employment agreement with Mr. Johnson whereby
he continues to serve as our CEO and Director. Mr. Johnson is entitled to
receive a base salary of $130,000.00 annually, plus options to purchase 300,000
shares of our Common Stock at $1.00 per share. The options vest as follows;
100,000 on the date of the agreement, 100,000 one year thereafter and the
remaining 100,000 two years thereafter. The options have a three-year life after
vesting. As a director, we will reimburse Mr. Johnson for expenses comparably to
other directors. Mr. Johnson will also receive a $200.00 monthly vehicle
allowance. Mr. Johnson's employment agreement includes a change of control
provision. In the event that his employment is terminated at any time during the
term of the agreement or any renewal term following a change of control, Mr.
Johnson is entitled to receive a lump sum cash amount equal to the sum of his
highest annual salary during his employment plus the largest aggregate amount
awarded to him in any year as a cash bonus. A change of control under Mr.
Johnson's employment agreement is deemed to occur if: (i) a third person,
including a "group" as defined in Section 13(d)(3) of the Securities and
Exchange Act of 1934, as amended, becomes the beneficial owner of shares of
WebQuest having more than fifty percent (50%) of the total number of votes that
may be cast by holders of capital stock upon any corporate action proposed to
shareholders for approval or adoption; or (ii) as a result of, or in connection
with, any cash tender or securities exchange offer, merger, or other business
combination, sale of assets or contested election, or any combination of the
foregoing transactions, the persons who were directors of WebQuest before such a
transaction cease to constitute a majority of the Board of Directors of WebQuest
or any successor corporation. For the change of control provision to be
effective, Mr. Johnson's employment termination must be either: (y) an
involuntary termination other than for "cause" or other than as a consequence of
his death, permanent disability or attainment of a normal retirement date; or
(z) the voluntary termination of his employment, not constituting a breach of
the employment agreement, following the occurrence of any of the different
events described in Section 7(b) of the employment agreement.
14
<PAGE>
Scott Berry, Chief Financial Officer -- On April 1, 2000 we entered into
an employment agreement to end on September 30, 2002 with Mr. Berry whereby he
serves as our CFO. Mr. Berry is entitled to receive a base salary of $85,000.00
annually, payable one-half in cash and one-half in restricted Common Stock of
WebQuest, $1.00 per share, issued quarterly. Mr. Berry was granted options to
purchase 300,000 shares of our Common Stock at $2.81 per share. The options vest
as follows: 25,000 shares on January 19, 2000 and 25,000 shares vesting
quarterly starting on March 31, 2000. The options have a three-year life after
vesting. Mr. Berry's employment agreement also includes a change of control
provision on terms identical to those included in Mr. Johnson's employment
agreement, except that the lump sum to which Mr. Berry would be entitled to upon
a change of control would be payable one-half in cash and one-half in restricted
Common Stock at $1.00 per share.
Frank Howard, President and Chief Operating Officer -- On January 19, 2000
we entered into a five-year employment agreement with Mr. Howard whereby he
serves as our President and COO. Mr. Howard is entitled to receive a base salary
of $130,000 annually, plus options to purchase 1,100,000 shares of our Common
Stock at $2.81 per share. The options vest as follows: 100,000 shares upon
execution of the employment agreement and 50,000 shares quarterly over five
years. As a director, we will reimburse Mr. Howard for expenses comparably to
other directors. Mr. Howard will also receive a $200.00 monthly vehicle
allowance. Mr. Howard's employment agreement also includes a change of control
provision on terms identical to those included in Mr. Johnson's employment
agreement.
Limitation of Liability and Indemnification Matters
Our articles of incorporation limit the liability of directors to the
maximum extent permitted by Nevada law. Nevada law provides that directors and
officers of a corporation will not be personally liable for monetary damages for
breach of their fiduciary duties as directors, except liability for the
following:
o acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law; or
o unlawful payments of distributions.
This limitation of liability does not apply to liabilities arising
under the federal securities laws and does not affect the availability of
equitable remedies such as injunctive relief or rescission.
Our articles of incorporation and bylaws provide that we shall
indemnify our directors, officers, employees and agents to the fullest extent
permitted by law. Our bylaws also permit us to secure insurance on behalf of any
officer, director, employee or agent for any liability arising out of his or her
actions in such capacity.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since October 1, 1998, there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which we were or
are to be a party in which the amount involved exceeds $60,000, and in which any
director, executive officer, holder of more than 5% of our common stock or any
member of the immediate family of any of these people had or will have a direct
or indirect material interest other than compensation agreements and other
arrangements, which are described elsewhere in this Proxy Statement and the
transactions described below.
During March 1999 we borrowed $50,000 from HomeSeekers.com, Inc., a
shareholder with over 5% beneficial ownership in our Company, and a significant
provider of programming and web site hosting services to us. Interest was at 12%
per annum and the note was unsecured. During October 1999 we paid off this note
and all accrued interest in the form of 53,800 shares of our restricted common
stock, valued at $1.00 per share.
We believe that all the transactions set forth above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. All future transactions, including any loans from our company to our
officers, directors, principal stockholders or affiliates, will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to our company than could be obtained from unaffiliated third parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, our directors,
executive officers, and any persons holding more than ten percent of our common
stock are required to report their initial ownership of WebQuest's common stock
and any subsequent changes in that ownership to the Securities and Exchange
Commission ("SEC"). Specific filing deadlines of these reports have been
established and we are required to disclose in this Proxy Statement any failure
to file by these dates during the fiscal year ended September 30, 1999. To the
best of our knowledge, all of the filing requirements have been satisfied except
that Form 3's were filed late for Messrs. Berry, Bushnell, Gallagher, Howard,
Johnson and Marzullo. Mr. Rotter has not yet field a Form 3 but will do so. In
making these statements, we have relied solely on written representations of our
directors and executive officers and any ten percent holders and copies of the
reports that they filed with the SEC.
16
<PAGE>
OTHER MATTERS
We know of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares they represent as
the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Kirk Johnson, Secretary
Dated: May 15, 2000
17
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
WEBQUEST INTERNATIONAL, INC.
2000 ANNUAL MEETING OF SHAREHOLDERS
The undersigned stockholder of WebQuest International, Inc., a Nevada
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated May 12, 2000, and hereby appoints
Kirk Johnson and Scott Berry, or either of them, proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 2000 Annual Meeting of
Stockholders of WebQuest International, Inc. to be held on June 16, 2000, at
9:00 a.m., local time, at 2248 Meridian Blvd. Suite A, Minden, Nevada 89423, and
at any adjournment (s) thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
WebQuest International, Inc.
|X| Please mark votes as in this example.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, ADOPTION OF THE 2000 STOCK OPTION
PLAN, FOR RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S INDEPENDENT AUDITORS,
AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING AND ANY ADJOURNMENT(S) THEREOF.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS
FOR AGAINST ABSTAIN
--- ------- -------
Nolan Bushnell [ ] [ ] [ ]
Frank Howard [ ] [ ] [ ]
Kirk Johnson [ ] [ ] [ ]
Brad Rotter [ ] [ ] [ ]
2. ADOPTION OF THE 2000 STOCK OPTION PLAN [ ] [ ] [ ]
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS [ ] [ ] [ ]
Signature:___________________________Date:_______________________
Signature:___________________________Date:_______________________
(This Proxy should be marked, dated, signed by the
stockholder(s) exactly as his or her name appears
hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so
indicate. If shares are held by joint tenants or as
community property, both should sign.)
</TABLE>
